WEBVTT - Surveillance: Global Recession With Malpass 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.640 --> 0:00:27.600 Bloomberg dot Com, and of course on the Bloomberg Right Now, 0:00:27.720 --> 0:00:31.319 an important interview and important conversation with a friend of 0:00:31.320 --> 0:00:34.319 this show, David mel Pass, of course, with more than 0:00:34.360 --> 0:00:37.680 a decade of service to what we've done at Bloomberg 0:00:37.720 --> 0:00:40.959 Surveillance and wisdom and perspective, and now holding court at 0:00:40.960 --> 0:00:44.040 the World Bank as their president. David, I know you 0:00:44.159 --> 0:00:48.040 never thought you would see the challenges of this pandemic. 0:00:48.240 --> 0:00:53.120 I talk of the pandemic partition of say American inequalities. 0:00:53.479 --> 0:00:57.400 Tell us the World Banks pandemic partition. What does it 0:00:57.440 --> 0:01:01.600 look like? Uh, it's it's the same or worse for 0:01:01.760 --> 0:01:05.720 developing countries and for poor countries. That takes to the 0:01:05.840 --> 0:01:10.080 inequality is two kind of different factors. One is poor 0:01:10.160 --> 0:01:14.280 people are a are worst hit by the global recession, 0:01:14.400 --> 0:01:18.240 the shutdowns UH and and the pandemic itself, so they 0:01:18.760 --> 0:01:21.720 feel the brunt of that UH. And then the second 0:01:21.840 --> 0:01:25.320 part is that the advanced economies have been doing stimulus 0:01:25.360 --> 0:01:31.360 programs that cut that concentrate on people that already have assets. 0:01:31.400 --> 0:01:34.480 That's the Central bank purchases, but it's also the fiscal 0:01:34.520 --> 0:01:39.520 stimulus from the from the Treasury Department. David, the focus 0:01:39.560 --> 0:01:41.720 of the World Bank for years has been on what 0:01:41.800 --> 0:01:44.240 I would call a third world, a frontier economy. I 0:01:44.280 --> 0:01:47.960 know those are not correct phrases. In two thousand twenty one, 0:01:48.400 --> 0:01:51.840 one of the great issues we have is accountability of cases, 0:01:52.400 --> 0:01:59.200 deaths and hospitalizations across Africa. Explain the pandemic for Africa 0:01:59.320 --> 0:02:01.840 right now in the veracity of your data at the 0:02:01.880 --> 0:02:05.040 World Bank, Uh, you know, this is a this is 0:02:05.040 --> 0:02:10.160 a cloudy area, Tom. The the death statistics aren't aren't 0:02:10.240 --> 0:02:13.440 that well kept and aren't that current, and so it's 0:02:13.440 --> 0:02:17.560 hard to tell how hard COVID is hitting people in Africa. 0:02:17.720 --> 0:02:21.600 The the original in the in the middle of there 0:02:21.760 --> 0:02:25.160 was the sense that it wasn't hitting as hard. It's 0:02:25.360 --> 0:02:28.880 different country by country. For example, South Africa has been 0:02:28.919 --> 0:02:33.720 hard hit, but other countries seeming to be less so. 0:02:33.800 --> 0:02:37.200 But now our sense is that it's that it's spreading 0:02:37.240 --> 0:02:40.080 and hitting, hitting all countries. What we want to do 0:02:40.080 --> 0:02:45.519 on vaccines, UH, is have vaccines available for everyone, including 0:02:45.560 --> 0:02:49.120 and especially the poor. And so that's that's one of 0:02:49.160 --> 0:02:53.639 the challenges to have systems that can actually deliver enough vaccines. 0:02:53.760 --> 0:02:55.880 That's exactly where I wanted to go, especially given some 0:02:55.919 --> 0:02:58.680 of the delays that we've seen in the developed world. 0:02:58.919 --> 0:03:02.480 How worried are you about the time frame for distributing 0:03:02.520 --> 0:03:06.919 the vaccine in the developing world? High Lisa? What what 0:03:06.960 --> 0:03:10.120 the World Banker has done? We've we passed in October 0:03:10.440 --> 0:03:14.240 twelve billion dollar package through the board UH, and that's 0:03:14.320 --> 0:03:17.399 available and are the first step is to assess countries 0:03:17.720 --> 0:03:20.040 and see what they need in terms of cold chain, 0:03:20.160 --> 0:03:24.359 in terms of identifying the people that need the vaccine 0:03:24.400 --> 0:03:27.200 the most. So that work is underway in a hundred 0:03:27.240 --> 0:03:31.560 countries UH. And then the next step is actual contracts. 