All the Credit

With the recent announcement of a major student loan forgiveness program in the U.S., we dissect the program and its implications for fixed income investors. PGIM Fixed Income’s Florence Chan, Head of ABS Research, and Scott Motta, of the Securitized Products portfolio team, are here to sort through all the details, including: a brief history of student loans in the U.S.; details on the new loan forgiveness program; thoughts on the economic and inflationary impact of the program; characteristics of the student loan asset back securities (SLABS) market; and how PGIM Fixed Income views and has been positioning ourselves within the SLABS market. Recorded on September 23, 2022.

In a prior episode, we examined the broad economic implications of the European energy crisis as a result of Russia’s invasion of Ukraine and the related effects of the conflict. And with the winter season fast approaching, we wanted to provide an update on the region’s energy situation. We’ve called on Katharine Neiss, PhD, Chief European Economist, and Magdalena Polan, Lead Economist for major EM economies in Central EU and the Middle East, to summarize the current state of affairs in Europe, detail the current and possible alternative sources of energy for the region, and highlight the areas in which access or reliance on Russian oil and gas has ceased. The duo also hones in on key distinctions in the energy situation across Europe, provides their assessment of the region’s outlook for this winter and the next, and hypothesizes how the ongoing energy transformation might ultimately shape Europe. Recorded on August 23, 2022.

After a challenging first half of the year for fixed income, we see reason for optimism ahead for a variety of sectors. PGIM Fixed Income Multi-sector Portfolio Manager, Lindsay Rosner, CFA, and Senior Portfolio Manager, Mike Collins, CFA, examine the state of individual fixed income sectors and share their top active management, relative-value ideas. We’re talking “all the opportunities” in this episode of All the Credit®! Recorded on August 2, 2022.

The current, compressed, and rapidly changing credit cycle, which has experienced dramatic swings in economics, policy, inflation, and corporate fundamentals, has been anything but typical. With a backdrop like this, investors’ and credit analysts’ heads are spinning trying to keep up! In this episode, Janet Crowe and Brian Barnhurst, CFA, PGIM Fixed Income’s Co-Heads of Credit Research, help us see the big picture in the underlying trends in corporate credit fundamentals, from earnings and leverage, to upgrades and downgrades, and more.   Host and Senior Portfolio Manager, Mike Collins, taps into the trio’s collective expertise to help assess how well equipped the corporate bond market is to withstand a potential slowdown. The episode also answers some key questions, including: which industries are likely to be the winners and losers as we move forward?; and where are the risks and opportunities? Find out in this episode of All the Credit®!   Recorded on June 27, 2022.

Although the traditional asset allocation portfolio mix of 60% stocks and 40% bonds has been a widely adopted investment approach that has spanned decades, a lower interest rate environment coupled with the underperformance of equities and bonds, has investors questioning the validity of the 60-40 asset allocation model. While we also see this portfolio structure as flawed, it’s not for the reasons that others have suggested. In this episode, PGIM Fixed Income’s Tom McCartan, FIA, CFA, Custom Multi-Sector and Multi-Sector LDI Portfolio Manager, and Tyler Thorn, of the multi-sector portfolio management team, shed light on why it’s not the idea, but rather the objective and execution that is flawed, as these traditional models overly emphasize asset returns and asset volatility, rather than focusing more on investors’ long-term outcomes. Tom and Tyler explain why the low level of bond yields should not alter one’s asset allocation mix, highlight the different types of risk premia available to investors, and dive into why investors should begin to shift away from near-term, asset-based targets to longer-term, outcome-based objectives. The duo concludes this episode by giving their suggestions on how investors can refine and realign their current portfolios to optimize their outcomes. Recorded on May 17, 2022.

The global impacts of Russia’s invasion of Ukraine are wide-ranging and include the global energy industry amidst the varied reliance on Russian oil and gas by European countries. With COVID-related supply shortages, the exacerbation of the shift away from traditional fossil-fuel-based energy investment, and higher housing, travel, and many food prices, conditions are increasing the need for tighter monetary policies while negative consequences for global demand are being realized.   In this episode of All the Credit®, we turn to Chief European Economist, Katharine Neiss, PhD and global energy analyst, David Winans, to guide us through the complexities of these events and the implications of powering down from Russian energy.   Katharine and Dave review vital facts around Europe’s reliance on Russian energy, discuss the geopolitical and energy policy alternatives available to different countries (including the status of green energy initiatives), share their views on the resultant fiscal and monetary policy implications, and what this all means for global energy producers and distributors. Host and Senior Portfolio Manager, Mike Collins, CFA, also discusses some PGIM Fixed Income’s key positions as we navigate this elevated macroeconomic tail risk environment and aim to generate alpha for our clients amid these uncertain times.   Recorded on April 8, 2022.

