WEBVTT - Surveillance: Narrative Ping Pong in the Bond Market 0:00:05.080 --> 0:00:07.200 This is the Bloomberg Surveillance Podcast. 0:00:07.680 --> 0:00:08.280 I'm Lisa A. 0:00:08.320 --> 0:00:11.640 Brahmoids along with Tom Keene and Jonathan Ferrell, join us 0:00:11.680 --> 0:00:15.280 each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:19.480 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:19.600 --> 0:00:22.840 Spotify and anywhere you get your podcasts, and always on 0:00:22.880 --> 0:00:26.440 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:26.920 --> 0:00:30.520 We're just seeing one narrative after another torpedoed in actuality 0:00:30.520 --> 0:00:34.000 because of all of the different myriaded factors that are 0:00:34.000 --> 0:00:34.519 playing into this. 0:00:34.640 --> 0:00:35.479 It is mind spinning. 0:00:35.600 --> 0:00:37.640 Let's try and come up with a theory with Mandy Zoo, 0:00:37.760 --> 0:00:40.919 vice President, Global head of Derivative Markets Intelligence over at 0:00:40.960 --> 0:00:42.360 Sea by Markets. Mandy, goodmorning to you. 0:00:42.479 --> 0:00:44.839 Good morning. I'll take a stab at then the narrative 0:00:44.880 --> 0:00:45.479 ping pine. 0:00:45.400 --> 0:00:47.560 Or pickleball or whatever. But Ima wants to call it okay, 0:00:48.360 --> 0:00:51.560 Max Katna HSBC said this morning, Lixa quotes of it. 0:00:51.880 --> 0:00:54.200 I'll cite it right now. The Move index is the 0:00:54.240 --> 0:00:56.560 new risky asset fear gauge. What would you say back 0:00:56.600 --> 0:00:56.840 to that? 0:00:57.320 --> 0:01:01.760 So certainly bond volatility is the highest across asset classes 0:01:01.840 --> 0:01:03.480 right now, But I don't think it is the only 0:01:03.520 --> 0:01:06.200 measure that investors are looking at. And obviously I'm not 0:01:06.240 --> 0:01:07.760 just saying that because I worked for the c BOW, 0:01:07.840 --> 0:01:10.080 but I would say the VIX index more so than 0:01:10.120 --> 0:01:12.360 any other, is what traders have up on their screen. 0:01:12.640 --> 0:01:14.200 But to be fair, you know, I think right now 0:01:14.240 --> 0:01:18.160 we need to look across multiple asset classes, rates, equities, credit, 0:01:18.240 --> 0:01:20.880 right We recently launched the credit VIX and decease to 0:01:20.920 --> 0:01:24.520 give investors a better gauge to measure credit volatility. All 0:01:24.560 --> 0:01:27.039 of these are important asset classes to watch for as 0:01:27.080 --> 0:01:29.600 we kind of go into the potential end of cycle. 0:01:29.800 --> 0:01:32.000 You know, as we talk about recession versus soft land, is. 0:01:32.000 --> 0:01:33.920 There anything about the price action the most we saw 0:01:34.000 --> 0:01:35.640 last week that would give you some indication as to 0:01:35.640 --> 0:01:37.200 whether it's sustainable or not. 0:01:37.720 --> 0:01:40.200 So to me, the price action of the past not 0:01:40.319 --> 0:01:41.480 just last week, but. 0:01:41.480 --> 0:01:43.760 The past two month has been extremely telling in terms 0:01:43.840 --> 0:01:46.760 of what the pain points are in people's portfolio. And 0:01:46.800 --> 0:01:48.920 it's not to the downside, right the pullback that we 0:01:48.920 --> 0:01:52.280 saw in September. In October, we're very very orderly, and 0:01:52.280 --> 0:01:57.080 that's because coming into the fall, the consensus investor expectation 0:01:57.320 --> 0:01:59.400 was for a pullback, and what you really saw the 0:01:59.400 --> 0:02:02.120 pain wasat week in the snatback rally, right, we saw 0:02:02.120 --> 0:02:05.720 people actually scramble for that upside because they weren't positioned 0:02:05.720 --> 0:02:07.639 for it. So if you look at for example, SMP 0:02:07.920 --> 0:02:11.040 put call ratio hit almost one year low as people 0:02:11.080 --> 0:02:13.400 were kind of buying those upside calls to really get 0:02:13.440 --> 0:02:14.720 that upside exposure that. 0:02:14.639 --> 0:02:15.880 They don't have in their portfolio. 