TCW Securitized Opportunities Strategy

Quarterly Commentary

Unintended Consequences

Years of zero interest policy and quantitative easing across the globe have massively boosted the muscle mass behind the demand for yield and returns. Like performance enhancing drugs, the immediate results of trillions of dollars of stimulus have been fantastic to say the least. Since the great financial crisis, global central banks have injected unprecedented amounts of liquidity into the financial system by expanding their combined balance sheets to over $20 trillion in size. This has resulted in a staggering 25% direct ownership by central banks of the entire global bond market. Driving risk free rates essentially to zero and in some cases into negative territory, investors, including asset managers and banks, have been effectively forced or “encouraged” to take risk that may not have been taken otherwise...

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