0:03:31.680 --> 0:03:34.679 One of the challenges is to have a common contract 0:03:35.200 --> 0:03:38.880 where people can UH, where people can see the the 0:03:39.080 --> 0:03:44.680 UH the same terms and and actually operate on them UH. 0:03:44.720 --> 0:03:47.880 And so we're working on that. And then another another 0:03:48.400 --> 0:03:52.920 immediate problem is in dimnification. FISER has been hesitant to 0:03:52.960 --> 0:03:55.800 go into some of the countries because of the UH 0:03:56.360 --> 0:04:00.840 liability problems or they don't have a liability shield. So 0:04:00.920 --> 0:04:02.960 we work with the countries to try to do that. 0:04:03.200 --> 0:04:06.400 But I think also some of the other vaccine manufacturers 0:04:06.640 --> 0:04:10.360 may be able to go into countries because they're operating 0:04:10.360 --> 0:04:14.080 through subsidiaries. This is all something that we're exploring and 0:04:14.240 --> 0:04:17.640 our goal. My goal is to have vaccines available for 0:04:17.800 --> 0:04:22.040 people throughout the developing world based on what their countries decide. 0:04:22.160 --> 0:04:26.279 We've got financing available, but that the countries need to 0:04:26.360 --> 0:04:31.120 choose systems and then begin buying or or receiving the vaccines. 0:04:31.320 --> 0:04:34.839 We're speaking with David Malpass, World Bank President. David, you 0:04:34.880 --> 0:04:38.160 talk about how the programs that have salvaged the global 0:04:38.200 --> 0:04:41.680 economy have really benefited the wealthiest individuals who have assets, 0:04:41.960 --> 0:04:44.320 not so much people at the bottom, and this has 0:04:44.360 --> 0:04:46.960 to do with the economies as well. How worried are 0:04:46.960 --> 0:04:49.840 you about the overhang of debt in the emerging world 0:04:50.160 --> 0:04:53.479 as we do get this ongoing economic pain without a 0:04:53.560 --> 0:04:56.960 vaccine distribution model that seems to be taking course quickly 0:04:57.040 --> 0:05:01.159 enough for many people's tastes. Uh, It's it's challenging to 0:05:01.279 --> 0:05:04.360 keep private sectors open. What we've tried to do through 0:05:04.440 --> 0:05:07.520 the i f C, the International Finance Corporation, the private 0:05:07.520 --> 0:05:10.560 sector arm of the World Bank is to provide working 0:05:10.600 --> 0:05:14.359 capital and trade finance so that the private sectors that 0:05:14.480 --> 0:05:19.159 do operate in poorer countries can continue to uh to 0:05:19.160 --> 0:05:23.000 to operate. But a challenge in the world in with 0:05:23.240 --> 0:05:26.120 given that interest rates are low for a long period 0:05:26.200 --> 0:05:30.440 of time, and that's being accomplished in part by by 0:05:30.520 --> 0:05:34.679 borrowing short term and having the government's invest long term. 0:05:34.920 --> 0:05:39.440 Think think about that the central banks borrow overnight money 0:05:39.600 --> 0:05:43.680 and put it into long term bonds. That disadvantages the 0:05:43.880 --> 0:05:47.799 small businesses because they need that money. The overnight money 0:05:47.880 --> 0:05:50.520 is what they live on in terms of working capital. 0:05:50.880 --> 0:05:53.240 Uh and so it's not just in the developing world, 0:05:53.279 --> 0:05:57.920 but in the advanced economies. The dichotomy, the inequality that 0:05:58.000 --> 0:06:00.680 comes out of that is a big challenge because you're 0:06:00.720 --> 0:06:04.720 losing the small business sector of the world. David meyle Pass, 0:06:04.760 --> 0:06:07.719 I've got to digress to US politics. You of course 0:06:07.800 --> 0:06:11.520 provided public service to the nation working for President Trump. 