WEBVTT - Avian Flu Spreads, Remembering George Floyd 0:00:01.440 --> 0:00:05.320 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:00:05.400 --> 0:00:08.480 weekdays at ten am Eastern on Apple Card playing Android 0:00:08.520 --> 0:00:11.600 otto with the Bloomberg Business app. Listen on demand wherever 0:00:11.680 --> 0:00:15.280 you get your podcasts, or watch us live on YouTube. 0:00:16.280 --> 0:00:18.639 Another headline that caught my eye, and it's a fun one. 0:00:19.280 --> 0:00:23.880 Avian flu oh yeah, spreads to second farm in Australia's 0:00:24.239 --> 0:00:27.840 Victoria State. So apparently, Mike, that's a fun one for you. No, 0:00:27.920 --> 0:00:30.880 it's not. Hundreds of thousands of egg laing chickens are 0:00:30.880 --> 0:00:34.199 reported to have been called in australia Southeast as quarantine 0:00:34.200 --> 0:00:36.720 measures are put in place to contain outbreaks of highly 0:00:36.920 --> 0:00:39.599 pathogenic avian influenza. And I feel like we've been hearing 0:00:39.640 --> 0:00:41.400 a lot about this too, China. 0:00:41.720 --> 0:00:44.239 Yeah, And I'm a hypochondriac, so I never like to 0:00:44.240 --> 0:00:47.239 hear about these things. You know, I'm gonna think I 0:00:47.280 --> 0:00:48.680 have it probably by the end of the weekend. 0:00:48.840 --> 0:00:50.760 So right, It just so was like, you know, I 0:00:50.800 --> 0:00:53.199 was emailing Sam Fazelli Boomberg Intelligence earlier and I'm like, 0:00:53.240 --> 0:00:54.960 do we have to worry about this yet? He's like 0:00:55.040 --> 0:01:00.520 not yet. It's like thanks especially a lot better anyway. 0:01:00.520 --> 0:01:02.200 I want to give some time to talk about this, 0:01:02.440 --> 0:01:04.320 like what is the bird flu? What is the avian flu? 0:01:04.400 --> 0:01:05.880 How do we get it? What does that look like? 0:01:06.040 --> 0:01:10.360 Lisa Jarvis is joining US Boomberg opinion columnists. She covers biotech, healthcare, 0:01:10.400 --> 0:01:13.560 and the pharmaceutical industry. She was previously executive editor of 0:01:13.640 --> 0:01:16.839 Chemical and Engineering News, and she joins US. Now, Lisa, 0:01:16.880 --> 0:01:18.560 can you give us like the four to one one 0:01:18.800 --> 0:01:20.760 on like what the avian flu is? 0:01:22.360 --> 0:01:22.560 Right? 0:01:22.760 --> 0:01:26.520 So thank you for having me. It's an infection that 0:01:27.200 --> 0:01:29.400 you know, you can tell by its name, primarily has 0:01:29.440 --> 0:01:34.039 been affecting wild birds and poultry up until now. You know, 0:01:34.200 --> 0:01:36.560 I think in recent years we've been seeing a lot 0:01:36.640 --> 0:01:41.319 more species with evidence that they can be infected. And 0:01:41.480 --> 0:01:43.920 in the US, the thing that's been alarming about this 0:01:44.200 --> 0:01:47.720 is that we've suddenly seen an outbreak in cows. 0:01:47.800 --> 0:01:48.360 That's new. 0:01:48.640 --> 0:01:51.800 We've never seen this species infected before. So for the 0:01:51.920 --> 0:01:56.760 last few months, increasingly we're seeing more herds with evidence 0:01:56.800 --> 0:02:00.440 that there's bird flu in their milk. And you know, 0:02:00.480 --> 0:02:03.200 the worry, of course, is that the more that the spreads, 0:02:03.280 --> 0:02:06.880 the more that this could cause infections in humans, which 0:02:07.120 --> 0:02:09.040 you know, we don't want another pandemic. 0:02:09.680 --> 0:02:10.000 At all. 0:02:10.040 --> 0:02:11.040 I'm sure all of us here. 0:02:11.840 --> 0:02:15.000 Yeah, I'll suck with that, Lisa. One thing that worries 0:02:15.040 --> 0:02:18.280 me about this story, Lisa, is, from what I've read, 0:02:18.480 --> 0:02:22.400 many farmers are very reluctant to agree to testing to 0:02:22.480 --> 0:02:26.600 see how prevalent it is. Is there anything that can 0:02:26.639 --> 0:02:28.600 be done to that? I mean, I suppose you can't 0:02:28.600 --> 0:02:31.280 really just force a farmer to take a test or 0:02:31.320 --> 0:02:34.320 have his animals tested. Is there is there any sort 0:02:34.360 --> 0:02:35.160 of workaround for that? 0:02:36.520 --> 0:02:36.720 You know? 0:02:36.840 --> 0:02:40.240 I think we've seen in each week a new set 0:02:40.280 --> 0:02:44.000 of incentives trying to get the farmers to buy into testing. 