0:02:16.280 --> 0:02:18.760 I love this by the way, that the pain trade 0:02:18.840 --> 0:02:21.400 is when things do too well, and that people got 0:02:21.520 --> 0:02:23.880 knocked out because there was a rally well. I mean, 0:02:23.919 --> 0:02:25.880 this is sort of where we are in this moment 0:02:26.040 --> 0:02:28.480 of upside down and downside up. But my question to 0:02:28.520 --> 0:02:30.680 you is have we washed that out? Are we done 0:02:30.800 --> 0:02:33.240 with the positioning that causes the pain trade to be 0:02:33.320 --> 0:02:34.720 further upside. 0:02:34.440 --> 0:02:35.000 I don't think so. 0:02:35.040 --> 0:02:37.440 I think the again were talking about the narrative ping palm, 0:02:37.480 --> 0:02:40.240 but I do think the consensus and even though economists 0:02:40.240 --> 0:02:42.560 have shifted to soft landing, I think if you talk 0:02:42.639 --> 0:02:46.000 to investors, everyone is still so bearish and the positioning 0:02:46.040 --> 0:02:48.240 to me, it's going to take longer to really wash 0:02:48.280 --> 0:02:50.160 out than what we saw last week. And that's why 0:02:50.160 --> 0:02:52.840 we're seeing that durable demand for those upside calls in 0:02:52.880 --> 0:02:53.400 the S and P. 0:02:53.600 --> 0:02:57.480 When we talk about upside, are we talking big tech upside? 0:02:57.520 --> 0:03:00.400 That that basically is what people have not loved because 0:03:00.400 --> 0:03:03.680 they've believed that higher yields might take away some of 0:03:03.680 --> 0:03:06.760 that valuation. That people are being forced to buy those 0:03:06.800 --> 0:03:07.320 once again. 0:03:07.960 --> 0:03:10.040 I think part of it there certainly has been. I 0:03:10.040 --> 0:03:13.640 think one of the distinguishing features of this year's price 0:03:13.680 --> 0:03:16.280 action has been the incredible sector dispersion. And we talked 0:03:16.280 --> 0:03:19.280 of the narrative ping pong, the ping pong between sector leadership. 0:03:19.360 --> 0:03:22.040 Right last year tech down forty this year tech up, 0:03:22.080 --> 0:03:25.400 you know, thirty forty percent. That changing sector leadership. That 0:03:25.520 --> 0:03:27.960 high dispersion in the market is part of the reason 0:03:27.960 --> 0:03:30.360 why volatility in the equity market and the index level 0:03:30.520 --> 0:03:33.000 has been so muted, is because of those wild swings 0:03:33.000 --> 0:03:35.600 that we're seeing at the sector and the stock level. 0:03:35.760 --> 0:03:38.840 How correlated have the bond and stock moves been, in 0:03:38.880 --> 0:03:39.600 other words. 0:03:39.360 --> 0:03:40.960 Is they're just a direct read through. 0:03:41.280 --> 0:03:45.680 Lower yields stocks rally, higher yields stocks meander because people 0:03:45.680 --> 0:03:46.920 aren't positioned in them too much. 0:03:46.960 --> 0:03:49.040 So if we zoom out from just the past week 0:03:49.080 --> 0:03:52.480 and look at over the past year, it's been incredibly unstable, 0:03:52.720 --> 0:03:54.840 So that's I think the key feature is the equity 0:03:54.880 --> 0:03:58.960 bond correlation has not normalized to what people are used 0:03:59.000 --> 0:04:01.360 to and because of the instability, I think as one 0:04:01.400 --> 0:04:04.080 of the reasons we're seeing more and more people gravitate 0:04:04.120 --> 0:04:08.120 toward equity specific hedges or options, right because if fixed 0:04:08.160 --> 0:04:11.560 income is no longer diversifying your equity're risking your portfolio, 0:04:11.640 --> 0:04:14.120 you need to look at more specific hedges, so you know, 0:04:14.160 --> 0:04:17.400 buying those SMP puts or other types of hedges. I 0:04:17.400 --> 0:04:18.960 think that's kind of been the trend, and that's why, 0:04:19.040 --> 0:04:21.960 you know, option volumes have been hitting record highs all year. 0:04:22.200 --> 0:04:24.840 A note they just caught my eye from City Andrew Hanenhorst. 