0:06:11.640 --> 0:06:14.000 I believe now there's going to be a new relationship 0:06:14.080 --> 0:06:16.480 of your World Bank and President by and of course 0:06:16.480 --> 0:06:20.520 the International Monetary Fund Kittie corner to you there to 0:06:20.760 --> 0:06:24.680 the west of the White House. David meyl Pass, how 0:06:24.720 --> 0:06:28.520 do you adapt adjust or you're oblivious to a new 0:06:28.800 --> 0:06:34.480 US administration. Uh, not oblivious. The US is our biggest shareholders, 0:06:34.520 --> 0:06:37.440 so we're very aware of what their their interests and 0:06:37.520 --> 0:06:40.839 goals are as we are of other countries, the developing 0:06:40.880 --> 0:06:43.720 countries included. You know, we one of the big voices 0:06:43.800 --> 0:06:46.640 within the World Bank is the voice of the developing 0:06:46.760 --> 0:06:50.080 countries through our Board of Directors. So we listen to 0:06:50.080 --> 0:06:52.800 all parties and we've been successful in the past in 0:06:52.880 --> 0:06:55.719 working across the aisle in in in all of the 0:06:55.800 --> 0:07:01.240 major shareholders. So I expect that to continue. One you that, uh, 0:07:01.279 --> 0:07:05.680 that where the US I think will be supportive of 0:07:05.800 --> 0:07:10.280 the of the climate policies of the World Bank. You know, 0:07:10.360 --> 0:07:15.360 the World Bank is the biggest UH international financier of 0:07:15.360 --> 0:07:20.720 of climate change activities. For example, in the poorer nations 0:07:20.920 --> 0:07:25.240 they need to adapt to to climate changes, uh and 0:07:25.240 --> 0:07:28.840 and we we put a lot of funding into that. 0:07:29.080 --> 0:07:32.040 So I think we'll see strong support from the US 0:07:32.040 --> 0:07:35.600 on that kind of agenda as well. So I'm looking 0:07:35.640 --> 0:07:38.840 forward to working with the new with the new administration, 0:07:39.320 --> 0:07:43.240 but we're non political, so uh we we I want 0:07:43.280 --> 0:07:46.600 to see people in developing countries do better. That's the 0:07:46.920 --> 0:07:49.000 that's the goal and the mission. Well, when you talk 0:07:49.040 --> 0:07:51.280 about being a political it still puts you into a 0:07:51.360 --> 0:07:53.680 somewhat sensitive place a lot of the time. And I'm 0:07:53.680 --> 0:07:56.000 thinking of some of your comments about China and how 0:07:56.040 --> 0:07:58.840 they hadn't been aggressive enough in your view with debt 0:07:58.840 --> 0:08:01.360 relief for poor nation and has given their primary role 0:08:01.400 --> 0:08:04.400 over the past few years accepting debt to these countries. 0:08:04.760 --> 0:08:07.480 Do you feel like they have gotten better with debt relief? 0:08:07.520 --> 0:08:11.400 Has have you changed it all over the recent months. Uh? Well, 0:08:11.440 --> 0:08:15.160 they've been changing um and and they're a full participant 0:08:15.160 --> 0:08:18.560 in the G twenty, the Group of twenty major economies, 0:08:18.600 --> 0:08:22.480 and so during I was happy to see, you know, 0:08:22.560 --> 0:08:25.520 I I went forward along with Crystallina at the i 0:08:25.680 --> 0:08:28.280 m F with the idea that there should be a 0:08:28.360 --> 0:08:32.320 moratorium on the payments by the poorest countries to their creditors, 0:08:32.440 --> 0:08:36.400 the official bilateral creditors of which China is the largest, 0:08:36.760 --> 0:08:40.800 and also the private sector creditors. So China subscribe to 0:08:40.880 --> 0:08:44.840 that and and is trying to move in that direction. 0:08:45.080 --> 0:08:47.320 So I don't see that there will be a change 0:08:47.320 --> 0:08:50.480 in that. I think the big countries want to find 0:08:50.840 --> 0:08:54.959 a way to work on this debt overhang. It's it's 0:08:55.000 --> 0:08:59.840 it's Uh, it's very worrisome because it's hard to invest 0:09:00.000 --> 0:09:03.080 into a poor country if that, if so much of 0:09:03.120 --> 0:09:06.920 their resources are having to go to repay past debt. 0:09:07.480 --> 0:09:10.800 David mel Pass folks as one of those famous charts 0:09:10.840 --> 0:09:13.240 in the history of everything I've done, and that is 0:09:13.320 --> 0:09:15.480 golden in terms. We're not going to ask him for 0:09:15.520 --> 0:09:18.440 a market called as President of the World Bank, but 0:09:18.559 --> 0:09:21.160 I am, David gonna link it into your knowledge at 0:09:21.200 --> 0:09:25.400 the World Bank about the commodity nations. Can you call 0:09:25.440 --> 0:09:29.520 a turn for the beleaguered commodity nations? Are they finally 0:09:29.559 --> 