Bill Campbell on Global Bond Markets and Powell's Parting Gift | Bloomberg TV

追加: 2026-05-09

[00:00:02]Bill Campbell is portfolio manager at Double Line and recently authored two major research papers making the case that global bond markets will increasingly price develop market sovereign debt with the same scrutiny it historically reserved for emerging economies. Bill, great to have you here.

[00:00:18]>> Well, great to have you here, both of you.

[00:00:20]>> Thank you. Uh, thanks for having us. We talk about this idea of what could be a major structural shift in the way that we view developed economies, emerging economies, and of course how you invest around that. Is this EM story that a lot of people have talking about, is that a short-term cyclical story or a longer term structural trend?

[00:00:37]>> Oh, I I think we're in the midst of uh a a sea change in global markets. uh for the past two to three decades uh we have seen the safe haven status of developed markets as uh a tenant across uh fixed income markets and uh that was really warranted. We saw you know strong growth in developed markets. We saw a very uh you know uh benign fiscal picture with uh you know managed fiscal deficits, low debt loads. Uh but then we went through into the global financial crisis.

[00:01:09]Interest rates were lowered. uh demands uh on governments increased and uh you know some of those uh you know structural uh you know uh benefits that uh developed markets had experienced um you know for these past several decades started to erode away. Uh on the other hand, emerging markets we've always put under uh you know more scrutiny uh when it comes to the outlook for uh you know the debt trajectory when it uh you know comes to inflation growth and then specifically uh you know the fiscal balance and uh the way that the government uh you know prioritizes their spending versus revenues that they take in. uh and that is important for us as investors because as we lend money uh you know whether it's to a company or to a country in this case uh we need to know that we're going to get paid back and paid back uh you know in the real terms uh inflationadjusted terms uh you know uh uh very pursuit to the risk that >> you know that we're taking >> but I'm curious about the fiscal side I mean we've seen of course obviously the story in in developed markets I mean obviously the own goal that we saw with the UK and the guild crisis France whatever the heck's going on with our interest payments here in the US. What happened where you started to see Brazil and Indonesia and all these EM countries somehow get their fiscal house in order.

[00:02:27]Was that just by accident?

[00:02:28]>> Well, no. Uh obviously uh you know uh emerging markets have a risk premium for a reason that you know for decades uh you know the fiscal was uh you know a big question. Uh the reason for that was the you know uh populist the electorate the people in the emerging markets demanded uh you know uh fiscal spending and uh you know government handouts uh you know uh from their governments and uh what that led to were a series of uh you know in the late 1990s uh you know we had debt uh crises and default crises that needed to be addressed with having uh the IMF and the World Bank come in and we've seen a series of packages uh you over the past few decades that have led to interactions between uh you know policy makers in emerging markets and uh you know the world bank and IMF officials uh to improve uh you know the fiscal policy the fiscal trajectory uh you know across many of the large emerging markets to you know where we are today where uh you know we look at when excluding interest payments if you just look at the primary balance the fiscal balance excluding interest payments for many emerging markets a lot of them are in balance. Uh when we look at the debt trajectories, a lot of them are less than 100% to debt to GDP. Let's just uh juxtaposition that against what's happened over the past couple of decades in developed markets where electorates now have demanded more social safety nets from their governments. increased fiscal spending uh you know across developed markets from the US to France to Italy to the UK to uh Japan uh you know have eroded uh many of uh you know those countries fiscal profiles increased their debt loads uh you know to just around or above 100% debt to GDP and I think the when we take a look at the forward trajectory of you know the way that you can you you can either deal with the fiscal balance of increasing revenues or you can pull back some of that spending.