0:04:24.880 --> 0:04:27.600 He said soft patch not soft lending. There's a difference. 0:04:27.839 --> 0:04:29.880 He says, rather than a steady slowing of job growth 0:04:29.920 --> 0:04:33.480 and inflation, our near term projections suggests a temporary soft patch, 0:04:33.760 --> 0:04:37.040 elevated inflation is likely to be more evident in upcoming data. 0:04:37.440 --> 0:04:41.760 Last week's reloosening of financial conditions also argues, in his eyes, 0:04:41.920 --> 0:04:45.640 against the moderation and activity and inflation. Mandy does that 0:04:45.800 --> 0:04:48.520 argue that we should be much more nimble as we 0:04:48.640 --> 0:04:50.800 work through this. At least some kind of mentioned this, 0:04:50.880 --> 0:04:52.560 and we were quite snarky about it earlier on in 0:04:52.560 --> 0:04:55.479 the program. It's difficult to make projections for the next 0:04:55.480 --> 0:04:57.800 twelve months. You can't cling to a theory at the 0:04:57.800 --> 0:05:00.880 moment when everything seems to change. It's painful. In bombs, 0:05:00.920 --> 0:05:03.400 you'll get whip sword in one direction and the next 0:05:03.400 --> 0:05:05.960 week whip sword in the other. Does that argue to 0:05:05.960 --> 0:05:08.599 be nimble? And what does that look like from your perspective? 0:05:08.680 --> 0:05:10.040 Yeah, so I alluded to earlier. 0:05:10.080 --> 0:05:14.200 So absolutely, the heightened macro uncertainty means investors do need 0:05:14.240 --> 0:05:16.440 to be nimble, and the way they're doing that is 0:05:16.440 --> 0:05:18.640 through using options right. And the way that I like 0:05:18.680 --> 0:05:20.880 to explain is if there's no uncertainty and you know 0:05:20.960 --> 0:05:23.240 stocks are going up, you just buy the underlying, right, 0:05:23.440 --> 0:05:26.080 you just buy the delta one instrument. It's when you're 0:05:26.200 --> 0:05:29.120 uncertain when you want to find risk reward right. You 0:05:29.160 --> 0:05:31.719 want to know what you're at. You're at risk of 0:05:31.800 --> 0:05:32.920 losing if you're wrong. 0:05:33.279 --> 0:05:35.200 That argues for using options right. 0:05:35.240 --> 0:05:37.720 If you buy call option, you know going into the trade, 0:05:37.800 --> 0:05:40.200 the max that you can lose is the premium pede 0:05:40.320 --> 0:05:43.080 I think that's why. You know, again, in this uncertain 0:05:43.120 --> 0:05:46.320 macro environment, even though it hasn't translated into higher levels 0:05:46.320 --> 0:05:49.800 of VIX, VIX being thirty day measure of uncertainty, that 0:05:50.240 --> 0:05:53.200 long term uncertainty has definitely led to more and more 0:05:53.200 --> 0:05:55.919 people using options to kind of define that risk reward 0:05:56.080 --> 0:05:58.359 to help manage that portfolio volatility. 0:05:58.440 --> 0:06:00.800 You touched on it there, just slightly. Yes, when you 0:06:00.839 --> 0:06:02.840 talk about volume and options, are we talking about zero 0:06:02.960 --> 0:06:03.600 day to expire? 0:06:04.080 --> 0:06:04.320 No? 0:06:04.320 --> 0:06:07.600 No, no, So people often think, okay, it's everything's coming 0:06:07.600 --> 0:06:11.479 from zero day to xpreoptions volume across all tenors or 0:06:11.800 --> 0:06:14.159 are growing higher, but obviously zero day has been the 0:06:14.160 --> 0:06:15.880 fastest growing segment. 0:06:16.080 --> 0:06:18.640 You've made the argument that's not something we should worry about. 0:06:19.120 --> 0:06:20.799 No, And because it's balanced. 0:06:20.800 --> 0:06:23.480 So people who make the argument that zero day options 0:06:23.560 --> 0:06:25.640 or what's driving the market, they look at the gross 0:06:25.720 --> 0:06:28.000 volume the notional volume, and they say, well, look it's 0:06:28.000 --> 0:06:29.200 five hundred billion a day. 0:06:29.240 --> 0:06:30.680 Of course that's what's driving the market. 