1 00:00:00,120 --> 00:00:08,640 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or 8 00:00:31,320 --> 00:00:33,920 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,840 Speaker 2: Terminal and the Bloomberg Business App. 10 00:00:36,159 --> 00:00:36,839 Speaker 3: John Bieber of. 11 00:00:36,800 --> 00:00:40,160 Speaker 4: Your Rasier Group writing this that President Joe Biden's inability 12 00:00:40,200 --> 00:00:43,479 Speaker 4: to team the story about his cognitive decline has prompted 13 00:00:43,479 --> 00:00:45,960 Speaker 4: your Razor group to increase the odds that he will 14 00:00:46,000 --> 00:00:49,760 Speaker 4: exit the race from fifteen percent to twenty five percent. 15 00:00:50,159 --> 00:00:52,720 Speaker 4: John joins us. Now, John, good morning to you. You 16 00:00:52,800 --> 00:00:55,640 Speaker 4: heard it there from Tyler. The strategy of Team Biden. 17 00:00:55,720 --> 00:00:57,920 Speaker 4: Get him out there as much as you can. Put 18 00:00:58,000 --> 00:01:01,000 Speaker 4: him in front of different interviews with ABC. Later tonight 19 00:01:01,040 --> 00:01:02,960 Speaker 4: we'll hear that, have him do Q and a's, give 20 00:01:03,040 --> 00:01:04,440 Speaker 4: him a grueling schedule. 21 00:01:04,959 --> 00:01:05,520 Speaker 3: Is it enough? 22 00:01:07,080 --> 00:01:07,280 Speaker 5: Yeah? 23 00:01:07,280 --> 00:01:09,560 Speaker 6: I'm concerned that twenty five percent odds might be low. 24 00:01:09,640 --> 00:01:11,880 Speaker 6: I mean, Biden has not looked good for a while 25 00:01:11,959 --> 00:01:15,040 Speaker 6: in public appearances. The debate was just one of many 26 00:01:15,160 --> 00:01:18,679 Speaker 6: reports we're hearing about what happens behind the scenes at 27 00:01:18,680 --> 00:01:22,240 Speaker 6: the G seven meeting, a meeting with congressional leaders. There's 28 00:01:22,280 --> 00:01:24,639 Speaker 6: just a lot of signs that he's losing a step 29 00:01:24,840 --> 00:01:27,960 Speaker 6: or three. And his appearance yesterday at the fourth July 30 00:01:28,040 --> 00:01:30,800 Speaker 6: at the White House was fine, was competent, but didn't 31 00:01:30,800 --> 00:01:33,040 Speaker 6: seem like a politician that was at the exactly at 32 00:01:33,040 --> 00:01:35,080 Speaker 6: the top of his game. And the stakes of this 33 00:01:35,120 --> 00:01:38,360 Speaker 6: interview tonight are going to be incredibly high for Biden. 34 00:01:38,720 --> 00:01:40,800 Speaker 6: But even if he gets through this, he's got to 35 00:01:40,840 --> 00:01:43,160 Speaker 6: go through another three or four months of campaigning where 36 00:01:43,200 --> 00:01:45,800 Speaker 6: he's got to be out there publicly making the case 37 00:01:45,840 --> 00:01:48,480 Speaker 6: that he's vigorous enough to last another four years. And 38 00:01:48,520 --> 00:01:50,760 Speaker 6: if he doesn't, he's going to be in big trouble 39 00:01:50,840 --> 00:01:54,160 Speaker 6: and probably hand the election back over to former President Trump. 40 00:01:54,760 --> 00:01:58,720 Speaker 7: John, good morning, What is this smart, political, graceful way 41 00:01:58,880 --> 00:02:02,720 Speaker 7: out of this? Is this filler kill weekend? In terms 42 00:02:02,920 --> 00:02:05,280 Speaker 7: of going head to head with Trump, there are the 43 00:02:05,320 --> 00:02:08,280 Speaker 7: Post forty eight percent to Trump forty two percent to 44 00:02:08,360 --> 00:02:12,560 Speaker 7: Biden is a smart, graceful way right now to try 45 00:02:12,600 --> 00:02:15,400 Speaker 7: and find a graceful exit because he doesn't sign like 46 00:02:15,440 --> 00:02:16,680 Speaker 7: a president that is ready to do that. 47 00:02:16,720 --> 00:02:17,799 Speaker 1: No one's pushing me out. 48 00:02:19,040 --> 00:02:22,440 Speaker 6: Well, every day he doesn't exit the race, the anger 49 00:02:23,160 --> 00:02:26,040 Speaker 6: if and when he eventually does, at him is going. 50 00:02:25,800 --> 00:02:27,600 Speaker 1: To be higher and higher and higher. 51 00:02:27,680 --> 00:02:31,600 Speaker 6: So he should move quickly to preserve his legacy. If 52 00:02:31,800 --> 00:02:34,560 Speaker 6: he's going to step aside, and you know it's possibly 53 00:02:34,600 --> 00:02:37,000 Speaker 6: he blows us away tonight, the way he blew everyone 54 00:02:37,000 --> 00:02:39,080 Speaker 6: away at the State of the Union, making this question 55 00:02:39,200 --> 00:02:42,320 Speaker 6: go away at least for until the next incident happens. 56 00:02:42,720 --> 00:02:44,640 Speaker 6: But if he does drop out, he's going to have 57 00:02:44,680 --> 00:02:46,680 Speaker 6: to do it soon. The Democrats, you know, they're they're 58 00:02:46,840 --> 00:02:49,440 Speaker 6: almost likely, almost certainly going to replace him with Kamala Harris, 59 00:02:49,480 --> 00:02:51,960 Speaker 6: the vice president. If he does step aside, that can 60 00:02:52,000 --> 00:02:54,560 Speaker 6: really happen at any moment, be now an election day, 61 00:02:54,800 --> 00:02:57,760 Speaker 6: But the momentum loss they're going to face from him 62 00:02:57,800 --> 00:03:01,240 Speaker 6: staying in here not exactly throughilling the voters is going 63 00:03:01,280 --> 00:03:03,160 Speaker 6: to be massive. So the earlier he does this, the 64 00:03:03,200 --> 00:03:05,120 Speaker 6: better off he is, and his legacy is. 65 00:03:05,280 --> 00:03:07,840 Speaker 7: In many ways. If he does choose to go or 66 00:03:07,880 --> 00:03:09,800 Speaker 7: if he's forced to go, or if he's advised to 67 00:03:09,840 --> 00:03:11,560 Speaker 7: go by his family. As you say, you think it's 68 00:03:11,600 --> 00:03:13,359 Speaker 7: the family and the inner court of Biden that will 69 00:03:13,440 --> 00:03:15,720 Speaker 7: drive him to make this decision to exit rather than 70 00:03:15,800 --> 00:03:19,320 Speaker 7: the Democratic Party. How much of a poison chalice is 71 00:03:19,320 --> 00:03:20,919 Speaker 7: that for anybody else who takes it a part from 72 00:03:20,960 --> 00:03:23,720 Speaker 7: Kamala Harris. She gets the money, she gets the money transfer, 73 00:03:23,960 --> 00:03:26,160 Speaker 7: she can get the black vote, the female vote. She 74 00:03:26,280 --> 00:03:28,639 Speaker 7: is strong, she's strong as polling strongly. 