Speaker · Updated
Jeff Snider: latest market views
Atlas Financial
Summary
Jeff Snider is Chief Strategist at Atlas Financial and host of the Eurodollar University channel, known for analyzing the global eurodollar reserve currency system, repo markets and deflationary signals, and previously Chief Investment Strategist at Alhambra Investments.
Chorus has 135 views from Jeff Snider across 18 episodes on Eurodollar University since October 5, 2026. Their latest calls: bearish on HSBC Holdings, Broadcom, CoreWeave and Meta Platforms.
Where they stand
Their latest bullish or bearish call on each company.
- HSBC HoldingsBearish ·
- BroadcomBearish ·
- CoreWeaveBearish ·
- Meta PlatformsBearish ·
- JetBlue AirwaysBearish ·
- Wizz Air Holdings PlcBearish ·
- SoftBank GroupBearish ·
- AnthropicBearish ·
- OpenAIBearish ·
- Blue Owl CapitalBearish ·
What they talk about most
The latest views
Newest first. Every quote is checked against the episode's transcript.
France's economy is deteriorating despite positive GDP: jobs are shrinking and confidence is collapsing.
Snider argues that a slightly positive French GDP figure hides deteriorating conditions. France has shed jobs for two years, hiring has nearly disappeared, and businesses have become more defensive. Business activity unexpectedly contracted in October. INSEE's consumer confidence index fell five points to 80, its lowest since 2013 and below every Bloomberg forecast. Assessments of past living standards hit their lowest since the series began in 1972, unemployment expectations rose to their highest since the pandemic, and household finance expectations were the gloomiest in four years. Snider links these to the protests and riots about the government's surging debt, six months before a presidential election. He sees the political crisis as a match igniting economic stagnation that had built up for years.
“What has happened is France has been shedding jobs for two years.”at 1:40
Eurodollar University: European Banks Just Did What They Do Before Every Crisis... ·
HSBC HoldingsBearish
HSBC's interest-income miss shows higher rates won't reliably lift bank earnings; its caution matters.
HSBC's pretax profit rose 32% to nearly $10 billion, but that was still below analyst expectations, and banking interest income of $11.9 billion also missed estimates. Investors had expected a more bullish outlook from the rate backdrop, and the shares fell as much as 7.5%. Goldman Sachs called the result slightly disappointing and warned that the rate environment may offer less benefit than expected. Snider argues this undermines the common view that higher rates unambiguously expand bank margins and income. Banks need viable projects, growing cash flows, reliable collateral and borrower confidence, and higher rates can reduce loan demand and raise default risk when conditions weaken. Because HSBC is a global institution with exposure across major economies, its caution is more significant, which is why he treats it as a warning against the simple rates-to-bank-profits story.
“If even HSBC can't deliver the expected benefit from higher rates, the simple story about rates and bank profitability, it has to be missing something.”at 2:52
Eurodollar University: European Banks Just Did What They Do Before Every Crisis... ·
French sovereign spreads at their widest since 2011 threaten banks indirectly through funding, valuations and defaults.
French government bonds have suffered historic turbulence, and the spread between French and German yields reached its widest since the 2011 euro crisis. BNP, Societe Generale and Credit Agricole together hold about $60 billion of French sovereign debt. Most analysts see the direct danger as limited, and Snider agrees that the bonds are not about to default. The larger risk is indirect: falling bond prices pressure bank portfolios, higher sovereign yields affect funding conditions and asset valuations, and political turmoil and weak consumer confidence reduce spending. A softer economy then damages borrower cash flows and raises future default probabilities. He argues French banks understand that their sovereign exposure cannot be separated from the surrounding economy, and that the higher yields reflect the premium investors demand for instability.
“That affects banks even without an immediate credit event. Falling bond prices pressures portfolios.”at 9:15
Eurodollar University: European Banks Just Did What They Do Before Every Crisis... ·
European banks are turning defensive: tightening credit and buying sovereign bonds, reflecting a credit-cycle downturn.
