Credit Markets: Caution, Compression, And Opportunity

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Art of Boring »
Credit Markets: Caution, Compression, and Opportunity | EP 203

14h ago 20:41

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On this episode of The Art of Boring, Global Credit Portfolio Manager Brian Carney unpacks what he believes are some of the most pressing issues in credit markets today. He explores whether recent private market bankruptcies signal deeper systemic concerns, how to position for sovereign bond issuer risk in a sticky inflation world, and the impact of the AI-driven debt wave on credit spreads. He also discusses regulatory rollbacks in the lending markets, credit risk premium mispricings, and concrete portfolio actions for late cycle markets. Key Highlights

Recent private market bankruptcies may signal broader, systemic credit market weakness rather than isolated events, with deteriorating lending standards and rising delinquencies warranting caution.
Growing sovereign debt and persistent inflation are challenging the traditional "safe haven" status of U.S. Treasuries, prompting a preference for shorter duration and higher-quality credit exposure.
The surge in AI-driven capital expenditures is fueling a wave of debt issuance by large tech companies, likely putting upward pressure on credit spreads and shifting market dynamics in favour of lenders over time.
Regulatory rollbacks in the U.S. are reducing transparency and increasing risk-taking, especially in unregulated and private markets, raising concerns about financial stability and corporate behaviour.
Credit risk premiums remain compressed, with investors often inadequately compensated for lower-quality credit risk; opportunities are limited, and selectivity is critical.
Defensive positioning—focusing on capital preservation, short duration, and high-quality issuers—remains key, with readiness to deploy capital quickly when market dislocations create attractive opportunities.

Host: Kevin Minas, CFA, Institutional Portfolio Manager

Guest: Brian Carney, CFA, Portfolio Manager This episode is available for download anywhere you get your podcasts.

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