No Free Lunch Podcast – Unpacking The Bond Market in 2026

In this episode of No Free Lunch, host Greg Stewart engages with Conway Williams, head of credit at Prescient Investment Management, to explore the intricacies of the bond market. They discuss the fundamental nature of bonds, the current dynamics affecting credit pricing, and the role of asset management in navigating these challenges. The conversation also delves into the impact of state-owned enterprises on market liquidity and the implications of global trends on local bond markets. Throughout the discussion, the importance of understanding risk and making informed investment decisions is emphasised.

Key Takeaways

• Bonds are a key investment tool for financing large-scale projects.
• The bond market operates similarly to loans but involves larger sums and longer terms.
• Current credit pricing reflects a low margin of safety for investors.
• Demand for corporate credit is high, but supply is limited, affecting pricing.
• Investors must be cautious as risks are often not fully priced in.
• Asset managers play a crucial role in managing client funds in the bond market.
• Corporate debt issuance has been muted due to economic uncertainty.
• State-owned enterprises are showing signs of improvement in capital raising.
• Global bond market trends can significantly impact local markets.
• Investors need to be selective and monitor risks in their portfolios.

Key quotes from Conway Williams:

1. The world is built on debt. The world is built on people being able to access finance, being able to access equity.”
2. “There’s a very low margin of safety when it comes to the return that you earn on a bond versus the actual risks embedded in the bond.”
3. “Price for perfection means that now if there is a default or a risk, all of those additional risk premiums that you need to be actually pricing into it, there’s less and less room.”
4. “We are an asset manager. We act on behalf of client and client funds.”
5. “Volatility, whether it is long term or short term, does impact yields.”
6. “If you’re not looking at the risk right now, you’re fighting a game that you are going to lose.”