[00:04:32]Pulling back spending is very difficult especially when uh you have uh you know voting that becomes more and more polarized >> and that historically has been a characteristic of emerging markets and we've had to price that risk appropriately. We've had to ask for additional term premium when we lend money into emerging markets which we haven't had to ask in many developed markets. when we look at the past decade from the UK to France to Japan and now uh we think increasingly uh you know these concerns are coming to the US as well right >> uh we're going to have to start pricing that in >> well let's talk a little bit about the US because I'm taking a look at you know one of your recent articles you titled it Pal's parting gift and basically you write that by normalizing on thereord disagreement at the monetary policy table that chair pal has probably diluted the power of the position in other he has likely created an institutional check on his successor Kevin Borsch and I'd love to expand on that a little bit and how that plays out because you said you know right before we started that perhaps you see the Fed moving more towards a Bank of England type model.

[00:05:40]>> Yeah. So historically the Fed chairman has uh wielded a lot of uh you know of power in being able to get consensus in meetings and have very little dissent in voting uh to decisions that are made and uh you know that power uh you know I think comes with uh you know both benefits but risks as well. If we have uh like we are seeing in the US questions rising about credibility, transparency uh you know in you know Fed decision-m uh I think one of the ways that you can counteract some of that question or that you know risk that the market's assessing is to reduce that you know soft power that the chairman has historically had and opening up the uh you know voting to become much more independent Because re really what do what do we want in our central bank? We want an independent institution that's focused on price stability and focused on uh you know maintaining full employment but really control of markets. If market participants don't believe that the Fed is acting uh uniquely in those interests, >> uh that's when you can have a lot of unintended consequences, increased volatility, uh you know, in markets. And I think Chair Powell recognized that, you know, the risks that the market was losing this confidence in the Fed were starting to grow.

[00:07:05]>> So when President Trump uh put Steve Myron on the Fed, >> uh I thought it was very interesting.

[00:07:11]Obviously, you know, uh Steve Myron was going to start uh you know, voting for uh cuts against uh what the majority of the FOMC wanted and you know, that was to be expected. But >> when we got to the end of last year, I found it very interesting that Powell allowed dissents for uh you know, uh Goulby uh decided that he wanted to disscent against a cut in uh December of last year. So kind of normalizing uh you know the descents not only uh to uh you know uh the direction the president wanted but also uh you know uh the the opposite direction as well.

[00:07:49]>> Yeah.

[00:07:49]>> And that I I think what that has done is uh by kind of taking that soft power away it's actually increased the probability that markets will still have that faith in the Fed.

[00:08:02]>> Well I am curious. I mean, you mentioned that this could breed an environment of more volatility, especially, you know, if we enter into an environment where it's really, you know, the economic backdrop doesn't point in one direction or another. It's something that could be debated. And, you know, you make a good point that the chair is just one of 12 votes, but really that's been kind of symbolic over the past couple years. But where would you expect to see that volatility expressed if we do enter a Fed that does normalize the sense more?

[00:08:32]Um well I I think you know I think the biggest concern is uh you know we're entering you know an environment where the macro is kind of turning against us.

[00:08:42]Uh we have this war in the Middle East that you know has pushed energy prices up and pushed uh you know an inflation shock into the system. The longer this inflation shock lasts the more that we have a question on the growth outlook.

[00:08:55]The on the Fed's side uh the last thing that we need is for credibility to be lost. We saw that uh you know around 2015 when you know there was concern about uh you know Fed funds you know remaining within the corridor and actually you know popping out when the if if there's if credibility is lost in the Fed uh you know the ability for the Fed to both maintain inflation expectations on uh you know a contained trajectory and lower interest rates when needed to offset slowing growth that could be taken away and that would manifest itself uh you know into uh you know increased volatility in markets and uh you know uh potentially bad growth outcomes. Uh the mechanism for which that is done is via term premium. Right?

[00:09:43]>> So if we think that Fed credibility is lost, interest rates are going to rise.

[00:09:48]Okay, we've already had an inflation shock that is put upward pressure on interest rates following this invasion in Iran. Right? You know, we have now questions about the fiscal which could put upward pressure, especially on the long end of the curve. And if we have a Fed where credibility becomes a question, yeah, that would be a third independent variable that would then potentially put upward pressure on interest rates.