Credit fundamentals across most municipal bond issuers have improved markedly and may be more immune from some of the recent geopolitical events in eastern Europe and rising commodity prices relative to many corporate or sovereign credits. That, coupled with aging populations, a steady stream of daily retirements in the U.S., and increased demand for high-quality fixed income securities, especially tax-exempt issues, leaves the municipal bond market well supported. In this episode of All the Credit®, host and Senior Portfolio Manager, Mike Collins, is joined by PGIM Fixed Income's Jason Appleson, CFA, FRM, Head of Municipal Bonds, and Lee Friedman, CFA, U.S. Investment Grade Corporate Bonds Portfolio Manager, to dissect the taxable and tax-exempt municipal bond market and discuss its evolution. The trio reviews some key characteristics of the broad municipal bond complex, highlights the fundamental trends amongst issuers, assesses the attractiveness of municipal bond valuations, and shares our best ideas and municipal positioning across our fixed income strategies. Recorded on March 8, 2022.

Securitized products, sometimes referred to as structured products or, more generically, asset-backed securities, has—more recently—experienced dramatic growth in market size. And while the sector is approaching nearly $4 trillion, the securitized assets market and investor appetite continues to expand. In this episode of All the Credit®, we’ll explore the evolution of the fixed income securitized marketplace and make our case as to why we believe securitized products offer a compelling source of value. Host and PGIM Fixed Income Senior Portfolio Manager, Mike Collins, sits down with Gabriel Rivera and Edwin Wilches, Co-Heads of Securitized Products at PGIM Fixed Income, to discuss the ins and outs of this complex asset class, what opportunities we like (and those we don’t), and our current positioning. Our panel closes their discussion with a look at the ESG footprint in the securitized products market, and the investor implications for the LIBOR to SOFR transition. Recorded on February 4, 2022.

Despite the wildly unique ride that was 2021, which saw a boom in economic growth in most countries, a global inflation surge, and COVID’s constant and pervasive presence, the path of the global economy and financial markets may have been more predictable a year ago than they are today. With economic and earnings growth poised to peak, inflation most likely to subside, and tightening of monetary and fiscal policies expected, the outlook for 2022 is murky. In the latest installment of All the Credit®, we provide our expectations for the global economy, inflation, and the fixed income markets for 2022. We also highlight investment and asset allocation trends we’re seeing across our global client base, discuss fixed income market technicals, share our best ideas across global bond markets, and identify keys risks for 2022. Join PGIM Fixed Income’s newly named Co-Chief Investment Officers, Craig Dewling and Gregory Peters, along with host and PGIM Fixed Income Senior Portfolio Manager Mike Collins, for this look into 2022. This episode was recorded on January 11, 2022.

The 26th annual UN Climate Change Conference (COP26) fell short of our expectations and left ESG-focused investors with more considerations than ever before. It also did little to add clarity to the path ahead. With COP26 behind us, host Michael Collins, CFA is joined by PGIM Fixed Income's ESG specialists, Armelle de Vienne and John Ploeg, CFA for an insightful discussion of the summit, how it came to be, its purpose, and its major takeaways. Our ESG specialists also provide their take on how the asset management industry and ESG-focused client expectations will evolve in response to the pervasive demand for ESG-considerations to be incorporated in investment decisions. The discussion details how climate and social governance considerations are factored into PGIM Fixed Income’s proprietary impact ratings, what we’re doing to help ESG-focused clients meet their investment goals, including in the CLO-space, and how our active investment approach helps PGIM Fixed Income maintain a competitive advantage in the ESG-space.   Looking for more content from PGIM Fixed Income’s ESG specialists? Check out The Bond Blog @ PGIM Fixed Income for John Ploeg’s recent post, Three Flawed Assumptions in Climate Risk Models: https://pgimfixedincome.blog/three-flawed-assumptions-in-climate-risk-models/?utm_medium=3rdParty&utm_content=2021-02-09   This episode was recorded on December 1, 2021.