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Book Review: Reminiscences of a Bond Operator
Book Review: Reminiscences of a Bond Operator
I’m honored that the CFA Institute has reviewed Reminiscences of a Bond Operator!
Seeing my work recognized in this way is truly gratifying. My goal in writing the book was to provide insights into analyzing corporate bonds, structuring debt portfolios, and navigating public & private credit markets. To be compared to Frank Fabozzi in a review is a dream come true!
Check out the CFA Institute Review.
AUGUST 2025 US CORPORATE CREDIT RECAP
AUGUST 2025 US CORPORATE CREDIT RECAP
📊 AUGUST 2025 US Corporate Credit Recap
August was a decent month for US corporate credit, driven largely by a drop in US Treasury yields. Credit spreads hit significant tights mid-month before widening modestly into month-end on the back of an equity market sell-off and fears of heavy post–Labor Day new issuance supply.
The Investment Grade (IG) Corporate Bond Index returned +1.01% in August, as a modest 3bp rise in credit spreads was more than offset by the decline in Treasury yields. IG spreads climbed to 79bp (from 76bp in July) after touching a more than 25-year low of 73bp on August 15. Despite the spread move, the IG Index yield fell to 4.91%, driven by a drop in the 10Y UST to 4.23%. IG issuance remained strong, bringing year-to-date volume to $1.186 trillion. September supply is estimated between $150–200 billion.
The High Yield (HY) Corporate Bond Index returned +1.25% in August, benefiting from the front end of the yield curve moving more than the back end—advantageous given HY’s shorter duration relative to IG. HY spreads fell 6bp to 272bp, placing them near the 5th percentile historically—an unusually tight level. The yield on HY closed August at 6.75%. Year-to-date HY issuance stands at $227 billion. Leveraged Loan (LL) spreads tightened to 425bp, with a yield of 7.65%.
🔮 WHERE DO WE GO FROM HERE?
Credit spreads remain low by historical standards. While investors earn carry by holding credit, forward excess returns are often negative following periods of extreme spread tightness.
Timing credit is notoriously difficult, and markets can remain irrational far longer than fundamentals suggest. That makes the decision to reduce exposure tricky. In my experience, however, taking chips off the table and bolstering liquidity when spreads are tight is prudent.
In Jackson Hole, Powell mentioned the potential for rate cuts at the upcoming September 17 FOMC meeting. But does the Fed cut because the economy is flagging—or due to external pressures? Is that bullish for equities, or a warning sign? Could rate cuts exacerbate inflation even as tariff pressures squeeze margins, hurt consumers, and push prices higher?
Equity and credit markets seem to be pricing in near-perfect conditions, with risks skewed to the downside. Rate cuts may be coming—but in this environment, they’re more cause for caution than celebration.
JULY 2025 US CORPORATE CREDIT RECAP
JULY 2025 US CORPORATE CREDIT RECAP
📊 July 2025 US Corporate Credit Recap
Risk On ruled July. Markets are frothy again—buoyed by tech earnings, AI euphoria, and trade optimism—and looking increasingly vulnerable to another reset (think Yen/Dollar volatility, DeepSeek, Liberation Day, etc). The S&P 500 climbed +2.17%, closing at 6339—just shy of its all-time high and notching multiple records throughout the month.
💼 Investment Grade (IG) Corporate Bonds
Returns were muted despite tighter spreads.
● Spreads: Tightened 7bp to 76bp (from 83bp in June), nearing the 20-year low of 74bp (11/8/2024) and matching the pre-GFC tight of 76bp (3/8/2005).
● Yields: 10Y UST rose to 4.37%, offsetting spread gains. IG ended July with a 5.07% yield.
● Issuance: Remained strong, bringing YTD volume to $1.073 trillion.
● Context: Current spreads sit well below 5yr (108bp), 10yr (119bp), and 30yr (147bp) averages.
📉 High Yield (HY) Corporate Bonds
Outperformed IG thanks to lower duration.
● Returns: +0.45% in July
● Spreads: Fell 12bp to 278bp—above the YTD tight of 256bp but still below historical averages (5yr: 362bp, 10yr: 407bp, 30yr: 509bp).
● Yield: Closed July at 7.08%
● Note: Despite higher index quality, spreads remain historically compressed. The 20-year low was 233bp (5/22/2007).
💸 Leveraged Loans (LL)
Spreads tightened to 428bp, with a 7.89% yield.
● New Issue Spreads: Averaged 335bp overall, 376bp for single-Bs.
● Credit Quality: LL Index sits at B1/B2, below HY’s Ba3/B1.
