1 00:00:17,840 --> 00:00:20,560 Speaker 1: Hello, Welcome to the Credit Edge Weekly Markets podcast. My 2 00:00:20,640 --> 00:00:23,880 Speaker 1: name is James Crombie. I'm a senior editor at Bloomberg and. 3 00:00:23,960 --> 00:00:28,120 Speaker 2: I'm totally Alamuto, a senior analyst at Bloomberg Intelligence. And 4 00:00:28,240 --> 00:00:31,680 Speaker 2: this week we are very pleased to welcome Greg Pesk, 5 00:00:31,760 --> 00:00:36,560 Speaker 2: who is the CIO for Global fixed Income at Amundi. 6 00:00:36,760 --> 00:00:39,519 Speaker 2: How are you Greg today, I'm day fine, I'm you 7 00:00:40,440 --> 00:00:43,640 Speaker 2: I'm not too bad. Enjoying the weather here of course, 8 00:00:44,000 --> 00:00:49,360 Speaker 2: of course anyway, Amundi is Europe's largest asset manager, with 9 00:00:49,720 --> 00:00:55,000 Speaker 2: two and a half trillion dollars worth under under management, 10 00:00:55,240 --> 00:00:58,160 Speaker 2: and for now at least a Mundi is the only 11 00:00:58,280 --> 00:01:02,400 Speaker 2: European name in the global top ten. Amundi has been 12 00:01:02,480 --> 00:01:07,240 Speaker 2: called Europe's answer to black Rock, and Greg has been 13 00:01:07,360 --> 00:01:10,240 Speaker 2: Amundi basically since it's very beginning. He was head of 14 00:01:10,240 --> 00:01:12,840 Speaker 2: credit at SoC Gen Asset Management prior to that, and 15 00:01:12,880 --> 00:01:16,600 Speaker 2: he's got extensive experience clearly in credit, so he is 16 00:01:16,680 --> 00:01:19,600 Speaker 2: definitely the go to person to go to for all 17 00:01:19,680 --> 00:01:21,160 Speaker 2: things fixed income. 18 00:01:21,760 --> 00:01:23,319 Speaker 1: Thanks for being here. I just want to start with 19 00:01:23,360 --> 00:01:26,160 Speaker 1: them the AI and tech story which is really dominating 20 00:01:26,160 --> 00:01:28,720 Speaker 1: the headlines this week. We have SpaceX out with a 21 00:01:28,800 --> 00:01:32,360 Speaker 1: huge debut bond deal, rated investment grade and the hyperscale 22 00:01:32,400 --> 00:01:35,000 Speaker 1: as are rapidly changing the face of the corporate bond market. 23 00:01:35,400 --> 00:01:36,520 Speaker 3: But as a large. 24 00:01:36,400 --> 00:01:39,200 Speaker 1: Investor, Greg wat do you just have to buy this? 25 00:01:39,280 --> 00:01:39,440 Speaker 2: Now? 26 00:01:39,480 --> 00:01:40,200 Speaker 1: What's the impact? 27 00:01:41,720 --> 00:01:45,280 Speaker 4: Well, first, there are a lot of I think as 28 00:01:45,319 --> 00:01:50,440 Speaker 4: always a lot of concern about AI, the happy gross 29 00:01:50,440 --> 00:01:56,360 Speaker 4: of Kapex, the issuance, the buy back, and a lot 30 00:01:56,400 --> 00:01:59,160 Speaker 4: of you know, parallela are being done with the TMT, 31 00:02:00,360 --> 00:02:03,840 Speaker 4: you know story from ninety eight and the liberalization of 32 00:02:03,880 --> 00:02:06,040 Speaker 4: telcos and so on. I think we are in a 33 00:02:06,080 --> 00:02:10,640 Speaker 4: completely different, completely different world. Back in the twenties, you know, 34 00:02:11,000 --> 00:02:15,280 Speaker 4: seventy percent of the Hagen market was the TMT. Here 35 00:02:15,320 --> 00:02:18,320 Speaker 4: we are with issue and that most of them are 36 00:02:18,639 --> 00:02:21,519 Speaker 4: investment had or even double A. And you know that 37 00:02:21,600 --> 00:02:25,919 Speaker 4: we have very few double A in the corporate board market. 38 00:02:26,000 --> 00:02:29,480 Speaker 3: So I wilcome in fact this new assience. 39 00:02:29,480 --> 00:02:33,000 Speaker 4: It will increase in fact the quality, It will increase 40 00:02:33,040 --> 00:02:35,880 Speaker 4: the number of efficients, it will increase the liquidity of 41 00:02:35,919 --> 00:02:38,680 Speaker 4: the market, your ability to do relative value. They are 42 00:02:38,720 --> 00:02:41,920 Speaker 4: issuing on the whole curve, on different cuencies, so you 43 00:02:41,960 --> 00:02:43,840 Speaker 4: can do cross currency, you. 44 00:02:43,800 --> 00:02:46,120 Speaker 3: Know, type of relative value. So I think it's a 45 00:02:46,240 --> 00:02:46,960 Speaker 3: very good muism. 46 00:02:47,760 --> 00:02:54,519 Speaker 4: I'm not really worried about the impact on interm efficients historically. 47 00:02:55,040 --> 00:02:56,600 Speaker 4: I need to update this because I did it a 48 00:02:56,600 --> 00:03:00,280 Speaker 4: long time ago. But you had more positive coalition when 49 00:03:00,280 --> 00:03:04,360 Speaker 4: you had the high level officients with a performance of 50 00:03:04,400 --> 00:03:08,320 Speaker 4: a credit market, because it means that you know liquidity 51 00:03:08,400 --> 00:03:11,040 Speaker 4: is there, people are ready to buy, so usually it 52 00:03:11,680 --> 00:03:16,160 Speaker 4: goes well for the performance of credits. It's more the 53 00:03:16,200 --> 00:03:18,240 Speaker 4: reverse when there's a squeeze in the market to have 54 00:03:18,280 --> 00:03:20,160 Speaker 4: no issuanes that you can start to worry. 55 00:03:20,240 --> 00:03:23,119 Speaker 3: So me, I think it's a it's a good news. 56 00:03:22,919 --> 00:03:26,520 Speaker 4: And we had additional good news very recently and that's 57 00:03:26,560 --> 00:03:32,679 Speaker 4: surprised to bid the market. Also, many companies doing right issues. Previously, 58 00:03:32,720 --> 00:03:34,960 Speaker 4: we are used to buy back. I remember I think 59 00:03:35,040 --> 00:03:37,200 Speaker 4: last year I think just I was checking this with 60 00:03:37,280 --> 00:03:38,200 Speaker 4: one of my guys. 61 00:03:38,560 --> 00:03:41,640 Speaker 3: During one quarter we had more than fifty billion of 62 00:03:41,760 --> 00:03:43,240 Speaker 3: buy backs. 63 00:03:43,840 --> 00:03:46,640 Speaker 4: Now this is more like twenty and I think we 64 00:03:46,680 --> 00:03:48,960 Speaker 4: will go to zero or maybe they will issue. 65 00:03:49,560 --> 00:03:51,600 Speaker 3: So also for bone Holder, it's a good news. 66 00:03:52,240 --> 00:03:54,080 Speaker 1: Are you're talking about You're talking about that buy that's 67 00:03:54,080 --> 00:03:54,840 Speaker 1: not stop man. 68 00:03:55,840 --> 00:03:59,240 Speaker 3: Yeah, I'm going about stock stock buy back. 69 00:03:59,560 --> 00:04:03,120 Speaker 4: Okay, So at the very beginning, people saw that they 70 00:04:03,320 --> 00:04:06,920 Speaker 4: were doing this because there is going. 71 00:04:06,720 --> 00:04:09,600 Speaker 3: To be even more capext than what they communicate so far. 72 00:04:10,280 --> 00:04:12,520 Speaker 4: But it's in fact not I think it's just for 73 00:04:13,000 --> 00:04:15,400 Speaker 4: the balance of you know, funding and. 74 00:04:15,320 --> 00:04:18,840 Speaker 3: To manage well the. 75 00:04:18,040 --> 00:04:21,840 Speaker 4: Average cost of capitola. So for me, you know, most 76 00:04:21,880 --> 00:04:26,080 Speaker 4: of them Africa Shop positives. It's more like a good news. 77 00:04:26,120 --> 00:04:29,800 Speaker 4: It's a very good news, I think AI and we 78 00:04:29,880 --> 00:04:32,159 Speaker 4: will not participect in all of them, but I think 79 00:04:32,240 --> 00:04:34,960 Speaker 4: we will. We will have some exposure and at least 80 00:04:35,320 --> 00:04:39,560 Speaker 4: you increase your opportunity sets in terms of doing more 81 00:04:39,600 --> 00:04:42,080 Speaker 4: bottom up, in terms of doing our relatively, so I 82 00:04:42,120 --> 00:04:43,800 Speaker 4: think it's it's very positive. 83 00:04:45,520 --> 00:04:49,159 Speaker 2: About how easy then to pick the winners from the losers, 84 00:04:49,160 --> 00:04:51,440 Speaker 2: because as you just said, you don't participate in all 85 00:04:51,520 --> 00:04:53,760 Speaker 2: of them. I guess that was one of the issues 86 00:04:53,800 --> 00:04:57,760 Speaker 2: with the tech Boom members that people couldn't necessarily say 87 00:04:57,760 --> 00:05:00,560 Speaker 2: who was going to survive through all that happened? Then 88 00:05:00,839 --> 00:05:02,839 Speaker 2: is it easier now, you would say than it was? 89 00:05:02,880 --> 00:05:05,880 Speaker 4: Then it's it's easier because as I said in the 90 00:05:06,000 --> 00:05:07,880 Speaker 4: in the during the TMT, many of. 91 00:05:07,800 --> 00:05:12,440 Speaker 3: Them were h and so the race were higher. 92 00:05:12,880 --> 00:05:16,120 Speaker 4: Here again we are we are dealing with many or 93 00:05:16,160 --> 00:05:20,039 Speaker 4: most of them. Africa's propositive, so I think it's I 94 00:05:20,080 --> 00:05:22,520 Speaker 4: would say it's it's safer at least for Ubon holder. 95 00:05:22,920 --> 00:05:26,599 Speaker 4: Is it easier to make money and to generate alpha 96 00:05:26,640 --> 00:05:29,400 Speaker 4: out of it? I think you al faced the similar 97 00:05:29,680 --> 00:05:32,560 Speaker 4: type of you know challenge. It's a bottom up skills, 98 00:05:32,960 --> 00:05:35,280 Speaker 4: so you need to buy at the right time to 99 00:05:35,600 --> 00:05:37,640 Speaker 4: time a bit the market. It's true that when you 100 00:05:37,720 --> 00:05:41,880 Speaker 4: have an avalanche of new issues, you have a bit 101 00:05:42,040 --> 00:05:45,440 Speaker 4: more time, maybe two or different you will have different 102 00:05:45,480 --> 00:05:49,719 Speaker 4: opporortimities to UH to enter the market. So I think 103 00:05:49,760 --> 00:05:54,159 Speaker 4: it's not it's easier because the quality of the issues 104 00:05:54,400 --> 00:05:56,840 Speaker 4: are easier. So for people that are a bit on 105 00:05:56,880 --> 00:05:59,840 Speaker 4: the on risk adverse, I think they can have some 106 00:06:00,080 --> 00:06:03,719 Speaker 4: or comfort. But for a portfolio manager that is just 107 00:06:03,920 --> 00:06:07,120 Speaker 4: looking to extract the excess return, I think it's I 108 00:06:07,160 --> 00:06:09,200 Speaker 4: would say the business as as usual. 109 00:06:09,480 --> 00:06:10,719 Speaker 3: It's a business as usual. 