75 00:03:29,360 --> 00:03:29,800 Speaker 8: She is the. 76 00:03:29,800 --> 00:03:32,640 Speaker 7: Obvious condidate because everybody else this is a poison chalice. 77 00:03:34,320 --> 00:03:35,240 Speaker 8: Yeah, I think that's right. 78 00:03:35,280 --> 00:03:38,360 Speaker 6: I mean, I don't think you're better off picking somebody 79 00:03:38,360 --> 00:03:41,280 Speaker 6: with lower name recognition than Harris who has not been 80 00:03:41,320 --> 00:03:44,960 Speaker 6: tested on the campaign trail. So for somebody like Gretchen Whitmer, 81 00:03:44,960 --> 00:03:47,680 Speaker 6: who's got a really promising political career in front of her, 82 00:03:47,880 --> 00:03:50,280 Speaker 6: or Gavin Newsom, who you know, this would have been 83 00:03:50,320 --> 00:03:52,840 Speaker 6: his moment in to run in a normal cycle where 84 00:03:52,920 --> 00:03:55,560 Speaker 6: Biden decided to drop out earlier. You know, these people 85 00:03:55,600 --> 00:03:58,480 Speaker 6: have long political careers ahead of them. Losing to Donald 86 00:03:58,480 --> 00:04:01,120 Speaker 6: Trump in twenty twenty four not exactly a way to 87 00:04:01,160 --> 00:04:04,160 Speaker 6: set that up, and they they probably start off at 88 00:04:04,200 --> 00:04:06,840 Speaker 6: a disadvantage because no one knows who they are. Whereas 89 00:04:06,880 --> 00:04:09,520 Speaker 6: Harris can kind of step into the race, she can 90 00:04:09,560 --> 00:04:12,160 Speaker 6: sort of mop up the mess, you know, clean up 91 00:04:12,160 --> 00:04:14,680 Speaker 6: on Ale Biden. I get there whether or not she wins. 92 00:04:14,720 --> 00:04:17,400 Speaker 6: And she wins, that's fantastic. If she loses, you can't 93 00:04:17,440 --> 00:04:19,080 Speaker 6: really blame her. She did what she had to do. 94 00:04:19,320 --> 00:04:20,360 Speaker 6: She can always come back. 95 00:04:20,200 --> 00:04:21,080 Speaker 9: In twenty twenty eight. 96 00:04:21,160 --> 00:04:23,800 Speaker 6: So I think, for just thinking about the personal incentives 97 00:04:24,000 --> 00:04:26,719 Speaker 6: of any of these people, Harris has the least to 98 00:04:26,800 --> 00:04:28,280 Speaker 6: lose from being the dominiee. 99 00:04:28,360 --> 00:04:30,120 Speaker 4: John May I have only a minute here, but the 100 00:04:30,160 --> 00:04:34,760 Speaker 4: strategy from Donald Trump has been stay quiet, will relatively quiet, 101 00:04:34,839 --> 00:04:38,120 Speaker 4: and let the Democratic Party implode if Biden steps down 102 00:04:38,279 --> 00:04:41,400 Speaker 4: and someone else takes the rain. Can Trump still afford 103 00:04:41,440 --> 00:04:43,719 Speaker 4: to do that? Can he make this a referendum on 104 00:04:43,760 --> 00:04:45,360 Speaker 4: a chaotic Democratic Party? 105 00:04:46,440 --> 00:04:47,080 Speaker 8: Yeah? Absolutely? 106 00:04:47,120 --> 00:04:47,320 Speaker 1: I think. 107 00:04:47,480 --> 00:04:50,000 Speaker 6: I mean Trump's drowning a very disciplined campaign so far. 108 00:04:50,240 --> 00:04:52,960 Speaker 6: He hasn't really been drawing attention to himself the way 109 00:04:53,000 --> 00:04:55,719 Speaker 6: he would even say twenty sixteen, and he's let Biden 110 00:04:55,800 --> 00:04:57,720 Speaker 6: be the main character of the election. 111 00:04:57,600 --> 00:04:59,480 Speaker 1: Which is exactly what he needs to do to win. 112 00:05:00,400 --> 00:05:02,920 Speaker 6: Harris comes in he's going to have to quickly define 113 00:05:02,960 --> 00:05:05,800 Speaker 6: her in the eyes of the American people as too progressive, 114 00:05:06,120 --> 00:05:08,560 Speaker 6: as you know, a party to all the inflation they've 115 00:05:08,560 --> 00:05:11,520 Speaker 6: been experiencing, and basically Biden part two. I don't think 116 00:05:11,560 --> 00:05:13,880 Speaker 6: that's going to be terribly hard for him, but you'd 117 00:05:13,880 --> 00:05:16,200 Speaker 6: expect to be him out there more vigorously trying to 118 00:05:16,200 --> 00:05:17,680 Speaker 6: define her in that situation. 119 00:05:18,040 --> 00:05:21,960 Speaker 4: John, appreciate it. Enjoy your weekend. John Lieber of Eurasior Group. 120 00:05:32,000 --> 00:05:36,000 Speaker 7: Could you TD Securities is our guest this morning. Could 121 00:05:36,040 --> 00:05:38,039 Speaker 7: you good to have you with us. I mean, here 122 00:05:38,080 --> 00:05:42,400 Speaker 7: we are, we're looking at significant change about to hit 123 00:05:42,440 --> 00:05:46,159 Speaker 7: the United Kingdom. For the moment, markets, the pine, the 124 00:05:46,240 --> 00:05:49,279 Speaker 7: guilt markets, same steady on the feet. 125 00:05:49,760 --> 00:05:51,599 Speaker 8: Will that honeymoon endure? 126 00:05:53,880 --> 00:05:56,760 Speaker 10: Oh when it comes to I mean yes, as you said, Labored, 127 00:05:56,960 --> 00:05:58,880 Speaker 10: right now, we are just done with the easy part 128 00:05:58,920 --> 00:06:01,440 Speaker 10: of the election. It was pretty expected that Labor will 129 00:06:01,440 --> 00:06:04,360 Speaker 10: get the win, and I think after a long time 130 00:06:04,400 --> 00:06:06,960 Speaker 10: after Brexit, we are basically entering the phase where there'll 131 00:06:06,960 --> 00:06:09,640 Speaker 10: be much more political stability that we have not seen. 132 00:06:09,720 --> 00:06:13,159 Speaker 10: So yes, it's great for the market, but again, as 133 00:06:13,200 --> 00:06:17,160 Speaker 10: we mentioned that, it's very Labor is ending has a 134 00:06:17,160 --> 00:06:19,800 Speaker 10: lot of challenges to actually meet up to. But on 135 00:06:19,839 --> 00:06:23,280 Speaker 10: the positive side, they're actually coming in when growth has 136 00:06:23,320 --> 00:06:25,880 Speaker 10: started to improve in UK as well as we do 137 00:06:26,040 --> 00:06:29,159 Speaker 10: expect BOI to actually start cutting rates, which means that 138 00:06:29,320 --> 00:06:32,880 Speaker 10: generally interest expenditure is also going down. But definitely there's 139 00:06:33,000 --> 00:06:35,120 Speaker 10: lots for labor to live up to right now. Given 140 00:06:35,160 --> 00:06:36,880 Speaker 10: the kind of strong win they've seen. 141 00:06:37,360 --> 00:06:39,280 Speaker 7: It certainly a sixty percent probability that the Bank of 142 00:06:39,279 --> 00:06:43,520 Speaker 7: Pinioning goes in August that may well be ahead of 143 00:06:43,560 --> 00:06:46,440 Speaker 7: the Fed. In terms of the guilt market. This is 144 00:06:46,440 --> 00:06:48,800 Speaker 7: going to be critically important the fiscal plan that they lay. 145 00:06:48,960 --> 00:06:51,120 Speaker 7: They have an autumn statement in the United Kingdom and 146 00:06:51,160 --> 00:06:54,000 Speaker 7: then they have a budget later in the first quarter 147 00:06:54,000 --> 00:06:56,839 Speaker 7: of twenty twenty five. You would say that the flow 148 00:06:56,880 --> 00:06:58,800 Speaker 7: of money and this is what we've hired from Goldman Sachs. 