Bloomberg Surveillance TV: October 19th, 2026

Jonathan Ferro (0:11)

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa Abramowicz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9am Eastern.

Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App. We begin this hour with stocks bouncing back following the worst week since June. Peter Tchir of Academy Securities writing, he remains cautious. The sell-off in credit and equity starts with the compute space widening. The risk is a large fast move to the downside is much greater than the chance that we see a big move tighter. Pete, join us now for more. Pete, good morning. Good to see you.

Peter Tchir (0:56)

Good morning.

Jonathan Ferro (0:57)

Good to have you because you've got your eyes on visibility across stocks, bonds, cross-asset. Let's start with credit. Are those cracks going from triple Cs and migrating up and potentially into IG from here?

Peter Tchir (1:07)

You know, my starting point is look what happened with treasuries, right? We went about 70 bips wide over a course of a month and 10s, but it's pretty much one way street. Then you had French, Italian, Spanish bond yields in two days, two years blew out 50 some odd basis points, right? So to me, it's the speed and size. There's this kind of full liquidity in the credit markets. And so far we've seen it hold in in corporate credit. It's been fairly isolated to some names. But my fear is all of a sudden that trickle of selling becomes a bucket getting dumped. And the market doesn't have that liquidity. And that's when it drags everything down. And I've always joked, I think it's kind of rightfully so, is nine out of 10 high-yield sell-offs start with EM. And it's because EM sells off so much, some is like, well, I can't sell something at 80 cents. I'm going to sell my high-yield bond at 99 And so the problems might be with some specific compute bonds. But at some point you look at those and spreads that haven't widened. That's where you go for your liquidity. And that's where you get that potential for cascade. I'm not seeing it yet, but I think that risk is on the table and I'm nervous.

Jonathan Ferro (1:59)

It's idiosyncratic until it's not. And then you start to think about fundamentals. If this compromises the capital markets boom, does it compromise the capex trade?

Peter Tchir (2:07)

Yeah. And I think your conversation before I got on was awesome. It's really about this computer AI. And I think there's three distinct stories. One is the funding there. Can they spend it? Two is, does it actually work as well as advertised? Are people really getting these benefits? Or is there more and more stories of having to pay to people to come in and fix up your AI slot? And then the third part, I guess, and this is only starting to get more attention, is will the first mover advantage really move? Make a big difference, right? Is the tech that's leading the way today be the tech that's still driving forward AI in five years? I think all those three stories, they put some pressure on the market. Yes, we're bouncing today, though, again, on NASDAQ futures, I'm not going to pay too much attention until bond markets actually open today.

SPEAKER_3 (2:48)

Just to unpack a little bit the sell off that we saw last week, how much was driven by sovereign debt and concerns about the sovereign debt market and developed markets? You were saying it usually happens in EM. Arguably, you could say it happened in DM with respect to France and even, to some degree, some of the longer term US bonds. How much is it that and how much is it this fundamental story tied to AI?

Peter Tchir (3:07)

I think that was probably a pretty big move because for the first time, people are saying, wow, what if liquidity is not there? If it's not there for France, maybe it's not there for French companies, maybe it's not there for the compute spending. I think at some point, people on the compute side are like, okay, there's a trillion coming next month maybe or next year. Well, if there's another trillion, maybe I've got to back up the pricing because I need to get paid for that risk. So I think there is kind of this growing concern about credit. And I think also we saw immense amount of deglobalization last week. No matter else what we want to say, we would have probably talked about what went on, whether Starlink or Starshield was taken offline or not. That would be a huge story. You saw some response in Europe. So I think this global decoupling is real. And that I don't see how you do well on global valuations when that sort of space.