Episode summary
AI Credit in Detention: Coreweave's Debt Panic & Jim Bianco's Bull Case for Bonds (Finally!)
Monetary Matters
· · Guests: Jim Bianco
Summary
Jim Bianco argues the long bond bear market has finally reached a fairer level: with U.S. nominal growth likely around 5% to 6% and inflation sticky near 3%, he says 5% yields are no longer expensive and may now be normal. He is not making a recession call; instead, he thinks rates have risen enough to restore a better risk-reward balance for duration investors after years of distorted pricing.
On inflation, Bianco says the post-2001 era of cheap Chinese goods suppressed prices, but deglobalization, tariffs, wars, and supply-chain disruptions have ended that disinflationary force. He argues crude oil looks far more expensive once tanker costs and naval security in the Strait of Hormuz are included, and that diesel will eventually seep into broader prices because it powers shipping, trucking, and production. Even so, he thinks the U.S. is now a 3% inflation economy rather than a 2% one.
On credit, Bianco says the jump in CCC yields and CoreWeave’s blowout is concentrated in a few overlevered names, not a systemwide warning. He is more bullish on AI than the market consensus, calling it a transformative technology that is still early in its cycle, more like 1997 than 2000. He expects AI spending to persist even if the category eventually becomes a bubble.
Key takeaways
- Bianco says the bond market is finally fairly valued, with 5% to 6% yields matching a 5% to 6% nominal-growth economy.
- He argues inflation is stuck near 3% because cheap Chinese goods are gone and deglobalization has replaced goods disinflation.
- Bianco says oil is effectively much more expensive once tanker security and shipping costs in the Strait of Hormuz are included.
- He views CoreWeave and other CCC blowups as localized “detention” cases, not a broad corporate-credit warning.
- Bianco is bullish on AI and thinks the current setup is closer to 1997 than the 2000 bubble peak.
Notable quotes
“I became very constructive on the bond market for the first time, as you pointed out, in six years”
“I think that we should expect the US economy to grow between say five and 6%. Let's call that 3ish% inflation”
“I think it is as revolutionary as the railroads, anything we've seen in the last hundred years”
How the episode opens
This episode is brought to you by Seraya Partners, who manages the return to tangibles ETF, Lens, ticker lens, the Sermaya thematic ETF built for a return to tangibles. Learn more at surmaya.com and see the show notes for disclosures. Let's get into it.
There's a series of twin panics going through the fixed income market right now. Not to be too dramatic, but it is accurate to say that there are two spasms going on in bonds that began in late summer. one long-term Treasury yields surge 10-year up 30-year way up prices down yields up the second AI credit are these bonds that are financing the AI buildout going to be paid back we have coreweave bonds issued at 9 and a half% some odd 2032 unsecured bonds yields now are going up to 15% wow what is going on for these two topics first yields then AI credit I'm going to be talking to Jim Bianco of Bianco Research and the WTBN ETF.
Jim, wonderful to see you. How are you?
Thanks for having me, Jack. Looking forward to the conversation.
So, Jim, probably one of the greatest wealth destroying events in financial history was the bondbear market of 2022. You were among a handful of people who called that right to be bearish on bonds. But I think since then, a lot of people have said from 2023 onwards, oh, actually, it's kind of bonds are kind of attractive now at 3.8%.
8% 4.2%. Not you. You were one of the few to continue to be cautious or bearish on bonds.
And that has played out really, really well with the 10-year yield, 30-year yields absolutely crashing higher, yields up, prices down. So, the bare market has continued. What is your outlook right now?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai credit
- bond yields
- inflation and china goods
- oil and energy logistics
- credit spreads and ccc bonds
Companies and tickers mentioned
- BYDDY
- CoreWeave
- BYD
- Sarmaya Partners
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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