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Speaker 2: David Steef joins his chief economist, Developed Market sitting. The
Speaker 2: Murray has just been outstanding over the recent a number
Speaker 2: of months. I want to get out to the FET
Speaker 2: and chat. Paul's been doing a little bit. I've been
Speaker 2: remiss on this. Are we at a Bank of England
Speaker 2: point where Worsh is alone?
Speaker 3: Good morning?
Speaker 4: I think I might characterize it a little bit differently,
Speaker 4: but a Bank of England analogy I think is actually
Speaker 4: very apt here in that you know, when the Bank
Speaker 4: of England votes, it's one person, one vote, and you
Speaker 4: know the governor, who's the equivalent of the FED Chair,
Speaker 4: has no enormous amount of power to dictate things. And
Speaker 4: that's very much in contrast to how the FED has
Speaker 4: worked for at least the past fifty years, where it's
Speaker 4: been I would say, a de facto dictatorship of the chair.
Speaker 4: And now we have Worsh presumably not only the most
Speaker 4: dubbish person of the nineteen member FOMC, but also with
Speaker 4: only a couple of others on the FED who are
Speaker 4: even I would say remotely dubbish at this point, and
Speaker 4: so he probably finds himself in a minority.
Speaker 2: Is there a dubvish framework going into this meeting, I'm
Speaker 2: not sure I can find it.
Speaker 4: Well, I think, you know, I think the dot plot
Speaker 4: is likely to show a number of dots that still
Speaker 4: have a cut or maybe even two appropriate for this year.
Speaker 4: And that's even with you know, under the assumption that
Speaker 4: Worsh chooses not to submit a dot, as has been reported. Now,
Speaker 4: it's going to be a scatterplot.
Speaker 3: Clear.
Speaker 4: I mean, we're gonna have plenty of dots for a
Speaker 4: hike this year.
Speaker 3: But I think there.
Speaker 4: Are still members of the FED who are looking for
Speaker 4: a cut later this year.
Speaker 2: If Governor Christophers was down there, yeah, she'd just go
Speaker 2: like this, I'm sorry, I'm not submitting a dot.
Speaker 3: No exactly.
Speaker 5: We're going to get some inflation data tomorrow, David. I mean,
Speaker 5: I'm just you know, looking at the Bloomberg terminal, the
Speaker 5: CPI headline four point two percent. That's not bueno. If
Speaker 5: you're the Fed here at all? Yeah, what's going on?
Speaker 4: I mean, you know, inflation appears to be actually rising
Speaker 4: now now we do actually see it in a more
Speaker 4: a fairly soft print tomorrow of point two and more
Speaker 4: risk of a point one than a point three.
Speaker 3: That's for core.
Speaker 4: But that that really is is not what the overall
Speaker 4: trend is the trend, especially when you look at the
Speaker 4: Fed's preferred measure of core PCE it's three point three
Speaker 4: percent on a year of a year basis, And in
Speaker 4: a couple of weeks when we get the print for May,
Speaker 4: we expect that year over year basis it to rise
Speaker 4: to three point four percent on a year over year basis.
Speaker 3: So too high and going in the wrong direction.
Speaker 5: So but the reality is there's nothing the FED can do, right,
Speaker 5: I mean.
Speaker 4: Well the Fed, I mean, the Fed could raise rates,
Speaker 4: and that would be the classics sort of move that
Speaker 4: a central bank is supposed to do when inflation is
Speaker 4: above target GDP is growing out or above trend, and
Speaker 4: unemployment is low and if anything set to fall a
Speaker 4: little bit, yep, So we don't think they will.
Speaker 5: But then inflation, I mean, I'll use the term, I
Speaker 5: don't care transitory, I mean, is it because of the
Speaker 5: war here, and if the war backs off, we got
Speaker 5: energy coming back down, maybe not the pre war levels,
Speaker 5: but certainly coming down. And there you go.
Speaker 4: I really think this is hard to say that this
Speaker 4: is transitory, especially when you look at core inflation, so
Speaker 4: headline inflation, which the FED doesn't concentrate as much on there.
Speaker 4: You can make a very good argument. But you know,
Speaker 4: when you look at how much the Straight of hor
Speaker 4: Mooz and the energy price bump is hitting core inflation,
Speaker 4: probably no more than a tenth of a percent or so,
Speaker 4: so that's pretty small.
Speaker 3: I think what we're seeing.
