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Goldman Sachs sees growth in private placements

Higher yields and better protections compared with public bonds draw buyers to private placements even as investors cut duration and credit spreads widen.

Photo: Reuters

At the start of March, Goldman Sachs Asset Management (GSAM) announced a new platform on which it will originate, underwrite and manage private placements of investment-grade debt for investor clients, notably insurance companies, for which it already has fiduciary investment management mandates covering public bonds.

Its Debt Private Placement Investors (DPPI) platform sees the light of day amid heightened volatility in secondary bond markets and a slow-down in primary debt capital markets following Russia’s invasion of Ukraine.

The ICE BofAML Move index is the bond market’s equivalent of the VIX equity fear index. It tracks implied volatility in one-month Treasury options. In November 2021, as fears mounted over possible US Federal Reserve rate hikes to combat inflation, the Move bond market fear index rose to 67, up from 50 in May 2021.

By February 21, it had reached 93. Then, in the first week of March 2022, it hit 131, its highest level since 2009.

Investors know that sanctions on one of the world’s largest suppliers of oil and natural gas will both drive up inflation and supress economic growth.

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