This is what I thought the TACO trade was.
From MarketWatch, March 29/30:
Wall Street might be coming for your lunch order
Wall Street is hungry for bonds backed by a welter of unconventional cash flows. Bond desks have already securitized revenue from data centers, student loans and fast-food franchise payments.
Now, your lunch order might be next.
Social-media platforms like X were flooded with memes about “burrito bonds” and “lunch-backed securities” in late March after Klarna Group Plc, the Swedish provider of buy-now-pay-later (BNPL) loans, filed paperwork to prepare for a U.S. public offering and also announced a partnership with DoorDash Inc. to offer interest-free financing on its platform for purchases of at least $35.
The memes, like the one below, suggest it could be only a matter of time before debt generated by the partnership finds its way into a security, given Wall Street’s history of turning simple things into something exotic it can sell to investors....***
...Many of these posts were made in jest. But a handful of experts, with years of experience structuring asset-backed securities at Wall Street banks or buying them for their firms’ portfolios, told MarketWatch that bonds backed by BNPL payment flows — including DoorDash orders — could soon become a regular thing. The appetite, they said, is certainly there.
‘Burrito bonds’
Representatives from DoorDash declined to comment on the possibility that loans generated by this partnership could wind up in bonds sold by Wall Street firms.
An individual familiar with Klarna’s thinking pointed out that a bond backed strictly by payment flows from the DoorDash deal probably wouldn’t be feasible, given the loan pool would need to reach critical mass first. In all likelihood, any BNPL-linked securities would likely include payment flows tied to a variety of merchants....
....MUCH MORE, they go deep into asset-backed securities.
Regarding the "Trump Always Chickens Out" trade, that might not be the way to bet as we get closer to the end of the 90-day pause.