The ECB's access-to-finance survey shows a net 46% of firms reporting higher bank interest rates, but loan availability deteriorated faster than demand: a net 5% of firms reported reduced access to bank loans versus 1% the prior quarter, while only a net 2% reported lower financing needs. This widens a financing gap in the real economy, affecting both small and large firms. The ECB's bank lending survey shows banks tightening credit and citing worsening risk perceptions and lower risk tolerance, not just the policy rate. Meanwhile, euro-area banks bought nearly €30 billion of government bonds in September after July and August sales, and the buying likely understated because bond prices fell. Snider reads this as banks preferring liquid, collateral-eligible sovereign debt over private loans with credit risk, which is balance-sheet protection rather than deflationary behavior. He frames it as the same environment causing borrowers and lenders to reinforce each other's pullback, a credit cycle downturn that is also visible in the US and China. The French banks BNP, Societe Generale and Credit Agricole hold about $60 billion of French sovereign debt, and he argues they face scrutiny for this exposure.
“Europe's banks are seeing the opposite. They're tightening lending standards. They're reducing loan availability. They're reporting weaker demand and buying more sovereign debt. It's not deflationary behavior. It's balance sheet protection.”at 11:35
Eurodollar University: European Banks Just Did What They Do Before Every Crisis... ·
Europe has suffered a persistent growth shortfall since 2008; crisis-era policies have not repaired its credit mechanism.
Europe entered 2008 heavily dependent on bank financing, with fewer alternative channels such as deep corporate bond markets and securitization than the US. When European banks were impaired by the global financial crisis, the main credit mechanism was impaired with them. The 2011 European sovereign debt crisis was a second Eurodollar-style banking crisis, in which banks and governments weakened each other, and Europe fell back into recession without a strong recovery. The ECB's LTROs, negative rates, asset purchases, targeted lending and repeated QE were each labelled stimulus, but Snider argues that a policy that must be restarted, enlarged and renamed repeatedly probably is not repairing the mechanism it claims to fix. Europe has not had an uninterrupted official recession since 2008, but a persistent depression-like shortfall compounds into an enormous loss of living standards over fifteen or eighteen years, which underlies both French unrest and bank reluctance to lend.
“Europe fell back into recession and never established a strong recovery afterward. In fact, the recovery that everybody talked about has been one of the worst we've ever seen.”at 13:14
Eurodollar University: European Banks Just Did What They Do Before Every Crisis... ·
ECB rate hikes are misguided: higher rates destroy loan demand and borrower quality rather than fixing Europe's credit problem.
Central bankers keep insisting higher rates are needed because energy costs might generate renewed inflation, but banks are looking past that because they see higher costs already damaging demand, margins and borrower quality. Snider argues the ECB administers a short-term benchmark rate and does not command banks to finance a factory or approve a mortgage. Those lending decisions depend on expected repayment, collateral values, liquidity, funding markets and confidence. Higher rates can raise some interest income but can also destroy loan demand, raise funding costs, reduce asset values and create future problems. He argues the ECB's rate hikes reflect inflation-fighting credibility while a bank sees weaker cash flow, poor collateral and another reason to reject a marginal borrower. He also argues that central banks treat policy as if they control economic conditions, raising rates to slow the economy and cutting to speed it up, while the actual speed of the European economy never changes.
“Higher rates don't create good borrowers. They can increase interest income that's earned on some assets, but they can also destroy loan demand for other things.”at 15:06
Eurodollar University: European Banks Just Did What They Do Before Every Crisis... ·
AI infrastructure & data centers
AI builders' debt financing is closing; lenders need independent revenue, and the weakest neoclouds face failure.
Snider endorses Elon Musk's warning that debt markets have almost entirely shut off funding for any company without substantial revenue independent of AI data centers. More than 200 neoclouds, data center operators and AI labs sit beneath the hyperscalers and need the same GPUs, power, cooling, networking and long-term leases before the revenue exists. Lenders are therefore financing projected demand rather than cash flow already produced. SpaceX can reportedly raise GPU debt because of Starlink and launch revenue, and Meta can access markets because of its advertising business, but most AI borrowers lack those advantages. If lenders require independent revenue and demonstrated cash flow, the weakest neoclouds will consolidate, scale back construction or default. Snider frames the AI financing need as colliding with a broader credit cycle that is demanding smaller, more selective financing.
“If lenders now require independent revenue and demonstrated cash flow, the weakest Neo Clouds are finished. Many will be forced to consolidate, scale back construction, or just outright default.”at 3:05
Eurodollar University: Elon Musk Warns Banks Have STOPPED Lending to AI Companies ·
The credit downturn is broadening into investment-grade debt; spreads are widening and nearing red lines.
