Why the Foreign Bid May Pose a U.S. Credit Problem

The transcript discusses the significant foreign investment in US investment grade credit, primarily from Japan, Taiwan, and Europe. It highlights the impact of currency hedging costs on investment returns, which have increased significantly, making US credit less attractive. The discussion also covers potential market risks and shifts in investment strategies due to changes in ECB and Bank of Japan policies. The transcript concludes with an analysis of the volatility and potential losses in US investment grade bonds, emphasizing the tight spreads and increased risks.

What factors have contributed to the massive foreign investment in U.S. investment grade credit over the last three years?

How do hedging costs affect foreign investors' returns on U.S. investment grade bonds?

What potential risks are associated with the shift of foreign investors towards longer duration instruments?

In what ways might the changes in monetary policy by the ECB and the Bank of Japan impact U.S. investment grade bonds?

What are the implications of increased volatility in the U.S. investment grade space for investors?