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Speaker 3: John Bieber of.
Speaker 4: Your Rasier Group writing this that President Joe Biden's inability
Speaker 4: to team the story about his cognitive decline has prompted
Speaker 4: your Razor group to increase the odds that he will
Speaker 4: exit the race from fifteen percent to twenty five percent.
Speaker 4: John joins us. Now, John, good morning to you. You
Speaker 4: heard it there from Tyler. The strategy of Team Biden.
Speaker 4: Get him out there as much as you can. Put
Speaker 4: him in front of different interviews with ABC. Later tonight
Speaker 4: we'll hear that, have him do Q and a's, give
Speaker 4: him a grueling schedule.
Speaker 3: Is it enough?
Speaker 5: Yeah?
Speaker 6: I'm concerned that twenty five percent odds might be low.
Speaker 6: I mean, Biden has not looked good for a while
Speaker 6: in public appearances. The debate was just one of many
Speaker 6: reports we're hearing about what happens behind the scenes at
Speaker 6: the G seven meeting, a meeting with congressional leaders. There's
Speaker 6: just a lot of signs that he's losing a step
Speaker 6: or three. And his appearance yesterday at the fourth July
Speaker 6: at the White House was fine, was competent, but didn't
Speaker 6: seem like a politician that was at the exactly at
Speaker 6: the top of his game. And the stakes of this
Speaker 6: interview tonight are going to be incredibly high for Biden.
Speaker 6: But even if he gets through this, he's got to
Speaker 6: go through another three or four months of campaigning where
Speaker 6: he's got to be out there publicly making the case
Speaker 6: that he's vigorous enough to last another four years. And
Speaker 6: if he doesn't, he's going to be in big trouble
Speaker 6: and probably hand the election back over to former President Trump.
Speaker 7: John, good morning, What is this smart, political, graceful way
Speaker 7: out of this? Is this filler kill weekend? In terms
Speaker 7: of going head to head with Trump, there are the
Speaker 7: Post forty eight percent to Trump forty two percent to
Speaker 7: Biden is a smart, graceful way right now to try
Speaker 7: and find a graceful exit because he doesn't sign like
Speaker 7: a president that is ready to do that.
Speaker 1: No one's pushing me out.
Speaker 6: Well, every day he doesn't exit the race, the anger
Speaker 6: if and when he eventually does, at him is going.
Speaker 1: To be higher and higher and higher.
Speaker 6: So he should move quickly to preserve his legacy. If
Speaker 6: he's going to step aside, and you know it's possibly
Speaker 6: he blows us away tonight, the way he blew everyone
Speaker 6: away at the State of the Union, making this question
Speaker 6: go away at least for until the next incident happens.
Speaker 6: But if he does drop out, he's going to have
Speaker 6: to do it soon. The Democrats, you know, they're they're
Speaker 6: almost likely, almost certainly going to replace him with Kamala Harris,
Speaker 6: the vice president. If he does step aside, that can
Speaker 6: really happen at any moment, be now an election day,
Speaker 6: But the momentum loss they're going to face from him
Speaker 6: staying in here not exactly throughilling the voters is going
Speaker 6: to be massive. So the earlier he does this, the
Speaker 6: better off he is, and his legacy is.
Speaker 7: In many ways. If he does choose to go or
Speaker 7: if he's forced to go, or if he's advised to
Speaker 7: go by his family. As you say, you think it's
Speaker 7: the family and the inner court of Biden that will
Speaker 7: drive him to make this decision to exit rather than
Speaker 7: the Democratic Party. How much of a poison chalice is
Speaker 7: that for anybody else who takes it a part from
Speaker 7: Kamala Harris. She gets the money, she gets the money transfer,
Speaker 7: she can get the black vote, the female vote. She
Speaker 7: is strong, she's strong as polling strongly.
Speaker 8: She is the.
Speaker 7: Obvious condidate because everybody else this is a poison chalice.
Speaker 8: Yeah, I think that's right.
