Speaker 1Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the hosts and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it's Wednesday, 14th of October, 2026, and plenty going on. Certainly not, though, in the broader U.S. stock indices. A pretty much of a shoulder shrug of a day with NASDAQ slightly down, S&P 500 basically flat, similar on the equal weight, Russell 2000 down a bit, SOX down a bit, and KOSPI stabilizing a bit overnight. We had that previous day of sort of a fuss over Broadcom CEO Hochtand's discussion of too many people investing in the space or treating it like casino gambling, so there was that one to chew on for a bit. But the market's recovering a bit. Nothing really going on worth generating headlines in the U.S. treasury yield space. We did see the dollar weakening back from its new local highs here. Probably just a bit of consolidation ahead of the CPI report today. And I'm really wondering, though, on the CPI report, it was the one we're supposed to anticipate so heavily, but there are just so many irons in the fire here with the geopolitical situation. The bond yields are perhaps down to pressures that have nothing to do with whether inflation is a tenth of a percent here or there to the side of what's expected. And I've got some interesting reading, if you really want to get in the weeds on fixed income, by the way, and some of the specific dynamics at work in the U.S. treasury market, which could be structurally very important. Well, I'll go ahead and get that right now, actually, the link. And these links are always in the podcast episode description if you're wondering what I'm talking about. You can also find these on the accompanying post on the Saxo platform if that's where you came across this podcast. It's from basically a legend within fixed income observations and trading and perspectives. And that's the so-called convexity maven, Harley Bassman, who has written a very long-form piece. And I haven't even read the whole thing. It's above my pay grade here. Certainly, Harley Bassman is above my pay grade in terms of his depth of knowledge and everything in the market. But the key point is, this, that the long end of the U.S. yield curve is rich levels of yields where there's this basic phenomenon in, not basic phenomenon, there's this phenomenon in the U.S. futures market that every futures contract is linked to a so-called cheapest to deliver actual physical bond out there or treasury note. And that's often quite stable and well-known what that treasury note is, but that we've reached sort of levels and yields that for some reason make it uncertain which of these cheap to deliver bonds. We'll be, you know, we should market to. And that basically there's some optionality linked to being short the U.S. treasuries as, as the better trade than being long, which means that they are sort of negatively convex, as he puts it. That is his name, the convexity maven. Long story short, there is this phenomenon afoot. He explains why, if you can wrap your head around it, and it's not an easy concept, but that this could mean that this, again, that it's more advantageous, that it's more advantageous in terms of the long term, the convexity is in the hands of the, the shorts, not the longs. And that this so-called structural sort of basis trade, this, this trade that's been out there that some are arguing has hedge funds essentially kind of, to some degree, supporting the whole treasury market with, you know, taking advantage of the discrepancies in pricing between futures and physical bonds out there, that they are ready to walk away from this trade and simply to, to, you know, dump their treasury holdings. Of course, at some level of distress, you would see the U.S. and others stepping in, the Fed meeting the others, stepping in to deal with this situation. But it's just to open your eyes to this whole area of, you know, risk and fixed income trading. And then back to sort of where we are, the CPI release. And again, another reason I'm not super interested in the CPI release is we have some pretty ugly signs of, you know, credit conditions tightening and tightening, especially for, you know, the very leveraged and players and those that are sort of the bleeding edge of risking. Default or seen as risking default or seen as moving in the wrong direction. And I pulled out a couple of CDS prices. I've mentioned these before. Credit, credit default swaps. These are basically the cost of insuring underlying bonds. If you care to, to hedge that cost in the market by buying a CDS and something like CoreWeave. I mean, this is a massive spender in the data center space, tens of billions of dollars, if I recall, spending on, you know, building servers for data centers. And, you know, I've mentioned where they're, you know, they're, you know, yields are before. I think I've mentioned their CDS prices as well. But in any case, yesterday, CDS price advancing to 982 basis points. That is what you're paying. If you want to insure your CoreWeave bonds on a yearly basis, it'll cost you 982 basis points, 9.82%. That is up 82 basis points just in one day. Paramount Global, it rocketed yesterday to 573 basis points from 513 the prior day. Oracle hit a new high, not massively up on the day, but still hit