Recession Fears and Credit Spreads: A Comprehensive Fixed Income Update | EP164

Art of Boring

In this episode, Crista Caughlin, lead Portfolio Manager of the Canadian Bond Strategy, and Brian Carney, lead Portfolio Manager of the Global Credit Opportunities Strategy, provide their thoughts on recent economic data releases, a shift in central bank language, and recent market volatility. They delve into new issuance activity in the U.S. and Canada, widening spreads in the investment-grade and high-yield markets, and current portfolio positioning. The conversation concludes with an update on the growth and expansion of Mawer’s fixed income team.

Key points from this episode:

• Central banks have shifted their focus from solely targeting inflation to balancing inflation and growth risks, leading to the start of a global easing cycle.
• Recession fears have increased due to weakening economic data, such as falling PMIs, rising unemployment, and weak growth, causing volatility in markets.
• It remains to be seen if recent volatility is just a pocket or something more material. If growth remains robust, it's likely just a pocket that will right-size itself. If growth continues to weaken and signs of a U.S. recession continue to pick up, it could be a larger downturn.
• The first half of the year has been smooth sailing for credit investors, but recent dislocations and changes resulted in significant widening in credit spreads.
• New issuance activity has been robust in the U.S. and Canada, with the levels of investment grade and high-yield issuance year-to-date already exceeding last year’s volumes.
• Commercial real estate has been a topical sector, but neither the Canadian bond strategy nor the global credit strategy have any direct exposure to real estate.
• In terms of where yield curves are today, parts of the curves are still inverted, particularly recession indicators.
• Both strategies hold Verizon Communications and Ford Credit Canada due to their favorable financial and operating metrics.

Host: Kevin Minas, Mawer Institutional Portfolio Manager Guests: Brian Carney, Mawer Portfolio Manager, Crista Caughlin, Mawer Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-the-canadian-equity-landscape-dispersion-energy-transition-and-opportunities-ep163 This episode is available for download anywhere you get your podcasts. -- Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at www.mawer.com.

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