[THE ENDGAME] : SSA Soirée

There’s an old saying, “You’ve got to spend money to make money,” and that’s been the premise that some of the world’s largest companies have been following when it comes to AI. Now the question is whether or not it was worth it. In the long run, sure, but does the means justify the end in the near term? That’s what had the market worried about today as investors anxiously awaited market darling, Nvidia’s quarterly earnings results. The poster child for the AI revolution is seen as the key to the continued bull market in high tech and all things AI-related.

It appears that traders erred on the side of caution ahead of the earnings report, paring positions in semi-conductors and other tech names just in case the company doesn’t live up to the hype, since, like GM years ago, the way Nvidia goes, so goes the tech market. The Nasdaq closed the session 199 points lower (-1.12%), Nvidia (-2.87%) dragging the index lower. Investors will be paying particular attention to the delivery schedule for the company’s new Blackwell chip, and an update on the demand for AI.

But it wasn’t just tech that took it on the chin today. Ahead of the release, the Dow ended the day lower by 159 points, falling far from its all-time high close last night, while the S&P500 fell 0.6%, also dragged down by weakness in the tech sector. Also weighing on the markets today were comments from Goldman Sachs’ head of asset allocation who said he was concerned about the market’s swift rebound from the rout earlier this month – the S&P500 fell 3% on August 5, its biggest one-day drop in two years."What’s concerning now is how quickly the market has gone back to where we were before ... but certainly that shows that we are sadly nearly back to the same problem we were at a month ago,” said Christian Mueller-Glissmann. “What I would say is the good news is while the S&P is back to where we were before, the complacency isn’t. We’re not at the same kind of extreme bullish sentiment and positioning,” he added.

As for the Treasury market, which survived another auction - $70bln 5yr - that was well received, still saw yields back up a bit. Needless to say, the complex didn’t benefit from the sell off in the equity markets, Where did all the money go, if not into safe haven assets? How about cash? The benchmark 10yr note yield edged 1bp higher to close at 3.84%, while the long bond was unchanged on the day at 4.13%. However, the 2yr note saw its yield jump 7bp, closing at 3.90%, inverting the 2yr/10yr curve (-07bp) once again after a brief reprieve yesterday.

In the meantime, we just may have seen the last of ex-SSA issuance for the month of August, as no deals were priced today making it the fifteenth “zero” issuance day of the year – there were 32 last year. As a matter of fact, we may not see another deal of any kind over the last two days of the month. That left ex-SSA issuance for the month at $106.995bln, $3bln shy of the highest monthly estimate of $110bln. This August marks only the fourth time in history that ex-SSA issuance has surpassed the century mark and ranks this month as the fifth busiest ex-SSA issuance month of the year.

No, today belonged solely to the SSA market, with four deals - Province of Quebec ($2bln 10yr global notes), Export Development Canada ($1.75bln 3yr notes), Oesterreichische Kontrollbank AG ($1bln 5yr global notes) and The Republic of the Philippines ($2.5bln 3-pt deal) – combining to raise $7.25bln. That brought overall (SSA-inclusive) issuance to $135.145bln for the month, far and away more than the Street was expecting – the average estimate came in at $100bln, while the highest estimate was calling for $115bln. It also brought overall issuance for the year to $1.410.258bln, roughly $10bln shy of the average annual overall estimate of $1.420.000bln.

September alone has averaged $166bln in overall issuance over the past 10 years, so it’s a foregone conclusion that will surpass that in the next week or so. Furthermore, we only need $139.7bln between now and the end of the year to reach the highest yearly overall estimate of $1.550.000bln, so that too should fall by the wayside, maybe as soon as the end of next month. That would make this year the fifth busiest overall issuance year on record. No, we haven’t adjusted for inflation.

.

.

.

.

.

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.