Speaker 6: I mean, I don't think you're better off picking somebody
Speaker 6: with lower name recognition than Harris who has not been
Speaker 6: tested on the campaign trail. So for somebody like Gretchen Whitmer,
Speaker 6: who's got a really promising political career in front of her,
Speaker 6: or Gavin Newsom, who you know, this would have been
Speaker 6: his moment in to run in a normal cycle where
Speaker 6: Biden decided to drop out earlier. You know, these people
Speaker 6: have long political careers ahead of them. Losing to Donald
Speaker 6: Trump in twenty twenty four not exactly a way to
Speaker 6: set that up, and they they probably start off at
Speaker 6: a disadvantage because no one knows who they are. Whereas
Speaker 6: Harris can kind of step into the race, she can
Speaker 6: sort of mop up the mess, you know, clean up
Speaker 6: on Ale Biden. I get there whether or not she wins.
Speaker 6: And she wins, that's fantastic. If she loses, you can't
Speaker 6: really blame her. She did what she had to do.
Speaker 6: She can always come back.
Speaker 9: In twenty twenty eight.
Speaker 6: So I think, for just thinking about the personal incentives
Speaker 6: of any of these people, Harris has the least to
Speaker 6: lose from being the dominiee.
Speaker 4: John May I have only a minute here, but the
Speaker 4: strategy from Donald Trump has been stay quiet, will relatively quiet,
Speaker 4: and let the Democratic Party implode if Biden steps down
Speaker 4: and someone else takes the rain. Can Trump still afford
Speaker 4: to do that? Can he make this a referendum on
Speaker 4: a chaotic Democratic Party?
Speaker 8: Yeah? Absolutely?
Speaker 1: I think.
Speaker 6: I mean Trump's drowning a very disciplined campaign so far.
Speaker 6: He hasn't really been drawing attention to himself the way
Speaker 6: he would even say twenty sixteen, and he's let Biden
Speaker 6: be the main character of the election.
Speaker 1: Which is exactly what he needs to do to win.
Speaker 6: Harris comes in he's going to have to quickly define
Speaker 6: her in the eyes of the American people as too progressive,
Speaker 6: as you know, a party to all the inflation they've
Speaker 6: been experiencing, and basically Biden part two. I don't think
Speaker 6: that's going to be terribly hard for him, but you'd
Speaker 6: expect to be him out there more vigorously trying to
Speaker 6: define her in that situation.
Speaker 4: John, appreciate it. Enjoy your weekend. John Lieber of Eurasior Group.
Speaker 7: Could you TD Securities is our guest this morning. Could
Speaker 7: you good to have you with us. I mean, here
Speaker 7: we are, we're looking at significant change about to hit
Speaker 7: the United Kingdom. For the moment, markets, the pine, the
Speaker 7: guilt markets, same steady on the feet.
Speaker 8: Will that honeymoon endure?
Speaker 10: Oh when it comes to I mean yes, as you said, Labored,
Speaker 10: right now, we are just done with the easy part
Speaker 10: of the election. It was pretty expected that Labor will
Speaker 10: get the win, and I think after a long time
Speaker 10: after Brexit, we are basically entering the phase where there'll
Speaker 10: be much more political stability that we have not seen.
Speaker 10: So yes, it's great for the market, but again, as
Speaker 10: we mentioned that, it's very Labor is ending has a
Speaker 10: lot of challenges to actually meet up to. But on
Speaker 10: the positive side, they're actually coming in when growth has
Speaker 10: started to improve in UK as well as we do
Speaker 10: expect BOI to actually start cutting rates, which means that
Speaker 10: generally interest expenditure is also going down. But definitely there's
Speaker 10: lots for labor to live up to right now. Given
Speaker 10: the kind of strong win they've seen.
Speaker 7: It certainly a sixty percent probability that the Bank of
Speaker 7: Pinioning goes in August that may well be ahead of
Speaker 7: the Fed. In terms of the guilt market. This is
Speaker 7: going to be critically important the fiscal plan that they lay.