110 00:06:10,800 --> 00:06:15,000 Speaker 4: You you have more or maybe a premium that is 111 00:06:15,040 --> 00:06:18,960 Speaker 4: still attached and historically has been attached to technological risk. 112 00:06:19,839 --> 00:06:22,400 Speaker 4: So that's the reason why you could expect some curve 113 00:06:22,440 --> 00:06:27,760 Speaker 4: that are a bit steeper or but cleared. Also opportunities 114 00:06:27,760 --> 00:06:30,880 Speaker 4: because you know that many investors like by an old 115 00:06:30,880 --> 00:06:35,200 Speaker 4: investor or insurance company are always very reluctant to buy, 116 00:06:35,240 --> 00:06:40,080 Speaker 4: certainly your bounder. So it's a different type of approach 117 00:06:40,800 --> 00:06:43,520 Speaker 4: whereby you probably need to be a bit more tactical 118 00:06:43,920 --> 00:06:46,080 Speaker 4: on the on the long en or everything that is 119 00:06:46,120 --> 00:06:49,560 Speaker 4: still your plus and then it's more a classical type 120 00:06:49,600 --> 00:06:53,960 Speaker 4: of its approach for everything that is more shortened or 121 00:06:53,960 --> 00:06:55,360 Speaker 4: the belly of the curve. 122 00:06:56,320 --> 00:06:58,039 Speaker 1: So you don't worry them that it's just way too much, 123 00:06:58,080 --> 00:07:00,680 Speaker 1: too fast. And you know the number of the perlatives, 124 00:07:00,720 --> 00:07:02,640 Speaker 1: you know, people just reaching for the skies in terms 125 00:07:02,640 --> 00:07:04,280 Speaker 1: of you know, how great this could all be, how 126 00:07:04,279 --> 00:07:07,600 Speaker 1: transformative it is. How you know the investors that there's 127 00:07:07,600 --> 00:07:09,520 Speaker 1: no end to what they might support in terms of 128 00:07:09,520 --> 00:07:11,920 Speaker 1: the infrastructure build out we're talking of, you know, going 129 00:07:11,960 --> 00:07:15,000 Speaker 1: into space and doing it, going to Mars. Someone earlier 130 00:07:15,000 --> 00:07:18,480 Speaker 1: on Bloomberg Television described as the Italian renaissance. You know, 131 00:07:18,480 --> 00:07:21,920 Speaker 1: I've just just you know, whenever I hear such a brilliance, 132 00:07:22,120 --> 00:07:22,960 Speaker 1: I worry a little bit. 133 00:07:23,520 --> 00:07:25,920 Speaker 4: I'm I'm a big fan ofsance, but it's not the 134 00:07:25,960 --> 00:07:28,880 Speaker 4: big the big today, but in fact not where where 135 00:07:28,920 --> 00:07:31,960 Speaker 4: it's I think it's very important is that were first 136 00:07:32,000 --> 00:07:34,640 Speaker 4: on this particular point on AI, as I said, I'm 137 00:07:34,680 --> 00:07:38,360 Speaker 4: quite I'm quite comfortable there will be some disruption. You 138 00:07:38,480 --> 00:07:41,840 Speaker 4: saw already, you know how the software industry has been 139 00:07:41,840 --> 00:07:45,360 Speaker 4: a bit challenge and impacted. But yesterday we had for 140 00:07:45,400 --> 00:07:48,520 Speaker 4: the first time one company that you should head bonder 141 00:07:48,680 --> 00:07:50,760 Speaker 4: and this was a company that was supposed to be 142 00:07:51,760 --> 00:07:55,120 Speaker 4: a victim of AI. And I think the market is 143 00:07:55,160 --> 00:07:57,480 Speaker 4: always going from one extreme to another. So we start 144 00:07:57,520 --> 00:08:02,120 Speaker 4: to see positive sign both with the right issue from hyperscalor, 145 00:08:02,200 --> 00:08:05,920 Speaker 4: but also with companies in the software industry that have 146 00:08:06,360 --> 00:08:11,240 Speaker 4: now access to liquidity again where people reaccessed and finally 147 00:08:11,280 --> 00:08:15,280 Speaker 4: it could be also an opportunity for software industry. However, 148 00:08:15,400 --> 00:08:18,240 Speaker 4: you will probably see as you said, the AI and 149 00:08:18,360 --> 00:08:21,240 Speaker 4: innovation it always comes with you know, it starts to 150 00:08:21,240 --> 00:08:24,280 Speaker 4: spread and it will spread everywhere. Like it's the theory 151 00:08:24,280 --> 00:08:28,160 Speaker 4: you know, Shumpetter where innovation by grapes, it's real innovation 152 00:08:28,320 --> 00:08:30,680 Speaker 4: is going to spread everywhere, and that's the reason why 153 00:08:30,960 --> 00:08:32,599 Speaker 4: we should create growth. 154 00:08:32,360 --> 00:08:32,760 Speaker 3: At the end. 155 00:08:33,440 --> 00:08:37,400 Speaker 4: So we will have probably negative headline or stories about 156 00:08:37,480 --> 00:08:42,320 Speaker 4: now it will be maybe healthcare, biopharma, other type of 157 00:08:42,559 --> 00:08:46,400 Speaker 4: sector that will start to experience maybe more vel at 158 00:08:46,480 --> 00:08:50,360 Speaker 4: it because people will say air is going to disrupt 159 00:08:50,360 --> 00:08:54,240 Speaker 4: against this business model, So it will spread from one 160 00:08:54,240 --> 00:08:58,760 Speaker 4: sector to another as I get wider. But at the end, 161 00:08:58,800 --> 00:09:01,160 Speaker 4: I think it's it's good news. Of course, you will 162 00:09:01,200 --> 00:09:03,439 Speaker 4: have probably some companies that will have to revise their 163 00:09:03,600 --> 00:09:06,440 Speaker 4: business model and the where they operate. But at the end, 164 00:09:06,520 --> 00:09:09,560 Speaker 4: if we really think it's a renaissance, I think everybody 165 00:09:09,559 --> 00:09:11,800 Speaker 4: should benefit from a from it, or. 166 00:09:11,800 --> 00:09:13,080 Speaker 3: At least gross overall. 167 00:09:13,160 --> 00:09:15,319 Speaker 4: But growth over all means there will be on average, 168 00:09:15,320 --> 00:09:17,920 Speaker 4: there will be winner, but there will be some some 169 00:09:18,000 --> 00:09:18,440 Speaker 4: of theirs. 170 00:09:19,800 --> 00:09:22,920 Speaker 2: One of the words you mentioned earlier, which I currently 171 00:09:23,120 --> 00:09:27,640 Speaker 2: with avalanche issuance, right. So it is then more than 172 00:09:27,720 --> 00:09:31,040 Speaker 2: a risk that you get to a point where there's 173 00:09:31,080 --> 00:09:36,840 Speaker 2: sound indigestion if you like, because the rise in capex 174 00:09:36,920 --> 00:09:39,480 Speaker 2: is greater than people anticipate and so on, and so 175 00:09:39,840 --> 00:09:45,640 Speaker 2: the market isn't basically there to absorb this the volume 176 00:09:45,800 --> 00:09:48,720 Speaker 2: evisians that you see coming out of these. 177 00:09:49,880 --> 00:09:52,160 Speaker 4: It can happen, I'm not sure it can happen to 178 00:09:52,200 --> 00:09:56,120 Speaker 4: the extent that it will, you know, disrupt completely the market. 179 00:09:56,440 --> 00:09:57,920 Speaker 3: We we sold, so I. 180 00:09:57,880 --> 00:10:04,679 Speaker 4: PERSCT having access to securitized you know market, so they 181 00:10:04,679 --> 00:10:06,400 Speaker 4: have different source to fun. 182 00:10:06,679 --> 00:10:09,400 Speaker 3: Maybe that's the reason why. I also the rest equity, 183 00:10:10,360 --> 00:10:11,079 Speaker 3: so they have. 184 00:10:11,760 --> 00:10:15,520 Speaker 4: An ample way and different sources of funding here. So 185 00:10:15,880 --> 00:10:18,360 Speaker 4: I'm not sure it will it will wait. 186 00:10:20,000 --> 00:10:21,440 Speaker 3: Too too much. 187 00:10:21,760 --> 00:10:24,440 Speaker 4: We know they are markets that are maybe too smaller 188 00:10:25,720 --> 00:10:29,520 Speaker 4: to attract repetitive new issue. But on the dollar market, 189 00:10:29,720 --> 00:10:32,280 Speaker 4: on the your market, I think there are still some 190 00:10:32,280 --> 00:10:32,760 Speaker 4: some rooms. 191 00:10:33,000 --> 00:10:37,520 Speaker 3: Look we I think this if you take the four 192 00:10:37,679 --> 00:10:40,200 Speaker 3: the five biggest issue I. 193 00:10:40,360 --> 00:10:43,480 Speaker 4: Checked just before, so now it's represents roughly three percent 194 00:10:43,600 --> 00:10:45,439 Speaker 4: of the global corps benchmark. 195 00:10:46,240 --> 00:10:50,319 Speaker 3: It doubles in size in a year. It's going to increase. 196 00:10:50,679 --> 00:10:53,240 Speaker 4: But if you look at the top ten issuer, it's 197 00:10:53,240 --> 00:10:58,040 Speaker 4: still financials. So so I think there are still some 198 00:10:58,040 --> 00:10:58,600 Speaker 4: some rooms. 199 00:10:58,640 --> 00:11:02,439 Speaker 3: We are far from indigestion. It needs to be ideally 200 00:11:02,559 --> 00:11:04,520 Speaker 3: to be spread over time and capex. 201 00:11:04,160 --> 00:11:07,360 Speaker 4: Will be spread over time, but there is we are 202 00:11:07,360 --> 00:11:12,319 Speaker 4: still far from the maximum issuer in the benchmark, and 203 00:11:13,240 --> 00:11:18,480 Speaker 4: they have access to me this sort of financing secured 204 00:11:18,600 --> 00:11:24,320 Speaker 4: and secured equity. So I think it's uh, it's okay, 205 00:11:24,480 --> 00:11:25,000 Speaker 4: it's okay. 206 00:11:25,160 --> 00:11:26,200 Speaker 3: We used to experience this. 207 00:11:26,320 --> 00:11:29,959 Speaker 4: Another sector I remember in the past few years ago 208 00:11:30,160 --> 00:11:32,760 Speaker 4: a built on the real estate. We had also a 209 00:11:32,800 --> 00:11:37,560 Speaker 4: lot of new issues, so we it's part of the 210 00:11:37,600 --> 00:11:41,080 Speaker 4: life of the market. But again, I'm not sure it's 211 00:11:41,120 --> 00:11:48,160 Speaker 4: going to be very different in terms of issuance from 212 00:11:48,200 --> 00:11:52,040 Speaker 4: other events that we experience over the last twenty years. 