Speaker 4: Is a much more classic sort of econ one oh
Speaker 4: one overheating of the economy, where there's a huge amount
Speaker 4: of one could say, price insensitive demand from hyperscalers for
Speaker 4: everything chip related, and that is outstripping supply and therefore,
Speaker 4: with demand outstripping supply, prices arising. And I think it's
Speaker 4: it's really hard to make a case that this is Straight.
Speaker 3: Of hor Moves related.
Speaker 4: Again, and key thing here, inflation on a core basis
Speaker 4: would be at or very close to the level it
Speaker 4: is right now, even had the Straight of Horror Moves
Speaker 4: not ended up being closed.
Speaker 2: Do we think, Okay, that's really interesting.
Speaker 5: That's a bit. If I'm mister Warsh, I'm like, now
Speaker 5: what do I do?
Speaker 4: That?
Speaker 2: Just did an out of rear and for j Jimmy
Speaker 2: Taylor out of Stanford, one of my first first supporters,
Speaker 2: And we have this architecture of certitude of a two
Speaker 2: percent inflation? Where did that go? I mean we are
Speaker 2: miles from a trend line two point x percent statistic.
Speaker 4: Yeah, we're I mean, this is going to be the
Speaker 4: sixth consecutive year with a what.
Speaker 2: Would Martin Feldstein say? You with the privilege you know
Speaker 2: I got, I knew Martin. Professor feltsay, well, we grieve
Speaker 2: his loss every day you worked the grind with Feldstein?
Speaker 2: What would he say?
Speaker 4: He certainly is missed, and I think he would almost
Speaker 4: certainly be calling for rate hikes at this point. And so,
Speaker 4: you know, I think the argument, the dubbish argument that
Speaker 4: Warsh and others who are doves will make is that
Speaker 4: they see disinflation coming because of the fading of the
Speaker 4: tariff effect, because of AI being disinflationary. But you know,
Speaker 4: we've heard these arguments a year after year now for
Speaker 4: six years. And where are we We're again well above
Speaker 4: target and if anything moving in the wrong direction on inflation.
Speaker 2: Paul, this is serious stuff. We're but numbed by it, Paul,
Speaker 2: and I Aron numb. Alexis is not numb because we
Speaker 2: have Tito's and Tang on this side of the studio.
Speaker 2: But I mean, this is serious stuff.
Speaker 5: Serious inflation, and I don't see it going anywhere. Labor market,
Speaker 5: what's your sense of the labor market.
Speaker 3: Labor market is in somewhat of a goldilock zone.
Speaker 4: So obviously we got a fantastic print just last week.
Speaker 3: Now, if we took that print just at face.
Speaker 4: Value, the NFP, I mean, it would actually look like
Speaker 4: the labor market might be overheating. A lot of that
Speaker 4: stuff was temporary, so we had a big bump in
Speaker 4: state and local that's that's probably just a statistical noise
Speaker 4: sort of thing. And then leisure and hospitality that may
Speaker 4: well have been related to the upcoming World Cup, so
Speaker 4: that's unlikely to be keep going.
Speaker 3: But still, you know, even taking those.
Speaker 4: Out, we're sort of right where we want to be
Speaker 4: at low hundred thousand sort of jobs.
Speaker 3: And yeah, are you.
Speaker 2: Going to be in the numurrors seats down low? Oh? Yes,
Speaker 2: Sun or are you going to be in the nu
Speaker 2: Mura box.
Speaker 3: To be determined?
Speaker 2: Yeah, David, thank you so on David Seed This with
Speaker 2: Namura can't say enough about his work, just exquisite research
Speaker 2: notes from Namua. Stay with us. More from Bloomberg Surveillance
Speaker 2: coming up after this.
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Speaker 2: Emrita send joins us from London. Imrit I'm just going
Speaker 2: to cut to the chase. A lot of people predicted
Speaker 2: a spike, a surge, a jump in Brent crude. There's
Speaker 2: a rationalization now of why that has not happened. Does
Speaker 2: our audience still need to get used to much higher
Speaker 2: oil prices.
Speaker 6: Down the line? Yes, Tom agreed. I'm in New York
Speaker 6: right now, been seeing clients here and that's exactly the
Speaker 6: question everyone's asking, you know, why are we not higher?