[00:10:13]>> Is there a risk though for the Treasury market in there? And I don't mean necessarily in terms of rates, but I mean in terms of demand, particularly coming from foreign uh buyers.

[00:10:22]>> Yeah. So you know the foreign buyer uh you know situation is that uh there has been uh you know more tepid buying in the long end uh you know of the US Treasury curve. Uh but they've been you know looking at allocating capital elsewhere. Uh you know I I tend to think that that is a smart uh you know uh decision at the moment. You know we're currently uh for all the reasons that I just listed uh you know uh cautious on uh placing money uh you know in the back end of the US Treasury curve. prefer to place uh you know our you know our investor capital uh you know more in the belly of the interest rate curve for the reasons that I discussed and a lot of foreign capital uh you know is doing uh is doing the same uh one thing that you know we have seen is uh you know again we we're kind of keeping I'm I'm going to come back to this war on Iran >> one large uh you know pool of investors uh you know for uh US treasuries is central banks >> uh you know now that we've had this global volatility shock. Uh central banks are you know selling a little bit of their treasury holdings in order to have uh you know longerterm treasury holdings in order to have more liquid uh you know cash available for intervention. So that >> it's a little selling but it's it seems like it's multiple banks. I mean if it was just one or two >> no it's a it's across the globe but I think they you know they want to have dry powder just in case you know things start to get out of hand. There's been a lot of discussion in uh you know Asia.

[00:11:47]Asia historically the institutional investors have been large buyers of uh you know treasuries right >> especially in Japan and now that you see you know JGB yields having backed up uh you know to their current levels uh on a hedged basis uh you know there's the discussion of will uh you know Japanese lifers and Japanese banks choose to buy JGBs instead of treasuries going forward. We continue to see JGB yields increase. Why? because they have the same fiscal pressures uh you know that we have. So they're right now I think that that allocation will still be in the US.

[00:12:21]>> If the US loses that fiscal anchor and that credibility anchor in the Fed and we start to see yields rise because of that reason I think you could get more of an allocation uh you know away from the US and that could cause you know uh knock-on problems. So we're not seeing to answer your question directly, we're not seeing very large movements on the, you know, uh, uh, as far as the foreign investor demand away from US treasuries.

[00:12:47]We're seeing it on the margin. The potential is that, you know, over time with these risks that are building that could increase.

[00:12:53]>> Well, Bill, in the minute or so we have left with you, I do want to bring the dollar into this conversation because you think about central banks buying fewer treasuries, uh, buying a lot of gold really in recent years. It sort of fits into that ddollarization narrative and I just wonder you know how you as a firm are viewing the dollar right now especially in light of the recent declines.

[00:13:13]>> We think that the dollar is now in a structural downward trend. Uh very near-term while we have the Iran situation going on. I think the dollar is relatively rangebound. But uh the change in US policy, whether it's trade policy or foreign policy, foreign policy being the biggest surprise this year in the fact that the US has switched from what we thought would be an America first isolationist policy to now an interventionist policy, not only engaging in kinetic activity in Iran, but also Venezuela. I think that only adds to in global concern about the US dollar being the reserve currency and the store of value. Uh I think that the best way to play this is through EM local uh you know the EM local trade whether it's EMFX or uh EM local rates.

[00:14:04]Yeah.

[00:14:05]>> And uh you know if we're in an environment today where equity valuations are very high credit spreads are very tight. the last place of value or you know place that you can easily pick up value in is em local where you have high real yields and still long-term cheap currencies.

[00:14:24]>> Yeah, Bill, this is a fascinating conversation. We can keep going, but we do have a commercial break. Really appreciate it. Uh one of the best in the business there. I think you just heard exactly why. That's Double Lines Bill Campbell who oversees the firm's global sovereign and emerging markets teams here with our special coverage from Double Lines headquarters in Los Angeles.