0:02:44.040 --> 0:02:46.800 Because you're right, it's very worrying because we don't actually 0:02:46.840 --> 0:02:50.680 know how widespread this outbreak is among dary hurds. We know, 0:02:50.919 --> 0:02:55.239 I think as of today you know that nine states 0:02:55.280 --> 0:02:58.160 have herds that have been infected, but it could be 0:02:58.280 --> 0:03:01.720 much more than that. Certainly, when we see the data 0:03:01.840 --> 0:03:07.040 showing that there's you know, bird flu, pieces of bird 0:03:07.040 --> 0:03:09.560 flu found in milk and states that don't have infections, 0:03:09.800 --> 0:03:13.040 it worries us. You know, I think USC has been 0:03:13.080 --> 0:03:15.000 a little slow in how they've rolled out some of 0:03:15.000 --> 0:03:17.640 the incentives. One of the things I think that could 0:03:17.639 --> 0:03:21.720 help is you know, just making sure that farmers understand 0:03:21.880 --> 0:03:26.560 very clearly what happens after one of their cows tests positive. 0:03:26.919 --> 0:03:28.720 One of their worries is they don't know when they 0:03:28.800 --> 0:03:31.640 can go back to normal operations. And then there's a 0:03:31.680 --> 0:03:36.160 lot of hesitancy on the part of farm workers, which 0:03:36.200 --> 0:03:38.720 is very understandable. A lot of them don't get sick time. 0:03:39.120 --> 0:03:43.600 This is a largely migrant population that may be distrustful. 0:03:43.640 --> 0:03:46.119 They don't have health insurance many of them, so there's 0:03:46.160 --> 0:03:48.440 a lot of challenges to overcome, and I think trying 0:03:48.480 --> 0:03:52.080 to find ways to draw people into this process is 0:03:52.120 --> 0:03:55.440 the only way that we're going to know have a 0:03:55.480 --> 0:03:57.880 good handle on in real time on what's happening. 0:03:58.320 --> 0:04:00.960 Just to be clear, it's zoonic. It can jump from 0:04:01.000 --> 0:04:05.200 animals to humans, and then can it go from human 0:04:05.240 --> 0:04:06.760 to human transmission. 0:04:06.960 --> 0:04:10.320 Well, right now we don't have any evidence that's happening, 0:04:10.400 --> 0:04:12.640 and in fact, the good news this is very good 0:04:12.640 --> 0:04:14.920 news and we should focus on that piece to feel better, 0:04:15.640 --> 0:04:17.719 is that the two cases in humans we've seen in 0:04:17.760 --> 0:04:20.720 the US, one in Texas and one in Michigan, are 0:04:20.720 --> 0:04:23.640 both in dairy farm workers too. Their only symptom is 0:04:23.640 --> 0:04:27.599 a conjunctivitis. So likely what's happening is a cow's not 0:04:28.000 --> 0:04:30.640 breathing on them. They're not being exposed to cows. Not 0:04:31.320 --> 0:04:35.320 cows are actually very snotty, I hear, But it's they're 0:04:35.360 --> 0:04:39.359 getting this through exposure, likely from the milking equipment, because 0:04:39.360 --> 0:04:41.839 there is so much bird flu in the milk of 0:04:41.920 --> 0:04:45.880 infected cows. But you know what, that's the thing we 0:04:45.920 --> 0:04:48.359 want to look for when it gets easier for a 0:04:48.480 --> 0:04:51.000 human to be infected from a cow, when it gets 0:04:51.080 --> 0:04:54.080 easier for a human to infect another human, And that's 0:04:54.080 --> 0:04:56.360 why it's so important to have a handle on the 0:04:56.680 --> 0:04:59.440 you know, breadth of the outbreak and in real time 0:05:00.000 --> 0:05:01.239 where infections are happening. 0:05:01.600 --> 0:05:03.599 This time of year, I'm pretty snotty myself, so I 0:05:03.640 --> 0:05:05.640 can I can sympathize with the calcy. 0:05:05.680 --> 0:05:10.320 I understand, Yeah, it's the allergy season. I was interested though. 