WEBVTT - Global Bond Rout as Trump Tariffs Take Effect 0:00:00.040 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.880 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:26.960 us live on YouTube. 0:00:27.080 --> 0:00:28.400 Well, I'm a going far away. 0:00:28.760 --> 0:00:31.120 I got on a plane and I was sitting up 0:00:31.120 --> 0:00:35.080 in the fancy seats and Christine Legarde got on a plane. 0:00:35.240 --> 0:00:38.120 We sat down one row ahead of me. We said hello, and. 0:00:38.040 --> 0:00:42.920 Sheep dived into the newspapers. Is the French banks blew up? 0:00:43.040 --> 0:00:46.519 It was a day where basically European banking collapsed. We 0:00:46.600 --> 0:00:50.560 start straw with the humility and history of BNP Perry 0:00:50.600 --> 0:00:55.440 By of Paris. There, Victor Hortyort joins us this morning 0:00:55.440 --> 0:00:59.240 and derivative and bond strategies. Victor, we are so honored 0:00:59.280 --> 0:01:02.400 to have you here with the French banking tradition. What 0:01:02.440 --> 0:01:06.280 does your measurement of liquidity look like in the system? 0:01:06.680 --> 0:01:10.679 Is the plumbing working in our financial system this morning? 0:01:11.760 --> 0:01:12.200 So far? 0:01:12.319 --> 0:01:15.600 I think it is in the corporate credit world that 0:01:15.680 --> 0:01:19.520 I live in. One good measure of this is what 0:01:19.640 --> 0:01:25.280 people are prepared to pay for the spread between derivatives 0:01:25.640 --> 0:01:32.399 and corporate bonds, and typically when you have liquidity shortage, 0:01:33.400 --> 0:01:36.559 people are forced to sell their bonds. That's not really 0:01:36.600 --> 0:01:38.720 been the story so far. 0:01:39.000 --> 0:01:39.440 Tom. 0:01:40.080 --> 0:01:43.839 You know, we've had a material move wider in spreads 0:01:44.360 --> 0:01:47.880 over the last few weeks, but it's been mostly driven 0:01:47.960 --> 0:01:52.960 by hedges derivatives. It's almost like the situation where, you know, 0:01:53.000 --> 0:01:56.880 you introduce a lot of uncertainty, people reach for the hedges, 0:01:57.280 --> 0:02:00.320 but they don't feel so negative yet that they need 0:02:00.360 --> 0:02:03.040 to sell their bond portfolios. And that's kind of where 0:02:03.120 --> 0:02:04.040 we are right now. 0:02:04.120 --> 0:02:08.360 The tension in New York this morning is percolating that 0:02:08.520 --> 0:02:12.440 we're not there yet, folks. For me, it's four standard deviations. 0:02:12.480 --> 0:02:15.720 We're not there, but that we're nearing a point where 0:02:15.760 --> 0:02:18.799 the Fed has to do something. They did that in 0:02:18.840 --> 0:02:22.720 a medical crisis, the pandemic it BMP perrybod. Do you 0:02:22.800 --> 0:02:25.440 have discussions that were at a point where any given 0:02:25.560 --> 0:02:29.040 central bank, including Jerome Powell, will have to step in 0:02:29.120 --> 0:02:30.520 to write the chaos. 0:02:30.840 --> 0:02:33.119 Well, first of all, I don't think that we are 0:02:33.760 --> 0:02:38.480 actually anywhere close to the conditions where that is that's 0:02:38.520 --> 0:02:43.959 on the cards. Even primary corporate bond markets reopened, although 0:02:44.000 --> 0:02:48.400 it was modest in the US yesterday, so the market's 0:02:48.400 --> 0:02:52.680 are obviously not shut. Then to your point, what do 0:02:52.720 --> 0:02:55.800 we think about the central banks? You're probably more likely 0:02:55.880 --> 0:03:01.120 to see the EASYB being proactive here, and the FED 0:03:01.720 --> 0:03:04.520 it used to be, has actually much easier job here 0:03:04.800 --> 0:03:07.320 given the lack of inflationary pressures. 0:03:07.360 --> 0:03:10.240 Brilliant, brilliant Paul headline out here, this is what's moved 0:03:10.240 --> 0:03:12.880 the market now now at one point seven percent. 