Bloomberg Surveillance TV: November 3rd, 2026

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1:36This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along with Lisa Abramowitz and Anne-Marie 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 9 a.m. 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 out with stocks wavering on fresh tech fears. Bob Michael of JPMorgan writing investor disappointment and hyperscaler earnings is less from AI endeavors and more from traditional business whose revenues are paying for AI capex but growing at low double digit rates.

2:15Bob joins us now for more. Bob, good morning. Good morning. Good to see you. Talk me through the cracks emerging in your credit space right now. How isolated are they? They're pretty isolated. We looked at yield changes quarter to date. And granted, it's a small sample. But when you look at the AI and related, the hyperscalers, you're seeing credit spreads out 25 to 30 basis points. When you look at the rest of the deals, they're out two to four basis points. Yesterday was a great example with that. Oracle comes to market. It widens spreads a little bit. The deal ends up going fine, I think three and a half times oversubscribed.

2:54I mean, we've been here, but I've been here before. I've heard a lot of moaning about the high yield market and narrow credit spreads. And really, you have to buy stuff that's 200 over that 7%. And there you have it. You have triple B rated Oracle 10 years at 8%. So that went well, but it was the non-tech AI related deals that went exceptionally well. They were six times oversubscribed. So the differentiation is there, but there's still money coming into the bond market looking for yield. And there's still a lot of supply as well. There is a lot of supply. It's not surprising. I think the issuers are becoming a lot more sensitive to that.

3:35Some of the deals were scaled back by five billion or so yesterday. That's a good sign. They're more thoughtful in telling us this is our plan. We're going to issue today and then it will be three to six months before the next issuance. That's easy for us. This is the guidance that Lisa was talking about. That way. By the way, Bram, you mentioned the same thing that we need to see more guidance from these guys about what they're going to issue and when they're going to issue it. Well, and that's ultimately what Oracle did. And part of the reason why they had better execution was because they were going that way.

4:04By the way, I'm not moaning about what's going on in the high yield space. It's just there is this. Did I even say your name once? You can look at her. You can look at her. Serious death stare. There is a sense, though, that at a certain point, you're going to get so much pushback that certain companies are not going to come to market, or they're not going to be able to raise financing. Are you seeing any deals not come to market that you were expecting, or names decide to look for other creative ways of financing? Are you seeing the risk kind of shift away from public markets as a result of some of this pressure?

4:33Well, the chip financing, the GPU financing, that's all out there. And I think when you look at RD Mish and Beignet, those transactions serve as a blueprint. I think those are pretty smart transactions. At times, those older deals come to the market to make room for some of the newer deals. Those present value. There's a lot of conversation going on. So far, there's not been a barrier to issuance. Everyone's happy to come up with some capital to place these deals. I'm with Anne-Marie, though, on the election. I've been following the gubernatorial races because I think that's critical. And we were trying to put together our own spreadsheet of what happens where.

5:18Happily overnight, Mike Semblis came out with a cheat sheet for us. And the three to watch are kind of like SEC football weekend. It's Texas, Oklahoma, and Georgia because there the expectation is if the Republicans manage to win those gubernatorial races, you may see conditions around data center built. So the things that you were talking about where you'll build bridges and schools and roads and pay for power versus the Democrats who are saying that there would likely be a pause. So you don't get the construction with conditions. Does that make you more willing to lend or less willing to lend if you, for example, get some clarity on where data centers can be built, but they get a whole lot more expensive.

6:09Yeah, and again, just looking at some of the work that Semblis did, there's 37 gigawatts of power production that are coming online next year. That's largely under construction. There's 97 that are planned for 2028. That's what's at risk with the elections. If there's enough populist pushback, we'll see. I mean, 2028 is a long way away. You've got a year and a half till you get there. And there could be a lot of bartering back and forth right now. We know that these companies have a lot of profits, so they can share that with communities. How are you viewing the election in terms of, do you think it's a clearing event for the bond market?

6:55We've looked at it two ways. We looked back on this year, and there were two things you had to get right. One is the repricing of the Treasury market. Yields went up over 100 basis points from below 4 % to above 5%. And the other is the amount of AI issuance. And I think we talked about watch the governor races for AI. For us, thinking about the potential for a blue wave here and sweeping Congress, I think it's mixed for the bond market. I think it's good for Treasuries. And I think it puts credit at a bit of risk here because you're going to have a Congress that can be emboldened to antagonize the administration.

