The Bond Market Is Asking a Different Question

In SpaceX Bond Yields Rocket Towards Junk, FT Alphaville examines what has happened to SpaceX’s debt in the weeks since the company issued $25 billion in bonds.

“If you’d been allocated $100mn of the SpaceX 2056 bonds, you’ve turned $100mn into $90.7mn in less than a month.”

What I find interesting is the difference between the story told by the stock market and the one being told by the bond market.

Stock investors can bet on rockets, Starlink, artificial intelligence, Mars, and decades of future growth. Bond investors are primarily concerned with whether the company will make its payments and return their money.

The bond market is not necessarily smarter, but it asks a less imaginative and more immediate question: how much risk am I taking to get paid back?

When bonds issued as investment-grade debt begin trading at yields associated with junk bonds, the company’s ambitions have not changed. The price of financing those ambitions has.

Read the full article: SpaceX Bond Yields Rocket Towards Junk from FT Alphaville