Forward Guidance

Kathy Jones: The Bull Case For Bonds, And The Need For “Caution” on Private Credit & Leveraged Loans

Dec 12, 2023

56:28

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Kathy Jones, Chief Fixed Income Strategist at Schwab, discusses the bull case for bonds, caution on private credit & leveraged loans. Topics include the inverted yield curve, declining term premia, bond market tracking, bond supply's effect on price, the state of mortgage-backed securities, investment options beyond treasury strategy, and bond market sentiment.

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Quick takeaways

Adding intermediate-term duration in high-quality fixed income is a reasonable approach in the uncertain bond market.

Central banks are expected to make interest rate cuts in response to falling inflation and slowing economic growth.

The Fed's quantitative tightening policy has raised concerns about liquidity issues and market accidents.

Deep dives

Bond market volatility driven by economic expectations

The bond market experienced significant volatility due to shifts in economic expectations. Strong third-quarter GDP growth led to increased yields, but later economic indicators suggested a slower growth environment.

Introduction

3min

Drivers of a Bull Case on Interest Rates

17min

Examining the Connection Between Bond Yields and Treasury Bond Issuance

5min

Supply and Demand in the Treasury Market

6min

The State of Mortgage-Backed Securities and the Need for Caution

3min

Investment Options Beyond Treasury Strategy

13min

Bond Market Sentiment and Investor Preferences

10min

Kathy Jones, Chief Fixed Income Strategist at Schwab, joins Forward Guidance to share her outlook on interest rates, credit spreads, the economy, and the Federal Reserve. Filmed on December 5, 2023.

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Timestamps:

(00:00) Introduction

(07:45) Inverted Yield Curve Is Here To Stay

(10:01) Term Premia Will Decline

(14:12) Bond Market Does Not Always Track Nominal Growth

(17:21) Can't Rule Out That This Is A Counter-Trend Rally

(20:56) How Does Bond Supply Affect Price?

(29:02) The Days Of Quantitative Tightening (QT) May Be Numbered

(31:33) Mortgage-Backed Securities (MBS)

(34:09) Investment Grade (IG) Corporate Bonds

(37:22) We Are Not Enthusiastic About CLOs and Private Credit

(46:40) Sentiment and Positioning In Fixed Income

(48:50) Views on Europe and Japan

(53:32) Bull Case For The Dollar

Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

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Forward Guidance

Kathy Jones: The Bull Case For Bonds, And The Need For “Caution” on Private Credit & Leveraged Loans

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Bond market volatility driven by economic expectations

Gradual approach to adding duration in low interest-rate environment

Inflation and slowing economic growth driving interest rate cuts

Impact of tightening credit availability on small businesses

Uncertainty around quantitative tightening and possible market impact

Get the Snipd
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AI-powered
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Discover
highlights

Save any
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Forward Guidance

Kathy Jones: The Bull Case For Bonds, And The Need For “Caution” on Private Credit & Leveraged Loans

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Bond market volatility driven by economic expectations

Gradual approach to adding duration in low interest-rate environment

Inflation and slowing economic growth driving interest rate cuts

Impact of tightening credit availability on small businesses

Uncertainty around quantitative tightening and possible market impact

Get the Snipdpodcast app

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Discoverhighlights

Save anymoment

Share& Export

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