Speaker 6: What have we missed? People are misconstruing this as a
Speaker 6: demand must be super weak, because if we've lost twelve
Speaker 6: million barrels for plus of production, then that's the only
Speaker 6: way to rationalize it. The reason is we have we
Speaker 6: had a really big buffer of oil, four hundred million
Speaker 6: barrels of stocks that we're still running down. And add
Speaker 6: to that four hundred million of SBR. So we did
Speaker 6: have and we still have that buffer. You know, we
Speaker 6: forget this time. I mean people were talking about us
Speaker 6: being at forty dollars right now. Remember for this year
Speaker 6: we were going to be three million barrels per oversupplied.
Speaker 6: So it's that overhang that we are running down. And
Speaker 6: that's what the market's almost forgotten about. Once that's true, yes,
Speaker 6: of course prices will be going higher. But then the
Speaker 6: question is how long does this gone for?
Speaker 2: Well with the energy aspects rigor do you have an
Speaker 2: xxis Paul wants to the week when the vest when
Speaker 2: the vestment becomes expensive.
Speaker 6: I'd say we still have a couple more weeks, right,
Speaker 6: It's more like weeks or months. It's in July that
Speaker 6: on our numbers we start to get like you know,
Speaker 6: critical levels between en July and end August, depending where
Speaker 6: you are, what buying and so on.
Speaker 5: Amrito, if we were to get an end to the
Speaker 5: hostilities today, do we have a sense of when the
Speaker 5: golf would be back up and running, and the oil
Speaker 5: would be free flowing, and we'd have it back to
Speaker 5: somewhat of a normalized market.
Speaker 6: That's actually the million dollar question. And I think the
Speaker 6: market there is getting very complacent. I've seen some reports
Speaker 6: that are it's going to be much quicker to recover.
Speaker 6: I was just in the Middle East and everyone there
Speaker 6: said that the damage to infrastructure has actually been a
Speaker 6: lot more than people have let on because for obvious reasons, right,
Speaker 6: and I think it's not an overnight thing. The tankers
Speaker 6: are in the wrong place. How the tankers are here
Speaker 6: in the US, they need to reapers tankers. The owners
Speaker 6: are still very cautious because of casualty. You know, despite
Speaker 6: the cease file, you still get these occasional ships being hit.
Speaker 6: Mines the other issue, and production is not a light switch.
Speaker 6: It takes a few months. Now some countries like Ua,
Speaker 6: even Iraq and Kuwait now are starting to kind of
Speaker 6: let some vessels. They're managing rather to get some vessels out.
Speaker 6: That means they are going back in there seeing what
Speaker 6: damage is so it won't be like too long. But
Speaker 6: you know, officially they've still come out and said months,
Speaker 6: not weeks, like it's going to be three four five
Speaker 6: months before production fully recovers, if not longer.
Speaker 5: Is there a sense in that part of the world
Speaker 5: in Marina that they need to de risk the straight
Speaker 5: up for moves. I don't know if it's through pipelines
Speaker 5: or other ways to get the crewed out of that
Speaker 5: region of the world. Is there any plan there to
Speaker 5: change how that works?
Speaker 6: Absolutely? That was probably one of the biggest points of conversation.
Speaker 6: And I think how the Arabia really stands out there
Speaker 6: right like they already had invested inspect kind of alternative capacity,
Speaker 6: and they've always said, look, we don't get paid for
Speaker 6: it until we do right. And I think the Kingdom
Speaker 6: is probably the least affected because of the East West pipeline.
Speaker 6: They are coming up with four pumping stations that makes
Speaker 6: the flow of that pipeline actually sustained at seven million
Speaker 6: barrels per day right now it's more like six. They're
Speaker 6: tweeting two gas lines gas pipelines to also flow crude.
Speaker 6: They're going to dredge the port so they can do more.
Speaker 6: Kuwait and Iraq a talking to them about new pipelines
Speaker 6: through Saudi Arabia. I think in two to three years time,
Speaker 6: that entire region will look different. You as also already
Speaker 6: got that second pipeline going.
Speaker 2: Yeah, absolutely, Amrida. One final question, and we know you've
Speaker 2: got to get off to Energy Aspect meetings this morning.
Speaker 2: Karg Island, Okay, I get it, it's a thousand miles
Speaker 2: some Israel and all that. But are we doing a
Speaker 2: sort of kind of like war because we don't want
Speaker 2: to easily take out this incredibly important important oil hub
Speaker 2: for Iran.
Speaker 6: Now you're asking why they haven't taken it out, I'll
Speaker 6: go with.
