As we highlighted yesterday, Thursday’s market was supported by better behaved interest rates.
As we highlighted yesterday, Thursday’s market was supported by better behaved interest rates. However, this morning we wake to renewed selling in the AI infrastructure space. CRWV is the major influence there, with reports of its credit default swaps flying into distressed territory. For those who do other things than watch markets all day, let us explain that credit default swaps (CDS) are basically insurance on debt. A higher CDS spread is like a higher insurance premium against the possibility that CRWV defaults on its notes. Over 1,000 basis points of spread is generally considered to indicate heightened risk. Yesterday, CRWV debt got to 1,194.
We like to think that bond traders are generally more studious and contemplative than stock traders, but CDS-land can be a very wild space, subject to the same panics as you’d see in the equity markets. Mention of CDS is frightening when it comes into play because it rarely comes up in common parlance among equity traders. It doesn’t mean that the bond folks are right, but it does explain the CRWV pressure in Friday’s premarket.
If yesterday’s broader market action demonstrates anything, it’s that dip-buyers are lurking. CRWV pressure could create opportunities in proxy names not suffering under the same CDS hex. Keep your eye on our trading board for setups as they emerge throughout the day.
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