ABOUT THIS EPISODE
TL;DR: Energy-driven inflation is pushing borrowing costs higher, squeezing vulnerable airlines and AI infrastructure financing while exposing a possible Treasury futures feedback loop.
📄 Summary
Energy Inflation: The Root Constraint (00:02:30)
Matt Dines says September CPI rose 65 bps, with roughly 35 bps attributable to fuel costs. Refining and diesel constraints following 2026 geopolitical disruptions remain what he calls the “underlying story of 2026” (00:03:44).
U.S.-Russia Diesel Deal: A Policy Reversal (00:04:46)
Matt describes a new diesel import agreement, including temporary relief for Rosneft, Lukoil and other Russian energy firms through April 2027, as a sharp turn from October 2025 sanctions intended to isolate Russian oil supply. He argues the change in direction matters more than the near-term import volume (00:07:38).
JetBlue and the K-Shaped Consumer (00:09:10)
High-yield bond yields have reached an 18-month high. Higher jet-fuel costs collide with weak spending power among lower-income travelers: JetBlue bonds closed around 61 cents on the dollar (23% yield), while shares broke long-term $3.15 support. Matt sees bankruptcy as likely, illustrating the business cycle’s creative destruction and the potential loss of affordable flights (00:13:16).
High-Yield Issuance Divergence (00:22:33)
U.S. high-yield debt outstanding stands near $1.54T. Unusually, issuance has surged even as bond prices fall and yields rise, suggesting borrowers need capital despite deteriorating financing conditions.
CoreWeave: AI Growth Meets Credit Limits (00:25:40)
CoreWeave parent-level unsecured debt traded at 14–15% yields midweek and closed near 13.5%. Secured, equipment and customer-contract-backed financing remains available at lower costs, but uncontracted, speculative data-center expansion is becoming harder to finance. Matt says public debt markets have taken “the speculative phase” off the table (00:31:28).
* CoreWeave’s June backlog totaled $104B versus $35–39B in guided 2026 CapEx and roughly $12.4–13.2B in projected revenue. Delivering that backlog requires immense financing; greater responsibility could move to hyperscalers with stronger balance sheets (00:31:49).
Treasury Futures: The Negative-Convexity Vortex (00:39:20)
Harley Bassman warns December ZB Treasury futures have become negatively convex for the first time since 2007. In two illustrative 70-bp rate scenarios, the cheapest-to-deliver bond shifts from ~11 duration at a 4.98% 20-year yield to ~17.5 at 6.38%. Rising yields could therefore increase portfolio DV01, trigger defensive duration selling, and push yields still higher (00:46:16).
* Matt estimates a possible $129M per basis point in added risk, equivalent to absorbing ~$110B in long-dated Treasuries, and connects the concern to discussion of curtailing 20-year auctions. This is a scenario to watch, not his base case (00:49:33).
Q4 Outlook and Pax Silica 100 Launch (00:56:02)
Energy inflation, Fed tightening, higher sovereign yields and corporate credit stress reinforce one another. Matt sees potential catalysts to resolve some bottlenecks before year-end, concluding “something will give” (00:59:36). He also introduces the Mine Print Hash Pax Silica 100 Index, grouping 100 companies across 11 strategic resource, technology, defense and supply-chain segments (00:59:56).
🔑 Key Takeaways
* Energy constraints connect CPI inflation, Treasury term premiums, credit stress and AI CapEx pressure.
* Watch JetBlue and CoreWeave for evidence of capital being withdrawn from marginal borrowers; AI adoption may outlast speculative financing.
* Monitor the 20-year yield, ZB cheapest-to-deliver dynamics, duration hedging and Treasury auction plans for self-reinforcing selloff risk.
* The Pax Silica 100 provides a framework for tracking the longer-term U.S.-led industrial and supply-chain buildout.
📱 Social Media
* Mine, Print, Hash: https://x.com/MinePrintHash
* Matt Dines: https://x.com/LeveredUSTs
* Cameron Otsuka: https://x.com/CameronOtsuka
🔗 Links
* 🎧 Subscribe to Mine, Print, Hash: https://api.substack.com/feed/podcast/3184485.rss
* 🌎 Build Asset Management: https://getbuilding.com
* ⚓ Build Bond Innovation ETF: https://bfix.fund
* 📈 Build Secured Income Fund I: https://buildbitcoin.com
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