>> FROM NEW YORK CITY, I’M SCARLET FU. BLOOMBERG REAL YIELD STARTS RIGHT NOW. >> COMING UP A MASSIVE WAVE OF VOLATILITY HITS WALL STREET TRIGGERED BY FED COMMENTARY THAT LEAVES THE DECEMBER RATE CUT IN DOUBT.UNSTEADY CREDIT MARKET LEADS TO A RARE WHOLESALE IN HIGH GRADE. WE START WITH THE MARKET. >> IF THE FED DOESN’T DELIVER THEACTICS WILL BE PRICED.THAT IS THE SPARK THAT LIT THIS. THERE’S A BROAD A YOU RAY OF RISK. THEY HAVE IT FIGURE OUT WHAT THEY DO TO PRIORITIZE.THE OCTOBER DATA WILL BE VERY NOISY AND ...

Core Insights - The Federal Reserve's recent interest rate cut may positively impact the overall credit market, although future cuts are not guaranteed [1][2] - Current credit spreads are tight, but the quality of high yield credit is at its best in a decade, indicating reasonable risk relative to spreads [4][5] - The equity market is priced for robust growth, while credit offers a more stable return, making it an attractive option in a slowing economic environment [6][7] Credit Market Conditions - Credit spreads remain tight, reflecting a low-risk environment [4] - The high yield market shows the highest percentage of double-B rated bonds and the lowest percentage of triple-C rated bonds in over ten years [5] - A potential slowdown in economic growth could favor credit investments, which are yielding around 7% to 8% [7] Economic Indicators - Consumer spending trends, particularly among low-end consumers, show signs of caution, with increasing credit card delinquencies and a rise in minimum payments [8][9] - The market is preparing for a potential slowdown, with companies having adjusted their strategies over the past three years [10][11] - The ability to select quality credits will be crucial in a credit pickers market, especially if a recession occurs [11]

Market Overview & Fed Policy - A 25 basis point rate cut by the Fed is generally beneficial for the credit market [1] - The market is uncertain about future rate cuts beyond the current one [2] - Tariffs initially caused inventory pre-buying, delaying the impact on prices, but Q3 is when the impact is expected to be felt [3][4] Credit Market Conditions - Credit spreads are currently tight [4] - High yield market quality is at its best in a decade, with the highest percentage of double B and lowest percentage of triple C ratings in over 10 years [5] - Current tight spreads are considered reasonable given the current risk levels [6] Investment Strategy & Economic Outlook - Equity market valuations require significant growth, while credit offers contractual returns, making credit potentially more attractive in a slowing economy [6][7] - Contractual returns in credit are yielding approximately 7% to 8% [7] - Signs of a slowdown include consumer spending trends, particularly among low-end consumers, and rising credit card delinquencies [8][9] - The market is heading into a credit picker's market, where the ability to select good credits will be crucial [10][11] - Core high yield and loan credit below investment grade are in a relatively good position with low leverage and good liquidity [11]

Private Credit Market Overview - Oakhill Advisers CEO 不认为私募信贷存在泡沫，虽然存在个别破产案例，但宏观经济背景依然稳固 [2][3][6] - 杠杆贷款市场和高收益市场中，低于 80 的信贷交易不到 5%，低于 90 的不到 10%，主要风险是个别公司特有问题 [4] - 信用市场与股票市场不同，股票市场集中度高（例如：美股七巨头），而信用市场有数百家公司，每家公司都有自己的情况，因此存在机会 [6] - 普遍认为私募股权回报将降低，因为竞争更加激烈，利息成本更高，因此许多投资者将资金从私募股权配置到私募信贷 [10] Risk Factors - 部分公司受到关税影响，特别是从中国进口工具的公司，成本上升 [5] - 人工智能（AI）对某些公司的业务模式构成挑战，可能降低其相关性，而另一些公司则可以利用 AI [5] - 利率上升导致成本增加，次级消费者面临挑战 [5][6] - Bank of America 的基金经理调查显示，57% 的受访者认为私募股权/私募信贷是最有可能引发系统性信用事件的来源 [9] Market Resilience and Opportunities - 信用市场没有普遍的强制卖家，且市场已经进化，银行贷款市场主要是 CLLO，高收益市场超过 50% 是 doubleB 评级，私募信贷市场都是双边谈判 [8] - 私募股权开始部署更多资本，为财富渠道带来良好机会 [8] - 直接贷款的回报率在 8% 或 9% 左右（未杠杆），部分基金会使用 1 到 1.5 倍的杠杆，与银行系统 10:1 的杠杆率不同，贷款公司的股权缓冲超过 50% [12] - 私募信贷由长期资本持有，包括前十大主权财富基金中的八个和前二十大美国养老金计划中的十五个，他们可以承担非流动性溢价 [13]

Bond Market Reaction & Fed Policy - The long end of the curve is considered cheap based on valuation metrics, but the front end could also move if economic data weakens due to a prolonged shutdown [2] - The market is pricing in gradual Fed cuts to neutral, but a worsening economy (unemployment rate above 45%) could lead to more aggressive Fed action [2] - An independent Fed is responding to data and aiming to reduce the level of restrictiveness, making bonds attractive [6] - The Fed is expected to cut rates to 3%, which is close to neutral, even without a significant slowdown [8] Auction & Demand - End-user demand for Treasury auctions remains strong, indicating structural positives in the US economy [5] - Structural positives in the US economy, such as AI capex and strong corporate fundamentals, are driving demand for US bonds [6] - People look at 55%-6% in high-quality bonds and they like it [6] Investment Strategy & Risk Hedge - The 5 to 10-year part of the curve is considered a sweet spot, offering a balance between yield and duration risk [3][14][15] - Bonds are still considered a hedge, especially with the Fed likely to cut rates more aggressively [12][13] - Investors may diversify into other assets like gold and cryptocurrency, but US Treasuries remain a safe haven [9][10][11][12] - High-yield market can offer yields higher than 5%-6% without taking on that much duration risk [15]