0:05:10.320 --> 0:05:13.120 There was a piece on the Bloomberg this week that 0:05:13.480 --> 0:05:17.400 shares of vaccine stocks that we're moving on this apparently 0:05:17.960 --> 0:05:20.039 Maderna shares were up. Visor shares were up. There was 0:05:20.040 --> 0:05:22.200 a report that companies aren't talks with the US government 0:05:22.240 --> 0:05:25.520 about the development of vaccines for bird flu. Shares of 0:05:25.560 --> 0:05:28.000 cure vac for example, they have a bird flu vaccine 0:05:28.040 --> 0:05:30.000 in early stage testing. What did you Is this just 0:05:30.000 --> 0:05:31.880 like memestock hype or is this a real thing? 0:05:33.040 --> 0:05:35.559 You know, I think investors are getting a little ahead 0:05:35.600 --> 0:05:40.159 of themselves. However, you know, ASPER, which is the kind 0:05:40.160 --> 0:05:43.120 of part of AHHS that takes care of, you know, 0:05:43.279 --> 0:05:47.640 preparedness and manages our stockpiles, did say this week that 0:05:47.680 --> 0:05:51.920 they had moved the ingredients for making four point eight 0:05:52.000 --> 0:05:56.800 doses of vaccines to manufacture and to put those into 0:05:56.880 --> 0:05:58.719 viles so that we would have them just in case. 0:05:59.120 --> 0:06:01.240 I mean that doesn't mean that even the justin case 0:06:01.240 --> 0:06:03.919 would be everybody. Probably if a just in case happened, 0:06:03.960 --> 0:06:07.719 it would be farm workers. But they also said that 0:06:07.760 --> 0:06:10.279 they were in talks with Buyser and Maderna. Now, the 0:06:10.320 --> 0:06:15.000 good thing about mRNA is that if the virus changed 0:06:15.000 --> 0:06:18.880 to more easily infect humans, it might be that the 0:06:18.960 --> 0:06:21.400 vaccine we have in our stockpiles isn't quite the right 0:06:21.480 --> 0:06:24.200 match in mRNA, as we know from the pandemic, allows 0:06:24.200 --> 0:06:27.599 some flexibility there. But I do think folks are getting 0:06:27.640 --> 0:06:31.279 ahead of themselves and you know, maybe getting excited that 0:06:31.360 --> 0:06:32.840 there could be a way to fill some of that 0:06:32.880 --> 0:06:36.159 capacity that no longer is making COVID vaccines, you. 0:06:36.160 --> 0:06:40.080 Know, Lisa, I wonder obviously for financial markets, inflation is 0:06:40.120 --> 0:06:43.880 such a big issue still food inflation especially. Are we 0:06:44.120 --> 0:06:47.880 at risk of seeing a situation where massive amounts of 0:06:48.000 --> 0:06:52.400 cows or chickens are slaughtered just to stop the spread 0:06:52.880 --> 0:06:53.720 of this virus? 0:06:55.120 --> 0:06:58.320 I don't think so well, certainly with poultry. That's kind 0:06:58.360 --> 0:07:02.799 of the Darian poultry industries very differently, and poultry farmers 0:07:02.880 --> 0:07:05.760 are well, very familiar with bird flu, and they have 0:07:05.800 --> 0:07:08.520 a lot of biosecurity in place, and part of it, 0:07:08.800 --> 0:07:11.600 part of the reason they have biosecurity in places that 0:07:11.720 --> 0:07:14.440 USDA has put a lot of you know, kind of 0:07:15.800 --> 0:07:19.360 rules around how they can be reimbursed in order to 0:07:19.400 --> 0:07:22.320 contain a bird flu outbreak. When it comes to the cattle, 0:07:22.640 --> 0:07:26.000 you know, so far infections are mild, and so I 0:07:26.040 --> 0:07:30.080 think what we need to understand is how long an 0:07:30.080 --> 0:07:34.000 outbreak will be disruptive in a particular hurd. It's sort 0:07:34.000 --> 0:07:38.160 of amazing to think about how many different states cows 0:07:38.200 --> 0:07:40.960 travel to and dairy cows travel to in their lifetime, 0:07:42.080 --> 0:07:45.480 and so that I would the only worry I think, 0:07:45.560 --> 0:07:47.320 and this is part of the reason farmers that have 0:07:47.400 --> 0:07:49.640 not been participating in testing, to be honest with you, 0:07:49.720 --> 0:07:52.600 I think is that they can kind of create a backup. 0:07:53.360 --> 0:07:56.119 But I don't think there's right now, there's no reason 0:07:56.160 --> 0:07:58.120 to think that there's a risk to the food supply. 