00:00Ven, why now is this happening? These concerns have been around for a while. Is it the lack
00:05of other catalysts in markets or how big of a role is the AI story playing here? We've
00:10got Alphabet kicking off its latest multi-billion dollar Australian debt sale as well.
00:18Lizzie, first of all, I like the misery going around the world idea. I think that's perfectly
00:24put. And I think it's actually a triple storm or a perfect storm, if you will. One is the
00:29AI hyperscalers raising debt, including Alphabet coming to Australia. I mean, they've been
00:34raising, they've raised about $1.5 trillion worth of debt this year alone. That is the
00:39most since the pandemic. So I think that that is weighing on sentiment that is providing
00:43the immediate catalyst for the yields higher. And, you know, we are just at the start of
00:48the AI capex cycle, as you know. And I think that, you know, there's lots more to come from
00:54the hyperscalers. And therefore, this spending is going to continue for the next four or five
01:00years. And I think that will have an impact on treasury yields because, you know, fund managers
01:05who can migrate between treasuries and investment-grade debt are going to overweight investment-grade
01:12debt. And therefore, the spread between investment-grade yields and treasuries is going to come narrow
01:20because treasury yields are going to climb higher. And then you've got the perfect combination
01:24of, you know, deficits that are unchecked, inflation that has been uncontained for five
01:30years now. So if you put all those heady things into the cocktail mix, it's a pretty potent
01:35combination. And that's why we are seeing what we are seeing in the markets.
01:39So what's the thing then, Ven, that will put a ceiling on yields?
01:45Well, I think that, you know, we saw, you know, the 10-year visit to a 5% levels in
01:502023.
01:51We have come off those levels. We've never gone back. And we are still quite a bit far away from
01:57those levels. But I think that if we get to 5% on the 10-year, that will push up
02:01the 30-year as well
02:02by sheer correlations. And that will be an interesting entry point for many people who are thinking that,
02:08look, you know, these are yields that are too tempting. And that may clear the market because
02:14that may see a short-term equilibrium there. So I think that, you know, we are some way off
02:19those levels, as I mentioned. But I think those levels are staring in the face of bond investors.
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