● Private Credit: Direct lending at SOFR ±500bp continues to attract interest—but concerns are mounting. Smaller, more leveraged issuers and looser underwriting standards are raising red flags.
🔮 Where Do We Go From Here?
Credit spreads look priced for perfection—but macro risks are stacking up:
● Inflationary pressures from tariffs and deportations
● Consumer headwinds as student loan repayments resume
● Stagflation risk remains real
● Fiscal strain: Unsustainable fiscal trajectory - Treasury projects $1.007 trillion in net marketable borrowing for Q3
● Valuation stretch: S&P 500 earnings expectations imply historically high P/Es—23.9x (CY25), 21.1x (CY26), 18.6x (CY27)
● Fed Watch - The Fed held rates steady this week, with Powell noting: “The economy is not performing as though restrictive policy is holding it back.” Markets now price in just 1.2 quarter-point cuts by year-end, with a year-end implied rate of 4.00%. Political pressure to ease rates could stoke inflation further.
● Global Lens - Japan’s 30Y JGB yield hit 3.10% this morning. Will global investors start to see better value in their own fixed income markets? Is anyone watching this shift?
Are credit markets priced for perfection—or teetering on the edge? Curious how others are positioning for Q3. Let’s discuss.
1H2025 CORPORATE CREDIT UPDATE
1H2025 CORPORATE CREDIT UPDATE
📊 1H2025 CORPORATE CREDIT UPDATE
The first half of 2025 ended with a paradox: geopolitical tremors and policy uncertainty on one hand, and remarkably resilient markets on the other.
🌍 Macro & Geopolitical Landscape
• June began with tariff headlines, pivoted to Middle East conflict, and circled back to domestic fiscal policy with the unveiling of the “Big, Beautiful Bill” (OBBB).
• Despite Israel-Iran hostilities mid-month, markets remained composed. Oil spiked to $75.14 before retreating to $65.11 by month-end as a ceasefire held.
• The U.S. dollar weakened sharply, falling to $1.18 per euro from $1.04 at the start of the year.
💸 Inflation & Rates
• Core PCE inflation came in at 2.7%, slightly above expectations and up from 2.6%, reinforcing the Fed’s cautious stance.
• Treasury yields declined across the curve; the 10Y UST ended June at 4.23%, down ~17bp. Still, questions about supply/demand imbalances linger given potential outsized treasury issuance.
• Fed outlook: Markets price just a 20% chance of a cut at the July 30 FOMC, but a 94% probability by September, with the implied rate falling to 4.04%.
🏦 Credit Markets
Investment Grade (IG)
• June return: +1.87%; 1H2025: +4.17%
• Spreads narrowed 5bp to 83bp; IG Index yield at 4.99%
High Yield (HY)
• June return: +1.84%; 1H2025: +4.57%
• Spreads fell 24bp to 290bp; HY Index yield at 7.06% CCCs led the rally, reflecting risk-on sentiment
Loans (LL)
• Leveraged Loans: +0.76% in June, +2.73% YTD
Credit Risk Signals
• 5Y CDS on the U.S. rose to 57bp in May after Moody’s downgraded U.S. sovereign debt (Aaa → Aa1). Ended June at 43bp, still elevated from 33bp in January. For context: post-GFC low was 9bp in 2021.
📈 Equities & Valuation
• The S&P 500 closed June at a record 6,204.95, up 5.5% YTD.
• The index trades at 24.4x trailing P/E, with CY25 EPS at $270 and CY26 at $309—implying a 20x+ forward multiple.
• With the dollar weakening and valuations stretched, foreign investor behavior will be a key watchpoint in 2H2025.
🧭 Looking Ahead
• Credit spreads have tightened sharply since the April 8 post-“Liberation Day” peaks (119bp IG, 453bp HY).
•Valuation: IG spreads sit in the 13th percentile of their 30-year range, while HY sit in the 9th percentile—historically a poor entry point for excess returns.
• With spreads near historical tights, sticky inflation, geopolitical risks, tariff uncertainty, and potential foreign capital outflows, better entry points for credit may lie ahead.
MAY 2025 US CORPORATE CREDIT RECAP
MAY 2025 US CORPORATE CREDIT RECAP
The S&P 500 surged +6.15% in May, marking its best May performance since 1990. Optimism surrounding corporate earnings—especially from tech giants—and shifting tariff policies fueled the rally. The so-called TACO trade (Trump Always Chickening Out) remained a key theme, with tariff-related market swings continuing.
