Michael Burry Warns Private Credit Market Poses Risk as U.S. 10-Year Yields Hit 4.68% on July 27

According to Michael Burry via Substack on July 27, the investor and subject of the film 'The Big Short' warned that private credit markets pose a potential risk to the financial system amid the artificial intelligence investment boom.

Burry highlighted that private equity-owned insurance companies have been significantly expanding their exposure to risky, illiquid credit products, including asset-backed securities (ABS) tied to AI data center and semiconductor rental contracts. He pointed to elevated U.S. 10-year Treasury yields—which have risen to 4.68%—as unsustainable for the leveraged private equity and private credit industries. If higher interest rates persist for extended periods, borrowing costs will increase and asset values will decline, raising the risk of default in these investment products and potentially triggering systemic financial risk if insurance companies incur major losses.