213 00:11:52,520 --> 00:11:54,839 Speaker 1: They are clearly hitting every market, you know, they're hitting 214 00:11:54,840 --> 00:11:58,040 Speaker 1: the abs, they're hitting different currencies, they're going back to 215 00:11:58,120 --> 00:12:01,160 Speaker 1: every possible pool of capsule anywhere in the world. But 216 00:12:01,200 --> 00:12:02,959 Speaker 1: for a big fund manager like yourself, I mean you're 217 00:12:03,120 --> 00:12:06,800 Speaker 1: managing multiple different funds. You're ending up with the same risk, 218 00:12:06,920 --> 00:12:08,880 Speaker 1: just in different buckets, right, is that not going to 219 00:12:08,920 --> 00:12:11,760 Speaker 1: be eventually a concentration risk for you as a firm? 220 00:12:11,960 --> 00:12:14,760 Speaker 3: Ah discarment will be true for a passive as a 221 00:12:14,840 --> 00:12:17,880 Speaker 3: manager or for OURNTF where they need to buy and 222 00:12:17,960 --> 00:12:21,760 Speaker 3: replicate the benchmark, So it's not true at all for us. 223 00:12:21,880 --> 00:12:23,079 Speaker 3: So it's like. 224 00:12:23,280 --> 00:12:25,600 Speaker 4: You know, on the financial there are some banks where 225 00:12:25,640 --> 00:12:28,000 Speaker 4: we have no exposure, even if it's two or three 226 00:12:28,040 --> 00:12:31,560 Speaker 4: percent of the benchmark. There are others where we are overwet. 227 00:12:32,040 --> 00:12:35,160 Speaker 3: So it would be exactly the same type of approach. 228 00:12:35,760 --> 00:12:38,600 Speaker 4: You do your homework in terms of a bottom up 229 00:12:38,640 --> 00:12:42,320 Speaker 4: relative value analysis, there are one that we are not 230 00:12:42,440 --> 00:12:45,880 Speaker 4: invested some I think I think are quite attractive and 231 00:12:45,960 --> 00:12:49,080 Speaker 4: offering quite a premium on some markets. 232 00:12:49,080 --> 00:12:52,400 Speaker 3: So no, I think it's we are not forced at 233 00:12:52,440 --> 00:12:55,120 Speaker 3: all to it. It's the countrary. 234 00:12:55,120 --> 00:12:57,440 Speaker 4: In fact, the more you have choice, the more you 235 00:12:57,520 --> 00:13:00,000 Speaker 4: have the opportunity to pick one and not the others. 236 00:13:00,040 --> 00:13:03,440 Speaker 4: So it's for for active for free manager, it's more unopportunity. 237 00:13:04,000 --> 00:13:04,280 Speaker 3: Right. 238 00:13:04,320 --> 00:13:06,120 Speaker 1: But you've gone from just in the index, in the 239 00:13:06,559 --> 00:13:09,160 Speaker 1: IG index in the US, you've gone from zero pretty 240 00:13:09,200 --> 00:13:10,959 Speaker 1: much to now ten percent, which is around the same 241 00:13:10,960 --> 00:13:13,160 Speaker 1: as your utility. So you can't if you if you're 242 00:13:13,160 --> 00:13:15,960 Speaker 1: in any way tracking the index, even though you're you know, 243 00:13:15,960 --> 00:13:17,559 Speaker 1: you're not passive, you're active, but you still have to 244 00:13:17,640 --> 00:13:20,400 Speaker 1: kind of have a waiting right to these these names. 245 00:13:20,559 --> 00:13:23,439 Speaker 3: No, no, even look if you were if you avoid three, 246 00:13:23,600 --> 00:13:26,680 Speaker 3: four or five names, even if they are big, it doesn't. 247 00:13:26,960 --> 00:13:31,160 Speaker 3: It creates some some tracking r but also investors sector 248 00:13:31,320 --> 00:13:35,080 Speaker 3: US because of our ability to take this risk, and 249 00:13:35,160 --> 00:13:37,880 Speaker 3: we think it's going to be rewarded either being overwet 250 00:13:38,040 --> 00:13:41,160 Speaker 3: or the it. It doesn't create on on investment GADA. 251 00:13:41,480 --> 00:13:44,400 Speaker 3: When you look, there are still some correlation between names. 252 00:13:45,160 --> 00:13:48,040 Speaker 3: There are some specific risk, but there is also some correlation, 253 00:13:48,520 --> 00:13:51,840 Speaker 3: so you can afford to uh to avoid the position 254 00:13:52,440 --> 00:13:54,440 Speaker 3: and you stay in a range of tracking R that 255 00:13:54,559 --> 00:13:57,640 Speaker 3: is acceptable for for the in the store. 256 00:13:58,920 --> 00:13:59,959 Speaker 1: Are you underweight right now? 257 00:14:01,000 --> 00:14:04,760 Speaker 4: No, we they are part of the market that we 258 00:14:04,800 --> 00:14:08,560 Speaker 4: do like in the in the TMT. So overall, when 259 00:14:08,600 --> 00:14:11,480 Speaker 4: we look at our position, we are slightly overwet. We 260 00:14:11,559 --> 00:14:15,960 Speaker 4: have more position I would say up to the tenure 261 00:14:17,040 --> 00:14:20,520 Speaker 4: and but we are extremely selective on the long and 262 00:14:20,560 --> 00:14:23,680 Speaker 4: I think the long en is a good way uh 263 00:14:23,960 --> 00:14:27,960 Speaker 4: more to tactically add a bitter to your portfolio. What 264 00:14:28,080 --> 00:14:30,840 Speaker 4: I like in the Longen more generally, not only on CMT, 265 00:14:31,000 --> 00:14:33,400 Speaker 4: but on the sector in the US, is that it's 266 00:14:33,440 --> 00:14:37,880 Speaker 4: pretty liquid, uh even daily quid and given the size 267 00:14:37,920 --> 00:14:40,680 Speaker 4: of the positions it will be more so. It's it's 268 00:14:40,760 --> 00:14:44,360 Speaker 4: a good way too to be tactical on the on 269 00:14:44,400 --> 00:14:47,400 Speaker 4: the market. So although we are for the moment we 270 00:14:47,480 --> 00:14:50,520 Speaker 4: are slightly overwet, I think there are names that we 271 00:14:50,520 --> 00:14:51,360 Speaker 4: will continue to. 272 00:14:52,880 --> 00:14:54,320 Speaker 3: Even to to to to. 273 00:14:54,360 --> 00:14:58,800 Speaker 4: Add and the longan as I said, it's it's it's 274 00:14:58,840 --> 00:15:02,280 Speaker 4: a good way to adjust the overall exposure you want 275 00:15:02,280 --> 00:15:04,520 Speaker 4: to have on the market, not only on TMT, but 276 00:15:04,560 --> 00:15:09,400 Speaker 4: also on the sector like healthscare, like media. 277 00:15:10,680 --> 00:15:13,520 Speaker 3: No It's clearly. 278 00:15:13,240 --> 00:15:15,680 Speaker 1: There is a lot of value relative on the long end. 279 00:15:15,720 --> 00:15:17,320 Speaker 1: A lot of people like that end of the curve. 280 00:15:17,360 --> 00:15:20,800 Speaker 1: But the problem, it seems, is that you know, you're 281 00:15:20,840 --> 00:15:24,920 Speaker 1: taking very long risk on something that you know, we 282 00:15:25,040 --> 00:15:26,800 Speaker 1: just don't know how it's going to change, right, We 283 00:15:26,840 --> 00:15:28,800 Speaker 1: don't know what's going to happen in AI next week. 284 00:15:29,120 --> 00:15:32,160 Speaker 1: So if you're forty years down the curve on on 285 00:15:32,200 --> 00:15:35,360 Speaker 1: an AI investment, you know, and we will suddenly our 286 00:15:35,360 --> 00:15:38,040 Speaker 1: our data centers are in space, not in the desert. 287 00:15:38,080 --> 00:15:40,040 Speaker 1: What what happens to your investment? You get you still 288 00:15:40,080 --> 00:15:40,680 Speaker 1: get paid. 289 00:15:40,440 --> 00:15:45,760 Speaker 4: Back, you know, will the average fine? It depends. But 290 00:15:46,320 --> 00:15:49,480 Speaker 4: the opposition we keep them for a week or two. 291 00:15:49,520 --> 00:15:51,680 Speaker 4: They are some we keep them for five years or 292 00:15:51,920 --> 00:15:55,280 Speaker 4: three years. And and there as I said on particularly 293 00:15:55,320 --> 00:15:57,800 Speaker 4: on those issue and even the issue in Dola in 294 00:15:57,920 --> 00:16:03,520 Speaker 4: euro in stealing animation. In the smaller currencies, we are 295 00:16:03,600 --> 00:16:07,600 Speaker 4: quite active a some benefiting from the segmentation of the 296 00:16:07,680 --> 00:16:11,320 Speaker 4: market and the inefficiencies or the impact that central banks 297 00:16:11,360 --> 00:16:14,320 Speaker 4: have on their own curve to switch from one to 298 00:16:15,400 --> 00:16:19,000 Speaker 4: the other. So we are not by an investor, So 299 00:16:19,160 --> 00:16:22,720 Speaker 4: I would understand that by an oil investor will be 300 00:16:23,320 --> 00:16:29,520 Speaker 4: more cautious on that sort of investor. Hence the steepness 301 00:16:30,160 --> 00:16:33,040 Speaker 4: of the curve when you have a technology color risk 302 00:16:33,240 --> 00:16:36,400 Speaker 4: or the type of risk where your visibility is lower. 303 00:16:37,960 --> 00:16:40,120 Speaker 2: As I said, you're not buying how you're more on 304 00:16:40,200 --> 00:16:41,880 Speaker 2: the active end of the spectrum and so on. So 305 00:16:42,000 --> 00:16:46,120 Speaker 2: what would cause you to go from the current slightly 306 00:16:46,400 --> 00:16:51,880 Speaker 2: overweight position to more cautious or even underway you think. 307 00:16:53,200 --> 00:16:57,760 Speaker 4: I think it's all about the opportunity set, so it 308 00:16:57,840 --> 00:17:00,880 Speaker 4: will be better opportunities as well. So if we see 309 00:17:01,040 --> 00:17:04,680 Speaker 4: you know, their market, you know, starting to the consumer 310 00:17:05,240 --> 00:17:09,119 Speaker 4: or healthscare or some other sector that could suffer for 311 00:17:09,560 --> 00:17:12,359 Speaker 4: whatever reason or maybe because of the area, and we 312 00:17:12,400 --> 00:17:15,400 Speaker 4: said that I could disrupt other sector, then we could 313 00:17:15,760 --> 00:17:22,880 Speaker 4: find you know, better alpha generation moving out of AI 314 00:17:23,040 --> 00:17:26,680 Speaker 4: to the sector. Or if we change our war view 315 00:17:26,840 --> 00:17:30,240 Speaker 4: because we we have a surprise on the on the capex, 316 00:17:30,320 --> 00:17:33,560 Speaker 4: on the cashrow generation, or we see a change in 317 00:17:33,640 --> 00:17:38,159 Speaker 4: the competition landscape. So there are a lot of you know, 318 00:17:38,359 --> 00:17:44,480 Speaker 4: the varius fundamental reason that could trigger a review of 319 00:17:44,680 --> 00:17:49,200 Speaker 4: our of our position. It's true for T N, T, A, I, 320 00:17:49,520 --> 00:17:52,280 Speaker 4: or but it's true for any sector. 321 00:17:54,040 --> 00:17:56,159 Speaker 1: So as an investor in the tech space, in the 322 00:17:56,240 --> 00:17:59,200 Speaker 1: AI story. What is the best way of doing that 323 00:17:59,480 --> 00:18:01,840 Speaker 1: right now? Is just to buy the investment grade bonds 324 00:18:01,840 --> 00:18:04,520 Speaker 1: of a hyperscale or is it to to do something 325 00:18:04,600 --> 00:18:06,760 Speaker 1: more structured? Is it to do something private? I mean, 326 00:18:06,800 --> 00:18:09,240 Speaker 1: how how do you think about relative value in that 327 00:18:09,359 --> 00:18:10,840 Speaker 1: in that whole area, because it's such a big one 328 00:18:10,880 --> 00:18:11,400 Speaker 1: and it's growing. 