00:00:23:14 - 00:00:25:01 Welcome back to Markets Mindset. 00:00:25:06 - 00:00:27:09 Once again here with Moshe Tomkiewicz, Head of DCM, and 00:00:27:09 - 00:00:28:22 Colby Griffith, Head of Debt Syndicate. 00:00:28:23 - 00:00:30:07 It's been a while since we've been together. 00:00:31:06 - 00:00:34:04 A lot has happened in that short while here. 00:00:34:10 - 00:00:38:02 We're, what are we, eight weeks into hostilities overseas, 00:00:38:15 - 00:00:41:00 and we are at an epic pace in terms of 00:00:41:00 - 00:00:42:01 supply at this moment. 00:00:42:04 - 00:00:44:19 So let's just kick it right off, start with you, Colby. 00:00:45:16 - 00:00:48:23 We're sitting here, end of February, beginning of March, 00:00:49:04 - 00:00:50:16 hostilities kick up over the world. 00:00:50:16 - 00:00:54:21 We see an initial reaction that seems familiar, right? 00:00:54:21 - 00:00:58:04 Volatility kicks up, spreads widen out to begin with, but 00:00:58:04 - 00:01:01:17 then now we stand here roughly four months almost into 00:01:01:17 - 00:01:07:01 the year, record-setting supply pace, $775 plus minus 00:01:07:01 - 00:01:09:00 billion of supply. 00:01:09:04 - 00:01:10:15 We're on a record, we're on a pace for, what, 00:01:10:15 - 00:01:12:20 $2.2 trillion if we kept this, even when you 00:01:12:20 - 00:01:13:23 take out some of the holidays. 00:01:15:18 - 00:01:18:07 Spreads are within, back to within seven basis points of 00:01:18:07 - 00:01:20:08 three decade tights. 00:01:20:08 - 00:01:22:14 Market seems to be, every time something goes on in 00:01:22:14 - 00:01:24:05 the world, market seems to be seeing light at the 00:01:24:05 - 00:01:24:16 end of the tunnel. 00:01:24:18 - 00:01:27:00 They seem to be seeing, you know, that there's a 00:01:27:00 - 00:01:29:10 point where it's going to be all rainbows and roses 00:01:29:10 - 00:01:31:16 at some point, and it's held together extraordinarily well. 00:01:31:19 - 00:01:34:19 Technicals on new issues, plus minus five basis points, new 00:01:34:19 - 00:01:37:00 issue premiums over subscriptions four plus times. 00:01:37:05 - 00:01:39:10 Why, what is it, what's the dynamic going on right 00:01:39:10 - 00:01:43:23 now that's just kept us pretty much intact, except for 00:01:43:23 - 00:01:45:13 a couple of bumps along the road, and maybe a 00:01:45:13 - 00:01:49:04 few days that aren't issuer-friendly, but able to digest 00:01:49:04 - 00:01:51:15 that kind of supply, in good fashion, mind you? 00:01:51:16 - 00:01:53:15 Yeah, no, I think you hit on a lot of 00:01:53:15 - 00:01:57:00 the points that we've been making over the last couple of weeks. 00:01:57:00 - 00:01:58:15 Concessions are slightly elevated. 00:01:59:00 - 00:02:01:01 We've gone from a zero to, call it two or 00:02:01:01 - 00:02:03:18 three basis point average concession, to something that's 00:02:03:18 - 00:02:06:14 more, on average, about five basis points, which, sure, 00:02:06:16 - 00:02:10:05 it's a little elevated, but not by big, 00:02:10:05 - 00:02:12:10 large standards by any means. 00:02:12:20 - 00:02:13:17 What's been driving it? 00:02:13:17 - 00:02:15:23 I think, one, there were, coming into the year, there 00:02:15:23 - 00:02:18:02 were huge expectations for supply. 00:02:18:09 - 00:02:18:12 Yep. 00:02:18:15 - 00:02:21:02 So I don't think the fact that we're running 25% 00:02:21:02 - 00:02:25:16 ahead versus last year is really catching people off sides. 00:02:25:19 - 00:02:26:03 Right. 00:02:26:03 - 00:02:28:04 If you look at the average expectation for the year, 00:02:28:05 - 00:02:31:11 it was really somewhere between $1.9 and $2 trillion. 00:02:32:03 - 00:02:34:21 If you take 25% above where we finished last 00:02:34:21 - 00:02:38:01 year, it gets you right to, effectively, a $2 trillion number. 00:02:38:05 - 00:02:40:19 So I think that's one positive factor that has helped 00:02:40:19 - 00:02:41:21 us manage this supply. 