0:07:59.240 --> 0:08:01.240 I think it's just more or just thinking about that 0:08:01.320 --> 0:08:03.320 movement of cows and how to make sure that we 0:08:03.360 --> 0:08:05.200 can ensure that that continues to happen. 0:08:05.720 --> 0:08:09.520 Lisa, fantastic. You are awesome, Lisa Jarvis, Bloomberg opinion columnist, 0:08:09.560 --> 0:08:12.120 joining us on the bird flu and giving us sort 0:08:12.160 --> 0:08:14.720 of the low down on the risks and the non risks. 0:08:14.720 --> 0:08:16.680 So do you feel better now, Mike or all? 0:08:17.680 --> 0:08:18.480 I think I have it. 0:08:18.880 --> 0:08:19.600 I think I have it. 0:08:19.640 --> 0:08:21.240 Okay, great. Definitely want to spread. 0:08:20.960 --> 0:08:26.360 That you're listening to the Bloomberg Intelligence Podcast. Catch us 0:08:26.400 --> 0:08:29.559 live weekdays at ten am Eastern on Apple car Play 0:08:29.600 --> 0:08:32.640 and Android Auto with a Bloomberg Business. You can also 0:08:32.760 --> 0:08:36.280 listen live on Amazon Alexa from our flagship New York station, 0:08:36.640 --> 0:08:39.400 Just Say Alexa playing Bloomberg eleven thirty. 0:08:40.559 --> 0:08:40.640 Hi. 0:08:40.800 --> 0:08:45.040 Eric Adelberg is chief mortgage backed securities strategist. There we 0:08:45.080 --> 0:08:49.800 go for Bloomberg Intelligence. Help us understand what's a mortgage 0:08:49.800 --> 0:08:52.720 backed security for those who are listening, and then sort 0:08:52.720 --> 0:08:54.520 of where are we right now? I mean, that's gonna 0:08:54.520 --> 0:08:57.000 be tied to the mortgage market. How's it going, hy, Alex. 0:08:56.760 --> 0:08:59.320 And Mike, thanks for having me, and happy Memorial Day 0:08:59.320 --> 0:09:03.120 weekend almost to everybody. So, mortgage backed security is a 0:09:03.120 --> 0:09:07.319 security that a bank or non bank lender creates out 0:09:07.360 --> 0:09:09.960 of the loans that they've lent to the homeowner. They 0:09:10.080 --> 0:09:14.360 pull up these mortgage loans into these massive securities. It's 0:09:14.480 --> 0:09:18.280 about almost a nine trillion dollar mortgage market for the 0:09:18.360 --> 0:09:22.600 agency MBS market, and much bigger if you include portfolio 0:09:22.600 --> 0:09:25.960 loans and non agencies, so it's a massive market. It 0:09:26.040 --> 0:09:29.640 really helps fuel the entire housing economy, which in turn 0:09:29.679 --> 0:09:32.480 helps fuel a lot of the economy. So it's a 0:09:32.520 --> 0:09:35.040 really important sector to keep an eye on, and it's 0:09:35.080 --> 0:09:37.679 been suffering a little bit recently because it's because it's 0:09:37.679 --> 0:09:40.240 so important to the economy. When the economy went into 0:09:40.240 --> 0:09:42.360 free fall both back in two thousand and eight and 0:09:42.400 --> 0:09:45.680 then various times since, including joining the pandemic, the Federal 0:09:45.800 --> 0:09:49.479 Reserve has purchased massive amounts of these mortgage backed securities, 0:09:49.960 --> 0:09:53.000 and with the inflation going rampant, and they fed actually 0:09:53.000 --> 0:09:55.000 trying to put the brakes a little bit on the economy. 0:09:55.320 --> 0:09:58.360 They've been letting that portfolio run off. So the mortgage 0:09:58.360 --> 0:10:02.120 backed securities has been really hurting as a result, because 0:10:02.559 --> 0:10:05.080 a lot of buyers have backed investors have backed away 0:10:05.080 --> 0:10:08.880 from that market. But at the same time, because the 0:10:08.920 --> 0:10:11.200 housing market has slowed down so much and so many 0:10:11.200 --> 0:10:14.600 people own rates so far above current market rates, there's 0:10:14.640 --> 0:10:17.079 not a lot of business for mortgage originators to do 0:10:17.200 --> 0:10:17.679 right now. 0:10:19.080 --> 0:10:20.800 So you know, I feel like I keep getting emails 0:10:20.840 --> 0:10:23.240 from like mortgage brokers being like, call me, we can 0:10:23.320 --> 0:10:25.280 do stuff, and I'm like, dude, I got two point 0:10:25.320 --> 0:10:27.839 seventy or fixed nothings, Eric, I. 0:10:27.760 --> 0:10:31.840 Wanted to ask you about that exact topic. They should 0:10:32.160 --> 0:10:33.960 Alex Refinance Now, that's that's not it. 0:10:34.000 --> 0:10:34.920 But it's never happened. 