Speaker 2: That, or when or what's Amrita sent take on the
Speaker 2: importance of carg Island. It's super important.
Speaker 6: You know, we've actually we've actually just acquired a company
Speaker 6: called Chios and their satellite base and they're literally going
Speaker 6: through tank by tank. How much is there and carve
Speaker 6: is Iran's lifeline in terms of how much oil sits there.
Speaker 6: They have been managing to get oil down there because
Speaker 6: they're still getting shipped through the US blockade right. That's
Speaker 6: been amazing to watch. I think, Look, kinetic action is
Speaker 6: not something the US wants to do or anybody wants
Speaker 6: to do right now, because the Iranian IRGC in particular
Speaker 6: has shown their asymmetric powers damaging infrastructure in the region.
Speaker 6: And you know they are the kind of people. They
Speaker 6: really believe in Scott Shreth. If they can't have it,
Speaker 6: nobody else can have it. And I think there is
Speaker 6: some real risks to again kind of restarting kinetic action,
Speaker 6: and that's why the US is backed off.
Speaker 2: Amrita. So and thank you, thank you, k appreciate it.
Speaker 2: Look forward to speaking to you way more often into
Speaker 2: two thousand and twenty seven. Brilliant research with energy aspects.
Speaker 2: The minutia of what she does is just really really
Speaker 2: uncommonly good. Stay with us. More from Bloomberg Surveillance coming
Speaker 2: up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 1: or watch us live on.
Speaker 2: YouTube Pleazanne Saunders joins, so should we try it around
Speaker 2: Bloomberg Money Friday twelve, It's is okay, it's okay, so
Speaker 2: we said, let's get her back. So Lizene Saunders here
Speaker 2: and I hate it. It's now midyear review. We're in
Speaker 2: God's name to twenty twenty six. Go there we are.
Speaker 2: How do you write a midyear review given the noise
Speaker 2: out there?
Speaker 7: Well, we always start with a right, what did we
Speaker 7: say for the full year? And what did we get right?
Speaker 7: What did we get wrong? And as you guys know,
Speaker 7: Kevin and I work on it together. He kind of
Speaker 7: tackles the economic side and I tackle the market side.
Speaker 7: You know, sometimes it's frustrating because in this instance, you know,
Speaker 7: we like to put them out before the end of June,
Speaker 7: and I think one of the missing links that would
Speaker 7: otherwise be in a report like this would be about
Speaker 7: FED policy, especially under a new FED share, but we
Speaker 7: had to get them out beforehand, so you just sort
Speaker 7: of take stock of the year so far. And we're
Speaker 7: not market timers, so we're we're not out there trying
Speaker 7: to time inflection points in the market, but just share
Speaker 7: some perspective, and we think the macro environment looks decent.
Speaker 7: Neither side of the Fed's mandate is suggesting they should
Speaker 7: be even considering easing policy here, and I think that's
Speaker 7: the right stance. But I think that's going to be
Speaker 7: the most fascinating thing is this first meeting and what
Speaker 7: worsh has to say about how he's going to think
Speaker 7: about running the FED.
Speaker 5: The good news is that earnings are driving this market.
Speaker 5: Maybe the less good part of it is it's kind
Speaker 5: of concentrated here. We get that concentration risk that's come
Speaker 5: back into the marketplace. How do you guys think about that?
Speaker 7: Yeah, well, we've written and spoken about concentration within the
Speaker 7: market in terms of performance. But you're right, Paul, there's
Speaker 7: a lot of concentration within the earning story. Now, the
Speaker 7: AI story and the infrastructure component of that has broadened
Speaker 7: out into areas like materials and industrials, but.
Speaker 3: You still have a relatively.
Speaker 7: Small handful of names that sit behind the huge surge
Speaker 7: in what were first quarter earnings, which contributed to a
Speaker 7: big jump in full year earnings. We were before reporting
Speaker 7: season started, we were in the teens in terms of
Speaker 7: estimates for calendar year twenty twenty six, and that's up
Speaker 7: to twenty five percent right now. So the bar has
Speaker 7: set high.
Speaker 2: We got a massive Dow Jones Industrial average draw down
Speaker 2: of one point sixty six percent from the record. Hi,
Speaker 2: you've got a piercing single sentence that three percent of
Speaker 2: SMP five hundred are hitting fifty two week highs. Have
Speaker 2: you ever seen this before? No, so discuss this is
Speaker 2: really this is the key question for me.
