Coronavirus and Credit: When the Music Stops

Published on
March 12th, 2020
Duration
38 minutes

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27

Coronavirus and Credit: When the Music Stops

The Expert View ·
Featuring Daniel Zwirn

Published on: March 12th, 2020 • Duration: 38 minutes

As the coronavirus continues to wreak havoc on the markets – or so it seems – the price-action has been particularly dramatic in the energy sector. The carnage in equities has been on display to anyone paying attention, but today we're focusing on the more opaque, but much larger, market of fixed income. Dan Zwirn, CEO and CIO of Arena Investors, is a major player in the credit space. Back by popular demand, he returns to discuss the ongoing rout in high-yield energy bonds. Zwirn analyzes the risks and opportunities he sees in leveraged loans, CLOs, private lending, and other assets within the credit universe. He also shares how he generates put optionality to hedge downside risk, while still getting paid. This interview was filmed on March 9, 2020 in New York, during one of the largest selloffs in history. To learn more about Dan Zwirn's thinking on the credit markets, check out his research report here: https://rvtv.io/2IFeX7n

Comments

Transcript

  • ST
    Simon T.
    24 March 2020 @ 09:10
    1 0
    Guy is smart but no clear guidance - seems deliberately - as a customer I would walk out of the meeting more confused
  • WG
    Wade G.
    19 March 2020 @ 23:31
    0 0
    Brilliant. Thanks.
  • MC
    Matt C.
    14 March 2020 @ 00:49
    1 0
    In the title there is a link to a res Pearce report he wrote, but the link isn’t live. Can you add it to this thread? Excellent interview.
    • MP
      Manos P.
      16 March 2020 @ 04:54
      0 0
      https://eprints.pm-research.com/17511/21697/index.html?27788
  • BG
    Brian G.
    15 March 2020 @ 22:59
    3 1
    He probably knows ten times what I do on any economic subject. But he can't convey it clearly.
  • SW
    Suzanne W.
    15 March 2020 @ 14:27
    2 0
    Super interesting interview!
  • CM
    Chris M.
    13 March 2020 @ 01:33
    9 0
    Excellent interview and a refreshing break from the talking heads at CNBC this week. Nice to listen to someone that shares their investment approach in an open and honest way without the agenda of pitching the market. His insights on where we are in the current market were good takeaways for those looking to put cash to work in the near future.
  • CT
    Chris T.
    12 March 2020 @ 15:08
    1 0
    the opening scene... "in post 2008, few are able to hedge against." Certainly not the case in Europe. Can still easily trade 1bn in Credit Indexes and 50m clips in single names. Typing this on the day eurostoxx is down 10%. And the above still stands and Europe is a far less liquid market than US credit markets .
    • JF
      Jack F. | Real Vision
      12 March 2020 @ 23:54
      10 0
      Interesting comment, Chris. Thanks for sharing your perspective. Before our interview, Dan mentioned to me that credit default swaps (CDS) are fraught with counterparty risk, and for this reason he preferred put optionality to raw short exposure. I've also read that CDS is more expensive than it was before 2008. It was these two factors that I was referencing with my comment. That being said, I know I rushed over the details in my little opening speech. The goal of the preamble is to set the stage for contributors' analysis and connect it to the newsflow and the themes that matter most for Real Vision members - not to provide my own analysis. Dan really is the best in the biz, and one of the things I love most about Real Vision is that guests like Dan, who are thinking about the markets at the highest level, want to come on our platform because they too see the value of the Real Vision network. I found Dan's analysis fascinating, and I hope you do too.

Chapters

  1. 00:01:13
    Could coronavirus be a catalyst for the end of the credit cycle?
  2. 00:03:27
    How do you generate put optionality?
  3. 00:06:56
    Bond market liquidity: how hard is it to get a bid?
  4. 00:08:53
    What does the Asset-Liability Mismatch mean in today's market?
  5. 00:11:02
    Is shorting credit ETFs a viable way to hedge?
  6. 00:12:24
    Is there a "new regime" for leveraged loans?
  7. 00:13:10
    What do you make of the credit writedowns in the energy sector?
  8. 00:19:23
    What about leveraged loans and high yield bonds?
  9. 00:21:07
    What's the significance of the recent rally in Treasurys?
  10. 00:24:15
    What about CLOs?
  11. 00:26:19
    How likely is a downgrade of BBB-rated bonds?
  12. 00:27:57
    How appropriately priced is credit risk?
  13. 00:32:09
    What risks do you see in the world of direct lending?
  14. 00:36:17
    Do you see opportunity in all of this chaos?