0:10:35.000 --> 0:10:38.559 It's not happening in this rate environment. But you write 0:10:38.600 --> 0:10:41.600 in a recent piece elevated mortgage rates and home prices 0:10:41.640 --> 0:10:45.120 have depressed housing turnover and mortgage lending, as Alex points out, 0:10:45.679 --> 0:10:48.040 and then you go on to say this has begun 0:10:48.160 --> 0:10:51.400 spurring quote innovations in mortgage lending. 0:10:52.040 --> 0:10:52.400 I get a. 0:10:52.400 --> 0:10:55.520 Little nervous when I hear about quote unquote innovations in 0:10:55.600 --> 0:10:59.640 mortgage lending. You know, thinking back to the financial crisis 0:10:59.800 --> 0:11:02.960 and what happened in the MBS market and the housing 0:11:03.040 --> 0:11:06.720 market unpacked for us a little bit what some of 0:11:06.720 --> 0:11:10.720 these innovations are and are they as risky as the 0:11:10.720 --> 0:11:13.280 innovations that brought us two thousand and eight. 0:11:13.440 --> 0:11:16.360 That's an excellent question. And I had the honor of 0:11:16.400 --> 0:11:20.600 attending the Mortgage Banker Association Secondary Market Conference this week 0:11:21.280 --> 0:11:24.200 where they touched on a lot of that exact topic. 0:11:24.800 --> 0:11:27.560 And you know, the good news is, even though memories 0:11:27.600 --> 0:11:30.080 tend to be short in the financial world, the memory 0:11:30.200 --> 0:11:32.160 is the scars from the two thousand and eight financial 0:11:32.160 --> 0:11:35.600 crisis cut very deep. So as a result, if you 0:11:35.640 --> 0:11:38.760 look at credit standards, for instance, they're still almost as 0:11:38.840 --> 0:11:41.360 high as they've ever been. You know, both banks and 0:11:41.400 --> 0:11:46.600 non banks really drew in their clause and the agencies Fanny, 0:11:46.600 --> 0:11:49.360 Freddie and Jenny may have all made a big effort 0:11:49.440 --> 0:11:54.360 to both expand perhaps the potential market for whom credit 0:11:54.400 --> 0:11:58.640 can be offered mortgage credit, that is, loans, but at 0:11:58.640 --> 0:12:01.960 the same time doing it ainable fashion. You know, their 0:12:01.960 --> 0:12:04.400 mantra is not only to make mortgages available to as 0:12:04.440 --> 0:12:06.480 many people as possible, but to keep as many people 0:12:06.480 --> 0:12:08.880 in their homes as possible. So it's become a dual 0:12:08.960 --> 0:12:10.840 mandate ever since two thousand and eight, and it really 0:12:10.920 --> 0:12:13.360 is the north star, I think for most of the 0:12:13.360 --> 0:12:16.200 people in the mortgage industry, because even non bank lenders, 0:12:16.240 --> 0:12:18.600 who theoretically have a little less skin in the game, 0:12:18.920 --> 0:12:22.280 they do have to repurchase mortgages if they violate repon 0:12:22.320 --> 0:12:25.719 warrants and you know, do other types of predatory lending practices. 0:12:25.800 --> 0:12:28.720 So on the good news, everybody's trying to work within 0:12:28.800 --> 0:12:31.880 those constraints to try to come up with new ideas. 0:12:32.120 --> 0:12:36.440 I mean, I will say that, for instance, fred one 0:12:36.480 --> 0:12:39.640 of the areas that is possible growth area is always 0:12:39.640 --> 0:12:43.600 first time borrowers, especially with millennials coming into that window 0:12:43.640 --> 0:12:46.280 for the first time, which is the largest demographic. So 0:12:46.400 --> 0:12:49.080 while they're having problems finding homes to buy, there are 0:12:49.120 --> 0:12:51.600 also sometimes having problems coming up with the down payments 0:12:51.640 --> 0:12:54.840 that maybe repeat borrower could come up with because they 0:12:54.880 --> 0:12:57.000 don't have home equity built up in the first place. 