0:03:12.919 --> 0:03:15.480 I forgot my glasses, so politic possible the wrong. 0:03:15.919 --> 0:03:17.880 Let me know, you know, it's like it's like I'm 0:03:17.880 --> 0:03:20.480 blind on the golf course, like Damian sass Hour. Here's 0:03:20.520 --> 0:03:23.840 the headline, and it has directly to do with Duke 0:03:23.960 --> 0:03:30.520 University merch China raises tariffs US goods to eighty four percent. 0:03:30.720 --> 0:03:33.720 Yep, So that Duke sweatshirt from the Champion, the reverse 0:03:33.760 --> 0:03:36.800 weave sweatshirt, I guess, goes up eighty four percent. 0:03:36.920 --> 0:03:39.200 I mean, this is it continues, Tom, this tit for 0:03:39.280 --> 0:03:41.680 tat for on the tear front. This is kind of 0:03:41.680 --> 0:03:45.160 what we signed up for here. So Victor, you know, 0:03:45.560 --> 0:03:48.360 in the credit markets, you know, where where are we 0:03:48.440 --> 0:03:51.080 in terms of assessing risk? What is the bond market, 0:03:51.080 --> 0:03:54.880 the credit market telling us about recession risk in the 0:03:55.000 --> 0:03:56.200 US economy. 0:03:56.440 --> 0:04:02.520 Well, spreads are substantially wider, but we're probably nowhere close 0:04:02.600 --> 0:04:06.200 to actually pricing in a recession. You know, if you 0:04:06.240 --> 0:04:10.560 look at US investment grades spreads on your Bloomberg index, 0:04:10.800 --> 0:04:13.800 we're around one hundred and twenty basis points. That usually 0:04:13.840 --> 0:04:16.039 gets to one hundred and forty one hundred and fifty 0:04:16.760 --> 0:04:21.440 even outside of recessions. If you're going to enter a recession, 0:04:21.480 --> 0:04:23.880 you're talking about two hundred basis points. So the credit 0:04:23.920 --> 0:04:27.919 market is under pressure, but it's still nowhere close to 0:04:28.120 --> 0:04:32.560 discounting a proper recessionary environment. It's actually only over the 0:04:32.640 --> 0:04:35.520 last couple of days, for instance, that the markets began 0:04:35.880 --> 0:04:41.200 switching focus from pure tariff concerns like auto's, like you 0:04:41.279 --> 0:04:46.440 mentioned pharmaceuticals earlier, and started to focus on the real cyclicals, 0:04:47.200 --> 0:04:51.640 including financials for instance. And cyclicals have started to underperform 0:04:51.640 --> 0:04:53.560 only on the last couple of days. 0:04:54.240 --> 0:04:56.839 Victor, we're going to see vulnerability in the credit markets. 0:04:56.880 --> 0:04:58.719 Where do you think we'll see it first? We'll be 0:04:58.720 --> 0:05:01.320 in a short term paper side or be in longer 0:05:01.400 --> 0:05:05.320 term issuance. If we do see some pain where would 0:05:05.320 --> 0:05:06.320 you see it first. 0:05:07.600 --> 0:05:10.880 So the one thing that's different today compared to let's 0:05:10.920 --> 0:05:13.159 say twenty twenty two, which was the last time we 0:05:13.279 --> 0:05:18.560 had volatility and spread winding, is on the borer side. 0:05:18.640 --> 0:05:22.680 So back then, HIEL companies had taken advantage of the 0:05:22.920 --> 0:05:27.280 easy funding conditions during the COVID stimulus and extended their 0:05:27.320 --> 0:05:32.160 born maturity profiles. This time around they have a little bit. Lastly, Whey, 0:05:33.000 --> 0:05:37.480 the born maturity walls are probably three times what they 0:05:37.520 --> 0:05:40.560 were back then. So my guess is that we're stay 0:05:40.640 --> 0:05:43.520 here for another few months, it's going to be the 0:05:43.600 --> 0:05:45.600 leveraged finance space that. 0:05:45.640 --> 0:05:46.839 Starts to look interesting. 0:05:46.920 --> 0:05:48.839 That's not the story today, but it will get there 0:05:48.920 --> 0:05:49.600 if we stay here. 0:05:49.760 --> 0:05:51.160 Don't be a stranger. Thank you so much. 0:05:51.200 --> 0:05:53.599 I'd like to do the interview in French, but that 0:05:54.040 --> 0:05:57.680 brilliant Victor or thank you so much with BMB bar 0:05:57.760 --> 0:06:01.239 about Paris out of London this morning to get us started. 