Here's What Credit Markets Experts Are Saying About Brexit
The markets may have got it wrong on Brexit, but many credit money managers now see buying opportunities in Britain's vote. At least, after the volatility abates. Bloomberg reached out to several of them to get their reacting to the historic referendum.
Dan Ivascyn, Chief Investment Officer at Pimco
"Given the volatility, the markets will be unpredictable for the next several trading sessions. With that said, we don't think this sufficiently systemic to throw the global economy off track ... The idea would be to buy things that are high-quality that are getting dragged down with the rest of the market."
Jack Flaherty, New York-based fixed income investor at GAM Holdings AG., which oversees about $120 billion
"This is unequivocally bad. A Bank of America analyst called it 'globalization in reverse' and I think that describes it perfectly. The risk now is not so much about Britain by itself, but about 'who's next?' It creates uncertainty."
Jim Caron, a money manager at Morgan Stanley Investment Management
"Risk is being transferred on an orderly basis — but it's not 2008. It's a political event."
"The concern is: does this get a lot worse? Nobody has that answer fully. I don't think we're just going to go 'Oh the event's over'. Volatility is going to continue for a while.''
Michael Shapiro, who helps run debt capital markets for the Americas at Societe Generale SA
"Everyone's still trying to figure out what it means for issuance. Right now, you can't do anything when stocks are down 500 or so points."
Vincent Murray, who heads U.S. fixed-income syndicate at Mizuho Securities USA in New York
"When Lehman collapsed, it took six business days for an issuer to do a round lot trade. I don't think this is as dramatic as that so I don't think it will take that long. Maybe you could see something in the middle of the week, maybe as early as Tuesday."
Dominick Dealto, New York-based chief investment officer of institutional fixed income at BNP Investment Partners
"It looks more like contagion and indiscriminate selling than what I would call strategic or more surgical selling. These are exciting times. This is where opportunities are made. Markets abhor uncertainty but investment managers love it because that's what gives us the opportunity to differentiate ourselves from passive management."
Jim Keegan, chief investment officer at Seix Investment Advisors
"We don't think it’s a Lehman moment, or a Greek default moment, we think it's very much a political event that has significant political ramifications for Europe, EU and UK obviously. We think a lot of what's going on in the risk markets is just risk markets priced in remain on Monday, and then just kept rallying, so we think this is a logical giveback of markets getting ahead of themselves. To the extent it does impact any credits that we like, we would view it as a buying opportunity."
Scott Carmack, CEO of Portland, Oregon-based Holbrook Holdings Inc.
"The market was caught off guard, that's for sure. I was watching Bloomberg last night and the volatility was ridiculous. Traders were caught on the wrong side of the trade."
David Tawil, president and co-founder of Maglan Capital
"The markets are reacting to the headlines. Over time, the reality will be very different than the emergency mode we are in today.
This is obviously unprecedented. What's next is hard to anticipate. We probably are going to see risk aversion.
We are going to see liquidity in the distressed assets drying up even more."
Martin Fridson, Chief Investment Officer at Lehmann Livian Fridson Advisors LLC
"I think the concern is a little more on the potential dominoes falling from this — we've already had a Scottish minister calling for another vote.’"
Peter Tchir, head of macro strategy at Brean Capital LLC
"I am very nervous that the next leg down is into the investment-grade space. I don’t think we’re there yet.”
Randall Parrish, high-yield money manager at Voya Investment Management
"It’s not like we've given up year-to-date gains in credit markets. We're up 8 or 9 percent year to date so if you give back a couple of percentage points you're still up 6 or 7 year to date which is a lot better than anyone was expecting going into this year.’’
Eric Stein, the Boston-based co-director of global fixed income at Eaton Vance Corp.
The two main things I am watching are how the EU-UK divorce goes and what is the reaction of global policymakers/central bankers to broader market moves."
Reporting from: Claire Boston, Rachel Evans, Michelle F. Davis, Chris Olsen, Emma Orr, Matt Scully, and Jodi Xu Klein.
For full coverage of the referendum, click here