149 00:06:58,800 --> 00:07:01,680 Speaker 7: I want to understand from you, to flow from international 150 00:07:01,760 --> 00:07:04,280 Speaker 7: parts into the guilt market. You think it is supportive 151 00:07:04,800 --> 00:07:08,000 Speaker 7: when this labor administration will be supportive to the guilt 152 00:07:08,040 --> 00:07:09,160 Speaker 7: market with right cuts. 153 00:07:09,320 --> 00:07:11,520 Speaker 8: How supportive? Yes? 154 00:07:11,560 --> 00:07:14,600 Speaker 10: Now, totally this left is very different from the left. 155 00:07:14,640 --> 00:07:17,120 Speaker 10: We are talking in France right now, so they do 156 00:07:17,200 --> 00:07:20,440 Speaker 10: not want to actually do the trust thing. Again, I 157 00:07:20,520 --> 00:07:22,480 Speaker 10: doubt they are going to change much in terms of 158 00:07:22,520 --> 00:07:25,680 Speaker 10: their fiscal when we are head to the autumn's statement. 159 00:07:26,320 --> 00:07:28,840 Speaker 10: More changes are likely to happen in the mark statement. 160 00:07:28,920 --> 00:07:31,520 Speaker 10: So I think right now Gilts in a very nice position, 161 00:07:31,600 --> 00:07:34,960 Speaker 10: given the fact that you have so much turmoil when 162 00:07:34,960 --> 00:07:37,960 Speaker 10: it comes to politically uncertainty in France as well as 163 00:07:37,960 --> 00:07:40,880 Speaker 10: in US as we head towards whether it's Trump versus Widen. 164 00:07:40,960 --> 00:07:44,520 Speaker 10: So I think from fiscal perspective, cross market wise, GILTS 165 00:07:44,640 --> 00:07:46,400 Speaker 10: is in a very good place, and we actually like 166 00:07:46,480 --> 00:07:48,240 Speaker 10: holding Gilts on a cross market basis. 167 00:07:48,240 --> 00:07:50,800 Speaker 4: Here you do make a good point, poocha, And this 168 00:07:50,840 --> 00:07:52,520 Speaker 4: is what are trying to manus about that it is 169 00:07:52,520 --> 00:07:56,880 Speaker 4: not just France, it is election upsets throughout the globe, 170 00:07:57,000 --> 00:07:59,280 Speaker 4: as it is a world that moves more right and 171 00:07:59,320 --> 00:08:03,520 Speaker 4: potentially more protectionist and more isolated. What does it mean 172 00:08:03,560 --> 00:08:05,720 Speaker 4: for the market to grapple with that, Because at the 173 00:08:05,720 --> 00:08:08,760 Speaker 4: moment we've been trading this is just idiosyncratic stories between 174 00:08:08,800 --> 00:08:11,520 Speaker 4: each individual and nation. It matters for the PAESO, it 175 00:08:11,560 --> 00:08:14,240 Speaker 4: matters for French bonds. But what happens when this global 176 00:08:14,320 --> 00:08:18,320 Speaker 4: story comes together and globalism the engine of growth takes 177 00:08:18,320 --> 00:08:18,920 Speaker 4: a back seat. 178 00:08:20,760 --> 00:08:23,960 Speaker 10: That is definitely the scary part. That is a it 179 00:08:24,040 --> 00:08:26,840 Speaker 10: impacts growth, it's also inflationary, and I think that is 180 00:08:26,880 --> 00:08:29,240 Speaker 10: something that those are the effects we actually going to 181 00:08:29,360 --> 00:08:32,160 Speaker 10: see going forward, and that especially the woods for Europe, 182 00:08:32,200 --> 00:08:35,840 Speaker 10: because Europe has created this strong integration and that is 183 00:08:35,960 --> 00:08:39,840 Speaker 10: definitely at risk risk as we head towards Sunday elections. 184 00:08:40,520 --> 00:08:43,200 Speaker 4: And as we head towards Sunday elections. Pouja again, this 185 00:08:43,240 --> 00:08:45,959 Speaker 4: is a market that is treating this like a near myss. 186 00:08:46,000 --> 00:08:48,360 Speaker 4: The spreads are still wider, but they have come in 187 00:08:48,760 --> 00:08:51,600 Speaker 4: because you don't have Marine Lopenz Party the national rally 188 00:08:51,679 --> 00:08:54,680 Speaker 4: securing as much as a majority, is it the all 189 00:08:54,720 --> 00:08:55,760 Speaker 4: clear for you as well? 190 00:08:57,480 --> 00:08:59,280 Speaker 10: So I know, I mean, we are going to these 191 00:08:59,320 --> 00:09:02,920 Speaker 10: elections a bit complacent at this stage. Markets are viewing 192 00:09:03,000 --> 00:09:06,079 Speaker 10: a hung parliament as positive for OITIS, just given the 193 00:09:06,120 --> 00:09:08,720 Speaker 10: fact that no decisions will be being made, just given 194 00:09:08,760 --> 00:09:11,520 Speaker 10: the fact that they won't be any clear majority. But 195 00:09:11,600 --> 00:09:14,400 Speaker 10: I do feel that it's not good for France growth 196 00:09:14,440 --> 00:09:18,240 Speaker 10: as well as deficits. They won't go lower, but I 197 00:09:18,280 --> 00:09:20,480 Speaker 10: don't see them improving, just given the fact that we 198 00:09:20,520 --> 00:09:23,400 Speaker 10: are basically the options right now is either to be 199 00:09:23,480 --> 00:09:26,000 Speaker 10: hung parliament with Aran as a majority, or a hung 200 00:09:26,040 --> 00:09:29,720 Speaker 10: parliament with a severe breakdown right now, which could also 201 00:09:29,720 --> 00:09:32,440 Speaker 10: mean we get head into a technocratic government, which is 202 00:09:32,440 --> 00:09:36,640 Speaker 10: definitely negative growth and not positive for France. So even 203 00:09:36,640 --> 00:09:39,880 Speaker 10: though Oiti's versus bond spread, the general levels are pretty 204 00:09:39,920 --> 00:09:42,280 Speaker 10: much contained. I don't think we are getting back to 205 00:09:42,320 --> 00:09:44,920 Speaker 10: the forty five level that we saw ahead of the 206 00:09:44,960 --> 00:09:46,280 Speaker 10: snap elections. 