Hawkish Fed cut, fragile bonds, credit opportunities (with Paul, April)

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PGIM 7.8
Asset Manager $1400.00B
Greg Peters 8.5

Hawkish Fed cut, fragile bonds, credit opportunities (with Paul, April)

yields

The back end is actually trading higher today than it was this time last year. Investors worried about inflation component and Fed credibility; term premium being built into the curve.

Asks what commentary to expect around further easing after soft jobs data.

Paul
Greg Peters

Expect a hawkish cut. Markets are focused on new Fed chair, composition, and administration meddling. Labor market softening but inflation remains stubborn.

Inflation will be much more stubborn going into 2026, complicating matters for Fed and markets.
Asks about Treasury rally trend for 2025-2026.

Paul
Greg Peters

Front end pulled lower by cuts, but back end is higher than last year due to inflation worries and Fed credibility concerns—term premium being built in.

Bond market in the back end is still quite fragile.
Asks about tariff revenue helping fiscal outlook.

April
Greg Peters

Tariffs might help on margin but don't solve the problem. Adds uncertainty; administration will keep tariffs high.

Harder to model debt outlook not knowing tariff outlook; tariffs affect growth.
Asks where opportunities are in credit.

April
Greg Peters

Prefer safe carry: AAA CLOs, short corporates. Don't see value going out the risk curve.

Credit spreads tight globally; lots of risks on horizon.
Asks about bond market ensuring Fed independence amid Kevin Hassett rumors.

Paul
Greg Peters

Bond market has reacted poorly to Hassett probability. Questions his credibility to drive consensus. Expect more structural changes that could further erode Fed independence.

Market telling you there are concerns; Fed chair is just one aspect.
Asks about AI-related credit issuance and bubble risk.

April
Greg Peters

$5.3 trillion needed to fund AI build-out; most must hit bond market. Unsecured debt for data centers looks terrible; prefer construction loans/collateralized lending.

Sheer amount of debt to be financed over next several years is staggering.

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