0:06:01.440 --> 0:06:05.320 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:06:05.360 --> 0:06:08.760 starting at seven am Eastern on Applecarplay and Android Auto 0:06:08.800 --> 0:06:11.760 with the Bloomberg Business app. You can also listen live 0:06:11.800 --> 0:06:15.400 on Amazon Alexa from our flagship New York station. Just 0:06:15.440 --> 0:06:17.960 say Alexa play Bloomberg eleven thirty. 0:06:18.240 --> 0:06:18.800 She does a. 0:06:18.680 --> 0:06:23.160 Wonderful synthesis of the moment. Many people do, but nobody 0:06:23.160 --> 0:06:23.839 does it better. 0:06:23.680 --> 0:06:24.520 Than Constance Hunter. 0:06:24.600 --> 0:06:28.080 She's the EIU and of course with macro policy perspective 0:06:28.080 --> 0:06:30.040 as an advisor there as well. 0:06:30.360 --> 0:06:33.840 What's the one chart for you, Constance Hunter right now that. 0:06:33.839 --> 0:06:37.760 Speaks It's the chart of uncertainty. And that chart takes 0:06:37.760 --> 0:06:39.239 into account. 0:06:38.600 --> 0:06:42.360 Well uncertainty at JP Morgan what's. 0:06:41.480 --> 0:06:45.320 Uncertain So it's it's a Nick bloom out of Stanford, 0:06:45.640 --> 0:06:49.920 and he uses EIU data to chart the word uncertainty 0:06:50.000 --> 0:06:53.360 in our reports. Plus he looks at changes in the 0:06:53.400 --> 0:06:55.840 tax code that are coming up. Plus he looks at 0:06:55.880 --> 0:06:59.200 the divergence of economic forecasts. And when you add all 0:06:59.240 --> 0:07:02.680 those three things together, we are almost at the COVID 0:07:02.760 --> 0:07:03.839 level of uncertainty. 0:07:04.120 --> 0:07:04.880 But what we know. 0:07:05.000 --> 0:07:09.120 Going back to the eighties is that this presage's recessions. 0:07:10.440 --> 0:07:13.960 You know that those that recession data was backdated, right 0:07:14.000 --> 0:07:17.520 you you look at the you choose a recession ex post. 0:07:17.920 --> 0:07:20.160 We know that the GDP data ends up getting revised 0:07:20.160 --> 0:07:22.760 down usually if there ends up being a recession. And 0:07:22.880 --> 0:07:25.160 so when we look at this chart. We know that 0:07:25.200 --> 0:07:28.720 there are certain behaviors that companies and households engage in 0:07:28.800 --> 0:07:30.840 when there is this level of uncertainty, and one of 0:07:30.880 --> 0:07:32.120 them is they do not invest. 0:07:33.040 --> 0:07:36.160 So are you forecasting a recession? 0:07:36.240 --> 0:07:38.480 We are forecasting recession, all right, talk to us about that. 0:07:38.840 --> 0:07:39.080 Yeah. 0:07:39.120 --> 0:07:40.920 Well, so we were in the process of doing our 0:07:40.960 --> 0:07:43.280 forecast last night as we were sending you our notes, 0:07:44.560 --> 0:07:47.520 and so before the latest that's where you were. 0:07:47.600 --> 0:07:51.360 I drove by Central Park, so the constance right, doing 0:07:51.440 --> 0:07:52.800 a recession forecast. 0:07:53.320 --> 0:07:56.400 Okay, yeah, I had to have a glass of seltzer, 0:07:56.440 --> 0:08:00.920 not a glass of wine. Yeah. So, I mean we're 0:08:01.240 --> 0:08:03.160 I mean, I think that the story is and everybody's 0:08:03.160 --> 0:08:04.360 going to be in this boat. We're just going to 0:08:04.400 --> 0:08:07.120 have to keep revising down right. So right now, as 0:08:07.160 --> 0:08:09.560 of last night, we were at down zero point one 0:08:09.560 --> 0:08:11.160 percent for the year. I think it's going to end 0:08:11.240 --> 0:08:13.600 up being lower than that. You don't have this kind 0:08:13.640 --> 0:08:16.840 of dislocation and then just bounce back right away, right. 