Xin Lang Cai Jing·2025-11-18 03:36Core Viewpoint - The article discusses the growing trend among financial institutions to hedge against potential risks associated with the rising debt burdens of major tech companies, particularly in the context of the AI investment boom. This is exemplified by the actions of Boaz Weinstein's Saba Capital Management, which is selling credit default swaps (CDS) on companies like Oracle and Microsoft while banks are seeking protection against potential defaults [1][4][7]. Group 1: Market Dynamics - Financial institutions are purchasing CDS to hedge their positions in tech giants' bonds, indicating a rising concern over the potential for defaults amid increasing debt levels [2][4]. - The demand for CDS related to Oracle has surged, with trading volumes reaching approximately $4.2 billion in six weeks, significantly higher than the $200 million from the same period last year [4][5]. - The cost of CDS for Oracle and Alphabet has reached a two-year high, reflecting the heightened demand for credit protection in the tech sector [5]. Group 2: Investment Strategies - Saba Capital is actively increasing risk leverage by betting that credit defaults are unlikely to occur, contrasting with the broader market's cautious stance [2][5]. - The strategy employed by Saba may involve synthetic purchases of bonds from major tech companies, suggesting confidence in the stability of these firms despite market fears [8][9]. - Historical context shows that Weinstein has previously succeeded in similar strategies, indicating a potential for capital structure arbitrage in the current market [9].