Deer Point Macro

SFRZ6M7 steepeners still look like an attractive trade. The Z6M7 curve flattened following stronger consumer spending and some retracement from May's employment strength, which led to M7 outperforming Z6. Looking at the Citi Economic Surprise Index, despite the noisy jobs report (which, as mentioned above, we are largely looking through), economic surprises continue to skew to the upside. Unless there is a material deterioration in the data and positive surprises begin to fade, steepeners remain an attractive positioning

The impact of supply has been particularly pronounced in longer-dated bonds, leading to a steepening bias in hyperscaler curves. Unlike the broader industrial universe, where 10s30s curves have flattened since May, hyperscaler curves have steepened since September. Historically, spread widening has tended to occur alongside curve flattening, making the current divergence notable. The combination of wider spreads and steeper curves suggests that hyperscaler issuance dynamics are creating pressure across both the sector’s spread profile and maturity structure.

Divergence between hyperscaler spread widening and curve steepening suggests issuance-driven technical pressure We favor an underweight stance on long-duration hyperscaler bonds, where supply absorption challenges are likely to persist, while remaining more neutral on front-end exposure given strong balance sheets and resilient fundamentals. But underperformance because of thin supply has been pretty pronounced Hyperscalers underperforming IG by 40bps since 2H of 25

Hyperfunders record bond sales

New Substack just dropped today.

new plumbing notes just dropped a schizo primer on "equity repo" conks.plumbing/p/plumbing-not…

Hyperscaler credit has been pressured by a wave of new issuance, which has created a meaningful supply overhang. As a result, spreads have widened relative to the broader IG universe, with the sector lagging by approximately 40bp since the middle of last year, excluding ORCL.

@pseudostokastic Bloomberg SRCH or LSEG issuance data

@deerpointmacro What do you use to track new bond issuance

The disconnect in pricing between ZAR and NOK, as reflected in implied versus realized volatility, appears notable. Being long the volatility spread between the two currencies looks attractive. For the second half of 2026, volatility strategies appear to be the most effective way to express views in FX markets.

Payer skew has richened: The onset of the Middle East conflict led to a richening of payer skew as investors sought high-strike protection. The implied distribution now appears to be priced more hawkishly than what is likely to materialize, suggesting that further richening in payer skew is probably limited.

@acllc2 Fantastic read 🫡

EM Credit: EM Credit: Recent escalation in Middle East tensions is a near-term headwind for bonds, though we remain OW UPLLIN. Prior oil shocks raised input and freight costs, but UPL offset pressure through price increases while maintaining volumes. Risk remains if prolonged oil strength and supply disruptions outpace pass-through ability.

@ericwallerstein Agreed, give Iboxx EUR corporates a look a lot of goodies in there as well 🫡

totally agree and think US IG is probably a good place to look for those with a lot of AI equity exposure and want a hedge. still my outright credit preference is xover. european high yield is crummiest index composition with worst macro backdrop (imo). overall i’m suggesting conditions are tighter than spreads suggest

broadly i think US credit spread tightness has a lot to do with supply. many rising stars & falling angels in recent years, broad increase in balance sheet quality among energy names, the ascent of private credit lending to junkier borrowers—there’s just not that much “junk” publicly trading anymore. this chart from KKR captures the rise in quality among the HY universe well