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00:00So let's talk a little bit about volatility our M life blogger yes you pointed this out about volatility here in the US the VIX gained ground a little bit today but still below that 20 level this and t go function on the Bloomberg showing that used trend and you can see the correlation between the words slowdown and China in news articles and the VIX really very strongly correlated given the atmosphere right now of rising trade tensions and really economic data not being so positive from China. Can we expect volatility to continue to be this low . Right so one of the differences we're seeing now is that rates are actually off the table in the U.S. in terms of rate hikes . That's an important part for the liquid markets and you've actually seen a tremendous ramp up in prices on public equities over the last 45 days or so as a result of that. And that's a big move. I mean now we're out of correction territory and some of the indices. So I think in the public liquid markets I think having rate hikes off the table is positive. I think the other issues you mentioned and have articulated on trade has been around for a while summer of 2015 we had the same issues . Commodities in China were on the table then they're still on the table. I think the uncertainty that you mentioned is real which is one of the reasons that Churchill and in private credit in general tends to be less correlated to these to these types of volatility that we're talking about private credit our capital is locked up for long term as is the capital of our clients. So that non correlated nature is an important part for investors who look at the volatility that you've described in the overall markets and say gee is there something that can protect us from from that kind of those kinds of moves. So what is important in credit selection is you see a more constructive rate environment . So the thing that we focus on rather than technicals are the fundamentals of the companies that we lend to. Number one where senior lenders so we're top of the capital structure. Number two our team has been I think we're in are well into our second decade of investing together. So we've been anticipating the next recession since the last recession. On every deal that we model we say OK there's going to be a recession next year how will this company do in that type of environment. And the result of that is we're looking at companies that tend to be lightly cyclical or even defensive in nature. My friend is there a little bit of exuberance building up in credit markets now because of that right environment that we just spoke about . I mean you're seeing more and more funds adding to their high yield exposure for example. Well Heidi the interesting thing about that exuberance is if you had asked me that in mid-December I would have said the opposite it was said that that prices were imploding and people were panicky. They said well there's never going to be a public high yield issue ever done because there hadn't been in 45 days until mid-January which was the first time in 10 years that that happened . Everybody wrote off high yield markets and all of a sudden they're back again and we're seeing that market in the U.S. being so hot right now as they're actually taking share away from the loan market. So it is true actually that capital markets can walk and chew gum at the same time there is an ability to go back and forth between bank and bonds that's been going on for decades and will continue. That's a very constructive time for credit right now when you look at where rates are in general which are generally low default rates are at historic lows and the economy. Well you know there's some concerns about what's going to happen the rest of the year is still pretty strong .

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Very Constructive Time for Credit, Churchill Asset Says

Randy Schwimmer, head of origination and capital markets at Churchill Asset Management, talks about the outlook for credit markets. He speaks with Shery Ahn and Haidi Stroud-Watts on "Bloomberg Daybreak: Australia." (Source: Bloomberg)

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