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Speaker 1: Hello, and welcome to the Credit Edge Weekly Markets Podcast.

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Speaker 1: My name is James Grumby. I'm a senior at Bloomberg.

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Speaker 2: And I'm Himanshu Bakshi, a senior credit analyst at Bloomberg Intelligence,

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Speaker 2: covering banks and non bank financials. This week, we are

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Speaker 2: very pleased to welcome Colin Martin, director and fixed income

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Speaker 2: strategist at show Op Center for Financial Research. How are you, Colin,

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Speaker 2: I'm doing great. Thank you so much for having me.

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Speaker 2: Thank you for joining us today. At SHOOP, Colin provides

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Speaker 2: in depth analysis and investor education on fixed income markets,

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Speaker 2: with a particular focus on taxable credit markets, and with

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Speaker 2: over a decade at Shop, Colin has established himself as

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Speaker 2: a leading voice in fixed income strategy with thrilled to

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Speaker 2: have you on the show.

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Speaker 1: Thank you so much, so we have loads of questions

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Speaker 1: for you. Before we ask the question, I'm just going

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Speaker 1: to set the scene a bit. Markets have rallied on

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Speaker 1: hopes of a broad ceasefire in the trade war, but

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Speaker 1: there's still a huge amount of uncertainty out there, plus

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Speaker 1: more volatility to come as the US moves on from

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Speaker 1: tariffs to tax and immigration reform. Headline risk is high,

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Speaker 1: yet credit markets project an air of complacency, with debt

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Speaker 1: spreads back below where they were before so called Liberation

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Speaker 1: Day at the start of April, and junk bonds just

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Speaker 1: had their best month in almost a year. Keeping corporate

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Speaker 1: debt risk premium very tight is the fact that there's

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Speaker 1: way too much demand for a limited amount of net

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Speaker 1: new supply of corporate bonds, and unless the M and

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Speaker 1: A machine cranks back up, the supply demand in balance

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Speaker 1: will continue. On top of that, the US has lost

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Speaker 1: its triple A credit rating, calling into question the idea

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Speaker 1: of risk free rate. Perhaps that makes corporate debt look

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Speaker 1: more attractive in relative terms. Investors are also looking more

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Speaker 1: at Europe and Asia as alternatives, but there are clear

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Speaker 1: limitations when it comes to scale and liquidity in those markets.

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Speaker 1: So Colin, what's your take. Is credit fairly valued at

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Speaker 1: these levels?

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Speaker 3: I'd say it is fairly valued.

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Speaker 4: To maybe a little bit overvalued. You know, we saw

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Speaker 4: that big blowout in spreads in early April because of

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Speaker 4: all the anxiety around the tariffs, but then they've since

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Speaker 4: come down. They're still a little bit elevated compared to

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Speaker 4: where they were earlier in the year. I think it's

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Speaker 4: important to point out that even though there's a lot

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Speaker 4: of uncertainty out there, you said that when.

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Speaker 3: You kicked us off.

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Speaker 4: I'll probably repeat it a lot in this conversation. I mean,

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Speaker 4: that's the number one thing we're looking at. But despite

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Speaker 4: all that uncertainty, we came into the year on relatively

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Speaker 4: solid footing and the data we're seeing right now, despite

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Speaker 4: the disappointing soft data, the hard data is okay. So

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Speaker 4: I think still think they're a little overvalued, But I

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Speaker 4: think it makes sense that spreads are where they are

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Speaker 4: because if tariffs.

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Speaker 3: Are you can't say they're off the table. Right now.

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Speaker 3: There's on again, off again.

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Speaker 4: We still have a relatively high tariff rate, even with

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Speaker 4: those big reciprocal tariffs kind of brought back to that

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Speaker 4: ten percent level. That is an overhang. But if you

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Speaker 4: look at fundamentals, revenues are still strong. Corporate profits are

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Speaker 4: still high. We got corporate profits last week GDP release

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Speaker 4: and they did decline in the first quarter by I

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Speaker 4: think three percent or so, but we're still at a

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Speaker 4: really high level. If you look at where we were

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Speaker 4: back in you know, the early stages of COVID late

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Speaker 4: twenty nineteen. Corporate profits on an aggregate are up fifty

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Speaker 4: or sixty percent, so that's a really strong starting point

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Speaker 4: in aggregate. Again, balance sheets are relatively strong, a lot

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Speaker 4: of cash on their balance sheets, and even though borrowing

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Speaker 4: costs financing costs are elevated compared to where we've seen

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Speaker 4: for the past fifteen years and right before the pandemic,

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Speaker 4: corporations have proven that they can mostly handle it. I

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Speaker 4: say mostly because lower rated companies I think will continue

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Speaker 4: to struggle, but they've shown us that that they can

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Speaker 4: handle it. So I think spreads will probably stay supported

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Speaker 4: for a while unless there's another, you know, big tariff

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Speaker 4: headline that I think would spook the markets.

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Speaker 3: But I think we'll probably trade low for a little bit.

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Speaker 2: So Coney, you talked about it, and then James mentioned

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Speaker 2: it in his own remarks. Despite tight spreads, he's remain

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Speaker 2: attractive due to high base rates. Our investors adequately compensated

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Speaker 2: for the risk, do you think or is there a

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Speaker 2: sense of complacency in the market.

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Speaker 4: I do think there's a sense of complacency of the market.

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Speaker 4: I'd say they're adequately compensated, but not compensated too well.

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Speaker 4: Pretty much our mantra when we talk about investing in

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Speaker 4: credit and regardless of you know what the spectrum of that,

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Speaker 4: that risk is to make sure you're being compensated.

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Speaker 3: Well for it.

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Speaker 4: So if we look at high yield, I think that

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Speaker 4: it's always more fun to talk about high yield than

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Speaker 4: ig just because you see, you know, much more volatility, spread, fluctuations,

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Speaker 4: kind of funkier issuance trends, things like that. At close

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Speaker 4: to three percent, that's well below the long term average.

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Speaker 4: So that leads us to be a little bit more

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Speaker 4: cautious here. But you mentioned yields. You know, what's the

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Speaker 4: yield that an investor earns. You can make the case

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Speaker 4: that the yields are relatively attractive. Again, if we go

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Speaker 4: back to the last fifteen years or so. On that point,

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Speaker 4: I'll pivot to investment create that that's an area that

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Speaker 4: we've liked for a while because despite the potential complacency,

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Speaker 4: despite the concerns about maybe slower growth down the road,

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Speaker 4: I think they're starting at a really really strong starting point,

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Speaker 4: like I mentioned before, And if we're looking at yields

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Speaker 4: of five, five and a half six percent depending on

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Speaker 4: the actual credit rating, depending on the maturity, we think

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Speaker 4: that's attractive for a lot of investors. Even if spreads

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Speaker 4: rise or fall a little bit and we see some fluctuations.

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Speaker 4: If you're looking for yield, and we know a lot

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Speaker 4: of investors are, we think that's a pretty good place

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Speaker 4: to start.

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Speaker 1: But the high yield market, you know, those are the

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Speaker 1: weaker borrowers. They are the ones, you know, most exposed

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Speaker 1: to a lot of this volatility, and potentially they can't

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Speaker 1: pay the money back. You know, it's a Fixingcome investor.

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Speaker 1: You want to get your coupon and the money back.

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Speaker 1: So what are the risks of more defaults? You know,

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Speaker 1: with this kind of turbulence in the economy.

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Speaker 4: I think the risk of defaults is still high. We

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Speaker 4: don't really talk about or hear about defaults, but the

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Speaker 4: rate's still pretty high right now.

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Speaker 2: You know.

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Speaker 4: We look at data from both Moodies and Standard and

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Speaker 4: Poors and the trail twelve months specorate default rate is

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Speaker 4: around four percent or so. It's nothing to sneeze at.

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Speaker 4: That is closer to the long term average. Using averages

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Speaker 4: is always difficult. It's usually above or below, just like

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Speaker 4: with spreads. But that kind of plays into our idea

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Speaker 4: of are you being compensated well appropriately? And if spreads

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Speaker 4: are well below average, but we think the risks are

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Speaker 4: pretty high and default rates are closer to their long

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Speaker 4: term averages. That's why we think spreads might need to

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Speaker 4: adjust a little bit. But defaults, like I said, that

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Speaker 4: they are elevated. We see a big risk with the

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Speaker 4: lowest rated parts of the market, the Triple C's. That's

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Speaker 4: pretty much always the case. I don't think that's anything

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Speaker 4: crazy to say. But you mentioned James the idea of

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Speaker 4: getting your money back, and we've seen, you know, fundamentals

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Speaker 4: deteriorate depending on credit rating. And just this morning I

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Speaker 4: was looking at.

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Speaker 3: All, right, what's the what's leverage look like, what's.

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Speaker 4: Interest coverage look like for the broad high yield universe,

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Speaker 4: And if you look specifically at Triple C's, interest coverage

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Speaker 4: is less than one. So, you know, bringing it back

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Speaker 4: to your point, if you're not making enough to pay

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Speaker 4: out that interest payment, I think that's a really big risk.

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Speaker 4: So defaults are probably gonna stay high. And but it's

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Speaker 4: I don't know if it's gonna surge higher, but at

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Speaker 4: four percent, it's enough for us to be a little

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Speaker 4: bit more cautious, and you know, suggest investors kind of

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Speaker 4: dive in headfirst.

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Speaker 1: And could it be higher if we didn't factor in

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Speaker 1: all of the liabilty management that's going on and all

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Speaker 1: of the you know, private credit amendments and pick and

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Speaker 1: all that stuff. I mean, could it could the actual

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Speaker 1: rate behive for all this other stuff wasn't going on?

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Speaker 4: It most likely is they treat defaults differently, and I

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Speaker 4: think each credit rating does. And forgive me, I forget

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Speaker 4: which one treats distressed exchanges differently.

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Speaker 3: But if you look at the highyal.