0:08:16.880 --> 0:08:19.280 And the thing that we were arguing is even if 0:08:19.320 --> 0:08:21.280 the tariffs get rolled back, which is what people were 0:08:21.280 --> 0:08:23.560 talking about a couple of weeks ago, you still have 0:08:23.600 --> 0:08:27.040 that uncertainty level very very high. Now of course it's 0:08:27.080 --> 0:08:29.440 gone even higher. And what I said at a dinner 0:08:29.440 --> 0:08:31.440 party this weekend, I was talking about how I had 0:08:31.640 --> 0:08:34.920 written a note to everybody on my team and listen, 0:08:34.960 --> 0:08:36.760 I've lived through a few crises. My first one was 0:08:36.800 --> 0:08:45.840 the tequila crisis back in the nineties. And there's always 0:08:45.880 --> 0:08:48.800 something that ends up being worse than you could imagine, right, 0:08:49.160 --> 0:08:51.760 And so there's some opacity somewhere that we're not going 0:08:51.800 --> 0:08:54.760 to see, some connectivity somewhere. And someone asked me a 0:08:54.800 --> 0:08:56.440 dinner party, so when you wrote this note, did you 0:08:56.440 --> 0:08:58.040 tell them what do you think? Is this going to 0:08:58.040 --> 0:09:00.000 be the worst of your career? And I said, yeah, 0:09:00.120 --> 0:09:02.840 very well, could be, because it's completely self inflicted. 0:09:03.000 --> 0:09:05.520 Right, Constant Hunner with us. We're going to continue with 0:09:05.600 --> 0:09:06.480 you're here and a good morning. 0:09:06.480 --> 0:09:07.560 We say good morning to all of you. 0:09:07.600 --> 0:09:09.840 With the futures negative one on the three, we're out 0:09:09.920 --> 0:09:12.760 five figures on evics fifty seven point two three. I'm 0:09:12.760 --> 0:09:14.679 not going to mince words an ugly tape and real 0:09:14.840 --> 0:09:20.440 talk about to be polite financial dislocation out there, Constants. 0:09:20.480 --> 0:09:22.160 One of the great things you do, and you've done 0:09:22.160 --> 0:09:25.640 this for years, is synthesize this into what central banks 0:09:25.640 --> 0:09:26.000 will do. 0:09:26.800 --> 0:09:27.960 We had a gentleman from B and. 0:09:27.960 --> 0:09:31.000 B, Perry Boss, say, actually, the ECB has more degrees 0:09:31.040 --> 0:09:36.040 of freedom hereror to work than a Trump affected Jerome Powell. 0:09:36.360 --> 0:09:40.920 How constrained is the FED right now to act within 0:09:41.080 --> 0:09:43.800 crisis because of the politics. 0:09:44.640 --> 0:09:47.600 So it's not so much the politics itself, but the 0:09:47.760 --> 0:09:51.720 political policy of raising tariffs, which we know is going 0:09:51.720 --> 0:09:55.760 to have an immediate inflationary impulse. And of course the 0:09:55.840 --> 0:09:58.600 question is when does that get overwhelmed by the negative 0:09:58.640 --> 0:10:02.559 economic impulse that then reduces to hand and pushes down prices. 0:10:02.960 --> 0:10:06.320 If we start to get market dislocation, if treasuring markets 0:10:06.520 --> 0:10:09.960 start not to clear, the FED is going to step in, right, 0:10:10.240 --> 0:10:11.960 I mean, so we're in a different as we wake 0:10:12.040 --> 0:10:14.120 up this morning, we're in a different realm than we 0:10:14.120 --> 0:10:16.760 were yesterday. Yesterday I would have told you the FED 0:10:16.840 --> 0:10:19.840 is going to be fashionably late because they don't want 0:10:19.880 --> 0:10:24.440 to repeat the problems of the COVID. Right, They're going 0:10:24.480 --> 0:10:26.200 to be a little bit late, and they know they 0:10:26.280 --> 0:10:29.119 have enough firepower. But if we're getting into a situation 0:10:29.240 --> 0:10:33.800 where we have breakdowns in capital markets and market's not clearing, 0:10:34.160 --> 0:10:36.640 then they're going to have to step in sooner from 0:10:36.640 --> 0:10:40.000 at least a market intervention perspective. 