0:09:34.160 going to see a bid on their various commodities? Tom 0:09:34.200 --> 0:09:35.880 this is a court. You know. We have our new 0:09:35.920 --> 0:09:39.920 Global Economic Prospects report that just came out yesterday, so 0:09:40.000 --> 0:09:42.760 we addressed the some of the some of the outlook 0:09:42.840 --> 0:09:46.040 or the forecast. But one of the one of the 0:09:46.200 --> 0:09:51.360 unknowns I think is as the central banks have created stimulus, 0:09:51.679 --> 0:09:54.520 what what's the mechanism for that? You know? My view 0:09:54.640 --> 0:09:57.880 is it is not money printing that they're doing. What 0:09:57.960 --> 0:10:01.080 they're doing is buying duration, so they they borrow short 0:10:01.200 --> 0:10:04.520 term and by long term assets that by itself is 0:10:04.559 --> 0:10:09.120 not inflationary. Uh. And the forecast that people have of 0:10:09.240 --> 0:10:13.319 the inflation outlook still don't show that there would be inflation. 0:10:13.720 --> 0:10:18.320 So I'm a concern for commodity producers is they do 0:10:18.440 --> 0:10:21.320 better in a red hot world. You know, where there's 0:10:21.600 --> 0:10:26.120 where there's inflationary pressures. Uh. And right now I'm I'm 0:10:26.160 --> 0:10:30.400 worried about or my I think the bigger challenge is 0:10:30.400 --> 0:10:35.719 to get enough GDP growth meaning nominal nominal supply the 0:10:35.760 --> 0:10:40.640 production side of the global economy up and running and recovering. Yep, 0:10:41.240 --> 0:10:43.440 We're gonna end this interview because I'm gonna asked David 0:10:43.480 --> 0:10:46.360 mel pass for a remand call and he's gonna people that. 0:10:47.920 --> 0:10:50.200 David mel Bess, thank you so much. He is President 0:10:50.520 --> 0:10:57.760 of the World Bank. In this changing world inflation over 0:10:57.800 --> 0:11:00.040 the next ten years. To get one for it in 0:11:00.120 --> 0:11:03.240 your treasury, you're losing money in real terms, Tom, And 0:11:03.280 --> 0:11:06.320 that is the conundrum. The other conundrum is is this 0:11:06.440 --> 0:11:08.360 a head fake the move that we're seeing today both 0:11:08.400 --> 0:11:11.480 in treasury yields and beyond. And Marcabanna has been covering 0:11:11.520 --> 0:11:13.840 all things rates. Bank of America Global Research, Head of 0:11:13.880 --> 0:11:16.480 US Rate Strategy, Mark, I'd love your sense of that. 0:11:16.559 --> 0:11:19.000 In other words, yield a kind of peeked out here 0:11:19.360 --> 0:11:22.880 and could be headed lower as people reassess the enthusiasm 0:11:22.920 --> 0:11:27.160 about faster growth and more stimulus. They could, but what 0:11:27.200 --> 0:11:30.120 we anticipate is that rates will gradually rise to around 0:11:30.120 --> 0:11:33.000 one and a half percent by the end of this year. Now, 0:11:33.000 --> 0:11:35.320 we had assume that even with the base case of 0:11:35.320 --> 0:11:38.400 a divided government, if the Democrats do end up winning 0:11:38.440 --> 0:11:41.240 both of these Georgia seats to us, that raises the 0:11:41.360 --> 0:11:43.840 risks that you see the rate repricing occur a little 0:11:43.880 --> 0:11:47.320 bit faster and potentially higher than we anticipate. Now, there's 0:11:47.320 --> 0:11:49.680 a number of headwinds in the near term. COVID is 0:11:49.720 --> 0:11:53.160 going to restrain economic activity in Q one, but we 0:11:53.200 --> 0:11:55.679 do anticipate that as the vaccine is rolled out and 0:11:55.720 --> 0:11:58.640 as global growth and US growth picks up, you're going 0:11:58.679 --> 0:12:01.600 to see long end rates reprice is higher. And importantly, 0:12:01.760 --> 0:12:03.959 we think that this long end rate repricing will be 0:12:04.000 --> 0:12:07.720 due to quote unquote healthy factors i eat, better growth, 0:12:08.120 --> 0:12:13.200 higher inflation expectations as the economy recovers, and if the 0:12:13.240 --> 0:12:15.920 Democrats when both of these Georgia seats, it naturally means 0:12:15.920 --> 0:12:18.959 more fiscal stimulus and likely higher deficits as well, how 0:12:19.040 --> 0:12:21.480 high can treasury yields go before the Fed steps in. 0:12:22.920 --> 0:12:25.280 So we think that it's less about a level and 0:12:25.320 --> 0:12:28.440 it's more about the set of conditions that's pushing rates higher. 