Speaker 7: They have an autumn statement in the United Kingdom and
Speaker 7: then they have a budget later in the first quarter
Speaker 7: of twenty twenty five. You would say that the flow
Speaker 7: of money and this is what we've hired from Goldman Sachs.
Speaker 7: I want to understand from you, to flow from international
Speaker 7: parts into the guilt market. You think it is supportive
Speaker 7: when this labor administration will be supportive to the guilt
Speaker 7: market with right cuts.
Speaker 8: How supportive? Yes?
Speaker 10: Now, totally this left is very different from the left.
Speaker 10: We are talking in France right now, so they do
Speaker 10: not want to actually do the trust thing. Again, I
Speaker 10: doubt they are going to change much in terms of
Speaker 10: their fiscal when we are head to the autumn's statement.
Speaker 10: More changes are likely to happen in the mark statement.
Speaker 10: So I think right now Gilts in a very nice position,
Speaker 10: given the fact that you have so much turmoil when
Speaker 10: it comes to politically uncertainty in France as well as
Speaker 10: in US as we head towards whether it's Trump versus Widen.
Speaker 10: So I think from fiscal perspective, cross market wise, GILTS
Speaker 10: is in a very good place, and we actually like
Speaker 10: holding Gilts on a cross market basis.
Speaker 4: Here you do make a good point, poocha, And this
Speaker 4: is what are trying to manus about that it is
Speaker 4: not just France, it is election upsets throughout the globe,
Speaker 4: as it is a world that moves more right and
Speaker 4: potentially more protectionist and more isolated. What does it mean
Speaker 4: for the market to grapple with that, Because at the
Speaker 4: moment we've been trading this is just idiosyncratic stories between
Speaker 4: each individual and nation. It matters for the PAESO, it
Speaker 4: matters for French bonds. But what happens when this global
Speaker 4: story comes together and globalism the engine of growth takes
Speaker 4: a back seat.
Speaker 10: That is definitely the scary part. That is a it
Speaker 10: impacts growth, it's also inflationary, and I think that is
Speaker 10: something that those are the effects we actually going to
Speaker 10: see going forward, and that especially the woods for Europe,
Speaker 10: because Europe has created this strong integration and that is
Speaker 10: definitely at risk risk as we head towards Sunday elections.
Speaker 4: And as we head towards Sunday elections. Pouja again, this
Speaker 4: is a market that is treating this like a near myss.
Speaker 4: The spreads are still wider, but they have come in
Speaker 4: because you don't have Marine Lopenz Party the national rally
Speaker 4: securing as much as a majority, is it the all
Speaker 4: clear for you as well?
Speaker 10: So I know, I mean, we are going to these
Speaker 10: elections a bit complacent at this stage. Markets are viewing
Speaker 10: a hung parliament as positive for OITIS, just given the
Speaker 10: fact that no decisions will be being made, just given
Speaker 10: the fact that they won't be any clear majority. But
Speaker 10: I do feel that it's not good for France growth
Speaker 10: as well as deficits. They won't go lower, but I
Speaker 10: don't see them improving, just given the fact that we
Speaker 10: are basically the options right now is either to be
Speaker 10: hung parliament with Aran as a majority, or a hung
Speaker 10: parliament with a severe breakdown right now, which could also
Speaker 10: mean we get head into a technocratic government, which is
Speaker 10: definitely negative growth and not positive for France. So even
Speaker 10: though Oiti's versus bond spread, the general levels are pretty
Speaker 10: much contained. I don't think we are getting back to
Speaker 10: the forty five level that we saw ahead of the
Speaker 10: snap elections.
Speaker 7: In terms of just stepping back from a moment Danny
Speaker 7: framed this I think very well early on, which is
Speaker 7: the discontent with the status quote in many democracies, not
Speaker 7: just the United king them, not just in France and
Speaker 7: in Germany. There is also discontent here in the United
Speaker 7: States of America with the status quo. We're seeing that
Speaker 7: in the polls at the moment between Biden and Trump.