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Speaker 4: Bond default rate versus a loan default rate, loans are

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Speaker 4: still very low, I'd say artificially low. They're not lying,

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Speaker 4: it's just different methodology. But we see more and more

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Speaker 4: distressed exchanges. I mean, the default environment is not what

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Speaker 4: it used to be.

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Speaker 3: It used to be.

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Speaker 4: You know, you you lend to an issuer, you hope

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Speaker 4: to get your money back. If not, we're going to

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Speaker 4: go into chapter seven, chapter eleven, we'll figure it out.

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Speaker 4: That's not the case anymore. And we've seen all these

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Speaker 4: this pickup into stressed exchanges. And I think, going back

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Speaker 4: to the point back complacency, I think markets don't really

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Speaker 4: worry about that. But at the end of the day,

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Speaker 4: it's generally speaking, you're getting something that you weren't promised.

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Speaker 4: You're probably taking a haircut, you're probably pushing out the maturity.

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Speaker 4: And at its core, you know, lending is expecting to

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Speaker 4: get your money back. And the world has changed. The

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Speaker 4: investing world has changed, especially with you know, spec rated

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Speaker 4: investors or borrowers, rather so.

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Speaker 2: Calling all these specific sectors within the investment grade or

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Speaker 2: HI space that you believe a more vulnerable or resilient

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Speaker 2: in the content environment.

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Speaker 4: So we when we look at the credit markets, you know,

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Speaker 4: we look at it from a high level, so we

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Speaker 4: don't look at specific sectors, say communications versus energy utilities.

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Speaker 4: That's kind of out of our wheelhouse. So we tend

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Speaker 4: to look at whether we like IG or high yield.

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Speaker 4: We'll look at things like fixed first floating rate, and

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Speaker 4: then maybe specific credit ratings. If we look at investment grade,

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Speaker 4: I think ninety two percent of the market single A

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Speaker 4: or triple B. It's tough to avoid triple b's these days,

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Speaker 4: but that's not something I'm too worried about. When I

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Speaker 4: think when I talk about investment grade, I think fundamentals

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Speaker 4: are pretty strong across the board. Yeah, there'll be some

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Speaker 4: weak issues here, and there. So if you are an

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Speaker 4: investor looking at individual single names, you know, maybe the

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Speaker 4: lowest of the triple B might be a little bit concerning,

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Speaker 4: but generally speaking, we're not too worried. There is some

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Speaker 4: good news though we've seen the share of triple b's

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Speaker 4: coming down. We saw it surging for almost a decade.

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Speaker 4: I think at its peak at the Bloomberg US Corporate

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Speaker 4: Index it got to about fifty two percent. It's down

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Speaker 4: to about forty six percent, where we've seen single a's

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Speaker 4: actually decline a little bit. So I think that's that's

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Speaker 4: pretty good. And then just bringing it back to where

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Speaker 4: and how we look at at junk, double bees are

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Speaker 4: probably going to be okay. I mean defaults, which we

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Speaker 4: were just talking about, they usually come from the lowest rated,

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Speaker 4: so you're looking at the low bs and the triple C.

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Speaker 4: So if you have a strategy that's focusing on double

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Speaker 4: b's or high single bees, yeah, they'll probably be volatility.

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Speaker 4: There could be spread widening as we expect as the

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Speaker 4: year progresses, but we wouldn't expect a blowout in those

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Speaker 4: parts of the junk market.

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Speaker 2: So that brings me to something that you mentioned tariffs

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Speaker 2: in your comments. So a recent US Straight Code ruling

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Speaker 2: blocked most of President Trump's drives. However, an appease scote

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Speaker 2: temporarily reinstated those statves spending for the review. How might

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Speaker 2: this legal uncertainty surrounding type of impact investor confidence and

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Speaker 2: product credit markets?

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Speaker 3: You know it should.

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Speaker 4: I think all the uncertainty should negatively influence consumer confidence.

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Speaker 4: We've seen that, whether it's at the business level or

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Speaker 4: the consumer level, the number we've seen have been really bad.

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Speaker 4: I mean, I can't stress that enough. Although we did

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Speaker 4: get an bounce back with the University of Michigan numbers.

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Speaker 3: Because of the quasi tariff rollback.

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Speaker 4: I think the on again, off again nature is just

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Speaker 4: going to leave this cloud of uncertainty around investors, around consumers,

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Speaker 4: I think specifically around businesses. We haven't seen consumers crack much.

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Speaker 4: Consumers continue to spend. It's been the case for years

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Speaker 4: where consumer driven economy. I think on the business level,

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Speaker 4: I think there is a risk that the sentiment we're

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Speaker 4: seeing translates to them actually changing how they run their business.

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Speaker 4: Are they going to hire a lot more people if

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Speaker 4: there's all this uncertainty out there, I don't think they will.

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Speaker 4: Maybe they start to reduce their headcount. That's the risk.

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Speaker 4: Obviously haven't seen it yet. The labor markets held up well.

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Speaker 4: Do they not expand capacity? Do they not buy a

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Speaker 4: company as you talked about, James, in terms of M

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Speaker 4: and A. So I think that should weigh on business

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Speaker 4: actual activity as the year progresses, and that translates to

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Speaker 4: a growth slow down. I think that's what would likely

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Speaker 4: bring spreads a little bit higher.

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Speaker 1: If growth slows down, could it not ultimately lead to recession?

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Speaker 1: And we were at this long end of a really

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Speaker 1: long cycle that seems to go on, but you know,

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Speaker 1: rates of high consumers are suffering, there's all these cracks appearing.

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Speaker 1: You know, there's a lot of volatility coming from the

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Speaker 1: policy side. What are the risks of a US recession

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Speaker 1: and something that might affect credit?

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Speaker 4: I think the risks are certainly up relative to the

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Speaker 4: past few months. It's pretty funny. Over twenty twenty three

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Speaker 4: and twenty twenty four, recession was all that a lot

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Speaker 4: of people talked about.

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Speaker 3: I mean, we talked about it a lot, but but

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Speaker 3: we were.

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Speaker 4: Warning about the risks, but not you know, flashing alarm

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Speaker 4: signs or alarm signals just yet. We were thinking that

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Speaker 4: it could happen. It was the recession that never came, though,

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Speaker 4: and then if we fast forwarded to early twenty twenty five,

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Speaker 4: I remember having a conversation with some colleagues where we

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Speaker 4: just stopped talking about it. The idea of a recession

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Speaker 4: in January and February of this year was just not

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Speaker 4: something that we were talking talking about. And I'd say

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Speaker 4: risk was very, very low because the economy was still

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Speaker 4: growing above trent. We were looking at economic growth in

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Speaker 4: the two and a half to three percent level. The

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Speaker 4: risks to the labor market we got a little spook

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Speaker 4: in twenty twenty four. We saw the sam rule triggered

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Speaker 4: for I think a month, maybe two, and then it

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Speaker 4: just leveled off.

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Speaker 3: So all those, you know, the.

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Speaker 4: Concerns we had didn't arrive, and they never arrived. With

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Speaker 4: slower economic data, I'd say the risk is on again

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Speaker 4: just due to uncertainty. I keep using that word a lot,

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Speaker 4: but I think there's a real risk to slower activity.

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Speaker 4: Also on the consumer side, we're seeing mortgage rates still

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Speaker 4: high again, I think around seven percent. For years, people

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Speaker 4: have been talking about the risks to the housing market

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Speaker 4: that again never really came. We're starting to see some

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Speaker 4: headlines there about you know, people looking to sell and

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Speaker 4: are there enough buyers out there with mortgage rates so high?

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Speaker 4: I think that's a risk. I think if there's a

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Speaker 4: just an unser environment, if.

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Speaker 3: You're worried about your job prospects.

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Speaker 4: Are you going to go you know, put on that addition,

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Speaker 4: build the deck, take that big vacation. I think there

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Speaker 4: is a risk that that slows down. But right now,

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Speaker 4: in the here and now, in early June, that seems

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Speaker 4: like it might be a few more months away because

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Speaker 4: right now things still appear to be generally okay.

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Speaker 1: Also, the rates side, I mean, is not supposed to

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Speaker 1: you know this inflation, sale prices stills seem to be

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Speaker 1: very sticky on the upside. What does the Fed do

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Speaker 1: in this situation?

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Speaker 3: Right now?

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Speaker 4: The Fed doesn't need to do anything that there's all

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Speaker 4: this talk about what happens when the Fed's mandates get

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Speaker 4: in conflict.

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Speaker 3: That is a risk. What are they going to do?

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Speaker 4: That's not a conversation that we need to have right now,

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Speaker 4: because the data says they're not in conflict. Inflation is

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Speaker 4: still above target, but we've gotten some good inflation readings

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Speaker 4: over the past month or two. I mean that PCEE

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Speaker 4: report was really nice in an environment where tariffs were

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Speaker 4: generally in place. So inflation, though is it's still about

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Speaker 4: target and the labor market's doing okay. So if you

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Speaker 4: look at that just those two indicators, the Fed doesn't

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Speaker 4: need to do anything. It supports the case for them

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Speaker 4: to hold rates where they are unless we start to

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Speaker 4: see that recent trend and inflation continue. If we see

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Speaker 4: inflation on a year over your basis getting really close

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Speaker 4: to two percent, and I think that would support.

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Speaker 3: The case for a cut.

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Speaker 4: We'd also need to see the labor market weaken a

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Speaker 4: little bit, but right now they don't need to if

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Speaker 4: we look ahead and those mandates are in conflict. You know,

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Speaker 4: Powell mentioned that that he will still look at inflation.