0:12:28.920 --> 0:12:32.120 If you see this again quote unquote healthy rate repricing, 0:12:32.320 --> 0:12:35.640 where you see higher break evens, where you see stable 0:12:35.720 --> 0:12:39.760 to higher risk asset prices, a stable to weaker dollar, 0:12:40.080 --> 0:12:41.920 there's no real level that we think the Fed is 0:12:41.920 --> 0:12:44.640 going to grow uncomfortable with. However, if you see this 0:12:44.800 --> 0:12:47.880 rate move that is in a liquid move, or it's 0:12:47.920 --> 0:12:50.960 due to concerns over too much treasury supply, that's when 0:12:50.960 --> 0:12:52.920 the Fed will step in. And just as you and 0:12:52.920 --> 0:12:55.320 Tom were talking about, we think that it's really all 0:12:55.360 --> 0:12:58.679 about the distribution between break evens and real rates. If 0:12:58.800 --> 0:13:01.360 rates are rising because rate evens are widening, the FED 0:13:01.480 --> 0:13:03.840 is going to see that as a generally healthy move 0:13:04.120 --> 0:13:06.640 and they're not going to step in and offset it. Now, 0:13:06.720 --> 0:13:09.000 if you saw rates really quickly moved to one and 0:13:09.000 --> 0:13:11.679 a half percent, that would probably be a bit more 0:13:11.679 --> 0:13:13.920 than the economy can handle at present, and the Fed 0:13:13.960 --> 0:13:15.800 would need to offset that. But if it's a more 0:13:15.800 --> 0:13:18.800 gradual move, then we think that the Fed will likely 0:13:18.840 --> 0:13:21.640 tolerate and you know, in fact, embrace the move if 0:13:21.679 --> 0:13:24.600 it's driven by better inflation expectations. Although mark as we're 0:13:24.600 --> 0:13:27.960 seeing today in the big tech stocks and other stocks 0:13:27.960 --> 0:13:30.960 that are considered havens or other securities that are riskier 0:13:31.000 --> 0:13:33.160 that have been bit up in large part because of 0:13:33.200 --> 0:13:36.600 how low bond yields are. There is a question of 0:13:36.600 --> 0:13:40.160 whether the Federal respond to a disruption and financial conditions, or, 0:13:40.280 --> 0:13:42.120 if you want to put it more bluntly, a sell 0:13:42.120 --> 0:13:45.480 off in anything and step in, or perhaps you know, 0:13:45.520 --> 0:13:49.080 try to suppress yields quicker than may other be worthwhile 0:13:49.200 --> 0:13:51.480 just to keep everything intact and make it look like 0:13:51.520 --> 0:13:55.160 everyone's happy and still getting gains. Absolutely, so, the Fed 0:13:55.320 --> 0:13:58.560 is looking at financial conditions broadly, and they do not 0:13:58.720 --> 0:14:01.520 want to see a d stave realizing rise in long 0:14:01.600 --> 0:14:05.080 term interest rates that causes financial conditions to tighten materially 0:14:05.480 --> 0:14:08.280 and that causes the economy to slow down. But are 0:14:08.320 --> 0:14:11.360 they concerned about a couple of percentage points sell off 0:14:11.679 --> 0:14:15.240 in tech stocks when they've had such an incredible run. No, not. 0:14:15.320 --> 0:14:18.240 In particular, would they be concerned if that turned into 0:14:18.320 --> 0:14:22.160 a correction, Yes, And would they be concerned if there 0:14:22.160 --> 0:14:24.360 were signs that two high interest rates were beginning to 0:14:24.720 --> 0:14:28.120 in the real economy, I US slowing down the housing market, um, 0:14:28.240 --> 0:14:31.000 things of that nature. That's when the Fed would get concerned. 0:14:31.200 --> 0:14:33.280 But I think that you know, seeing the tenure yield 0:14:33.320 --> 0:14:36.280 just above one percent does not yet seem to be 0:14:36.320 --> 0:14:39.240 a level whereby those long end rates are really beginning 0:14:39.240 --> 0:14:41.800 to bite in terms of the real economy and broader 0:14:41.840 --> 0:14:46.120 financial conditions. Mark grow nerd to the bull market in 0:14:46.200 --> 0:14:49.640 the equity space, whether it's double digit tech returns, even 0:14:49.640 --> 0:14:53.440 what we're beginning to see in small cap recovering so nicely. 