Very interesting things happens to markets at bottoms and tops – there are typically panic spikes down and up.
My market instincts suggest that we’re approaching some sort of local maximum for fear in terms of the energy markets. All doom and gloom, and usually you hear about the opposite arguments (demand is rising, geopolitical risk, etc, etc.) but none of this is present.
Probably a reasonable time to shop for assets in entities that will be able to survive the trough.
Sacha, what are your thoughts on what is happening to the rate reset preferred market? Do you also see the point of maximum fear?
Seems to be straight-forward: as 5-year government bond rates drop, the batch of rate resets that were issued 5 years ago are going to experience price depreciation!
With the Bank of Canada talking about negative interest rates and the rest of western Europe showing that these things can indeed trade at negative yields, who knows where the bottom is?
However, a 450bps spread over government (e.g. like the last RY issue) is huge, historically speaking, for what should be top-notch credit rated entities.