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Speaker 4: He mentioned that they're going to see how far away

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Speaker 4: they are from each of their mandates. I think if

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Speaker 4: push comes to shove that they'd probably focus on the

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Speaker 4: labor market more. But as Powell mentioned it, that did

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Speaker 4: give them a little wheel room. But right now they

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Speaker 4: don't need to do anything. You know, we keep seeing

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Speaker 4: changing expectations from the Fed Fund's futures market. Right now,

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Speaker 4: markets are pricing in two cuts by the end of

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Speaker 4: the year with a risk cut not coming into like

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Speaker 4: I believe October we are in the one to two

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Speaker 4: cut camp. September would probably be the earliest. But the

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Speaker 4: more this data that we receive that continues to kind

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Speaker 4: of be in line or suggest that things are holding

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Speaker 4: up well, that probably pushes the timeline back a little bit.

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Speaker 2: So, given your outlook for rates and the risk that

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Speaker 2: you talked about, what strategies would you recommend for investors

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Speaker 2: or what securities, whether it's preferred or corpid bonds, would

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Speaker 2: you like what you don't like as of today?

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Speaker 4: So our big picture guidance is intermediate term maturities and

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Speaker 4: on that. It's mainly because we kind of see two

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Speaker 4: sided risks here, given all the deficit concerns that it's

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Speaker 4: historically we've not really bought into that. We haven't found

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Speaker 4: a relationship between debt deficits and the level of treasure yields.

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Speaker 3: But the deficits.

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Speaker 4: Continue to grow, our debt continues to grow, so there's

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Speaker 4: a strong possibility that that zero relationship becomes somewhat of

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Speaker 4: a relationship. So we are worried that yields can rise

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Speaker 4: at the long end. So we're worried about taking a

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Speaker 4: little bit too much interest rate risk. If you're too short,

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Speaker 4: you're opening yourself up to reinvestment rate risk if the

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Speaker 4: FED were to cut more than expected. So we just

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Speaker 4: want to protect investors from both sides. Focus on intermediate

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Speaker 4: term maturities. We think that's pretty good. On the credit

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Speaker 4: quality side, we favor an up in credit quality stance

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Speaker 4: right now. For the points I made before, we think

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Speaker 4: it makes sense to take risks if you're being well

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Speaker 4: compensated for them. That's not the case. We really like

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Speaker 4: investment grade corporates. Intermediate term, you can get yields of

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Speaker 4: five five and a half percent or so for high

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Speaker 4: yield bonds. We're not saying investors need to get out

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Speaker 4: of high yield bonds. Even though spreads are tight, those

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Speaker 4: absolute yields are relatively attractive around seven and a half percent.

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Speaker 4: And what we've seen over the past few years the

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Speaker 4: spread fluctuations, they've been fast. They go up and then

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Speaker 4: they come down. So if you're holding for twelve months,

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Speaker 4: twenty four months, thirty six months, you can still generate

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Speaker 4: relatively attractive return. So that's how we frame a high

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Speaker 4: yield allocation right now. If seven and a half percent

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Speaker 4: looks attractive now. I frame that a little bit that

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Speaker 4: if you hold it for a long period of time,

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Speaker 4: your returns will probably be a little bit less than

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Speaker 4: seven and a half percent because of potential credit loss.

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Speaker 4: But we think that's relatively attractive if you're looking to

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Speaker 4: be tactical. We don't think it's a great time to

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Speaker 4: dive in right now. We think there could be a

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Speaker 4: better opportunity down the road. You mentioned preferreds. I like preferreds.

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Speaker 4: It's an area that doesn't make as many headlines. I mean,

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Speaker 4: it's a really small market, but I think it makes

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Speaker 4: a lot of sense for individual investors.

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Speaker 3: I mean a lot of the parts of the.

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Speaker 4: Preferred market are really geared towards individual investors with those

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Speaker 4: twenty five dollars par values. What I really like about them,

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Speaker 4: and it's not the whole market, but a good chunk

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Speaker 4: of the market, are the tax advantages that they offer.

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Speaker 4: Because a lot of preferred securities, if they're considered equity,

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Speaker 4: they can pay qualified dividends. So if you're investing in

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Speaker 4: a taxable a count you can get yields after tax

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Speaker 4: yields that are higher than the high yield bond market.

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Speaker 4: It's not in apples to apples comparison, but if you

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Speaker 4: look at just credit ratings, you know, most preferreds. If

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Speaker 4: we're looking at those issued by the large US banks,

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Speaker 4: kind of the investment crede market, you're looking at low

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Speaker 4: triple b's, maybe some high double bees. It's a more

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Speaker 4: highly rated index than junk bonds. Obviously you're taking some

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Speaker 4: capital structure risk, but you can get after tax yields

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Speaker 4: in the four and a half to five percent if

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Speaker 4: you're in the high tax brackets. So I think that's

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Speaker 4: a pretty attractive opportunity. And but it goes into you know,

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Speaker 4: asset sorting, making sure which accounts you're placing investments in.

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Speaker 4: But we think that they can make a lot of sense.

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Speaker 1: Colleague Arnold Kakuta refer to them as thenay danger field

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Speaker 1: of the credit markets. Yeah, he agrees with you.

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Speaker 2: Yeah, so Arnold, actually my colleague he published research today

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Speaker 2: and he said that banks flutas actually healing more than

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Speaker 2: some of the investment copied bonds. Because we know, given

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Speaker 2: that the front end of the treasure cover is in whatted,

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Speaker 2: which generally signals impending rate cuts, and you yourself mentioned

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Speaker 2: that you're expecting one to two rate cuts. Do you

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Speaker 2: find floating rate notes appealing?

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Speaker 4: I do, and that's and that's great timing with with

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Speaker 4: Arnold's fort.

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Speaker 2: Is it relative valuation, credits spreads, defensive qualities, or something else.

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Speaker 3: It's not necessarily credit spreads. I'd say it's.

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Speaker 4: The defensive qualities. I think floaters can be a great

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Speaker 4: way to invest in the market and stay invested in

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Speaker 4: the market when there's a lot, a lot of potential

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Speaker 4: for volatility. Now, floaters there there tend to be higher

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Speaker 4: rated than the broad ig market. If you look at

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Speaker 4: the broad investment grade market, you're looking at mostly triple

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Speaker 4: b's and single a's. For floaters, it's a lot of

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Speaker 4: single a's and double a's, a lot of allocation, a

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Speaker 4: lot of exposure to banks, so you have some sector

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Speaker 4: risk there, but again, if you're investing in highly rated banks,

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Speaker 4: we think that's acceptable.

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Speaker 3: What we like is is the the lack of volatility.

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Speaker 4: They have very low interest rate risk, so when we

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Speaker 4: do see fluctuations and volatility like we saw through the

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Speaker 4: first five months of the year, their prices do change

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Speaker 4: a little bit, but the magnitude is much much smaller,

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Speaker 4: and I think the yields are attractive. Now, if you

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Speaker 4: look at the average yield of the Bloomberg Floater index,

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Speaker 4: it's close to five percent, And if you look at

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Speaker 4: the average yield of an intermediate term corporate index, it's

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Speaker 4: less than that. It's closer to four point six or

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Speaker 4: four point seven. So on a maturity to maturity basis,

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Speaker 4: you get higher yields because of the inverted nature of

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Speaker 4: the yield curve that you just alluded to, and you

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Speaker 4: don't have to worry as much about the price fluctuations.

437
00:21:44,840 --> 00:21:48,080
Speaker 4: I think it's again a good way to earn yields

438
00:21:48,119 --> 00:21:51,359
Speaker 4: near five percent, and you take away a lot, a

439
00:21:51,359 --> 00:21:53,760
Speaker 4: lot of the potential movements.

440
00:21:54,200 --> 00:21:56,080
Speaker 2: So I just want to die everything to together that

441
00:21:56,119 --> 00:21:59,480
Speaker 2: you mentioned. So how my recent tie of discussions that

442
00:21:59,480 --> 00:22:04,280
Speaker 2: we talked about beeflee and potential trade restrictions impact inflation,

443
00:22:05,040 --> 00:22:09,640
Speaker 2: economic growth, and consequently the risk of recession. Would such

444
00:22:09,680 --> 00:22:14,120
Speaker 2: an environment also your view on attractiveness of floating rate notes.

445
00:22:14,800 --> 00:22:17,639
Speaker 4: It would if we were to get let's look at

446
00:22:17,680 --> 00:22:21,800
Speaker 4: a situation where tariffs were in place at a high

447
00:22:21,920 --> 00:22:25,359
Speaker 4: level that they did impact growth and then therefore the

448
00:22:25,400 --> 00:22:28,080
Speaker 4: labor market, because that's a situation if they were high enough,

449
00:22:28,119 --> 00:22:31,359
Speaker 4: we'd probably see inflation stay sticky, even though the recent

450
00:22:31,400 --> 00:22:34,880
Speaker 4: trends have kind of bucked that thinking. I would expect

451
00:22:34,880 --> 00:22:37,600
Speaker 4: inflation to pick up in a situation like that, and

452
00:22:37,640 --> 00:22:41,920
Speaker 4: I would expect growth to slow. If we're seeing that scenario,

453
00:22:42,040 --> 00:22:45,200
Speaker 4: the Fed probably cuts more than expected, and that's a

454
00:22:45,320 --> 00:22:48,080
Speaker 4: risk to floaters. That is a risk in general to

455
00:22:48,119 --> 00:22:50,840
Speaker 4: floaters if you hold them right now. Yes, they offer

456
00:22:51,920 --> 00:22:54,960
Speaker 4: very attractive yields, especially compared to fixed rate bonds, but

457
00:22:55,560 --> 00:22:57,760
Speaker 4: they're not fixed, so if the Fed cuts rates, your

458
00:22:57,800 --> 00:23:00,919
Speaker 4: income would likely come down. If if we continue to

459
00:23:00,960 --> 00:23:06,000
Speaker 4: get kind of this i'd say stable decent data and

460
00:23:06,040 --> 00:23:08,920
Speaker 4: that continues to push back the timing of rate cuts.

461
00:23:08,920 --> 00:23:09,760
Speaker 3: That's great for floaters.

