Swell rejects the idea that central banks literally lack bonds to purchase. Raising purchase prices lowers yields until existing holders sell or rotate into equities and credit, which is part of the intended monetary-policy transmission mechanism.

Supply exists when buyers are willing to raise prices
Central-bank purchases push sovereign yields lower
Lower yields encourage movement into equities and credit
Home-market bonds can become unattractive under heavy policy intervention

“I don't believe that there's a shortage of bonds. There's a shortage of bonds at good prices.”
Mike Swell · 19:49

“What they're doing is they're driving sovereign yields down to the point where you are forced to sell them and do something else with it.”
Mike Swell · 20:16

#bond supply#quantitative easing#central banks#asset prices

Myth Buster34:10

Why the Yield Curve Was No Longer a Clean Economic Oracle

Swell says the yield curve’s forecasting reputation is overstated in an environment dominated by quantitative easing and mandated institutional buying. Pension liability matching, corporate cash investment, and central-bank purchases can shape maturities independently of economic expectations.

Central banks intervene in policy rates and long-duration assets
Pension funds buy long bonds regardless of curve shape
Cash-rich corporations concentrate demand in short maturities
Market segmentation weakens historical signal interpretation
Steepening may reflect issuance and policy expectations rather than a pure growth forecast

“what I'll tell you is that we're not that smart.”
Mike Swell · 34:30

“it's hard to look at the shape of the yield curve as a predictor for much right now”
Mike Swell · 35:00

#yield curve#economic forecasting#quantitative easing#pensions

Myth Buster45:31

Bond ETFs Cannot Manufacture Liquidity During a Credit Panic

ETFs provide cheap, targeted exposure and can continue trading when cash bonds freeze, but their liquidity ultimately depends on the underlying securities. During the COVID shock, ETF prices became real-time estimates of stale or unknown bond values until fixed-income specialists and Fed intervention narrowed the dislocations.

RIAs use ETFs for low-cost portfolio segmentation
Institutions use them for rapid exposure and arbitrage
ETF liquidity cannot permanently exceed underlying liquidity
ETF trading supplied price discovery when cash bonds stopped trading
Specialist buyers helped reconnect ETF and bond valuations

“There's no free lunch that E t S gives an investor.”
Mike Swell · 47:08

“b t S are only as good as the underlyer.”
Mike Swell · 47:26

#etfs#liquidity#price discovery#credit markets

Hot Take· 1

Hot Take25:25

Fed Intervention Has Costs, but Crisis Policy Is About Tradeoffs

Swell acknowledges that low rates damage savers and financial institutions but argues that the COVID shock threatened frozen capital markets and widespread corporate failure. In his view, rapid and expansive Fed action was justified because the alternative economic damage was more severe.

Every policy choice protects against one risk while imposing other costs
Low rates hurt savers and banks
The COVID shock threatened access to debt and equity financing
The Fed acted faster and more broadly than during 2007-08
Crisis purchases affected rates across the yield curve

“When it comes to policy, it's all about tradeoffs.”
Mike Swell · 25:30

“Now. It doesn't come without a cost, but they had to do it”
Mike Swell · 26:57

#federal reserve#monetary policy#covid-19#tradeoffs

Explainer· 3

Explainer06:07

Why Active Bond Managers Retain an Edge Over Indexes

Swell argues that bonds are less homogeneous than equities and that transparent benchmarks, investment mandates, maturity limits, and ratings constraints create exploitable pricing disparities. Active managers can buy outside an index or target securities excluded from many institutional portfolios.

Bond issues differ by maturity, coupon, liquidity, and structure
Transparent indexes reveal predictable demand
Institutional mandates create market segmentation
Restricted buyers can make adjacent maturities or ratings unusually cheap
Mortgage expertise can add value through prepayment-risk selection

“There is a lack of homogeneity in the bond market.”
Mike Swell · 06:07

“Very very UM significant market segmentation issues that creates inefficiencies.”
Mike Swell · 07:09

#bonds#active management#indexing#market inefficiency

Explainer12:22

Why Near-Zero US Yields Can Still Attract Global Buyers

Domestic yields may appear meager, but many savers, retirees, insurers, and banks must own income-producing assets. Negative rates in Europe and Japan make US yields comparatively attractive, while the Fed’s employment and average-inflation goals support an extended low-rate environment.

Many institutions cannot freely replace bonds with equities
Retirees and conservative investors still require income
Negative overseas rates redirect demand toward US assets
Average-inflation targeting supports prolonged policy accommodation
Global comparison matters more than viewing US yields in isolation

“There is an enormous amount of demand for yield.”
Mike Swell · 12:26

“You're almost always right to not fight the Fed.”
Mike Swell · 14:12

#yield#global markets#federal reserve#bond demand

Explainer22:59

How China’s Bond Opening Could Reshape Global Allocation

Greater access to Chinese sovereign and high-quality corporate bonds adds liquid, higher-yielding assets to global portfolios. Their inclusion in major indexes may enhance investor yield while crowding some demand out of low-yielding US, European, and Japanese sovereign markets.