0:14:53.520 --> 0:14:56.600 We forget that if I look at Bloomberg Barkley's total return, 0:14:57.320 --> 0:15:00.600 it's been a persistent bullmarket of higher pro a slower 0:15:00.680 --> 0:15:04.480 yield in years space. Have we forgotten what a bond 0:15:04.480 --> 0:15:09.600 bear market is to some extent, Yes, given that you know, 0:15:09.720 --> 0:15:13.480 US interest rates have recently been at historic lows. The 0:15:13.520 --> 0:15:16.960 equity market did incredibly well despite the pandemic, and I 0:15:17.000 --> 0:15:18.800 think that the market is going to have to adjust 0:15:18.840 --> 0:15:21.840 to the notion that long and interest rates will be rising. 0:15:22.320 --> 0:15:24.960 Now again, we think that this rate rise will not 0:15:25.040 --> 0:15:27.960 necessarily constrain the economy in a material way. If it does, 0:15:28.000 --> 0:15:30.360 the federal step in But I think investors are going 0:15:30.440 --> 0:15:31.960 to have to get accustomed to the fact that they 0:15:31.960 --> 0:15:35.440 should expect to see at least the prices of bonds 0:15:35.480 --> 0:15:37.680 go down to some extent as rates ree price in 0:15:37.760 --> 0:15:40.400 growth and inflation does pick up over time. We welcome 0:15:40.440 --> 0:15:43.000 all of you on this historic day in Washington, Mark 0:15:43.040 --> 0:15:47.160 Cabana of the Bank of America with us here on rates. 0:15:47.160 --> 0:15:49.080 And we do this with futures red and green in 0:15:49.120 --> 0:15:52.800 the screen. A little bit better tape than three hours ago. Uh. 0:15:52.880 --> 0:15:57.240 The yield one point zero one percent. Mark Cabanna, I 0:15:57.240 --> 0:16:00.440 want you to talk to savers out there, not the 0:16:00.480 --> 0:16:04.520 fancy guys like you doing fancy hedging strategies and trying 0:16:04.520 --> 0:16:09.200 to manage with a higher price, higher yield, lower price. Uh, 0:16:09.400 --> 0:16:12.960 Mill you, what does the average person do in fixed income? 0:16:13.320 --> 0:16:18.600 If you're telling me higher yield and lesser price. Yeah, 0:16:18.640 --> 0:16:20.680 So I think that if you're a saver, what you 0:16:20.680 --> 0:16:22.720 wanna do is that you want to carefully think about 0:16:22.960 --> 0:16:25.600 extending out the curve, trying to pick up some additional 0:16:25.720 --> 0:16:29.120 yield based upon your own risk tolerance and your comfort level. 0:16:29.160 --> 0:16:31.560 Maybe you think about moving into the corporate space more 0:16:31.560 --> 0:16:34.320 than the government space. But you're gonna have to be careful, 0:16:34.320 --> 0:16:35.960 and you're gonna have to recognize that you want to 0:16:36.040 --> 0:16:39.040 leg into this strategy over time, because we do anticipate 0:16:39.080 --> 0:16:42.440 that rates will be slowly rising. Now, if you're an 0:16:42.480 --> 0:16:44.760 institutional investor, what you want to do is that you 0:16:44.840 --> 0:16:47.280 probably want to hew a little bit shorter on your 0:16:47.320 --> 0:16:51.560 overall duration allocation as do re price higher. Now, we 0:16:51.600 --> 0:16:54.000 do think that that it's it's great that we're seeing 0:16:54.040 --> 0:16:56.760 rates move today. I'm given some of the news out 0:16:56.760 --> 0:16:59.200 of Georgia and the implications that it has for Washington, 0:16:59.600 --> 0:17:02.920 But we still think that fundamentally, the big rate repricing 0:17:02.960 --> 0:17:05.160 that we see towards one and a half percent will 0:17:05.200 --> 0:17:08.440 likely take place in Q two or later again, as 0:17:08.480 --> 0:17:10.960 the vaccine has rolled out and as we get confirmation 0:17:11.240 --> 0:17:14.960 the economy is indeed recovering on a price yield basis. 0:17:15.040 --> 0:17:18.800 The fancy guys talk about duration in the second derivative convexity, 0:17:18.800 --> 0:17:22.200 which I'm gonna call acceleration. Guys like you call it gamma. 0:17:22.480 --> 0:17:24.000 I don't MiG And do you know what gamma means? 