a new high at 263 basis points. And we have the overall index, one of the ones I track anyway, from Bloomberg, hitting 313 basis points above U.S. Treasuries. So if you benchmark that, I'm not sure what the year is, you know, if that's a duration of five years or 10 years. But if you let's say it's 5%, whatever the underlying Treasury is, that's an 8% plus yield that these companies are having to pay on their underlying debt. It's really hard to compare back when the days of U.S. Treasury yields 8% or something like that. And you had a spread of 400 basis points because they're only having to trade this at or pay 5% in such an instance versus the 8 plus percent. Now, there was also just in sort of the whole leverage space within, you know, out there in terms of financing, AI companies, etc. Somebody noticed me yesterday. It wasn't yesterday, it was a prior day. So in prior day in Asia, therefore, the Tuesday session, SoftBank was down 8.5% and is getting near its 200-day moving average. A key player in all this, you know, sort of functioning like a big investor in all manner of AI and other tech-related things out there. So, yeah. And then we had, in terms of single stock names, I'll get to earnings in a second, but Applied Materials was off 6.7%. They had an investor day, and apparently the market was throwing a tantrum about their lack of a detailed forecast. So that stock was down quite heavily. Of course, that's the founding equipment maker, so the makers of equipment that makes chips. And that's an early phase of the whole semiconductor production process. That company off quite heavily. And one of these ones is down very, very considerably from its 52-week high for sure. And then we got some of our first earnings reports rolling in for the quarter. Again, the first focus on these big financial names, JP Morgan off a little under a percent, apparently disappointing on our fixed income trading. That seems like a weird read. I mean, this has been quite an amazing quarter volatility-wise for fixed income trading. And then we got some of our and then Wells Fargo down a chunkier 3% and more. Basically, they had very strong results, loan growth, deposit growth, but they're putting aside more money to credit provisions. And that suggests that they're seeing something that they're worried about on the credit front. That jives with, of course, the credit conditions tightening, as I indicated. Citi was down over 5%. Some of that on the investment banking results disappointing and the trading results. And then Goldman Sachs. Here was kind of an interesting one because here you have a bank reporting very strong earnings. Again, there was a story I passed along recently within the last week or so about especially, I think it was Goldman Sachs and Morgan Stanley, because they're not allowed to leverage their balance sheet like in the old days directly with prop trades, etc. Old days meaning pre-global financial crisis when the subsequent legislation disabled that ability. They do lend and provide prime broking services, prime brokerage, services to players that are sort of semi-institutional. And some of them are called hedge funds. Some of them are actual hedge funds. Others seem more like semi-institutional market makers. And here I'm thinking of the Citadel's, Citadel Securities of the World, etc., who have apparently been leveraging up. And Goldman Sachs and Morgan Stanley and similar are providing a lot of credit to this leveraging process. Anyway, it's very strong results. A lot higher, 2%, 3%, 4%. I can't remember how much the percentage was. And then closed down actually slightly on the day. So a pretty ugly candlestick, if you will, if you'd have a look at the candlestick chart there. Kind of an interesting feel for or sort of market-centric reaction to what were otherwise very strong results. We also had Johnston & Johnson reporting. I didn't even see what the driver was here, but it was off quite heavily, minus 5.7%. Today we had ASML, and the driver was Johnston & Johnson. And we had Johnston & Johnson reporting. And we had ASML, and the driver was Johnston & Johnson reporting. Everything's looking great in terms of the results, maybe not hitting the very highest end of what was expected, but not bad at all. But talking about they can't keep up with the demand, that is actually their main concern. There's so much demand, they won't be able to keep up with it. But they were sort of off quite heavily yesterday and are up, at least in early trading, up around 2% today. So not only recovering sort of half of yesterday's losses, they're certainly not anywhere near their highs. Although to be fair, they're far closer to their highs of the cycle from back, what was that? it over the summer than many of these other names that were like ramping like crazy into those around end of Q2 memory names, hard disks, et cetera. So it's shown a bit more of a stable behavior than some of these other names out there. Also later today, we have Bank of America, Morgan Stanley, and BlackRock. What else should I cover? A little bit on the geopolitical front, I've jotted down a couple of headlines. Of course, there's plenty of focus on the oil price. It remains quite elevated, but not setting new highs. We saw, I think there was one headline