1
00:00:00,000 --> 00:00:02,040
Speaker 1: So let's get to our guests now, Regive Demelo as

2
00:00:02,080 --> 00:00:05,440
Speaker 1: Global macro portfolio manager at Gamma Asset Management, joining us

3
00:00:05,519 --> 00:00:08,480
Speaker 1: on the line from Singapore. So we're looking ahead to

4
00:00:08,560 --> 00:00:12,480
Speaker 1: the jobs report, Regive, and that's certainly seen quite a

5
00:00:12,480 --> 00:00:15,680
Speaker 1: big move coming through in the two year yield. The

6
00:00:16,120 --> 00:00:18,400
Speaker 1: risk here that if it is a very strong number,

7
00:00:18,440 --> 00:00:20,880
Speaker 1: we are going to see an even more hawki ish fit.

8
00:00:21,160 --> 00:00:24,279
Speaker 1: How do you say this plan out? Well, thanks for

9
00:00:24,320 --> 00:00:26,759
Speaker 1: having me and we had great creeping on your on

10
00:00:26,840 --> 00:00:30,080
Speaker 1: your show. I I do think that if the number

11
00:00:30,200 --> 00:00:33,559
Speaker 1: is very strong, the chances of the seventy five basis

12
00:00:33,560 --> 00:00:36,640
Speaker 1: point high end of September at the fed's next meeting

13
00:00:37,240 --> 00:00:41,199
Speaker 1: will go up significantly. So that is a that is

14
00:00:41,200 --> 00:00:44,120
Speaker 1: a concern, but the market is already priced quite a

15
00:00:44,200 --> 00:00:48,360
Speaker 1: large chance of high seventy five or fifty. Now if

16
00:00:48,400 --> 00:00:51,920
Speaker 1: the number is somewhat weaker, that wouldn't take away the

17
00:00:52,000 --> 00:00:54,560
Speaker 1: chance of seventy five. The important number after that will

18
00:00:54,640 --> 00:00:58,120
Speaker 1: be the CPI coming in in about ten days time.

19
00:00:58,600 --> 00:01:01,240
Speaker 1: So we really need to see both of these very

20
00:01:01,280 --> 00:01:06,880
Speaker 1: important numbers pointing to stronger labor market and higher CPI

21
00:01:07,080 --> 00:01:09,880
Speaker 1: to really push the FED into the seventy five basis

22
00:01:09,920 --> 00:01:12,840
Speaker 1: point side, you say that some of this has already

23
00:01:12,880 --> 00:01:15,920
Speaker 1: been really priced into market, so there is potentially a

24
00:01:16,040 --> 00:01:18,240
Speaker 1: chance that we can see a lot of assets move

25
00:01:18,280 --> 00:01:21,280
Speaker 1: out of the lower levels that we've been witnessing. But

26
00:01:21,640 --> 00:01:23,440
Speaker 1: the question of the day that we're asking today is

27
00:01:23,520 --> 00:01:26,520
Speaker 1: how much does a bond bear market really matter? Here?

28
00:01:29,280 --> 00:01:33,839
Speaker 1: By definition here already in a bond bear market. Um

29
00:01:34,000 --> 00:01:38,560
Speaker 1: where it does matter if bonds continue to decline is

30
00:01:38,600 --> 00:01:41,600
Speaker 1: that it makes it very difficult for investors to build

31
00:01:41,640 --> 00:01:46,080
Speaker 1: a balanced portfolio, which is traditionally built between equities and

32
00:01:46,200 --> 00:01:49,840
Speaker 1: bonds and eventually some other asset classes like commodities, which

33
00:01:50,080 --> 00:01:54,160
Speaker 1: give diversification to portfolio. So with bonds on their way down,

34
00:01:54,200 --> 00:01:57,320
Speaker 1: if they continue to fall, it makes it very difficult

35
00:01:57,360 --> 00:02:00,120
Speaker 1: for equity holders to continue holding that same level all

36
00:02:00,160 --> 00:02:03,200
Speaker 1: of equities, and and does trigger by itself by the

37
00:02:03,240 --> 00:02:08,440
Speaker 1: construction of a portfolio pressure on the equity markets. You know,

38
00:02:08,760 --> 00:02:11,959
Speaker 1: say you're continuing to hold longer maturity US treasuries and

39
00:02:12,080 --> 00:02:14,880
Speaker 1: also German bords. So tell us that exists your thoughts

40
00:02:14,880 --> 00:02:17,240
Speaker 1: here on on what kind of economic rebound we are

41
00:02:17,240 --> 00:02:21,800
Speaker 1: going to see? Well, the reason for holding longer maturity

42
00:02:21,840 --> 00:02:26,560
Speaker 1: bonds is really one of confidence restored in central banks.