Speaker 7: And by the way, it's it's only about twenty percent
Speaker 7: of SMP constituents that are outperforming the index itself over
Speaker 7: the past couple of months. Now in the past week
Speaker 7: there's been a little bit of breath improvement, but we
Speaker 7: do have an incredible concentration in terms of performance. The
Speaker 7: one thing I wanted to point out though, when we
Speaker 7: discuss the megacaps and their contribution to a cap weighted
Speaker 7: index like the S and P five hundred, an example
Speaker 7: would be in Nvidia, which I think is still the
Speaker 7: fifth largest contributor to S and P five hundred returns,
Speaker 7: but it's not even ranked in the top one hundredth
Speaker 7: within the S and P in terms of price performance.
Speaker 7: And that's an important message for individual investors because I
Speaker 7: think sometimes they feel that they have to be in
Speaker 7: say a cohort like the Magnificent seven, But there's a
Speaker 7: big difference between contribution to return and actual price performance.
Speaker 7: So there's one hundred plus stocks performing better than the
Speaker 7: alphabets and the NVIDIAs of the world. They're just large
Speaker 7: contributors by virtue of the multiplier of their cap size.
Speaker 5: So I mean, what are your schwab I mean you
Speaker 5: and Kevin, you're on the road all the time talking
Speaker 5: to your schwap clients. What's the big issue today?
Speaker 2: What's there? Is it?
Speaker 3: Fomo?
Speaker 2: Is it? You know?
Speaker 5: I don't understand AI, what's the big issue that you get?
Speaker 3: Some of it is age dependent.
Speaker 7: I think the FOMO is more prevalent among the younger investors.
Speaker 7: I would say that then, lately, a lot of questions
Speaker 7: on the IPOs okay, and you know much to your
Speaker 7: chagarn there, and it's not something I can talk about
Speaker 7: with any kind of specificity. I would say for our
Speaker 7: more seasoned investors, still the number one question that we
Speaker 7: get is on debt and depicite.
Speaker 3: Really without a doubt.
Speaker 5: But you and I have been in the market soon
Speaker 5: amount of time. It's never been an issue as long
Speaker 5: as people keep showing up to the Fed and our
Speaker 5: trade free and behind our debt.
Speaker 7: For whatever reason, I think the investor class cares deeply
Speaker 7: about this subject. I think the average constituent maybe cares
Speaker 7: about it in the abstract, but they don't tend to vote.
Speaker 2: Based on it.
Speaker 7: So as a result, something that those in Washington on
Speaker 7: both sides of the aisle just continue to play nice
Speaker 7: with the kick the can down the road?
Speaker 2: Can I sink you sure? There's all these fossil eggs
Speaker 2: out there. And I saw Springsteen the other day and
Speaker 2: he's just absolutely phenomenal. He did not mail it in
Speaker 2: never September of nineteen eighty. Ready, forty six years ago
Speaker 2: we lost John Bonham and they have the courage to
Speaker 2: say it's just never going to be the same. I mean,
Speaker 2: they really led Zeppelin, Lizanne's you should see her living them.
Speaker 2: The merchis the collector. I'm some unbelievable player. They have
Speaker 2: the courage then to just say, we're not going to
Speaker 2: fake it.
Speaker 7: That's right, and you know, but what's also interesting is
Speaker 7: the unwillingness, at least on Robert Plant's part, to do
Speaker 7: some sort of get back together because John bottom Son
Speaker 7: Jason is an extraordinary drummer. And they did it the
Speaker 7: one time at O two and two thousand and seven
Speaker 7: tribute Costs.
Speaker 5: They sold their catalog like a lot of other I
Speaker 5: don't believe.
Speaker 2: Trust be the underwriter. Yeah yeah, okay, but then Rush
Speaker 2: comes out with Anika. Now, so they're just starting a
Speaker 2: brand new tour with Neil Perth dying. They they're trying
Speaker 2: to do it. It's very cool what's going on out there.
Speaker 7: And they got the Stones still doing it.
Speaker 2: Ye are we seeing the Stones this summer? I don't
Speaker 2: even know.
Speaker 7: Are they I don't know if they're I've seen them
Speaker 7: so many times, but I.
Speaker 5: Mean, it's that's the only way, well, one of the
Speaker 5: few ways left for these folks to make money.