0:12:58.080 --> 0:13:01.079 So housing market is relatively on a four. So what 0:13:01.200 --> 0:13:04.600 a lot of different areas are doing. In particular, both 0:13:04.640 --> 0:13:08.080 the GCS and Ginny May is they are trying to 0:13:08.120 --> 0:13:12.680 improve access to down payment assistance, but it's for people 0:13:12.720 --> 0:13:16.040 with positive good credit scores, so that if that happen, 0:13:16.120 --> 0:13:19.600 like where do you get that? Well, there's actually a 0:13:19.600 --> 0:13:22.600 big educational program to try to tell people where this 0:13:22.679 --> 0:13:26.920 can come from. And usually that down payment assistance comes with, 0:13:27.240 --> 0:13:30.480 you know, a lot of insurance, extra insurance costs and 0:13:30.520 --> 0:13:33.360 things like that. But literally, I don't know the exact amount, 0:13:33.360 --> 0:13:35.600 but I think it's a twenty five thousand dollars credit 0:13:35.640 --> 0:13:38.920 towards down payments for instance, that Fanny and Freddie can 0:13:38.960 --> 0:13:44.160 tap into and Ginny May for instance, for FHA and 0:13:44.280 --> 0:13:46.600 VA both allow up to ninety five to one hundred 0:13:46.640 --> 0:13:49.000 percent of the loan to be financed. Again, that comes 0:13:49.080 --> 0:13:52.400 with extra mortgage insurance costs. But if getting your foot 0:13:52.400 --> 0:13:54.160 in the door is the difference between having a down 0:13:54.160 --> 0:13:57.480 payment or not, especially for first generation homeowners for instance, 0:13:57.480 --> 0:14:01.480 who don't have that generational wealth, then finding ways to 0:14:01.520 --> 0:14:04.400 get those people down payments is a is you know, 0:14:04.600 --> 0:14:08.240 is perhaps the game changer. The problem is, you know, 0:14:08.320 --> 0:14:10.800 if the homeowner therefore has no skin in the game 0:14:11.400 --> 0:14:13.400 because they haven't put down to down payment, are they 0:14:13.400 --> 0:14:15.680 more willing and likely to walk away, which is why 0:14:15.679 --> 0:14:19.360 they get charged extra insurance homeowner insurance costs to. 0:14:19.280 --> 0:14:19.600 Be in that. 0:14:20.480 --> 0:14:22.680 You know, with mortgage rates the way they are, my 0:14:22.720 --> 0:14:25.960 guess would be that it yields on MBS are looking 0:14:26.080 --> 0:14:29.200 pretty attractive. But I'm wondering what you're seeing as far 0:14:29.240 --> 0:14:31.960 as spreads, you know, is the lack of issuance sort 0:14:31.960 --> 0:14:34.120 of keeping those spreads down. How are you sort of 0:14:34.240 --> 0:14:36.800 sussing out the opportunities in the MBS market. 0:14:36.840 --> 0:14:40.120 Right, That's a very good question. And supply low supply 0:14:40.200 --> 0:14:43.440 has been a tailwind for the sector, but because volatility 0:14:43.720 --> 0:14:46.720 in the market has been so high, it's actually pressured 0:14:46.760 --> 0:14:49.480 mortgage spreads much wider than usual and you don't have 0:14:49.520 --> 0:14:51.560 somebody like the FED or even banks have been kind 0:14:51.560 --> 0:14:54.000 of stepping away as well recently coming in as the 0:14:54.040 --> 0:14:57.520 buyer last resort. You're relying on relative value investors who 0:14:57.640 --> 0:14:59.520 care a lot about risk return, they care a lot 0:14:59.520 --> 0:15:03.240 about he So as a result, spread's actually went all 0:15:03.280 --> 0:15:04.920 the way out to like one hundred and ninety basis 0:15:04.960 --> 0:15:08.480 points for the Kart coupon for new issue to treasuries 0:15:08.640 --> 0:15:11.600 back in October. They've since come in. They're around one 0:15:11.720 --> 0:15:13.960 hundred and forty basis points. But like when the FED 0:15:14.080 --> 0:15:16.880 was buying in twenty twenty one, there were was tit 0:15:16.920 --> 0:15:19.200 to seventy basis points for new issue. So there's still 0:15:19.320 --> 0:15:23.160 very wide relative to history, especially relative to the fifteen 0:15:23.240 --> 0:15:25.040 years since the FED started buying securities. 