CCC spreads have surged above roughly 1,350 basis points, and distressed leveraged loans are approaching pandemic-era totals. Investment grade spreads are beginning to move higher, approaching the energy-shock levels and possibly exceeding the March and April 2025 tariff turmoil highs. Snider says the spreads are not at crisis levels yet, but they are closing in on red lines, and the direction, speed and growing breadth matter most. Loans trading below 60 cents, considered deeply distressed, rose to about $65 billion from $40 billion a year ago, the highest since March 2020. Broader distressed loans trading near 80 cents rose nearly 90% over the past year to about $139.8 billion, roughly $4 billion below the May 2020 high. Technology is about 39% of distressed loans, more than $54 billion. Stress began in private credit and low-quality junk, moved into leveraged loans and is now reaching higher-quality corporate debt just as AI financing needs collide with lender caution.
“But investment grade spreads have now begun moving higher, approaching the levels reached during the earlier part of the energy shock and maybe even moving above them to the tariff turmoil highs of March and April 2025.”at 4:56
Eurodollar University: Elon Musk Warns Banks Have STOPPED Lending to AI Companies ·
BroadcomBearish
Broadcom is increasingly financing its AI customers, a circular, dot-com-like arrangement that signals strain.
Broadcom's CEO reportedly intervened in weekend talks, accepting higher rates and giving lenders stronger protection after banks got cold feet on the roughly $63 billion Anthropic financing. Broadcom is providing residual value support because the banks were not comfortable relying on the chips as collateral. Earlier, Apollo and Blackstone announced another roughly $35 billion Anthropic chip financing deal with Broadcom protecting lenders, and Broadcom is reportedly seeking more than $50 billion to finance custom chips for OpenAI. The supplier is no longer merely selling equipment and is helping finance customers so they can keep buying its equipment. Snider sees this as uncomfortably circular and familiar from the dot-com era, and notes that supposedly the most important assets in the world still need supplier guarantees against losing value.
“The supplier isn't merely selling equipment anymore, is increasingly helping finance customers so those customers can keep buying its equipment.”at 7:19
Eurodollar University: Elon Musk Warns Banks Have STOPPED Lending to AI Companies ·
Private credit stress is deepening; listed private credit firms hit new lows as investors demand bigger discounts.
Publicly traded private credit companies are hitting new lows, and these stocks are among the few places where investors can continuously price concerns about an otherwise opaque market. Snider notes that the declines do not prove every private loan is impaired. They do show that investors are less willing to accept reported asset values, dividend promises and assumptions about future recoveries without demanding a much larger discount. Snider presents this as part of a broader credit downturn that began with tricolor lenders and private credit funds facing investor withdrawals and has since spread into leveraged loans and higher-quality debt.
“Their declines don't prove every private loan is impaired, but they show investors are becoming less willing to accept reported asset values, dividend promises, and assumptions about future recoveries without demanding a much larger discount.”at 8:47
Eurodollar University: Elon Musk Warns Banks Have STOPPED Lending to AI Companies ·
Meta PlatformsBearish
Meta's $98B equity raise signals AI build-out strain; negative free cash flow and huge commitments shift risk to shareholders.
Meta's planned equity program could raise about $98 billion, one of the largest ever. The upsized $25 billion common stock sale drew roughly five times the available shares, and Meta also sold $12.5 billion of mandatory convertible preferred and plans a large at-the-market program. Snider argues the oversubscription only proves Meta can still raise equity. The key question is why a company with Meta's profitability is issuing equity rather than funding the build-out from internal cash flow or ordinary debt. Meta's quarterly free cash flow was negative $2.12 billion versus positive $10.625 billion a year earlier, and future leases and non-cancelable commitments have climbed toward $825 billion. Selling equity transfers risk to shareholders and dilutes existing owners. Snider reads this as management recognizing that debt markets are increasingly sensitive to AI exposure, and asks what it implies for companies without Meta's advertising cash flow.
“By selling equity, Meta transfers more of the financial risk to shareholders, preserving balance sheet capacity, but also at the expense of diluting existing owners.”at 10:46
Eurodollar University: Elon Musk Warns Banks Have STOPPED Lending to AI Companies ·
CoreWeaveBearish
CoreWeave's debt-funded expansion is in distress; bonds and shares have collapsed as credit markets price default risk.
