1 00:00:00,160 --> 00:00:04,160 Speaker 1: Jeffrey Rosenberg, a Blackrock knows we've seen a standard deviation move. 2 00:00:04,480 --> 00:00:08,039 Speaker 1: He is with their systematic multi strategy fund. Oh, I 3 00:00:08,039 --> 00:00:10,200 Speaker 1: can see you in the classroom as a freshman at 4 00:00:10,240 --> 00:00:13,480 Speaker 1: Cardige email and Jeff Rosenberg going, what in God's name 5 00:00:13,560 --> 00:00:17,120 Speaker 1: is standard deviation? Did we get a jump condition today? 6 00:00:17,200 --> 00:00:21,560 Speaker 1: Jeff Rosenberg towards a less restrictive FED well. 7 00:00:21,760 --> 00:00:24,720 Speaker 2: As Lisa pointed out earlier, there's a lot of data 8 00:00:24,760 --> 00:00:28,120 Speaker 2: coming out today, and so parsing out the reaction from 9 00:00:28,160 --> 00:00:31,800 Speaker 2: the Fed versus the earlier kind of main event behind 10 00:00:31,800 --> 00:00:35,080 Speaker 2: the Treasury refunding is a little bit tricky, but I 11 00:00:35,120 --> 00:00:39,120 Speaker 2: would highlight that the main kind of differentiation is really 12 00:00:39,159 --> 00:00:41,560 Speaker 2: the reaction in the front end of the curve, right 13 00:00:41,640 --> 00:00:45,080 Speaker 2: from the refunding announcement. That was really the back end. 14 00:00:45,120 --> 00:00:47,680 Speaker 2: As Lisa highlighted, a little bit of the weaker data 15 00:00:47,720 --> 00:00:51,920 Speaker 2: on pmis also helping the back end rally, But the 16 00:00:51,960 --> 00:00:55,200 Speaker 2: Fed market reaction was really in the front end. So 17 00:00:55,680 --> 00:00:58,400 Speaker 2: I think, Powell, you want to look at the statement, 18 00:00:58,440 --> 00:01:01,000 Speaker 2: and you want to look at the opening the press conference. 19 00:01:01,040 --> 00:01:05,080 Speaker 2: That's what they intended to say versus what the market 20 00:01:05,160 --> 00:01:08,000 Speaker 2: interpreted from the Q and A what they intended to 21 00:01:08,040 --> 00:01:12,080 Speaker 2: say was to try to be balanced. Resiliency on economic 22 00:01:12,160 --> 00:01:15,080 Speaker 2: growth implies we need to stay tight, maybe do one 23 00:01:15,120 --> 00:01:18,760 Speaker 2: more against the tightening of financial conditions, which implies maybe 24 00:01:19,000 --> 00:01:21,600 Speaker 2: we've done enough. That's what they were hoping to say. Clearly, 25 00:01:21,600 --> 00:01:25,000 Speaker 2: what the market saw was a preference for the worry 26 00:01:25,040 --> 00:01:28,760 Speaker 2: of tightening financial conditions where at sufficiently restricted we could 27 00:01:28,760 --> 00:01:30,840 Speaker 2: be done, and so you price out the little bit 28 00:01:30,880 --> 00:01:34,520 Speaker 2: of probability for the next hike. That's the market reaction, 29 00:01:35,160 --> 00:01:37,800 Speaker 2: as you went over in the earlier segment with Dudley. 30 00:01:38,040 --> 00:01:40,720 Speaker 2: You know, it remains to be seen. The data will 31 00:01:40,720 --> 00:01:45,320 Speaker 2: dictate that. But certainly to your question, Tom big reaction, 32 00:01:45,520 --> 00:01:47,760 Speaker 2: I think a lot more of that standard deviation move 33 00:01:47,800 --> 00:01:50,840 Speaker 2: has to do with refunding earlier a little bit coming 34 00:01:50,840 --> 00:01:52,040 Speaker 2: out of this press comp How do. 35 00:01:51,960 --> 00:01:53,600 Speaker 3: You play this then, Jeff, if you think that the 36 00:01:53,640 --> 00:01:56,600 Speaker 3: market is reading way too much into what Jay Pellis said, 37 