The latest Wall Street Week newsletter features discussions with experts in Global Wall Street on a range of topics. One such discussion was with Glenn August of Oak Hill Advisors, who talked about the credit market responses to interest rate policies and Niall Ferguson of the Hoover Institution, who discussed the possibility of a second Cold War with China and the risks associated with a declining global population. If you haven’t subscribed yet, you can sign up for this newsletter and receive daily market analyses from Bloomberg Surveillance.
In recent months, there has been much debate about how a 500 basis point increase in interest rates would affect the markets. However, it is currently challenging to determine what impact this would have. According to Glenn August, founder and CEO of Oak Hill Advisors, the strong performance of the economy plays a significant role in this ambiguity. Six months ago, he discussed concerns about potential challenges in refinancing up to $1 trillion due to rising financing costs. However, since then there has been a 50 basis point decrease in financing costs due to a limited supply of new deals leading to decreased credit demand. Additionally, there is now more equity in deals compared to previous times, resulting in market extending maturities rather than reducing debt.
Despite these factors, Jamie Dimon’s recent warning about potential trouble in private credit raises questions. While August acknowledges that Dimon’s concerns are important to pay attention to, he suggests that Dimon may be referring specifically to instances of aggressive underwriting practices in the market. It remains to be seen how these developments will unfold over time and what impact they will have on investors moving forward.