0:15:25.520 --> 0:15:27.840 Erica really appreciate it, Thank you so very much. I 0:15:27.920 --> 0:15:31.360 learned a ton. Eric Adelberg, Bloomberg Intelligence, Cheap Mortgage Backed 0:15:31.400 --> 0:15:34.800 Securities strategist, on mortgage lending, on the market and all 0:15:34.840 --> 0:15:36.880 the new rules and everything going into it, and how 0:15:36.880 --> 0:15:38.280 to make a good investment out of it. 0:15:40.640 --> 0:15:44.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:15:44.600 --> 0:15:48.160 weekdays at ten am Eastern on Applecar Play and Android 0:15:48.160 --> 0:15:50.920 Auto with the Bloomberg Business Act. You can also listen 0:15:51.040 --> 0:15:54.160 live on Amazon Alexa from our flagship New York station, 0:15:54.520 --> 0:15:58.440 Just say Alexa Play Bloomberg eleven thirty. 0:15:58.720 --> 0:16:01.520 Let's get more insight here, Ben a senior portfolio manager, 0:16:01.600 --> 0:16:03.600 head of fixed Income at New Edge. Well, but what's 0:16:03.640 --> 0:16:06.040 so great about Ben? It's his daily notes he does 0:16:06.080 --> 0:16:09.360 to today are so helpful in connecting different trends to 0:16:09.440 --> 0:16:11.640 the market. It's not just a fixed income thing. It's 0:16:11.720 --> 0:16:13.840 more like here's a trend, here's how it plays in 0:16:13.840 --> 0:16:17.160 today's market action, which is so valuable to someone like me. Ben, 0:16:17.160 --> 0:16:18.400 thanks so much for joining us. 0:16:18.600 --> 0:16:20.960 Great to be here, Alex, Mike, good to see you again. 0:16:21.240 --> 0:16:23.360 Do you have your white pants and suit ready for 0:16:23.520 --> 0:16:24.440 post Memorial Day? 0:16:24.520 --> 0:16:28.920 I'm a Miami vice guy this Friday night, eight thirty 0:16:28.920 --> 0:16:32.240 crocoded top. So I got your flannel shirt, all that 0:16:32.320 --> 0:16:36.480 my mom made for me. I can say, shoes without socks, 0:16:36.480 --> 0:16:37.320 and yeah, let's go. 0:16:37.520 --> 0:16:40.440 We're good wicker shoes. They're important, all right, Ben, I 0:16:40.520 --> 0:16:42.160 we just sort of set this up. Vince was saying 0:16:42.240 --> 0:16:45.520 no cut this year. Apoulo says the same thing. Goldman 0:16:45.600 --> 0:16:47.440 socks pushing back their cut. Where are you on this? 0:16:48.040 --> 0:16:50.000 So I was on that for some time of Like, 0:16:50.080 --> 0:16:52.760 you know, I think many people realized that seven cuts 0:16:52.840 --> 0:16:55.800 was just a really I think esoteric type of pricing 0:16:55.840 --> 0:16:58.200 in the markets. You know, people very quickly rushing on 0:16:58.280 --> 0:17:01.920 the FETs language that they are ready to move sooner, 0:17:02.520 --> 0:17:04.639 and then realizing that, you know, we do have an 0:17:04.640 --> 0:17:07.880 economy that stays above the trend and is really slowing 0:17:07.920 --> 0:17:09.920 down to that trend, and as a result, you're getting 0:17:09.920 --> 0:17:12.320 price pressures and so yes, it that be my data. 0:17:12.320 --> 0:17:15.280 For example, if you get prices paid start to move 0:17:15.359 --> 0:17:18.080 up even further, there's not much room for the FED 0:17:18.160 --> 0:17:20.600 to do anything really, And that I think is the 0:17:20.680 --> 0:17:22.720 process we're going through, which is pushing a very cut 0:17:22.800 --> 0:17:25.800 further out in the future. Whatever become a RAID hike, 0:17:25.960 --> 0:17:28.040 that is to be seen. I think I'm not sure 0:17:28.080 --> 0:17:30.600 when that camp yet, but I think that with this year, 0:17:30.920 --> 0:17:33.359 we're just going to be unchanged on the FED flows rate, 0:17:33.880 --> 0:17:34.040 you know. 0:17:34.119 --> 0:17:36.119 But I want to shift gears a little bit because 0:17:36.160 --> 0:17:38.760 I know you've been thinking and writing a lot recently 0:17:38.800 --> 0:17:43.040 about artificial intelligence, you know, obviously in videos the big 0:17:43.240 --> 0:17:47.000 market story of the year. I'm curious how you're thinking 0:17:47.160 --> 0:17:50.320 about AI from a macro perspective. I mean, obviously there 0:17:50.520 --> 0:17:55.080 is the potential for vast improvements in productivity, but a 0:17:55.080 --> 0:17:59.280 lot of that type of technology driven productivity gains can 0:17:59.320 --> 0:18:02.760 be a little weird when they happen. You know, it 0:18:02.960 --> 0:18:05.120 could wake up some morning to read about a lot 0:18:05.119 --> 0:18:07.680 of job cuts because of AI is what I keep 0:18:07.760 --> 0:18:10.480 raising for. So how are you thinking about this transition 0:18:10.560 --> 0:18:13.280 into sort of a really AI driven economy from a 0:18:13.320 --> 0:18:14.000 macro level. 0:18:14.280 --> 0:18:16.800 Yeah, let's start with investment First, you know, I did 0:18:16.880 --> 0:18:20.160 some research on the data centers that are being built 0:18:20.160 --> 0:18:24.000 across the United States. Virginia obviously is the hotbed right now, 0:18:24.040 --> 0:18:27.280 but it's moving to other states. It's enormous. It's like, 0:18:27.359 --> 0:18:29.240 there's an estimated two on a fifty to four and 0:18:29.280 --> 0:18:34.040 a billion of investment planned into twenty twenty five. There's 0:18:34.080 --> 0:18:36.719 a resulting group out there that attracts the exactly square 0:18:36.760 --> 0:18:39.960 meters you talk about millions and milliones of square meters 0:18:39.720 --> 0:18:44.359 of data centers develops or in the planning. That's I 0:18:44.359 --> 0:18:48.119 think the productivity aspect of AI, Curry, it's about investment. 0:18:48.760 --> 0:18:51.720 Then you have, of course technology companies are spending on AI, 0:18:52.160 --> 0:18:55.000 so I think that's fueling the investment and then leading 0:18:55.040 --> 0:18:58.840 to productivity. Well, your point is about, you know, once 0:18:58.840 --> 0:19:02.120 we get this productivity research, we're going to get automation, 0:19:02.240 --> 0:19:05.800 We're going to get other things developing that maybe certain 0:19:05.840 --> 0:19:08.760 parts of labor become obsolete so to speak, they're not 0:19:09.000 --> 0:19:11.879 you know, being used, and that could effect productivity. I 0:19:11.880 --> 0:19:13.520 would say though that if you go back in the 0:19:13.600 --> 0:19:16.159 nineties when I started working, they're just as rolled out 0:19:16.160 --> 0:19:20.159 of Microsoft in a new sort of like Office version 0:19:20.280 --> 0:19:21.920 and the Bloomberg terminal, by the way, at the time 0:19:22.040 --> 0:19:24.240 was upgraded, and I was sitting there as a young 0:19:24.320 --> 0:19:27.400 kid like, wow, okay, I was able to navigate much 0:19:27.400 --> 0:19:30.240 faster than my older colleague. But yet you know what 0:19:30.440 --> 0:19:33.119 did that lead to a productivity search? Apparently the search 0:19:33.160 --> 0:19:36.280 happened the years before. Of all the investment that was 0:19:36.320 --> 0:19:38.600 put into this to get to that point of Microsoft 0:19:38.720 --> 0:19:41.720 rolling out and Bloomberg upgrading is terminal. I think that's 0:19:41.720 --> 0:19:43.720 what we're in right now. We're in the in the 0:19:43.840 --> 0:19:46.600 initial stage of investing. I think this is part of 0:19:46.920 --> 0:19:49.680 what the economy is currently reacting to. If you look 0:19:49.680 --> 0:19:52.800 at Durbal Good State again today, all the elements about 0:19:52.800 --> 0:19:55.400 computer chips and computers and all this type of equipment 0:19:55.600 --> 0:19:57.360 that's all up in new orders. I think that's what's 0:19:57.400 --> 0:19:57.760 going on it. 0:19:57.880 --> 0:20:00.280 Which I really appreciated your note on when when day 0:20:00.280 --> 0:20:02.359 when Nvidia did come out, because you talked about how 0:20:02.400 --> 0:20:04.639 to relate that to say the neutral rate. And then 0:20:04.640 --> 0:20:06.720 if you wind up having all this investment, does that 0:20:07.080 --> 0:20:09.080 raise the neutral rate? And does it make it harder 0:20:09.119 --> 0:20:11.880