0:06:30.960 --> 0:06:33.479 But if fifty percent of that is by fifty percent 0:06:33.520 --> 0:06:36.280 of the customer selling, then there's that zero impact, right, 0:06:36.360 --> 0:06:39.320 So the balance of that trading matters, and what we 0:06:39.400 --> 0:06:42.679 see is that it's incredibly balanced and because that's the case, 0:06:42.800 --> 0:06:44.680 there's actually very minimal market disruption. 0:06:44.839 --> 0:06:47.599 Mandy, this was great. Always is Mandy Zoo of Cibo 0:06:47.600 --> 0:06:53.760 and Mandy, thank you, Thank you. Michael. I literally with 0:06:53.760 --> 0:06:56.120 the serround of table to Ryan. Michael, I wish people 0:06:56.120 --> 0:06:57.919 could see your face as that Beast team was faking 0:06:58.040 --> 0:07:00.279 just to get some reaction. It's going to see you can. 0:07:00.520 --> 0:07:02.400 It's great to be here, John, Lisa good talk to 0:07:02.400 --> 0:07:02.720 you again. 0:07:02.839 --> 0:07:05.000 Well, thank you, buddy. You've had earnings out this morning. 0:07:05.120 --> 0:07:07.960 We've been talking about this dividend of four hundred million euros. 0:07:07.960 --> 0:07:10.000 We've got to talk about this relationship with Boeing. I 0:07:10.000 --> 0:07:11.720 want to share a couple of quotes with you and 0:07:11.720 --> 0:07:13.320 then try and get some clarity. So you said in 0:07:13.360 --> 0:07:15.920 the last week, if anything, it's getting worse. I would 0:07:15.920 --> 0:07:18.080 have been reasonably confident up until about a month ago 0:07:18.120 --> 0:07:20.400 that we'd get fifty seven aircraft by the end of June. 0:07:20.720 --> 0:07:23.440 I'm not confident. We heard from your CFO this morning 0:07:23.480 --> 0:07:25.280 said the worst case scenario is that we'll end up 0:07:25.320 --> 0:07:27.760 with growth of forty seven aircraft next summer instead of 0:07:27.760 --> 0:07:30.400 fifty seven. Help me understand where things are. What did 0:07:30.440 --> 0:07:32.600 you want and what do you think you're going to get. 0:07:32.760 --> 0:07:35.240 Yeah, I mean our case, Boy are contracted to deliver 0:07:35.280 --> 0:07:37.880 as fifty seven aircraft by the end of April twenty fourth, 0:07:37.880 --> 0:07:40.520 in other words, fifty seven editional aircraft for summer twenty four. 0:07:41.000 --> 0:07:44.240 At the moment that has slipped by the Spirit production issues, 0:07:44.280 --> 0:07:46.640 in which it's all Boy's own production issues in Seattle. 0:07:47.520 --> 0:07:50.080 I think now it looks like we'll get the leave 0:07:50.160 --> 0:07:52.400 us maybe ten short by about the end of June. 0:07:52.600 --> 0:07:54.800 We'll hopefully we get forty five fifty aircraft by the 0:07:54.880 --> 0:07:56.440 end of June. We said the boy, we're not taking 0:07:56.480 --> 0:07:59.080 planes in July and August because frankly we're too busy, 0:08:00.280 --> 0:08:02.520 but we're reasonably hopeful that we'll get forty five to 0:08:02.520 --> 0:08:04.720 fifty aircraft front they will leave us short. I think 0:08:04.760 --> 0:08:07.760 that's inevitable at this point in time, which means we'll 0:08:07.760 --> 0:08:10.080 have slightly slower growth next summer, but we'll still add 0:08:10.440 --> 0:08:13.160 forty five aircraft. It'll still be enough to enable us 0:08:13.200 --> 0:08:15.240 to grow traffic from one hundred and eighty three million 0:08:15.280 --> 0:08:18.480 passengers this year to just over two hundred million passengers. 0:08:18.520 --> 0:08:20.240 It's for a number you have in mind whereby you 0:08:20.280 --> 0:08:22.480 would have to cut capacity the next summer. 0:08:23.200 --> 0:08:23.680 There isn't. 0:08:23.720 --> 0:08:25.880 I mean we haven't yet announced for the capacity will 0:08:25.880 --> 0:08:27.240 be next summer. As we said this morning, we have 0:08:27.360 --> 0:08:30.360 ninety percent of our summer twenty four capacity already on sales. 