0:10:40.360 --> 0:10:42.480 Yeah, I mean, I mean Jamie Diamond's on with Maria 0:10:42.600 --> 0:10:45.360 right now. Paul, there's the headline economists or right to 0:10:45.400 --> 0:10:48.760 say we're headed for a slowdown. Jamie Diamond didn't sleep 0:10:48.840 --> 0:10:53.080 last night. I mean the major banks, Paul, are doing 0:10:53.200 --> 0:10:58.640 risk management now against all this contagion, including speculation about 0:10:58.760 --> 0:10:59.960 losses at hedge funds. 0:11:00.679 --> 0:11:01.120 Inflation. 0:11:01.200 --> 0:11:03.240 What's your inflation call here? Are we taking that up? 0:11:03.480 --> 0:11:05.960 Yes, so we're at three point six percent for the 0:11:06.000 --> 0:11:06.800 full year, but. 0:11:06.800 --> 0:11:08.960 What we were before. 0:11:09.000 --> 0:11:11.679 We were at two point five. But what we've cautioned 0:11:11.720 --> 0:11:13.719 clients is that that doesn't mean there's not going to 0:11:13.760 --> 0:11:15.160 be a couple months in there where we see a 0:11:15.320 --> 0:11:16.640 prints above five percent. 0:11:17.120 --> 0:11:17.360 Right. 0:11:17.559 --> 0:11:21.400 Our expectation is inflation spikes up and then it comes down. 0:11:22.559 --> 0:11:25.400 But again, this demand destruction is very significant, and the 0:11:25.520 --> 0:11:27.880 supply effect that you would expect to have a little 0:11:27.880 --> 0:11:30.520 bit of a lag, The lags are going away. China 0:11:30.559 --> 0:11:33.840 said they're not importing anymore LNG. They're just not importing 0:11:33.920 --> 0:11:37.320 any more of it. Right, So everything is happening in 0:11:37.360 --> 0:11:38.800 a much more compressed fashion. 0:11:39.600 --> 0:11:41.760 So where do we go from here? What are the 0:11:41.760 --> 0:11:44.240 next steps that you're looking for? Just from an economic 0:11:44.280 --> 0:11:47.400 outlook perspective, is it get starting to see it in 0:11:47.559 --> 0:11:49.000 the data, because I guess if you look at the 0:11:49.520 --> 0:11:52.240 you miss sentiment data, we're already seeing it, but we 0:11:52.280 --> 0:11:54.000 haven't seen in some of the heart that data that 0:11:54.040 --> 0:11:54.640 the FED likes. 0:11:54.920 --> 0:11:57.719 Yeah, I mean, obviously they're going to be watching. I 0:11:57.760 --> 0:11:59.800 think the next big piece of data that will contain 0:12:00.120 --> 0:12:03.560 information about this will be the April jobs data, Okay, 0:12:03.600 --> 0:12:06.880 and we would expect that to be softer. And then 0:12:06.880 --> 0:12:08.520 you've got to look under the hood, right, what's the 0:12:08.520 --> 0:12:11.160 diffusion index? How many firms are hiring? Maybe we get 0:12:11.160 --> 0:12:14.200 a positive print of one twenty or something, but you 0:12:14.240 --> 0:12:17.839 know the diffusion index falls significantly or ours worked false. 0:12:17.920 --> 0:12:19.880 What's your model unemployment rate out? 0:12:19.920 --> 0:12:23.000 I would suggest maybe that's the thing that moves this instration. 0:12:23.320 --> 0:12:26.839 Oh off, there are you modeling a five figure on unemployment? 0:12:26.880 --> 0:12:30.240 We were modeling four point seven. But I think we 0:12:30.320 --> 0:12:33.960 are as we as I sit here, we are remodeling everything, 0:12:34.240 --> 0:12:36.760 and I think five is absolutely not out of the question. 0:12:37.040 --> 0:12:39.760 Cassus Hunter, thank you so much, greatly appreciate with are 0:12:39.800 --> 0:12:41.360 you this morning? 0:12:46.960 --> 0:12:50.520 You're listening to the Bloomberg Surveillance Podcast. Catch US live 0:12:50.600 --> 0:12:53.640 weekday afternoons from seven to ten am E's durn Listen 0:12:53.679 --> 0:12:57.200 on Applecarplay and Android Auto with the Bloomberg Business app, 0:12:57.400 --> 0:12:59.160 or watch US live on YouTube. 0:12:59.480 --> 0:13:01.040 Greg p is it pigeum. 