329 00:18:11,480 --> 00:18:15,560 Speaker 4: Yeah, me, me, I'm focusing mostly interested in liquid I set, 330 00:18:15,600 --> 00:18:17,600 Speaker 4: so I can't talk about the private one. 331 00:18:17,680 --> 00:18:19,439 Speaker 3: So the way that we are going from we are 332 00:18:20,119 --> 00:18:22,520 Speaker 3: you know, managing where our position is. 333 00:18:24,400 --> 00:18:27,200 Speaker 4: With say very very classic it's an in depth analysis 334 00:18:27,359 --> 00:18:31,119 Speaker 4: on the bottom melt and then check the relative value 335 00:18:31,240 --> 00:18:34,160 Speaker 4: and and select the one where we think I carry 336 00:18:34,240 --> 00:18:38,320 Speaker 4: the most attractive you know return And for the moment. 337 00:18:38,359 --> 00:18:42,160 Speaker 4: There are big difference also in where you have something 338 00:18:42,200 --> 00:18:44,160 Speaker 4: that is a bit more attractive on the Euro curve 339 00:18:44,280 --> 00:18:48,320 Speaker 4: for some for some of those issure up to the 340 00:18:48,400 --> 00:18:52,639 Speaker 4: tenure and from the seven to the very long end. 341 00:18:54,320 --> 00:18:58,760 Speaker 4: I think the US is as quite is quite attractive. 342 00:18:59,760 --> 00:19:02,560 Speaker 3: On on some names. So we are more. 343 00:19:05,280 --> 00:19:08,720 Speaker 4: Short to medium maturity on the formament on euro and 344 00:19:08,960 --> 00:19:13,120 Speaker 4: more on the on the dollar and dollar. The ten 345 00:19:13,160 --> 00:19:16,800 Speaker 4: thirty curve has been quite volatile and so it's something 346 00:19:16,880 --> 00:19:19,440 Speaker 4: that we also play very actively. Curve treads are part 347 00:19:19,480 --> 00:19:23,840 Speaker 4: of our you know, typical strategy spread cave run, not 348 00:19:23,960 --> 00:19:27,080 Speaker 4: a red scurve, but spead curve. And this is something 349 00:19:27,200 --> 00:19:31,080 Speaker 4: we UH wet and here it's so that you you 350 00:19:31,160 --> 00:19:35,000 Speaker 4: can be even more tactical with the new issues and 351 00:19:35,280 --> 00:19:37,560 Speaker 4: UH and the creding effect that it can have also 352 00:19:37,640 --> 00:19:41,280 Speaker 4: another you know, type of issuer. So it's a way 353 00:19:41,320 --> 00:19:44,560 Speaker 4: to ramp up with supposition for the moment. I think 354 00:19:44,640 --> 00:19:50,000 Speaker 4: that you know, the euro market also quite outperformer US 355 00:19:50,119 --> 00:19:51,960 Speaker 4: market over the last three or four years, and it 356 00:19:52,160 --> 00:19:54,639 Speaker 4: was used to tread at a premium, and now with 357 00:19:54,760 --> 00:19:57,399 Speaker 4: the gross differential, I think the US we start to 358 00:19:57,520 --> 00:20:00,440 Speaker 4: rebalance a bit toward the more US, at least on 359 00:20:00,520 --> 00:20:03,600 Speaker 4: the non financial part. So it include the AI. So 360 00:20:03,760 --> 00:20:09,280 Speaker 4: we are ovasively shifting here two more two more US. 361 00:20:09,359 --> 00:20:15,080 Speaker 4: The issuance we keep very more like a bullish stance 362 00:20:15,320 --> 00:20:19,720 Speaker 4: on financials but here in your and mostly on European bonds. 363 00:20:20,480 --> 00:20:22,960 Speaker 4: But for indust real we are a bit more used 364 00:20:22,960 --> 00:20:25,080 Speaker 4: to be over at job and we we we start 365 00:20:25,160 --> 00:20:28,760 Speaker 4: to uh rebellance a bit to the US. 366 00:20:30,400 --> 00:20:34,920 Speaker 2: Just considering what games mentioned earlier about the AI stroke 367 00:20:34,960 --> 00:20:39,880 Speaker 2: tech companies issuing not just across several maturities, but also 368 00:20:40,280 --> 00:20:44,000 Speaker 2: across many currencies. You've talked about yours. You talked about 369 00:20:44,040 --> 00:20:49,160 Speaker 2: dogs to some extent. Are you really thinking worthwhile cross 370 00:20:49,280 --> 00:20:52,280 Speaker 2: currency opportunities elsewhere because we know they've also issued in 371 00:20:52,359 --> 00:20:55,200 Speaker 2: Stirling and Franks and so on. Or do you think 372 00:20:55,280 --> 00:20:59,040 Speaker 2: that maybe the liquidity issues stop people from going into 373 00:20:59,080 --> 00:20:59,879 Speaker 2: some of those other. 374 00:21:00,280 --> 00:21:02,280 Speaker 4: We are doing some, but to be honest, due to 375 00:21:02,320 --> 00:21:07,320 Speaker 4: the liquidity of the other market, we can't tread that much. 376 00:21:07,640 --> 00:21:10,800 Speaker 4: So most of the relative value tread that we are 377 00:21:10,840 --> 00:21:13,440 Speaker 4: doing is between your own larcers because here you have 378 00:21:13,520 --> 00:21:14,160 Speaker 4: the liquidity. 379 00:21:14,840 --> 00:21:16,399 Speaker 3: Sometimes we do a bit. 380 00:21:16,760 --> 00:21:22,240 Speaker 4: Of other occurrencies like mostly the UK and then ouzy 381 00:21:22,440 --> 00:21:25,720 Speaker 4: card is very very, very very limited. So even we 382 00:21:25,840 --> 00:21:29,080 Speaker 4: don't we when we go into this market, it's not 383 00:21:30,000 --> 00:21:33,520 Speaker 4: it's not a short term tread, it's something the liquidity 384 00:21:33,600 --> 00:21:34,440 Speaker 4: is not good enough. 385 00:21:35,280 --> 00:21:38,040 Speaker 1: Okay, But what impact is this all having on your 386 00:21:38,119 --> 00:21:40,240 Speaker 1: broader portfolio, because it don't you just corporates, you do 387 00:21:40,320 --> 00:21:42,680 Speaker 1: government bonds as well. Is there any crowding out impact 388 00:21:42,760 --> 00:21:43,000 Speaker 1: at all? 389 00:21:43,880 --> 00:21:46,000 Speaker 3: Now? What is what is very interesting? And you know 390 00:21:46,080 --> 00:21:48,320 Speaker 3: one of the reasons why when you look at valuation 391 00:21:48,440 --> 00:21:52,840 Speaker 3: on credit, it's very tight. It's right. 392 00:21:54,720 --> 00:21:58,040 Speaker 4: Fundamentals are super good when you look at leveredge, when 393 00:21:58,080 --> 00:22:00,800 Speaker 4: you look at learning release now they do write issue, 394 00:22:01,240 --> 00:22:03,879 Speaker 4: they have access to liquidity, so everything. 395 00:22:03,600 --> 00:22:04,280 Speaker 3: Is on the gain line. 396 00:22:04,320 --> 00:22:07,040 Speaker 4: But when you look at you know, personal time in spread, 397 00:22:07,080 --> 00:22:10,280 Speaker 4: we are at very very expensive level. And when the 398 00:22:10,320 --> 00:22:12,359 Speaker 4: PM say it's priced to perfection, it means it's a 399 00:22:12,400 --> 00:22:17,359 Speaker 4: bit expensive. So it's mostly ad except on some where 400 00:22:17,400 --> 00:22:20,119 Speaker 4: you can pick up some relative value once on. But 401 00:22:20,359 --> 00:22:23,879 Speaker 4: the valuation is quite expensive today if you want to 402 00:22:23,920 --> 00:22:26,840 Speaker 4: add risk, and it's going back to your question, I 403 00:22:26,960 --> 00:22:30,800 Speaker 4: think one segment that the market where it really suffered 404 00:22:30,800 --> 00:22:33,119 Speaker 4: and did not come back to the title. So if 405 00:22:33,200 --> 00:22:36,439 Speaker 4: you look at you know, end of the level versus 406 00:22:36,680 --> 00:22:40,480 Speaker 4: end of February before the attack, we are at the 407 00:22:40,520 --> 00:22:43,200 Speaker 4: tightest level on credit and we are at the highest 408 00:22:43,200 --> 00:22:45,960 Speaker 4: on equity. But there is one market that is still 409 00:22:46,080 --> 00:22:50,000 Speaker 4: wider and suffered a lot is the rights market. So 410 00:22:50,240 --> 00:22:52,680 Speaker 4: today what we have been doing in our here, not 411 00:22:52,800 --> 00:22:56,040 Speaker 4: in our credit portfolio, but in our globalgred portfolio where 412 00:22:56,080 --> 00:22:59,320 Speaker 4: we do Q and C rates and credit, we have 413 00:22:59,440 --> 00:23:04,920 Speaker 4: been buying a bit more sovereign risk because we thought 414 00:23:05,080 --> 00:23:08,399 Speaker 4: we think that the banks are not in a position 415 00:23:09,040 --> 00:23:12,600 Speaker 4: I think at least in Europe to raisin ate as 416 00:23:12,680 --> 00:23:15,720 Speaker 4: it was priced by the market following the event, and 417 00:23:16,200 --> 00:23:18,520 Speaker 4: so as a way, we have been adding more like 418 00:23:19,640 --> 00:23:24,560 Speaker 4: duration on short dated bonds short duration and and we 419 00:23:24,640 --> 00:23:27,359 Speaker 4: are even slightly that you think the credit risk because 420 00:23:27,359 --> 00:23:28,000 Speaker 4: it didn't move. 421 00:23:28,080 --> 00:23:30,080 Speaker 3: So if you want a better risky. 422 00:23:31,600 --> 00:23:35,200 Speaker 4: It's better to buy rates and duration and sometimes on 423 00:23:35,320 --> 00:23:39,960 Speaker 4: sovereign that's underperform for many for many reasons than. 424 00:23:41,840 --> 00:23:45,800 Speaker 3: Than than than than credit. So when when you look 425 00:23:46,640 --> 00:23:47,119 Speaker 3: there was a. 426 00:23:47,359 --> 00:23:50,680 Speaker 4: Big repricing, A big question of the market today is 427 00:23:50,760 --> 00:23:54,359 Speaker 4: to to to check where is the surath and you 428 00:23:54,440 --> 00:23:56,920 Speaker 4: know we are talking about cm T and you know, 429 00:23:57,119 --> 00:24:01,800 Speaker 4: or if you go back to the the GFC, the 430 00:24:01,880 --> 00:24:04,560 Speaker 4: problem where the banks and the financial system, it was 431 00:24:04,680 --> 00:24:09,280 Speaker 4: very risky and people, you know, to hedge both government 432 00:24:10,280 --> 00:24:13,040 Speaker 4: and to the extent that you had even a negative 433 00:24:13,080 --> 00:24:16,040 Speaker 4: premium to government bond because they were good quality. Now 434 00:24:16,160 --> 00:24:21,000 Speaker 4: since COVID, government bond debt you know, increase like more 435 00:24:21,040 --> 00:24:23,879 Speaker 4: than fifty percent cumulative deficity in the US and all 436 00:24:23,960 --> 00:24:26,320 Speaker 4: the government you know, the debt to GDP increase massively. 