00:02:42:11 - 00:02:45:13 Two, as far as the Iran war goes, 00:02:45:19 - 00:02:49:00 I think the market investors have certainly been looking 00:02:49:00 - 00:02:51:20 towards it being more of a short-term versus a long-term. 00:02:52:16 - 00:02:56:09 Expectations that there would be some form of an 00:02:56:09 - 00:02:59:11 off-ramp in the, you know, call it more short versus 00:02:59:11 - 00:03:01:22 medium or certainly not a long-term type thing. 00:03:01:22 - 00:03:04:13 I think that's been very supportive. 00:03:04:20 - 00:03:07:06 I think, to some extent, a lot of investors in 00:03:07:06 - 00:03:09:14 our market view our market as a — 00:03:09:14 - 00:03:11:10 We were out with an investor last night, and they mentioned 00:03:11:10 - 00:03:13:16 how the IG is very much a mean reversion type 00:03:13:16 - 00:03:16:10 market where you may have swings, high or low, but 00:03:16:10 - 00:03:18:09 we tend to kind of move back to the middle. 00:03:18:09 - 00:03:21:00 And so I think whenever we saw that widening, we 00:03:21:00 - 00:03:24:08 saw investors kind of step in and move us back lower. 00:03:24:08 - 00:03:26:07 I think this is part of the importance, or one 00:03:26:07 - 00:03:28:08 of the more important, is where we are from a 00:03:28:08 - 00:03:29:19 yield perspective, right? 00:03:29:21 - 00:03:32:00 If you look at where we are on the index, 00:03:32:14 - 00:03:35:02 we've been over 5% of the index since the 00:03:35:02 - 00:03:37:00 beginning or since about the middle part of March. 00:03:37:03 - 00:03:39:20 We're about 25 or 30 basis points higher on the 00:03:39:20 - 00:03:41:09 year from a yield perspective. 00:03:41:17 - 00:03:44:04 We really haven't been at these types of yields on 00:03:44:04 - 00:03:47:15 the IG index since about July of last year. 00:03:47:21 - 00:03:50:04 And so I think that's been very helpful for spreads 00:03:50:04 - 00:03:52:20 as you have yield buyers come into the market. 00:03:53:01 - 00:03:55:22 I've been fascinated with the fact that supply for the 00:03:55:22 - 00:03:57:13 year, net supply for the year, right? 00:03:57:13 - 00:04:02:06 We've talked about this. Up 60%, which to me says this 00:04:02:06 - 00:04:04:00 supply is being taken down by new money. 00:04:04:19 - 00:04:06:09 Where is that money coming from? 00:04:06:12 - 00:04:07:11 Where do you see it? 00:04:07:11 - 00:04:09:14 Because it's not just, we knew we came in this 00:04:09:14 - 00:04:12:16 year with large maturity towers increasing over the next 00:04:12:16 - 00:04:16:01 five years, but that's not what's driven the demand over 00:04:16:01 - 00:04:17:00 the first four months. 00:04:17:00 - 00:04:19:23 When you think about net supply up 60%, up over 00:04:19:23 - 00:04:21:22 100% net supply for financials. 00:04:21:23 - 00:04:24:01 Right, so I think some of that is kind of 00:04:24:01 - 00:04:26:23 a calendar or a timing thing as far as the 00:04:26:23 - 00:04:31:10 net numbers because if you look at net issuance in, 00:04:31:17 - 00:04:33:11 call it the first quarter or the first four months 00:04:33:11 - 00:04:36:23 of last year, and particularly the start of the second 00:04:36:23 - 00:04:40:23 quarter, there was very high redemption numbers because 00:04:40:23 - 00:04:43:08 there was a lot of the five-year paper that 00:04:43:08 - 00:04:45:14 was issued in the early days of Covid, right? 00:04:45:17 - 00:04:48:19 March, April, etc., May, which were the largest months 00:04:48:19 - 00:04:50:09 we've ever had from an issuance perspective. 00:04:50:13 - 00:04:53:17 And so last year's net issuance, kind of in this 00:04:53:17 - 00:04:55:12 part of the calendar, right where we are right now, 00:04:55:14 - 00:04:58:09 is a little bit suppressed because there were such high 00:04:58:09 - 00:04:59:05 redemptions last year. 00:04:59:15 - 00:05:00:14 So technically lower. 00:05:00:16 - 00:05:01:09 Technically lower. 