Yields Don't Lie

In this episode, recorded on September 24, we discuss the worst day for Treasury yields in 18 months, the latest PMI composite, the escalating conflict with Iran, and Oracle’s dispute with lenders. Treasury note and bond yields suffered their sharpest one day rise in 18 months following a strong headline PMI reading, hawkish commentary from a Federal Reserve governor, and a weak Treasury note auction. Beneath the robust PMI headline, however, the details were less reassuring. Survey respondents reported mounting supply chain delays, while inflationary pressures climbed to their highest level since October 2022. The conflict with Iran also took a turn for the worse after President Trump threatened to “annihilate Iran,” while Iran outlined far fetched preconditions for returning to the negotiating table. Finally, in another unwelcome development for private credit, Oracle threatened to invoke a force majeure clause if construction of one of its Blue Owl backed data centers misses its 2028 completion target. The dispute highlights another potential vulnerability for private credit investors, particularly as economic growth weakens and the enormous capital requirements of the AI buildout increasingly collide with tighter financial conditions.