(DISCLAIMER - this blog is my personal view)
With Covid having finally caught up with me, I have had to isolate for a few days now.
Without access to my office, this has forced me to take up some new distractions. One of which is that I (finally) registered on a popular app that seems to promote asymmetric arguing and some innovative approaches to corporate governance (Hi Elon! 👋🏽).
Whilst fun for a while, I have found it an interesting study on figuring out what matters – especially on the markets side.
I was not surprised to see that there are LOTS of discussions on equities and crypto. However, what caught my attention was a Bloomberg Wealth headline that bonds are "in a coma” in the context of a commodity story.
Hmmmm. Not sure about that… (or indeed the choice of words…)
Last I checked, the bond markets are alive and well.
In fact, it is the single biggest investable market with the widest variety of flavours* to choose from (say at least 3x bigger than equities…).
Moreover, with the triple header of inflation, global economic adjustments (post bull run / covid hangover?) and quantitative tightening all looming, things are about to get very interesting (or should that be tasty?). Portfolios are going to be under pressure as benchmarks squeeze spreads and prices take a hit. Equally, new issuance will be more expensive and there is a WALL of legacy, low coupon debt to refinance over the mid-term.
But it is true that bonds remain the poor relation to equities and now crypto in the eyes of many.
This is despite fixed income being the market most directly connected to the average person – whether due to the fact they have a pension plan or insurance contract, or because it funds their roads, schools and hospitals. You could say, bonds are the heartbeat of the global economy and the highway for economic flows.
Unfortunately, this lack of popularity has resulted in a lack of investment in the technology and infrastructure side.
For those of us coming out of the front office and with the right vision, we are seizing the opportunity of building a really exciting new ecosystem for the bond markets. Moreover, we need to do this in order to keep the flows of the global economy flowing.
The intersection between technology and traditional financing tools is the real sweetspot. It is where we can aim this supertanker market without running it aground.
Whilst I am excited to see where we newer players can take the bond markets to. I’m also strapping in for the rollercoaster ride that will be the next 3 years. Time to get tooled up!
*btw - my favourite is pistachio in case you were wondering...