Our “Behind the Markets” podcast is taped live every Friday at 1:00 p.m. ET, and the week before the inauguration we had the privilege of hosting James McGrath in our Wharton studio. James is Director of Research of LGL Partners, a family office and investment firm from the Philadelphia area with only 50–60 client relationships. We had a great discussion with McGrath on LGL’s approach to life planning, investments, including alternative investments, as well as his take on the current environment across the major markets.
We were joined by Peter Tchir of Brean Capital to hear his view on the fixed income markets under Trump. We covered a lot of great topics in this one.
Peter discussed the great rotation that is occurring with money coming out of cash and Treasuries and into high-yield bonds and leveraged loans. These are two reflation trades he is favorable on, whereas he’s more worried about duration in the investment-grade credit market.
High Yield Market Less Dangerous Than Historically?
Those could turn out to be famous last words. But we discussed whether high-yield bond spreads over Treasuries were too low—and there was a good discussion of how the changing composition of the category could be supportive.
One phrase from Peter I especially liked: There are fewer “drive-bys” in high-yield bond issuance market today—meaning fewer companies are flying by that no one ever heard of and trying to raise capital via a high-yield bond issuance. This makes the market more stable and requires less yield spread pickup.
We also discussed the U.S. Treasury’s recent issuance of floating rate debt with Trump potentially also reversing course and extending duration and issuing bonds with maturities up to 50 years. This could be another interesting potential development.
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