Part 5/17:
The conversation highlights that, despite high yields in the past, today's environment with ultra-low rates has been heavily biased toward borrowers, not savers. This environment incentivizes "opportunistic pricing" and creates distortions in asset valuation, extending even into equities, which are also impacted by the risk-free rate set by the Treasury bond market.
Default Risk and Sovereign Debt: A Delicate Balance
The discussion transitions to sovereign and international bonds, emphasizing that risk varies across countries. For instance, Argentina's bonds command higher interest rates because of perceived risky default, whereas countries like Canada maintain high credit ratings but still face spreads reflecting underlying risk.