The Overnight RateThree moves
Credit. Meta sold $15 billion of bonds on Tuesday in five pieces, and lenders charged it close to double April’s spread. Its new 2036 notes yield 6.552%, 1.60 percentage points over Treasuries, and the 2056s went out 2.20 points over. Even the shortest piece, due 2031, yields 5.85% (SEC). On April 30, Meta’s 2036s priced 0.90 point over and its 2056s 1.32 points over (SEC). Same company. The ratings barely moved: Aa3 at Moody’s and AA- at S&P, now with a negative outlook. The other side: Meta still borrows for 10 years for less than Oracle paid for three. Our view: a top-rated balance sheet now pays a real premium to fund AI, and the premium grows with every year it asks for.
AI power. AMD had a record quarter and kept little of it as cash. Revenue rose 45% to $13.4 billion and data center sales nearly doubled to $8.5 billion, but free cash flow fell to $554 million from $1.53 billion a year earlier (AMD via SEC). Inventory soaked up $3.0 billion of cash in the quarter, and total debt rose to $7.08 billion from $3.23 billion three months earlier. AMD guided fourth-quarter revenue to about $17 billion, plus or minus 3%, with an adjusted gross margin near 55%. To be fair, chips stocked today become sales next quarter if that guide holds. We’d call it AMD carrying the build-out on its own balance sheet before customers pay.
Rates. Federal debt rose $353 billion in October to $40.52 trillion on Oct. 30, from $40.17 trillion on Sept. 30 (Treasury). At 8:30 a.m. ET today, Treasury says how much of its next round it sells as longer notes and bonds. The 30-year yield closed Tuesday at 5.32% and the 2-year at 4.61% (Treasury). Short paper costs less than long paper, which is why the mix matters. In fairness, the 10-year slipped to about 4.92% by 4:56 a.m. ET (CNBC). The upshot: more long bonds lean on home loans first, and Mortgage News Daily already has the 30-year at 7.30% (MND).
What could move prices
Kalshi traders put a December hike at 76% as of 2:51 a.m. ET, up 3 points in a day. Polymarket (International) has two hikes this year at 74%, and with September’s hike already done, those odds point at the same December meeting. Today’s refunding is the near test: a bigger share of 10-year and 30-year debt would add supply where mortgages price. The EIA’s weekly crude stocks report at 10:30 a.m. ET is the morning’s other big print.
The calendar
Treasury’s quarterly refunding comes at 8:30 a.m. ET, and the EIA’s weekly petroleum numbers follow at 10:30 a.m. ET. On Thursday, Freddie Mac’s weekly mortgage survey lands, after the 8:30 a.m. ET productivity and unit labor cost release. October payrolls arrive Friday at 8:30 a.m. ET (BLS).
Who pays: the April lender
Whoever bought Meta’s 2036 notes in April holds a bond paying a 5.25% coupon, while the same company now offers 6.552% on nearly the same maturity (SEC). The April notes priced to yield 5.286%. If they traded at Tuesday’s yield, by our math each $1,000 of them would be worth about $909, a paper loss near 9% in six months. Nothing about Meta’s ratings changed enough to explain that by itself. Any bond fund holding the April notes marks them down the same way, and the coupon doesn’t reset.
Net net: when a AA-rated borrower has to pay up for new money, its earlier lenders eat the gap.
Footnotes
- Tokyo: SoftBank Group fell 3.2% and Kioxia 5.4% in Tokyo on Wednesday, and the Nikkei 225 lost 1.4%, a read on Asia’s AI chip trade before the US open (CNBC).
- Block: Cash App reached 60 million monthly transacting actives in September, and Block’s third-quarter gross profit rose 22% to $3.24 billion (SEC).