00:05:01:23 - 00:05:03:18 As we get into the later part of this year, 00:05:03:18 - 00:05:06:05 I think that will normalize because we do see higher 00:05:06:05 - 00:05:08:21 redemptions in this year kind of more evenly balanced 00:05:08:21 - 00:05:09:12 throughout the year. 00:05:09:16 - 00:05:12:03 Now, to answer your question about where the demand's 00:05:12:03 - 00:05:14:23 coming from, I think one of it is we are 00:05:14:23 - 00:05:16:23 seeing some yield buyers that have been maybe a little 00:05:16:23 - 00:05:20:06 bit more cautious because of where coupons were, come back 00:05:20:06 - 00:05:21:03 into the market. 00:05:21:04 - 00:05:25:02 So we've seen, if you look at insurance participation over 00:05:25:02 - 00:05:28:00 the first quarter of the year and something that we 00:05:28:00 - 00:05:31:21 track in our new issues, we've seen their order sizes 00:05:31:21 - 00:05:34:23 from insurance companies or percent of the orders go up 00:05:34:23 - 00:05:37:18 from 10% to 15% during the first quarter. 00:05:37:23 - 00:05:40:10 We also saw their percent of allocations go from 00:05:40:10 - 00:05:41:16 15% to 20%. 00:05:41:16 - 00:05:42:23 So I think that's part of it. 00:05:43:13 - 00:05:46:13 We've also, outside of two weeks, a couple of weeks 00:05:46:13 - 00:05:50:05 ago, had seen pretty good inflows into our market. 00:05:50:11 - 00:05:50:18 Right. 00:05:50:18 - 00:05:53:10 Two weeks before tax day, actually. 00:05:53:10 - 00:05:54:02 Before tax day. 00:05:54:04 - 00:05:54:11 Think about it. 00:05:54:13 - 00:05:57:13 And so we were sitting at about $37 billion if 00:05:57:13 - 00:05:59:06 you look at one of the providers. 00:05:59:16 - 00:06:01:12 At this point last year, we were only at $8 00:06:01:12 - 00:06:03:14 billion by that same metric. 00:06:03:21 - 00:06:06:18 We didn't get to the $37, $38 billion type number 00:06:06:18 - 00:06:08:22 until really kind of the middle of the year. 00:06:09:01 - 00:06:10:18 And so I think that's been helpful as well. 00:06:11:05 - 00:06:12:01 I'm going to switch to Moshe. 00:06:12:02 - 00:06:13:05 I'm going to switch to you on the issuer side 00:06:13:05 - 00:06:13:16 of the equation. 00:06:14:14 - 00:06:16:15 So there is a truce taking effect. 00:06:17:01 - 00:06:20:00 We can all debate whether it's going to be durable 00:06:20:00 - 00:06:22:06 or not, but let's for a second say that it's 00:06:22:06 - 00:06:24:01 relatively durable. 00:06:24:10 - 00:06:26:12 The last two months, we've come through in pretty good 00:06:26:12 - 00:06:27:16 stead, as you heard Colby go through. 00:06:27:17 - 00:06:28:10 The demand is there. 00:06:28:10 - 00:06:31:06 Do you think now that there's more of an official 00:06:31:06 - 00:06:34:11 attempt at a truce, do you think issuers have the 00:06:34:11 - 00:06:35:13 ability now to sit back? 00:06:35:21 - 00:06:37:14 Do you think issuers have the ability to wait to 00:06:37:14 - 00:06:41:11 see if oil prices come back down, we get a 00:06:41:11 - 00:06:45:04 grind back in rates lower because the Fed now maybe 00:06:45:04 - 00:06:46:02 has more leeway? 00:06:46:08 - 00:06:48:14 Although I will say right now, you look at the 00:06:48:14 - 00:06:51:08 World Interest Rate Probability (WIRP) index, it's saying there's only maybe a third of 00:06:51:08 - 00:06:54:15 an ease built into the system by the end of 00:06:54:15 - 00:06:55:04 the year even. 00:06:55:08 - 00:06:56:23 I mean, we at one time were at two and 00:06:56:23 - 00:06:57:18 a half eases. 00:06:57:18 - 00:06:59:23 Right now we're back at maybe a third of an ease. 00:07:00:11 - 00:07:02:16 Do you think it gives issuers an ability to wait 00:07:02:16 - 00:07:04:03 now and be a little more selective? 00:07:04:06 - 00:07:06:09 Or do you still think there is a reason to 00:07:06:09 - 00:07:08:17 move forward, get your financing done in this window and 00:07:08:17 - 00:07:09:13 not take chances? 