US Bond Auction Smashes Demand Fears as SpaceX Debt Wobble Rattles AI Trade

US sovereign yields steadied on Wednesday after a $39 billion 10-year bond auction drew strong investor demand, with a high yield of 5.30% and a bid-to-cover ratio of 2.77x, according to Rabobank senior market strategist Benjamin Picton. The result eased fears of a disorderly correction in bond prices sparked by a poor 5-year auction in late September that produced the second-longest tail on record.

The calm in Treasuries contrasted with fresh stress in the AI investment narrative. SpaceX 5-year credit default swap spreads widened 16.5 basis points to 197bps after the company sought to raise $40 billion in debt to buy NVIDIA chips, with similarly large deals reportedly in the works for Broadcomm ($50bn) and Oracle. The Financial Times reported that investors approached about financing the chip purchase received only a two-page deal memo with pictures of outer space and an arrow pointing to data centres to be built 'somewhere in the universe.' In Australia, the IPO of data centre operator Firmus was repricing from A$11 to about A$8.25 per share as local pension funds passed and US long-only demand fell short.

European sovereign yields came under renewed pressure, with French 10-year OAT yields up 11.8bps to 4.86%, Italian yields up 9.7bps to 4.62% and Greek yields up 8.9bps to 4.47%, while UK 10-year gilt yields rose 6.8bps. The Wall Street Journal reported France is considering issuing more short-dated debt, a move Picton likened to a developed market behaving like an emerging market. Against that backdrop, US Secretary of State Marco Rubio, speaking in Athens with the Parthenon behind him, urged the West to regain its 'Thumos' — the 'fire of passion, strength, courage, pride' — defending nationalism and decrying the transfer of sovereignty to global bureaucracies, remarks widely seen as aimed at the European Union.