Bridgewater is betting on a sell-off in corporate bonds this year as the world’s largest hedge fund takes a gloomy view on the trajectory of the global economy.
The wager against US and European corporate debt underscored Bridgewater’s view that weakness across financial markets will not be shortlived.
“We’re approaching a slowdown” — Greg Jensen, one of Bridgewater’s chief investment officers, told the Financial Times
Jensen warned that inflation would be far stickier than economists and the market have predicted, and that could put pressure on the Federal Reserve to raise interest rates higher than expected by Wall Street.
Bridgewater had already been positioning for a sustained sell-off in the $23tn US government bond market and has wagered similarly on equity prices falling further even after collectively shedding $9tn in value this year.
High-grade US corporate bonds are down about 13 per cent this year on a total return basis, while those in Europe have fallen 15 per cent, according to ICE Data Services indices.
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Five more stories in the news
1. Yellen urges Congress to do more on inflation US Treasury secretary Janet Yellen has pressed Congress to help ease price surges. The call came as pressure mounts on Joe Biden’s administration to contain the highest inflation in four decades. “Congress can do a lot to mitigate some of the most important and burdensome costs that households face,” Yellen said, although she acknowledged that inflation was running at an “unacceptable” level.
2. Zelenskyy: Stalemate with Russia ‘not an option’ Ukraine’s president Volodymyr Zelenskyy told FT editor Roula Khalaf that pushing Russian forces back to positions occupied before the invasion would amount to a “serious temporary victory”. Speaking at the FT Global Boardroom conference, he added that full territorial sovereignty remained his ultimate goal. “We are inferior in terms of equipment and therefore we are not capable of advancing,” he said, appealing for western military support.
More on the war: Angela Merkel denied that she “appeased” Vladimir Putin as German chancellor in her first interview since stepping down last year.
3. Billionaire to face congresswoman in race for mayor The billionaire property developer Rick Caruso — who only recently switched to the Democratic party — will face California congresswoman Karen Bass in a November run-off election to be mayor of Los Angeles. The contest is likely to be dominated by debate over how to fight rising crime and homelessness, and both contenders can boast a host of celebrity backers.
4. OECD: UK economic growth to grind to a halt next year Only Russia, hobbled by western sanctions, will perform worse among the G20 leading economies in 2023, the OECD forecast today. The Paris-based organisation forecast that the UK economy would record growth of 3.6 per cent this year, but that growth would fall to zero next, as households were increasingly squeezed. The economy was described as “stagnating in 2023 due to depressed demand”.
5. Bolsonaro tries to burnish diplomatic credentials with Biden meeting Joe Biden and Jair Bolsonaro, the leaders of the western hemisphere’s two most populous nations, will try to set aside their differences in a first bilateral meeting. Their meeting, during this week’s Summit of the Americas in Los Angeles — which several Latin American leaders are boycotting — will be a chance for each to boost their standing, analysts said. Bolsonaro, who is fighting for re-election, confirmed his summit attendance only after the White House agreed he could meet Biden — Felipe Loureiro, a professor of international relations at the University of São Paulo, said that what the president wanted was “the picture opportunity.”
Brazilian army launches search for missing journalist and researcher The Brazilian army is searching for a British journalist, Dom Phillips, a contributor to the Guardian and FT, and Bruno Pereira, an expert on indigenous peoples, who disappeared on Sunday deep inside the Amazon rainforest. The men were last seen leaving a village by boat en route to Atalaia do Norte, a regional town. They never arrived.
The day ahead
Football corruption trial The fraud trial of former Fifa president Sepp Blatter and ex-Uefa chief Michel Platini over a 2011 payment of SFr2mn ($2.19mn) begins in the Swiss Federal Criminal Court.
Quarterly earnings Campbell Soup Company and Brown-Forman will report quarterly earnings before the bell.
Spotify investor day The audio streaming company holds its investor day today. Spotify, which has invested heavily in its podcast business this year, has seen its shares drop 55 per cent in the past 12 months and below its initial list price.
US primaries California, New Jersey, Iowa, Mississippi, Montana, South Dakota and New Mexico are holding primaries today.
Wholesale inventories Economists expect wholesale inventories to rise 2.1 per cent month on month in May, matching the rate of increase in April.
Today is day two of the FT Global Boardroom, with speakers including Gina Raimondo, the US Secretary of Commerce, and the Bank of Japan governor Haruhiko Kuroda. Find out more.
What else we’re reading and listening to
How space debris could threaten modern life After 65 years of space flight, the area around Earth is littered with 9,000 metric tonnes of debris, according to Nasa, all zooming uncontrollably around at 25,000km an hour. Check out our impressive interactive on the increasing threat posed by space junk.
The FT’s Investing in Space conference begins today, online and in person at the Pan Pacific hotel in London. It includes an interview with astronaut Samantha Cristoforetti from the International Space Station. You can register here.
Why the US must start caring about Latin America Irene Mia argues that although some steps have been taken by the Biden administration to re-engage with Latin America after years of neglect, the reality is that the region’s importance in US foreign policy remains “painfully low”. Mia explains why this may prove a strategic miscalculation.
Who rules porn? Stoya is a porn star who saw first-hand how free pornography online transformed the adult industry. She sends the hosts of our new Hot Money podcast, Alex Barker and Patricia Nilsson, on a quest: find out who’s in charge and get to the bottom of how the business works.
TikTok Shop’s troubled UK expansion A culture clash between the social media group’s Chinese owners and some of its London employees has triggered a staff exodus and complaints about a “toxic” corporate culture that runs counter to typical working practices in Britain.
Johnson’s hollow victory is a bad outcome for Britain Despite his nominal win in a confidence vote, the magnitude of the protest against Boris Johnson is a bad result for him and, above all, the country as it faces momentous challenges at home and abroad, writes our editorial board.
Opinion
Don’t miss Janan Ganesh on the bright side of Anglo-American populism and how the invasion of Ukraine succeeded in forcing both the British conservative party and American Republicans into a choice between pushing back or seeming weak. “It triggered their national egoism, their dread of losing face in front of foreigners, even their machismo,” Ganesh writes, in this must-read piece.
Source: Economy - ft.com
