Episode summary
Wealth Management Invest: Fixed Income Opportunities in a Higher-Rate Market with Sean Banai
Summary
Sean Banai argues that fixed income investors are in a very different rate regime than they were before COVID, with persistent inflation, heavier fiscal deficits and stronger nominal growth pushing the equilibrium level of rates higher. He says the market may be underpricing how far the Fed can actually go: his view is that 3% inflation is the new 2%, and that the Fed may deliver only one or two more hikes rather than the three currently priced in.
He also says investors do not need to stretch far out the curve to find income, because current yields allow them to earn about 5% in government bonds and roughly 80 basis points more in investment grade credit without giving up much protection. In his view, the 10-year Treasury around 5% is logical given roughly 2% real growth and 3% inflation, and duration can still help if growth slows.
Banai sees the economy as broadly resilient, with AI spending, reshoring and defense spending supporting growth, while lower-income consumers show stress through higher delinquencies. He is positive on AI as a force for growth, but warns that debt-funded infrastructure and concentration risk matter. He favors security selection over broad beta, highlighting securitized assets, CLOs, selective commercial real estate lending and TIPS as areas where investors may be paid for complexity and inflation protection.
Key takeaways
- Sean Banai thinks the Fed may raise rates one or two more times, but not the three hikes currently priced in by markets.
- Banai says the equilibrium level of rates has moved higher, making a 5% 10-year Treasury consistent with about 2% real growth and 3% inflation.
- Banai says investors can earn meaningful income without extending duration, using short-duration structure and about 80 basis points of investment grade spread.
- Banai sees consumer stress concentrated in lower-income households, but says delinquency deterioration appears to be stabilizing.
- Banai likes securitized assets, CLOs and selective commercial real estate lending because he thinks the market is paying for complexity rather than broad credit beta.
- Banai says AI can boost growth, but warns that debt-funded capex and concentration to hyperscalers are the key risks to watch.
Notable quotes
“my view has been that the 3% inflation target is the new 2%”
“You really don't need to extend duration to pick up income”
“The biggest story, in my view, is that the equilibrium level of rate has moved higher”
“our view is that we stick around somewhere around that 2 and 1/2 3%”
“there are securities you want to own, and there are securities you want to rent”
How the episode opens
Fixed income investors face a changing landscape. That's why Voya Investment Management is focused on helping advisors understand what's shaping fixed income today and what may come next. Explore fixed income solutions, insights, and expertise built for what's next at voyainvestments.com.
Hello and welcome back to the Wealth Management Invest podcast. I'm your host David Bodamer, editorial director with Wealth Management where I cover investments. This episode, I'm excited to bring on Shawn Benai who is head of multi-sector fixed income with Voya. Shawn, welcome to the podcast.
Thank you. Thank you for having me.
So, before we get started, I always like to give the guest an opportunity to talk a bit about themselves, maybe a little bit about your background, what your role entails, and anything you want to say about Voya. Obviously, it's a firm a lot of people I think are familiar with, but if there's anything that that for folks who maybe, you know, want to know a a bit more about it, just give you a chance to talk about that and then we will talk a bit about fixed income.
Sure, yeah. Thank you. Thanks.
Maybe just a little bit of background with myself and Voya. Voya Investment Management is a broad-based asset management with about 380 billion in assets across equities, multi-asset solutions, fixed income, and alternatives. Fixed income has historically been a significant part of what we do with capabilities across investment grade credit, high yield, emerging markets, securitized credit, and private credit and what I do which is on the multi-sector strategies.
I am on the fixed income side and have been with Voya for about 27 years now. Today, I lead our multi-sector and public fixed income business. I started my career on the quantitative side and have spent much of my career now managing multi-sector portfolio.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- higher-rate fixed income
- federal reserve rate path
- inflation and treasury yields
- ai infrastructure spending
- securitized assets and clo income
Companies and tickers mentioned
- Voya Investment Management
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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