0:13:01.760 --> 0:13:03.960 It's very important to speak, I think today, on the 0:13:04.000 --> 0:13:07.720 management side of things, of running portfolios, but far more. 0:13:07.800 --> 0:13:11.280 He combines that with tours of duty at Salomon Smith Barney. 0:13:11.280 --> 0:13:14.560 This is ancient Columbus just left yep, Salom and Smith 0:13:14.600 --> 0:13:17.719 Barney and the US Treasury, and of course iconic work 0:13:17.760 --> 0:13:20.520 when I first heard of him at Morgan Stanley as well. 0:13:20.720 --> 0:13:24.080 Greg Peters compare this moment to the other analogs out there. 0:13:24.240 --> 0:13:26.760 Is it a nineteen ninety eight reducts. 0:13:26.480 --> 0:13:27.960 No, I think it's very different this time. 0:13:28.040 --> 0:13:28.439 Tom. 0:13:28.640 --> 0:13:31.800 You touched on it with the sofa spread. I know 0:13:31.880 --> 0:13:34.640 that's kind of an in the weeds type of measure. 0:13:34.760 --> 0:13:38.440 But I think what you're seeing here, and you're seeing 0:13:38.480 --> 0:13:40.959 it in kind of the correlation and the price action 0:13:41.600 --> 0:13:43.800 is risk premium being put into. 0:13:43.600 --> 0:13:46.080 The entire US rate curve. 0:13:47.160 --> 0:13:50.679 And you know, you look at the price action over 0:13:50.720 --> 0:13:51.720 the past few days. 0:13:52.280 --> 0:13:53.520 You know stocks have you. 0:13:53.480 --> 0:13:57.160 Know, sold off and you know, you haven't really seen 0:13:57.200 --> 0:14:01.760 the bond market react or at least react, uh, you know, 0:14:01.920 --> 0:14:04.640 as a kind of a defense mechanism. So you know, 0:14:04.679 --> 0:14:08.959 the markets are very nervous on the bond side around 0:14:09.360 --> 0:14:14.880 debt and deficits, foreign buyers stepping away in a meaningful fashion. Uh. 0:14:15.000 --> 0:14:18.480 And there's a lot of technical underwater, uh, you know, unlined. 0:14:18.559 --> 0:14:22.400 So this is a very sloppy, ugly bond market right now. 0:14:22.400 --> 0:14:25.800 Within it is the question of liquidity. You've got Trip, 0:14:25.880 --> 0:14:28.840 You've got Peters, you got Percelli when he decides to 0:14:28.960 --> 0:14:32.480 show up for work within the holistic page in view, 0:14:33.080 --> 0:14:36.520 are we edging towards a liquidity freeze up where the 0:14:36.520 --> 0:14:37.800 Fed needs to step in. 0:14:39.520 --> 0:14:43.120 I think at some point that is almost inevitable. And 0:14:43.160 --> 0:14:46.320 I don't want to be a doom's sayer, but I 0:14:46.360 --> 0:14:49.720 do think it is inevitable. At the same time, you know, 0:14:49.840 --> 0:14:53.760 things have actually been reasonably okay and orderly, but there's 0:14:53.800 --> 0:14:56.200 only so much capacity to absorb. 0:14:57.040 --> 0:14:57.160 Uh. 0:14:57.760 --> 0:15:01.800 You know, treasuries and the dealer ballance sheets just don't 0:15:01.840 --> 0:15:06.080 have enough of that capacity. So I think it's inevitable. 0:15:07.360 --> 0:15:11.560 But but we're not there now. You know, this is 0:15:11.560 --> 0:15:14.320 an incredibly important week. Of course, we had a three 0:15:14.360 --> 0:15:18.040 year auction yesterday, we have tens and thirties today. That's 0:15:18.200 --> 0:15:22.160 that's a lot of duration entering the system. And so 0:15:22.280 --> 0:15:25.880 we'll have more you know, informational content to see how 0:15:27.120 --> 0:15:30.800 you know that that notional kind of gets absorbed into 0:15:30.840 --> 0:15:31.280 the system. 0:15:31.400 --> 0:15:35.160 Greg you mentioned kind of the weaker than expected auction yesterday. 0:15:35.160 --> 0:15:38.320 We have more duration today from the treasury is an issue? 