Why credit is so expensive right now

Roni Green from GF Asset Management tries to demystify why credit is currently so expensive. Roni points out that investors are attracted to the high yields on bonds which haven't been seen since the financial crisis. However, this is a mask for the high base rate and tight credit spreads indicating high default risk. Roni highlights that default risk is baked into pricing with credit spreads showing a predicted 2% default rate in 2024.

He stresses caution with regards to high yield bonds particularly, as recession could cause credit spreads to unfavourably widen. He suggests staying defensive and opting for higher quality as an investment strategy.

Roni also details the uncertainty surrounding the Fed's potential response to the economic situation. He anticipates the Fed will not rush to cut rates unless unemployment rates shift drastically and will likely resist until the data demands such reaction.

In terms of what to expect with the Aussie credit market, he says that interest from Asia is particularly strong due to high yields, urging potential investors not to miss out as these high yields are fleeting.