462
00:23:09,840 --> 00:23:11,320
Speaker 4: It means you don't have to worry about it as much.

463
00:23:11,680 --> 00:23:15,080
Speaker 4: If growth just slows a little bit. From here, I

464
00:23:15,119 --> 00:23:16,800
Speaker 4: think you have to accept the idea that your income

465
00:23:16,840 --> 00:23:18,800
Speaker 4: will come down a little bit. But that's the trade off.

466
00:23:18,840 --> 00:23:23,359
Speaker 4: It's a trade off of floaters. You know, you're sacrificing yield,

467
00:23:23,760 --> 00:23:27,359
Speaker 4: potential yield to get more price stability. So that's something

468
00:23:27,359 --> 00:23:30,560
Speaker 4: to consider. If we were to get a recession that

469
00:23:30,640 --> 00:23:34,080
Speaker 4: we talked about, or significantly slower growth and the Fed

470
00:23:34,119 --> 00:23:37,200
Speaker 4: cuts more than expected, floaters wouldn't be the best place

471
00:23:37,240 --> 00:23:37,640
Speaker 4: to be in.

472
00:23:38,119 --> 00:23:42,400
Speaker 1: So price stability, floating rates sounds like you're the ideal

473
00:23:42,440 --> 00:23:45,639
Speaker 1: customer full private credit? Why not private credit called it?

474
00:23:45,960 --> 00:23:48,560
Speaker 1: Why not go straight down into the everyone's talking about it.

475
00:23:49,040 --> 00:23:51,639
Speaker 4: Yeah, I'd be silly to think we would talk about

476
00:23:51,640 --> 00:23:53,879
Speaker 4: private credit here. Well, why isn't everybody? And it's a

477
00:23:53,920 --> 00:23:56,200
Speaker 4: tough market to get into. I'll frame it that way.

478
00:23:56,240 --> 00:23:58,160
Speaker 1: How do you see the relative value though? In that market?

479
00:23:58,320 --> 00:24:01,639
Speaker 4: You know, I think the relative values fine, just like

480
00:24:01,720 --> 00:24:06,639
Speaker 4: my view on general leveraged investing. That's always how I

481
00:24:06,680 --> 00:24:09,199
Speaker 4: like to frame this discussion. Because we hear about private

482
00:24:09,240 --> 00:24:12,160
Speaker 4: credit so much these days, I don't think a day

483
00:24:12,200 --> 00:24:14,399
Speaker 4: goes by. We're one of the top stories on the

484
00:24:14,400 --> 00:24:18,239
Speaker 4: Bloomberg Terminal has to do with private credit, so we

485
00:24:18,359 --> 00:24:21,720
Speaker 4: keep hearing about it. And there are a lot of positives.

486
00:24:21,720 --> 00:24:26,280
Speaker 4: You look at historical returns, they are attractive if you

487
00:24:26,280 --> 00:24:27,960
Speaker 4: have a long term investing horizon, they can make a

488
00:24:28,000 --> 00:24:31,040
Speaker 4: lot of sense. But if you consider what you're investing in,

489
00:24:31,960 --> 00:24:35,520
Speaker 4: it's generally junk rated issues, and sometimes you know, some

490
00:24:35,560 --> 00:24:37,320
Speaker 4: would argue maybe it's a little bit better than junk.

491
00:24:37,320 --> 00:24:40,080
Speaker 4: We don't really know, right, because sometimes they're not necessarily rated.

492
00:24:40,080 --> 00:24:42,600
Speaker 4: We're not seeing what's in there. But for the most part,

493
00:24:42,920 --> 00:24:46,440
Speaker 4: it's leveraged lending direct lending that you don't really see

494
00:24:46,480 --> 00:24:50,280
Speaker 4: what's going on behind the surface. And just like I'm

495
00:24:50,320 --> 00:24:53,720
Speaker 4: a little bit worried and cautious about the public junk markets,

496
00:24:54,080 --> 00:24:56,840
Speaker 4: I just I share that with private credit, and that

497
00:24:57,240 --> 00:25:01,240
Speaker 4: it's not some magical elis. You know there's risks there,

498
00:25:01,560 --> 00:25:04,040
Speaker 4: and you don't hear about the risks too often. I

499
00:25:04,160 --> 00:25:06,439
Speaker 4: like to frame it this way. It's not it's probably

500
00:25:06,440 --> 00:25:09,280
Speaker 4: not the best analogy, but James, I could open up

501
00:25:09,440 --> 00:25:11,919
Speaker 4: an account at Schwab for you. I can buy a

502
00:25:12,000 --> 00:25:15,000
Speaker 4: high yield ETF. I'm never going to tell you what

503
00:25:15,119 --> 00:25:18,560
Speaker 4: your account password is, and in five or six years

504
00:25:18,560 --> 00:25:21,920
Speaker 4: will take a look and see how it is. It's okay,

505
00:25:22,000 --> 00:25:23,760
Speaker 4: it's not the best analogy, but it's kind of how

506
00:25:23,760 --> 00:25:25,240
Speaker 4: it is. You don't see what's going on, and you're

507
00:25:25,240 --> 00:25:27,160
Speaker 4: gonna see how it grows over time because you don't

508
00:25:27,160 --> 00:25:30,040
Speaker 4: have the ability to see it in real time or

509
00:25:30,080 --> 00:25:31,280
Speaker 4: to take your money out.

510
00:25:31,600 --> 00:25:34,919
Speaker 3: So it's not a bad thing. I'm neutral on it.

511
00:25:35,000 --> 00:25:36,080
Speaker 3: I just I always like.

512
00:25:36,040 --> 00:25:39,080
Speaker 4: To tell our clients at Schwab who are interested in it,

513
00:25:39,640 --> 00:25:43,840
Speaker 4: that it's it's risky investing, just like investing in junk bonds.

514
00:25:43,480 --> 00:25:45,640
Speaker 1: But for much higher yields. So you're going to get

515
00:25:45,640 --> 00:25:47,640
Speaker 1: that return? Is it not worth sticking your neck out?

516
00:25:48,320 --> 00:25:52,440
Speaker 4: Potentially the returns are higher, I think because of those risks.

517
00:25:52,560 --> 00:25:57,240
Speaker 4: There's no free lunch. If they're offering those high returns,

518
00:25:57,920 --> 00:26:01,119
Speaker 4: it's because there's a lot of risk there. Otherwise, I

519
00:26:01,119 --> 00:26:03,159
Speaker 4: don't think they'd be going to those markets. If they

520
00:26:03,200 --> 00:26:08,320
Speaker 4: could issue publicly at a six or seven percent yield,

521
00:26:08,520 --> 00:26:10,840
Speaker 4: why would you issue at ten or eleven or twelve

522
00:26:10,880 --> 00:26:13,719
Speaker 4: percent privately? There are benefits to private right it's a

523
00:26:13,760 --> 00:26:17,399
Speaker 4: smaller investor base. You can negotiate directly with lenders. That

524
00:26:17,480 --> 00:26:18,840
Speaker 4: is a good thing. So I want to make sure

525
00:26:18,880 --> 00:26:21,200
Speaker 4: I'm balanced here and not making it seem like I'm

526
00:26:21,200 --> 00:26:23,800
Speaker 4: all negative. That can be a good thing. But again,

527
00:26:23,840 --> 00:26:27,240
Speaker 4: there's no free lunch, and those yields, those yields do.

528
00:26:27,200 --> 00:26:27,760
Speaker 3: Come with risk.

529
00:26:28,119 --> 00:26:30,399
Speaker 4: And then actually I'll build on something we talked about before.

530
00:26:31,000 --> 00:26:34,120
Speaker 4: It's a different type of lending. This is my view.

531
00:26:34,800 --> 00:26:37,520
Speaker 4: When I think of traditional bonds, you lend to an

532
00:26:37,520 --> 00:26:39,440
Speaker 4: issue you hope to get your money back. I think

533
00:26:39,880 --> 00:26:42,960
Speaker 4: direct lending and private credit is very different than that

534
00:26:43,240 --> 00:26:47,320
Speaker 4: because I think there's an acknowledgment that it won't be

535
00:26:47,359 --> 00:26:51,400
Speaker 4: that straightforward, that there might be some sort of asset

536
00:26:51,840 --> 00:26:56,920
Speaker 4: liability management exercise. Maybe there's going to be exchange. Where

537
00:26:56,920 --> 00:27:00,479
Speaker 4: am I in the capital stack? What's my recovery value?

538
00:27:01,119 --> 00:27:02,960
Speaker 4: Bankers are thinking about that when they come to the

539
00:27:03,000 --> 00:27:06,240
Speaker 4: market with debt traditional debt, but I think with private

540
00:27:06,440 --> 00:27:10,879
Speaker 4: it's a much different thought process about how might my

541
00:27:11,160 --> 00:27:15,640
Speaker 4: position look in three or four years versus traditional borrowing

542
00:27:15,760 --> 00:27:17,879
Speaker 4: or lending. Am I getting my money back in four

543
00:27:17,960 --> 00:27:18,480
Speaker 4: or five years?

544
00:27:18,560 --> 00:27:18,720
Speaker 3: Right?

545
00:27:18,840 --> 00:27:21,280
Speaker 1: So some guests are talking about investment grade private credit,

546
00:27:21,320 --> 00:27:23,080
Speaker 1: and they're talking about asset based finance, and they're talking

547
00:27:23,119 --> 00:27:25,080
Speaker 1: about a growth in the market to forty trillion dollars,

548
00:27:25,119 --> 00:27:27,560
Speaker 1: which is, you know, presuming you just can't ignore it

549
00:27:27,600 --> 00:27:30,080
Speaker 1: at that point, what do you think of investment grade

550
00:27:30,160 --> 00:27:31,240
Speaker 1: private sure?