7:39There are all the things about the appointments to the Supreme Court, to the Federal Reserve. Those are going to be controversial. There are going to be debt ceilings and all kinds of stuff. And credit risk doesn't like that kind of animosity in Washington. What would be the worst case scenario for the bond market? it would actually be a Republican sweep. I imagine the equity guys would be rejoicing because they'd be thinking about some continued fiscal spend. Is it$5 ,000 checks for everyone? It's not happening, Bob. Come on. I know. It's not going to happen. But there will be a lot of talk of that, and the demons will set into the bond market again.

8:20And if you're at the Federal Reserve, you've got to think about, uh-oh, the floodgates are open on borrow and spend. We need to push back on that. But that looks like the smaller of the tower, frankly. The Treasury is going to be in focus tomorrow as well. Right on brand, this program will be covering the quarterly refunding announcement while the rest of the country focuses on the election. What kind of changes are you expecting? I'm going to help the Treasury out right now. Go on. Get rid of the 20-year. Nobody likes it. It's applying the long end. Why do you issue it? It made sense in another era.

8:52It doesn't make sense. Now, just say it's done for. It was an orphan issue. We're going to just dump it into the front end where there's$8 trillion in money market fund assets, plus a lot of other liquidity sloshing around the system. We can finance ourselves there with ease. Is that sufficient? You get rid of 20s. Do you rebalance supply demand at the long end sufficiently? Well, don't forget, they're still coming into the market and buying about the$6 billion a month in the long end. You put the two together, you get some pretty nice support out there. It is the equivalent of what Yellen said, paint drying.

9:28It just happens. Nobody's really talking about it anymore. It will create a level of support that us holders of the long end will like. This bond market has been nothing like watching paint dry for the years so far. How much support has come from the deceleration on the equity side in the tech trade? How much support is coming from that? Well, it first started when we went from below four to above five. And I was on and I said we had been buying and that now looks like a good decision when we had a blow off top. And then you just run out of adrenaline. If you've created a big short in the market, where do you cover?

10:05You're at 530. Do you wait for 550? Do you think? Like it just started the covering. And I think that brought us down closer to five. I'd have liked to have stopped there. it would have given our clients a lot more time to buy. But now it's the anxiety about what's going on in the AI build-off. I think the bond market went through its demons from March to September into October. Now the equity market, which held up pretty nicely, is going to go through some of its demons. And the bond market will benefit from that. Do you think we've went through the worst of that then? It's over. For the bond market?

10:40Yeah. I think we're at a point now where we can easily see the Fed funds rate and the Treasury yield curve converging around 4.5%. We put that out there in September. We still believe it. Are there going to be fits and starts along the way? I think 480 is an interesting first level to reach because that's the 100-day moving average. It's a Fibonacci retracement level. There's all kinds of stuff there. But I think the days of pushing well above 5 % are in the past for now. Superflat curves. Basically what you're looking for. That's what it sounds like. Yeah, it feels like it because I think there is an expectation that higher rights do exact a cost on the economy.

11:24They do help to slow things down. I think everyone's parsing through the economy and we recognize the third quarter was a strong quarter. There will be some payback in the fourth quarter. And I think everyone's getting comfortable like, hey, you know, the Fed funds rate can get into the mid fours. I don't know, four and three-eighths, four and five-eighths. That's still a heck of a lot higher than zero where we were a few years ago. And it's a lot higher than three and five-eighths where we were a few months ago. But it's not at five or six percent yet in this cycle. Stay with us. More Bloomberg Surveillance coming up after this.

12:05If you invest, lead a business, or allocate capital, one-sided views aren't enough. Join me, Brad Rogoff, the Global Head of Research at Barclays, on the Flipside podcast. Each month, I go head-to-head with one of our expert analysts on my global team to debate the economic and market issues that matter most. From inflation and AI to equity and credit trends, each debate helps you see what headlines might miss. Find the flip side wherever you get your podcasts.

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13:17Candidate quality is something that's come up continuously with regards to that race. Tobin Marcus of research has this to say, we're confident that the polls are overstating democratic strength. No matter how it turns out, we see limited policy and market implications from a blue sweep. Tobin joins us now for more. Tobin, let's get to that first line. Let's dig into that interrogated, if you will. Why do you think the polls are overstating their strength? Thanks for having me. So this is not just a view that the polls are always wrong, that they always overstay Democrats. We were making the opposite argument in 2022, pushing back on the sort of buzz about a red tsunami at that time.

13:52But in this case, we do see, I think, some patterns that give us pause about taking the results at face value. On the one hand, just in general, when you get out into the tails of the generic ballot polling, the bigger the advantage for one party. It tends to not fully translate into the actual result. And then I think more troublingly, we have this very clear pattern where the blue shifts from 2024 to 26 have been much bigger in redder places, which looks a lot like the pattern of past polling error in 18 and 22 when we had pretty good accurate polling at the national level. We still had a pattern where Democrats were more overestimated in redder places.

