Markets Ready for Fed and Tech Earnings

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**Tom Keene** (0:27)
Joining us right now with Goldman Sachs Asset Management, Kay Haigh joins us here. You're out of London, out of Bristol. You are out of the land of Central Bank descent.
I love when the Bank of England comes out. Everybody's angry. Everybody's arguing. Do you see where you sit and where you digest Yonhatsu's economics? Do you see a Fed that's going to become more like the Bank of England?

**Kay Haigh** (0:53)
Well, good morning. It's tough to tell at this stage. It's going to be very interesting to see actually how today's meeting goes. I think it will give us a little bit of a flavor of what is to come.
I think the market understands very clearly that there's going to be less forward guidance going forward, but the market still needs to figure out what that means in terms of kind of policy and reaction function. So let's be open minded about that. But it is really very likely to your point that we're going to get a little bit more volatility at the short end going forward, given the way the Fed is likely to communicate.

**Paul Sweeney** (1:28)
Your fixed income markets, I mean, it's been higher for longer. Is that the new world for you guys? Higher for longer? Here I'm looking at the 10 year at 460 something. I mean, that's not, I kind of thought the 450 was my ceiling and then you guys blew right past that.

**Kay Haigh** (1:43)
Well, there's a couple of things going on. First of all, short end rates are likely to be higher. Inflation is higher, not just in the US around the world, but inflation is higher and stickier. And then of course now we've got the commodity price shock that is propagating throughout the economy. So that lifts the shorter end of the curve and then, you know, we've got a lot of supply coming at the long end of the curve. A from fiscal, so governments are issuing more. But you see it in the IG market as well. You see the corporate market issuing more, particularly kind of hyperscalers at the long end. So that puts pressure.

**Paul Sweeney** (2:16)
Your bankers have been busy, Morgan Stanley Bankers, JP Morgan Bankers have been busy pumping out all this technology paper here. Where do you see the best value, I guess, on a global scale?
Is it the US market? Where do you see the value today?

**Kay Haigh** (2:31)
So I think there are pockets of value globally. If you're thinking of the paper that's being pumped out, I think on the IG side, I think it's very important to just keep in mind that there's going to be a lot of this coming.
You know, we kind of look at the numbers to about 20, 30 expectations. You're going to see something like an additional 1.4 trillion. And compare that to the 8 trillion that you have in the kind of Bloomberg IG index. That's a big number. So where's the value? I think you have to assess the value on an individual basis. Typically, you know, what matters are the details in the number of these deals, the maturities of these deals, the leases, the states in which, you know, some of these projects are being built. So, you know, selection and getting actually into the weeds of individual deals is going to be the driver because the volume is gigantic and the bondholders will be very discerning when it comes to buying this paper.

**Tom Keene** (3:27)
What is the signal you see in a hyperscale or price down in some of the CDS elevation that we see? When you look at technology paper, can you add to those positions with new issuance or existing issuance?

**Kay Haigh** (3:41)
Well, coming back to the point that there is going to be a lot more where this paper comes from.
So one shift you have actually seen is that the risk premium that the bond market commands is going up over time. So the spreads are not only wider but the spread curve is steeper. Now that's a good thing because the market is beginning to command the right risk premium and the breakdown between what the equity market gets versus the fixed income.

**Tom Keene** (4:09)
This is the heart of the matter. You just brilliantly said it. We've got a new steeper normal curve. Ed Yardeni on Friday said, get used to it. This is normal. Is that where Goldman Sachs is? All we're doing is reverting to a normal market?