CoreWeave's bonds fell to distress levels this month, and its shares fell about 40% from October 6 through the prior Friday while major indexes hit record highs, with the damage spreading across the neocloud sector. Credit markets price a greater than 60% probability of default within five years. Demand does not automatically produce enough free cash flow to service the debt, because CoreWeave must secure chips and build data centers before customers' revenue arrives. If construction costs rise, deployment is delayed or customers negotiate lower prices, equity absorbs the first losses. Bondholders then worry, refinancing becomes more expensive when it is most needed, and a micro event becomes a sector event, then a credit event, then a macro event.
“Credit markets have priced a greater than 60% probability that CoreWeave defaults within five years.”at 14:07
Eurodollar University: Elon Musk Warns Banks Have STOPPED Lending to AI Companies ·
Rising fuel costs are shrinking airline capacity and demand, not just squeezing margins.
Snider argues that airline fuel costs are producing demand destruction: airlines cut productive capacity because they know their business, and the result is fewer flights rather than layoffs. Premium and business travel have held up because wealthy customers are still spending on a strong stock market. Airlines serving the bottom of the income distribution cannot raise fares to pass on fuel costs, so some routes are no longer profitable to fly. He reads the capacity cuts as a sign that airlines expect a weaker spring season.
“Yeah, that's the thing. It's demand destruction. Productive capacity shrinks because they know the business.”at 3:15
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
Wizz Air Holdings PlcBearish
Wizz Air's winter capacity cuts and pilot buyouts signal weak spring demand ahead.
Wizz Air, facing what it calls an unprecedented rise in fuel prices, is cutting winter capacity and offering buyouts to pilots at its main UK base. Snider reads this as demand destruction. He says it implies the airline does not expect spring travel to recover, which means a bigger winter trough and a weaker spring rebound. He presents it as an early example of an energy shock shrinking productive capacity. He also notes Wizz serves price-sensitive travelers who cannot absorb higher fares.
“when you offer buyouts to pilots... what you're really saying is we don't expect... the spring travel season to come back.”at 3:49
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
JetBlue AirwaysBearish
JetBlue's loyalty-backed bonds at 40 cents signal the market expects it may not survive.
JetBlue's stock hit its lowest level since its 2002 IPO. Bonds backed by its loyalty-program receivables fell from about 80 cents on the dollar in early October to about 40 cents. Snider says that price is normally associated with severe financial distress. Because the bonds are collateralized by loyalty-program receivables, he argues the market is pricing in a collapse of the loyal customer base before maturity. He concedes markets can be wrong but says the bond price implies a high expectation that JetBlue will not be in business.
“40¢ on the dollar is a high expectation that JetBlue is not gonna be in business.”at 8:39
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
Market-implied long-run inflation fell sharply, so oil-driven inflation is expected to fade.
Short-run TIPS breakevens rose slightly, but not enough to signal inflation. The 10-year breakeven fell. The 5-year, 5-year forward rate fell 15 basis points on one day, one of the largest one-day declines since it began trading about 25 years ago. Snider reads this as the market expecting oil to lift near-term CPI but then break the economy, so inflation rises briefly and then falls.
“What that says is the marketplace is saying, yeah, oil prices go up in the short run and then they start breaking stuff over the longer term.”at 12:56
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
The oil-driven energy shock is starting to break the economy through demand destruction.
Snider argues that higher oil prices are raising fuel, shipping and production costs at a moment when consumers and businesses are least able to absorb them, and the shock is colliding with high debt, weaker demand and deteriorating credit. He says oil is the worst form of economic redistribution: spending at the gas pump does not make the economy better off, and the money flows to oil producers who buy Treasuries. He says markets are increasingly pricing this demand destruction. He describes the anecdotes as lining up with the evidence already in hand.
“oil prices are the worst form of economic redistribution. We spend more money at the gas pump and the economy isn't better off for it.”at 13:32
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
Junk spreads have blown out while investment-grade spreads stayed calm, an unusually wide divergence.
CCC spreads are at roughly 1340 to 1350 basis points and screaming for attention. Investment-grade spreads, however, have stayed relatively calm. Snider says the ratio between CCC and investment-grade spreads has blown out to an unprecedented level, because investors treat junk-company stress as isolated while still believing the broader economy is resilient. He argues that this divergence is unsustainable and that investment-grade spreads, which correlate strongly with the VIX, are beginning to rise. He adds that if they converge with junk, that would signal trouble.