00:07:10:00 - 00:07:12:18 I'm more of a no chance guy to be completely 00:07:12:18 - 00:07:13:16 candid with you. 00:07:13:20 - 00:07:18:05 So if you just take a step back, so before 00:07:18:05 - 00:07:22:02 February, right before February, tens were trading at 4.20%. 00:07:22:17 - 00:07:24:10 Then we kicked into February. 00:07:24:10 - 00:07:28:04 Then you started to see yields fall and oil rise. 00:07:28:08 - 00:07:31:22 So the market was already starting to bake in some 00:07:31:22 - 00:07:36:02 geopolitical premium into crude and some flight to safety 00:07:36:02 - 00:07:37:05 factor into rates. 00:07:37:08 - 00:07:39:08 It turned out to be the wrong bet, but that's 00:07:39:08 - 00:07:40:10 what ended up happening. 00:07:40:23 - 00:07:44:02 So when I think about, like in terms of a 00:07:44:02 - 00:07:48:07 valuation reference point, kind of pre-war, post-war, 00:07:48:07 - 00:07:50:04 I don't look at 4% tens. 00:07:50:06 - 00:07:52:08 I look at more 4.20% tens. 00:07:52:08 - 00:07:55:04 And that's basically where we are. 00:07:55:10 - 00:07:58:23 So I think, sure, all our clients have financial 00:07:58:23 - 00:08:01:08 flexibility that they could sit back and wait. 00:08:01:17 - 00:08:03:13 At least from where I sit, I think the risk 00:08:03:13 - 00:08:07:04 reward profile is somewhat asymmetric, at least on the risk. 00:08:07:04 - 00:08:10:16 So you don't think the view changes if the war 00:08:10:16 - 00:08:11:17 starts going behind us? 00:08:11:22 - 00:08:14:02 Fed testimonies, Fed hearing has started, confirmation 00:08:14:02 - 00:08:15:01 hearings have just started. 00:08:15:03 - 00:08:17:19 And obviously people have a view that the new Fed 00:08:17:19 - 00:08:21:01 chair is more of a dove or at least maybe 00:08:21:01 - 00:08:22:15 wants to get what the administration wants done. 00:08:22:17 - 00:08:24:21 You don't think that necessarily bleeds into the market 00:08:24:21 - 00:08:28:13 where an issuer should be waiting for 4% or the 3.95%? 00:08:28:13 - 00:08:30:18 I mean, if that bleeds into the market, it'll bleed 00:08:30:18 - 00:08:32:07 into the front end, right? 00:08:32:09 - 00:08:35:05 If you're looking to go out the curve, then you go. 00:08:35:13 - 00:08:38:19 If you're dead set on doing a two-year fixed 00:08:38:19 - 00:08:42:10 rate paper, then maybe you wait, but most of our 00:08:42:10 - 00:08:45:02 clients aren't just doing a two-year fixed rate paper. 00:08:45:06 - 00:08:46:17 Now talk to me about going forward here. 00:08:47:02 - 00:08:48:16 You try to get the war behind you. 00:08:48:16 - 00:08:51:15 A lot of people ask when do, when or if, 00:08:51:21 - 00:08:53:23 I'm not going to say when, when or if do 00:08:53:23 - 00:08:58:22 midterms become maybe a question mark, a point of volatility? 00:08:59:04 - 00:09:01:12 When do we start getting into that where maybe it 00:09:01:12 - 00:09:04:10 becomes an issue to talk about with issuers and do 00:09:04:10 - 00:09:05:22 you want to finance earlier or later? 00:09:06:01 - 00:09:08:15 Do you want to wait to the third quarter to 00:09:08:15 - 00:09:09:03 do things? 00:09:09:12 - 00:09:11:20 My conversations about the midterms haven't been 00:09:11:20 - 00:09:16:16 necessarily about it being as this pivot point in either 00:09:16:16 - 00:09:18:11 the rate backdrop or risk sentiment. 00:09:19:00 - 00:09:23:01 My point in the conversation I'm having with my clients 00:09:23:01 - 00:09:27:09 is about the M&A impact of the midterms because 00:09:27:09 - 00:09:32:16 I think most CEOs, if not all CEOs, will see 00:09:32:16 - 00:09:38:13 a progressive wave in the midterms as a potential precursor to 2028. 00:09:39:08 - 00:09:42:12 And so as a result, any big ticket M&A 00:09:42:12 - 00:09:44:14 that they're thinking about, they're going to want to hit 00:09:44:14 - 00:09:45:23 the fast-forward button on it. 00:09:46:09 - 00:09:49:22 So that's really where the midterm conversation comes into 00:09:49:22 - 00:09:52:07 the dialogue with the clients, not as much of what's 00:09:52:07 - 00:09:53:07 going to happen in the market. 