As U.S. stocks celebrate, the bond market has already sounded the alarm. CDS prices for tech giants are soaring, and Treasury yields have topped 5%—ominous signs reminiscent of the period before the crisis two decades ago. Doubts about AI profitability, massive debt siphoning off capital, and simmering geopolitical tensions are converging. The “canary in the coal mine” is already crying out. Beware the risks lurking behind irrational exuberance.
When stock markets are surging, undercurrents in the bond market are often the first to sense danger.
U.S. stocks set new records again this week, presenting an entirely optimistic picture on the surface. However, credit default swap (CDS) prices for AI-related borrowers—including Meta, Google, and Microsoft—are quietly rising, with Oracle seeing a particularly pronounced increase. After reports that SpaceX is seeking $40 billion in financing, its CDS prices surged sharply this week. Meanwhile, the yield on 10-year U.S. Treasuries has topped 5%, a marked increase from the previous level of around 4%.