14:25And that's exactly where they need to perform well in order to retake the Senate today and where they have been performing kind of surprisingly well to date. So I think fairly clear to me that the error is going to be in that direction. The question is magnitude, whether or not that error is big enough to overcome the margins that they currently have in the polling averages in key red states. Tobin, in these key red states, which ones do you think that the Democrats have the best favorability? You know, I think Ohio looks pretty good. Texas, I think, is where they have the clearest candidate quality advantage, but it is a somewhat redder state.

14:56So I have generally felt better for Democrats about Ohio and Alaska across that set of red reach states. But honestly, I think they're all fairly flat. Like, Iowa, I think, is a bigger reach. Kansas has kind of recently made its way into that set of reach states for Democrats, but with quite good polling recently. But across, you know, Ohio, Texas, Alaska, I think it's fairly flat, and I wouldn't be that surprised about any particular permutation of those states. Forget the polls. Poly Market this morning has Tallarico 75 percent in Texas. And I mean, it was also the betting markets that were pricing in a Trump win in the presidential.

15:30What do you say to that? This is people putting money on these races, not pollsters making cold calls. Yeah, so I don't really think that it's possible this cycle to look at the betting markets and say, put the polling aside, because they have just so strongly followed polling all cycle long, both at the national level in terms of things like Senate control. and then also when you dig down into some of these particular races. So in situations where the polling has been very wrong, the betting markets have been very wrong in the exact same way. The particular example that always comes to mind for me is the Wisconsin Democratic Gubernatorial, where you had Francesca Hong, who I think everyone would acknowledge was a very weak candidate and yet quite ahead in the polling.

16:06She was 95-plus percent to win on the eve of that election before having a 15-point polling miss and losing out. And if ever there were a situation where, you know, sophisticated betting market participants ought to be able to sniff out a weak candidate, sniff out the possibility of a polling miss, you'd think that would be one of them. So they've not exactly covered themselves in glory of the cycle. And of course, internationally, we have situations like Brazil where there also were huge, huge misses recently. Tobin, how much are investors already pricing in increased regulation on data center build and the idea that some governors will win on the mandate of reducing or completely prohibiting any new data centers from being built?

16:43It's been a very active talking point for investors. I don't get the sense that there has been that much active portfolio positioning around it. Texas clearly is the biggest question. If Governor Abbott loses in Texas, I think that's the thing that pretty much everyone involved in this trade has circled as a potentially really material setback that could spook markets. The rest of the shifts, you have states like Ohio that are kind of deterministically moving in a more restrictive direction because both the Democrat and the Republican are running on more data center skeptical platforms than the current Republican incumbent.

17:13But in general, we think that in most states, we're going to be able to absorb a little bit of a shift in that direction. Even the most strident anti-data center critics are essentially saying we want to build it right. We want to build it under certain conditions rather than saying we don't want to build it at all. And as I think you were talking about in the previous segment, you know, the impacts largely are falling farther in the future. Anything with shovels in the ground is not going to be effective right now. We've also, I think, nicely had a little bit of, you know, the kind of rotation out of that trade over the course of the past week or so does put us a little bit better positioned into the midterm.

17:47I feel a little more worried about the data center trade getting spooked if everyone were like really overextended in a bullish direction. And that's swung back a little bit in the other direction recently. Significant repricing heading into this vote, that's for sure. Stay with us. More Bloomberg Surveillance coming up after this.

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19:41Let's get to Anthropic. The Wall Street Journal reporting institution investors are pushing for a lower valuation ahead of the company's planned mega IPO. A growing list of concerns putting the target at 1.5 to 1.6 trillion. Dan Ives of Yorkville Ives writing the deal. Still gets done in our view, but valuation will be the question. Dan joins us now for more. Dan, good morning. It's a$500 billion swing. That's something. That's not nothing. What's underpinning that?

20:04Dan Ives: I mean, I think it's the amount that they're going to need to spend. If you look in the S1, I think that's something where, especially in this broader market, what we're seeing in terms of just credit and bond yields and ultimately for Anthropik, the growth is not the question. But I think it's just getting there. And from a monetization perspective, the amount of capital they're going to need to raise. And you could call it 1.5 is maybe baseline to what probably could even go lower as you get into mid-November. So they're looking to spend, what, close to$500 billion through 2030? If they don't get an investment-grade credit rating, how compromised is their ability to meet those commitments?