00:09:53:13 - 00:09:53:18 Okay. 00:09:54:02 - 00:09:55:06 Colby, so back to you. 00:09:56:08 - 00:09:57:20 You know, we talked about spreads. 00:09:58:09 - 00:10:00:06 I think it's the Bloomberg Index spreads right now, are what, 00:10:00:07 - 00:10:01:03 78, 79? 00:10:01:22 - 00:10:04:21 I think maybe during the height of the situation here 00:10:04:21 - 00:10:08:07 over the last eight weeks, we got as high as 00:10:08:07 - 00:10:10:11 the mid-90s, low mid-90s, somewhere in 93. 00:10:10:18 - 00:10:12:20 Given where we are right now and given the backdrop, 00:10:12:20 - 00:10:14:14 where do you see spreads going? 00:10:14:21 - 00:10:15:21 What I would say is it does feel 00:10:15:21 - 00:10:17:20 like the market, to your point, has moved 00:10:17:20 - 00:10:19:13 past the war at this point, right? 00:10:19:14 - 00:10:21:06 And so we've kind of returned back to 00:10:21:06 - 00:10:23:07 the things that we were worried about or 00:10:23:07 - 00:10:27:03 talking about pre— you know, middle of February. 00:10:27:03 - 00:10:31:14 So obviously the economy, earnings, private credit, 00:10:31:17 - 00:10:33:05 although that's caught in kind of a bid over 00:10:33:05 - 00:10:34:11 the last couple of days here. 00:10:35:00 - 00:10:37:01 I think the other big factor is supply. 00:10:37:04 - 00:10:38:18 It kind of goes back to that again. 00:10:39:18 - 00:10:41:15 As far as kind of where we are 00:10:41:15 - 00:10:43:17 from a spread perspective, as you pointed out, 00:10:43:20 - 00:10:45:09 we're in that high 70s type number. 00:10:46:12 - 00:10:48:15 I think, quite frankly, I think it's going 00:10:48:15 - 00:10:50:15 to be hard to go much tighter than 00:10:50:15 - 00:10:51:18 where we are right now. 00:10:52:06 - 00:10:54:09 I think if anything, there's probably a little bit of 00:10:54:09 - 00:10:57:15 a bias to move higher, but I still believe, particularly 00:10:57:15 - 00:10:59:21 if we sit where we are from a rates perspective, 00:11:00:00 - 00:11:02:10 to Moshe's point, kind of around a 4.20% plus or 00:11:02:10 - 00:11:05:22 minus, I think anytime you move into the low to 00:11:05:22 - 00:11:08:14 mid-80s, you're going to find some more support from 00:11:08:14 - 00:11:09:06 the investor base. 00:11:09:19 - 00:11:11:20 And so I think it's a boring answer to say, 00:11:11:23 - 00:11:14:04 but unfortunately I think it's the answer I believe in, 00:11:14:15 - 00:11:16:03 is that we're going to be in some kind of 00:11:16:03 - 00:11:19:23 a range between maybe as best in mid-70s and 00:11:19:23 - 00:11:22:23 probably as wide as call it mid-to-high 80s 00:11:23:16 - 00:11:25:03 for the next couple of weeks here. 00:11:25:10 - 00:11:30:18 So take that spreads are relatively in a band, treasuries maybe 00:11:30:18 - 00:11:31:20 relatively in a band. 00:11:32:05 - 00:11:35:06 We've seen the effect with the VIX coming down below 00:11:35:06 - 00:11:37:13 20, the MOVE Index is back down at 70. 00:11:37:16 - 00:11:39:07 We're all at levels that were well before the war. 00:11:39:20 - 00:11:42:17 Hybrids, which are coupons, forget spreads for a second, 00:11:42:19 - 00:11:46:01 those are coupon, resurgence of demand in that product. 00:11:46:09 - 00:11:49:03 We saw a couple of issuers recently do non-call 00:11:49:03 - 00:11:50:22 seven that went extraordinarily well. 00:11:51:03 - 00:11:53:01 We saw an issuer who for the first time put 00:11:53:01 - 00:11:57:07 the floor product on their dual-tranche transaction, $9, 00:11:57:10 - 00:11:59:10 $10, $11 billion book for that trade. 00:11:59:17 - 00:12:02:10 We saw some of the BBs get done recently. 