I am posting this here because I would like someone to disprove my idea / pushback on it.
Simply put the idea is as follows:
The federal reserve has done arguably the most herculean monetary stimulus in American history - they have said essentially that the fed is going to backstop all corporate credit, all muni credit, and to a large extent all SMB credit.
There must be some credit consequences to massively levering up during a downturn in earnings - the US government is doubling its debt, while earnigns are down 30+%, perhaps more - GDP will be down 30+% this quarter, and tax receipts who knows how bad those will be or if we even have a tax holiday this year
The old school credit methodology is you have your sovereign risk as it's the risk free asset in a given country, and then tack on a credit spread for a corporation, a municipality, or a pizza shop what have you.
Right now, the trade the fed is doing is buying all credit assets - so it seems quite likely that the spread between treasuries and corproates should massively collapse overall - essentially the fed has decided we're all in this together - so doesn't matter if you are a high yield casino, an IG health care company with a rock solid balance sheet, or Mama's Pizza & Pasta, we're all all for one and one for all.
At the same time, the federal deficit is going to double, while the "earnings" that support that leverage are down massively.
So I think the positive carry trade is to be long all credit assets and short US treasuries - this can be accomplished through many ways - a simple equity driven approach would be logn HYG, short TLT, but there are other smarter ways to put it on I'm sure
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