207 00:09:47,760 --> 00:09:50,440 Speaker 7: In terms of just stepping back from a moment Danny 208 00:09:50,520 --> 00:09:53,320 Speaker 7: framed this I think very well early on, which is 209 00:09:53,600 --> 00:09:58,640 Speaker 7: the discontent with the status quote in many democracies, not 210 00:09:58,880 --> 00:10:02,600 Speaker 7: just the United king them, not just in France and 211 00:10:02,760 --> 00:10:06,440 Speaker 7: in Germany. There is also discontent here in the United 212 00:10:06,440 --> 00:10:08,679 Speaker 7: States of America with the status quo. We're seeing that 213 00:10:08,720 --> 00:10:11,320 Speaker 7: in the polls at the moment between Biden and Trump. 214 00:10:11,360 --> 00:10:13,880 Speaker 7: From the global capital flow, and this is what I'm 215 00:10:13,960 --> 00:10:18,400 Speaker 7: curious to understand, there is this suggestion that with a 216 00:10:18,400 --> 00:10:21,400 Speaker 7: new form of government and taxation in the United Kingdom 217 00:10:21,559 --> 00:10:24,560 Speaker 7: and coming potentially in France, that you will see a 218 00:10:24,600 --> 00:10:30,200 Speaker 7: material dislocation of global wealth flows from the UK. 219 00:10:30,640 --> 00:10:32,040 Speaker 3: And from France. 220 00:10:32,120 --> 00:10:36,320 Speaker 7: How might that play out on the stage of global investing? 221 00:10:36,400 --> 00:10:39,319 Speaker 7: Do all roads ultimately then lead back to the United 222 00:10:39,360 --> 00:10:40,280 Speaker 7: States of America. 223 00:10:43,800 --> 00:10:46,080 Speaker 10: I mean, I think there will be. There is already 224 00:10:46,080 --> 00:10:49,280 Speaker 10: a shift of flows happening since COVID crisis, where all 225 00:10:49,320 --> 00:10:51,840 Speaker 10: countries had to active were forced to be self dependent 226 00:10:51,880 --> 00:10:54,520 Speaker 10: than actually being dependent on others, and that also happened 227 00:10:54,600 --> 00:10:57,320 Speaker 10: during the Ukraine crisis. So I'm not thinking of a 228 00:10:57,360 --> 00:11:00,280 Speaker 10: big majorship, but that's the way we are going into. 229 00:11:00,400 --> 00:11:02,760 Speaker 10: I totally agree with your point, but I think I 230 00:11:02,800 --> 00:11:05,280 Speaker 10: don't exp I mean, UK is still a market which 231 00:11:05,320 --> 00:11:08,199 Speaker 10: is basically owned by non domestics, especially when I talk 232 00:11:08,240 --> 00:11:10,760 Speaker 10: about the fixed income space. As long as we are 233 00:11:10,840 --> 00:11:14,480 Speaker 10: able to show that kind of stability, I do see 234 00:11:14,480 --> 00:11:25,040 Speaker 10: a lot of flows coming into UK for sure. 235 00:11:27,280 --> 00:11:30,120 Speaker 4: Joining US now is black Rocks Jeff Rosenberg and former 236 00:11:30,160 --> 00:11:33,080 Speaker 4: Fed Governor Randy Krosner is still with us. Jeff, let 237 00:11:33,160 --> 00:11:35,480 Speaker 4: me start with you. What's your face first take on 238 00:11:35,520 --> 00:11:36,120 Speaker 4: these figures. 239 00:11:37,160 --> 00:11:39,680 Speaker 11: My first take is was your first take that it's 240 00:11:39,720 --> 00:11:43,480 Speaker 11: the revisions and a little bit the unemployment rate figure 241 00:11:43,520 --> 00:11:46,920 Speaker 11: that the markets are most focused on here today. Like 242 00:11:47,080 --> 00:11:50,760 Speaker 11: I think this is supportive to the story of slow 243 00:11:50,800 --> 00:11:54,120 Speaker 11: down in the labor markets the powers looking for I 244 00:11:54,120 --> 00:11:56,840 Speaker 11: think you see that in the bond market reaction, and 245 00:11:56,880 --> 00:11:59,760 Speaker 11: I think this keeps September on the table. 246 00:12:00,160 --> 00:12:01,720 Speaker 9: The other story here and why the. 247 00:12:01,600 --> 00:12:04,720 Speaker 11: Market reactions to the revisions is there's a bigger story 248 00:12:04,800 --> 00:12:07,880 Speaker 11: that there's more manas that it is a beautiful turn 249 00:12:07,920 --> 00:12:14,040 Speaker 11: of phrase, the foothills of substantial revisions. I think there's 250 00:12:14,040 --> 00:12:16,120 Speaker 11: a big story there in the market that there are 251 00:12:16,200 --> 00:12:21,280 Speaker 11: revisions coming, that they're the established MINTS survey is overstated. 252 00:12:21,880 --> 00:12:24,920 Speaker 11: You do get the benchmark revisions, and there's an expectation 253 00:12:25,120 --> 00:12:29,760 Speaker 11: here that you're seeing an overstatement, and that is a 254 00:12:29,800 --> 00:12:32,120 Speaker 11: little bit fed into the market narrative. 255 00:12:31,720 --> 00:12:34,560 Speaker 9: With the two month revision number that you highlighted. 256 00:12:34,080 --> 00:12:37,040 Speaker 4: Earlier, Randy, would you agree with that some slowness in 257 00:12:37,080 --> 00:12:39,800 Speaker 4: these numbers, a slow down potentially confirmed. 258 00:12:41,200 --> 00:12:44,040 Speaker 5: I wouldn't say it's confirmed. I mean, obviously that was 259 00:12:44,080 --> 00:12:46,960 Speaker 5: something that I'm looking for. I think, as we were 260 00:12:47,040 --> 00:12:50,120 Speaker 5: describing before, you know, and Spike picked up on, we've 261 00:12:50,160 --> 00:12:52,640 Speaker 5: got the different pieces of the Picasso and it's hard 262 00:12:52,640 --> 00:12:54,880 Speaker 5: to put the image together right now. 263 00:12:55,200 --> 00:12:57,319 Speaker 1: And I think this is very much consistent. 264 00:12:56,840 --> 00:13:01,760 Speaker 5: With the fed's focus and Jay's focus on the labor market, 265 00:13:01,800 --> 00:13:04,000 Speaker 5: watching it very carefully. 266 00:13:04,040 --> 00:13:05,439 Speaker 1: This is really consistent. 267 00:13:05,480 --> 00:13:08,760 Speaker 5: This is broadly consistent with kind of the slow cooling 268 00:13:08,960 --> 00:13:12,160 Speaker 5: of the of the labor market that they want. But 269 00:13:12,200 --> 00:13:14,679 Speaker 5: I think it's going to be difficult to just say, ah, 270 00:13:14,720 --> 00:13:17,280 Speaker 5: we can stop the cooling whenever we want with just 271 00:13:17,480 --> 00:13:20,800 Speaker 5: a with a couple of recuts. Because of the long 272 00:13:20,840 --> 00:13:23,199 Speaker 5: and variable lags, it's going to be hard to do 273 00:13:23,240 --> 00:13:26,920 Speaker 5: that just at the right time. And so I think, 274 00:13:28,000 --> 00:13:30,160 Speaker 5: just as Jeff said, if that's not going to move 275 00:13:30,200 --> 00:13:33,240 Speaker 5: at the at the end of this month, but September 276 00:13:33,320 --> 00:13:36,000 Speaker 5: is live because we'll see how the labor market. 