21 Mar 2023 1 min read

Podcast: Banks, bondholders and the macro outlook


We provide a summary of our second live webinar on the latest developments in the banking sector, in addition to links to the podcast recording.

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Ongoing pressure on banks worldwide, underscored by the takeover of Credit Suisse* by UBS*, raises fresh questions for investors about the health of the sector, the treatment of bondholders and implications for the global economy.

We held a second special live webinar with our clients to discuss this fast-moving story on 21 March, hosted by LGIM’s Chief Investment Officer, Sonja Laud.

Sonja was joined by Colin Reedie, Head of Active Strategies; Christopher Jeffery, Head of Rates & Inflation Strategy; Dan Lustig, Senior Credit Analyst; and Tim Drayson, Head of Economics. Among other things, the panel said:

  • Authorities look determined to avoid a 'Lehman moment'; this weekend’s developments suggest they have the tools to do so
  • We continue to believe that Credit Suisse* is a unique case, linked to the bank’s profitability, and don’t expect other lenders in Europe to follow suit
  • The writedown of AT1 bonds is likely to create a higher risk premium for bank capital, in our view
  • We expect to see renewed tightening of lending standards across the US and Europe as a result of this episode; this will probably spark a recession in the second half of 2023
  • There’s a mismatch between how equities and credit markets are pricing the macro outlook, with the former suggesting a more benign trajectory
  • We believe developed market bond yields may have peaked for the foreseeable future
  • We also think the macro context means further stresses will probably emerge in the system; this means better entry points for equity investors are likely, in our view

The webinar was moderated by Max Julius, Head of Content. You can listen to a recording of the webinar on our podcast channel, LGIM Talks, via Apple, Audioboom and Spotify.

*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.


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