Speaker 2: My biggest my biggest agony of this, sitting on a
Speaker 2: bed at Rochester is to do detechnology looking at Steroay
Speaker 2: to Heaven and that album and saying, what is this is?
Speaker 2: Jimmy Page just didn't go forward like Robert Plant did
Speaker 2: with Alison Kraus, right and all that, and that's so?
Speaker 2: Is that a good segurity? What do you doing?
Speaker 7: I like that to do that sec that won't show
Speaker 7: up right exactly.
Speaker 2: Well, thank you so much for coming in. But the
Speaker 2: do you have a vision into twenty seven? I don't.
Speaker 7: I don't, No, I think not, other than I think
Speaker 7: that there's a greater connection now between the bond market
Speaker 7: and the stock market, pretty significant inverse correlation between bond
Speaker 7: yields and stocks I think the bond market is keying
Speaker 7: more off the inflation side of things and on the
Speaker 7: employment side of things, And as long as that stays
Speaker 7: the case, I think that inverse correlation is maintained.
Speaker 2: Thirty year round five point zero two percent. Liz Ane Saunders,
Speaker 2: Thank you, Thank you, Thank you. Stay with us. More
Speaker 2: from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
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Speaker 2: Nature putell rights really smart notes for parametric It's about
Speaker 2: like the dynamics of municipal bonds, our muni bonds like
Speaker 2: everything else, if it's priced down, yield up our muni's
Speaker 2: like government's full faith and creditor, you know, corporate bonds.
Speaker 2: Recently of muni price gone down because everybody else's bill
Speaker 2: note in bond prices have gone down.
Speaker 8: So I would say we had a little bit of
Speaker 8: a hiccup. Obviously, as a war started, right we saw
Speaker 8: treasury yields increase, prices down. That did affect markets generally
Speaker 8: across the board in the fixing.
Speaker 3: Cop cyberunies as well.
Speaker 8: Of course, now always it's never going to be a
Speaker 8: linear move Directionly you could expect it to go into
Speaker 8: the similar direction. The one nuance with munis different than
Speaker 8: treasuries in corporate markets is that your primary buyer base
Speaker 8: are high net worth individuals typically or retail investors. And
Speaker 8: that is what we saw last year as being a
Speaker 8: really big catalyst for a lot of the underperformance. A
Speaker 8: lot of supply and not a lot of demand. We
Speaker 8: talk about technicals in the meuni market. Now, Tommy has
Speaker 8: a good question. I think what's changed this year is
Speaker 8: that we've seen the demand pick up, right, So we've
Speaker 8: had a tremendous inflow cycle in munis, the second highest
Speaker 8: since nineteen ninety two. Now why is that? It's because
Speaker 8: you'lls start getting attractive enough. Right, you have clients who
Speaker 8: are looking to move out of cash high tax brackets, Paul,
Speaker 8: We always talk about New Jersey tax equivalent to eels there. Tom,
Speaker 8: I think you have a MUNI account. But you know,
Speaker 8: when you start to see on a risk reward basis,
Speaker 8: yields getting this attractive, you start to see the inflows
Speaker 8: kind of begin. So that has been incredibly supportive so
Speaker 8: far this year to where as of late we've actually
Speaker 8: seen muni eels come down and prices.
Speaker 2: That's where because Paul's walking around different, he's very happy,
Speaker 2: a bigger smile, very happy.
Speaker 5: So there's demand there, but there's also a ton of supply.
Speaker 5: It seems like record years of visions in twenty four,
Speaker 5: twenty five, house twenty six shipping up.
Speaker 8: So twenty six we had a record year last year.
