US Economic Resilience Weights on Rate Cut Bets, Private Credit Risks | Real Yield 2/20/2026
Speakers
Summary
- Supreme Court Strikes Down Tariffs: The SCOTUS ruled President Trump's "Global Tariffs" (IEEPA-based) illegal. While this theoretically lowers costs for importers, the bond market reacted negatively (yields up) due to the anticipation of a larger fiscal deficit (loss of tariff revenue) and the likelihood that the administration will simply pivot to other tariff mechanisms (Section 232).
- Private Credit Liquidity Fears: Blue Owl (OWL) restricted withdrawals from a retail fund, sparking contagion fears across the Private Credit sector. However, underlying loan valuations remain at par, suggesting a liquidity mismatch rather than a credit quality crisis.
- Fed Policy Stagnation: Despite the tariff ruling, stubborn inflation and a resilient economy suggest the Fed is in no rush to cut rates. The neutral rate is argued to be closer to 4.25%, implying "higher for longer" remains the base case.
- Institutionalization of Prediction Markets: TradeWeb (TW) is integrating Kalshi data, signaling that prediction markets are moving from retail speculation to institutional data inputs for fixed income trading.
Trade Ideas
Blue Owl (OWL) restricted withdrawals from one of its private credit funds because redemption requests exceeded the quarterly limit (6% vs 5% limit). This creates a "sentiment overhang" for the entire Private Credit sector (Apollo, Blackstone, Ares). Investors fear a liquidity mismatch similar to the BREIT saga. However, the loans were sold "at par" to meet redemptions, indicating the *credit quality* is fine, it is purely a *liquidity structure* issue. WATCH. The knee-jerk reaction is to sell the asset managers, but if the underlying assets are performing (as Apollo claims), the dip may eventually be a buying opportunity once the liquidity panic subsides. If this triggers a broader "run on the bank" for private credit funds, fees and AUM will contract sharply across the sector.
The IEEPA tariffs are ruled illegal. Apple (AAPL) specifically recognized ~$3B in tariff charges previously. Furniture stocks and retailers were highlighted as immediate beneficiaries. The immediate removal of these duties acts as a direct tax cut for importers. Margins for companies with heavy overseas supply chains (Consumer Discretionary/Tech Hardware) expand instantly before any new tariffs can be legally structured and implemented. LONG (Tactical). This is a relief rally trade; however, it may be short-lived if the administration pivots to Section 232 tariffs quickly. President Trump is holding a press conference immediately; he may announce retroactive or alternative tariffs that negate this benefit instantly.
The $16B Gateway Tunnel project (NY/NJ) is restarting construction after federal funding was released. The release of funds translates directly into revenue for engineering and construction firms involved in major infrastructure. Despite political noise, the checks are clearing. LONG. Infrastructure spending is sticky once projects commence. Future administration actions could pause funding again, creating stop-start volatility.
Michael McKee
International Economics & Policy Correspondent, Bloomberg
The Supreme Court struck down the IEEPA tariffs, which were a significant source of government revenue. The 10-Year Treasury yield immediately "popped" (prices fell) on the news. The market is engaging in second-order thinking: removing tariffs removes a tax revenue stream, which widens the fiscal deficit. A larger deficit requires more Treasury issuance, increasing supply and driving yields higher. Additionally, the administration is expected to reimpose tariffs via other means, maintaining inflationary pressure while increasing volatility. SHORT. The fiscal outlook worsens with the removal of tariff revenue, and the Fed remains on hold. If the administration fails to implement new tariffs and inflation cools significantly due to lower import costs, bonds could rally.
There is a "wall of cash" entering the Investment Grade (IG) market ($30B+ YTD). Net issuance is high, but demand is overwhelming supply. Despite macro volatility, institutional investors (insurers, pension funds) need yield and are locking in rates at these levels. The technicals (inflows) are stronger than the fundamentals, which will keep spreads tight. LONG. The "Fed Put" might be gone, but the "Yield Buyer Put" is in full effect for high-grade paper. A resurgence of inflation forcing the Fed to *hike* (low probability but mentioned) would hurt total returns.
Katherine Doherty
Finance Reporter, Bloomberg
TradeWeb (TW) is partnering with Kalshi to bring prediction market data onto their institutional trading platform. This legitimizes prediction markets as a valid data input for institutional fixed income traders. It differentiates TradeWeb's offering and opens a new data monetization stream, moving prediction markets from "gambling" to "financial instrumentation." LONG. This represents a structural growth expansion for TradeWeb into alternative data. Regulatory crackdowns on prediction markets could render the partnership less valuable.
Up Next
This Bloomberg Markets video, published February 20, 2026, features Scarlet Fu, Michael McKee, Elizabeth Ramberg, Credit Roundtable, Katherine Doherty discussing OWL, APO, BX, ARES, XRT, AAPL, WMT, ITB, TLT, IEF, LQD, TW. 6 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Scarlet Fu, Michael McKee, Elizabeth Ramberg, Credit Roundtable, Katherine Doherty · Tickers: OWL, APO, BX, ARES, XRT, AAPL, WMT, ITB, TLT, IEF, LQD, TW