00:01:56,600 --> 00:01:59,040 Speaker 3: which is trying to stick close to the script, although 38 00:01:59,080 --> 00:02:02,200 Speaker 3: perhaps giving a different tone than people thought of, do 39 00:02:02,240 --> 00:02:04,320 Speaker 3: you then sell to your notes and wait for them 40 00:02:04,400 --> 00:02:06,280 Speaker 3: for yields to go back up, for them to cheapen 41 00:02:06,360 --> 00:02:07,080 Speaker 3: and buy them back. 42 00:02:07,360 --> 00:02:09,480 Speaker 2: Well, you know, I think it's less a question about 43 00:02:09,520 --> 00:02:12,120 Speaker 2: selling the two year node. Now, I think given the 44 00:02:12,200 --> 00:02:15,840 Speaker 2: pricing and given the data that we have that Powell 45 00:02:15,880 --> 00:02:19,360 Speaker 2: refer to two more inflation prints, two more labor prints, 46 00:02:19,639 --> 00:02:22,480 Speaker 2: and what Dudley was just hinting at, you know, are 47 00:02:22,480 --> 00:02:25,760 Speaker 2: we really seeing the degree of tightness? The degree is 48 00:02:25,800 --> 00:02:30,160 Speaker 2: sufficiently restrictive given the trajectory of growth that we just 49 00:02:30,240 --> 00:02:34,400 Speaker 2: came off of. Obviously no one expects that to persist. 50 00:02:34,800 --> 00:02:39,240 Speaker 2: But the risk there is that you're not pricing enough 51 00:02:39,280 --> 00:02:41,760 Speaker 2: of the possibility of another hike, and so maybe a 52 00:02:41,800 --> 00:02:44,480 Speaker 2: hold off on adding twos at these levels. 53 00:02:44,520 --> 00:02:46,440 Speaker 1: And Jeff from why you said at black Rock and 54 00:02:46,480 --> 00:02:48,640 Speaker 1: I understand there's an index play here, but there's some 55 00:02:48,680 --> 00:02:51,560 Speaker 1: active management and you're watching everybody else in the game. 56 00:02:52,120 --> 00:02:54,760 Speaker 1: What's the bet of the market right now? Is the 57 00:02:54,800 --> 00:02:58,080 Speaker 1: bet that we're going to get this fed done in 58 00:02:58,120 --> 00:03:01,320 Speaker 1: a more dubbsh less restrictive tone, or's a bet, hey, 59 00:03:01,320 --> 00:03:03,280 Speaker 1: we're scared stiff and we may move higher. 60 00:03:03,639 --> 00:03:05,280 Speaker 2: Well, I mean, you have a number, you have a 61 00:03:05,320 --> 00:03:07,399 Speaker 2: couple of different cross currents on there. 62 00:03:07,800 --> 00:03:08,000 Speaker 1: You know. 63 00:03:08,280 --> 00:03:12,520 Speaker 2: Obviously there's been a lot of talk about movement into 64 00:03:12,560 --> 00:03:16,320 Speaker 2: the long end, movement of retail flows buying the long end. 65 00:03:16,320 --> 00:03:20,440 Speaker 2: That's very much kind of we're we're at or close 66 00:03:20,520 --> 00:03:22,680 Speaker 2: to the end, and we're going back to the old 67 00:03:22,720 --> 00:03:26,679 Speaker 2: playbook that you know, once the FED is done tightening, 68 00:03:26,680 --> 00:03:28,840 Speaker 2: then you get a big rally. I think I think 69 00:03:28,840 --> 00:03:31,000 Speaker 2: you got to be a little bit cautious about we're 70 00:03:31,040 --> 00:03:33,480 Speaker 2: just simply going back to the old playbook, but certainly, 71 00:03:33,639 --> 00:03:35,560 Speaker 2: you know there's a degree of that in the market. 