Episode summary
Markets Absorb Earnings and Oil Shock | Bloomberg Surveillance
Bloomberg Surveillance
· · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Amanda Lynam, Ken Kim, Barbara Humpton, Odeta Kushi
Summary
Credit markets are holding up despite a choppy backdrop, and the Goldman Sachs credit strategist said spreads should stay around three-year averages even if volatility picks up into mid-year. She argued that the biggest structural change is the flood of financing tied to AI, with about $400 billion of AI-related supply already issued since the middle of 2025, spanning public markets, private credit, and infrastructure funding. She also said private credit does not look like a systemic-risk flash point because there is no classic asset-liability mismatch and limited leverage in many vehicles.
On the rates side, the KPMG economist said the Fed’s latest meeting showed more concern about inflation than labor-market weakness, especially after the Middle East conflict pushed oil and fuel prices higher. He said the 2% first-quarter GDP print looked solid, but higher energy costs could start weighing on second-quarter activity. Still, he put recession odds at 30%, with the consumer and labor market resilient enough to keep the economy afloat for now.
The CEO of USA Rare Earth made the case that the company is trying to break China’s hold on rare earths by building a mine-to-magnet supply chain, including domestic assets and allied supply links such as Brazil. The housing economist said affordability is slowly improving as inventory rises and price growth cools, but chronic underbuilding and rate-lock remain major constraints, with the market still far from normal.
Key takeaways
- Goldman Sachs sees credit as resilient, with wider spreads possible but still roughly in line with three-year averages.
- Amanda Lynam said about $400 billion of AI-related debt has been issued since mid-2025, and more financing is likely across public and private markets.
- The KPMG economist said the Fed is leaning against inflation after the oil shock, while assigning recession odds of 30%.
- Odeta Kushi said housing affordability is improving at the margin, but rate-lock and chronic underbuilding are still the main brakes on sales.
- Barbara Humpton said USA Rare Earth is building a mine-to-magnet platform to reduce dependence on China and expand non-China supply options.
Notable quotes
“if I had to frame the the credit market, it's it's generally resilient, but I think with an expectation of some volatility through mid-year”
“there's already been 400 billion of AI-related supply since the middle of 2025”
“We don't believe it is. Um, that doesn't mean that there can't be dispersion, however, across managers and vintages and funds”
“the biggest news was uh, you know, the four dissents”
“We're actually seeing We talk a lot about this K-shaped economy everywhere, but we're seeing that in the housing market as well”
How the episode opens
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Amanda Lynam, chief credit strategist for Goldman Sachs, joins us today in studio. Amanda, thanks so much for joining us here. Um, what's your How's your market?
How's the credit market behaving over the last, you know, 6 7 8 weeks? I I would say um, if I had to frame the the credit market, it's it's generally resilient, but I think with an expectation of some volatility through mid-year, but even so, um, we're not expecting spreads to really underperform in any material way. We have a forecast for wider spreads, but it's basically putting the market around the three-year averages.
I think to your point, Paul, what's most interesting uh, in this market is kind of this paradigm shift that we're seeing in terms of various pockets of the credit market. So, pockets in liquid credit, pockets in private credit, even in infrastructure funding this AI build-out. It's just driven by the size and the magnitude of the opportunity, uh, but by our estimates, there's already been 400 billion of AI-related supply since the middle of 2025.
Most of that in investment grade, um, but the the needs here are so large that we expect US markets to participate, euro, Swiss, sterling, private markets. And then even in what we wrote about last night is in the investment grade market, the traditional investment grade market, we're seeing more of these kind of complex JV structures uh, that are being used to finance data centers. Amanda, uh, want to talk private credit, um, and whether or not what we're seeing in the private credit market right now is really uh, is systemic risk.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai debt issuance
- bond market
- oil prices
- earnings
- housing affordability
Companies and tickers mentioned
- GS
- FAF
- Goldman Sachs
- KPMG
- USA Rare Earth
- First American
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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