FICC Focus

A comfortable environment of US exceptionalism has been replaced by noise around tariff risks, the EU’s fiscal bazooka and US policy pivots, which has supported cross-asset volatility. This edition of All Options Considered is the recording of part of the Bloomberg Volatility Forum 2025 held in London on March 18. Bloomberg Intelligence’s chief global derivatives strategist Tanvir Sandhu gave an opening speech on macro and volatility across markets. A panel discussion on the options market was moderated by Noel Hebert, BI’s global director of FICC strategy, with Dennis Davitt, CEO at Millbank Dartmoor Portsmouth, Pierre-Henri de Monts de Savasse, senior portfolio manager at RBC BlueBay and Pierre de Saab, Former Partner at Dominice & Co Asset Management.

Patrick Haskell, managing director and head of the Municipal Bond Group at BlackRock, delves into the evolving municipal bond market, highlighting it as a potential goldmine for income amidst changing tax policies. He discusses the implications of current dynamics, including the rise of active ETFs and the importance of using technology in assessing credit risks. Haskell emphasizes the unique opportunities for institutional investors while navigating the complexities of fiscal uncertainties and market trends in this transformative period.

In this engaging discussion, Tim Horan, Chief Investment Officer of Fixed Income at Chilton Trust, shares insights on the current economic landscape and bond market dynamics. He highlights the Federal Reserve's nuanced approach to interest rates, particularly the term 'transitory.' Horan emphasizes the attractiveness of municipal bonds while steering clear of longer-maturity Treasuries. The conversation also touches on the labor market's post-COVID evolution and personalized fixed-income strategies that react to macroeconomic trends.

Direct lending remains a pillar of private credit, providing companies with new and flexible sources of financing in today’s high interest-rate environment. Laura Holson, Chief Operating Officer of Credit and Managing Director at New Mountain Capital, joins Bloomberg Intelligence’s Noel Hebert and Sam Geier on Credit Crunch to discuss the firm’s focus on “defensive growth” direct lending, and expansion into other areas of the private credit markets, including BDCs and CLOs. The conversation touches on collaboration within New Mountain, deal sourcing, the addressable market, direct lending risk premiums, secondary market viability, and more.

Government bonds sold off in the past weeks, due to tariff news from the US and the debt brake being eased soon in Germany and this has increased the probabilities of rate cuts by central banks, including the Fed. Credit rallied through this mayhem and the big question is, will this strength continue? In this episode of our Credit Crunch podcast, host Mahesh Bhimalingam, Global Head of Credit Strategy at Bloomberg Intelligence, and Pierre Krief, Head of Credit at CDC (Caisse Des Depots ET Consignations) discuss tariffs and debt brake effect on inflation, growth and central bank policy, its impact on global credit and the challenges of taking a directional view after the big rates moves.They discuss rates, yields and credit spreads along with curve steepening, the dollar weakness and their impact on credit.

Patrick McGrath, a partner at Anchorage Capital, shares his expertise in restructuring and liability management in an engaging discussion. He dives into how lenders can provide valuable time and financial certainty in distressed scenarios. The importance of institutional reputation is highlighted, along with strategic approaches to navigating high yield markets and the evolving dynamics between lenders and borrowers. Additionally, McGrath addresses the complexities of execution risks in liability management amidst litigation challenges, offering insights into navigating the current distressed debt landscape.

Michael Cirami, Managing Director at Artisan Partners and expert in emerging debt markets, dives into the intricate world of geopolitical risk in fixed income. He argues that the Cold War offers valuable lessons for today’s investors. Cirami discusses distinctive investment opportunities in struggling nations, the evolving landscape of EM credit amid inflation, and India's rising fixed income appeal. He also highlights the complexities within China's economy and the potential impact of cryptocurrency on emerging markets.

Valentin Petrescou, a Senior Portfolio Manager at Lombard Odier Investment Managers with expertise in global macro strategies, discusses the shifting landscape of the U.S. dollar. He argues that emerging tariffs and trade war scenarios may not boost the dollar as expected. The conversation dives into currency diversification, spotlighting the yen’s role and its potential as a safe haven. They also touch on the fading prospects of euro-dollar parity and suggest more promising strategies in Euro-Swiss investments due to geopolitical tensions.

Ari Lefkovits, managing partner at Delos Capital, shares insights on hybrid capital solutions aimed at helping SMEs deal with high borrowing costs. The discussion uncovers trends in the private credit market, revealing the shift towards co-op agreements among lenders and the evolving default process. Lefkovits also highlights how hybrid capital can provide financial advantages amidst inflation and tariffs. This conversation offers a fascinating look at the current financial landscape and its implications for small businesses.

Lisa Pendergast, President and CEO of CREFC, offers keen insights into the commercial real estate landscape. They explore the shift in market sentiment post-COVID-19, highlighting a newfound confidence despite economic uncertainties. The conversation dives into potential office-space conversions amid rising interest rates and the factors driving changes in supply absorption. Pendergast also discusses the complexities of commercial loans and the challenges facing older properties versus newer constructions, providing a comprehensive understanding of current trends and future outlooks.