talking about Saudi managing to intercept some of the attacks, but the Saudi Aramco headquarters had been hit to some degree. It doesn't look like it was kind of any kind of comprehensive damage. And then there was this interesting little news item from the trustee, Michael Evry, about it was a note from Somaliland to President Trump. And I don't think there's any kind of official note. I don't think there's any kind of official note. I don't think there's any kind of official Maybe there's some kind of umbrella effect into other people as well. Maybe there is, but particularly repulsive that the guy was, and this is what the Wall Street Journal article is about, was hanging out with confirmed fraudsters on the U.S. health care front in Dubai at a New Year's Eve celebration and with some woman he was having an affair with while he was married. I mean, this guy in Dubai, and I think there was two of them, but the one guy was convicted of embezzling $15 million from some hospital. Just the hubris of this guy running for office, and just how can anybody pull the lever in the voting box for the guy? Yes, I understand partisanship, but it's just incredible. If the Democrats can't flip Texas, you wonder, they need to go back to the drawing board and figure out what the party is about. Or you have to figure out. I don't know what people are doing or thinking when they're going into the voting booth. I understand there's policy, but there's also personality and morality at some point at the end of the day. My two cents. I shouldn't get too political. Apologies for that. I'll try not to do it again. And then another one from the Wall Street Journal. This one a little bit more quantitative and very, very interesting and something I've read about for years. But it talks about some of the specific ways that China's overall population might be overreported to the tune of 130 million. So China's actual population might be on the order of 1.27 billion versus 1.4 billion. And they're getting creative with what sources they're drawing on to make these calculations. Things like the number of vaccination vials that are ordered for children born in a certain year and admissions into school for certain years as well. So I'm sure that this is directionally very right, even if the specific numbers are wrong. And you can even make demographic projections that would suggest that within 100 years, that U.S. population will be far larger than that of China. And certainly for the younger generations, India's population is far, far greater. Whatever it means, it means something, certainly for housing needs and otherwise. But in a country that gets zero immigration, it is a very important factor to consider. And then finally, and I found this super interesting. Again, I've only been able to skim it. It's this quick morning rundown. Before I run in here to record the podcast. Super, super interesting. Yes, it's from leftist Cory Doctorow, whatever you want to call him. But it is an interesting history of the whole crypto wars. When I say crypto wars, it's this whole argument back in starting ages ago on the ability and the legality of using heavily encrypted tools for communicating. And how actually many of our systems out there are not as secure as they could be. Actually by design, because the powers that be would like to have access on demand to everything, if need be. So they don't want to be completely blind in the online or in the computing infrastructure. Therefore, things are flawed by design. And this is now dovetailing with an era where AI is able to discover many of these flaws. And this is this whole tension between the need to be secure, the need not to be hacked. The apparent. Government need to be able to have access to any data at will. And then the AI out there, you know, disrupting all this potentially because it is able to find these these faults and tolerances. And what do you do with all that? And of course, Doctorow has his own opinions on that. And you can take those or leave those. But there's a very high quality discussion around everything that's issue with tons of links as well. So I just think you some might find this whole area of inquiry and this whole area of sort of what AI means for the future of security. I think that's a very, very interesting topic. OK, that's it for today. As if that wasn't enough with all of the links and things to consider, it's hard to get all this into a single day. But I hope you find it all interesting and worth your while. Certainly lots in the mix here. Super interesting day ahead with CPI and how big a test it is or not. All the geopolitical risks out there, all of this energy in the credit space, I think we're again adding up to considerable volatility risks. Here in the near term and medium term as well, for that matter. So stay careful out there and I'll be back tomorrow with the next Saxo Market Call. This has been the Saxo Market Call podcast. Thanks for joining today's episode. We're always happy for your feedback and questions of all kinds. To reach out, you can drop us an email at market call at Saxo Bank dot com. That's market call at Saxo Bank dot com. Saxo. Serious trading worldwide. Saxo. Serious trading worldwide.
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