Premium"Markets May Not Wait": BofA Says AI Equity Vol Hasn't Caught Up With What Credit Already Knows
The bond market has been sounding the alarm about AI for months. The stock market, it seems, has had its headphones on.
That, in a nutshell, is the message of the latest Global Equity Volatility Insights note from BofA's equity derivatives team (available to pro subs), titled simply "The AI credit-equity disagreement." The bank's strategists (Benjamin Bowler et al.) find that as hyperscalers have turned into some of the biggest borrowers in the investment grade market, their bond spreads and CDS have blown out to the widest levels in at least five years... while their P/E multiples and implied vols have barely budged. Here is how they frame it: