SpaceX and a Z.1 (Q1 2026)
Doug Nolan
To visualize historic Bubble excess, a variety of Z.1 charts are available on the “Charts” page at the new website, thecreditbubblebulletin.com.
Also, Z.1 analysis with charts available on the site’s “Latest Z.1” page.
For posterity, SpaceX traded 522 million shares in its initial Friday trading session, gaining 19.2%, and inflating market capitalization to $2.105 TN.
By market cap, SpaceX trails only Nvidia, Alphabet, Apple, Microsoft and Amazon in the U.S.
The world has its first trillionaire.
“‘Praise the Lord’: Traders Feel Lucky to Get a Piece of Space X.”
“‘Manic Impulsiveness’ Drives SpaceX-Fueled Retail Risk Complex.”
“SpaceX’s Goldilocks IPO Just Changed Markets Forever.”
“Financials Up on Anticipation of Investment Banking Bonanza.”
“Goldman and Morgan Stanley to Pocket $100 Million Each In SpaceX IPO Fees.”
“The SpaceX Feeding Frenzy is Under Way.”
One would be hard-pressed to conceive of a more telling sign that a major market top is at hand.
At least SpaceX, Trump claims of an imminent Iran deal, and an impending quarterly options/derivatives expiration made for lively market dynamics.
The Semiconductors rallied 9.4% (up 89% y-t-d!), while the Nasdaq100 recovered 2.3%.
The Broker/Dealers surged 5.1% to within 1% of all-time highs.
Not to be left in the dust, the small cap Russell 2000 jumped 3.9% to close the week at a record high (up 18.6% y-t-d).
Curiously, the MAG7 Index dropped 2.5%, with losses from the May 29th high at 8.1%.
Crude was down 6% this week to a near three-month low.
The Bloomberg Commodities Index dropped 2.4% to the low since March.
It was almost enough to erase memories of Wednesday’s 4.2% y-o-y gain in May CPI, along with Thursday’s 6.5% y-o-y surge in PPI.
I would have expected more.
Ten-year Treasurys this week mustered only a five bps yield decline, to 4.48%.
I’ll note that 10-year yields closed the week 23 bps higher than when WTI last traded at the current level (April 17th).
The rates market closed Friday pricing a 3.82% policy rate for December, down less than six bps this week.
Understandably, an apprehensive bond market remains on inflation watch.
A $2 TN increase in perceived wealth (SpaceX) and all associated hoopla is not comforting.
Financial conditions indicators pointed to looser conditions this week.
High-yield CDS dropped 10 for the week to a near five-month low of 302 bps – and not far (13bps) from January’s multi-year lows.
Investment-grade CDS declined two, also near a five-month low.
“Broad Gains for Data Center-Heavy Week’s New US Junk Bonds.”
“76% of Week’s New US Investment-Grade Bonds Sold Trade Tighter.”
Wall Street is booming.
June 8 – Wall Street Journal (Sam Goldfarb):
“Funding rounds and IPOs raising 11-figure sums.
Blockbuster bond sales spanning three continents.
The casual announcement of an $85 billion equity raise.
Such is life on Wall Street at the dawn of the artificial-intelligence build-out.
Tech companies are hungry for cash to invest in data centers, and investors are forking it over through all possible means, in all parts of the globe—a flurry of fundraising that has mostly supported markets by powering technological advances, even as it tests their ability to absorb it all.
Alphabet’s announcement that it would raise $85 billion of equity was just the latest example.
SpaceX, Anthropic and OpenAI are poised for public listings that could make this year the biggest ever for money raised through IPOs.
Meanwhile, the AI hyperscalers Alphabet, Amazon.com, Meta Platforms, Microsoft and Oracle have issued $159 billion of bonds globally this year—up from $108 billion all of last year and just $17 billion in 2024…”
In such an extraordinary environment of excess, crosscurrents, and mounting fragility, it was helpful to have a new Z.1 (Q1) to sift through – data always good for illustrating where the rubber meets the road.
Or, more descriptively, these days where hot rubber meets overheated pavement.
This report sheds important light on historic Bubble developments.
Non-Financial Debt (NFD) expanded at a seasonally adjusted and annualized rate (SAAR) of $4.577 TN during Q1, up from Q4’s SAAR $3.829 TN - and significantly above Q1 25’s $2.706 TN.
This degree of Credit growth is categorically inflationary.
It’s worth noting that annual NFD growth averaged $1.874 TN during the decade 2010 through 2019. At SAAR $2.256 TN, the expansion of federal government borrowings accounted for roughly half of Q1 system NFD growth.
NFD expanded at a 5.67% rate during Q1, up from 2025’s 5.16%, which was the strongest growth back to 2022.
Corporate borrowings jumped to an 8.83% pace (double 2025’s 4.25%), the fastest pace since 2020.
In an ongoing historic inflation of government debt, Treasury Securities increased a nominal $572 billion during Q1 to a record $30.642 TN.
Treasuries expanded $2.194 TN over the past year – which would rank as the third largest annual increase.
For perspective, prior to the pandemic, post-crisis 2010 held the record for growth in Treasury Securities at $1.590 TN.