US Investment Grade (IG) Corporate Bonds saw minimal returns in May. While spreads tightened, rising US Treasury yields—driven by Moody’s downgrade of the US Long-Term Sovereign Rating to Aa1 from Aaa—offset any gains from tighter spreads. The 10Y UST yield spiked to 4.60% mid-month before settling at 4.40% by month-end resulting in a -1.0% return in US Treasuries in May. IG spreads fell to 88bp on May 30 from 106bp at the end of April and were much improved from the post-Liberation Day peak of 119bp on April 8. IG spreads still remained well below their 30-year monthly average of 137bp. IG ended May with a 5.21% yield, while issuance remained strong at $170 billion, bringing the YTD total to $864 billion.
US High Yield (HY) Corporate Bonds returned +1.68% in May, benefiting from their lower duration exposure. HY spreads tightened dramatically, falling 69bp from 384bp to 315bp on May 30, a sharp recovery from the April 8 peak of 453bp. HY spreads still remain well below their 30-year monthly average of 492bp. HY corporate bonds closed May with a 7.46% yield.
US Leveraged Loans saw spreads tighten 27bp, ending May at 456bp with an 8.15% yield.
WHERE DO WE GO FROM HERE?
May’s rebound in risk assets was swift, but concerns remain. The rising US deficit, potentially higher Treasury yields, a weakening dollar, inflation fears, policy uncertainty, trade tensions, and tariff rhetoric could weigh on markets, particularly as questions remain about the attractiveness of US assets to foreigners. The S&P 500 earnings estimates for 2025E ($264) and 2026E ($299) imply P/E multiples in the low-20x range, raising valuation concerns. Investors hoping for Fed rate cuts may be disappointed—only 5% probability is priced for June 18, and 21% for July 30. Lower rates are unlikely to fuel further market gains. Stagflation risks persist.
APRIL 2025 CORPORATE CREDIT RECAP
APRIL 2025 CORPORATE CREDIT RECAP
Markets faced intense volatility in April as shifting trade policies rattled investor sentiment. Despite the turbulence, US Corporate Investment Grade (IG) returns held steady at -0.03%, while High Yield (HY) remained flat at -0.02%. The Treasury curve bull-steepened as 2Y UST yields fell 28bps to 3.60%, cushioning credit returns despite some credit spread widening. The S&P 500 dipped -0.8%.
Had you escaped to the Heard or McDonald Islands, you might have thought not much had changed in the month —except for penguins upset about the unintended consequences of tariffs.
Liberation Day—April 2—brought a storm of volatility as President Trump’s tariff announcement sent the S&P 500 plunging 14% at its worst point in ensuing days. The US 10-year Treasury yield surged nearly 70bps intra-month, hitting a low of 3.86% and a high of 4.56% before settling just 4bps tighter at 4.16% by month-end.
Credit spreads widened:
IG hit 119bps on 4/8 (up from its 77bps YTD low), closing at 106bps (+12bps MTD).
HY jumped to 453bps on 4/8 (from a YTD low of 256bps), ending at 384bps (+37bps MTD).
Goldman Sachs initially predicted a recession following the tariff announcement but reversed course after Trump paused tariffs—highlighting the difficulty of forecasting amid policy swings.
What’s Next?
With China holding firm on trade, speculation is growing that Trump may pivot toward deregulation and tax cuts ahead of the 2026 midterms. Yet uncertainty remains:
Q1 GDP contracted -0.3%, while inflation surged to +3.7% (stagflation).
The IMF lowered global growth forecasts to 2.8% for 2025 and 3.0% for 2026.
Market pricing suggests just a 7% chance of a rate cut at the FOMC meeting on May 7, despite Trump’s push for lower rates.
Concerns linger over the US deficit, debt swaps, and dollar weakness.
Oil prices dipped below $60/barrel, hinting at a slowdown.
Consumer sentiment remains fragile.
Credit Market Takeaways?
US IG spreads sit at the 37th percentile, while HY is at the 40th percentile—off tight levels earlier in the year but not yet pricing in recession risks. Investors remain cautious as policy uncertainty weighs on sentiment, while yields stay modestly elevated with US IG at 5.14% and HY at 7.90%.
Don’t Miss - Open Yield Markets Podcast!
I had an incredible 40-minute conversation with @Mark Hebert on the Open Yield Markets podcast (Link: YouTube | Apple Podcasts | Spotify | Open Yield), where we explored a range of compelling topics:
Navigating uncertainty around tariffs, spending cuts, inflation, and the risk of slowing economic growth
Drawing parallels to the Global Financial Crisis (GFC)
Analyzing seismic intraday swings in U.S. Treasury yields and stock markets
Developing actionable strategies for the Credit Markets
We also discussed my new book, Reminiscences of a Bond Operator, during which Mark Hebert graciously dubbed me the Ernest Hemingway of the Credit Markets.