551
00:27:31,359 --> 00:27:33,520
Speaker 4: I mean I'd be more interested in that if it

552
00:27:33,560 --> 00:27:37,280
Speaker 4: is true investment grade. You know, I think generally speaking,

553
00:27:37,280 --> 00:27:39,760
Speaker 4: fundamentals are pretty strong. Again, I don't want to be

554
00:27:39,800 --> 00:27:42,080
Speaker 4: too much of a curmudgeon here. I just want to

555
00:27:42,160 --> 00:27:45,399
Speaker 4: highlight that there are risks on investment grade. If that

556
00:27:45,440 --> 00:27:47,399
Speaker 4: were the case, and it's truly investment grade, then I

557
00:27:47,400 --> 00:27:50,239
Speaker 4: think that can make sense. And if you are an

558
00:27:50,320 --> 00:27:53,679
Speaker 4: investor and you're looking for a diversified portfolio, and you

559
00:27:53,880 --> 00:27:56,959
Speaker 4: have a large enough asset base to kind of handle

560
00:27:57,240 --> 00:28:01,119
Speaker 4: the long lock up periods, then these invests are generally okay.

561
00:28:01,359 --> 00:28:02,800
Speaker 4: You just want to make sure that you have that

562
00:28:02,840 --> 00:28:07,120
Speaker 4: time horizon and that an allocation there is appropriate given

563
00:28:07,200 --> 00:28:08,000
Speaker 4: your risk tolerance.

564
00:28:09,000 --> 00:28:12,120
Speaker 2: Colin, you said you like preferred securities, you like floating

565
00:28:12,160 --> 00:28:15,879
Speaker 2: rate notes, which I mostly should buy financial institutions, and

566
00:28:15,880 --> 00:28:18,800
Speaker 2: we talked about private credit. Are there other particular segments

567
00:28:18,840 --> 00:28:22,440
Speaker 2: of fixed income you believe either overvalued or undervalued at

568
00:28:22,440 --> 00:28:22,879
Speaker 2: this point?

569
00:28:23,880 --> 00:28:26,840
Speaker 4: An area we've been looking at a lot, but it's

570
00:28:27,000 --> 00:28:29,520
Speaker 4: changed so much lately, and I say lately just over

571
00:28:29,560 --> 00:28:31,800
Speaker 4: the past few weeks is the municipal bond market. I

572
00:28:31,840 --> 00:28:33,920
Speaker 4: don't know if that's maybe out of the realm here,

573
00:28:33,920 --> 00:28:36,320
Speaker 4: but you know, we look at all asset classes, of course,

574
00:28:36,680 --> 00:28:40,120
Speaker 4: and if we go back to the early stages of

575
00:28:40,400 --> 00:28:44,840
Speaker 4: the tariff announcements in early April, it presented a really,

576
00:28:44,880 --> 00:28:47,520
Speaker 4: really attractive opportunity in the municipal bond market. I think

577
00:28:47,560 --> 00:28:49,960
Speaker 4: there were a lot of dynamics at play, and our

578
00:28:49,960 --> 00:28:52,600
Speaker 4: team has looked into that a lot where I think

579
00:28:52,600 --> 00:28:55,360
Speaker 4: people got spooked they left the market where we've seen

580
00:28:55,360 --> 00:28:58,960
Speaker 4: this big and we've seen funds become more and more

581
00:28:59,000 --> 00:29:02,400
Speaker 4: prominent with MUNI bonds, and so if people kind of

582
00:29:02,400 --> 00:29:05,040
Speaker 4: pulled their money out in a relatively ill liquid market,

583
00:29:05,080 --> 00:29:07,239
Speaker 4: I think we saw a lot of price discrepancies there,

584
00:29:07,280 --> 00:29:10,200
Speaker 4: and we saw relative yields with Muni's go to levels

585
00:29:10,240 --> 00:29:13,520
Speaker 4: that we that we thought were really really attractive. That

586
00:29:13,560 --> 00:29:17,239
Speaker 4: has since reversed itself a little bit, so Munis can

587
00:29:17,240 --> 00:29:19,200
Speaker 4: still make sense a lot. We're not worried about the

588
00:29:19,400 --> 00:29:22,160
Speaker 4: credit quality. We think those price movements again were due

589
00:29:22,160 --> 00:29:25,760
Speaker 4: to liquidity as opposed to credit quality. But I think

590
00:29:25,800 --> 00:29:30,560
Speaker 4: these fast movements are appropriate to discuss in kind of

591
00:29:30,640 --> 00:29:32,880
Speaker 4: all of the asset classes, and I'll tie it back

592
00:29:32,880 --> 00:29:35,720
Speaker 4: to whether it's IG or high yield or preferreds that

593
00:29:35,760 --> 00:29:38,760
Speaker 4: investors might need to be a little bit more nimble

594
00:29:38,880 --> 00:29:42,080
Speaker 4: in this environment, because if you're a high yield investor

595
00:29:42,120 --> 00:29:46,320
Speaker 4: and you're waiting for say five percent credit spreads before

596
00:29:46,360 --> 00:29:48,840
Speaker 4: you want to dive in, we didn't get there. And

597
00:29:48,920 --> 00:29:50,240
Speaker 4: even if you were looking at four and a half

598
00:29:50,280 --> 00:29:52,160
Speaker 4: percent in April. They were there for a day or

599
00:29:52,160 --> 00:29:55,320
Speaker 4: two and then right back down. So we kind of

600
00:29:55,360 --> 00:29:58,840
Speaker 4: give that guidance right now where we prefer quality. We

601
00:29:58,880 --> 00:30:01,200
Speaker 4: think valuations are are rich for a lot of the

602
00:30:01,320 --> 00:30:04,680
Speaker 4: riskier investments. But if we were to see that reverse,

603
00:30:05,600 --> 00:30:07,880
Speaker 4: even in the short run, that can present an opportunity.

604
00:30:08,400 --> 00:30:11,320
Speaker 1: Why are these dips not lusts? What are they snap

605
00:30:11,360 --> 00:30:13,480
Speaker 1: back so quickly? Let's feel rationale for.

606
00:30:13,440 --> 00:30:15,320
Speaker 4: That, you know, I think, well, I think they snapped

607
00:30:15,360 --> 00:30:19,280
Speaker 4: back quickly because of kind of the rollback with the tariffs.

608
00:30:19,360 --> 00:30:21,720
Speaker 4: Even though the tariffs were still there, they were they

609
00:30:21,720 --> 00:30:25,000
Speaker 4: were less extreme than initially mentioned. But also there's a

610
00:30:25,000 --> 00:30:27,760
Speaker 4: lot of demand and you mentioned this earlier, James, there's

611
00:30:27,800 --> 00:30:30,520
Speaker 4: a lot of money out there looking for a home.

612
00:30:30,640 --> 00:30:34,320
Speaker 4: And and I think this is how private credit can

613
00:30:34,400 --> 00:30:35,680
Speaker 4: help the markets.

614
00:30:35,280 --> 00:30:38,200
Speaker 3: Because, like I said, every day goes by where I see.

615
00:30:38,000 --> 00:30:40,479
Speaker 4: A new headline on Bloomberg about private credit, a lot

616
00:30:40,480 --> 00:30:42,800
Speaker 4: of it is a lot of new private credits, private

617
00:30:42,800 --> 00:30:45,480
Speaker 4: credit funds, you know, raising money. That means there's a

618
00:30:45,520 --> 00:30:48,280
Speaker 4: lot of money looking for a home. Now there's pros

619
00:30:48,320 --> 00:30:51,040
Speaker 4: and cons to that. If there's too much money chasing

620
00:30:51,080 --> 00:30:55,040
Speaker 4: too few investments, we don't get real price discovery, and

621
00:30:55,080 --> 00:30:56,080
Speaker 4: maybe maybe.

622
00:30:55,800 --> 00:30:58,560
Speaker 3: We get low spreads. That's probably why we get low spreads.

623
00:30:58,480 --> 00:31:00,560
Speaker 4: But I think it can help on the down side,

624
00:31:00,760 --> 00:31:04,160
Speaker 4: where those funds might be looking for an attractive home,

625
00:31:04,720 --> 00:31:08,000
Speaker 4: and when we do get these quick selloffs, there can

626
00:31:08,000 --> 00:31:11,080
Speaker 4: be investors willing to go inside. So I think even

627
00:31:11,120 --> 00:31:14,560
Speaker 4: though we're nervous about the risk of rising spreads as

628
00:31:14,600 --> 00:31:18,240
Speaker 4: the year progresses, they're probably not going to go as

629
00:31:18,320 --> 00:31:21,960
Speaker 4: high as you'd think based on previous recessions or previous

630
00:31:22,040 --> 00:31:24,280
Speaker 4: kind of risk off environments. You know, if you look

631
00:31:24,320 --> 00:31:28,160
Speaker 4: at say a fifteen year high yield spread chart, you

632
00:31:28,160 --> 00:31:30,800
Speaker 4: can point to, you know, ten plus percent for recessions,

633
00:31:31,480 --> 00:31:34,800
Speaker 4: seven and a half eight percent for kind of a

634
00:31:34,840 --> 00:31:38,360
Speaker 4: pretty bad risk off environment. Maybe we don't get that

635
00:31:38,520 --> 00:31:40,480
Speaker 4: high this time around. They didn't get that high back

636
00:31:40,520 --> 00:31:43,040
Speaker 4: in twenty twenty two. They only got to four and

637
00:31:43,040 --> 00:31:45,960
Speaker 4: a half percent in early April, so maybe they're only

638
00:31:46,000 --> 00:31:48,920
Speaker 4: that four and a half five percent level is what

639
00:31:49,000 --> 00:31:52,080
Speaker 4: becomes attractive because there might be more demand coming in

640
00:31:52,120 --> 00:31:53,640
Speaker 4: to prevent a further blowout.