0:17:24.040 --> 0:17:26.920 I have no idea what gamma means. How about convexity, 0:17:27.000 --> 0:17:30.320 Mark Cabanah, what is going to be the accelerated forces 0:17:30.359 --> 0:17:34.239 as we go through two thousand one. Well, so as 0:17:34.280 --> 0:17:36.240 we go through two twenty one, what we do you 0:17:36.320 --> 0:17:38.879 think that we do think we're going to see again 0:17:38.960 --> 0:17:42.440 is that sell off that will likely really accelerate again 0:17:42.480 --> 0:17:45.359 from Q two onwards. Q one is going to have 0:17:45.400 --> 0:17:48.280 a very significant headwind from COVID. We don't know how 0:17:48.280 --> 0:17:52.040 effective the anybody treatments will be to the new strain 0:17:52.080 --> 0:17:54.600 of the vaccine. We don't know how quickly vaccines will 0:17:54.640 --> 0:17:58.400 be rolled out, but after that is generally behind us. 0:17:58.600 --> 0:18:01.080 We do think that the rate will need to reprice 0:18:01.359 --> 0:18:05.439 to the new reality of strong fiscal fairy tale winds 0:18:05.880 --> 0:18:07.879 and the fact that we're likely going to see the 0:18:07.920 --> 0:18:11.800 economy operate meaningfully above trend from Q two through the 0:18:11.880 --> 0:18:14.160 end of the year, and that we think is going 0:18:14.200 --> 0:18:16.800 to take rates higher. So we do expect to see 0:18:16.840 --> 0:18:20.119 a more accelerated move later in the and today it 0:18:20.160 --> 0:18:22.320 just seems like the market is repricing a bit more 0:18:22.320 --> 0:18:24.760 to the fact that you need to assign higher odds 0:18:24.800 --> 0:18:27.919 to a democratic control of the Senate than you did previously. 0:18:28.080 --> 0:18:29.920 Mark Obanna, thank you so much for the Bank of 0:18:29.960 --> 0:18:37.600 America splipperg surveillance, folks, on radio and television. It runs 0:18:37.640 --> 0:18:41.320 like a Swiss watch, and within that you get lucky 0:18:41.400 --> 0:18:43.600 when you have guests. John Lieber is with US Now 0:18:43.640 --> 0:18:46.600 with your Asia Group, Managing director for the United States, 0:18:47.119 --> 0:18:51.800 but also expert on policy and international policy for America. 0:18:52.320 --> 0:18:56.040 Here is the breaking news. On November twelve, the President 0:18:56.080 --> 0:19:00.640 put out an extensive executive order essentially really saying We're 0:19:00.640 --> 0:19:03.320 not going to do business with China companies because of 0:19:03.359 --> 0:19:07.040 their linkage to China military. To make a long story short, 0:19:07.080 --> 0:19:11.440 everybody reacted, and then Treasury dropped a bombshell Monday evening 0:19:11.520 --> 0:19:14.320 and said no, and I mean literally the sentence, folks, 0:19:14.720 --> 0:19:18.480 was an oh period. Moments ago, the New York Stock 0:19:18.520 --> 0:19:23.560 Exchange announced a suspension date for securities of three issuers 0:19:23.640 --> 0:19:27.600 and proceeds with delisting. John Lieber, it's unfair to catch 0:19:27.600 --> 0:19:30.760 you like this. This is truly breaking news. What are 0:19:30.760 --> 0:19:36.440 the ramifications that you see of a strident policy against 0:19:36.680 --> 0:19:45.400 financial instruments of China in our global and American financial system. 0:19:45.480 --> 0:19:48.399 The threat here is of retaliation that you know, the 0:19:48.480 --> 0:19:52.159 Chinese figure out they don't need American financial markets, and 0:19:52.200 --> 0:19:54.360 that doesn't seem like that would be obvious right now, 0:19:54.400 --> 0:19:57.679 but that over time that could certainly develop, and you know, 0:19:57.720 --> 0:20:00.879 the US are missing out on these listings. On the 0:20:00.920 --> 0:20:04.480 other hand, this policy, some of these companies don't simply 0:20:04.560 --> 0:20:09.919 don't live up to American standards of transparency of um uh, 0:20:10.000 --> 0:20:14.000 you know, on accounting standards. And as a result of that, 0:20:14.119 --> 0:20:17.280 you know, this this policy is need a little bit overdue, 0:20:17.280 --> 0:20:20.240 and I think would be politically popular if the Treasury 0:20:20.280 --> 0:20:22.760 had the will to see it through, if we started 0:20:22.800 --> 0:20:25.960 with this with the Democrats and the Republicans. One of 0:20:26.000 --> 0:20:28.160 the few things are on the same page on which 0:20:28.200 --> 0:20:32.440 