437 00:24:27,119 --> 00:24:31,080 Speaker 4: So government bond are not a safe sets. It's good 438 00:24:31,160 --> 00:24:33,480 Speaker 4: news big trials. It's good news because you have higher 439 00:24:33,560 --> 00:24:37,200 Speaker 4: year now of further on the on the market, and 440 00:24:37,320 --> 00:24:41,600 Speaker 4: you need to basically even have an approach to sovereign 441 00:24:41,680 --> 00:24:43,960 Speaker 4: debt as you have an approach to corporate bond because 442 00:24:44,000 --> 00:24:47,520 Speaker 4: today sovereign depth carry a lot of credit risk, so 443 00:24:47,680 --> 00:24:50,040 Speaker 4: we can use it, in fact, the skill of emerging 444 00:24:50,080 --> 00:24:53,720 Speaker 4: market or corporate bond guys to manage to manage soeign 445 00:24:54,080 --> 00:24:58,600 Speaker 4: so reign debt. And basically the reason why people think 446 00:24:58,800 --> 00:25:01,680 Speaker 4: I was saying that spread are very expensive, but the 447 00:25:01,800 --> 00:25:04,560 Speaker 4: reason why we have so much flows and interest on 448 00:25:04,720 --> 00:25:07,359 Speaker 4: credit is not because of the credits, because of the yield. 449 00:25:09,880 --> 00:25:13,600 Speaker 2: So isn't that a concern then, because you've also mentioned 450 00:25:13,680 --> 00:25:18,399 Speaker 2: that fundamentals on corporate are not in a bad place, 451 00:25:18,760 --> 00:25:22,879 Speaker 2: but you're already seeing relatively high detuy GDP ratios and 452 00:25:22,960 --> 00:25:25,399 Speaker 2: other metrics on the government side. So isn't that a 453 00:25:25,520 --> 00:25:29,920 Speaker 2: concern for you that the metrics on the government side 454 00:25:30,000 --> 00:25:33,359 Speaker 2: might actually get worse given disruptions related to the Middle 455 00:25:33,359 --> 00:25:35,960 Speaker 2: East conflict or whatever else. Isn't that a concern that 456 00:25:36,640 --> 00:25:41,920 Speaker 2: you could see government bonds continue to trade weaker relative 457 00:25:41,920 --> 00:25:44,960 Speaker 2: to historical levels because they need to issue more and 458 00:25:45,040 --> 00:25:47,120 Speaker 2: more and their fundamentals aren't getting any better. 459 00:25:48,119 --> 00:25:50,040 Speaker 3: Yeah, I see, I think you're perfectly right. 460 00:25:50,160 --> 00:25:52,399 Speaker 4: I think we were quite you know, on the expose, 461 00:25:52,600 --> 00:25:55,119 Speaker 4: the on the long end, as I said, we were 462 00:25:55,200 --> 00:25:57,840 Speaker 4: trading more or less survey like we trade credit. We 463 00:25:57,960 --> 00:26:03,360 Speaker 4: were a very negative on the the trajectory of government 464 00:26:03,440 --> 00:26:06,320 Speaker 4: bond and hand and hands who are expecting big steepening 465 00:26:06,440 --> 00:26:10,280 Speaker 4: of you know, of curs and reprising of threats higher. 466 00:26:10,440 --> 00:26:13,240 Speaker 4: So this is something where you can even extract the 467 00:26:13,320 --> 00:26:15,240 Speaker 4: value because if you do steepening, or if you are 468 00:26:15,240 --> 00:26:17,920 Speaker 4: a bit a short duration, it's a way to capture 469 00:26:18,080 --> 00:26:22,159 Speaker 4: this this type of move. Now, I think that a 470 00:26:22,320 --> 00:26:26,440 Speaker 4: lot of the physical risk is partly priced, so I 471 00:26:26,440 --> 00:26:31,520 Speaker 4: would say not everything, but I think we did probably 472 00:26:31,600 --> 00:26:35,160 Speaker 4: seventy eighty percent of the move. So I still think 473 00:26:35,600 --> 00:26:38,360 Speaker 4: a leg to the stepping tread because we are still 474 00:26:38,359 --> 00:26:43,000 Speaker 4: a bit concious about the sovereign the sovereign depth. We 475 00:26:43,160 --> 00:26:45,600 Speaker 4: we saw very few and I'm not expecting a lot 476 00:26:45,680 --> 00:26:50,200 Speaker 4: of you know, government to cut you know, spending. And 477 00:26:50,320 --> 00:26:52,520 Speaker 4: when one is trying to do so, either they are 478 00:26:52,640 --> 00:26:55,560 Speaker 4: sacked by voters or the coalition is breaking down. So 479 00:26:56,920 --> 00:27:00,280 Speaker 4: it's difficult to see to see a chain. No, I 480 00:27:00,359 --> 00:27:02,520 Speaker 4: think as long as I think it's good for fixing 481 00:27:02,560 --> 00:27:04,920 Speaker 4: come investors, because we are now in a position where 482 00:27:05,000 --> 00:27:07,520 Speaker 4: you have on your portfolio you have a high level 483 00:27:07,600 --> 00:27:12,600 Speaker 4: of you know yeed and usually it's positive correlated with 484 00:27:12,760 --> 00:27:16,000 Speaker 4: the forward performance. Of course, we have a lot of 485 00:27:16,680 --> 00:27:19,879 Speaker 4: the good reason for this higher YEL. You mentioned the 486 00:27:19,960 --> 00:27:24,560 Speaker 4: deput GDP. They are also you know, maybe a premium 487 00:27:24,680 --> 00:27:30,240 Speaker 4: due to inflation that is higher than what you cra 488 00:27:30,280 --> 00:27:33,320 Speaker 4: album should achieve. So there are many reason to explain, 489 00:27:33,800 --> 00:27:36,960 Speaker 4: to explain why ye are higher. But it creates also 490 00:27:37,240 --> 00:27:40,399 Speaker 4: an appetite for for the for the ssel class and 491 00:27:40,640 --> 00:27:43,240 Speaker 4: if like on credit, if you do a good job 492 00:27:43,359 --> 00:27:47,960 Speaker 4: in selecting the issue, but then you can start al 493 00:27:48,040 --> 00:27:49,320 Speaker 4: far out of it. 494 00:27:51,160 --> 00:27:52,480 Speaker 1: I just want to be clear on what kind of 495 00:27:52,800 --> 00:27:54,480 Speaker 1: servants were talking about here, because you know, tellering my 496 00:27:54,680 --> 00:27:57,520 Speaker 1: old emerging markets hands and Munday's got a long history 497 00:27:57,520 --> 00:28:00,240 Speaker 1: in emerging markets. It sounds like you're talking about emerging Okay, 498 00:28:00,400 --> 00:28:02,040 Speaker 1: we're kind of brought up to believe that's you know, 499 00:28:02,119 --> 00:28:05,560 Speaker 1: Latin America, Africa, parts of Asia. It's not the US, 500 00:28:05,640 --> 00:28:07,920 Speaker 1: it's not the UK, it's not you know G seven, 501 00:28:08,160 --> 00:28:10,359 Speaker 1: So those are very well behaved countries. What what do 502 00:28:10,400 --> 00:28:12,280 Speaker 1: you what do you mean by the sovereiants that have 503 00:28:12,359 --> 00:28:13,560 Speaker 1: credit risk in that context? 504 00:28:13,720 --> 00:28:16,280 Speaker 4: No, I was I was pointing to a DM world. 505 00:28:16,320 --> 00:28:20,320 Speaker 4: I was pointing to seven. Look at the US and 506 00:28:20,720 --> 00:28:25,240 Speaker 4: to GDP trajectory is very worrying. If you look at 507 00:28:26,400 --> 00:28:29,879 Speaker 4: all the since COVID, all the dead to GDP of 508 00:28:30,040 --> 00:28:33,040 Speaker 4: the men developed countries and killed by on a regia 509 00:28:33,080 --> 00:28:36,320 Speaker 4: would say forty percent. Most of the countries are running 510 00:28:36,359 --> 00:28:40,320 Speaker 4: five percent of deficits. If you do that for three 511 00:28:40,440 --> 00:28:44,960 Speaker 4: or four additional year, it will it will clear don reds. 512 00:28:46,080 --> 00:28:49,200 Speaker 4: So I think there is a Now the frontier between 513 00:28:49,240 --> 00:28:53,000 Speaker 4: your M and DM is a bit blurred and and 514 00:28:53,160 --> 00:28:54,920 Speaker 4: I think that's the reason why I think you need 515 00:28:55,080 --> 00:29:00,480 Speaker 4: to to apply the same type of approach to DM 516 00:29:01,680 --> 00:29:04,920 Speaker 4: as the one you are using to EM or TOM. 517 00:29:06,160 --> 00:29:09,440 Speaker 1: Of course, you know, the knowing emerging markets is very 518 00:29:09,520 --> 00:29:12,000 Speaker 1: useful for looking at the politics of finanity station and 519 00:29:12,080 --> 00:29:15,320 Speaker 1: understanding this country now. But you have no choice, right 520 00:29:15,320 --> 00:29:16,840 Speaker 1: but you have to buy the treasury because it's just 521 00:29:16,880 --> 00:29:18,960 Speaker 1: such a massive market. If you're fixing a manager, there's 522 00:29:19,000 --> 00:29:22,400 Speaker 1: no alternative conceivably in the world that would be bigger, 523 00:29:22,920 --> 00:29:27,640 Speaker 1: more liquid, more stable relative terms than the US treasury. 524 00:29:27,640 --> 00:29:28,280 Speaker 3: How do you avoid it? 525 00:29:29,120 --> 00:29:32,160 Speaker 4: No, you can, you can, you can be extremely short. 526 00:29:32,480 --> 00:29:36,480 Speaker 4: It depends again, it's going back to the your earlier question. 527 00:29:36,640 --> 00:29:40,280 Speaker 4: It depends off your risky budget and your ability to 528 00:29:40,720 --> 00:29:46,640 Speaker 4: deviate from the benchmark, so you can diviate very significantly. 529 00:29:46,720 --> 00:29:48,920 Speaker 4: You know, for Eampari in twenty two we had nearly 530 00:29:49,040 --> 00:29:52,480 Speaker 4: know or very detailer government debt. 531 00:29:52,560 --> 00:29:55,080 Speaker 3: We are very short duration and it paid off well. 532 00:29:55,600 --> 00:29:58,880 Speaker 4: You can express also dise you is being short currency 533 00:29:59,040 --> 00:30:01,120 Speaker 4: or on the way to currency. So you have many 534 00:30:01,240 --> 00:30:04,680 Speaker 4: ways to play the two sides in fie or one 535 00:30:04,880 --> 00:30:07,680 Speaker 4: or the other. So it's quite symmetric color if you 536 00:30:07,760 --> 00:30:12,240 Speaker 4: have the flexibility in your often however, I don't want 537 00:30:12,280 --> 00:30:15,720 Speaker 4: to scare too much people about US and government bondet 538 00:30:15,800 --> 00:30:19,160 Speaker 4: the US still have you know this. I think it 539 00:30:19,320 --> 00:30:23,000 Speaker 4: was coined by a French president, the exhorbitan privilege, and 540 00:30:23,120 --> 00:30:27,080 Speaker 4: it's true that it's where you can fund most of the. 541 00:30:29,240 --> 00:30:30,320 Speaker 3: The needs of a corporate. 