641
00:31:53,760 --> 00:31:55,760
Speaker 1: But it seems that the demand holds, and I'm wondering

642
00:31:55,840 --> 00:31:59,479
Speaker 1: what the risks to that appetite, you know, us credit

643
00:32:00,040 --> 00:32:02,320
Speaker 1: from let's say someone in Japan who's getting very high

644
00:32:02,400 --> 00:32:05,600
Speaker 1: local yields from the government. What's the risk that demand

645
00:32:05,640 --> 00:32:06,080
Speaker 1: goes away.

646
00:32:06,280 --> 00:32:08,680
Speaker 4: Yeah, well, if the demand goes away, it makes it

647
00:32:08,720 --> 00:32:11,240
Speaker 4: harder for companies to refinance. I mean, we have the

648
00:32:11,240 --> 00:32:14,880
Speaker 4: so called zombie companies that are staying alive because they

649
00:32:14,880 --> 00:32:19,280
Speaker 4: can refinance now. They're refinancing now at very high higher rates,

650
00:32:19,600 --> 00:32:22,040
Speaker 4: but they're still doing it even though there's a lot

651
00:32:22,040 --> 00:32:25,520
Speaker 4: of demand there. Yes, that might keep support in the

652
00:32:25,560 --> 00:32:29,360
Speaker 4: secondary market or even the primary market, but that doesn't

653
00:32:29,360 --> 00:32:32,720
Speaker 4: mean there aren't problems under the surface. You know, strong

654
00:32:32,760 --> 00:32:37,640
Speaker 4: demand for high yield debt doesn't mean that a troubled

655
00:32:37,640 --> 00:32:40,840
Speaker 4: issuer doesn't have the troubles that it already had. That's

656
00:32:40,880 --> 00:32:44,080
Speaker 4: not going to fix their earnings outlook, their revenue outlook.

657
00:32:44,320 --> 00:32:46,240
Speaker 4: It might help their borrowing costs a little bit, but

658
00:32:46,360 --> 00:32:49,400
Speaker 4: if there are issues that are tied to economic growth,

659
00:32:49,640 --> 00:32:53,960
Speaker 4: twerf uncertainty, things like that, strong demand and lower borrowing

660
00:32:54,000 --> 00:32:55,160
Speaker 4: costs can only do so much.

661
00:32:55,640 --> 00:32:59,400
Speaker 1: So in terms of the global picture we have and

662
00:32:59,480 --> 00:33:01,760
Speaker 1: we keep saying this idea of sell America and that

663
00:33:01,920 --> 00:33:05,560
Speaker 1: comes and goes. What impact is that having on global credit.

664
00:33:05,600 --> 00:33:06,960
Speaker 1: Are you seeing any evidence of that?

665
00:33:07,640 --> 00:33:10,200
Speaker 4: Well, we have seen it pick up lately in US

666
00:33:10,280 --> 00:33:15,600
Speaker 4: companies issuing Euro denominated debt. I think because we have

667
00:33:15,680 --> 00:33:18,480
Speaker 4: investors looking for it for non US dollar assets.

668
00:33:19,200 --> 00:33:20,160
Speaker 3: I don't know if that's.

669
00:33:20,040 --> 00:33:23,560
Speaker 4: Going to become the norm or a sustained trend. Despite

670
00:33:23,600 --> 00:33:29,000
Speaker 4: all the concerns about the end of US exceptionalism, it

671
00:33:29,040 --> 00:33:30,920
Speaker 4: always comes down to the question of.

672
00:33:30,880 --> 00:33:31,840
Speaker 3: What's the alternative.

673
00:33:32,120 --> 00:33:35,120
Speaker 4: And I'm sure you've had numerous guests on this podcast

674
00:33:35,160 --> 00:33:36,560
Speaker 4: who've said the same thing.

675
00:33:37,320 --> 00:33:38,120
Speaker 3: For better or for worse.

676
00:33:38,160 --> 00:33:40,560
Speaker 4: We have a lot of treasury debt outstanding. That in

677
00:33:40,600 --> 00:33:42,320
Speaker 4: itself is a problem, but it means there's a lot

678
00:33:42,320 --> 00:33:44,960
Speaker 4: of high quality treasury debt that investors can own if

679
00:33:45,000 --> 00:33:49,440
Speaker 4: they're looking for high quality investments. The dollar, we don't

680
00:33:49,480 --> 00:33:54,560
Speaker 4: expect it to lose its reserve currency status anytime soon soon,

681
00:33:54,680 --> 00:33:58,000
Speaker 4: and probably even longer than that. Most trade is still

682
00:33:58,040 --> 00:34:00,880
Speaker 4: done in US dollars, Foreign central banks hold a lot

683
00:34:00,880 --> 00:34:05,480
Speaker 4: of US dollars, and there just isn't an alternative, whether

684
00:34:05,600 --> 00:34:09,520
Speaker 4: in currency terms or or highly rated debt terms. So

685
00:34:09,880 --> 00:34:12,320
Speaker 4: maybe we see the dollar decline a little bit from here,

686
00:34:12,360 --> 00:34:14,280
Speaker 4: but that doesn't mean it's the end of the dollar.

687
00:34:14,920 --> 00:34:17,520
Speaker 2: And Colin, I think you mentioned this in the beginning

688
00:34:17,520 --> 00:34:21,160
Speaker 2: of the podcast, But given the recent warnings from figures

689
00:34:21,239 --> 00:34:25,400
Speaker 2: like Jamie Diamond about potential cracks in the bond market

690
00:34:25,480 --> 00:34:27,880
Speaker 2: due to rising national debt, do you see any imagy

691
00:34:27,960 --> 00:34:30,600
Speaker 2: at risk that could disrupt the kind of stability in

692
00:34:30,640 --> 00:34:31,600
Speaker 2: the credit spreads.

693
00:34:32,440 --> 00:34:35,040
Speaker 4: I do think that if rates were to move higher,

694
00:34:35,440 --> 00:34:38,360
Speaker 4: that would have an impact, and it would trickle away

695
00:34:38,400 --> 00:34:40,840
Speaker 4: from right now, you know. I'd say that the junkiest

696
00:34:40,840 --> 00:34:43,600
Speaker 4: of the junkies most at risk. If rates on the

697
00:34:43,640 --> 00:34:46,480
Speaker 4: intermediate term and long part of the curves move up

698
00:34:46,480 --> 00:34:50,120
Speaker 4: a little bit higher and stay there, then you get

699
00:34:50,120 --> 00:34:52,719
Speaker 4: more and more companies that become more at risk. I

700
00:34:52,800 --> 00:34:55,840
Speaker 4: think the risk is that yields stay at these current levels,

701
00:34:56,400 --> 00:34:58,719
Speaker 4: and the longer they stay there, which we're at a

702
00:34:58,719 --> 00:35:01,799
Speaker 4: handful of years now, but the longer they stay there,

703
00:35:02,520 --> 00:35:07,040
Speaker 4: the more that these you know, highly indebted companies needed

704
00:35:07,040 --> 00:35:08,680
Speaker 4: to need to manage that. And if we go back

705
00:35:08,680 --> 00:35:11,719
Speaker 4: to triple c's again, you know, interest coverage of less

706
00:35:11,760 --> 00:35:14,799
Speaker 4: than one, if we see those borrowing costs rise even more,

707
00:35:14,840 --> 00:35:17,879
Speaker 4: we'd probably see those ratios come down, So that would

708
00:35:17,960 --> 00:35:19,959
Speaker 4: be more of a risk in our view, but again

709
00:35:20,000 --> 00:35:21,600
Speaker 4: it's more of a I think it's more of a

710
00:35:21,719 --> 00:35:23,480
Speaker 4: junk issue than an investment great issue.

711
00:35:23,760 --> 00:35:25,440
Speaker 1: And if we see that spike in defaults at that

712
00:35:25,560 --> 00:35:28,839
Speaker 1: really low end of credit, you know, triple c's how

713
00:35:29,080 --> 00:35:31,240
Speaker 1: much of an impact does it have on broader credit?

714
00:35:31,680 --> 00:35:34,719
Speaker 4: Yeah, it has, it has an impact. It's a ripple effect.

715
00:35:34,960 --> 00:35:36,640
Speaker 4: It's not a one for one. But if we were

716
00:35:36,640 --> 00:35:39,319
Speaker 4: to see the default rate pick up from the current

717
00:35:39,400 --> 00:35:43,239
Speaker 4: levels and pick up enough that it was making headlines

718
00:35:43,320 --> 00:35:45,839
Speaker 4: because again, like it's been high, but people aren't really

719
00:35:45,840 --> 00:35:48,560
Speaker 4: talking about it too much, then yeah, you'd see single

720
00:35:48,600 --> 00:35:49,960
Speaker 4: be spreads continue.

721
00:35:49,560 --> 00:35:50,680
Speaker 3: To rise or rise.

722
00:35:50,800 --> 00:35:53,919
Speaker 4: Rather you'd see double be spreads rise. The magnitude would

723
00:35:53,960 --> 00:35:55,960
Speaker 4: be less, but in general, it would be a you know,

724
00:35:56,040 --> 00:35:58,600
Speaker 4: repricing of risk. And if the outlook is a little

725
00:35:58,600 --> 00:36:01,520
Speaker 4: bit gloomier, and if corporate profits are expected to be

726
00:36:01,640 --> 00:36:04,520
Speaker 4: challenged in an environment where rates were high, I think

727
00:36:04,600 --> 00:36:07,200
Speaker 4: investors are going to start repricing those issues a little bit.

728
00:36:07,239 --> 00:36:09,560
Speaker 4: We'd see spreads move up, but again we'd see single

729
00:36:09,560 --> 00:36:11,120
Speaker 4: bees move up a lot more than double bees.

