GS Privorotsky GS Basics Rates Calm. Cost of Capital. TTF new Highs

GS Privorotsky - GS Basics Rates Calm. Cost of Capital. TTF new Highs 14 Oct 2026 Rich Privorotsky · Goldman Sachs · FICC & Equities 14 Oct 2026

Asia/ASML: Headline indices going nowhere, but plenty of chop beneath the surface as AI related concerns continue to build. Asia had been finding its

Asia/ASML: Headline indices going nowhere, but plenty of chop beneath the surface as AI related concerns continue to build. Asia had been finding its feet after yesterday’s sharp semiconductor underperformance. KOSPI was +1–2% after falling 5.5% yesterday but now small down, as had Samsung and Hynix but now fading post the initial take on ASML. Headline blowout numbers, raising lower end of 2026 guidance and highlighting extraordinary demand extending into 2029/30... becoming very clear that given the growth their experiencing they wont have enough capacity to meet customer demand. . But the sticking point is the lack of an upgrade to 2027 expectations. Given the recent pullback I would not have thought the bar is that high so we will watch to see how this trades but first glance market wanted a more meaningful upward reset to next year’s earnings (optimistic it is fine).

Rates: Williams yesterday lowering the temperature on 2027 hikes. Pretty clear message that this Fed wants to stay on hold in October unless absolutely forced to act. CPI today is the key litmus test, with consensus looking for 0.6% headline and 0.2% core. Interestingly, bonds have actually been rallying, rate vol compressing and some of the financial tightening of recent weeks beginning to reverse. The original source of much of the stress is getting easier, despite energy remaining elevated. Feels like very one sided positioning a tail wind + worries on the ex-AI underlying economy supportive (seen consumer confidence lately?).

Energy: Heating oil threatening to retest the highs. This is probably the price we should be watching most closely. Still no real solution to the distillate shortage, and Russian diesel exports are unlikely to change the near term equation materially. We remain in a real quagmire of refined products. European Gas took out the highs earlier in this week and now at 86 for TTF. This is both an inflation problem and increasingly an economic problem as higher fuel costs filter through the system. Politically not much new. Zelensky showing some willingness to engage, but little evidence that the odds of a Russia/Ukraine resolution have materially improved. Saudi escalation against the Houthis raises the risk of further retaliation against energy infrastructure, although the latest attack hit Aramco corp headquarters as opposed to actual Oil assets.

AI: Google’s Gemini 4 Argon is out and competing at the frontier across a remarkable range of benchmarks. You now have Anthropic, OpenAI, Google and Meta all genuinely in contention. Can’t remember a time when the frontier was quite so competitive. X floating hopes of Fable 5.5, although nothing confirmed. Anthropic’s closed door investor event today, so watch for headlines. The pace of

progress remains extraordinary, and the promise of recursive self improvement feels tantalizingly close. Hard to argue that underlying demand for intelligence isn’t accelerating rapidly.

Credit: CCC spreads around 1,250bp, over 200bp wider since September, while BB and single B have had very less dramatic widening. Some of this is idiosyncratic distress in legacy media, cable and building products. But notably HY has been widening in aggregate and at a very high level gigantic sovereign deficits and enormous demands to financing AI spending through 2028 create an unprecedented need for capital. At these yields there is a lot of paper competing. Not necessarily convinced AI crowding out is driving CCC weakness as that seems more idiosyncratic, but the broader issue is whether the cost and availability of capital become prohibitive for lower quality borrowers. There are a few in the AI vertical with notable increases in CDS that we should be watching. Think we need to be vigilant and watch for migration into single B, leveraged loans and primary issuance. If credit stress broadens, the implications extend well beyond AI to…