FICC Focus

The Fed's nearing rate peak and evidence of a turning US economy should revive the bearish view of the US dollar in 2H. In our latest FX Moment podcast, host Audrey Childe-Freeman, Bloomberg Intelligence's chief G10 FX strategist, examines the outlook for the US and global economies and the implications for currencies with Solita Marcelli, chief investment officer Americas, UBS Global Wealth Management.In particular, Solita and Audrey acknowledge that beyond a structurally dollar-negative case that's not going away, a shifting US cyclical and inflation narrative and near Fed rate peak are giving dollar bears another chance in 2H, with $1.15 euro-dollar and 0.85 dollar-Swiss feasible into 2H and beyond.

European high yield has had just two defaults this year and the proportion of stressed and distressed bonds is under control after a positive 1H for returns. Will 3Q sustain the 1H gains and when do we see a default wave, if any? Listen to hear Mahesh Bhimalingam, Chief European Credit Strategist, Bloomberg Intelligence discuss the results of the 3Q23 High Yield Survey and comment on the market outlook and trends in a Q&A format with George Flynn, Head of Credit at Wisealpha Technologies.They discuss our 3Q23 survey publication, in detail, covering investor positioning, sentiment, key return drivers, default and supply forecasts and relative-value opinions by geography, rating and sectors in detail.

The Treasury yield curve may remain inverted for quite a while, but bull steepening could begin as the Federal Reserve finished its interest rate hikes, Bloomberg Intelligence’s Chief US Interest Rate Strategist says in this Macro Matter’s edition of the FICC Focus podcast. Jersey provides his short- and longer-term view of the rate markets, mentioning how the real federal funds rate may peak at about 2.5% if consensus inflation estimates and market pricing are realized. Jersey is also joined by US Interest Rate Strategy Associate Will Hoffman to discuss the rebuild of the Treasury General Account (the government’s checking account held at the Fed), and how T-bill issuance has thus far been primarily funded by lower use of the Fed’s reverse repurchase agreement facility. They also talk about how Fed liabilities move around during the TGA rebuild, and Jersey gives his expectation of when the Fed runoff might end due to bank reserves reaching their “tipping point.”

After central banks gathered in Portugal at the ECB Forum earlier this week, a turn in European inflation and a strong 1Q GDP revision in the US caused a sell off in developed market sovereign debt. Bloomberg Intelligence’s Chief US Rates Strategist Ira Jersey is joined by his European counterpart Huw Worthington on this Macro Matters edition of the FICC Focus podcast. Huw gives his outlook for inflation and central bank policy actions in Europe and the UK, while Jersey highlights his shift in view that the Federal Reserve may hike further.In this episode’s Interest Rate Intro segment, US Interest Rate Strategy Associate Will Hoffman asks Jersey about the Fed’s bank stress tests and how they may be affecting markets. Jersey gives a summary of the tests and his view that bank compliance has depressed risk taking and therefore liquidity.

Structured credit markets have evolved into a multi-trillion dollar asset class, one that we dive into in the latest episode of Credit Crunch, part of the FICC Focus podcast series. Waterfall Asset Management’s Managing Partner and Cofounder Jack Ross, one of the pioneers in asset-based securities, joins Bloomberg Intelligence’s Director of FICC Research Noel Hebert and Senior Credit Strategy Associate Sam Geier for an in-depth discussion about the transformation of the asset class over Ross’ storied career, areas of concern in commercial real estate and consumer spending, as well as how the burgeoning private credit space is influencing the investment landscape. This recorded discussion is not intended to be and does not constitute an offer of Waterfall Asset Management, LLC’s (“Waterfall”) investment advisory services. The information, statements, commentary, views, and opinions (collectively, the “Commentary”) provided in this discussion are general in nature, may reflect the perspective of the individual rather than Waterfall and the Commentary is not intended to be and should not be construed as the provision of investment advice by Waterfall, to that listener or generally, and do not result in any listener being considered a client or customer of Waterfall. Any discussion of the past performance of any investment, sector, or market is not indicative of any future results. Further, the Commentary is as of the date of recording and may not be current at the time that listener hears the discussion. Waterfall does not undertake any obligation whatsoever to provide any form of update, amendment, change or correction to the Commentary.

The Bank of England remains highly data-dependent, re-accelerating to a 50-bp hike "at this particular meeting" given the upside inflation surprises. The wide difference between actual inflation data releases vs. consensus keeps volatility elevated at the front end of the yield curve. The flattening of the curve reflects the risk to growth and increased pricing of cuts. In this edition of the All Options Considered podcast, BI's Chief Global Derivatives Strategist Tanvir Sandhu is joined by Dan Hanson, Senior UK Economist.

An improving inflation outlook alongside weaker cross-asset volatility and more moderate global growth is contributing to the bullish narrative in EM local government debt. In this month’s EM Lens & Look-Through podcast, Phoenix Kalen, Head of Emerging Market Research at Societe Generale, joins Chief EM Fixed Income Strategist Damian Sassower to deliver her mid-year outlook on EM local currencies and debt. She discusses the firm's key EM trading themes, and highlights various structural, idiosyncratic and tactical opportunities.

The Federal Reserve may not hike the additional 50 bps shown in the infamous “Dot Plot” at the June monetary policy meeting, Bloomberg Economics’ Chief US Economist Anna Wong remarks. She joins Bloomberg Intelligence’s Chief US Rates Strategist Ira Jersey on this Macro Matters edition of the FICC Focus podcast to recap the FOMC meeting and discuss her views for the future. Wong still expects a mild recession in 2H, thinks the Fed will maintain interest rates near the peak and that balance-sheet reduction will continue into next year. She also believes Chairman Jerome Powell’s press conference was relatively neutral, though the dot plot was hawkish.

The stage is set for municipals to look better vs. other fixed income in 2023-2024. Though fund flows remain a concern, the asset class’ ability to provide tax-exempt income exceeding inflation remains a key feature, especially if recessionary pressures increase. Parametric’s Nisha Patel joins Bloomberg Intelligence’s Eric Kazatsky and Karen Altamirano on this episode of the Masters of the Muniverse FICC Focus podcast to discuss the advantages of technology-driven systematic solutions and some of the strategies used to maximize returns. Patel also shares how not all ladder strategies need to be passive.

Credit markets have a dour seasonal outlook and piecemeal restructurings are flailing. BI Global Credit Strategy head Noel Hebert, distressed credit analyst Philip Brendel, and bankruptcy litigation analyst Negisa Balluku discuss these issues and more on the June edition of the State of Distressed Debt Podcast. Guest Matthew Cantor, Head of Legal Strategies and Special Situations of Pretium Partners, shares his views on litigation finance, distressed banks and the distressed cycle (8:12). Also of note: the latest developments in Serta, Incora, FTX, Diamond Sports, J&J and Cineworld (46:05).