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"We hope it will end up being a year of carry..." set the tone at yesterday's first München Credit Club. More below ⬇️ 𝐒𝐩𝐫𝐞𝐚𝐝𝐬 𝐚𝐫𝐞 𝐭𝐢𝐠𝐡𝐭... 𝐫𝐞𝐥𝐚𝐭𝐢𝐯𝐞 𝐭𝐨 𝐰𝐡𝐚𝐭? Persistent sovereign issuance has led to structurally wider Bund yields so it follows that the differential is tighter. Look through the lens of swaps. 𝐒𝐰𝐞𝐞𝐭 𝐬𝐩𝐨𝐭 𝐢𝐬 𝐝𝐨𝐰𝐧 𝐢𝐧 𝐪𝐮𝐚𝐥𝐢𝐭𝐲 𝐚𝐧𝐝 𝐬𝐨𝐦𝐞𝐰𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐞𝐫 𝐝𝐮𝐫𝐚𝐭𝐢𝐨𝐧. This squares: 1) curve shape, a long-end that doesn't pay enough and a front-end compressed by fixed maturity fund flows, 2) carry maximization in a low-default context and 3) lower volatility. Hybrids help, and there could be value in US long end. Sector-wise: Utilities and cautious optimism on Autos spreads. Questions on consumer cyclical being tight to non-cyclical. 𝐃𝐨𝐞𝐬𝐧'𝐭 𝐩𝐚𝐲 𝐭𝐨 𝐛𝐞 𝐛𝐨𝐥𝐝 𝐢𝐧 𝐁𝐚𝐧𝐤𝐬. Compression across the capital structure has left even senior preferred and non-preferred trading too close for comfort. Value may lie in Eastern European banks. 𝐇𝐲𝐩𝐞𝐫𝐬𝐜𝐚𝐥𝐞𝐫𝐬, 𝐑𝐞𝐯𝐞𝐫𝐬𝐞 𝐘𝐚𝐧𝐤𝐞𝐞𝐬 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐋𝐨𝐧𝐠 𝐄𝐧𝐝. Serial issuance tapping several currency pockets is leading to poor single-name technicals, with the added externality of repricing the long end of AA corps. Again, longer maturities open up a whole new set of risks, leading to this crucial observation: "An issue with a Google 100-year sterling bond is that there might not be pounds anymore then." 𝐋𝐞𝐟𝐭-𝐭𝐚𝐢𝐥 𝐫𝐢𝐬𝐤𝐬. Consumer vs AI leaves households either unemployed or at the mercy of an unwinding wealth effect. The return of animal spirits could mark the beginning of a new releveraging cycle. Climate-driven economic disruption might arrive faster than expected and has no quick fix. Sovereign debt capacity to respond to any of this could be a topic for the next credit club. 🙏 Thanks to the München credit community and our panellists for their frank insights: Georg MESSNER, CFA, Fixed Income Research at Bayerische Landesbank Dr. Michael Brandl, Head of Credit Portfolio Management at MEAG Robert Van Kleeck, CFA, Head of Credit Portfolio Management at Assenagon Asset Management S.A. AM From Bloomberg Intelligence: Aidan Cheslin (hybrids, TMT), Heema Patel, CFA (strategy), Jeroen Julius (banks) and Tolu Alamutu (real estate and EM banks). 📩 Presentations and BI analyst contact details are in your inbox. Hope you enjoyed this as much as we did. Remember: If you have a Terminal, you have all of Bloomberg Intelligence. We are just an IB away, Renato P.s.: None of this would have been possible without Bloomberg team Germany: Thomas Outen, Mira Mansfield, Lily Magny, Johannes Klee & Jane Woltmann. #investmentgrade #bonds #munchen #munich #fixedincome #highyield #credit