00:12:02:21 - 00:12:04:13 That product seems to have caught a bid. 00:12:04:15 - 00:12:05:15 It kind of faded for a little bit. 00:12:05:16 - 00:12:06:08 Now it's got a bid. 00:12:06:11 - 00:12:08:21 If we're going to stay at such a kind of 00:12:08:21 - 00:12:11:16 dull, I'll say band in terms of spreads and yields, 00:12:11:22 - 00:12:13:10 should that not help that product? 00:12:13:12 - 00:12:15:07 And do you see it returning to the types of 00:12:15:07 - 00:12:18:04 coupons we saw before where the five-year product is 00:12:18:04 - 00:12:20:13 coming in at the 5.75 to 5.78 type 00:12:20:13 - 00:12:22:16 coupon ranges, or do you think there's still going to 00:12:22:16 - 00:12:25:12 be a little bit of indigestion as we get back 00:12:25:12 - 00:12:26:00 down to fives? 00:12:26:01 - 00:12:27:23 Because we couldn't fully hold them for a long period 00:12:28:11 - 00:12:29:18 when we got there last time. 00:12:30:04 - 00:12:32:00 Yeah, well, I'll give you my view, and certainly love 00:12:32:00 - 00:12:33:09 to hear your view as well. 00:12:33:12 - 00:12:36:20 I think, you know, when you talk about stability, right? 00:12:36:22 - 00:12:39:14 And what does that usually mean for spreads if you 00:12:39:14 - 00:12:40:22 think about it historically, right? 00:12:41:05 - 00:12:43:23 In that type of scenario, you usually see duration 00:12:43:23 - 00:12:46:21 outperform and quality arguably underperform. 00:12:47:11 - 00:12:49:13 And so if we believe, and we've kind of talked 00:12:49:13 - 00:12:51:13 about it, you pointed out the MOVE Index has moved 00:12:51:13 - 00:12:54:20 back below to the levels that we were pre-war, and 00:12:54:20 - 00:12:59:11 quite frankly, lower than where we were for most of 2025. 00:12:59:22 - 00:13:02:20 Outside of a couple of weeks in the fourth quarter, 00:13:03:15 - 00:13:05:22 that should be positive for hybrids. 00:13:06:04 - 00:13:10:00 You know, it's certainly lower rated, not AA, single A 00:13:10:00 - 00:13:10:16 type paper. 00:13:10:16 - 00:13:14:13 So as we've seen kind of spreads continue to compress, 00:13:15:01 - 00:13:16:23 I would put hybrids in that category. 00:13:17:06 - 00:13:18:19 You know, I was having a conversation with our index 00:13:18:19 - 00:13:21:11 trader the last couple of days, 13 of the last 00:13:21:11 - 00:13:25:13 14 days, high yield has outperformed the IG CDX index. 00:13:25:17 - 00:13:29:01 As that compression trade just continues to grind tighter, 00:13:29:04 - 00:13:30:10 and I think that's part of the reason you're seeing 00:13:30:10 - 00:13:31:06 it in hybrids. 00:13:31:18 - 00:13:33:18 If that continues, there's no reason to think that it 00:13:33:18 - 00:13:37:05 won't kind of maintain a very good market for hybrid issuance. 00:13:37:05 - 00:13:39:09 I have to admit, I'm with you on that. 00:13:39:09 - 00:13:42:10 I've always had that belief that, and when I look 00:13:42:10 - 00:13:44:16 back and you look at the MOVE Index, whether one 00:13:44:16 - 00:13:46:16 is cause for the other, it's the other way around. 00:13:47:05 - 00:13:50:06 When the MOVE Index got to its lows, our index 00:13:50:06 - 00:13:51:21 spreads got to their lows, right? 00:13:51:23 - 00:13:53:00 In January, February. 00:13:53:08 - 00:13:56:02 But I always maintain that when treasury volatility comes 00:13:56:02 - 00:13:59:19 down, that the bid for product that prices in coupon 00:13:59:19 - 00:14:02:06 or trades in price always seems to get better. 00:14:02:07 - 00:14:05:02 And that's high yield is compressing, and we see the 00:14:05:02 - 00:14:05:23 hybrids compressing. 00:14:06:00 - 00:14:07:19 And if you take a look, we've done some deals 00:14:07:19 - 00:14:10:01 lately where some of the big buyers have been high 00:14:10:01 - 00:14:14:10 yield buyers, going up and buying BB hybrids, BBB hybrids. 