730
00:36:11,200 --> 00:36:14,040
Speaker 1: Yeah, I mean, certainly all seeing the gap between spreads

731
00:36:14,040 --> 00:36:16,960
Speaker 1: on triple seas and single Bees is quite wide and

732
00:36:17,080 --> 00:36:20,480
Speaker 1: has stayed wide throughout all of this snapback and spreads

733
00:36:20,480 --> 00:36:23,520
Speaker 1: over the last few weeks, which kind of suggests that

734
00:36:23,920 --> 00:36:26,680
Speaker 1: credit investors are kind of, you know, differentiating a little bit,

735
00:36:26,920 --> 00:36:29,400
Speaker 1: and so they're not so complacent about that part of

736
00:36:29,400 --> 00:36:32,239
Speaker 1: the market, which it seems like it will conveniently blow

737
00:36:32,320 --> 00:36:35,560
Speaker 1: up and go away and not rip through the entire market.

738
00:36:35,640 --> 00:36:37,960
Speaker 1: I mean, do you think that's the complacency that people

739
00:36:38,000 --> 00:36:41,400
Speaker 1: just underestimate the contagion risk from the low end of junk.

740
00:36:42,360 --> 00:36:43,080
Speaker 3: I think so.

741
00:36:43,640 --> 00:36:46,120
Speaker 4: But but what you alluded to that we're seeing right now,

742
00:36:46,239 --> 00:36:48,320
Speaker 4: I think that's a good thing. If we're looking across

743
00:36:48,320 --> 00:36:52,120
Speaker 4: the curve or across the credit spectrum and all spreads

744
00:36:52,120 --> 00:36:55,200
Speaker 4: were low, that would be concerning. But like you said,

745
00:36:55,480 --> 00:36:57,680
Speaker 4: triple c's are still elevated.

746
00:36:57,719 --> 00:36:58,560
Speaker 3: So if we look at.

747
00:36:58,440 --> 00:37:01,560
Speaker 4: Where all the various credit ratings are relative to the

748
00:37:01,600 --> 00:37:04,480
Speaker 4: past ten years or so, I look at kind of

749
00:37:04,520 --> 00:37:09,200
Speaker 4: what's their you know, percentile, and I think most you know,

750
00:37:09,239 --> 00:37:12,799
Speaker 4: from double A down to single Bee are in like

751
00:37:12,840 --> 00:37:16,080
Speaker 4: the ten to twenty percent range, but triple c's are

752
00:37:16,080 --> 00:37:18,960
Speaker 4: in the closer to forty percent range. So that shows

753
00:37:19,000 --> 00:37:22,160
Speaker 4: that the markets are focusing more of their attention there

754
00:37:22,200 --> 00:37:25,319
Speaker 4: and I think acknowledging that there are risks there. The

755
00:37:25,440 --> 00:37:30,080
Speaker 4: question is from a fundamental standpoint, will it trickle in

756
00:37:30,120 --> 00:37:33,759
Speaker 4: to these single bees that markets are not pricing in

757
00:37:33,800 --> 00:37:37,040
Speaker 4: that risk and are too complacent. I guess it remains

758
00:37:37,040 --> 00:37:39,720
Speaker 4: to be seen, but the fact that the triple c's

759
00:37:40,200 --> 00:37:43,480
Speaker 4: haven't come down as much shows that, yes, the markets

760
00:37:43,520 --> 00:37:45,080
Speaker 4: are differentiating to a degree.

761
00:37:45,520 --> 00:37:47,279
Speaker 1: And you know, we're always looking for the next problem,

762
00:37:47,360 --> 00:37:49,360
Speaker 1: the next blow up. You know, since two thousand and

763
00:37:49,400 --> 00:37:51,560
Speaker 1: eight when most people missed it. What do you think

764
00:37:51,600 --> 00:37:53,719
Speaker 1: could really take us down at this point? I mean,

765
00:37:53,760 --> 00:37:55,719
Speaker 1: is there anything that you worry about in terms of

766
00:37:55,760 --> 00:37:57,160
Speaker 1: credit markets at the moment.

767
00:37:57,640 --> 00:37:59,840
Speaker 4: In terms of well, one thing, we worried about a

768
00:37:59,840 --> 00:38:03,279
Speaker 4: lot that would have ripple effects everywhere, but luckily it

769
00:38:04,160 --> 00:38:08,040
Speaker 4: seems to have passed. We worry about FED independence because

770
00:38:08,080 --> 00:38:13,399
Speaker 4: that can have a huge impact on everything on all investments,

771
00:38:13,800 --> 00:38:17,920
Speaker 4: stock bonds, governments, things like that. On the bright side,

772
00:38:17,920 --> 00:38:20,919
Speaker 4: that appears to have passed. We got some good news

773
00:38:20,960 --> 00:38:24,480
Speaker 4: that the President and fedcher Powell actually had lunch together

774
00:38:24,560 --> 00:38:25,520
Speaker 4: for I think the first time.

775
00:38:25,560 --> 00:38:26,040
Speaker 3: That's good.

776
00:38:26,320 --> 00:38:28,799
Speaker 4: Didn't seem like it went too well, but they met,

777
00:38:29,280 --> 00:38:31,600
Speaker 4: and I feel like that's a step in the right direction.

778
00:38:32,160 --> 00:38:35,719
Speaker 4: That's one thing that was making us a bit concerned,

779
00:38:36,040 --> 00:38:40,360
Speaker 4: but it seems like that's died down for now. Aside

780
00:38:40,400 --> 00:38:43,920
Speaker 4: from that, I don't want to keep talking about uncertainty

781
00:38:44,000 --> 00:38:47,480
Speaker 4: or complacency too much, but I just wonder if the

782
00:38:47,560 --> 00:38:50,920
Speaker 4: general level of complacency because again, if you look at

783
00:38:51,160 --> 00:38:55,880
Speaker 4: the ability of issuers to continue to exist in this environment,

784
00:38:56,000 --> 00:38:58,279
Speaker 4: not just for the next three months or six months,

785
00:38:58,360 --> 00:39:01,000
Speaker 4: but for you twelve eighteen month on twenty four months,

786
00:39:01,520 --> 00:39:05,480
Speaker 4: is there too much complacency there? And do we see

787
00:39:05,640 --> 00:39:08,360
Speaker 4: you know, some sort of mass selling that that spooks

788
00:39:08,400 --> 00:39:13,760
Speaker 4: the markets. But aside from that, it's uncertainty with tariffs,

789
00:39:14,280 --> 00:39:16,279
Speaker 4: it's the FED independence, but that doesn't seem to be

790
00:39:16,320 --> 00:39:20,360
Speaker 4: an issue right now. And you know how the tariffs

791
00:39:20,400 --> 00:39:24,400
Speaker 4: and trade policy kind of translates to the overall economy.

792
00:39:24,400 --> 00:39:30,120
Speaker 4: If the tariff news continues to make headlines but we

793
00:39:30,160 --> 00:39:33,200
Speaker 4: continue to see the data come in, okay, I think

794
00:39:33,200 --> 00:39:36,320
Speaker 4: the markets will keep drugging along. If we start to

795
00:39:36,360 --> 00:39:39,560
Speaker 4: see it have a real impact on business activity and

796
00:39:39,600 --> 00:39:41,920
Speaker 4: we start to see cracks in the labor market, I

797
00:39:41,960 --> 00:39:44,080
Speaker 4: think that's when you start to see a real repricing

798
00:39:44,080 --> 00:39:44,439
Speaker 4: of risk.

799
00:39:44,880 --> 00:39:48,560
Speaker 1: And is the general assumption now around the policy that

800
00:39:48,960 --> 00:39:54,000
Speaker 1: the trub administration will be more pragmatic than confrontational. Is

801
00:39:54,000 --> 00:39:56,920
Speaker 1: that having seen the sort of flip flop over tariffs

802
00:39:56,920 --> 00:39:59,040
Speaker 1: over the last few weeks, do you expect more just

803
00:39:59,120 --> 00:40:02,720
Speaker 1: accommodation and more of a rational policy.

804
00:40:02,360 --> 00:40:06,759
Speaker 4: Making Maybe all of the above. It's so tough to

805
00:40:06,800 --> 00:40:10,040
Speaker 4: tell right now. I'd say that we hear something new

806
00:40:10,080 --> 00:40:14,399
Speaker 4: every single day. I think what has changed is we've

807
00:40:14,440 --> 00:40:20,120
Speaker 4: gotten it seems like President Trump prefers treasury sectory, dosn't

808
00:40:20,280 --> 00:40:22,839
Speaker 4: to be kind of the mouthpiece of what's going on,

809
00:40:22,920 --> 00:40:24,759
Speaker 4: and the markets seem to react.

810
00:40:24,440 --> 00:40:25,200
Speaker 3: Better to that.

811
00:40:26,560 --> 00:40:30,760
Speaker 4: Policy itself, though you know, it's still all over the place.

812
00:40:31,440 --> 00:40:34,279
Speaker 4: I think that there's just so much uncertainty out there

813
00:40:34,360 --> 00:40:38,000
Speaker 4: that even with you know, the court pause and then

814
00:40:38,040 --> 00:40:40,480
Speaker 4: the appeal that allows them to stay on, and then

815
00:40:40,520 --> 00:40:43,319
Speaker 4: the potential that, let's say that doesn't work, do they

816
00:40:43,360 --> 00:40:46,640
Speaker 4: go down other paths with some of these other sections

817
00:40:46,640 --> 00:40:49,400
Speaker 4: of the law that allows them to explore other avenues.

818
00:40:49,880 --> 00:40:55,040
Speaker 4: I just think this overhang of the tariffs is problematic.

819
00:40:55,080 --> 00:40:55,279
Speaker 3: I do.