The conversation is packed with valuable insights and reflections, making it one you won’t want to miss—whether you choose to listen or watch!
(This material is for informational purposes only and should not be construed as accounting, legal, tax, or investment advice. Always consult a qualified professional for personalized guidance.)
THE TARIFF PLAYBOOK
THE TARIFF PLAYBOOK
I can’t believe I’m writing another market update so soon—and on a weekend! It feels like the GFC all over again. If you’ve followed my posts, you’ll know I’ve been warning about exceptionally tight spreads. Some friends teased me about it (you know who you are). How tight? In November, HY and IG spreads were at their 2nd and 11th percentile ranks, respectively, based on month-end levels over the past 30 years. Earlier this year, they approached those levels again.
But a confluence of recent events has caused spreads to widen meaningfully, with HY now at its 49th percentile and IG at its 38th. So, what’s next?
Equity valuations were historically stretched, with the S&P 500 exceeding a 25x P/E multiple. Deepseek, government spending cuts, and tariffs have deflated much of the froth. Multiples could revert closer to historical averages, with earnings sliding lower—potentially driving further downside. Credit markets face their own challenges: spreads could widen further, defaults may increase, and some private credit asset managers may fail.
President Trump has embraced tariffs to tackle the growing deficit. Restructurings are often painful but occasionally effective—the real question is whether the “medicine” could kill the patient. In the short term, tariffs are inflationary, and higher costs could contract the economy as already-stretched consumers cut back. Cuts to government spending and resulting job losses may amplify these issues. Companies struggling to absorb higher costs could face squeezed margins, lower earnings, lower capex and additional equity pressure. Declining stock markets also create a negative feedback loop, leaving consumers feeling less wealthy.
Fed Chair Powell addressed this on Friday, noting that tariffs risk pushing inflation higher and growth lower. He added that the Fed isn’t in a hurry to cut rates—signaling no imminent Fed or Trump “put.” If the economy or markets need resuscitation, this is concerning.
The silver lining? Credit valuations are now more appealing. HY credit spreads are nearing their 30-year average, with a spread of 427bp and yields at 8.30%. Importantly, the US high-yield corporate bond market is of higher quality than before. Net debt/EBITDA stood at 3.6x at the end of 4Q2024 (though likely increasing), while BBs now comprise 52% of the index (up from 32% in 2008), and CCCs account for just 11%.
There’s still room for further drawdowns, but these are topics I’ll explore in more detail on my upcoming podcast with Mark Hebert at OpenYield next Tuesday.
(This material is for informational purposes only and should not be construed as accounting, legal, tax, or investment advice. Always consult a qualified professional for personalized guidance.)
Markets Podcast
Next week, I’ll be interviewed by Mark Hebert on the Markets Podcast from OpenYield. We’re diving into corporate credit—what’s moving it, what’s breaking it…and where opportunity still hides. We’ll also cover highlights from my new book, Reminiscences of a Bond Operator: A Guide to Investing in Corporate Debt. Two Marks, one market—expect strong views and zero fluff.
The episode will be taped at next Tuesday at 3pm EST and will be available for replay shortly after. With the recent credit selloff, timing couldn’t be better. If you participate in financial markets, this one’s discussion should not be optional…and will be helpful.
Podcast Available at:
and
Book available at:
MARCH 2025 CREDIT RECAP
U.S. INVESTMENT GRADE CORPORATE CREDIT: Spreads widened by 7 basis points (bp) to 94bp at month-end. While this marks a notable move from the year-to-date (YTD) low of 77bp in February, spreads remain well below the 5-year average of 114bp and the 30-year average of 148bp. The U.S. Treasury curve steepened in March, with front-end yields declining and long-end yields rising. Despite this, the 10-year U.S. Treasury yield held relatively steady at 4.21%. The combination of wider spreads and mixed Treasury yields led to a modest increase in the U.S. Investment Grade Corporate Index yield, which rose to 5.15% by quarter-end. Consequently, U.S. IG Corporates delivered a total return of -0.29% in March, bringing the YTD total return to 2.31%. This performance compares favorably to the S&P 500, which has declined -4.59% YTD, and the NASDAQ, down -10.42% YTD. Year-to-date new issuance for U.S. IG stands at $575 billion.
