Timely, concise insights from across Mesirow

Welcome to the  1Q2023 Capital Markets Brief

This quarter, we have expanded our topics to include a more comprehensive set of fixed income markets. While our strongest conviction is knowing that the next wave of volatility will likely come from an asset class that is currently out of focus, we will do our best to provide expertise and information as these extraordinary times continue to unfold.

What do CBDCs mean for the US dollar as the world’s major reserve currency? 

Eleven nations1 have issued central bank digital currencies, a digital form of a government-issued currency that is legal tender but isn’t backed by gold or silver (like US dollars). Another 18 countries are piloting CBDCs while dozens of nations are in research or development stages.

Market Jitters Continue, but Private Credit Investors Seek Opportunity

The market has taken a step back this past week in light of considerable uncertainty in the banking sector. However, private credit investors will be quick to point out that they remain insulated from the volatility in the banking world given their funding sources (institutional investors, pension funds, high-net-worth individuals, sovereign wealth funds, etc.) are typically very diverse and long-dated.

Dominant reserve currencies—those currencies that banks hold as reserves for use in international trade and finance—come and go. These currencies rise into prominence, spend about 90 to 100 years in the spotlight and decline into obscurity.1 The US dollar is the current dominant reserve currency: It rose in the first half of the 1900s and has maintained its position as the world’s most important currency for more than two decades into the new century.