277 00:13:36,000 --> 00:13:37,240 Speaker 1: They'll get a couple more labor. 278 00:13:37,000 --> 00:13:41,120 Speaker 5: Market reports before that, before that meeting, and I think 279 00:13:41,200 --> 00:13:45,160 Speaker 5: that'll be really a key thing. But the wage inflation 280 00:13:45,240 --> 00:13:48,200 Speaker 5: has not come down. It's it's basically in the same 281 00:13:48,280 --> 00:13:50,120 Speaker 5: range that they were expecting it to be. 282 00:13:50,760 --> 00:13:53,040 Speaker 1: So if that drops significantly. 283 00:13:52,559 --> 00:13:55,640 Speaker 5: That would give them the okay to go ahead. 284 00:13:56,080 --> 00:13:57,320 Speaker 1: Now they're going to be cautious. 285 00:13:57,800 --> 00:14:00,640 Speaker 8: Is it, Randy Goodmore into good to see? 286 00:14:00,760 --> 00:14:01,120 Speaker 1: Randie? 287 00:14:01,320 --> 00:14:05,439 Speaker 7: Is this going to come down to the part of 288 00:14:05,480 --> 00:14:08,040 Speaker 7: the curve where the jobs are lost? In other words, 289 00:14:08,440 --> 00:14:10,840 Speaker 7: forgive me for being so brutal, but the quality of 290 00:14:10,920 --> 00:14:15,959 Speaker 7: jobs that are lost in this next unemployment cycle that's 291 00:14:15,960 --> 00:14:17,800 Speaker 7: going to be critically important here, isn't it. 292 00:14:18,920 --> 00:14:21,000 Speaker 5: Well, let's certainly be looking at the types of jobs, 293 00:14:21,080 --> 00:14:24,920 Speaker 5: because obviously, depending whether you lose jobs at the higher 294 00:14:24,960 --> 00:14:28,400 Speaker 5: pay or lower pay, that's going to affect the average wage. 295 00:14:28,200 --> 00:14:30,840 Speaker 1: The so called composition effect. They'll be looking at that. 296 00:14:31,320 --> 00:14:35,600 Speaker 5: They'll be looking at potential pockets of weakness in certain 297 00:14:35,640 --> 00:14:38,280 Speaker 5: areas that may be more interest rates sensitive, and so 298 00:14:38,320 --> 00:14:40,800 Speaker 5: they will be looking not just at the overall numbers, 299 00:14:40,840 --> 00:14:44,160 Speaker 5: but kind of digging deep into where they see monetary 300 00:14:44,160 --> 00:14:45,480 Speaker 5: policy having an effect. 301 00:14:45,720 --> 00:14:47,800 Speaker 4: Well, when you look deep into those numbers, Jeff, let 302 00:14:47,840 --> 00:14:49,440 Speaker 4: me bring you back into this because you mentioned this 303 00:14:49,600 --> 00:14:50,800 Speaker 4: a wages growth. 304 00:14:50,560 --> 00:14:53,480 Speaker 3: Point three percent. There is still growth here. 305 00:14:53,480 --> 00:14:55,920 Speaker 4: You can even look at the week iom services number, 306 00:14:56,080 --> 00:14:58,040 Speaker 4: so that we got earlier in the week and still 307 00:14:58,200 --> 00:15:00,320 Speaker 4: prices paid are higher. If I want to to make 308 00:15:00,360 --> 00:15:03,120 Speaker 4: an argument for why the Fed should hold, I could 309 00:15:03,200 --> 00:15:06,120 Speaker 4: make an argument about this that, look, wages and prices 310 00:15:06,160 --> 00:15:06,920 Speaker 4: are still high. 311 00:15:06,960 --> 00:15:10,000 Speaker 3: It is too soon to move. Is it an error to. 312 00:15:10,080 --> 00:15:12,840 Speaker 4: Air on that side to say, look, we need to 313 00:15:12,880 --> 00:15:15,120 Speaker 4: continue to hold where things are until some of those 314 00:15:15,200 --> 00:15:16,800 Speaker 4: factors start to come back in line. 315 00:15:17,840 --> 00:15:20,240 Speaker 11: You're pointing out the part of the labor markets that 316 00:15:20,360 --> 00:15:24,760 Speaker 11: has been the least that has shown the least progress 317 00:15:25,200 --> 00:15:29,360 Speaker 11: in terms of showing the normalization. So whether it's age 318 00:15:30,080 --> 00:15:33,960 Speaker 11: wages that we're seeing today ECI, Atlanta FED Wage Tracker, 319 00:15:34,160 --> 00:15:40,920 Speaker 11: our own private estimates through scraping jobs posting data, you know, 320 00:15:40,960 --> 00:15:43,400 Speaker 11: they all point to a similar story, which is the 321 00:15:43,440 --> 00:15:47,160 Speaker 11: pace of slow down and the pace of normalization hasn't 322 00:15:47,200 --> 00:15:51,080 Speaker 11: really kept up. We've kind of normalized to a pre 323 00:15:51,240 --> 00:15:56,320 Speaker 11: COVID tight level of labor market conditions and elevated wages 324 00:15:56,360 --> 00:15:59,240 Speaker 11: relative to productivity. So that's the one thing that kind 325 00:15:59,280 --> 00:16:02,720 Speaker 11: of keeps the thing at a little bit at worry 326 00:16:02,760 --> 00:16:06,040 Speaker 11: in terms of moving too quickly. But it's the broader 327 00:16:06,120 --> 00:16:09,480 Speaker 11: price data you know, we'll get next week that is 328 00:16:09,840 --> 00:16:12,000 Speaker 11: really going to be more determined and I think they'll 329 00:16:12,040 --> 00:16:17,320 Speaker 11: be okay with wages US stabilizing and if as long 330 00:16:17,360 --> 00:16:20,520 Speaker 11: as you're seeing the broader wage pressures continue to normalize 331 00:16:21,160 --> 00:16:23,280 Speaker 11: and certainly you know, not a repeat of what we've 332 00:16:23,320 --> 00:16:25,760 Speaker 11: got in the first three months of this year over reacceleration, 333 00:16:26,600 --> 00:16:28,520 Speaker 11: that's going to be the backdrop for the FED to 334 00:16:29,280 --> 00:16:33,520 Speaker 11: open up the door towards you know, slow normalization. Maybe 335 00:16:33,600 --> 00:16:35,440 Speaker 11: quarterly pace of twenty five. 336 00:16:35,280 --> 00:16:38,120 Speaker 4: Basis point cuts and for those just joining us this morning, 337 00:16:38,120 --> 00:16:40,520 Speaker 4: we just moments ago got the jobs figures. Two hundred 338 00:16:40,520 --> 00:16:43,280 Speaker 4: and six thousand is where we landed. The estimate was 339 00:16:43,320 --> 00:16:46,360 Speaker 4: for one ninety also a revision for April and May 340 00:16:46,720 --> 00:16:50,360 Speaker 4: down by one hundred and eleven thousand. Unemployment rate goes 341 00:16:50,360 --> 00:16:53,280 Speaker 4: from four percent to four point one