Baker says credit tightened in July with rising real yields, wider spreads, and mispriced Meta bonds.
“ cannot be skipped. The market will panic and recover repeatedly before an ASML order is ever threatened. The fourth narrative is the one that matters. Credit genuinely got tighter in July: real yields rose, credit spreads widened, a Meta bond priced below where a Meta bond should price, and CDS was ”
Baker explains Meta's compute rental was inspired by SpaceX selling clusters at massive premiums to contracted rates.
“What it was is they saw SpaceX have a big installed base of compute and sell some big trading optimized clusters into the market at a truly massive premium to these contracted rates.”