542 00:30:30,480 --> 00:30:33,080 Speaker 4: Look at how much has been printed on the US 543 00:30:33,640 --> 00:30:38,240 Speaker 4: market by the hyper scaler, largely more than in any 544 00:30:38,320 --> 00:30:38,960 Speaker 4: other market. 545 00:30:39,120 --> 00:30:42,200 Speaker 3: So it's it does mean that this market and. 546 00:30:42,320 --> 00:30:45,240 Speaker 4: The dollar at least the currency and the dollar market 547 00:30:45,400 --> 00:30:49,080 Speaker 4: as a fixed income is still the main source of financing. 548 00:30:49,720 --> 00:30:52,800 Speaker 4: And I'm expecting this to stay for some time. Even 549 00:30:52,880 --> 00:30:54,880 Speaker 4: if you if you look over the last three or 550 00:30:54,880 --> 00:30:59,280 Speaker 4: four years, the share of the euro market in significantly, 551 00:30:59,800 --> 00:31:05,040 Speaker 4: So it will continue, but probably at at a slow pace. 552 00:31:06,680 --> 00:31:10,240 Speaker 4: So so the dominant position of the of the dollar 553 00:31:11,240 --> 00:31:14,320 Speaker 4: will not be challenged in the next two or or 554 00:31:14,400 --> 00:31:18,080 Speaker 4: three I think it will letter but not in the twustreel. 555 00:31:18,200 --> 00:31:21,400 Speaker 4: But when you buy a credit bounder, and this is 556 00:31:21,440 --> 00:31:24,480 Speaker 4: what we do sometimes a lot of time, you can 557 00:31:24,680 --> 00:31:28,480 Speaker 4: you can decide to hedge it, you know, uh, to 558 00:31:28,600 --> 00:31:31,040 Speaker 4: hedge the duration if you prefer your duration or the 559 00:31:31,080 --> 00:31:35,240 Speaker 4: standing direction. So you know, we see credit and interested 560 00:31:35,240 --> 00:31:39,280 Speaker 4: at risk completely differently. So we look at credit spread 561 00:31:39,320 --> 00:31:41,640 Speaker 4: and we look at youation. If we like both, we'll 562 00:31:41,680 --> 00:31:44,120 Speaker 4: buy the bonds and the duration. If I want to 563 00:31:44,200 --> 00:31:47,160 Speaker 4: buy one, but I'm a bit concerned about the long 564 00:31:47,360 --> 00:31:50,160 Speaker 4: end in the US, I will hedge it with with 565 00:31:50,320 --> 00:31:52,560 Speaker 4: forchuer and swap, and I will I look at my 566 00:31:52,680 --> 00:31:56,520 Speaker 4: interest rates maybe on Australia or on Japan or whatever. 567 00:31:57,360 --> 00:31:57,920 Speaker 2: Mm hmmmm. 568 00:31:59,160 --> 00:32:01,880 Speaker 1: Back to the issuance point though, we've talked about the 569 00:32:01,920 --> 00:32:03,360 Speaker 1: AI stuff. There's a lot of M and A, there's 570 00:32:03,360 --> 00:32:05,400 Speaker 1: a lot of generals of net new issuance. The the 571 00:32:05,520 --> 00:32:08,200 Speaker 1: market has overall been under supply for a long time, 572 00:32:08,240 --> 00:32:11,200 Speaker 1: so that's kept spreads very tight. Now we're getting rebalancing. 573 00:32:11,240 --> 00:32:13,920 Speaker 1: Now we're getting you know, just maybe a trillion dollars 574 00:32:13,960 --> 00:32:16,600 Speaker 1: of net new issuance from i G, which we've never 575 00:32:16,680 --> 00:32:18,920 Speaker 1: seen before. That could almost be as much as the 576 00:32:19,240 --> 00:32:22,360 Speaker 1: actual net issuance of US treasuries. To what extent is 577 00:32:22,480 --> 00:32:26,360 Speaker 1: the corporate issuance crowding out the abilities government of governments 578 00:32:26,400 --> 00:32:27,760 Speaker 1: to fund that. 579 00:32:27,960 --> 00:32:30,520 Speaker 3: That's if we have a you're right, if we have a. 580 00:32:32,160 --> 00:32:37,400 Speaker 4: Real like silulation, and if supply is surprise us more 581 00:32:37,480 --> 00:32:40,600 Speaker 4: than what we have current when you supply was big, 582 00:32:40,760 --> 00:32:43,720 Speaker 4: but it's still okay. Supply when you look at the 583 00:32:44,080 --> 00:32:46,640 Speaker 4: so far, the supply has been record high, but it's 584 00:32:46,680 --> 00:32:48,400 Speaker 4: more less the same or it's the same man to 585 00:32:49,760 --> 00:32:52,800 Speaker 4: the last year. It's not the same sector. But so 586 00:32:52,960 --> 00:32:56,800 Speaker 4: it's it's it's it's largely manageable. But you're right, at 587 00:32:56,880 --> 00:33:02,800 Speaker 4: some points it could uh have a a coding effect, 588 00:33:02,840 --> 00:33:06,440 Speaker 4: but we are not there yet. What is interesting is 589 00:33:06,520 --> 00:33:09,640 Speaker 4: that if we have and don't forget that most of 590 00:33:09,720 --> 00:33:12,280 Speaker 4: these issues for the moment are double life and some 591 00:33:12,520 --> 00:33:15,320 Speaker 4: a lot are double If you look at Microsoft or 592 00:33:15,560 --> 00:33:20,400 Speaker 4: the issuer that they have very good quality rating, so 593 00:33:20,680 --> 00:33:23,800 Speaker 4: it's easy for them to find some given that it 594 00:33:24,000 --> 00:33:25,880 Speaker 4: was quite scarce and you don't have a lot of 595 00:33:25,920 --> 00:33:30,040 Speaker 4: double A even in government less and less. So so no, 596 00:33:30,160 --> 00:33:33,360 Speaker 4: I think it's adding, it's adding something, and it's even 597 00:33:33,440 --> 00:33:38,760 Speaker 4: it's rebalancing a bit better. Both benchmarks where you know, 598 00:33:38,880 --> 00:33:42,120 Speaker 4: the financial sectors were quite heavy, so having more industrial 599 00:33:42,200 --> 00:33:45,280 Speaker 4: I think makes makes sense. And if you have more 600 00:33:45,320 --> 00:33:49,640 Speaker 4: industrial but also high quality also it makes sense. But 601 00:33:49,760 --> 00:33:52,320 Speaker 4: you're right, it's something that we monitor. The coding effect 602 00:33:52,400 --> 00:33:55,360 Speaker 4: could have an impact. I read some studies saying that 603 00:33:55,720 --> 00:33:59,600 Speaker 4: you know, the long end of the yield curve, you 604 00:33:59,720 --> 00:34:03,640 Speaker 4: know on the perform significantly and this was the result 605 00:34:03,720 --> 00:34:08,760 Speaker 4: of fiscal risk and the deterioration of of of government 606 00:34:08,800 --> 00:34:12,040 Speaker 4: bond deb The short end was higher because central banks 607 00:34:12,080 --> 00:34:14,320 Speaker 4: maybe were a bit late in the cycle and because 608 00:34:14,320 --> 00:34:16,880 Speaker 4: of inflation shocks, top play shock iron and so on, 609 00:34:17,000 --> 00:34:18,960 Speaker 4: they have to hike. So the long end you have 610 00:34:19,080 --> 00:34:22,960 Speaker 4: the physical risk, the short end the inflation risk, and 611 00:34:23,360 --> 00:34:25,200 Speaker 4: we had also pressure on the mid part of the 612 00:34:25,280 --> 00:34:30,160 Speaker 4: curve because of some more corporatitions. So you're right, it can, 613 00:34:30,400 --> 00:34:35,279 Speaker 4: it can readjust to some extent, but I think it's 614 00:34:35,280 --> 00:34:40,160 Speaker 4: still relatively limited for the moment. I think it's it's okay, 615 00:34:40,239 --> 00:34:42,360 Speaker 4: but it's a risk that we monitor. 616 00:34:43,160 --> 00:34:45,200 Speaker 1: You've talked about also how you like government bonds, but 617 00:34:45,280 --> 00:34:47,320 Speaker 1: you think the credit is less compelling than it was 618 00:34:47,600 --> 00:34:50,920 Speaker 1: at this time of year, this time last year. But 619 00:34:51,120 --> 00:34:53,040 Speaker 1: everything you're saying is kind of you know, like you 620 00:34:53,280 --> 00:34:55,319 Speaker 1: seem to really like the corporate side, and you seem 621 00:34:55,320 --> 00:34:57,040 Speaker 1: to like the ratings, and you seem to like the 622 00:34:57,160 --> 00:35:00,480 Speaker 1: you know, the way these companies are operating count you know, 623 00:35:00,600 --> 00:35:02,880 Speaker 1: to what you think about the governments. So I'm just 624 00:35:02,960 --> 00:35:05,400 Speaker 1: trying to reconcile that view. I mean, it seems like 625 00:35:05,560 --> 00:35:07,920 Speaker 1: some of these companies are clearly run better than a 626 00:35:07,960 --> 00:35:11,320 Speaker 1: lot of governments. If you take the emerging market's parallels. 627 00:35:11,320 --> 00:35:13,960 Speaker 1: You know, a lot of the companies in places like Mexico, 628 00:35:14,000 --> 00:35:16,440 Speaker 1: they trade through the sovereign because you know, investors like 629 00:35:16,520 --> 00:35:18,480 Speaker 1: them more the then actual sovereign. Do you do you 630 00:35:18,560 --> 00:35:21,280 Speaker 1: expect a similar dynamics to occur in develop markets? 631 00:35:21,719 --> 00:35:22,239 Speaker 3: Yeah, it can. 632 00:35:22,400 --> 00:35:25,000 Speaker 4: It can it's already more or less the case you. 633 00:35:25,360 --> 00:35:27,200 Speaker 4: I think you're right, it's something here. 634 00:35:28,520 --> 00:35:29,479 Speaker 3: We had this also. 635 00:35:30,160 --> 00:35:33,960 Speaker 4: I remember in twenty during the Play for All crisis 636 00:35:34,040 --> 00:35:37,640 Speaker 4: you had the Italian and Spanish corporate trading titled and 637 00:35:38,040 --> 00:35:42,520 Speaker 4: their government so you But usually it's mostly the result 638 00:35:42,640 --> 00:35:46,840 Speaker 4: of of isither you have a high political risk and 639 00:35:47,000 --> 00:35:49,640 Speaker 4: then you have a big premium attached to the government 640 00:35:51,000 --> 00:35:55,120 Speaker 4: or supply. But it's not sustainable. It's not something that 641 00:35:55,280 --> 00:35:58,600 Speaker 4: is really sustainable unless it's explained by volume, because you 642 00:35:58,680 --> 00:36:04,040 Speaker 4: have so the relative size of government debt use corporate 643 00:36:04,160 --> 00:36:07,120 Speaker 4: debt mean that even if both are triple b. But 644 00:36:07,560 --> 00:36:11,440 Speaker 4: the biggest issue, it's the outstanding amount of debt is 645 00:36:11,560 --> 00:36:14,240 Speaker 4: so big that you will require or need to offer 646 00:36:14,800 --> 00:36:18,680 Speaker 4: maybe ten twenty thirty bps more than a similarish well 647 00:36:18,760 --> 00:36:22,320 Speaker 4: with a smaller amount of outstanding. So for this to 648 00:36:22,360 --> 00:36:25,799 Speaker 4: be sustainable, it's usually due to the debt capitalization. 