percent. Mike McKee 342 00:16:53,360 --> 00:16:55,600 Speaker 4: is still with us, digging through the numbers. Mike, what's 343 00:16:55,640 --> 00:16:57,000 Speaker 4: some of the other takeaways you're seeing here. 344 00:16:57,440 --> 00:16:59,840 Speaker 12: Well, there's a lot in here that addresses the idea 345 00:16:59,840 --> 00:17:02,480 Speaker 12: of how serious has slow down this is, and it 346 00:17:02,560 --> 00:17:05,280 Speaker 12: might have a bearing on inflation as well. First of all, 347 00:17:05,320 --> 00:17:09,080 Speaker 12: the unemployment rate, it goes up because we saw a 348 00:17:09,160 --> 00:17:11,600 Speaker 12: large rise in the labor force two hundred and seventy 349 00:17:11,640 --> 00:17:15,160 Speaker 12: seven thousand. Now what's interesting is that we have seen 350 00:17:15,200 --> 00:17:18,480 Speaker 12: a decline in immigration. People have been giving immigration a 351 00:17:18,520 --> 00:17:22,080 Speaker 12: lot of credit for the job's numbers, and in this case, 352 00:17:22,320 --> 00:17:25,639 Speaker 12: it didn't translate. The decline didn't translate into fewer people 353 00:17:25,640 --> 00:17:28,359 Speaker 12: coming into the labor force, but it only pushed up 354 00:17:28,400 --> 00:17:29,920 Speaker 12: the unemployment rate by a little bit. 355 00:17:30,240 --> 00:17:33,240 Speaker 8: It was four point zero five four. 356 00:17:33,080 --> 00:17:35,359 Speaker 12: When you take it out to three digits. So just 357 00:17:35,600 --> 00:17:39,520 Speaker 12: barely rounding up to four point one percent. And you 358 00:17:39,520 --> 00:17:41,760 Speaker 12: look at the number of people who lost jobs and 359 00:17:41,800 --> 00:17:44,840 Speaker 12: got jobs in the household survey employment and unemployment, they're 360 00:17:44,840 --> 00:17:47,600 Speaker 12: almost exactly the same, one hundred and sixteen, one hundred 361 00:17:47,600 --> 00:17:48,640 Speaker 12: and sixty eight thousand. 362 00:17:49,040 --> 00:17:51,280 Speaker 8: What really stands out is. 363 00:17:51,600 --> 00:17:57,120 Speaker 12: A very weak performance for service providing industries and manufacturing. 364 00:17:57,160 --> 00:18:00,520 Speaker 12: Manufacturing lost eight thousand, construction gained twenty seven thousand, but 365 00:18:00,600 --> 00:18:04,840 Speaker 12: for service industries only one hundred and seventeen thousand jobs created, 366 00:18:05,160 --> 00:18:07,560 Speaker 12: and most of that was in the healthcare field that 367 00:18:07,640 --> 00:18:11,840 Speaker 12: we normally see adding a lot of jobs. Instead the 368 00:18:11,840 --> 00:18:17,359 Speaker 12: big number is government seventy thousand, and so the loss 369 00:18:17,359 --> 00:18:20,399 Speaker 12: of service sector jobs suggests that maybe we'll see some 370 00:18:20,480 --> 00:18:25,119 Speaker 12: inflation come down in the service industries because labor costs 371 00:18:25,160 --> 00:18:26,440 Speaker 12: are the biggest issue there. 372 00:18:26,760 --> 00:18:27,879 Speaker 8: And it also may. 373 00:18:27,800 --> 00:18:32,440 Speaker 12: Mean that the government the government hiring maybe a seasonal 374 00:18:32,440 --> 00:18:36,359 Speaker 12: adjustment problem, and it could end up being revised lower. 375 00:18:36,480 --> 00:18:40,480 Speaker 12: So at this point, it's definitely, as Randy said, kind 376 00:18:40,480 --> 00:18:42,879 Speaker 12: of a picasso here. A lot of different things in 377 00:18:42,920 --> 00:18:45,560 Speaker 12: here that tell you the economy has slowed. 378 00:18:46,040 --> 00:18:47,720 Speaker 8: But where we go from here is going to be 379 00:18:47,760 --> 00:18:48,639 Speaker 8: the interesting question. 380 00:18:48,760 --> 00:18:50,199 Speaker 7: I think there's a couple of other numbers that are 381 00:18:50,200 --> 00:18:53,080 Speaker 7: coming through on the tea love that various colleagues are 382 00:18:53,160 --> 00:18:56,320 Speaker 7: pointed nine temporary help is done a massive forty eight 383 00:18:58,000 --> 00:19:01,360 Speaker 7: nine hundred gene that is the most in twenty twenty one. 384 00:19:01,640 --> 00:19:03,560 Speaker 7: And the time that it takes you to get a job, 385 00:19:04,359 --> 00:19:06,520 Speaker 7: the median time that it takes to get a job 386 00:19:06,800 --> 00:19:09,959 Speaker 7: has gone to nine point eight weeks, and that's up 387 00:19:09,960 --> 00:19:12,840 Speaker 7: from eight point nine weeks now. Look, these are idiosyncratic 388 00:19:12,880 --> 00:19:15,240 Speaker 7: in those revisions. The powerful message is going to be 389 00:19:15,240 --> 00:19:16,920 Speaker 7: in the revisions, and it's going to be in the 390 00:19:17,000 --> 00:19:21,399 Speaker 7: unemployment numbers. But that temporary help, that's quite quite a 391 00:19:21,440 --> 00:19:26,440 Speaker 7: flashing amber number, especially given services dropping so significant into 392 00:19:26,480 --> 00:19:27,160 Speaker 7: a four year low. 393 00:19:27,200 --> 00:19:28,159 Speaker 1: Going into this. 394 00:19:28,400 --> 00:19:31,239 Speaker 12: Well, temporary help is usually sort of thought of as 395 00:19:31,240 --> 00:19:33,800 Speaker 12: a sort of Canarian the coal mine, because if you're 396 00:19:33,800 --> 00:19:36,359 Speaker 12: going to be adding workers, you go to temporary workers first. 397 00:19:36,720 --> 00:19:39,280 Speaker 8: In this case, that doesn't seem to be the case. 398 00:19:39,600 --> 00:19:43,639 Speaker 12: The interesting counterpoint to that is average weekly hours didn't change, 399 00:19:43,680 --> 00:19:46,159 Speaker 12: and you would expect that to start to go down 400 00:19:46,680 --> 00:19:50,080 Speaker 12: if companies were seeing business slow. 401 00:19:50,200 --> 00:19:51,960 Speaker 8: So that's something to keep an eye on. 402 00:19:52,040 --> 00:19:54,159 Speaker 12: We did know, we did have a pretty good idea 403 00:19:54,400 --> 00:19:57,119 Speaker 12: about taking longer to get a job because the continuing 404 00:19:57,119 --> 00:19:58,720 Speaker 12: claims numbers have been going. 405 00:19:58,560 --> 00:19:59,480 Speaker 8: Up nine weeks. 