00:14:14:13 - 00:14:18:08 They're getting high BBB or weak A credits in 00:14:18:08 - 00:14:21:12 hybrid format, but they're getting yields they can't get in 00:14:21:12 - 00:14:23:13 the BB range even in the shorter end. 00:14:24:00 - 00:14:26:23 And so we've seen that bid, I think, just been 00:14:26:23 - 00:14:30:04 a resurgence with the lower volatility in treasuries. 00:14:30:10 - 00:14:31:00 I'm with you. 00:14:31:02 - 00:14:32:14 I think if we stay here, if we don't get 00:14:32:14 - 00:14:35:06 a big sell-off in rates and rates stay in 00:14:35:06 - 00:14:37:04 this band, I do think we're going to get the 00:14:37:04 - 00:14:39:07 best of the best, the real high quality hybrid issuers 00:14:39:07 - 00:14:42:05 are going to be pricing between five and five eighths 00:14:42:05 - 00:14:43:23 and five and three quarters on the five, non-call 00:14:43:23 - 00:14:45:12 five stuff, and the non-call ten stuff will be 00:14:45:12 - 00:14:47:08 hovering around six at some point. 00:14:47:19 - 00:14:49:11 And we'll see how much supply they can take. 00:14:49:23 - 00:14:52:12 When we look at where we were before the war, 00:14:53:05 - 00:14:58:04 Europe in many aspects on hybrids and on a spread 00:14:58:04 - 00:15:00:19 basis for a lot of issuers had an advantage, even 00:15:00:19 - 00:15:04:04 on a swap-back basis to where U.S. levels were. 00:15:04:05 - 00:15:07:17 And we saw a lot of issuers, it wasn't huge, 00:15:07:20 - 00:15:10:16 but enough, an increase in issuers going over and taking 00:15:10:16 - 00:15:14:20 advantage of European credit markets that despite decent 00:15:14:20 - 00:15:17:04 amounts of supply, granted much smaller than we see here 00:15:17:04 - 00:15:20:14 in the States, but were trading at all-time tights. 00:15:20:23 - 00:15:23:02 And we saw a lot of credits that were inverted 00:15:23:02 - 00:15:25:11 compared to their swapped equivalents in the States. 00:15:26:08 - 00:15:28:09 That sold off a little bit more than we did 00:15:28:09 - 00:15:30:02 in the States or hasn't recovered, I should say, as 00:15:30:02 - 00:15:33:02 much as we've gotten what seems to be towards the 00:15:33:02 - 00:15:36:05 end of the hot portion of the war. 00:15:37:01 - 00:15:38:13 Where do you see that going forward? 00:15:38:16 - 00:15:41:02 Do you see that as still a draw for U.S. issuers? 00:15:41:05 - 00:15:43:04 Will it come back to those kind of levels as 00:15:43:04 - 00:15:43:19 it was before? 00:15:44:04 - 00:15:47:12 Or do you think it'll stay where it is and 00:15:47:12 - 00:15:50:07 we've kind of reverted back to a situation where Europe 00:15:50:07 - 00:15:52:16 is better for European names, U.S. is still better for 00:15:52:16 - 00:15:53:12 most of the U.S. names? 00:15:53:18 - 00:15:55:20 Europe's underperformance is due to two things. 00:15:55:23 - 00:15:58:20 First off, their reliance on energy coming out of the 00:15:58:20 - 00:15:59:13 Strait of Hormuz. 00:16:00:01 - 00:16:02:12 And two, the fact that the central bank has a 00:16:02:12 - 00:16:06:02 single mandate, which is price stability, which meant that 00:16:06:02 - 00:16:10:00 the central banks went from potentially cutting rates to 00:16:10:00 - 00:16:11:13 raising rates multiple times. 00:16:12:03 - 00:16:16:01 So you saw a real de-risking in European credit 00:16:16:01 - 00:16:18:10 when the war kicked off. 00:16:18:13 - 00:16:21:03 So definitively lagged what we saw in the U.S. 00:16:21:07 - 00:16:24:17 If we have a true resolution here, we're going to 00:16:24:17 - 00:16:29:01 be seeing a re-risking in European spreads, okay? 00:16:29:10 - 00:16:32:04 And at the same time, we're likely to see a 00:16:32:04 - 00:16:37:00 divergence between European rates and treasuries, just 00:16:37:00 - 00:16:39:21 given the convergence that we've been seeing over the last 00:16:39:21 - 00:16:40:16 month or so. 00:16:41:02 - 00:16:42:21 And I think if you have both those come into 00:16:42:21 - 00:16:47:03 play, you'll definitively see supply being stolen from over 00:16:47:03 - 00:16:48:04 here to over there. 