00:00It's been a very interesting couple of trading days. And you can look at the market. There's a lot of
00:05dispersion that's happening.
00:06Dispersion is happening at the front end of the curve because of the March madness of central banks last week,
00:12making decisions and having to respond to this dynamic, which is how long do we really see this potential inflationary
00:19impulse go on?
00:20But the other thing that's really interesting, too, is credit itself is holding on pretty well.
00:24Mm hmm. Why do you think that is? I mean, particularly when we look at credit spreads, we never really
00:29saw any meaningful blowout.
00:31We saw some minor widening. But through this whole course of what we've seen with the war and even some
00:36of the issues just prior to the war in late February,
00:39we never really saw a whole lot of movement. Well, look, I say yield matters.
00:42You could look at where the investment grade corporate index is trading in the neighborhood of around five and a
00:48quarter.
00:48Those all in yield buyers are really interested at these current levels. So it's yield matters probably more than spread.
00:54That's interesting. I feel like that has been the case for a while, that you've had folks more focused on
01:00the yield levels that they can get rather than spreads,
01:03which have been pretty tight for a while. I do want to get your thoughts on the read through from
01:07what we're seeing in private credit,
01:09some of the agita that's going on there, whether or not you're going to start to see that show up
01:14in the public debt markets as well.
01:16It's an interesting question. It's something we're really, really focused on.
01:20But when you think about the dynamics of private credit and how that shows up in public markets, you look
01:25at high yield,
01:26you can look at bank loans or BDCs, always a very, very small percentage of the overall market.
01:31But the bigger picture is the worry that we're seeing there is creating an opportunity for a little bit more
01:37of a bond pickers market
01:38as we see spreads widen or some dispersion that starts to happen under the hood.
01:42Well, when it comes to that bond pickers market, I'm curious, you know, how you're thinking about tech debt at
01:48this moment,
01:49especially when it comes from, you know, the tech titans that are out there, the hyperscalers who are coming to
01:54the public bond markets
01:55in a way that they haven't relative to the last decade or so.
01:59I mean, how is Vanguard thinking through that influx of supply?
02:03Look, it's an important new dynamic that the market is beginning to see.
02:07But ultimately, as long-term allocators and long-term investors, this gives us an opportunity to find new names in
02:13the market
02:14that might be of interest for clients.
02:16But ultimately, it comes back to this yield story.
02:19And that yield story is significant whether you look at banks or even look at some of the hyperscaler issuance
02:24there.
02:25I do want to ask you just, too, about some of the inflation worries that have crept into this market
02:29because of the spike in energy prices, the war in Iran.
02:32Do you see that potentially as being long-lasting?
02:34I don't necessarily mean the official inflation numbers, but just expectations for where we might be going over,
02:40I don't know, the next six months, year, beyond?
02:42Look, it's about time and transmission.
02:44And that's what the market is really trying to get a sense of.
02:48That was really apparent last week with respect to all of the central banks that came to market
02:53and had to really respond to this particular dynamic.
02:55But right now, the Fed, if you think about its mandate, there are potential downside risks on really both sides
03:00of its mandate.
03:01It's really, really focused on the data and as we kind of persist through this.
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