Episode summary
Credits Risks and the Market Outlook | Bloomberg Surveillance
Bloomberg Surveillance
· · 35 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Kay Herr, Scott Diamond, Henrietta Treyz, Ozan Tarman
Summary
The episode argued that credit markets remain constructive even as rates, supply, and geopolitics create pockets of volatility. A JPMorgan Investment Management CIO said investment-grade corporates are being driven by earnings fundamentals and heavy issuance, but strong inflows and yields north of 5.25% are keeping demand healthy. She said the market is likely to be more about carry than capital gains, and that the Fed looks on hold as inflation cools toward target.
A Goldman Sachs municipal-bond executive said muni supply is running about 5% to 6% ahead of last year’s record pace, but demand has held up through more than $50 billion of year-to-date inflows into mutual funds and ETFs. He argued active management still matters because muni markets are fragmented, and he pointed to solid credit quality, with rainy-day funds still above pre-COVID levels. He also flagged pressure points in smaller higher-education credits and opportunities in school districts and taxable munis.
A political analyst said Congress faces a crowded calendar, a shutdown risk on October 1st, and a difficult midterm environment for both parties. A Deutsche Bank macro strategist said recent market angst is being driven by positioning, not just headlines, and expects a choppy but still earnings-sensitive summer with a potentially weaker dollar if global rotation continues.
Key takeaways
- The JPMorgan Investment Management CIO said investment-grade credit is being supported by 12 straight weeks of inflows and yields above 5.25%.
- The JPMorgan Investment Management CIO said fixed income is mainly a carry trade, with little expectation for major capital appreciation.
- The Goldman Sachs municipal-bond executive said muni issuance is running 5% to 6% ahead of last year, but over $50 billion of inflows has kept demand strong.
- The Goldman Sachs municipal-bond executive said active muni managers can add value because the market is highly fragmented and issuer-specific.
- The political analyst said Congress has only about 12 effective working days left and sees shutdown risk on October 1st.
- The Deutsche Bank strategist said market volatility is likely to stay choppy, with earnings and positioning more important than the latest headline shocks.
Notable quotes
“The market's healthy. I think there's a little bit of indigestion”
“I think the answer Paul is people like the yields here”
“the majority of your returns come from that carry or that coupon”
“We're going to do it again. Wow”
“I think the one top call is that the crowded trade of earlier summer, shorting US rates versus going long euro rates”
How the episode opens
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Joining us now, Ker. has been very patient here watching the festivities. Again, Sarah will show images of the iconic Buckingham uh palace as we await some news uh from there. With the instabilities of British politics, I love you have a pro paragraph. I'm not going to waste time and read, but you talk about the dispersion within investment grade bonds. They're winners and losers. Now, who's who?
Say good morning. Lovely to be with you, too. I mean, the fun thing is I never know what we're going to talk about and I never know, Tom. I never would have imagined you'd be wearing a Red Sox jersey.
I've been watching the World Cup. — I I know. That's why I might have thought Spain something. — Oh, no. We're doing Spanish music here. You know, killing me in Yes, folks. We will play Macarena. You should have seen Kair doing the Macarena years ago.
Tell me about the spread in right now. There's winners and losers.
There's absolutely winners and losers. And I think the two things that people should be focused on are number one the fundamentals. So we're moving away from last week which was an economicheavy week.
If you had tier one data and you had a lot of Fed speak, a lot of focus on Worsh. This week we're moving solidly into earning season. We're in the Fed blackout period.
So don't expect any Fed commentary. We've got a lot of earnings this week and next week.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- credit risks
- bond market outlook
- muni supply
- iran escalation
- geopolitical market risks
Companies and tickers mentioned
- JPM
- GS
- DB
- JPMorgan Investment Management
- Goldman Sachs Asset Management
- Veda Partners
- Deutsche Bank
Watch the episode
Watch “Credits Risks and the Market Outlook | Bloomberg Surveillance” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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