Capital Markets

the current federal funds target range is

3.5 - 3.75%

the 10-year is at

4.95%

3 reasons yields have risen

Treasury yields have moved sharply higher. The 10-year is just under 5%. I think the move reflects a combination of sticky inflation, the recent oil shock increasing inflation expectations, and some longer-term concern around Treasury supply and deficits. That's caused markets to price a more hawkish Fed as well.

august producer price index at

final demand prices rose 0.4% MoM and 5.4% YoY

fed’s personal consumption expenditure was elevated at

3.7% headline

august payrolls have increased

162,000

unemployment is at

4.1%

the consumer price index (CPI) is an

economic gauge tracking average price changes over time for a representative basket of everyday consumer goods and services

what do high rates mean for debt issuers

For debt issuers, the obvious impact is a higher all-in cost of borrowing because the risk-free base rate is higher. Depending on risk sentiment, credit spreads can widen as well. That can make companies delay issuance, shorten maturities, use private capital, or consider other structures if the public market isn't attractive.

what do high rates mean for equities

For equities, higher rates increase the discount rate applied to future cash flows, which generally pressures valuations, particularly for long-duration growth companies. Higher Treasury yields also make bonds relatively more attractive versus equities.

Rates rise 100 bps. What happens to debt?

New debt generally becomes more expensive because the Treasury base rate is higher. Existing fixed-rate bonds fall in price, with longer-duration bonds usually moving more. Floating-rate borrowers also see interest expense rise directly as the reference rate increases.

What happens when the Fed raises rates?

Floating-rate debt becomes more expensive immediately, refinancing generally becomes more expensive, and higher discount rates can pressure equity valuations.

What is a credit spread?

The credit spread is the additional yield an investor demands over a comparable risk-free Treasury to compensate for credit and liquidity risk.

Why might a company issue debt instead of equity?

Debt avoids shareholder dilution and can be cheaper, particularly because interest is tax deductible, but it increases fixed obligations and financial risk. Equity doesn't require contractual repayment but dilutes existing owners and is generally a more expensive source of capital.

when would you use a convertible?

A convertible can make sense when a company wants a lower coupon than straight debt and is willing to accept potential future dilution. It's particularly useful for growth companies where investors value the equity upside.

Why private credit instead of syndicated/public debt?

Private credit can offer speed, certainty of execution and more customized structures, particularly for complex situations. The trade-off is that it can be more expensive and potentially more restrictive than broadly syndicated financing

debt issuance observation

One thing I've been watching is the amount of investment-grade supply tied to AI infrastructure. Hyperscalers have issued roughly $220 billion over the past year. What's interesting is that fundamentals can still be very strong while enormous supply affects spreads and relative value because investors have to absorb so much paper.

CPI today

I thought it was a slightly hawkish report. Headline CPI was basically in line at 0.4% month over month, but core was a little hotter than expected at 0.3%. Energy, especially gasoline, drove a significant portion of the headline increase, but because core inflation also accelerated monthly, I don't think the Fed can dismiss the report as purely an energy story.

why capital markets?

• I went into Apollo pretty open-minded and wasn’t set on one particular product or path, but I realized the work I kept gravitating toward was how companies finance themselves and how those decisions change with the market.

• Every week, I updated debt capital structures and credit comps for our Industrials and Marketing Services screens. Watching different tranches, maturities and pricing move week to week made capital markets much more tangible to me. Financing depends on the company’s fundamentals, but also on where markets are trading and what investors are willing to fund.

• I saw the company side of that as well with a healthcare portfolio company preparing for an IPO while amending its ABL as its inventory and asset base evolved. After spreading five years of financials, I found myself more interested in the decisions behind the numbers: how much liquidity does the company need, what can it actually borrow, and what should the capital structure look like going into an IPO?

• I also diligenced two software investments that we ultimately passed on. That reinforced that raising or deploying capital isn’t automatically value-creating. You have to understand the business, the risk and what form of capital actually makes sense.

• That’s what draws me to Capital Markets: it sits at the intersection of understanding the company, the investor base and the market, and then using all three to determine how a business should finance itself.

• Moelis is especially compelling because the team is product-agnostic across public and private debt, equity and structured solutions. I like that you’re not starting with a product you need to sell. You’re starting with the client’s situation and figuring out the right answer across the capital structure.

why moelis

• The biggest thing for me is the culture of ownership and development. I’ve realized I grow fastest on lean teams where expectations are high and juniors are trusted with real responsibility.

• That’s something I’ve consistently heard about Moelis. This opportunity actually came to me through Jake Rattner and the team at Apollo, and it stood out to me that Jake started his career as an analyst at Moelis and is now an MD at Apollo. To me, that says a lot about the foundation you can build here early in your career.

• My conversation with Nicole reinforced that. What really stood out was the breadth of industries and products she’s been able to work across, rather than being narrowly siloed into one type of financing.

• That breadth is becoming even more interesting as the Capital Markets platform expands. For example, Moelis recently built out its securitization and structured-products capability. As a junior, the opportunity to see public and private debt, equity, and increasingly more specialized financing solutions is really compelling because I can develop judgment across the capital structure rather than just learn one product.

• The independence of the firm is the other piece that really resonates with me. At Apollo, I’ve spent time on the investor side thinking about risk and whether an opportunity actually merits capital. At Moelis, I’d get to understand the other side: build relationships with capital providers, understand what the market will support, and advise the client on the best solution rather than being tied to a particular product.

• So when I think about where I want to start my career, Moelis gives me the combination I’m looking for: real ownership early, broad exposure across financing solutions, and the chance to build judgment as an independent advisor.

what is going on in markets rn

What’s going on in the markets right now?

• Capital markets environment is very active but increasingly rate sensitive

• On the debt side credit fundamentals and investor demand is very strong

  • Heavy debt issuance for technology companies financing AI capex

• Underlying Treasury curve has sold off significantly

  • Fed at 3.5% and the 10-year approaching 5%

• Equity market at record highs and IPO/ECM market has reopened

  • Supported by strong earnings and investor appetite for AI infra growth

• Connection of the two markets is rates: if inflation/energy prices keeps yields elevated or force the Fed to hike further

  • Raises debt financing costs and puts pressure on equity multiples 

what are you following right now

What I find interesting about trade right now is that we're seeing a shift toward much more strategic and managed trade, particularly around industrial inputs and supply chains.

Copper is a good example. There is already a 50% tariff on certain semi-finished copper products, but the bigger question markets are watching is whether the U.S. implements the proposed 15% tariff on refined copper beginning in 2027. The expectation alone has mattered because importers have pulled copper into the U.S. ahead of a potential tariff, which has distorted global inventories and contributed to recent price volatility.

More broadly, I think the contrast between Canada and Europe is interesting. U.S.-Canada trade has become much more confrontational, with new U.S. tariffs and Canadian retaliation even though the two economies have extremely integrated supply chains. Europe, on the other hand, has moved toward a more negotiated framework where most EU imports face a roughly 15% U.S. tariff ceiling and the EU has reduced tariffs on U.S. industrial goods.

From a capital-markets perspective, I think the important part is what happens next. Tariffs affect input costs, margins, working capital and where companies invest, so changes in trade policy can ultimately change both capital allocation and financing needs.