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Delta: the beginning of the end, or the end of the beginning?

Are we experiencing the final late-cycle surge in credit markets, or is there more distance left to run? Alternatively, do low policy-rate peaks in heavily indebted economies signal the beginning of Japanification in the US and Europe?

In this episode of Delta, Jacko confronts a recurring question: is the credit cycle maturing or ending, and how much risk is present in this environment?

To assess the bearish case, he speaks with Tommaso Mancuso, Head of Multi Asset at Hermes, who considers many Western economies to be on the verge of a high-debt, low-growth future.

“If we continue on this current path of lower highs for policy rates and lower lows, in a system that keeps creating leverage,” Mancuso says. “I think the trend is very clear towards a Japanification of the developed economies.”

Rallying the bulls, Filippo Alloatti, Senior Credit Analyst at Hermes, emphasises areas of fundamental strength in credit markets – such as debt issued by financial institutions.

“The current situation could be very positive for financial credit. The banks are accruing capital – not so much for the benefit of shareholders in terms of capital return, but for bondholders and regulators.”

In ‘All options on the table’, a regular feature directed by questions from listeners, all three provide their respective views on what level of risk would be prudent as the credit cycle matures. (Or is it ending?)

Tune in to Delta.

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Got a question?

In each episode of Delta, Jacko and his guests answer a front-of-mind question from listeners in a regular feature, ‘All options on the table’. Enter yours below.

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