Speaker 7: From the global capital flow, and this is what I'm
Speaker 7: curious to understand, there is this suggestion that with a
Speaker 7: new form of government and taxation in the United Kingdom
Speaker 7: and coming potentially in France, that you will see a
Speaker 7: material dislocation of global wealth flows from the UK.
Speaker 3: And from France.
Speaker 7: How might that play out on the stage of global investing?
Speaker 7: Do all roads ultimately then lead back to the United
Speaker 7: States of America.
Speaker 10: I mean, I think there will be. There is already
Speaker 10: a shift of flows happening since COVID crisis, where all
Speaker 10: countries had to active were forced to be self dependent
Speaker 10: than actually being dependent on others, and that also happened
Speaker 10: during the Ukraine crisis. So I'm not thinking of a
Speaker 10: big majorship, but that's the way we are going into.
Speaker 10: I totally agree with your point, but I think I
Speaker 10: don't exp I mean, UK is still a market which
Speaker 10: is basically owned by non domestics, especially when I talk
Speaker 10: about the fixed income space. As long as we are
Speaker 10: able to show that kind of stability, I do see
Speaker 10: a lot of flows coming into UK for sure.
Speaker 4: Joining US now is black Rocks Jeff Rosenberg and former
Speaker 4: Fed Governor Randy Krosner is still with us. Jeff, let
Speaker 4: me start with you. What's your face first take on
Speaker 4: these figures.
Speaker 11: My first take is was your first take that it's
Speaker 11: the revisions and a little bit the unemployment rate figure
Speaker 11: that the markets are most focused on here today. Like
Speaker 11: I think this is supportive to the story of slow
Speaker 11: down in the labor markets the powers looking for I
Speaker 11: think you see that in the bond market reaction, and
Speaker 11: I think this keeps September on the table.
Speaker 9: The other story here and why the.
Speaker 11: Market reactions to the revisions is there's a bigger story
Speaker 11: that there's more manas that it is a beautiful turn
Speaker 11: of phrase, the foothills of substantial revisions. I think there's
Speaker 11: a big story there in the market that there are
Speaker 11: revisions coming, that they're the established MINTS survey is overstated.
Speaker 11: You do get the benchmark revisions, and there's an expectation
Speaker 11: here that you're seeing an overstatement, and that is a
Speaker 11: little bit fed into the market narrative.
Speaker 9: With the two month revision number that you highlighted.
Speaker 4: Earlier, Randy, would you agree with that some slowness in
Speaker 4: these numbers, a slow down potentially confirmed.
Speaker 5: I wouldn't say it's confirmed. I mean, obviously that was
Speaker 5: something that I'm looking for. I think, as we were
Speaker 5: describing before, you know, and Spike picked up on, we've
Speaker 5: got the different pieces of the Picasso and it's hard
Speaker 5: to put the image together right now.
Speaker 1: And I think this is very much consistent.
Speaker 5: With the fed's focus and Jay's focus on the labor market,
Speaker 5: watching it very carefully.
Speaker 1: This is really consistent.
Speaker 5: This is broadly consistent with kind of the slow cooling
Speaker 5: of the of the labor market that they want. But
Speaker 5: I think it's going to be difficult to just say, ah,
Speaker 5: we can stop the cooling whenever we want with just
Speaker 5: a with a couple of recuts. Because of the long
Speaker 5: and variable lags, it's going to be hard to do
Speaker 5: that just at the right time. And so I think,
Speaker 5: just as Jeff said, if that's not going to move
Speaker 5: at the at the end of this month, but September
Speaker 5: is live because we'll see how the labor market.
Speaker 1: They'll get a couple more labor.
Speaker 5: Market reports before that, before that meeting, and I think
Speaker 5: that'll be really a key thing. But the wage inflation
Speaker 5: has not come down. It's it's basically in the same
Speaker 5: range that they were expecting it to be.
Speaker 1: So if that drops significantly.
Speaker 5: That would give them the okay to go ahead.
Speaker 1: Now they're going to be cautious.
Speaker 8: Is it, Randy Goodmore into good to see?
Speaker 1: Randie?
