In its simplest form, a fixed income instrument is a legal contract between a borrower and a lender. Aside from other aspects, one of the most stressful times for both of them, is the maturity of the contract, since the money that was borrowed has to be repaid, with interests. In the chart below, you can see the maturity wall for Comercial Real Estate, US High Yield, US Investment grade and Leveraged loans. As you can see, there is more than $1 Tn a year that needs to be repaid or refinanced over the next 4 years. That’s 10% of the total U.S. fixed income market. For US treasury instruments, not shown in the chart, $9Tn need to be refinanced over the next 4-6 months. And they are the basis to price everything else. The majority of the instruments shown on the chart below will be repriced up in yields, because Treasury yields are trending higher. Some of the bonds maturing over the next 3 years were issued when official rates were zero and Treasury yields where close to zero. Borrowers will pay 3-5 times more this time to refinance their bonds. We’re entering a new regime in fixed Income as well.
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