Hi guys:
was just wondering if I can hear about your views on fixed income/credit after rates go up? Are we at a point in the credit cycle where the last 20 years of bond bull market is about to end and reverse? if so, would fixed income/credit investing become a declining industry? what are your thoughts on this?
Thanks!
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Hi,
I think when (or if?) rates go up, there will be much more focus on floating coupon part of fixed income - loans, structured credit etc. However, I would expect the bear market to be much shorter than bull market - rates increase would happen gradually but over years rather than tens of years. On the other hand, I'd say return oriented investors might actually appreciate higher yields and therefore the sector could get a bit more attention.
^Seconded. I'd think that rates going up would be good for "new" FI investment, as the higher rate environment starts showing the cracks in equities of companies that rode the low rate wave, money will shift out of equities into newly issued, higher yielding corporate debt.
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