0:08:30.400 --> 0:08:33.520 Strongforward booking is good pricing, but we can't commit to 0:08:33.559 --> 0:08:35.920 the last ten percent until we get a better picture 0:08:35.920 --> 0:08:38.760 from Boei. I speak weekly with Dave Calhoun. I think 0:08:38.800 --> 0:08:41.880 he's doing a good job in difficult circumstances. I have 0:08:42.000 --> 0:08:44.719 less faith in the management in Seattle, but I think 0:08:44.760 --> 0:08:46.240 you know, we're working closely with them. 0:08:46.280 --> 0:08:47.640 We have our own people in Seattle, we. 0:08:47.640 --> 0:08:50.720 Have our own people in Spurting, Whichito and anything we 0:08:50.760 --> 0:08:53.400 can do to expedite these deliveries will do because growth 0:08:53.440 --> 0:08:54.640 is so strong in Europe. 0:08:54.760 --> 0:08:56.920 What is it about the management in Seattle what they're 0:08:56.960 --> 0:08:57.480 getting wrong? 0:08:58.240 --> 0:09:00.720 I think there isn't enough focus there on a daily 0:09:00.760 --> 0:09:02.800 basis on how do we get in with these aircraft out. 0:09:02.920 --> 0:09:05.920 Everybody is kind of ringing their hands blaming Wichita. You 0:09:05.920 --> 0:09:07.920 know a lot of the issues are in Seattle as well. 0:09:08.000 --> 0:09:10.360 They need a more crisis I would like to see 0:09:10.400 --> 0:09:14.040 greater crisis management in Seattle and greater. 0:09:13.800 --> 0:09:16.280 Focus on quality control. If you. 0:09:16.280 --> 0:09:18.840 You know, I don't understand how Wichita spirit and which 0:09:18.880 --> 0:09:22.079 we're able to have this succession amount of production problems 0:09:22.280 --> 0:09:24.280 if Boeing's quality control was up to speed. 0:09:24.440 --> 0:09:28.280 Do you have options options in terms of what. 0:09:28.160 --> 0:09:29.200 Do you do if you don't want to work with 0:09:29.200 --> 0:09:29.880 Boeing anymore? 0:09:29.920 --> 0:09:31.800 I no, no, no, Let's say we want to work 0:09:31.800 --> 0:09:34.400 with Boeing. We're Boeing's biggest customer by a mile in Europe. 0:09:34.679 --> 0:09:37.559 We're a committed Boeing customer. Now, I would buy Airbus 0:09:37.600 --> 0:09:40.000 aircraft if they were five percent cheaper per seat than Bowing, 0:09:40.240 --> 0:09:41.640 but Boeing continue to beat. 0:09:41.440 --> 0:09:42.400 Airbus on pricing. 0:09:42.679 --> 0:09:45.160 The seventy three seven Max is a phenomenal aircraft, like 0:09:45.440 --> 0:09:47.360 we've we now this summer, we've flown one hundred and 0:09:47.400 --> 0:09:50.760 twenty five of the Max eight aircraft. We're carrying four 0:09:50.760 --> 0:09:53.840 percent more pastors but burning sixteen percent less fuel. You know, 0:09:53.880 --> 0:09:57.320 they're transformative in terms of the engine and aircraft efficiency. 0:09:57.679 --> 0:10:00.240 We've ordered three hundred Max tens, which will I was 0:10:00.240 --> 0:10:03.080 to carry two hundred and twenty eight passengers per fight 0:10:03.120 --> 0:10:06.400 and burn twenty percent less fuel. So they're making great aircraft. 0:10:06.640 --> 0:10:08.640 It's just they're not making them. On time or delivering 0:10:08.679 --> 0:10:09.040 them in time. 0:10:09.160 --> 0:10:11.040 Is it fair to say though, this is a relationship 0:10:11.040 --> 0:10:13.200 you're stuck with regardless of what it delivers next year. 0:10:13.640 --> 0:10:15.520 I mean, yes, you know we're committed to Boeing. 0:10:15.520 --> 0:10:18.000 If you look around the world, the aircraft manufacturers, I 0:10:18.000 --> 0:10:19.800 mean airbusts are no better than Boeing at the moment. 