Bitcoin Surges Above $80,000 as Gold Gains on Treasury Buyback Bets

Broadcom's credit-default swap premium has surged to 120 basis points from 40 over the past few months, sparking concern in the bond market about the financing structures behind AI chip sales. This rise in CDS spread means it now costs around $120,000 a year to insure $10 million of Broadcom corporate bonds, triple the original cost.

However, the key issue is not Broadcom's absolute risk level but rather how quickly its perceived credit risk has increased relative to other major tech companies. The market is focused on Broadcom's involvement in a $35 billion financing arrangement backed by firms including Apollo Global Management and Blackstone, which provides funding for customer purchases of custom AI chips and server equipment.

Broadcom does not directly buy the equipment; instead, it rents computing resources held by a special purpose vehicle (SPV) and collects lease fees. The risk emerges if AI companies fail to monetize their businesses as hoped, leading to weakened SPV lease income and debt-servicing capacity. If Broadcom has provided guarantees or a backstop, it could face financing obligations just as revenue starts to slow.

In related news, Bitcoin surged about 22% last week, breaking above $80,000, while spot ETFs recorded net inflows of $1.92 billion. Expectations for further gains are building as institutional money flows into spot ETFs, a large short squeeze unfolds, and selling pressure eases.

Gold prices are also gaining on expectations that the U.S. Treasury's expanded long-term bond buybacks could lower Treasury yields and the dollar's value. The report said investors could hold as much as 10% to 15% of their portfolios in gold to guard against a debt crisis driven by rising government borrowing.