The debt markets, often referred to as the bond markets, can be seen as the collective name given to all trades and issues of debt securities, in which Governments are usually the largest part. Governments typically issue bonds in order to raise capital to fund spending including ports, hospitals and roads. Businesses issue debt securities when they need to finance business expansion projects or maintain ongoing operations.
We have experienced one of the fastest interest rate tightening cycles in history, that has created uncertainties for consumers and businesses including banks that have lent and invested money that has not incurred an adequate return. The collapse of Silicon Valley Bank, Signature Bank in the US and Swiss banking giant Credit Suisse in Europe exposed weakness following the interest rate increases. Debt markets seem to have painted a more dire outlook of global economic growth, whilst share markets seem to have held up fairly well.
In our April Ground Control, Andrew Papageorgiou, Managing Partner at Realm Investment House, Emmanuel Calligeris, Chair of the DWA Investment Committee, and Grahame Evans, Director of DWA Managed Accounts, had an in-depth discussion around debt markets. More importantly, has there been any disconnection between what has been priced in the debt markets and that of the equity markets? If so, what might be the implications for our investors and their investments?