72 00:03:35,600 --> 00:03:38,360 Speaker 2: And then the other really big kind of consensus story 73 00:03:38,720 --> 00:03:41,400 Speaker 2: is around the steepness of the curve, that the curve 74 00:03:41,480 --> 00:03:43,960 Speaker 2: is just way too inverted, that you need to see 75 00:03:44,000 --> 00:03:47,360 Speaker 2: normalization of the curve, all the factors around that. You know, 76 00:03:47,400 --> 00:03:49,760 Speaker 2: the refunding was a little bit of that. That that 77 00:03:49,880 --> 00:03:53,960 Speaker 2: kicked in posts the August refunding announcement Japan and the 78 00:03:54,000 --> 00:03:57,200 Speaker 2: news on the BOJ and yield curve control, you know, 79 00:03:57,320 --> 00:04:00,080 Speaker 2: deficit FINANCEE. There's a litany of lists, but there's a 80 00:04:00,200 --> 00:04:03,040 Speaker 2: very popular positioning around the steepening, and I think the 81 00:04:03,080 --> 00:04:06,560 Speaker 2: reaction to the refunding earlier today really reflects that very 82 00:04:06,600 --> 00:04:11,360 Speaker 2: crowded steepening position that exacerbates that standard deviation move that 83 00:04:11,400 --> 00:04:11,920 Speaker 2: we saw earlier. 84 00:04:12,160 --> 00:04:14,360 Speaker 1: If I want to go full circle to where Lisa 85 00:04:14,360 --> 00:04:16,440 Speaker 1: and I were early this morning. Folks, we've been live 86 00:04:16,520 --> 00:04:18,920 Speaker 1: since two am this morning. It's really, you know, you know, 87 00:04:19,000 --> 00:04:22,760 Speaker 1: quite something, And Jeff, it's about the commercial banking system 88 00:04:22,800 --> 00:04:25,600 Speaker 1: of America, which the chairman alluded to maybe a little 89 00:04:25,600 --> 00:04:29,120 Speaker 1: bit and maybe not enough for my taste. Can we 90 00:04:29,160 --> 00:04:32,880 Speaker 1: get a bond market that heals to take those bond 91 00:04:32,960 --> 00:04:36,840 Speaker 1: losses and drift them away into twenty twenty five where 92 00:04:36,839 --> 00:04:39,240 Speaker 1: things can even get better if we don't get a 93 00:04:39,320 --> 00:04:42,080 Speaker 1: massive bond move, but just enough of a bond move. 94 00:04:42,360 --> 00:04:43,760 Speaker 1: Is there really the strategy here? 95 00:04:44,480 --> 00:04:47,360 Speaker 2: No, And you did hear that question. It was probably 96 00:04:47,400 --> 00:04:50,720 Speaker 2: one of the few questions on that topic. I mean, 97 00:04:50,760 --> 00:04:53,520 Speaker 2: this is a historic move in terms of interest rates. 98 00:04:53,560 --> 00:04:57,120 Speaker 2: So you know, even if you get a modest kind 99 00:04:57,200 --> 00:04:59,800 Speaker 2: of cut in interest rates that the bond market in 100 00:04:59,800 --> 00:05:03,520 Speaker 2: this second half of twenty twenty four is anticipating, that's 101 00:05:03,560 --> 00:05:07,719 Speaker 2: nowhere near enough to kind of unwind the unrealized losses 102 00:05:07,720 --> 00:05:10,240 Speaker 2: that you're talking about from this historic move from zero 103 00:05:10,279 --> 00:05:13,520 Speaker 2: to five. So that's really about a long term story 104 00:05:13,520 --> 00:05:17,240 Speaker 2: of repairing capital and dealing with those issues within the 105 00:05:17,279 --> 00:05:20,760 Speaker 2: banking system that if you kind of repair the funding 106 00:05:21,200 --> 00:05:23,520 Speaker 2: concerns and that was what the bank term funding question 107 00:05:23,680 --> 00:05:27,200 Speaker 2: was referring to. Then maybe that doesn't become a crisis moment, 108 00:05:27,279 --> 00:05:29,400 Speaker 2: but it still becomes kind of a longer term drag 109 00:05:29,440 --> 00:05:32,599 Speaker 2: in terms of capital repair that even a small rally 110 00:05:32,720 --> 00:05:35,600 Speaker 2: is anticipated in the bond market, pricing for twenty twenty 111 00:05:35,600 --> 00:05:37,400 Speaker 2: four isn't going to be sufficient to repair. 