It’s also worth noting that Treasuries ended 2007 at $4.494 TN, about two years’ worth of current borrowings.
Treasury Securities inflated a staggering $14.023 TN, or 84%, over the past 25 quarters, and $26.148 TN, or 582%, since 2007 – expanding from 31% of GDP to 96%.
Including Agency Securities (up $74bn during Q1 to a record $12.562 TN), this ratio jumps to a record 136% of GDP.
As important as Washington’s unrelenting borrowing and spending binge has been, it’s recent financial sector ballooning that captures my analytical focus.
Massive financial sector leveraging is a powerful source of liquidity fueling booming securities market Bubbles.
The firing on all cylinders Domestic Financial Sector expanded borrowings SAAR $2.514 TN during Q1, up from Q4’s SAAR $481 billion, a blistering 9.87% pace, more than double 2025’s 4.21% growth.
Financial Sector assets rose $12.314 TN over the past year, or 8.5%, to a record $157.356 TN.
I’ll break with my typical routine and return to the banks, prioritizing the epic boom in market-based securities finance.
Broker/Dealer Assets inflated a booming $414 billion, or 26.4% annualized, during Q1 to surpass the previous high from Q1 2008, to a record $6.689 TN.
Broker/Dealer Assets rose $930 billion, or 16.2%, over the past year, and $2.265 TN, or 51%, over 14 quarters.
Broker/Dealer Repo assets (loans) rose $82 billion, or 16.5% annualized, to a record $2.072 TN, with six-month growth of $215 billion (22% annualized).
Repo Assets were up $741 billion, or 56%, over 14 quarters.
The asset “Loans” gained $34 billion, or 14.9% annualized, to a record $953 billion, with one-year growth at a blistering $210 billion, or 28.3%.
Miscellaneous Assets gained $199 billion during Q1 to a record $1.912 TN, with one-year growth of $276 billion, or 16.9%.
Broker/Dealer Debt Securities holdings jumped another $109 billion, or 33.6% annualized, to a record $1.408 TN, with one-year growth of $235 billion, or 20%.
Broker/Dealer Debt Securities surged $806 billion, or 134%, over a historic 14 quarters.
Treasury holdings rose $78 billion during Q1 to a record $620 billion, with 14-quarter growth of $394 billion, or 174%.
Up another $22 billion to $650 billion (matching the Q3 ’08 high), holdings of Agency Securities expanded $374 billion, or 135%, over 14 quarters.
How was such spectacular Broker/Balance sheet expansion financed, one might ask.
For Q1, Repo Liabilities surged $213 billion, or 30% annualized, to $3.041 TN – the high back to Q1 2008.
Repo Liabilities ballooned $343 billion, or 12.7% annualized, over the past year, and a noteworthy $1.427 TN (88%) over 14 quarters.
This move mirrors the mortgage finance Bubble period’s 16-quarter doubling, which inflated Repo liabilities to the all-time 2007 high of $3.132 TN.
Elsewhere (sort of), “Other Financial Businesses” – the old “Funding Corps” - (“Includes funding subsidiaries, custodial accounts for reinvested collateral of securities lending operations.”) rose $51 billion (14.8% ann.) to a record (surpassing Q4 ’08) $1.529 TN – with one-year growth of $205 billion (15.5%).
Funding Corp Assets have inflated a notable $900 billion, or 143%, since the end of 2019.
Total System Repo Liabilities surged another $293 billion, or 18% annualized, to $6.757 TN.
Joining the Broker/Dealer 30% annualized Q1 growth club, Rest of World Repo Liabilities jumped $154 billion to a record $2.206 TN.
Total System Repo Assets expanded $102 billion, or 4.9% annualized, to a record $8.341 TN.
Repos Assets expanded $1.239 TN over five quarters.
It’s worth mentioning that system Repo growth was reduced by the $109 billion contraction in the Fed’s Repo liability.
Money Market Fund Assets (MMFA) expanded yet another $99 billion to a record $8.290 TN.
MMFA surged $892 billion, or 12.1%, over the past year.
Over a historic 14-quarter monetary inflation, MMFA ballooned $3.205 TN, or 63%.
Over this period, money market funds increased holdings of Treasury securities by $2.170 TN (to $3.426 TN) and Agencies by $608 billion ($1.100 TN).
The MMFA largest holding, however, was Repos at $2.932 TN.
For Q1, Agency holdings jumped $87 billion, or 34% annualized, to a record $1.100 TN (up $198bn y-o-y, 22%).
By fund category, “government” funds gained 68% over 14 quarters to $6.756 TN.
While not at Wall Street’s intensity, the banking system is more than holding its own.
Bank (“Private Depository Institutions”) Assets surged $568 billion, or 7.8% annualized, during Q1.
Excluding the pandemic period, asset growth was second only to Q1 ’25 ($583bn).
Total Bank Loans expanded another solid $239 billion (5.7% ann.) to a record $16.906 TN.
Loans were $1.076 TN higher (6.8%) y-o-y.
This compares to 2007’s annual record of $826 billion.