0:10:19.840 --> 0:10:22.480 Airbus are way behind on their deliveries too. You have 0:10:22.480 --> 0:10:24.880 the Part and Whitney engine, which is going to be 0:10:24.920 --> 0:10:27.760 a real crisis next summer across the A three twenty 0:10:27.760 --> 0:10:29.960 fleet in Europe. Yeah, the Part and Whitney engine is 0:10:29.960 --> 0:10:32.480 going to ground a significant number of Airbus aircraft next summer, 0:10:32.520 --> 0:10:35.640 So all of the aircraft manufacturers are challenged. We're a 0:10:35.679 --> 0:10:38.120 very proud Boeing customer. I think Boeing will get its 0:10:38.240 --> 0:10:40.640 act together. It's just taking a bit longer than we 0:10:40.640 --> 0:10:41.400 had originally hoped. 0:10:41.559 --> 0:10:44.040 In the meantime, how far can you jack up prices 0:10:44.080 --> 0:10:45.319 if capacity is constrained? 0:10:45.720 --> 0:10:47.360 I mean I think that the real issue for at 0:10:47.400 --> 0:10:49.160 least is not how much would we jack up prices? 0:10:49.160 --> 0:10:52.199 How much will Loftanza or France, IAG or BA keep 0:10:52.280 --> 0:10:54.920 jacking up prices? And the answer is a lot. You 0:10:54.960 --> 0:10:58.920 know your control estimate. This summer, Europe's operated about ninety 0:10:58.960 --> 0:11:01.800 four percent of pre COVID opacity. That includes US growing 0:11:01.840 --> 0:11:04.480 by twenty five percent. So take Ryan Air away. Europe 0:11:04.520 --> 0:11:06.959 still at less than ninety percent of pre COVID capacity. 0:11:07.320 --> 0:11:08.640 That's not changing next year. 0:11:08.800 --> 0:11:11.760 The aircraft manufacturers are delivering aircraft late the part and 0:11:11.800 --> 0:11:14.200 whitneys will mean five ten percent of the airbus street 0:11:14.200 --> 0:11:17.600 will be grounded. And consolidation Loftans will buy al Italians, 0:11:17.600 --> 0:11:19.440 somebody else will buy Tap and there'll be even less 0:11:19.440 --> 0:11:20.320 capacity on offer. 0:11:20.440 --> 0:11:22.280 Okay, so this is good news for you because you 0:11:22.320 --> 0:11:25.080 don't have to really have to try too hard to 0:11:25.120 --> 0:11:27.640 be the lowest cost aircraft while still raising prices. 0:11:27.679 --> 0:11:29.320 How much you're going to raise prices next year. 0:11:29.240 --> 0:11:31.920 We're price passive, load factor active. I think what's happening 0:11:31.960 --> 0:11:35.240 is how much Ifthansa or France Kalem will drive up fares. 0:11:35.520 --> 0:11:38.079 I think by a double digit number next year, it'll 0:11:38.080 --> 0:11:40.800 send even more people in the direction of Ryanair. People 0:11:40.840 --> 0:11:43.040 want to keep flying, families want to go on holidays. 0:11:43.080 --> 0:11:45.720 They just don't want to pay Luftansa's outrageous prices. So 0:11:46.080 --> 0:11:48.520 I think fares that next year I mean my operating 0:11:48.520 --> 0:11:51.440 assumptions fares will go by a low double digit percentage 0:11:51.440 --> 0:11:53.280 again through the summer twenty four. It'll be the third 0:11:53.400 --> 0:11:55.520 year in a row, third summer in a row, we'll 0:11:55.520 --> 0:11:57.520 see double digit fare increases in Europe. 0:11:57.600 --> 0:12:00.120 This is the first year in the first time that 0:12:00.160 --> 0:12:04.240 you're initiating a dividend. Yep, it's a four hundred pounds dividend. 0:12:04.800 --> 0:12:06.880 It is the first time. Does this mean that you 0:12:06.960 --> 0:12:08.800 have nothing else to do with that money? 0:12:09.120 --> 0:12:09.520 Essentially? 0:12:09.600 --> 0:12:11.360 Yes, you know, I mean, so the first time we've 0:12:11.400 --> 0:12:13.480 done it. We've done special difference in share buybacks. We've 0:12:13.480 --> 0:12:16.880 done about seven billion in share buybacks and special dividends. 0:12:17.000 --> 0:12:18.000 But you know, we're. 0:12:17.760 --> 0:12:20.000 Clearly generating a lot of cash at the moment. We've 0:12:20.000 --> 0:12:22.240 paid down about two billion in debt. We're down to 0:12:22.280 --> 0:12:23.800 our last two billion in bond debt. 0:12:23.840 --> 0:12:24.760 We'll pay that down. 0:12:24.600 --> 0:12:27.280 Over the next three years, and we're generating more cash 0:12:27.320 --> 0:12:28.200 that we know what to do with. 0:12:28.640 --> 0:12:29.920 We have specifical requirements. 