Financial Repression – The elephant in the room
Public debt has surged to 100% of GDP, with governments unable to rely on growth or fiscal tightening, making financial repression the preferred path. Yield manipulation is now widespread, punishing savers and driving investors toward riskier assets such as high-yield debt and emerging market bonds. As we highlight in our latest report, central banks are shifting away from government debt into gold, while credit markets have become the main source of real income. Going forward, success will depend on finding sustainable real yield, a task that calls for selective positioning and active management.
US Government Shutdown: Data frozen, job cuts looming
Last Wednesday, the US government entered its first shutdown in seven years, halting the release of economic data for the past week. Unlike previous instances, the administration is considering permanent workforce reductions, potentially eliminating tens of thousands of federal jobs. Market impact is expected to remain limited unless the shutdown is prolonged, in which case US GDP forecasts could come under pressure. Our base case remains a resolution within a reasonable timeframe.
Middle East – Gaza deal
President Trump met with Israeli Prime Minister Netanyahu in Washington, where both sides agreed on a framework aimed at ending the Gaza conflict. The proposal requires Hamas to accept significant concessions in exchange for the release of remaining Israeli hostages. Arab leaders have signalled support for the US post-war plan, momentum is building toward a potential resolution.
Algebris Investments’ Global Credit Team
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