0:15:38.880 --> 0:15:42.080 How important if we have another week showing today, what 0:15:42.080 --> 0:15:42.800 would that tell you? 0:15:44.560 --> 0:15:48.160 Oh well, it means that there's just somewhat of a 0:15:48.200 --> 0:15:51.640 buyer strike, right and so and so our read on 0:15:51.760 --> 0:15:54.640 yesterday's auction is, you know not, you know, not a 0:15:54.640 --> 0:15:57.680 lot really came from it. From informational content standpoint, I 0:15:57.680 --> 0:15:59.640 think today is the important day. 0:16:00.120 --> 0:16:02.960 Watch watch the tail, watch the bid to cover. 0:16:04.120 --> 0:16:05.760 You know, it's important to note that, you know, we 0:16:05.840 --> 0:16:08.880 can't have a failed auctions, right, the dealers must take 0:16:08.920 --> 0:16:11.160 it down, but that doesn't mean it can't. 0:16:11.000 --> 0:16:13.600 Trade you know, in a sloppy, ugly fashion. 0:16:13.720 --> 0:16:16.840 So there's a lot of duration hitting the market at 0:16:16.880 --> 0:16:21.160 a time when there is a you know, massive selling 0:16:21.320 --> 0:16:23.960 of you know, treasuries across the board. 0:16:24.080 --> 0:16:28.080 So it's it's going to be very very interesting, and. 0:16:28.040 --> 0:16:32.320 The volatility is really extreme. I think it's important just 0:16:32.400 --> 0:16:35.800 to kind of note that the ten year has traversed 0:16:35.920 --> 0:16:38.440 like almost a sixty basis point range in just a 0:16:38.480 --> 0:16:42.920 few days. Talk about standard deviation moves, Tom, that's uh uh, 0:16:43.120 --> 0:16:45.360 you know, that's just eye popping, Paul. 0:16:45.400 --> 0:16:48.520 I've got since April four the ten year, and nobody 0:16:48.520 --> 0:16:51.960 ever quotes price except Liz Goldenberg. See the scar here, 0:16:52.200 --> 0:16:55.600 Sure that's a that's a Manola blanocute. She got so 0:16:55.720 --> 0:16:57.640 angry at me, she threw the shoe at me. It 0:16:57.680 --> 0:17:00.520 bounce off the terminal, hit me in the face. The 0:17:00.560 --> 0:17:03.120 price of the ten years down three point four to 0:17:03.240 --> 0:17:08.400 seven percent in one two three days. That annulyzes out 0:17:08.440 --> 0:17:12.080 to a ninety two per year long boy, sounds like. 0:17:12.920 --> 0:17:14.000 A little bit hyperbolic. 0:17:14.040 --> 0:17:17.960 Therefore, you know, exactly Greg, what who's been selling here 0:17:18.119 --> 0:17:19.240 the last several days. 0:17:20.760 --> 0:17:23.520 Well, there's been you know, a few factions. There's been 0:17:23.600 --> 0:17:28.359 lots of talk around foreign selling. Well we'll know that 0:17:28.520 --> 0:17:31.919 for sure, you know when the data are released. But 0:17:32.000 --> 0:17:37.520 that's you know, a a a clear conversation in the marketplace. 0:17:37.880 --> 0:17:40.359 But you're seeing a lot of kind of levered onlines. 0:17:41.160 --> 0:17:43.399 There was a very popular basis trade that you know, 0:17:43.640 --> 0:17:47.000 been talked about a lot, you know, over the past 0:17:47.000 --> 0:17:50.080 couple of years, but you know, kind of entering this year, 0:17:50.119 --> 0:17:52.720 there was a belief that you know SLR type of 0:17:52.720 --> 0:17:55.359 relief would you know come on board. And there was 0:17:55.400 --> 0:17:58.960 a loading up on that type of investment, which is 0:17:59.000 --> 0:18:02.880 you know, long treasury short futures. Uh. And the stopouts 0:18:03.160 --> 0:18:07.280 and the unwindes are you know, pretty substantial. So there's 0:18:07.320 --> 0:18:10.399 this kind of broad based selling. I'd say, there's a uh, 0:18:10.960 --> 0:18:14.160 you know, a raising of dollars and you know, exiting 0:18:14.440 --> 0:18:16.440 you know, the US bond market. I think it's also 0:18:16.520 --> 0:18:21.480 important to note that, uh, you know, trading partners, you know, 0:18:21.600 --> 0:18:24.240 if their trading volumes are going down or going down 0:18:24.240 --> 0:18:28.399 to zero, the the need to hold US treasuries. 