20:42Dan Ives: I think it will be tougher. Look, no doubt the investment grade, I mean, that's something where a bit of a gut punch. And I think if you go back to the market, you know, selling off even last week when that news came out, you look at the updated S1 when it came out yesterday, I think that definitely put pressure on the tech trade. Like, because Anthropic, it's foundational to the AI revolution, no matter which way you cut it, from NVIDIA to Microsoft to Amazon to everything. So the tech trade needs this to go public, not just for what they're going to raise from a capital perspective, but then the valuation.

21:15Dan Ives: Like, what's the mark? Is it$1.5 trillion? Is it$1.4 trillion? What's the appetite going to be? When I think of Dan Ives, I think of the biggest tech pool out there. I think of someone who says it's always 10 p.m. at this all-night rager party. and sometimes it gets to 11 a.m. The clock stopped 10 years ago, didn't it? What's the sweat factor for you right now when suddenly these valuations seem to be in free fall, regardless of what they post in earnings, regardless of what they can finance in debt markets? Yeah, I mean, I'd say right now the nervousness is, from an investor perspective in my conversations, SaaS apocalypse type feel going back to like March, April, and maybe even worse just because the capital raises that we're seeing kind of flooding the market.

21:58Dan Ives: Now, in terms of like my, you know, fear, the words in terms of the tech trade, look, I think it's a tale of two cities because the hyperscale are numbers, the CapEx, check, check. You look at Palantir, the use cases, that's accelerating. But I think then the level of disruption that we've seen, memory, Intel, advertising when it comes to Google, software when it comes to ServiceNow and even Fortinet and some others, I think that's what's really caused this to be not just a white knuckle moment, but this is a gut check period. This will be the start of winners and losers and who ultimately sort of gets through.

22:35Dan Ives: And I can jump in, Dan. That sounds like quite a diplomatic way of saying the bubbles burst. No, I don't. I mean, to me, I view it different. I view it as like we're just, no, we're entering, in my view, the next phase where it's not just because you say AI 30 times in your conference call, you could raise capital. I think it's more discriminant in terms of who the winners will be in, not just in terms of raising capital, but just in terms of executing. And I think patience, John, to my view, patience is much more wearing thin. So maybe if these companies had 12 to 18 months to monetize, now it's maybe six to nine months.

23:14To me, the concept that Anthropik may not have an investment grade rating is actually a watershed moment. because it highlights these companies that used to be asset light and revenue heavy are completely flipped on their heads. And in order for them to keep expanding, they're going to have to pay so much money to give us all new roads if they want to build a data center. And frankly, to investors, debt investors, to raise money. At what point do you think that fundamentally the equity valuations are going to be compromised going forward as a result of all of these extra costs?

23:41Dan Ives: I think there's a line in the sand. I think Oracle would probably be more the poster child. I mean, some could say Corey, but I think Oracle, where there's a line in the sand where you're like, okay, this is the amount that we're going to raise. We're not going to raise more. We're going to build out these data centers. Call it 800 to 1 ,000. We've talked about data centers in the U.S. next 12 to 18 months. If that gets cut by 10 to 15 percent, and then it comes down to who are the winners. Is it Microsoft? Where's Alphabet? Can they build and their advertising business still be strong? I think they can get through it.

24:12Dan Ives: But it comes down, it's going to be a gut check moment, not just for investors, but for these companies. And I think it's ultimately healthy, in my opinion, to get to the other side of this. But we're going through one of those periods where not everyone is going to come at this party in good shape. So what time of the party is it? Your neighbors are calling the cops and complaining about the noise level? We've said it's about 11.30 p.m. in the party. But in the party, you could have Glass on the Dance floor, DJ stops playing music, cops come to break it up for a noise violation. I think we're going through one of those periods.

24:47Dan Ives: It's more than I thought we were at the party. I thought it was just the neighbors. The cops have arrived. This is the problem. So I think we're going through a gut check moment in the thesis. But I believe the fundamentals will prove it out. Just like we saw Palantir, Apple, and Hyperscale. Let's lock it in. 30 % of the highs on chips. How much lower before I take you suit shopping? So I think another 10 % to 12 % down, I think then we have to maybe... Another 10 % down? Another 10 % to 12 % down, and I think on the socks. Another 10 % to 12 % down, then maybe we start to look at towers and we start going suit shopping to potentially see where this could...

25:28Dan Ives: Yeah, it's expensive. I'm not paying it for the record. I know what John wears, so buckle up. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV, weekday mornings from 6 a.m. to 9 a.m. 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.

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