It’s worth noting that “Loans not elsewhere classified” (chiefly business) jumped $234 billion, or 16% annualized, during Q1 to a record $6.067 TN (up 14.3% y-o-y).
Meanwhile, Mortgage loans added a tepid $29 billion (1.6% ann.), while Consumer Credit contracted $42 billion (6% ann.).
Banks’ Debt Securities holdings jumped $165 billion, or 10.3% annualized, to a 15-quarter high of $6.572 TN.
Treasury holdings jumped $88 billion, or 18% annualized, to a record $2.050 TN, with one-year growth of a notable $309 billion, or 17.7%.
Why are the banks such aggressive buyers of Treasuries?
Corporate Bond holdings rose $53 billion, or 23% annualized, to $958 billion.
On the Bank Liability side, Total Deposits jumped $409 billion, or 7.5% annualized, to a record $22.162 TN, the strongest expansion since Q3 ’21.
Total Deposits rose $1.014 TN, or 4.8%, over the past year.
Outstanding Corporate Bonds rose a solid $218 billion (5.2% ann.) to a record $17.071 TN ($646 TN, or 3.9%, y-o-y).
Interestingly, the booming financial sector saw outstanding bonds expand $125 billion, or 9.6% annualized, during the quarter to $5.330 TN (high since ’09).
Asset-backed Securities increased $38 billion, or 9.6% annualized, to a 13-year high of $1.622 TN.
Led by Treasuries, Total Debt Securities expanded $980 billion during Q1 to a record $66.163 TN, with one-year growth of $3.416 TN.
Over the past 26 quarters, Debt Securities inflated $22.430 TN, or 51%.
Debt Securities ended Q1 at 208% of GDP, up from previous cycle peaks 147% to conclude the nineties and 201% to end 2008.
With the war slamming stocks in March, Equities Securities declined $3.290 TN during the quarter to $106.893 TN.
Equities ended the quarter at 336% of GDP, up from previous cycle peaks, 188% (Q3 ’07) and 210% (Q1 2000).
Total (Debt and Equities) Securities ended March at 544% of GDP, compared to previous cycle peaks 376% (Q3 ’07) and 357% (Q1 2000).
The bloated household balance sheet is a principal Bubble manifestation.
Household Assets and Net Worth were little changed during Q1 (because of stock losses), though it’s worth noting the S&P500’s 14% return so far during Q2 – which equates to more than a $6 TN increase in Net Worth.
Despite the down Q1, Household Assets inflated $14.057 TN, or 7.4%, y-o-y to a record $204.540 TN.
With Liabilities up $686 billion y-o-y, Household Net Worth surged $13.371 TN y-o-y to a record $182.980 TN.
Household Financial Assets expanded $11.830 TN, or 9.1%, y-o-y, to $141.605 TN.
The Z.1 has a new Total Equities category, which includes stocks held both directly and indirectly.
Total Equities surged $8.879 TN, or 15.9%, y-o-y to $64.800 TN.
Over the past three years, Total Equities inflated $21.922 TN, or 51%.
And over three years, Debt Securities holdings jumped $1.019 TN, or 20%, to $6.129 TN.
During Q1, Household Total Deposits holdings rose $323 billion (8.8% ann.) to a record $15.105 TN.
Money Fund holdings gained another $90 billion (6.8%) to a record $5.419 TN.
Over the past year, Total Deposits jumped $455 billion (3.1%), and Money Funds surged $625 billion (13%).
Over 24 quarters of historic monetary inflation, Deposits ballooned $3.636 TN (31.7%) and Money Funds surged an incredible $2.683 TN (98%).
As such, Household Deposits and Money Fund holdings inflated $6.319 TN, or 45% over an incredible six-year period.
There is no mystery surrounding the resilient consumer sector.
The Rest of World (ROW) has been aggressively partaking in Bubble dynamics.
While down slightly during Q1, ROW Assets were up $8.607 TN, or 15.2%, y-o-y, to $65.180 TN.
For perspective, ROW Assets ended the nineties at $7.878 TN.
ROW U.S. Debt Securities holdings increased $118 billion during Q1 to a record $15.929 TN, with Treasuries increasing $46 billion (to $9.317 TN) and Agencies adding $10 billion ($1.424 TN).
Holdings of U.S. Corporate Bonds gained $59 billion ($4.909 TN).
But, as it is throughout, Repo is where the action has been.
ROW Repo Assets jumped $123 billion (31.4% ann.) to a record $1.690 TN, with Repo Liabilities surging $154 billion (29.9% ann.) to a record $2.206 TN.
Over four quarters, Repo Assets inflated $196 billion (13.1%) and Repo Liabilities $309 billion (16.3%).
Over 22 bubbling quarters, Repos Assets ballooned $830 billion (97%) and Repo Liabilities $1.000 TN (83%).
ROW U.S. assets inflated a staggering $26.465 TN, or 68%, over 22 quarters.
Rapid financial sector expansion ensures the perception of endless liquidity.
In particular, historic Broker/Dealer, Repo, money market fund, banking system, and ROW ballooning stokes Bubble excess while creating acute financial fragility.
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