FICC Focus

With global bond yields at multi-decade highs and markets pricing further central-bank tightening, investors are reassessing the relative value of rates, equities and currencies. Christian Lawrence, chief cross-asset strategist at Rabobank, joins Bloomberg Intelligence chief US interest rate strategist Ira Jersey to discuss that and more on this Macro Matters edition of the FICC Focus podcast. Lawrence argues that the recent surge in Treasury yields has been driven more by real rates and strong growth than by rising inflation expectations, and says the latest move increasingly resembles a pain trade that could partially reverse. The two discuss how higher yields are already weighing on market breadth beneath equity indexes, why large-cap companies with strong free cash flow may remain better positioned and how changing hedge ratios and interest-rate differentials are influencing the dollar. They also examine whether markets are pricing too many rate hikes from the Federal Reserve and other major central banks, the global trend toward looser fiscal policy and why relative-value trades may offer better opportunities than outright directional bets while volatility remains elevated.

The Macro Matters podcast is part of BI’s FICC Focus series.

“You want to buy the security based on this yield, but you have to protect against the risks,” says Mike Vranos, CEO and founder of Ellington Management Group. “What you see is many investors just ignore the option they’re short or, in the extreme example, they ignore the left tail risk,” Vranos adds when discussing how to deliver alpha in securitized products. He joins Bloomberg Intelligence’s Erica Adelberg and Noel Hebert on the latest episode of Credit Crunch to discuss innovation in the mortgage-backed market during his time at Kidder Peabody and later at Ellington, the rise of non-qualified mortgages and the merits of CLO equity. The three discuss the role of insurance capital, investment discipline and where value resides in the current landscape, before closing on the importance of philanthropy.

The Credit Crunch podcast is part of BI’s FICC Focus series.

“’Co-op first, ask questions later’ is down a bit from its peak, though not dead,” observes John Sobolewski, Global Chair of Latham & Watkins’ Liability Management Practice, as he addresses the latest dynamic between debtors and lenders in distressed situations. In this episode, Bloomberg Intelligence analysts Negisa Balluku and Phil Brendel sit down with John to explore the current state of Liability Management Exercises (LMEs) and why stakeholders are ultimately motivated to find negotiated resolutions over value-destroying, multiyear litigation. The conversation unpacks the delicate mechanics of these negotiations, including why repeat market players will give minority holdouts a fair shake but “hold the line” against nuisance value to avoid giving an inch that turns into a yard. John also breaks down the massive bid-ask spreads — think “Grand Canyon” — between debtors and creditors, why debt funds continue to resist taking back equity, and the software sector’s growing interest in LM solutions.

The podcast concludes (53:10) with BI’s Noel Hebert joining Negisa and Phil for a roundup of their latest research on Air Baltic, QVC, DISH DBS, DISH Wireless, Hughes Satellite Systems, Telesat, and Xerox.

The State of Distressed Debt podcast is part of BI’s FICC Focus series. Listen on Apple Podcasts and Spotify.

With AI investment accelerating, energy costs rising and Treasury yields pushing to multi-decade highs, investors are confronting a market where few assets look obviously cheap. Jimmy Chang, chief investment officer of Rockefeller Global Family Office, joins Bloomberg Intelligence chief US interest rate strategist Ira Jersey to discuss that and more on this Macro Matters edition of the FICC Focus podcast. Chang explains how the extraordinary scale of AI-related capital spending is supporting economic growth while also adding inflation pressure through shortages of power, semiconductors and other inputs. The two discuss why 10-year Treasury yields above 5% may be consistent with strong nominal growth, when extending duration could become attractive and how additional Federal Reserve tightening might ultimately slow the economy. They also examine the record amount of cash in money-market funds, why Chang doesn’t view it simply as “dry powder” and how higher yields are reinforcing a K-shaped economy. The episode closes with a longer-term discussion of AI investment, potential overcapacity, power demand and why family-office portfolios may benefit from diversification across bonds, precious metals and other hard assets.

The Macro Matters podcast is part of BI’s FICC Focus series.

With the Federal Reserve beginning a new tightening cycle and markets pricing additional rate increases, investors are reassessing where the Treasury yield curve may be headed next. Ira Jersey, Bloomberg Intelligence chief US interest-rate strategist, discusses this and more in a solo Macro Matters edition of the FICC Focus podcast. Jersey explains why Chairman Kevin Warsh’s latest press conference offered a clearer view of the Fed’s reaction function, with resilient economic growth allowing policymakers to focus more directly on above-target inflation. Jersey outlines why BI expects another 50 bps of tightening, though likely at a slower pace than markets currently price, and examines how previous Fed cycles suggest further curve flattening could follow the first hike. Jersey also discusses why two- to five-year Treasuries may offer attractive carry and downside protection as the curve flattens, how inflation expectations will influence the Fed’s next moves and why solid nominal growth continues to support relatively high long-term Treasury yields.

The Macro Matters podcast is part of BI’s FICC Focus series.