43
00:02:27,040 --> 00:02:32,120
Speaker 1: They lost the investors confidence because they lagged on combating inflation.

44
00:02:32,560 --> 00:02:35,280
Speaker 1: They were very slow to high crates. But now they've

45
00:02:35,360 --> 00:02:38,320
Speaker 1: caught up and they're they're talking a very fowkish talk

46
00:02:38,600 --> 00:02:41,880
Speaker 1: and they're actually walking that talk with two seventy five

47
00:02:41,880 --> 00:02:44,840
Speaker 1: basis points back to back heights by the Fed and

48
00:02:44,960 --> 00:02:49,200
Speaker 1: now an acceleration in heights by the ECB. So I

49
00:02:49,280 --> 00:02:52,720
Speaker 1: do think that that is restoring confidence in the central banks,

50
00:02:53,000 --> 00:02:54,840
Speaker 1: which is good for the very long end of the

51
00:02:54,880 --> 00:02:57,519
Speaker 1: bond market, and that's the reason for my abolishness of

52
00:02:57,639 --> 00:03:00,000
Speaker 1: that part of the youth curve. It is a big

53
00:03:00,120 --> 00:03:02,640
Speaker 1: thought here in terms of when we see a global

54
00:03:02,680 --> 00:03:05,240
Speaker 1: slowdown what we're seeing in Europe and particularly the war

55
00:03:05,280 --> 00:03:10,480
Speaker 1: in Ukraine, that is of course a worry and bonds

56
00:03:10,639 --> 00:03:16,240
Speaker 1: will eventually react well. One month sees a slowdown. Initially, though,

57
00:03:16,600 --> 00:03:19,880
Speaker 1: we are looking for lower inflation, and that's what the

58
00:03:19,919 --> 00:03:23,520
Speaker 1: central banks need to see and bond market investors as

59
00:03:23,560 --> 00:03:26,480
Speaker 1: well before they really plunge in headlong. We are seeing

60
00:03:26,560 --> 00:03:31,000
Speaker 1: some indications of lower inflation coming from like I S

61
00:03:31,160 --> 00:03:33,760
Speaker 1: M Prices Paid which came out yesterday, or core p

62
00:03:33,760 --> 00:03:36,920
Speaker 1: P I cord cp I, those numbers starting to decline.

63
00:03:37,160 --> 00:03:40,320
Speaker 1: An inflasient brake evens and swaps are also declining, and

64
00:03:40,400 --> 00:03:43,480
Speaker 1: wholesale gasoline price in the US are really backed down

65
00:03:43,600 --> 00:03:45,960
Speaker 1: quite sharply. They reach levels where we were at the

66
00:03:46,000 --> 00:03:49,440
Speaker 1: beginning of this year or even in October twe so

67
00:03:49,520 --> 00:03:52,440
Speaker 1: that part of inflation is coming off already a stronger

68
00:03:52,440 --> 00:03:54,960
Speaker 1: than expected. You want fixed from the PBOC for an

69
00:03:54,960 --> 00:03:58,200
Speaker 1: eighth day with quite a strong move there. We saw

70
00:03:58,240 --> 00:04:01,480
Speaker 1: an earlier move of around two forty nine pips I

71
00:04:01,480 --> 00:04:03,640
Speaker 1: think earlier in the week two, which was the second

72
00:04:03,800 --> 00:04:06,520
Speaker 1: strongest on record. What does this kind of show us

73
00:04:06,520 --> 00:04:11,200
Speaker 1: about how uncomfortable authorities are with the weekly one. Well,

74
00:04:11,240 --> 00:04:14,720
Speaker 1: it clearly shows that they're they're bringing the big guns

75
00:04:14,760 --> 00:04:20,279
Speaker 1: to to slow down the appreciation. And that is particularly

76
00:04:20,320 --> 00:04:23,640
Speaker 1: interesting because when one looks at the UN against its

