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HomeVideoBloomberg: JPMorgan's Reschke: Risk Rally Has Run Out of Steam

Bloomberg: JPMorgan’s Reschke: Risk Rally Has Run Out of Steam


JPMorgan’s head of European investment grade finance Matthias Reschke says his unit has come through the last nine months “very well in terms of our own lending, especially also in the leveraged finance space.” Speaking on Bloomberg Television on Friday, Reschke said the market has “taken a little bit of a halt” since the unemployment data in early February out of the US.

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Transcript

The risk rally in Mar in March we’re not even March in January didn’t run too far well clearly it has run a little bit out of steam as you said really since the unemployment data on the 3rd of February out of the U.S the market has taken a

Little bit of a halt let’s remember we’ve seen a relatively strong rally since the peaks in October investment grade indices across the world from that point are still 50 basis points tighter than we were at the time and the market is you know worrying exactly about the points that you were mentioning earlier

There are a lot of signs that the economy is still running relatively strong and that obviously puts pressure on inflation remaining high and central banks potentially having to do more what do you make though of of junk debt of high yield debt also not doing well because obviously it’s less policy

Sensitive some of the ETFs investors pulled over six billion dollars from a U.S high yield bond fund last week so we are seeing steady outflows there but that’s not really as much where you’d expect it if it is a rate story yes um the the leverage that space

Definitely uh you know is slightly more challenged than the investment grade side although having said that we are very uh happy to see that since October November also that market start has started going a little bit but what’s very clear is that in the new environment of higher rates Leverage is

Slightly more restricted for leveraged borrowers and that needs to be managed yeah I’ve had a lot of conversations we’re talking about this in the break with with private Equity folks who’ve said I found really attractive deals but I haven’t been able to do them because financing is so hard to come by when

Does that market open up again not that it’s necessarily completely closed but when does it start to ramp up again to more normal levels well the question is whether This Is The New Normal really we’ve seen since the financial crisis in 2007-2008 that rates were super low you

Know liquidity was ample and maybe more than what is normal and right now we need to adjust what we’re facing at the moment if we are in an environment where inflation is structurally at sort of two to three percent then leverage levels being a little bit more constrained and

Invest and costs for leverage Finance being higher people have to accept that that’s the new normal it is actually very interesting that that is one of the reasons why we feel investment grade corporates at the moment are extremely strongly positioned because they were facing the competition from the private

Equity world in the last decade and it’s a bit more of a Level Playing Field now so does that mean your appetite to lend it’s still there it’s just only with those corporates with healthy balance sheets then well we are we’ve got we’ve come through the last sort of nine

Months very well in terms of our own lending especially also in the in the leveraged Finance space so our Bridge book is clean and we are able to be very proactive that doesn’t only mean that we’re only supporting investment grade corporates but we’re very much open for business under leverage Finance side but

We are picking our spots a bit more in that space What Becomes your playbook when there’s still that so much unknown everything from energy to war to rates there’s still so much unknown out there so what we’re telling our clients is you make need to make use of the good

Windows of the market so we told everybody to be on it as we were going through January and that really worked risk products hybrids you know long data transactions went really well and that’s really what you need for to do for the remainder of the Year there will be

Periods that are softer right now I’d say we are sort of calibrating and we’re finally balanced there will be soft spots in the market which you want to avoid and then you make use of the you know good Windows you just have to be ready get on with it and be ready

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7 COMMENTS

  1. Until the US Fed does not hike the interest rates above 9% there is NO WAY it can bring inflation down to 2%. Will it do it ? NOT. The inflation will keep smoldering and burning peoples savings every month for a decade. The US Fed will call this the "SOFT LANDING" 😂🤣

  2. Right now the stock market is 85% overvalued. So it is natural that there will be more volatility in the stock market. Inflation if not brought down will lead to reduced consumer spending which in turn causes companies to lay off workers. It is better for the Fed to keep raising rates to bring down prices in a controlled way both for the monetary health of consumers and the health of the economy. Clearly the Fed will have to raise rates another 1.50% above their initial projections to bring inflation under control

  3. If you don't have enough money to buy something, DON'T buy it!!! This teaches businesses to learn how to use money properly and really, it teaches individuals to do the same thing and take responsibility. If you start giving money out you encourage financial irresponsibility!

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