406 00:20:00,080 --> 00:20:02,800 Speaker 12: Yeah, that's what it's been telling us. But it is 407 00:20:02,840 --> 00:20:06,600 Speaker 12: interesting to see that maybe this Canary just sort of 408 00:20:07,480 --> 00:20:08,400 Speaker 12: cheaping a little bit. 409 00:20:08,520 --> 00:20:08,840 Speaker 8: Here. 410 00:20:09,320 --> 00:20:12,680 Speaker 4: A slight tweet coming from the Canary. Jeff, I want 411 00:20:12,680 --> 00:20:14,040 Speaker 4: to bring you back into the conversation. 412 00:20:14,119 --> 00:20:14,640 Speaker 3: Black Rocks. 413 00:20:14,680 --> 00:20:17,840 Speaker 4: Jeff Rosenberg is still with us. Jeff, I want to 414 00:20:17,840 --> 00:20:20,880 Speaker 4: touch on what Mike was talking about of particularly the 415 00:20:20,920 --> 00:20:24,120 Speaker 4: services sector being weak. This is the part of inflation 416 00:20:24,200 --> 00:20:26,879 Speaker 4: that we had been worried about about service inflation not 417 00:20:27,080 --> 00:20:29,840 Speaker 4: coming back in If you look at the contours of 418 00:20:29,880 --> 00:20:32,240 Speaker 4: this report, does it give us more confidence? 419 00:20:32,400 --> 00:20:34,760 Speaker 3: Is it enough to cement September? 420 00:20:34,800 --> 00:20:35,280 Speaker 8: For the Fed? 421 00:20:37,160 --> 00:20:41,359 Speaker 11: Probably not quite enough to cement September. When you look 422 00:20:41,400 --> 00:20:43,959 Speaker 11: at the services, it's what the conversation was just on. 423 00:20:44,040 --> 00:20:47,680 Speaker 11: It's that big drop in tempell minus forty nine, you. 424 00:20:47,640 --> 00:20:50,600 Speaker 9: Know the three month average. It's just a little bit. 425 00:20:52,240 --> 00:20:52,840 Speaker 1: Below that. 426 00:20:53,680 --> 00:20:56,000 Speaker 9: So it is one of the highlights. You know, there's 427 00:20:56,040 --> 00:20:57,400 Speaker 9: some other industry highlights there. 428 00:20:57,400 --> 00:21:00,440 Speaker 11: You got a kind of a big offset government that 429 00:21:00,800 --> 00:21:03,320 Speaker 11: Mike talked about, So there's some cross currents there. 430 00:21:03,480 --> 00:21:05,600 Speaker 9: There's a pretty strong construction. 431 00:21:05,240 --> 00:21:07,600 Speaker 11: Number that could be seasonal, that could be weather affected, 432 00:21:08,119 --> 00:21:12,920 Speaker 11: and the seasonals that Mike mentioned are particularly tricky, especially 433 00:21:12,920 --> 00:21:14,840 Speaker 11: around the government data given the. 434 00:21:14,840 --> 00:21:17,720 Speaker 9: Education flows in and out, so there are. 435 00:21:17,600 --> 00:21:19,920 Speaker 11: Some cross currants that make it a little bit tricky, 436 00:21:20,000 --> 00:21:23,040 Speaker 11: and I think when you're when you're looking at those details, 437 00:21:23,160 --> 00:21:25,320 Speaker 11: it's hard to say that that cements it. I think 438 00:21:25,359 --> 00:21:28,800 Speaker 11: what will cement September is really, you know, another round 439 00:21:28,840 --> 00:21:31,880 Speaker 11: of data and more importantly, what we see in terms 440 00:21:31,880 --> 00:21:33,800 Speaker 11: of the inflation data next week and what we see 441 00:21:33,840 --> 00:21:34,320 Speaker 11: next month. 442 00:21:35,000 --> 00:21:36,480 Speaker 9: I think that's going to be the case. 443 00:21:36,480 --> 00:21:41,000 Speaker 13: As long as we're seeing trends towards slow down in 444 00:21:41,119 --> 00:21:46,480 Speaker 13: top line, the unemployment rate, broader measures of labor markets normalizing, 445 00:21:47,240 --> 00:21:50,560 Speaker 13: I think that'll be enough, not enough to say that today, 446 00:21:50,600 --> 00:21:51,200 Speaker 13: but I think. 447 00:21:51,040 --> 00:21:53,000 Speaker 9: Once we get to September that that'll be there. 448 00:21:53,000 --> 00:21:56,480 Speaker 11: And obviously, as Powell said, you know, any surprise slow 449 00:21:56,520 --> 00:22:02,320 Speaker 11: down acceleration, you know, the earliernversation around perhaps there is 450 00:22:02,359 --> 00:22:07,959 Speaker 11: a bigger revisions and benchmark revision that tells us that 451 00:22:08,080 --> 00:22:11,920 Speaker 11: establishment says this is a survey has been much more overstated. 452 00:22:12,359 --> 00:22:13,600 Speaker 9: Perhaps that that comes through. 453 00:22:13,680 --> 00:22:17,000 Speaker 11: That's you know, the cement in an environment where inflation 454 00:22:17,119 --> 00:22:20,639 Speaker 11: is continuing to deliver this kind of pace towards two percent. 455 00:22:20,680 --> 00:22:23,080 Speaker 11: The power and the FED have've talked about a little 456 00:22:23,080 --> 00:22:25,520 Speaker 11: bit too early to say that that's the read today. 457 00:22:25,560 --> 00:22:27,000 Speaker 9: But as you can see and you got up on 458 00:22:27,040 --> 00:22:30,280 Speaker 9: the screen, you know, the yield reactions are moving towards 459 00:22:30,359 --> 00:22:32,639 Speaker 9: raising that probability of a move in September. 460 00:22:32,880 --> 00:22:33,760 Speaker 8: So Jeff tell me this. 461 00:22:33,840 --> 00:22:36,040 Speaker 7: We had premiss with us a little bit earlier on 462 00:22:36,160 --> 00:22:39,440 Speaker 7: talking about the reinvigoration, the reincarnation of the FED put. 463 00:22:40,600 --> 00:22:42,760 Speaker 7: That is certainly there when you look at the market 464 00:22:42,800 --> 00:22:44,480 Speaker 7: reaction function today. 465 00:22:44,560 --> 00:22:45,760 Speaker 8: User lower again. 466 00:22:45,920 --> 00:22:50,040 Speaker 7: The bomb bulls have been handed, you know, a fig 467 00:22:50,119 --> 00:22:53,280 Speaker 7: leaf to reinvigorate their bullishness because they've been slapped by 468 00:22:53,359 --> 00:22:57,240 Speaker 7: politics in the previous week. Does it embolden you in 469 00:22:57,280 --> 00:23:00,080 Speaker 7: regards to duration and does it cause you to be 470 00:23:00,160 --> 00:23:02,800 Speaker 7: a little bit more anxious about credit? 