Bond Market Volatility and Economic Predictions with Nancy Davis

The bond market is a complex and significant component of the financial world that plays a crucial role in global finance and investing. Nancy Davis (@nancy_davis), founder of Quadratic Capital Management and portfolio manager for the IVOL ETF and BNDD ETF, explains her unique investment thesis, shedding light on how they approach the rates market and the necessity of going beyond short volatility in fixed income portfolios. With a third of the Ag index invested in US mortgages, Nancy highlights the importance of recognizing the options inherent in homeownership and the resulting implications for fixed income. The discussion turns to the recent 30-year auction and the implications of an inverted yield curve. Nancy provides insights into the atypical environment where you can earn more by parking your money overnight at the Fed than by investing in long-term bonds. The conversation ponders whether this inverted curve is a reflection of policy rates, international dynamics, or more complex factors. Nancy doesn't shy away from examining the consequences of an overextended balance sheet, and the potential impact of rising interest rates on the US economy. The episode explores the intertwined nature of credit and rate spreads, as well as the strange attraction of short-duration credit investments despite minimal spreads. 

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