77
00:04:23,640 --> 00:04:26,280
Speaker 1: trade weighted basket, it isn't all that week because of

78
00:04:26,320 --> 00:04:28,840
Speaker 1: course it does trade with Europe when the US been

79
00:04:28,880 --> 00:04:32,400
Speaker 1: falling um and with Japan as well, so that had

80
00:04:32,440 --> 00:04:35,320
Speaker 1: been their measure before in the past. Just look at

81
00:04:35,360 --> 00:04:37,960
Speaker 1: the one against the trade weighted basket, but now they

82
00:04:38,000 --> 00:04:41,640
Speaker 1: seem to be particularly focused on on the UN's weakness

83
00:04:41,760 --> 00:04:44,720
Speaker 1: versus the US dollar, which is a sign which is

84
00:04:44,760 --> 00:04:48,120
Speaker 1: often interpreted domestically as a sign of confidence in China.

85
00:04:48,400 --> 00:04:52,760
Speaker 1: So there's obviously a political dimension um to this strength

86
00:04:52,800 --> 00:04:56,000
Speaker 1: of the defense of the yuan levels. Now and when

87
00:04:56,000 --> 00:04:58,359
Speaker 1: we talk about confidence, I mean, how much does the

88
00:04:58,400 --> 00:05:02,760
Speaker 1: lockdown in Chain do kind of really affect sentiment here too,

89
00:05:02,800 --> 00:05:04,920
Speaker 1: because I mean that's a city of twenty one million

90
00:05:04,960 --> 00:05:07,080
Speaker 1: people at a time when you're starting to see the

91
00:05:07,080 --> 00:05:12,560
Speaker 1: rest of Asia mostly open up. Now lockdown absolutely. I

92
00:05:12,600 --> 00:05:16,400
Speaker 1: mean after the lockdown in Shanghai, we all remember how

93
00:05:16,400 --> 00:05:19,080
Speaker 1: long it took for that lockdown to be lifted. Now

94
00:05:19,160 --> 00:05:21,760
Speaker 1: changing for the time being, it's for mass testing. So

95
00:05:21,839 --> 00:05:24,560
Speaker 1: depending on the results, the lockdown could continue or not.

96
00:05:24,720 --> 00:05:27,920
Speaker 1: But if it does continue, we could expect another hit

97
00:05:28,000 --> 00:05:31,280
Speaker 1: to Chinese growth, just at the time when you know,

98
00:05:31,520 --> 00:05:36,000
Speaker 1: slowly growth is recovering and confidence might be bottoming. But

99
00:05:36,080 --> 00:05:38,800
Speaker 1: this is a problem, especially coming so close to National

100
00:05:39,920 --> 00:05:43,600
Speaker 1: National Congress in mid October. Yeah, of course, A big

101
00:05:43,680 --> 00:05:46,120
Speaker 1: question though, is they just doing this until then? And

102
00:05:46,160 --> 00:05:49,520
Speaker 1: do we see a turnaround after that? When you talk

103
00:05:49,560 --> 00:05:51,840
Speaker 1: about the weakness in currency, So you mentioned the year

104
00:05:51,839 --> 00:05:56,080
Speaker 1: and we're looking at potentially you know this fresh low here,

105
00:05:56,400 --> 00:05:58,920
Speaker 1: and we also mentioned the pace so falling to an

106
00:05:58,920 --> 00:06:01,600
Speaker 1: all time low. How much of a concern is there

107
00:06:01,640 --> 00:06:03,960
Speaker 1: that we're going to see similar to what we saw

108
00:06:04,279 --> 00:06:10,440
Speaker 1: in the Asian currency crossis of n Indeed, the moves

109
00:06:10,480 --> 00:06:14,400
Speaker 1: are strong and the dollar has been extremely strong, But

110
00:06:14,520 --> 00:06:17,400
Speaker 1: I I think it's quite different from back then because

111
00:06:17,400 --> 00:06:21,520
Speaker 1: back then previously had been a system of quite pegged

112
00:06:21,520 --> 00:06:24,479
Speaker 1: exchange rates or closely I managed exchanges to the US,

113
00:06:24,560 --> 00:06:29,000
Speaker 1: and there was a letter of steam in in Asia

114
00:06:29,160 --> 00:06:32,680
Speaker 1: at that time from pegs to a closing exchange rate.