00:16:48:13 - 00:16:49:19 What are the things you're going to be looking at 00:16:49:19 - 00:16:51:14 over the next two or three months that you're going 00:16:51:14 - 00:16:54:13 to be keeping an eye on that issuers should be 00:16:54:13 - 00:16:55:02 thinking about? 00:16:55:05 - 00:16:57:03 And I'll let you go first Moshe and 00:16:57:03 - 00:16:57:19 Colby, you follow up. 00:16:59:04 - 00:16:59:15 Earnings. 00:16:59:15 - 00:17:03:09 Market is assuming basically 20% earnings growth for the 00:17:03:09 - 00:17:04:08 S&P this year. 00:17:04:13 - 00:17:07:06 Now we've had five consecutive quarters of double-digit 00:17:07:06 - 00:17:09:13 earnings growth, so it may not be as big of 00:17:09:13 - 00:17:10:15 a lift as we think. 00:17:11:15 - 00:17:16:15 But earnings help solidify the floor for all risk markets. 00:17:17:04 - 00:17:20:20 So even if you have massive geopolitical turbulence 00:17:20:20 - 00:17:21:10 whatsoever. 00:17:21:21 - 00:17:23:23 So that's going to be number one for me. 00:17:24:02 - 00:17:28:01 Then given what's going on, oil will clearly be number two. 00:17:28:01 - 00:17:32:09 And then finally, very focused on not only the absolute 00:17:32:09 - 00:17:34:19 level of rates, but the shape of the curve. 00:17:35:11 - 00:17:39:09 Because the fiscal situation here is not getting any better. 00:17:39:12 - 00:17:42:03 We've seen the treasury market, for all intent and 00:17:42:03 - 00:17:44:08 purposes, be dismissive of that. 00:17:44:16 - 00:17:47:10 If that changes, that is a notable development. 00:17:48:01 - 00:17:48:15 Colby. 00:17:48:16 - 00:17:50:05 The only thing I would add, and it's kind of 00:17:50:05 - 00:17:52:19 piggybacking on Moshe's third one around rates, is not only 00:17:52:19 - 00:17:54:22 the shape of the curve, but I would say the 00:17:54:22 - 00:17:56:00 speed of any change. 00:17:56:11 - 00:17:58:06 Because I think that will have an impact not only 00:17:58:06 - 00:18:02:08 on the MOVE Index, but also on investors' behavior and 00:18:02:08 - 00:18:03:23 where they participate on the curve. 00:18:04:02 - 00:18:05:23 Particularly given the amount of supply that we're going to 00:18:05:23 - 00:18:08:07 have to see, or we're expecting to see, I'll say. 00:18:09:06 - 00:18:12:04 And where that issuance will have to come from a 00:18:12:04 - 00:18:12:19 curve perspective. 00:18:13:19 - 00:18:17:09 If some of the big tech data center, large M&A 00:18:17:09 - 00:18:20:03 type transactions do come to market, they're not going 00:18:20:03 - 00:18:21:20 to be able to avoid the long end of the curve. 00:18:22:10 - 00:18:24:17 And if we do start seeing some rate volatility, we 00:18:24:17 - 00:18:29:08 do see some of those concerns around the fiscal situation, 00:18:30:00 - 00:18:32:02 we could see some pretty rapid movement out the curve 00:18:32:02 - 00:18:33:04 and changing in that shape. 00:18:33:05 - 00:18:35:08 And I think that could have an impact on the 00:18:35:08 - 00:18:37:07 flatness of the credit curve that we've been able to 00:18:37:07 - 00:18:40:02 live with and benefit off of over the last couple 00:18:40:02 - 00:18:40:14 of months here. 00:18:40:22 - 00:18:42:06 Well, we'll keep an eye on the data centers. 00:18:42:06 - 00:18:43:16 And we're going to keep an eye on, if your 00:18:43:16 - 00:18:46:17 estimate's right, another two times issuance of what we've 00:18:46:17 - 00:18:48:08 already had during the course of the rest of the year. 00:18:48:10 - 00:18:50:04 We'll see how the market handles it. 00:18:50:04 - 00:18:51:22 But both of you, again, thank you very much for 00:18:51:22 - 00:18:52:09 being here. 00:18:52:15 - 00:18:53:13 We appreciate it. 00:18:53:13 - 00:18:56:18 And to everyone watching on Markets Mindset, thanks for joining. 00:18:56:23 - 00:18:57:14 We'll see you next time. 00:18:57:17 - 00:18:58:02 Thank you. 00:18:58:05 - 00:18:58:12 Thank you.