U.S. HIGH YIELD CORPORATE BONDS: The High Yield (HY) Index saw a significant widening of credit spreads, increasing by 67bp during the month to 347bp. This represents a 91bp move from the YTD tight of 256bp in February. Despite the widening HY spreads remain modestly below the 5-year average of 385bp and significantly below the 30-year average of 512bp. Given rising spreads, the HY Index yield rose to 7.73% at quarter-end. U.S. HY Corporates posted a total return of -1.02% in March, reducing the YTD total return to 1.00%. Year-to-date HY new issuance totals $87 billion.
U.S. LEVERAGED LOANS: Spreads rose by 14bp to 458bp in March, resulting in a yield of 8.24%. Leveraged Loans generated a total return of -0.26% for the month, bringing the YTD return to 0.62%. Year-to-date new issuance in this space stands at $458 billion.
LOOKING AHEAD: President Trump’s unconventional policies continue to generate significant uncertainty. Reciprocal tariffs and discretionary government spending (DOGE) cuts may bolster the long-term health of the U.S. balance sheet, given its substantial budget deficit. However, in the near term, tariffs are likely to fuel inflation, while both spending cuts and tariffs could hinder growth due to their adverse effects on consumer spending. Geopolitical concerns further add to the challenges.
With equity market valuations starting the year at elevated levels, normalization is expected to persist amidst the risk of stagflation, potentially further constraining consumer spending. This could weigh on asset returns and may explain the ongoing flight to quality into gold and Treasuries. Policy uncertainty is likely to persist, potentially extending until the mid-term elections, when the administration may aim to showcase its achievements. Despite this uncertainty, markets are currently pricing in less than a 20% chance of a rate cut at the upcoming FOMC meeting on May 7.
Interview with Business Insider
Interview with Business Insider
I had a fantastic conversation with Laila Maidan at Business Insider about my new book Reminiscences of a Bond Operator and my current perspectives on the credit market. We delved into the implications of a steeper yield curve, with the Fed lowering front-end rates and long-term rates rising, all amidst compressed corporate bond spreads.
The Business Insider article available here: https://lnkd.in/eSxKdD5z.
📚 BOOK LAUNCH TODAY!📚
📚 BOOK LAUNCH TODAY!📚
“Reminiscences of a Bond Operator: A Guide to Investing in Corporate Debt”
ABOUT THE JOURNEY:
For over two decades, I’ve been jotting down thoughts and keeping notes on the credit markets. Over the past year, I’ve dedicated most of my time to compiling and organizing these writings. The result is “Reminiscences of a Bond Operator”.
The overwhelming feeling of seeing something I’ve worked so hard on for so long, now bound and printed, is indescribable. I’m so excited to share it with the world!
ABOUT THE BOOK:
In “Reminiscences of a Bond Operator”, a seasoned credit investor shares invaluable insights into the realm of corporate debt. Whether you’re an experienced investor or new to the field, this book offers a wealth of knowledge to help you navigate the complex landscape of corporate debt investing. Designed for professionals and individual investors in both public and private credit markets, it’s also an essential read for business executives, allocators, CIOs, CFOs, and Treasurers who want to gain a deep understanding of how the debt markets operate.
GET YOUR COPY HERE:
March 9, 2023
March 9, 2023
Corporate bond credit spreads widened as concerns mounted about Silicon Valley Bank. US IG spreads widened +3bp to 130bp, while US HY spreads widened +18bp to 427bp. The yield on the US IG Corporate Bond Index is now 5.61%, while the yield on the US HY Corporate Bond Index is now 8.61%.
March 12, 2023
March 12, 2023
How did things go wrong for SVB?
SVB had $212bn of assets at 31 Dec 2022, including $26.1bn of available for sale securities, $91.3bn of held to maturity securities, and $74.2bn of loans.
SVB’s $91.3bn of held to maturity securities had unrealized -$15.1bn of losses that were carried on their balance sheet at cost!
That’s almost as much as SVBs $16.3bn of total equity!
One has to wonder whether SVBs other large asset, its $74.2bn of loans has been impacted by the recent technology rout. Perhaps the depositers can get back “premium wine” listed as $1.1bn to drown their sorrows?
US HIGH YIELD SECTOR SPREAD DISPERSION
US HIGH YIELD SECTOR SPREAD DISPERSION
Recent discussions have highlighted the historically limited spread dispersion in credit, but that dynamic shifted in April as dispersion in US Credit Indices widened.
One striking example is CCC spreads, which began the year at 549bp—near the post-Global Financial Crisis tight of 444bp (7/6/2021). By the end of March, they had climbed to 676bp, then surged to 874bp on April 7 before settling at 770bp by month-end.
Sector dispersion also expanded in April, as illustrated in the race chart tracking spread movements across various high-yield sectors. For those with fortitude, this environment presented intriguing opportunities.
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