112 00:05:37,839 --> 00:05:40,120 Speaker 3: Jeff, you talked about positioning, and I want to go 113 00:05:40,160 --> 00:05:42,280 Speaker 3: there because a lot of people are saying short squeeze, 114 00:05:42,360 --> 00:05:44,240 Speaker 3: This is a positioning squeeze, and we've been hearing that 115 00:05:44,400 --> 00:05:48,479 Speaker 3: a lot. How much is levered funds that have come 116 00:05:48,520 --> 00:05:51,800 Speaker 3: into the treasury market. How much is that what's underpinning 117 00:05:51,800 --> 00:05:55,159 Speaker 3: some of the incredible volativity that we've seen over recent weeks. 118 00:05:55,680 --> 00:05:58,279 Speaker 2: Well, you know, that's a tough one to sort of 119 00:05:58,320 --> 00:06:02,720 Speaker 2: pin it on leverage. You know, there's a lot of 120 00:06:03,240 --> 00:06:07,919 Speaker 2: drivers to that volatility into that uncertainty. You know, positioning 121 00:06:08,000 --> 00:06:12,040 Speaker 2: and crowded positioning exacerbates those moves, and that's that can 122 00:06:12,080 --> 00:06:14,640 Speaker 2: be levered, it can be unlevered. It can be just 123 00:06:14,760 --> 00:06:18,520 Speaker 2: asset managers who favor particular positions. 124 00:06:18,560 --> 00:06:20,480 Speaker 3: I don't mean to interrupt, Jeff, but there's a difference 125 00:06:20,480 --> 00:06:23,200 Speaker 3: between real money investors who are making a long term 126 00:06:23,279 --> 00:06:27,040 Speaker 3: vet on treasuries and people who are fast positioning trying 127 00:06:27,080 --> 00:06:30,120 Speaker 3: to make a trade. Or is the market right now 128 00:06:30,160 --> 00:06:33,640 Speaker 3: being determined by the trading types not by the real money. 129 00:06:34,160 --> 00:06:37,960 Speaker 2: I mean in short term reactions, absolutely, right, leverage is 130 00:06:38,000 --> 00:06:42,320 Speaker 2: going to exacerbate reactions to price movements. So I think 131 00:06:42,320 --> 00:06:46,400 Speaker 2: it's really about you know, decoupling, and you said it earlier. 132 00:06:46,600 --> 00:06:49,680 Speaker 2: You know, the near term reaction isn't always to any 133 00:06:49,760 --> 00:06:52,240 Speaker 2: data point where whether we're talking about the press conference 134 00:06:52,360 --> 00:06:56,360 Speaker 2: or on Friday to payroll or CPI, that near term 135 00:06:56,400 --> 00:06:59,520 Speaker 2: move yes, that's going to be dictated by algos, it's 136 00:06:59,560 --> 00:07:02,120 Speaker 2: going to be dictated soon by AI. It's going to 137 00:07:02,120 --> 00:07:07,039 Speaker 2: be dictated by the levered positions and crowded positioning. But 138 00:07:07,120 --> 00:07:10,600 Speaker 2: let's separate that from kind of the longer run impact 139 00:07:10,600 --> 00:07:13,480 Speaker 2: of the fundamental signaling. And as you mentioned earlier, you know, 140 00:07:13,520 --> 00:07:15,800 Speaker 2: you can have the near term reaction and then a 141 00:07:15,840 --> 00:07:18,160 Speaker 2: day later or two days later, you know, it's a 142 00:07:18,240 --> 00:07:22,080 Speaker 2: very different trend as we parse the totality of the data. 143 00:07:22,120 --> 00:07:24,840 Speaker 2: But certainly very short term price reactions are going to 144 00:07:24,880 --> 00:07:26,840 Speaker 2: be driven by those levered factors. 145 00:07:26,960 --> 00:07:29,680 Speaker 3: Jeff Rosenberg, thank you so much. As always for your 146 00:07:29,680 --> 00:07:32,200 Speaker 3: comments on this incredibly important day.