471 00:23:04,320 --> 00:23:07,240 Speaker 11: So I would say on the kind of the FED put, 472 00:23:07,880 --> 00:23:10,800 Speaker 11: it is a big deal. And you know, while we're 473 00:23:10,800 --> 00:23:14,520 Speaker 11: talking about policy, what we haven't really spent a lot 474 00:23:14,520 --> 00:23:16,639 Speaker 11: of time talking about, and we haven't really heard what 475 00:23:16,680 --> 00:23:18,320 Speaker 11: I mean by that is the FMC and the FED 476 00:23:18,359 --> 00:23:21,560 Speaker 11: and Powell is talking about the impact of financial conditions, 477 00:23:21,720 --> 00:23:26,160 Speaker 11: and so the proposal the way in which the FED 478 00:23:26,200 --> 00:23:31,160 Speaker 11: has been treating its response function to inflation. If inflation 479 00:23:31,240 --> 00:23:34,280 Speaker 11: surprises a little bit stronger, the whole grates here. If 480 00:23:34,320 --> 00:23:37,879 Speaker 11: inflation returns to trend, they're excited to cut rates. It's 481 00:23:37,880 --> 00:23:41,560 Speaker 11: an asymmetric response function, but it's very market friendly, and it's. 482 00:23:41,440 --> 00:23:44,000 Speaker 9: What perhaps Pria and you were talking about earlier. 483 00:23:44,160 --> 00:23:47,200 Speaker 11: Brings back a bit of the FED put that's led 484 00:23:47,240 --> 00:23:49,520 Speaker 11: to much easier financial conditions. 485 00:23:49,760 --> 00:23:52,120 Speaker 9: And when you look at financial conditions relative. 486 00:23:51,720 --> 00:23:54,000 Speaker 11: To interest rates, which you see is a huge disconnect, 487 00:23:54,040 --> 00:23:57,480 Speaker 11: that policy is much easier than what the interest rate 488 00:23:57,520 --> 00:24:02,959 Speaker 11: would otherwise imply, Yes, that's good for risk taking. 489 00:24:03,000 --> 00:24:04,080 Speaker 9: Does it embolden duration? 490 00:24:04,160 --> 00:24:05,760 Speaker 11: I think you got to be careful when you talk 491 00:24:05,760 --> 00:24:08,800 Speaker 11: about duration in a portfolio about where you hold that 492 00:24:08,920 --> 00:24:10,520 Speaker 11: duration in terms of maturity. 493 00:24:10,800 --> 00:24:13,480 Speaker 9: You mentioned earlier this week we saw a big bear steepening. 494 00:24:13,720 --> 00:24:17,240 Speaker 11: We've got fiscal policy challenges in the back end, and 495 00:24:17,320 --> 00:24:20,119 Speaker 11: so I think it emboldens the part of duration that 496 00:24:20,160 --> 00:24:22,879 Speaker 11: the FED has its greatest influence over, and that's the 497 00:24:22,880 --> 00:24:25,600 Speaker 11: front end of the curve, and maybe moving out into 498 00:24:25,640 --> 00:24:27,680 Speaker 11: the front belly of the curve, kind of the two to. 499 00:24:27,640 --> 00:24:28,720 Speaker 9: Five year part of the curve. 500 00:24:28,960 --> 00:24:30,480 Speaker 11: But I think the back end of the curve, in 501 00:24:30,520 --> 00:24:32,600 Speaker 11: that kind of traditional way in which people have thought 502 00:24:32,640 --> 00:24:36,560 Speaker 11: about using the longest end of duration as its portfolio edge, 503 00:24:36,560 --> 00:24:39,080 Speaker 11: I think we have to really rethink that in an 504 00:24:39,160 --> 00:24:42,120 Speaker 11: environment of substantial changes to fiscal policy. 505 00:24:42,800 --> 00:24:45,800 Speaker 7: And that's substantial change in fiscal policy. Even if it 506 00:24:45,880 --> 00:24:48,600 Speaker 7: is Biden or An or the Democrat in the White House, 507 00:24:48,640 --> 00:24:50,480 Speaker 7: there will still be a continuation of some of the 508 00:24:50,480 --> 00:24:52,080 Speaker 7: Trump tax cuts. 509 00:24:52,119 --> 00:24:54,120 Speaker 8: And if it is Trump on. 510 00:24:54,119 --> 00:24:58,719 Speaker 7: A Republican switep, then the coupon sizes are going to rise. 511 00:24:59,040 --> 00:25:00,280 Speaker 8: And the theory. 512 00:25:00,200 --> 00:25:02,320 Speaker 7: Of the policy that he espises at the moment is 513 00:25:03,000 --> 00:25:07,119 Speaker 7: for some very inflationary. So is it next year that 514 00:25:07,119 --> 00:25:09,840 Speaker 7: the bomb market is really tested in terms of its 515 00:25:09,840 --> 00:25:12,560 Speaker 7: appetite to take inventory on? 516 00:25:13,480 --> 00:25:16,040 Speaker 9: Yeah, you know. Part of it is the is the 517 00:25:16,160 --> 00:25:19,359 Speaker 9: pressure between kind of Treasury and the Fed. 518 00:25:19,920 --> 00:25:22,280 Speaker 11: How much Treasury has been able to hold the coupon 519 00:25:22,400 --> 00:25:25,880 Speaker 11: issuance back from the bond market by keeping these bills 520 00:25:26,080 --> 00:25:30,560 Speaker 11: issuance high, and so that time period of when that 521 00:25:30,680 --> 00:25:32,960 Speaker 11: starts to really be impacted in the back end of 522 00:25:33,000 --> 00:25:35,080 Speaker 11: the curve, you know, One, it's a function of the 523 00:25:35,119 --> 00:25:37,040 Speaker 11: expected path of fiscal policy. 524 00:25:37,440 --> 00:25:41,199 Speaker 9: Two it's a function of the treasury issuance pattern. 525 00:25:41,720 --> 00:25:43,880 Speaker 11: And three it'll be a function of where the demand 526 00:25:44,040 --> 00:25:47,840 Speaker 11: falls in terms of global investors and more importantly global 527 00:25:47,880 --> 00:25:50,760 Speaker 11: private investors, because that's the other piece of what is 528 00:25:50,760 --> 00:25:55,360 Speaker 11: substantially different here, exiting the era of QE into an 529 00:25:55,400 --> 00:25:56,119 Speaker 11: era of QT. 530 00:25:56,320 --> 00:25:58,439 Speaker 9: Yes, I know we're. 531 00:25:58,320 --> 00:26:03,720 Speaker 11: Normalizing that as well, but there's more reliance on the 532 00:26:03,760 --> 00:26:09,080 Speaker 11: private markets to fund those increasing debt and deficits. And 533 00:26:09,119 --> 00:26:11,120 Speaker 11: I think when that starts to hit and we saw 534 00:26:11,119 --> 00:26:15,080 Speaker 11: this last year a little bit in the quarterly refunding announcements, 535 00:26:15,600 --> 00:26:18,840 Speaker 11: and when you get that change in that coupon issuance 536 00:26:18,840 --> 00:26:21,800 Speaker 11: that we know under current trajectories is eventually going to. 537 00:26:21,720 --> 00:26:22,320 Speaker 1: Have to happen. 538 00:26:22,760 --> 00:26:26,200 Speaker 7: Okay, Well, a lot of nervousness going into next year 539 00:26:26,200 --> 00:26:28,080 Speaker 7: as well, isn't it in terms of the size there. 540 00:26:28,680 --> 00:26:31,720 Speaker 7: Jeff Rosenberg with a very latest on his first take 541 00:26:31,800 --> 00:26:33,000 Speaker 7: on those jobs. 542 00:26:33,600 --> 00:26:37,160 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 543 00:26:37,200 --> 00:26:40,720 Speaker 2: in markets, economics, angiopolitics. 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