FICC Focus

“The market reaction has been very measured. Spreads have clearly moved in response to changes in fiscal outlooks and ratings,” says Patrick Drum, Saturna Capital’s fixed-income lead and portfolio manager, discussing the impact of current events in the Middle East on sukuk and the Islamic finance market. It’s “not so much the conflict itself. Tension is really back to the basics of balance sheet.” Drum joins Bloomberg Intelligence’s Noel Hebert on the latest Credit Crunch podcast to examine sukuk, the market’s size, composition and growth, and the economic backdrop that has helped drive it beyond $1 trillion. The episode also covers risk-adjusted returns, underlying assets and his view of the market’s continued evolution.

The Credit Crunch podcast is part of BI’s FICC Focus series.

Credit and high yield had first quarter losses due to the Iran war impact, especially on rates. Will 2Q revert those losses, and why? Mahesh Bhimalingam, Bloomberg Intelligence global head of credit strategy, discusses the results of the BI 2Q26 Investor Survey and the market outlook with Manuel Schoeffler, Head of High Yield at Deka Investment GmbH. They discuss valuations and central bank actions, along with distress and default rates. This podcast also covers survey results on investor positioning, sentiment, key return drivers, supply forecasts and relative value across asset classes (high grade vs. junk), geography (Europe vs. US), ratings and sectors.

“Troubled businesses don’t turn around on a dime. They took years to get messed up. They got worse through the restructuring when they were capital-starved,” observed Jon F. Weber, founder of Jon F Weber & Co. “A lender should not have the expectation that, upon pouring in liquidity and improving the capital structure, they’re going to immediately improve. We’re in the reality business... We have to establish what can be realistically achieved with a 70%-80% probability and align awards, budgets and all of those things around those outcomes.” Weber and Jon F Weber & Co. board director Alvaro Aguirre shared their well-honed insights with Bloomberg Intelligence’s Negisa Balluku and Phil Brendel, as they delved into their recent paper, “From Creditor to Owner: Adapting an Ownership Playbook.” They highlight the need for lenders to act swiftly and decisively to prepare for potential ownership, as well as the common pitfalls that can arise during this transition. The podcast concludes (1:02:40) with BI’s Noel Hebert joining Balluku and Brendel to discuss the latest developments in Hertz, First Brands, New Fortress Energy, Multi-Color Corp., Serta and Telesat.

JFW &Co.'s paper may be found here:

https://jonfweber.com/thought-leadership/f/from-creditor-to-owner-adopting-an-ownership-playbook

The Federal Reserve still has an easing bias and may lower rates another 50 bps this year, says Vincent Reinhart, chief economist for BNY Investments, on this edition of Macro Matters in the FICC Focus podcast series. Reinhart joins host Ira Jersey, chief US interest rate strategist for Bloomberg Intelligence, to discuss BNY Investments’ view on the economy and central bank actions as uncertainty remains high around energy prices. The two discuss the economic backdrop and how the path of nominal growth may remain steady even as the inflation/real growth mix shifts. Reinhart also discusses the cadence of work while he was with the Fed’s Monetary Affairs staff and as secretary of the Federal Open Market Committee.

The US-Iran ceasefire and associated relief in risk aversion and pullback in oil prices may be a first step out of the sterling-dollar bear cycle of the past few weeks. There will be cyclical relief as the market adjusts back to less hawkish Bank of England rate expectations, which were hurting the pound via the stagflation narrative. Structural relief may also emerge, as the expected monetary-fiscal policy mix implies less reliance on fiscal stimulus to support the economy and reduces fiscal credibility concerns that have become a constant consideration for sterling. In this episode of FX Moment, Bloomberg Intelligence’s Chief FX Strategist Audrey Childe-Freeman and Bloomberg Economics Chief UK Economist Dan Hanson discuss the U-turn in Bank of England rate and growth expectations in the context of the Iran conflict, fiscal policy, as well as how UK politics could shape sterling’s near- to mid-term dynamics.