“CCC spreads, as I mentioned, those are through the roof... But investment grade spreads have been relatively calm and tame.”at 15:55
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
If investment-grade spreads keep rising, the VIX climbs and stocks will not hold up.
Snider argues the stock market is tied to the credit cycle. Investment-grade spreads correlate strongly with the VIX. If investment-grade spreads, which have risen over the last couple of weeks, keep rising and converge with junk spreads, volatility will climb. Investors will sell and buy protection, and stocks will fail to hold up. He links this to the economic story: when wealthy consumers pull back spending, the downturn becomes real.
“that's where you start to see the stock market really run into trouble... Stocks are not going to hold up.”at 16:55
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
A K-shaped economy: wealthy spending is propping things up, but it is at risk of pulling back.
Snider argues the economy has become K-shaped. Premium and business travel have held up because wealthy consumers are still spending, supported by the stock market near record highs. Those at the bottom of the K cannot absorb higher costs, and airlines serving them are being squeezed. Once wealthy customers tighten their spending, they will cut airline and other discretionary purchases. The result would be a substantial downturn in spending, which would push businesses into bigger adjustments.
“as wealthy individuals start to spend less on airlines, they're also going be spending less on other discretionary forms as well.”at 18:05
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
The US economy looks fragile, not resilient, and recession probabilities are rising.
Snider argues the economy was never resilient and that artificial factors made it look so, especially since the Iran conflict began in late February. The bond market had been pricing rate cuts and weakness before the energy shock. Once businesses realize the economy is fragile, they move from small adjustments to bigger ones, and cutbacks spread from airlines to other industries. He says this uncertainty is the downside of the cycle emerging. The market is not certain of a downturn, but the probabilities are rising and prices reflect that.
“the more and more you see this resilience as an illusion... It looks resilient from a certain perspective, but if you shift your perspective a little bit, it suddenly doesn't look resilient. It looks fragile.”at 20:56
Eurodollar University: Airlines Just Sent a TERRIFYING Warning About the Economy ·
Private credit stress is spreading: fund withdrawals are restricted and fund losses are mounting.
The first warning signs came from private credit funds restricting withdrawals, followed by investors rushing to redeem. Snider cites Bloomberg reporting that Arena Capital's master fund lost 6.9% in the first half of October after falling 15.7% through September. Sona Asset Management's main fund lost about 3.1% over two weeks, erasing its 2026 gains. Each manages over $20 billion, and neither had previously lost money over a full calendar year. He reads this as evidence that the long-running credit cycle is ending. He also says the full paper losses have not yet appeared because many firms have not reported updated numbers.
“Private credit funds restricted withdrawals, leveraged loans fell, CCC rated bond spreads surged to now well above 1,300 basis points,”at 0:09
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
Investment grade spreads are rising fast and the credit cycle is turning, not just stressing junk borrowers.
Stress began in the weakest parts of credit: CCC spreads passed 1,300bp and are about 1,340bp, up nearly 300bp since early September, while leveraged loans fell and private credit funds restricted withdrawals. Investment grade spreads had stayed calm, which Snider argues was the last holdout pricing a near-perfect outcome. They are now rising fast enough to move back toward the March–April 2025 tariff-turmoil highs. Snider says this is not yet a crisis, since the absolute move is modest next to CCC, but the direction and speed matter. Because the IG-junk divergence is historically extreme, he expects it to close, and a partial convergence could be violent. He also notes that IG borrowers depend on the same consumer demand and energy costs, so they cannot stay insulated.
“Investment grade spreads are rising quickly, moving back toward the levels reached during the tariff chaos of March and April twenty twenty five.”at 0:45
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
Equities are at risk because the extreme IG-junk spread gap must close, likely hurting stocks.
Snider argues the stock market has been ignoring credit stress because the junk problems look company-specific. Investment grade credit is different because it finances the large, systemically important companies that dominate equity indexes. The IG-junk divergence is historically extreme, and oil-driven margin pressure may force it to close. If it closes in the direction credit markets are pointing, he says equity indexes will not stay unaffected. He hedges that a stabilisation in IG spreads would let stocks keep looking through junk-market problems, and that a few days of widening does not guarantee a sell-off.
