Credit & Fed Desk: October 16, 2026
Good morning. It's Friday, October 16th, and you are listening to the Credit and Fed Desk.
Yesterday I told you I was watching three things. All three got answered overnight.
One. Fed Chairman Kevin Warsh took the stage in Bangkok last night and said nothing about interest rates. "I don't prejudge meetings," he said. Markets heard a hold. Per relays of futures pricing, the odds of an October hike fell to roughly 13 to 15 percent, from roughly 28 percent on Thursday.
Two. The spread data from Wednesday's AI credit rout are in, and they show the stress. The riskiest junk bonds, rated CCC and lower, hit a spread of 12.82 percent. That's a new high in the window I track. High yield widened to 325 basis points, the widest since the end of March.
Three. Volta, the roughly 5 billion dollar AI loan, got done. But it priced wide. Per Bloomberg, via public relays, it priced at SOFR plus 650 basis points, at 95 cents on the dollar. That's a yield above 11 percent.
Meanwhile, the bond rally kept going. The ten-year Treasury closed Thursday at 5.10 percent, its lowest close since September 22nd.
Show notes
- Fed: Warsh says nothing on rates at the IMF fireside in Bangkok ("I don't prejudge meetings"), calling AI "probably the most important thing happening in the global economy on the upside"; Timiraos projects September core PCE around 0.34% and 3.1% y/y; Bowman, Goolsbee and Daly preach patience before the blackout; October hike odds about 13 to 15%.
- Data and Treasuries: import prices up 1.1% in September and 8.1% y/y, the most since July 2022; industrial production up 0.7% with capacity use at 76.9%; the ten-year closes Thursday at 5.10, down 14 bp on the week, and the 30-year at 5.43.
- Credit: the roughly $5B Volta AI loan prices wide at SOFR+650 and 95, a yield above 11%; CoreWeave five-year CDS above 1,100 bp and tech default insurance at records; Wednesday's spreads show HY at 325, the widest since March 31, and CCC at 12.82%; Deutsche Bank's Jim Reid on respecting credit price action.
- Banks: Truist takes a $1.45B loss selling securities, M&T's AOCI falls $588 million, Regions and Citizens report, Schwab posts record core net new assets of $190.4B, and JPMorgan's Barnum on the AI sentiment reversal.
- AI finance and the week: Jensen Huang on bubbles, Hock Tan's "casino," the chip index's seventh straight down day, Slok war-games an AI crack; quick hits on the IEA reserve release, Brent 105.72 and gold 4,204.40; the week in one breath and the scoreboard with next week's calendar.