649 00:36:26,920 --> 00:36:30,200 Speaker 3: Otherwise it means that there is a political risk and at. 650 00:36:30,080 --> 00:36:33,480 Speaker 4: The end it's not sustainable and you you know, government 651 00:36:33,560 --> 00:36:37,600 Speaker 4: can rest, tax, can patmente. So depending on the solution 652 00:36:37,719 --> 00:36:43,560 Speaker 4: they select. But apart from the technicals and the outstanding 653 00:36:43,600 --> 00:36:47,319 Speaker 4: amount of supply, usually doesn't last very long. 654 00:36:49,440 --> 00:36:54,000 Speaker 2: You mentioned the complex in run and obviously the Russia 655 00:36:54,280 --> 00:36:58,640 Speaker 2: Ukraine conflicted still ongoing as well. One fact that we 656 00:36:58,840 --> 00:37:03,960 Speaker 2: haven't talked about that defense, So what would be your 657 00:37:04,080 --> 00:37:08,600 Speaker 2: approach to that sector now given the state of the world, 658 00:37:08,680 --> 00:37:09,160 Speaker 2: if you like. 659 00:37:10,280 --> 00:37:14,440 Speaker 4: Yeah, our defense is is not a big sector in 660 00:37:14,560 --> 00:37:19,640 Speaker 4: the corporatebod market. So far as it's it's not, I'm 661 00:37:19,680 --> 00:37:22,040 Speaker 4: pretty sure it will go or you will see also 662 00:37:22,200 --> 00:37:26,239 Speaker 4: companies that dilacify or have you know, subsidiaries or maybe 663 00:37:26,280 --> 00:37:28,760 Speaker 4: they will transform a bit. They are that business model 664 00:37:28,840 --> 00:37:34,160 Speaker 4: to to be to be involved in this. But it 665 00:37:34,360 --> 00:37:36,200 Speaker 4: I hope it will will see. You know, the more 666 00:37:36,239 --> 00:37:39,320 Speaker 4: I have issh word, the better I am more happy. 667 00:37:39,640 --> 00:37:43,800 Speaker 4: I am to have a deferense set of opportunities and 668 00:37:43,960 --> 00:37:47,239 Speaker 4: usually they are they need to be quite also, they 669 00:37:47,280 --> 00:37:49,600 Speaker 4: need to have a strong balance it and you have 670 00:37:49,800 --> 00:37:54,560 Speaker 4: sometimes you know, so government stake in it. So that's 671 00:37:55,239 --> 00:38:01,719 Speaker 4: usually a interesting and different opportunity and it's not correlated 672 00:38:01,800 --> 00:38:05,719 Speaker 4: in the same way as the type of sector. So 673 00:38:06,400 --> 00:38:08,879 Speaker 4: for us it will be good because it will add 674 00:38:08,920 --> 00:38:11,880 Speaker 4: a lot of diversification and even it will have a 675 00:38:11,920 --> 00:38:16,919 Speaker 4: different correlation than a cyclical sector, you know, So that's 676 00:38:17,280 --> 00:38:21,560 Speaker 4: something that will be quite welcome, I would say, in 677 00:38:22,480 --> 00:38:25,320 Speaker 4: our in our universe, it's mostly for the moment in 678 00:38:25,360 --> 00:38:29,560 Speaker 4: the uniquity story. When you look at the number of 679 00:38:29,640 --> 00:38:32,200 Speaker 4: fis who are on the size in our universe, it's 680 00:38:32,320 --> 00:38:32,800 Speaker 4: very smaller. 681 00:38:33,000 --> 00:38:35,000 Speaker 3: Fine, it's still very small. A bit more in the US, 682 00:38:35,080 --> 00:38:36,640 Speaker 3: but it's still very limited. 683 00:38:38,000 --> 00:38:40,520 Speaker 1: Where is the risk of rega to put your finger on. 684 00:38:40,560 --> 00:38:42,760 Speaker 1: There's a ton of pretty weak companies out there, partically 685 00:38:42,760 --> 00:38:44,799 Speaker 1: in Europe. They've been kicking the camp for a long time. 686 00:38:44,880 --> 00:38:47,320 Speaker 1: Rate so not going down in time soon. They're probably 687 00:38:47,320 --> 00:38:50,360 Speaker 1: going higher. They've got that. Coming to the macro is 688 00:38:50,400 --> 00:38:53,120 Speaker 1: more difficult in fuel prices. There's lots of things to 689 00:38:53,200 --> 00:38:55,840 Speaker 1: worry about. Obviously I worry about stuff because I'm covering credit. 690 00:38:55,920 --> 00:38:58,160 Speaker 1: But but is there any risk in terms of what 691 00:38:58,280 --> 00:39:01,040 Speaker 1: you're saying in terms of we have your credit market? 692 00:39:02,960 --> 00:39:05,120 Speaker 3: I think as long as rates are higher. 693 00:39:07,320 --> 00:39:10,800 Speaker 4: And we are we are not in we are in 694 00:39:10,880 --> 00:39:14,279 Speaker 4: a low growth environment, So it's okay, it should be. 695 00:39:14,320 --> 00:39:18,920 Speaker 4: It's even what you prefer as an as an environment 696 00:39:19,000 --> 00:39:22,399 Speaker 4: for fixing the low growth. In love relativity, you don't 697 00:39:22,400 --> 00:39:25,640 Speaker 4: have a lot of diffault threads and reds are attracting 698 00:39:25,640 --> 00:39:27,399 Speaker 4: a lot of money. So we are in in fact, 699 00:39:27,480 --> 00:39:29,359 Speaker 4: we are in one of the best I would say 700 00:39:30,120 --> 00:39:32,719 Speaker 4: environment for cary tread and credit is a carry tread. 701 00:39:33,360 --> 00:39:37,040 Speaker 3: So I think the enemy, if you you need to 702 00:39:37,160 --> 00:39:38,720 Speaker 3: find something that will. 703 00:39:40,600 --> 00:39:43,840 Speaker 4: That will potentially disrupt the market, is as a recession, 704 00:39:46,120 --> 00:39:49,239 Speaker 4: and it could it could have happened. Look if we 705 00:39:49,360 --> 00:39:53,839 Speaker 4: had another deterireration in Iran, for when we have oil 706 00:39:53,960 --> 00:39:57,920 Speaker 4: coming to above a hundred, we revise grows down, but 707 00:39:58,000 --> 00:40:01,279 Speaker 4: it was still not a recession. If we have all 708 00:40:01,360 --> 00:40:03,440 Speaker 4: going to I don't know one fifty or another, we 709 00:40:03,480 --> 00:40:05,480 Speaker 4: will have a rezation. So then you will have a 710 00:40:05,760 --> 00:40:08,319 Speaker 4: big credit spread widening. And that's the reason why. Also 711 00:40:08,440 --> 00:40:11,520 Speaker 4: we are not running a lot of risk in our 712 00:40:11,640 --> 00:40:15,880 Speaker 4: portfolio even if this scenario is in. So this is 713 00:40:15,960 --> 00:40:19,359 Speaker 4: one one that could be one risk. The second one 714 00:40:20,320 --> 00:40:23,160 Speaker 4: I think would be for whatever reason, you could sink. 715 00:40:23,520 --> 00:40:26,000 Speaker 4: But I think one of the catalysts or why people 716 00:40:26,080 --> 00:40:29,279 Speaker 4: are buying credits is because of the if for some 717 00:40:29,440 --> 00:40:33,399 Speaker 4: reason yields go down, I think the appetite for credit 718 00:40:33,480 --> 00:40:34,200 Speaker 4: will be lower. 719 00:40:35,120 --> 00:40:37,560 Speaker 1: I think how far we after you're down there, because 720 00:40:37,560 --> 00:40:39,239 Speaker 1: they're still you know, they're they're a long way from 721 00:40:39,360 --> 00:40:41,240 Speaker 1: what most people think are sort of crunch levels. 722 00:40:42,120 --> 00:40:43,719 Speaker 3: Yeah. But if if you have. 723 00:40:45,560 --> 00:40:51,640 Speaker 4: Let's say, suddenly sound albums turning all very okis and 724 00:40:51,840 --> 00:40:54,719 Speaker 4: they decide to say, but we need really to take 725 00:40:54,719 --> 00:40:57,680 Speaker 4: all inflation down at target, which is not what they 726 00:40:57,680 --> 00:40:59,399 Speaker 4: are doing for the moment or not all of them, 727 00:41:00,920 --> 00:41:03,360 Speaker 4: then it can slow the economy and put the red slower. 728 00:41:05,120 --> 00:41:08,120 Speaker 3: But for the moments it's it's not the case. 729 00:41:08,160 --> 00:41:11,040 Speaker 4: As long as we have this environment of flow grows 730 00:41:12,400 --> 00:41:15,759 Speaker 4: inflation slightly above target, I think it's okay. 731 00:41:17,280 --> 00:41:19,319 Speaker 2: I think given the headlines that we've had this week, 732 00:41:19,360 --> 00:41:21,920 Speaker 2: I guess we have to talk about the UK, right, 733 00:41:23,640 --> 00:41:29,000 Speaker 2: So how is Monday approaching stelling investments first and then 734 00:41:29,800 --> 00:41:34,040 Speaker 2: companies within the UK at the moment? Does the sort 735 00:41:34,040 --> 00:41:37,440 Speaker 2: of revolving door of the number ten make a difference 736 00:41:38,760 --> 00:41:42,000 Speaker 2: or is it just noise? Do you think for credit investors? 737 00:41:44,360 --> 00:41:47,200 Speaker 4: For credits investor, it depends if you invest in a 738 00:41:48,000 --> 00:41:51,440 Speaker 4: a in stelling dolominated pure fund. I think it has 739 00:41:51,480 --> 00:41:54,239 Speaker 4: an impact because you are your performance is linked to 740 00:41:54,320 --> 00:41:57,920 Speaker 4: the REDS performance. On our side, what we have been 741 00:41:58,000 --> 00:42:01,120 Speaker 4: doing recently is more to add a bit of durrection 742 00:42:01,239 --> 00:42:06,400 Speaker 4: on the UK and particularly on the short end, saying 743 00:42:06,480 --> 00:42:11,560 Speaker 4: that the by will not be in a position to 744 00:42:11,719 --> 00:42:15,399 Speaker 4: hike as much that what his price and this level 745 00:42:15,440 --> 00:42:19,239 Speaker 4: of him was relatively attractive. What remn more, I would 746 00:42:19,320 --> 00:42:23,040 Speaker 4: say uncertain is about the long gain. However, I think 747 00:42:23,120 --> 00:42:27,439 Speaker 4: when you look at how it's under performassively, I think, 748 00:42:27,520 --> 00:42:30,160 Speaker 4: again as I was saying for other country. 749 00:42:29,920 --> 00:42:30,920 Speaker 3: The physical risk. 750 00:42:32,920 --> 00:42:37,440 Speaker 4: Is already h he is already party price, maybe just 751 00:42:38,120 --> 00:42:41,359 Speaker 4: not one hundred percent, maybe seventy eighty percent. 752 00:42:42,920 --> 00:42:49,480 Speaker 3: The potential you know, new PM mister Darman already. 