Asia shares subdued, bonds swamped by AI debt wave
SPY•Asian shares slipped as reports that major tech companies were seeking billions in debt to buy AI chips added pressure to sovereign bond markets. Japan's Nikkei fell 0.9%, while U.S. 10-year Treasury yields eased from a 24-year peak of 5.326% to 5.298%.
1. Shares slip as debt rises
Asian shares fell on Thursday as reports that SpaceX, Broadcom and Oracle were looking to raise billions to buy AI chips added to strains in sovereign bond markets. Japan's Nikkei lost 0.9%, South Korea's benchmark fell 0.6%, and MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1%; U.S. stock futures were barely changed.
2. Technology borrowing plans
Broadcom was looking for $50 billion in financing, while SpaceX planned to issue $30 billion in investment-grade debt and raise $10 billion in loans to buy chips from Nvidia. Credit default insurance on SpaceX rose to record highs, and its shares and bonds lost ground. DeVere Group CEO Nigel Green warned that borrowing by AI companies could expose investors if expected profits failed to materialize.
3. Bonds and currencies
A strong U.S. 10-year debt auction helped pull yields off overnight peaks, with the 10-year yield at 5.298% after reaching 5.326%, its highest in 24 years. The euro fell to $1.1198 as concerns over France's finances spread to Italian and Greek debt. Samsung Electronics projected a 783% jump in third-quarter operating profit to 107.4 trillion won, while its shares slipped 0.3%.