0:18:27.960 --> 0:18:29.560 Uh just becomes a lot less. 0:18:29.600 --> 0:18:33.479 So you know, that's just a natural byproduct of you know, 0:18:33.600 --> 0:18:38.800 trying to reduce trade, right and and that's an unintended 0:18:38.840 --> 0:18:42.240 consequence that you know, I don't think the administration really 0:18:42.320 --> 0:18:43.120 kind of thought through. 0:18:43.480 --> 0:18:45.919 Greg Peters, thank you so much about eight more questions, 0:18:45.920 --> 0:18:48.640 but we can't get there this morning. Mister Peters, of course, 0:18:48.680 --> 0:18:50.840 with his work at Morgan Stanley and Salomon Brothers. 0:18:50.880 --> 0:18:52.920 He's with pgum a frous the hood. 0:18:53.600 --> 0:18:57.480 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:18:57.520 --> 0:19:00.520 starting at seven am Eastern on Apple Corplay and Android 0:19:00.560 --> 0:19:03.600 Auto with the Bloomberg Business app. You can also listen 0:19:03.680 --> 0:19:06.960 live on Amazon Alexa from our flagship New York station, 0:19:07.480 --> 0:19:10.159 Just say Alexa play Bloomberg eleven thirty. 0:19:10.520 --> 0:19:12.000 This is fun, folks. 0:19:12.080 --> 0:19:15.800 In the jargon across the pond is from London to 0:19:15.880 --> 0:19:19.399 New York. Out on the left coast across the pond 0:19:20.080 --> 0:19:21.040 is San Francisco. 0:19:21.800 --> 0:19:24.359 And the answers Ernie T. Todesky did Chad Jones did. 0:19:24.200 --> 0:19:26.280 This too, and I think in the case of Ernie, 0:19:26.359 --> 0:19:29.199 he went from Stanford to Berkeley, ben which is so 0:19:29.400 --> 0:19:33.359 I mean, there's no international comparison to this outrage joining 0:19:33.400 --> 0:19:36.560 us now from Yale with the budget lab is Ernie Tdesky, 0:19:36.600 --> 0:19:39.840 who did? What was it like going from Stanford to Berkeley? 0:19:40.640 --> 0:19:41.000 Ernie? 0:19:41.040 --> 0:19:43.040 What did did people like not talk to you for 0:19:43.119 --> 0:19:43.480 a year? 0:19:44.800 --> 0:19:45.080 They did? 0:19:45.119 --> 0:19:46.600 They didn't talk to me for a year, And I 0:19:46.640 --> 0:19:49.080 didn't care because I knew what a real college town 0:19:49.240 --> 0:19:53.560 was like. When I finally went to Berkeley, I have 0:19:53.640 --> 0:19:54.720 to say, what is it. 0:19:54.680 --> 0:19:57.600 Like going down the hallway and seeing the plaque of 0:19:57.720 --> 0:20:00.720 like DeLong, Ike and Green in the rest the criminals 0:20:00.720 --> 0:20:01.280 out there. 0:20:01.640 --> 0:20:03.920 I mean, it must have been. It must have been 0:20:04.000 --> 0:20:05.600 just a colectic as all get out. 0:20:07.800 --> 0:20:10.520 I took Brad Delong's seminar on economic history and it 0:20:10.560 --> 0:20:13.400 was my favorite class. Bar nun at Berkeley. 0:20:13.520 --> 0:20:15.760 I've heard that you have a character such an honor 0:20:15.800 --> 0:20:18.040 to do some panels with him over the years, and 0:20:18.119 --> 0:20:21.720 he's been a huge contribution to American economics with Brad 0:20:21.760 --> 0:20:26.240 Delong's study of history. Where are we right now, doctor Tedesky? 0:20:29.040 --> 0:20:30.119 Where we are right now? 0:20:30.480 --> 0:20:33.119 I mean we're at a very uncertain point right now. 0:20:34.000 --> 0:20:38.960 You know, with these retaliatory tariffs that we the increase 0:20:38.960 --> 0:20:41.159 in the China tariffs that we announced, and then the 0:20:41.200 --> 0:20:45.680 retaliation from China. So we're at a effective tariff rate 0:20:45.760 --> 0:20:49.480 now of everything announced in twenty twenty five, of twenty 0:20:49.520 --> 0:20:52.600 four percentage points, we've added twenty four percentage points to 0:20:52.680 --> 0:20:55.760 our effective tariff rate. So that brings us to the 0:20:55.840 --> 0:20:59.520 highest effective tariff rate since nineteen o three as of 0:20:59.560 --> 0:21:04.200