753 00:42:49,239 --> 00:42:54,480 Speaker 4: Said he will respect you know, the physical rules. So 754 00:42:54,680 --> 00:42:57,040 Speaker 4: let's see, because they all say that, but after they 755 00:42:57,120 --> 00:43:01,120 Speaker 4: start to be a bit more creative. And but I 756 00:43:01,200 --> 00:43:06,880 Speaker 4: think he has he has very little about flexibility around there, so. 757 00:43:08,360 --> 00:43:09,839 Speaker 3: Maybe there could be another. 758 00:43:09,840 --> 00:43:13,440 Speaker 4: Slightly lay higher, But given that the flexibility is very 759 00:43:13,560 --> 00:43:17,560 Speaker 4: very low, he's yeah, he doesn't have much of rumor 760 00:43:18,760 --> 00:43:20,520 Speaker 4: even if he wants to change, seeing. 761 00:43:21,920 --> 00:43:22,600 Speaker 3: It's not easy. 762 00:43:22,800 --> 00:43:29,400 Speaker 4: So so I'm not expecting a bit strong deterioration of 763 00:43:30,520 --> 00:43:33,680 Speaker 4: of the UK. The market has already priced as I said, 764 00:43:33,719 --> 00:43:36,840 Speaker 4: I think eighty percent maybe even more of that. So 765 00:43:36,920 --> 00:43:40,120 Speaker 4: I'm happy to be overwhet the UK, and particularly as 766 00:43:40,160 --> 00:43:44,440 Speaker 4: I said, on the on the shorthand when it stands 767 00:43:44,480 --> 00:43:50,840 Speaker 4: to the credit UK eliminated. Unfortunately, this market is not 768 00:43:51,360 --> 00:43:55,160 Speaker 4: very liquid. I would like to be more involved on it, 769 00:43:56,560 --> 00:43:59,839 Speaker 4: and I was hoping that with you know, the UK 770 00:44:01,280 --> 00:44:04,440 Speaker 4: and with the monetary policy and also being now outside 771 00:44:04,480 --> 00:44:08,680 Speaker 4: the the EU, could be you know, offering a way 772 00:44:08,760 --> 00:44:11,200 Speaker 4: to diversify significantly. 773 00:44:12,120 --> 00:44:15,920 Speaker 3: Our part for you. But the depth of the market 774 00:44:16,360 --> 00:44:18,480 Speaker 3: is not on the core port market is not. 775 00:44:18,840 --> 00:44:21,160 Speaker 4: It's not very very big. So it's it's it's okay, 776 00:44:21,280 --> 00:44:24,920 Speaker 4: but it's not as liquid as you know. You usked 777 00:44:24,960 --> 00:44:28,000 Speaker 4: me about the coross councy opportunity. You u s your 778 00:44:28,200 --> 00:44:31,440 Speaker 4: We are doing some on the UK, but it's not 779 00:44:31,600 --> 00:44:33,840 Speaker 4: as liquid and as the tow other markets, so you 780 00:44:33,920 --> 00:44:36,160 Speaker 4: need to have a slightly different approach. 781 00:44:37,080 --> 00:44:39,000 Speaker 3: You can't, Yeah, you can't have. 782 00:44:39,080 --> 00:44:41,279 Speaker 4: The same approach as you have on the on the 783 00:44:41,480 --> 00:44:45,680 Speaker 4: U S and the Europe because the market is slightly smaller. 784 00:44:46,880 --> 00:44:51,480 Speaker 3: But I hope that there will be more issues and 785 00:44:51,760 --> 00:44:52,920 Speaker 3: more you know, liquidity. 786 00:44:53,640 --> 00:44:54,040 Speaker 2: Mm hmm. 787 00:44:55,400 --> 00:44:58,200 Speaker 1: Looking ahead, Greg, you're combining the crystal ball and the 788 00:44:58,520 --> 00:45:01,040 Speaker 1: globe in terms of your your massive view of the 789 00:45:01,080 --> 00:45:03,239 Speaker 1: whole fixed income universe. What do you think is the 790 00:45:03,320 --> 00:45:05,080 Speaker 1: best or where do you think the best realtive value 791 00:45:05,160 --> 00:45:07,680 Speaker 1: is right now, let's say for the next twelve months. 792 00:45:07,719 --> 00:45:10,400 Speaker 1: In terms of the investment horizon. 793 00:45:11,040 --> 00:45:13,640 Speaker 4: I think it's a mixed of I think, as I said, 794 00:45:14,360 --> 00:45:17,960 Speaker 4: credit is okay. Government bonds I think are offering now 795 00:45:18,480 --> 00:45:22,399 Speaker 4: quite significant. We are at the very historical high level 796 00:45:22,480 --> 00:45:27,120 Speaker 4: on the short en, so I like the short end 797 00:45:27,160 --> 00:45:32,600 Speaker 4: in Europe. There are still this physical risks as we 798 00:45:32,719 --> 00:45:35,520 Speaker 4: discussed all the longer that is waiting a bit on 799 00:45:35,640 --> 00:45:40,480 Speaker 4: the market. There are some areas where it's priced I think, 800 00:45:41,160 --> 00:45:45,080 Speaker 4: like maybe the very long und in Japan. There are 801 00:45:45,080 --> 00:45:48,480 Speaker 4: also some countries where they are quite physically responsible. You 802 00:45:48,560 --> 00:45:53,240 Speaker 4: have Australia, you have New Zealand. There are some rerating 803 00:45:53,280 --> 00:45:57,400 Speaker 4: in emerging markets. So there are plenty of opportunities. I 804 00:45:57,440 --> 00:46:01,040 Speaker 4: think in each country you can have, given where rates are, 805 00:46:01,160 --> 00:46:07,759 Speaker 4: you can find a turner that is quite quite attractive. 806 00:46:07,880 --> 00:46:12,560 Speaker 4: So when you look at our budget of risk in 807 00:46:12,640 --> 00:46:15,920 Speaker 4: our portfolio, it's through that over the past Faviio, with 808 00:46:16,000 --> 00:46:18,400 Speaker 4: the strong performance of credit, we have decreased a bit 809 00:46:18,480 --> 00:46:21,560 Speaker 4: the exposure to credit because the risk return is less attractive. 810 00:46:21,680 --> 00:46:23,320 Speaker 3: Still good, but it's a bit less attractive. 811 00:46:23,320 --> 00:46:25,799 Speaker 4: We're still positive, but a bit less and we are 812 00:46:25,840 --> 00:46:29,640 Speaker 4: rebalancing it where volativity is it's more like on on 813 00:46:29,840 --> 00:46:31,160 Speaker 4: rights and a bit on on for. 814 00:46:31,400 --> 00:46:31,680 Speaker 3: X or so. 815 00:46:34,280 --> 00:46:36,719 Speaker 2: So James has asked about the opportunity, so I have 816 00:46:36,840 --> 00:46:40,600 Speaker 2: to obviously ask about the risks and the threats. What 817 00:46:40,760 --> 00:46:46,040 Speaker 2: would you say, keep the CIO global fixed, incomes CIO 818 00:46:46,160 --> 00:46:48,759 Speaker 2: over Monday up at night. At this point, what is 819 00:46:48,840 --> 00:46:49,759 Speaker 2: he as the biggest risk? 820 00:46:50,680 --> 00:46:55,480 Speaker 4: Well, the biggest risk is, uh, you know, you have 821 00:46:56,080 --> 00:47:02,360 Speaker 4: we had success see the you know, inflation shock or 822 00:47:02,400 --> 00:47:06,240 Speaker 4: supply shock. You have the we had as you said, Russia, 823 00:47:06,360 --> 00:47:10,160 Speaker 4: you can Russia, then we have Iran, and now we 824 00:47:10,320 --> 00:47:15,200 Speaker 4: have also AI capects that can also put So inflation 825 00:47:15,320 --> 00:47:19,640 Speaker 4: has been overshooting for no target in the US for 826 00:47:19,800 --> 00:47:25,600 Speaker 4: five years. I think again it's not sustainable. So you 827 00:47:25,719 --> 00:47:31,000 Speaker 4: wonder at some point, if you know administration, some albums 828 00:47:31,000 --> 00:47:34,640 Speaker 4: should be a bit more I would say independent, and 829 00:47:34,719 --> 00:47:37,560 Speaker 4: I think some are and they clearly listen some signal, 830 00:47:38,080 --> 00:47:42,320 Speaker 4: So I think, what the worsh You know his first 831 00:47:43,000 --> 00:47:47,840 Speaker 4: press conference, it sounds very okey and maintained, you know, independent. 832 00:47:47,920 --> 00:47:51,279 Speaker 4: I think it's key for that. So one one of 833 00:47:51,360 --> 00:47:54,279 Speaker 4: my concerns would be if we have a doubt about that, 834 00:47:56,080 --> 00:48:00,080 Speaker 4: so some halbanks independence. And then as I said, the 835 00:48:00,160 --> 00:48:04,600 Speaker 4: second may be things that where we we are so 836 00:48:04,760 --> 00:48:06,719 Speaker 4: concerned that we are a bit short is on the 837 00:48:06,760 --> 00:48:10,080 Speaker 4: physical risk, because if you look long term, the trajectory 838 00:48:10,160 --> 00:48:14,719 Speaker 4: of debt to GDP can be concerning on some on 839 00:48:14,840 --> 00:48:18,239 Speaker 4: some countries. So these are the tourist but I think 840 00:48:18,280 --> 00:48:22,960 Speaker 4: it's already factory in after it is the question of 841 00:48:23,080 --> 00:48:26,560 Speaker 4: valuation that you put that you put on on it. 842 00:48:28,480 --> 00:48:28,920 Speaker 3: Very stuff. 843 00:48:29,000 --> 00:48:31,520 Speaker 1: Greg wor Pesk with a Monday many thanks for joining 844 00:48:31,600 --> 00:48:34,800 Speaker 1: us on the credit edge. Thank you very much, and 845 00:48:34,960 --> 00:48:36,960 Speaker 1: of course I'm very grateful to Tolu Ala Musu with 846 00:48:37,000 --> 00:48:39,600 Speaker 1: Bloomberg Intelligence. Thank you for joining us today. Thank you 847 00:48:39,680 --> 00:48:43,279 Speaker 1: for having me for more credit market analysis and insight. 848 00:48:43,360 --> 00:48:45,440 Speaker 1: Read all of Toto's great work on the Bloomberg terminal. 849 00:48:45,480 --> 00:48:47,920 Speaker 1: Bloomberg Intelligence is part of our research department with five 850 00:48:48,040 --> 00:48:51,200 Speaker 1: hundred analyst and strategists working across all markets. Coverage includes 851 00:48:51,200 --> 00:48:53,560 Speaker 1: over two thousand equities and credits, pass outlooks on more 852 00:48:53,560 --> 00:48:57,719 Speaker 1: than ninety industries and one hundred market indices, currencies and commodities. 853 00:48:58,280 --> 00:49:00,960 Speaker 1: Please do subscribe to the Credit wherever you get your 854 00:49:01,040 --> 00:49:04,920 Speaker 1: podcasts We're on Apple, Spotify, and all other good podcast providers, 855 00:49:05,160 --> 00:49:08,520 Speaker 1: including the Bloomberg Terminal at bpod Go. Give us a review, 856 00:49:08,920 --> 00:49:11,960 Speaker 1: tell your friends, or email me directly at jcrombieight at 857 00:49:11,960 --> 00:49:13,080 Speaker 1: Bloomberg dot net. 858 00:49:13,680 --> 00:49:14,440 Speaker 3: I'm James Crombie. 859 00:49:14,480 --> 00:49:16,399 Speaker 1: It's been a pleasure having you join us again next 860 00:49:16,400 --> 00:49:17,560 Speaker 1: week on the Credit Edge.