Speaker 8: So far year to date we're actually versus the same
Speaker 8: time last year, slightly higher now now. So expectations you
Speaker 8: know from underwriters on the street is that we will
Speaker 8: likely be at twenty twenty five levels when we close
Speaker 8: out the full year, could even be slightly higher. The
Speaker 8: reality is that there's a lot of pent up to
Speaker 8: make and right for infrastructure needs, and so when the
Speaker 8: economy is on a stable footing look as we are
Speaker 8: seeing currently, there's more confidence for issuers to issue debt right,
Speaker 8: balance sheets are healthier, and again again across all sectors,
Speaker 8: you're seeing that to generally be the trend. Again, the
Speaker 8: biggest caveat is if demand is sustainable. If demand stays strong,
Speaker 8: then that will help absorb the supply, which is exactly
Speaker 8: what we've seen us is this is this refinancing or
Speaker 8: is this new borrowing in the meunium market. So some
Speaker 8: of this is refinancing, but a lot of this is
Speaker 8: also going to be new borrowing as well, So it
Speaker 8: is a combination, but a good portion of this is
Speaker 8: going to be new money issues that we're seeing across
Speaker 8: the board. Again, if you look at kind of you know,
Speaker 8: the trends over the past few years, we have seen
Speaker 8: just an increased demand for infrastructure infrastructure needs. You know,
Speaker 8: I will kind of integrate AI and AI kind of
Speaker 8: capex spending that is happening. So you know, as these
Speaker 8: actual physical warehouses and storage units are being built out,
Speaker 8: you also need supportive right utility infrastructure needs to help
Speaker 8: with this. So that's just one of the elements that
Speaker 8: you're seeing. And look in the MENI market, issuers are
Speaker 8: never timing rates. It is very difficult to do. So
Speaker 8: if they have a need, they can finance it. If
Speaker 8: they got voter approval, they're going to come to the
Speaker 8: market tissue. But again, you know, with even the recent rally,
Speaker 8: we still see an opportunity here in Munis and I
Speaker 8: think for the foreseeable future. In these summer months, we
Speaker 8: should see demand side hold up pretty well.
Speaker 5: I haven't seen much credit quality issues out there. I
Speaker 5: haven't seen a Puerto Rico kind of blow up or
Speaker 5: or I don't know, how's credit quality out there?
Speaker 8: Yes, good, good question, And I think that's another reason
Speaker 8: for really the supportive demand. I think generally the credit
Speaker 8: story has been very strong. You still are seeing, you know,
Speaker 8: net more upgrades than downgrades across most sectors. Again, the
Speaker 8: economy has been very strong, so think about that across
Speaker 8: the board. Tax collections are high across the board. These
Speaker 8: kind of geo cities, town states have built up very
Speaker 8: strong reserve levels and strong balance sheets. But again I
Speaker 8: would say professional credit management is still key here. Sector
Speaker 8: bisector story, healthcare, higher education, airports, It's all going to
Speaker 8: depend upon the sector.
Speaker 2: I saw you in the third row last night at
Speaker 2: the next game. There's such a bond nerd that you know,
Speaker 2: you don't look at this like we do. Yankee Stadium
Speaker 2: and the city field were MUNI bond transactions, right, But
Speaker 2: MSG's wacko and wasn't is that there's not like MSG.
Speaker 8: There's not MSG UNI bonds correct, Correct.
Speaker 2: They don't texting, I don't understand.
Speaker 8: Right, so Yankee Stadium, they will issue through a muni
Speaker 8: conduit Madison Square Garden. I have not seen that ever be.
Speaker 2: Exception, but it's a nineteen eighty tru state law. They
Speaker 2: have a permanent one hundred property tax exemption.
Speaker 5: Yeah, I guess so, I mean people want to move
Speaker 5: Madison Square Garden. Good luck with that better.
Speaker 2: People have tried.
Speaker 5: So talk to us about just kind of the FED.
Speaker 5: There's a municipal bond market. How much does a muni
Speaker 5: bond market care about the FED and what it does.
Speaker 3: That's a great question.
Speaker 8: So when we started this off, Look, munis are going
Speaker 8: to be dependent on just overall rate picture, right, and
Speaker 8: treasury rates for that matter, directionally, typically in the same direction,
Speaker 8: and we've seen this over the past few years. You
Speaker 8: see a major uptake in treasury yields, you see volatility.
Speaker 8: Munis have typically underperformed in those markets. So my answer
Speaker 8: is on the FED side, it is very important in
Speaker 8: the sense that it's important for the treasury market and
Speaker 8: just on the directional move of where rates go. Now,
Speaker 8: obviously we've seen an uptake and short end rates because
Speaker 8: of the market now increasingly pricing in rate hikes, right,
Speaker 8: So the market is saying, look, the fetis is off.
Speaker 8: They're wrong. Rates are not restrictive enough. Next week is
Speaker 8: a big meeting that is going to be a big one.
Speaker 8: So any market reaction from that, particularly in the treasury market,
Speaker 8: could be a catalyst for a move on the Meani side.
Speaker 2: Nischa Hotel, thank you so much. Sma fixed income portfolio
Speaker 2: manager at Parament, greatly appreciate that.
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