820
00:40:55,360 --> 00:40:56,759
Speaker 4: I mean, it's the same thing we've talked about this

821
00:40:56,800 --> 00:40:59,360
Speaker 4: whole discussion, the uncertainty that's out there, and if I

822
00:40:59,400 --> 00:41:02,520
Speaker 4: don't know what I'm going to be paying for goods

823
00:41:02,560 --> 00:41:05,520
Speaker 4: that I'm importing, how do I set a plan for

824
00:41:05,560 --> 00:41:08,120
Speaker 4: the next twelve months. And I think that's I think

825
00:41:08,120 --> 00:41:11,920
Speaker 4: that's a big problem. So until we get clarity, you know,

826
00:41:12,200 --> 00:41:14,920
Speaker 4: I think uncertainty is going to be very much present.

827
00:41:15,280 --> 00:41:16,960
Speaker 1: And Besten did say over the weekend that he was

828
00:41:17,000 --> 00:41:19,000
Speaker 1: never going to default on the debt, which kind of

829
00:41:19,040 --> 00:41:22,000
Speaker 1: reminded me of what the Argentines used to say, you know,

830
00:41:22,160 --> 00:41:25,080
Speaker 1: just before they defaulted on that debt. So we'll have

831
00:41:25,160 --> 00:41:28,400
Speaker 1: to see. But in terms of, you know, the relative

832
00:41:28,480 --> 00:41:31,480
Speaker 1: value of fixed income in this in this market, the

833
00:41:31,520 --> 00:41:34,080
Speaker 1: President also seems to like stocks a lot and talks about,

834
00:41:34,080 --> 00:41:36,640
Speaker 1: you know, great chance to buy, but it's a very

835
00:41:36,719 --> 00:41:40,120
Speaker 1: volatile stock market. Does that make the relative appeal of

836
00:41:40,160 --> 00:41:42,600
Speaker 1: fixed income, you know, credit, Does that make it more

837
00:41:42,880 --> 00:41:44,400
Speaker 1: appealing to most people or not?

838
00:41:44,440 --> 00:41:44,720
Speaker 2: Really?

839
00:41:45,040 --> 00:41:47,640
Speaker 4: Well, I think it can support the market. So all

840
00:41:47,680 --> 00:41:50,000
Speaker 4: the risks I've talked about, which again I want to

841
00:41:50,080 --> 00:41:53,360
Speaker 4: highlight that yields are relatively attractive, and with high yield,

842
00:41:53,360 --> 00:41:54,880
Speaker 4: if you're a long term investor, you know, we're not

843
00:41:54,920 --> 00:41:57,480
Speaker 4: expecting that the market to tank anytime soon. We just

844
00:41:57,560 --> 00:41:59,880
Speaker 4: want to make sure that investors are aware of the risks.

845
00:42:00,520 --> 00:42:04,080
Speaker 4: If President Trump begins focusing more on the stock market,

846
00:42:04,120 --> 00:42:06,719
Speaker 4: I'd argue that, aside from the a few tweets or

847
00:42:06,960 --> 00:42:09,600
Speaker 4: truths that he said now is the time to buy,

848
00:42:09,760 --> 00:42:12,000
Speaker 4: he hasn't focused on it as much as he had

849
00:42:12,040 --> 00:42:16,279
Speaker 4: in the previous administration. But if he does start to

850
00:42:16,320 --> 00:42:19,200
Speaker 4: focus on it more, I think implicitly that's good for

851
00:42:19,239 --> 00:42:22,080
Speaker 4: the credit markets. It's good for risk assets in general.

852
00:42:22,520 --> 00:42:25,480
Speaker 4: If it seems that I don't know how much he'll

853
00:42:25,560 --> 00:42:27,680
Speaker 4: change his policies, but if he, you know, changes the

854
00:42:27,680 --> 00:42:31,640
Speaker 4: way he communicates things, I think that that results in

855
00:42:31,760 --> 00:42:34,320
Speaker 4: a general support for pretty much all risk assets.

856
00:42:34,400 --> 00:42:37,080
Speaker 1: Yeah, one strategies I was talking about one thirty on

857
00:42:37,160 --> 00:42:40,040
Speaker 1: the IG spread is the kind of Trump put level

858
00:42:40,280 --> 00:42:42,920
Speaker 1: which they back off. But do you have a I

859
00:42:42,920 --> 00:42:44,839
Speaker 1: mean that we talk about the taco trade as well,

860
00:42:45,480 --> 00:42:48,160
Speaker 1: But is there any level at which you think, you know,

861
00:42:48,239 --> 00:42:50,640
Speaker 1: we are supported in terms of spreads by by the

862
00:42:50,680 --> 00:42:51,239
Speaker 1: Trump put?

863
00:42:52,600 --> 00:42:55,879
Speaker 4: One thirty sounds pretty good if I look at though,

864
00:42:55,920 --> 00:42:57,480
Speaker 4: if I look at spreads, you know how high have

865
00:42:58,000 --> 00:43:00,760
Speaker 4: junk spread or high yield or investment grades. Spread's gone

866
00:43:00,920 --> 00:43:03,800
Speaker 4: in non recessionary environments, you know, they've gone to like

867
00:43:03,840 --> 00:43:06,719
Speaker 4: two percent or so they're probably not getting that high.

868
00:43:06,920 --> 00:43:08,799
Speaker 4: I think that you're right, maybe in the one to three,

869
00:43:08,800 --> 00:43:11,560
Speaker 4: maybe one and a half percent range for high yield,

870
00:43:11,680 --> 00:43:14,040
Speaker 4: maybe in the four and a half to five percent range,

871
00:43:14,360 --> 00:43:18,040
Speaker 4: because even though again he hasn't been as vocal this

872
00:43:18,160 --> 00:43:21,120
Speaker 4: time around, we know that he has a preference for

873
00:43:21,239 --> 00:43:24,000
Speaker 4: the stock market and the risk asset's doing well, so

874
00:43:24,880 --> 00:43:27,880
Speaker 4: I would expect some sort of support and part of

875
00:43:27,880 --> 00:43:32,279
Speaker 4: the reason why we're nervous that spreads will increase, but

876
00:43:32,320 --> 00:43:35,200
Speaker 4: again not to levels that we've seen in previous risk

877
00:43:35,239 --> 00:43:36,239
Speaker 4: off environments.

878
00:43:36,600 --> 00:43:38,840
Speaker 1: Is there one area of relative value that you highlight

879
00:43:38,920 --> 00:43:41,719
Speaker 1: right now? Where do you think the best investment opportunity

880
00:43:41,800 --> 00:43:43,240
Speaker 1: is for the next let's say, twelve months.

881
00:43:43,640 --> 00:43:46,800
Speaker 4: I still really like it Intermedia term investment, Crede corporates.

882
00:43:47,400 --> 00:43:52,120
Speaker 4: It's probably a boring, boring recommendation or outlook, but I

883
00:43:52,239 --> 00:43:54,080
Speaker 4: just know that there's a lot of investors out there

884
00:43:54,080 --> 00:43:56,960
Speaker 4: looking for yield, and I know that there were a

885
00:43:57,000 --> 00:43:59,200
Speaker 4: lot of investors, and we talk we talked to a

886
00:43:59,239 --> 00:44:02,840
Speaker 4: lot of individual investors at Schwab that when money market

887
00:44:02,840 --> 00:44:06,200
Speaker 4: fund yields got to over five percent, that was, you know,

888
00:44:06,320 --> 00:44:10,720
Speaker 4: a great opportunity. We agreed it was an objectively attractive yield,

889
00:44:11,400 --> 00:44:14,200
Speaker 4: but those are short term yields, and anyone who held

890
00:44:14,200 --> 00:44:16,160
Speaker 4: a money market fund a year, year and a half

891
00:44:16,200 --> 00:44:17,880
Speaker 4: ago is now seeing yields probably in the four to

892
00:44:17,920 --> 00:44:20,319
Speaker 4: four and a quarter percent range. If you're looking for

893
00:44:20,400 --> 00:44:24,239
Speaker 4: five percent, you can get it now. I'm not comparing

894
00:44:24,400 --> 00:44:27,560
Speaker 4: an intermediate term corporate bond or bond fund or strategy

895
00:44:27,719 --> 00:44:30,359
Speaker 4: with a money market fund, but if you have a

896
00:44:31,239 --> 00:44:34,479
Speaker 4: longer term investing horizon five years or more and five

897
00:44:34,520 --> 00:44:36,960
Speaker 4: percent is going to help you reach your goals, I

898
00:44:36,960 --> 00:44:39,840
Speaker 4: think it's it's a really, really attractive opportunity because I

899
00:44:39,880 --> 00:44:42,759
Speaker 4: just think fundamentals are strong and a five percent plus

900
00:44:42,880 --> 00:44:46,120
Speaker 4: yield just seems attractive relative to where we've been over

901
00:44:46,160 --> 00:44:47,240
Speaker 4: the past fifteen years.

902
00:44:47,440 --> 00:44:50,960
Speaker 1: Great stuff. Colin Martin, Director and Fixed Income Stresses at

903
00:44:50,960 --> 00:44:53,800
Speaker 1: the Schweb Center for Financial Research. It's been a pleasure

904
00:44:53,880 --> 00:44:55,000
Speaker 1: having you on the Credit Edge Money.

905
00:44:55,040 --> 00:44:56,719
Speaker 3: Thanks thank you so much for having.

906
00:44:56,480 --> 00:44:58,360
Speaker 1: Me, and of course we're very grateful to him and

907
00:44:58,440 --> 00:45:01,080
Speaker 1: Shoot Bakshi from Bloomberg Intelligence. Thanks for joining us today.

908
00:45:01,160 --> 00:45:02,240
Speaker 2: Thank you for having me James.

909
00:45:02,400 --> 00:45:04,640
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910
00:45:04,719 --> 00:45:07,840
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00:45:07,880 --> 00:45:10,319
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913
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919
00:45:33,239 --> 00:45:35,640
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920
00:45:35,920 --> 00:45:36,720
Speaker 3: I'm James Crombie.

921
00:45:36,719 --> 00:45:38,680
Speaker 1: It's been a pleasure having you join us again next

922
00:45:38,680 --> 00:45:56,839
Speaker 1: week on the Credit Edge