Thumos-Maxxing

By Benjamin Picton, senior market strategist at Rabobank

US sovereign yields steadied yesterday as a 10-year bond auction saw strong investor demand. $39bn of bonds were sold with a high yield of 5.30% with a bid to cover ratio of 2.77x and low primary dealer takedown. The result signals that investors are beginning to view government debt as attractive at current levels and eased fears of a disorderly correction in bond prices that had been sparked by a poor 5-year auction in late September that saw the second-longest tail on record.

Relative valuations may be playing a role here as US equity indices pulled back from record highs. US equity market breadth is remarkably narrow, with AI-adjacent tech megacaps leading indices higher in recent times as many other sectors struggle for traction. The AI narrative had a wobble yesterday as SpaceX 5-year CDS spreads widened by 16.5bps to 197bps. That follows news that the company is seeking to raise $40bn in fresh debt financing to buy NVIDIA chips, with similarly large deals also in the works for Broadcomm ($50bn) and Oracle.

Markets were probably not reassured by comments published by the FT yesterday that “investors whom SpaceX has previously approached about financing its multibillion-dollar chip purchase said they only received a short two-page deal memo with pictures of outer space and an arrow pointing out that the company was going to build data centres “somewhere in the universe”.” The ambition is admirable, but for a market that is already running long on vibes this might have been a bridge too far.

Similar wobbles in the AI narrative have emerged Down Under as the Aussie market seeks to digest the initial float of data centre operator Firmus. Firmus had been seeking to raise $5.5bn at a valuation of approximately $30.5bn, which would have made it the second-largest IPO in Australian history, trailing only the privatisation of a public telecommunications monopoly in the late 1990s. The Australian Financial Review reports that the original offer price of A$11/share is now repricing closer to A$8.25/share as key local pension funds opted to pass on the float and demand from US long-only funds proved weaker than expected.

While US bonds were finding bids and investors were casting a more critical eye over the AI investment boom, European sovereign yields were again under pressure. French 10-year OAT yields were up by 11.8bps to 4.86%, Italian 10-year yields were up 9.7bps to 4.62% and Greek 10-year yields rose 8.9bps to 4.47%. Even the not-quite-European UK saw a sharp lift in borrowing costs, with 10-year gilt yields rising 6.8bps while Bunds bucked the trend to see yields finish slightly lower. The Wall Street Journal reports that France is considering issuing more short-dated debt; a fresh instance of a developed market economy behaving like an emerging market.

With the turmoil in European bonds ongoing, and riots across France generating unwelcome visual metaphors of people dining calmly as the streets burn, US Secretary of State Marco Rubio yesterday issued a rallying cry to Western civilization. He gave a speech in Athens with the Parthenon as the backdrop, urging the West to regain its Thumos, the “fire of passion, strength, courage, pride”. Rubio mounted a defense of nationalism, decrying the transfer of sovereignty to global bureaucracies. He argued that the West is now at a crossroads where decisions taken today will determine whether it remains pre-eminent or resigns itself to “atrophy and servitude and decline”.

SECRETARY RUBIO: This thumos, as the Ancient Greeks called it – the fire of passion, strength, courage, pride – is the heart of great civilization. Without it, nations lose their will to fight, to strive, to survive. https://t.co/r5hfm550Zw

— Department of State (@StateDept) October 7, 2026

According to Rubio, the US has chosen the former and is seeking to extend the frontier in advanced manufacturing, superintelligence, drones, weapons, warfare; chips, minerals, cyber, and “every other domain of human possibility”. Doubtless this is why recent calls from US tech CEOs to “pace the frontier” of artificial intelligence development were met with short shrift by the White House, and intrepid back-of-the-napkin risk taking is perhaps viewed more positively in the United States than elsewhere.

Rubio’s remarks were pointed directly at Europe, and particularly the European Union. The criticism of global bureaucracies reflects earlier criticisms in the US’s 2025 National Security Strategy where the US warned that Europe faces “civilizational erasure” and urged it to re-capture its civilizational self-confidence, stating clearly that the United States would seek to “cultivate resistance to Europe’s current trajectory” and lend support to “healthy nations” of Central, Eastern and Southern Europe.

These latter were widely interpreted as a pledge to support right-wing nationalist political movements on the continent in similar fashion to how the United States has (successfully) supported pro-US right-wing movements in South America. Newswires this morning are reporting that right-wing Brazilian presidential candidate Flavio Bolsonaro has won the support of four key centre-right parties ahead of a runoff vote against incumbent leftist Lula de Silva. Installing a more Washington-friendly (and perhaps China-unfriendly) government in Brasilia would be the last major piece of the puzzle for the Donroe Doctrine in South America, leaving only Canada as a problem to be solved in the Western hemisphere.

Rubio went on to say that there are emerging signs that Europe is beginning to awake from its “long slumber”, pointing to rising defense spending and the recent agreement over Greenland as examples of progress. He also pointed to expansion of production and manufacturing, though – perhaps politely – he declined to be specific in this area.

That’s as China yesterday rejected European calls to voluntarily limit exports of hybrid electric vehicles into the European market. It was hoped that China would agree to a soft quota that would reduce China’s share of the European market from 30% to 15%, and that the need for more overt trade restrictions to protect European industry and invite retaliation from the Chinese side might therefore be avoided.

Clearly, that is now unlikely to be the case. It’s worth noting that another broad policy ambition noted in the US National Security Strategy was “encouraging Europe to take action to combat mercantilist overcapacity…” Are we about to see that ambition realized through an assertive and self-confident European policy response? It would mark a departure from ten years of criticism of the United States doing exactly the same thing.