isn't more strident approach to President gi and Beijing. If 0:20:32.480 --> 0:20:35.840 that's the reality, do you see you raise your group 0:20:36.000 --> 0:20:40.960 a Biden Trump differential off of the strident executive order 0:20:41.000 --> 0:20:46.240 of President Trump November twelve. Know, what you'll see is 0:20:46.280 --> 0:20:49.800 a little bit more process around the Biden administration, a 0:20:49.880 --> 0:20:53.639 little bit more transparency into the direction they're heading. And 0:20:53.760 --> 0:20:57.800 you know, this rule, this December rule executive order has 0:20:57.840 --> 0:21:01.720 been criticized for being kind slap dash or haphazard and 0:21:01.880 --> 0:21:03.760 a little bit confusing to follow, which I think is 0:21:03.920 --> 0:21:06.400 you're seeing now in its implementation. And so I think 0:21:06.400 --> 0:21:09.600 the Biden people have the opportunity to potentially reframe it 0:21:09.720 --> 0:21:12.040 or perhaps even withdrawn and then issue it in a 0:21:12.040 --> 0:21:14.480 new form. And that's all subjects going to be a 0:21:14.520 --> 0:21:17.639 point of subject to negotiations with the Chinese. And I 0:21:17.680 --> 0:21:19.639 think that's an important point to keep in mind about 0:21:19.640 --> 0:21:23.560 all of everything President Trump has done visa be China. 0:21:23.720 --> 0:21:27.520 This is all leverage and negotiating points that President President 0:21:27.520 --> 0:21:30.159 Biden will be able to use to get concessions out 0:21:30.160 --> 0:21:32.040 of the Chinese. And he starts in a very strong 0:21:32.080 --> 0:21:36.359 stance with pretty restrict things in place with terrorists, and 0:21:36.400 --> 0:21:39.240 that can all be negotiated down over time if the 0:21:39.320 --> 0:21:41.480 Chinese want to do that. And that's really what we 0:21:41.520 --> 0:21:43.800 don't know right now is how desper they to try 0:21:43.840 --> 0:21:45.960 to undo some of the damage that Trump has done 0:21:45.960 --> 0:21:49.080 to the trading relationship. So John, as it relates to 0:21:49.119 --> 0:21:51.919 the U. S. China relationship, and now it appears that 0:21:52.040 --> 0:21:55.679 the president like Biden may have control of the Senate 0:21:55.720 --> 0:21:59.159 as well, how do you expect the Biden administration to 0:21:59.200 --> 0:22:02.359 deal with China easy? The our other allies is it? 0:22:02.960 --> 0:22:06.600 You know, obviously President Trump was kind of America first. 0:22:07.080 --> 0:22:09.240 How do you expect the president like Biden to kind 0:22:09.240 --> 0:22:13.320 of try to re engage with other countries around the 0:22:13.320 --> 0:22:16.320 world as it relates to China. Well, there's an obvious 0:22:16.359 --> 0:22:19.920 opportunity here for an anti China coalition which would probably 0:22:19.960 --> 0:22:23.320 be more effective in isolating them from the global trading order. 0:22:23.600 --> 0:22:26.399 That's sort of the approach of the Obama administration. It 0:22:26.480 --> 0:22:29.560 was the theory behind the Transtacific Partnership, which is probably dead. 0:22:30.080 --> 0:22:33.480 But you know, for issues like technology security, you're trying 0:22:33.520 --> 0:22:36.440 to cut Walway out of networks, You're trying to squeeze 0:22:36.480 --> 0:22:39.280 the Chinese financial sector, You're trying to gain more market 0:22:39.280 --> 0:22:43.840 access and better intellectual and property enforcement. Coordinated measures with 0:22:43.920 --> 0:22:47.240 the European allies and Asian allies is something I think 0:22:47.240 --> 0:22:49.399 the Biden administration is going to be very easier to do, 0:22:49.840 --> 0:22:53.520 given you expected approach on multilateralism. Tell us of your 0:22:53.560 --> 0:22:57.600 top risks of Asia and of Washington, John Lieber, your 0:22:57.680 --> 0:23:00.080 view off of what you and Dr Bremer of it. 0:23:02.080 --> 0:23:04.520 You know, the top risk that we've highlighted in the 0:23:04.640 --> 0:23:08.600 US this year is what we'd called the Astis presidency, 0:23:08.680 --> 0:23:12.320 where you've got Joe Biden, who has been duly elected 0:23:12.320 --> 0:23:15.240