High interest rates reshape macro assets, new investment environment challenges emerge🤔

As we have alluded to a few times, the return of persistently higher funding rates will have profound impacts on macro asset classes across the board, as young investors venture their way into a '5%-riskless' world that they have never imagined before. Bank shares have dropped nearly 9% over the past month on concerns over portfolio losses on higher rates. Estimates of paper losses on banks' held-to-maturity portfolios are nearing $400bln and above the peak before the SVB collapse, while yields on 10y bond yields have exceeded implied SPX earnings yield for the first time since the early 2000s. Even the once-hot private equity funding world has plummeted back to 2020 levels based on executed deal volumes, as spiking borrowing rates have severely curtailed financing options and exit assumptions for the foreseeable future.

#FundingRates #MacroImpacts #PortfolioLosses #PrivateEquity #macro