Is it nervousness around that? Because last week, we saw a lot of activity in Oracle's stock after its earnings report.

Yeah.

So it's worries that companies are borrowing a ton of money to sort of build out this infrastructure that they won't ultimately need because their AI projects might not work as ex- as expected.

Oracle's CDS has been sort of the bellwether for worries about AI and AI borrowing.

Trading in the company's CDS has more than doubled this year, and that trading really picked up after the company announced that it was going to be borrowing all this money.

That's one thing that I think is very notable for all of these companies, is that trading was maybe picking up a little bit this year prior to these bond announcements, but after the announcements that they were going to borrow record amounts of money, sort of between September and November, that's when this move really took off.

Is that the concern from investors now?

Investors are not worried that Meta is going to default on its bonds.

Okay, so Canada is one example, but what other countries' tax policies are considered, quote, "punitive" under this definition?

So there are countries across six continents, nearly all of the EU, the UK, Canada, Australia would all be immediately swept up in this.

This tax provision can be understood as a response to Pillar Two of the, uh, Organization for Economic Cooperation and Development, their tax framework.

So Pillar Two taxes were ones that increased taxes on big US corporations with a large presence abroad.

Meta, for example.

So any country that currently has any of the tax rules that are included in that Pillar Two would immediately be deemed unfair.

All right, but what about the crucial investors that are buying US government debt, you know, Treasuries?

So it's, it's a little bit ambiguous as to whether or not Treasury bonds would be taxed.

So, first off, why did Moody's downgrade the US credit rating?

The short answer is they are worried about the levels of US public debt.

So, the US has been borrowing a lot of money in recent years.

This really sort of ramped up after the pandemic and it's been exacerbated by tax cuts as well as additional spending.

And meanwhile, interest rates have been raised which adds to the debt pile.

So, the US has this yawning fiscal deficit and Moody's rating reflects a slightly elevated risk for default on that debt.

That risk is still really low, but what it means is, like, that there's, like, a little bit of, uh, of a risk added here.

So, i- is this kind of a wake-up call for the US government? I mean, uh, how much more of a runway does the US have before its widening budget deficit does actually start to really seriously harm the Treasury market in the long term?

How were some investors caught flat-footed?

After President Trump announced the tariffs on April 2nd, the market went into overdrive betting on a recession in the US as well as higher inflation.

And those bets kind of amounted to selling the dollar, selling US stocks, and moving into traditional safe havens, with the exception of Treasury bonds.

It was kind of what we were calling a Sell America trade.

What's happened is that those bets haven't really paid off.

We have seen stocks rise as we've seen these kind of climb downs from President Trump, as deals have gotten worked out.

And so what's happened this week, uh, is that a lot of traders were forced to cover their shorts and close out these positions that have been painful for the past month.

Uh, Kate, will people buy back into America and then, you know, potentially get caught flat-footed again? I guess what I'm asking is does this rebound show that there's confidence in America?

Do you think the global economy is out of the woods yet? You mentioned a lot of this reaction is to backward-looking data.

We are definitely not out of the woods.

You know, just because the effects of tariffs have not yet shown up in the economic data doesn't mean that they won't.

We know that a lot of companies in their earnings guidance have said that they have no idea sort of what to expect in coming quarters.

They've pulled guidance or they've offered sort of different scenarios, like United Airlines offered two different scenarios for their year ahead.

One was if tariffs stay in place, and one was if tariffs are dramatically reduced.

So there's a lot, a lot of uncertainty, and I think that investors may be buying the dip, may be trying to take advantage of some short-term moves right now, but I don't think that this is the end of the, the ructions in the market.

What does all the volatility from the past few months tell you about trading in the age of Donald Trump and Trump tariffs?

Uh, why the selloff then?

The market wasn't particularly excited about this because the data is stale.

It doesn't capture anything that has happened with tariffs in the past week or so.

So, markets are really kind of looking through this good inflation print and thinking, "Okay, it seems like we're going to have a bunch of inflationary policies coming in pretty soon, and that is more important than sort of backwards-looking data about inflation." And this is despite the fact that we have this pause on tariffs, right? We still have huge tariffs on China.

There still is a blanket 10% tariff across sort of trading partners.

And so, markets are looking at this and thinking, "Tariffs are higher than they were a week ago.

That will be inflationary.

So, Kate, I guess, what's the big picture takeaway here from all this? Does anything particularly stick out to you?