115
00:06:32,920 --> 00:06:37,040
Speaker 1: Right now, we've had exchange rates flexible, and we've seen

116
00:06:37,080 --> 00:06:41,120
Speaker 1: moves that moved down already, and central banks have reacted

117
00:06:41,200 --> 00:06:45,080
Speaker 1: and many of them have tightened montrely policy as well,

118
00:06:45,320 --> 00:06:47,880
Speaker 1: initia a bit at a slower pace than what we've

119
00:06:47,920 --> 00:06:50,560
Speaker 1: seen in Latin America where they were very quick to HiPE.

120
00:06:51,000 --> 00:06:54,000
Speaker 1: So I don't expect a big meltdown in Asian currencies,

121
00:06:54,240 --> 00:06:56,400
Speaker 1: but that doesn't mean that they wouldn't be pressures on

122
00:06:56,520 --> 00:07:00,400
Speaker 1: central banks to high rates in this region. We heard

123
00:07:00,480 --> 00:07:03,240
Speaker 1: yesterday that Hong Kong officials are targeting an end to

124
00:07:03,320 --> 00:07:07,240
Speaker 1: hotel quarantine in November. The SCMP now saying that Hong

125
00:07:07,320 --> 00:07:10,040
Speaker 1: Kong is going to offer incentives to attract overseas E

126
00:07:10,240 --> 00:07:13,840
Speaker 1: s G talent. We had Singapore announcing plans to try

127
00:07:13,880 --> 00:07:15,960
Speaker 1: and get more talent in earlier in the week two.

128
00:07:16,800 --> 00:07:19,480
Speaker 1: This reopening, hopefully in Hong Kong, does it Does it

129
00:07:19,520 --> 00:07:23,520
Speaker 1: bring the Hong Kong story back? I think it definitely

130
00:07:24,120 --> 00:07:28,440
Speaker 1: improves the situation for many people who would do business

131
00:07:28,480 --> 00:07:30,800
Speaker 1: with and in Hong Kong. And we have to go

132
00:07:30,840 --> 00:07:35,040
Speaker 1: in and out and these these UH quarantine systems, even

133
00:07:35,080 --> 00:07:37,400
Speaker 1: though the one right now is much later than it

134
00:07:37,520 --> 00:07:41,440
Speaker 1: was before, a huge impediment to business travel and UH

135
00:07:41,520 --> 00:07:44,480
Speaker 1: and commerce, and so that will that will improve the

136
00:07:44,520 --> 00:07:47,760
Speaker 1: Hong Kong story, even though it still remains very difficult.

137
00:07:48,640 --> 00:07:50,800
Speaker 1: All Right, Just a quick final question, Reggie, what is

138
00:07:50,800 --> 00:07:53,160
Speaker 1: your kind of I guess best call right now, particularly

139
00:07:53,160 --> 00:07:57,440
Speaker 1: as we do look at the reopening across Asia. Well,

140
00:07:57,600 --> 00:08:00,560
Speaker 1: I am one thing to note in terms of positive

141
00:08:00,600 --> 00:08:03,240
Speaker 1: indications because a lot of the markets are on the

142
00:08:03,280 --> 00:08:05,400
Speaker 1: way down and I still think that they can go

143
00:08:05,520 --> 00:08:09,000
Speaker 1: further down. M as we we get closer to the

144
00:08:09,200 --> 00:08:11,120
Speaker 1: fo m C meeting at the end of September. It's

145
00:08:11,160 --> 00:08:13,640
Speaker 1: really about how focused the FED is going to be.

146
00:08:14,240 --> 00:08:16,640
Speaker 1: But if you look at Chinese high Yield Index, that's

147
00:08:16,680 --> 00:08:18,960
Speaker 1: one which has really performed well in August. It's up

148
00:08:19,760 --> 00:08:23,480
Speaker 1: close to seven since the end of July. And that's

149
00:08:23,840 --> 00:08:27,000
Speaker 1: you know, that's one outside China high YEA gragive Demelo

150
00:08:27,080 --> 00:08:30,280
Speaker 1: Global macro portfolio manager, Gamma Asset Management on the line

151
00:08:30,280 --> 00:08:32,439
Speaker 1: from Singapore. For US, this is Bloomberg