0:12:30.000 --> 0:12:32.720 Firstly was to do pay increases for our people who 0:12:32.760 --> 0:12:34.880 worked with us during COVID. Secondly was to pay down 0:12:34.920 --> 0:12:38.440 the bonds, and thirdly is to fund aircraft deliveries. But 0:12:38.800 --> 0:12:41.400 we're running out of the existing order. We take the 0:12:41.440 --> 0:12:45.240 last aircraft in December twenty twenty four. The first of 0:12:45.280 --> 0:12:47.560 the Max tens doesn't arrive Toll January twenty seven, so 0:12:47.600 --> 0:12:48.280 we're looking. 0:12:48.120 --> 0:12:48.920 Into two or three years. 0:12:48.960 --> 0:12:51.880 So we have effectively very little uses for cash, and 0:12:51.960 --> 0:12:53.840 I think it's a commitment on our part. We'll return 0:12:53.920 --> 0:12:57.720 to shareholders. We won't squander it the way many other 0:12:57.760 --> 0:13:01.840 airlines do in m and A or buying hotels or whatever, 0:13:02.000 --> 0:13:06.679 or as Delta or as Delta would do giving monstrous 0:13:06.679 --> 0:13:08.920 pay increases to its pilots over the next four or 0:13:08.960 --> 0:13:12.480 five years. We need to keep our cost low, keep 0:13:12.520 --> 0:13:15.320 our efficiency high, and keep passing on on Beata Blair 0:13:15.320 --> 0:13:16.200 first to our customers. 0:13:16.280 --> 0:13:17.920 Do you think scheholders then can expect more of the 0:13:17.920 --> 0:13:19.280 same of the next few years. 0:13:19.320 --> 0:13:21.800 I think so as long as trading continues. You know, 0:13:21.920 --> 0:13:23.840 who knows what's going to happen in Ukraine or in 0:13:23.880 --> 0:13:25.640 the Middle East. But as long as we get a 0:13:25.679 --> 0:13:29.520 reasonable wind on trading, then I think we will continue 0:13:29.520 --> 0:13:32.800 to be very cash generitive and we will return large 0:13:32.840 --> 0:13:34.200 amounts of cash to shareholders. 0:13:34.240 --> 0:13:37.000 It's hard to know what is going to happen in Ukraine, 0:13:37.080 --> 0:13:38.800 in the Middle East. I don't expect you to give 0:13:38.880 --> 0:13:40.920 us a protection. I do want to understand, though, Are 0:13:40.920 --> 0:13:42.760 you seeing things slow down in any way, shype or 0:13:42.760 --> 0:13:45.280 form when you start to see these things escalate anything, 0:13:45.280 --> 0:13:45.920 that's all no. 0:13:46.080 --> 0:13:49.040 I anyway, we saw the initial when Russia invade Ukraine 0:13:49.080 --> 0:13:52.440 in February twenty twenty two, twenty two or three account 0:13:52.480 --> 0:13:54.800 remember you know, there's a sudden downturn in all of 0:13:54.800 --> 0:13:57.360 our traffic into Poland, Romania, those countries. 0:13:57.440 --> 0:13:59.960 It recovered after two or three weeks. We've had to suspend. 0:14:00.040 --> 0:14:02.320 We're suspending all flights. We've about thirty flights a day 0:14:02.360 --> 0:14:06.480 into Tel Aviv. They've been suspended until Christmas. So we 0:14:06.520 --> 0:14:10.480 do want to see those those scenarios resolve themselves. But 0:14:10.559 --> 0:14:13.920 the ultimate underlying trend across Europe we've locked up everybody 0:14:13.960 --> 0:14:15.920 for two years in COVID. They all want to go back, 0:14:15.960 --> 0:14:18.640 traveling families, want to go on holidays. We've just completed 0:14:18.640 --> 0:14:22.600 the October midterm break. We were still full, and I 0:14:22.640 --> 0:14:25.760 think what people want is to travel more. But there's 0:14:25.760 --> 0:14:28.280 only ninety percent of the pre COVID capacity. So in 0:14:28.280 --> 0:14:32.200 Europe you've constrained capacity, enormous demand and that is resulting 0:14:32.240 --> 0:14:34.240 in very strong prices, not just for Rhynder but for 0:14:34.280 --> 0:14:35.000 all of the airlines. 