“that's got to close one way or the other, and if it closes in the same direction all the markets are continuing to point at, ... it is not going to be good for stocks.”at 1:54
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
A mechanical Fed response to energy-driven inflation could mean more hikes or higher rates for longer.
Snider argues that the energy shock pushes up gasoline, transport and production costs, and so headline inflation. If the Federal Reserve reacts mechanically to that rise, as he says it already has with one hike, it could raise rates again in the short run or keep them elevated longer. He presents this as a possibility rather than a forecast. He contrasts it with the bond market, which is looking past the next CPI print toward the damage to growth.
“And if the Federal Reserve reacts mechanically to that increase, which it already has with [one hike] in the books, it could raise rates again in the short run or keep them elevated for a bit longer.”at 5:18
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
Treasuries price the energy shock as later disinflation, not a new inflation regime.
Five-year breakevens rose on the oil-driven CPI jump, but ten-year breakevens fell toward about 230bp, which inverts the inflation curve. The five-year, five-year forward rate fell about 15bp on one Thursday, one of the largest one-day declines in the TIPS market's quarter-century history and the biggest since the August 2024 carry-trade blow-up. Snider says that if oil were expected to drive sustained income growth and self-reinforcing inflation, long-term compensation would rise. Instead it is falling, so the market is pricing the sequence of higher prices now and damage to demand later. Options flows favouring longer-dated Treasury calls, and the 10-year yield dropping below 5%, point to investors seeking safety rather than confidence in nominal growth.
“This is not what a market pricing a new inflationary regime looks like.”at 6:09
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
The energy shock is a tax that destroys demand, squeezing household and business budgets.
Snider argues higher energy costs create no income and only redistribute it. Households spend more on gasoline, utilities and transport without higher wages, so they cut restaurants, electronics, travel and other discretionary spending. Businesses face higher fuel, shipping and materials costs, and their ability to pass them on depends on customers having income. Oil raises CPI now but, by reducing household income, squeezing corporate margins and weakening demand, it produces lower inflation later. The energy shock is therefore disinflationary in the medium run after it has done its damage.
“higher energy costs don't create income, they redistribute it in the most harmful way possible.”at 10:35
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
Manufacturers cannot pass on energy-driven costs, so the economy is weakening and demand is fragile.
Snider cites the Kansas City Fed's manufacturing survey: raw material costs accelerated while finished goods price increases slowed. More than half of firms say customers have become more price sensitive, and 51% can pass through no more than a fifth of added costs. Backlogs and export orders have weakened. He calls this a margin squeeze, not a wage-price spiral, and admits it is only one anecdote, though he says it is consistent with the wider evidence. He reads it as a sign that a fragile economy cannot absorb the energy shock, which is why the damage is moving up the credit ladder.
“More than half say their customers have become more price sensitive, not less. 51% report they can pass through no more than one fifth of their additional costs.”at 11:27
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
Rising costs with slowing revenue will squeeze free cash flow and turn margin pressure into credit stress.
Snider argues that when revenue growth slows while costs rise, free cash flow deteriorates. Companies may respond by cutting investment and payrolls, or by borrowing more. The strongest borrowers can absorb this for a while, but the weakest cannot. The longer the energy shock lasts, the further the damage moves up the quality ladder. He connects the margin squeeze directly to the credit cycle turning.
“When revenue growth slows while costs rise, free cash flow deteriorates.”at 11:50
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
Investors are demanding more for bank AT1 and contingent capital, though a banking crisis is not imminent.
Snider cites the average spread on global contingent convertible bonds (COCOs), which rose to about 253bp after falling below 200bp in August and September. A Bank of New York Mellon preferred priced 32.4bp wider than a near-identical structure sold three months earlier. A new AT1 from Belfius was indicated below face value almost immediately, and BancoBPM's AT1 order book shrank during sales. Investors now demand more compensation for loss-absorbing bank capital that can skip payments or go unpaid. He says this does not signal a banking crisis, only that the margin for complacency is narrowing.
“The average spread in Bloomberg's multicurrency index of global contingent convertible bonds or COCOs has risen to approximately two fifty three basis points...”at 15:56
Eurodollar University: The Credit Cycle Just Flipped (The Stock Market Is Next) ·
105 older views from Jeff Snider are on the episode pages, and all of them are a question away in your AI with Chorus.
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