00:00I think as fixed income investors, we are investing in balance sheets, getting paid for
00:03credit risk, convexity, complexity, and illiquidity. Right now, I think credit risk is too undervalued.
00:10Right now in the market, we saw that with the big deal yesterday of $25 billion that needed a big
00:15concession. We're finding a lot of value there. Talk to us about that Amazon deal. How did that
00:20go yesterday? Big surprise came out. We were thinking that they were almost done for the
00:25capex build out for this year in terms of debt issuance from the IG market. Surprised us with
00:30a big deal there, 25 basis points. Significant pushback in the market, meaning 20 to 25 basis
00:39points wider on spread. So I'm just going to translate that in. If you take a 30-year bond
00:44in Amazon, bought it two days before, and then the new issue comes in, you are three and a half
00:50to
00:50four points down on that day. Wow. That's the concession the bond market built. And then you
00:55had a one and a half times book subscription, which is much lower than if you look at the other
01:00investment grade deals. So why is that? Is it just your market, the investment grade market has
01:04had enough high technology paper at the moment, or is it something about Amazon per se?
01:10It's supply overall, not Amazon. So if you break it down, fixed income investors again.
01:15It's kind of money sitting in your back pocket. You guys can step up.
01:17Yield-based money is quite a bit sitting. So that's where we bought quite a bit of that,
01:22where yield-based buyers, pensions, insurance, who have a liability, the long-end bond was
01:28610 to 615 yield on a AA-type balance sheet that you can have. Yes, they have supply pressures,
01:35but fundamentals are extremely strong on the company.
01:39Can I ask a completely... See, he was buying the bonds yesterday.
01:43He's like, he gets two phone calls.
01:46Yeah, exactly.
01:47Michelle, if this is a compliance issue, please speak up. I don't want to get you in trouble.
01:54Price down, yield up. I looked at the Japanese 10-year today. It's on the other side of the
02:00world, as Patrick O'Brien would say, the far side of the world. We don't care, except we care.
02:07I'm looking at the SpaceX 30-year piece. And if you can't talk about this, interrupt me.
02:12The yield's gone from a published 665 to we're enjoying a 7.1% yield today. We're down 5%
02:20on
02:20that piece. Do you get concern here that selected pieces are priced down, yield up?
02:26Actually, this is very normal for the bond market. You give us uncertainty, and we want to get paid
02:33for it. And the longer-term 30-, 40-year bonds in any space, whether it's treasuries or any of these
02:39tech AI hyperscalers, if you will, need a lot more uncertainty, need to be priced. So if a capex in
02:46a
02:46company is going from $0 to $250 billion, and the first issuance is $25 billion, we know there's
02:52another $200 coming behind this. And the company is in significant capex mode. So as debt holders,
02:57we're going to ask for more compensation. And the difference here, I would say, PimpFox
03:00was brilliant at this years ago. Yes, he was.
03:02PimpFox walked around with the Standard & Poor's 500 Blue Book. Okay, retail and institutional
03:08are different in that if I have a SpaceX 30-year, I'm in an institution. I'm in it forever,
03:14right? Absolutely. Where retail is like, OMG, I've gone 99 to 94, I'm in a lost position.
03:22What should they do? I think bonds overall, yields are so powerful. Again, at the start of the segment,
03:29we talked about the two-year, providing you the cushion for negative returns. So demand more from
03:34your bond investors today in your bond funds. And I think the sweet spot for us in terms of taking
03:39credit risk in these type of hyperscalers is still that zero to sort of seven, 10-year point.
03:45You're solving the problem. This is critical, folks. For Bose 101, you're solving the problem
03:51by the duration call. That's spot on. I think go back to your bond basics. And that's where it
03:56starts to become extremely powerful at these levels of yields. For these technology deals,
04:00these AI deals, these... Who buys the long end of these deals? I mean, you're not buying them,
04:06are you? Hedge funds aren't buying those, are you? I think yield-based buyers. And we do have
04:09accounts that are focused on yield. So for example, I think if tech was giving you 5.5% at
04:17AA balance
04:17sheet and now is giving you 6.15, and you have liabilities on the other side that are at about
04:235.5 to 5.75, these are pretty fantastic balance sheets. But the key point there is you're going to
04:29buy
04:29and maintain these. You have a liability which is 10 to 15-year long, and that's why you're
04:35matching these with pretty attractive yields. So that's where it becomes pretty powerful.
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