Chinese sovereign yields were materially above developed-market alternatives
Index inclusion creates automatic institutional demand
China retained more room to lower rates during a slowdown
Clearing and custody reforms improve accessibility
New supply may pressure other low-yield sovereign markets

“The Chinese bob markets actually pretty attractive at those kind of yields”
Mike Swell · 24:17

“as they liberalize clearing and custodial issues, UM it's going to become a very important part of the broader capital markets.”
Mike Swell · 24:49

#china#bond market#capital markets#global allocation

Story· 2

Story10:37

How the Credit Crisis Forced Mike Swell to Reinvent His Role

Swell joined Goldman Sachs intending to develop structured-product issuance but concluded that leveraged CDO and CLO structures offered investors too little return for their risk. When issuance collapsed, he repositioned himself as a distressed investor in the same underlying assets.

He rejected an unattractive mandate after analyzing investor risk
The CDO and CLO markets shut down
Distress transformed an obsolete role into a new opportunity
Career flexibility became essential during structural change

“this is not actually a good investment for investors.”
Mike Swell · 11:07

“I went from trying to be an issuer in that market to being a distress investor.”
Mike Swell · 11:46

#career#financial crisis#structured products#reinvention

Story57:10

The Public Correction That Taught Swell Never to Bluff

Early at Lehman Brothers, Swell improvised an answer about a European bond issue rather than admit uncertainty. A senior colleague corrected him publicly and emphasized that professional decisions affect careers and client money, making factual honesty more important than appearing knowledgeable.

Swell hesitated and then pretended to know an answer
His mentor challenged the response in the meeting
Professional uncertainty should be stated explicitly
Unknown facts should be researched and reported back
The incident permanently strengthened his respect for accuracy

“If you're not if you're not sure, you say you're not sure when you get back to someone”
Mike McKeever · 58:11

“you're talking about people's careers, our client's money at stake, and you can't fake it.”
Mike McKeever · 58:16

#integrity#mentorship#finance careers#decision-making

Q&A· 1

Q&A37:38

Could Market Demand Push US Treasury Yields Below Zero?

The Fed had chosen not to adopt negative policy rates, but Swell says Treasury yields could still cross below zero during a severe global slowdown. Investors might willingly pay a small amount to preserve wealth in dollar-denominated safe-haven assets rather than accept larger risks elsewhere.

Negative rates sacrifice savers to support financing and risk-taking
The Fed’s policy preference does not fully control market yields
A global recession could intensify dollar safe-haven demand
Investors may accept a small negative yield for perceived security

“I think that there is some merit to negative yields.”
Mike Swell · 38:52

“it is a possibility, but from a policy standpoint, the US has so far made a decision to to not to not go there.”
Mike Swell · 39:45

#negative rates#treasuries#safe haven#monetary policy

Takeaway· 2

Takeaway21:00

Look Beyond Manipulated Zero-Rate Sovereign Markets

When US, European, and Japanese yields leave little room to rally, Swell suggests considering higher-yielding developed markets and selected emerging markets. Steeper curves and positive real rates may offer both income and more defensive upside during a slowdown, though currency and country risks require active evaluation.

Australia, Canada, Sweden, and Norway offered steeper curves
Higher starting yields improve potential hedge efficacy
Selected emerging markets may offer positive real rates
Currency exposure should be chosen deliberately
Policy room can create greater rally potential in a slowdown

“keeping your money in your own market when the central bank is manipulating the price. I think that that's something to kind of think about.”
Mike Swell · 21:00

“getting a little bit more diversified in your sovereign exposure, we think makes a lot of sense.”
Mike Swell · 22:31

#sovereign bonds#diversification#emerging markets#duration

Takeaway53:40

Your Defensive Bond Allocation Must Be Defensive When Needed

Swell distinguishes government, core, aggregate-plus, and unconstrained bond mandates by credit and duration freedom. His central warning is that a nominal bond allocation can fail as a hedge if it quietly contains substantial credit or subprime exposure.

Government income emphasizes sovereign and agency mortgage exposure
Core portfolios remain investment grade
Aggregate-plus mandates add high yield and emerging-market debt
Unconstrained strategies can seek absolute returns with less duration
Credit-heavy bond allocations may fall alongside equities during crises

“core is by definition core.”
Mike Swell · 54:41

“their forty was also down because it had a lot of credit and and and subprime mortgages and things like that in there.”
Mike Swell · 54:31

#portfolio construction#core bonds#credit risk#asset allocation

Frameworks in this episode

Fed-Aware Fixed-Income Barbell

People-First Early-Career Selection

Plan, Diversify, and Stay Invested

Insights & moments

⚡Myth Buster· 3

The Bond Shortage Is Really a Shortage of Attractive Prices