Scott Minerd, the chief investment officer of Guggenheim Investments, thinks that government support of corporate America in the wake of the coronavirus pandemic will ultimately lead to the creation of a “new moral obligation” to help U.S. companies access credit.

“Corporate borrowers are most likely on the way to becoming something akin to government-sponsored enterprises like Fannie Mae and Freddie Mac,” he wrote in a note dated May 10. “Many companies, including Boeing, Southwest, and Hyatt Hotels, have likely gained access to financing simply on the strength of the government’s intentions to intervene in credit markets.”

Minerd, who on Friday warned that markets were sending a clear message that negative rates would soon be here, said he thought yields on 10-year Treasury notes could fall to -50 basis points in the intermediate term.

“The long bond could ultimately reach around 25 basis points as the 10-year and 30-year area of the curve shifts down by over 100 basis points from where it is today,” he wrote.

Key Quotes:

• “The difference is that in this cycle, it is not a specific institution that is too big to fail, it is the investment-grade bond market that is too big to fail.”
• “Our portfolios reflect the view that we are likely going to be facing a long period of repression in the yield curve, and that the risk of significant widening in high-quality credit spreads has been reduced by the market’s faith in the Fed’s new facilities.”
• “What could go wrong with my outlook? We are already in uncharted territory and another black swan might emerge in the midst of a very fragile market.”
• “If at some point markets begin to question the efficacy of QE, or the Federal Reserve is perceived to be behind the curve in making necessary asset purchases, we could very well get a tantrum in the Treasury market, which would likely spill over into a tantrum in corporate credit, and into the stock market.”
• “As Americans we will need to have more faith in the willingness and the ability of our government to print money as the ultimate solution to every problem.”