Schwab's Jones Says Credit Markets 'All Good, Except The Yield'

The video discusses the economic context of a potential global recession and the Federal Reserve's policy challenges, particularly in managing the yield curve and inflation expectations. It explores the bond market dynamics, including the impact of quantitative easing and global savings glut on long-term rates. The performance of high yield and investment grade credits is analyzed, highlighting their strong fundamentals despite low yields. Finally, the video speculates on potential hawkish surprises from the Federal Reserve, such as raising the terminal rate or initiating quantitative tightening.

What is the main challenge for the Federal Reserve as they try to tighten policy?

• Balancing the federal budget

• Increasing inflation rates

• Managing rate hikes without inverting the yield curve

• Decreasing unemployment rates

Which factor is NOT mentioned as contributing to low bond yields?

• Quantitative easing

• Global savings glut

• Overseas economic conditions

• High unemployment rates

What strategy could the Federal Reserve use to increase long-term rates?

• Reducing government spending

• Implementing quantitative tightening

• Increasing quantitative easing

• Lowering interest rates

What is a potential risk when moving into lower credit investments?

• Market accidents

• Stable interest rates

• Increased liquidity

• Higher yields

What could be a hawkish surprise from the Federal Reserve?

• Announcing roll-offs later

• Lowering the terminal rate

• Raising the terminal rate

• Increasing quantitative easing