0:14:35.040 --> 0:14:36.920 And you're noticing getting right down. I hate to describe 0:14:36.960 --> 0:14:39.320 it as tried down from Bight to ryan abbat United 0:14:39.360 --> 0:14:40.200 saying anything like that. 0:14:40.320 --> 0:14:42.400 Not at the moment, but you know, I think it's 0:14:42.400 --> 0:14:45.160 inevitable if the next year or two, if consumers are 0:14:45.240 --> 0:14:47.040 under pressure, I think you know you'll see the little 0:14:47.040 --> 0:14:48.479 and all these are the supermarkets. 0:14:48.520 --> 0:14:50.800 Ikea will do very well, in Rhine will do very well. 0:14:50.880 --> 0:14:53.120 So what about using some of the cash to make 0:14:53.160 --> 0:14:56.440 the experience nicer for people who might be frustrated. 0:14:55.920 --> 0:14:57.880 With At least it'd be impossible to make the experience 0:14:57.920 --> 0:15:01.560 on Rhinier any nicer. You know, aircraft on time flights 0:15:01.600 --> 0:15:04.160 the fewest cancelations of any airline in Europe. And I 0:15:04.200 --> 0:15:06.840 don't understand why people pay such ridiculous air force for 0:15:06.880 --> 0:15:10.200 a horrendous experience on Lofanza. Who lose your bag, miss 0:15:10.240 --> 0:15:13.240 your connection? On Ryanery It's efficient, it's cheap, it's. 0:15:13.120 --> 0:15:14.760 On time, and it is below. 0:15:14.600 --> 0:15:17.360 Like a man that four million people, once upon. 0:15:17.240 --> 0:15:20.240 A time, did you live like I had to do 0:15:20.760 --> 0:15:22.400 on a road show a year ago, I had to 0:15:22.400 --> 0:15:24.600 fly from Frankfurt to Zurich, which is only about a 0:15:24.640 --> 0:15:26.880 one and a half our flight. They stung me for 0:15:27.000 --> 0:15:30.520 nine hundred euros one way in economy and I was 0:15:30.520 --> 0:15:32.360 sitting at the back, in the middle seat, in front 0:15:32.400 --> 0:15:35.200 of the toilet on an adleweis a three twenty. 0:15:35.720 --> 0:15:37.560 I mean seven hundred years. I could fly all year 0:15:37.640 --> 0:15:39.360 round on Ryanier for seven hundred euros. 0:15:39.360 --> 0:15:43.680 Michael, it's got to say it, John Lisa, Michael Larry 0:15:43.680 --> 0:15:56.280 that the Ryan A CEO I at the line up 0:15:56.320 --> 0:15:58.200 joint just now had a macro credit recearch at a 0:15:58.200 --> 0:15:59.720 black Rock. I matter, don't worry. We're not going to 0:15:59.760 --> 0:16:01.240 be so about that. I do want to talk about 0:16:01.600 --> 0:16:03.960 supply if we can start there. We've got forty eight 0:16:04.040 --> 0:16:06.280 billion dollars a three year notes this week, we've got 0:16:06.280 --> 0:16:08.200 forty billion dollars a ten year notes. We've got some 0:16:08.240 --> 0:16:11.000 thirty year bonds twenty four billion dollars worth. These are big, 0:16:11.040 --> 0:16:14.600 big numbers. That's treasury supply. What's happening with credit supply 0:16:14.920 --> 0:16:15.760 going into year end? 0:16:16.000 --> 0:16:18.600 Good morning, Thank you both for having me so. As 0:16:18.640 --> 0:16:20.640 you know, credit supply had a bit of a flurry 0:16:20.680 --> 0:16:24.240 of activity in September. It calmed down in October. I 0:16:24.320 --> 0:16:28.760 do think with this tentative stability in the treasury market 0:16:28.960 --> 0:16:32.000 that corporates, CFOs and treasures may look to move ahead 0:16:32.000 --> 0:16:34.760 before the year end seasonal slow down. It will be 0:16:34.800 --> 0:16:37.400 an important test for the market how this treasury supply 0:16:37.720 --> 0:16:42.000 is digested, But as we know, the Treasury Secretary guided 0:16:42.080 --> 0:16:43.680 us towards the front end of the curve and not 0:16:43.720 --> 0:16:46.560 so much in duration in the refunding announcement last week. 0:16:47.040 --> 0:16:50.080 But I actually think, if nothing else, the past several 0:16:50.120 --> 0:16:52.760 months have shown corporates that this can be very episodic 0:16:52.840 --> 0:16:55.400 in terms of these windows opening, and so given that 0:16:55.440 --> 0:16:58.240