Speaker 7: Is this going to come down to the part of
Speaker 7: the curve where the jobs are lost? In other words,
Speaker 7: forgive me for being so brutal, but the quality of
Speaker 7: jobs that are lost in this next unemployment cycle that's
Speaker 7: going to be critically important here, isn't it.
Speaker 5: Well, let's certainly be looking at the types of jobs,
Speaker 5: because obviously, depending whether you lose jobs at the higher
Speaker 5: pay or lower pay, that's going to affect the average wage.
Speaker 1: The so called composition effect. They'll be looking at that.
Speaker 5: They'll be looking at potential pockets of weakness in certain
Speaker 5: areas that may be more interest rates sensitive, and so
Speaker 5: they will be looking not just at the overall numbers,
Speaker 5: but kind of digging deep into where they see monetary
Speaker 5: policy having an effect.
Speaker 4: Well, when you look deep into those numbers, Jeff, let
Speaker 4: me bring you back into this because you mentioned this
Speaker 4: a wages growth.
Speaker 3: Point three percent. There is still growth here.
Speaker 4: You can even look at the week iom services number,
Speaker 4: so that we got earlier in the week and still
Speaker 4: prices paid are higher. If I want to to make
Speaker 4: an argument for why the Fed should hold, I could
Speaker 4: make an argument about this that, look, wages and prices
Speaker 4: are still high.
Speaker 3: It is too soon to move. Is it an error to.
Speaker 4: Air on that side to say, look, we need to
Speaker 4: continue to hold where things are until some of those
Speaker 4: factors start to come back in line.
Speaker 11: You're pointing out the part of the labor markets that
Speaker 11: has been the least that has shown the least progress
Speaker 11: in terms of showing the normalization. So whether it's age
Speaker 11: wages that we're seeing today ECI, Atlanta FED Wage Tracker,
Speaker 11: our own private estimates through scraping jobs posting data, you know,
Speaker 11: they all point to a similar story, which is the
Speaker 11: pace of slow down and the pace of normalization hasn't
Speaker 11: really kept up. We've kind of normalized to a pre
Speaker 11: COVID tight level of labor market conditions and elevated wages
Speaker 11: relative to productivity. So that's the one thing that kind
Speaker 11: of keeps the thing at a little bit at worry
Speaker 11: in terms of moving too quickly. But it's the broader
Speaker 11: price data you know, we'll get next week that is
Speaker 11: really going to be more determined and I think they'll
Speaker 11: be okay with wages US stabilizing and if as long
Speaker 11: as you're seeing the broader wage pressures continue to normalize
Speaker 11: and certainly you know, not a repeat of what we've
Speaker 11: got in the first three months of this year over reacceleration,
Speaker 11: that's going to be the backdrop for the FED to
Speaker 11: open up the door towards you know, slow normalization. Maybe
Speaker 11: quarterly pace of twenty five.
Speaker 4: Basis point cuts and for those just joining us this morning,
Speaker 4: we just moments ago got the jobs figures. Two hundred
Speaker 4: and six thousand is where we landed. The estimate was
Speaker 4: for one ninety also a revision for April and May
Speaker 4: down by one hundred and eleven thousand. Unemployment rate goes
Speaker 4: from four percent to four point one percent. Mike McKee
Speaker 4: is still with us, digging through the numbers. Mike, what's
Speaker 4: some of the other takeaways you're seeing here.
Speaker 12: Well, there's a lot in here that addresses the idea
Speaker 12: of how serious has slow down this is, and it
Speaker 12: might have a bearing on inflation as well. First of all,
Speaker 12: the unemployment rate, it goes up because we saw a
Speaker 12: large rise in the labor force two hundred and seventy
Speaker 12: seven thousand. Now what's interesting is that we have seen
Speaker 12: a decline in immigration. People have been giving immigration a
Speaker 12: lot of credit for the job's numbers, and in this case,
Speaker 12: it didn't translate. The decline didn't translate into fewer people
Speaker 12: coming into the labor force, but it only pushed up
Speaker 12: the unemployment rate by a little bit.
Speaker 8: It was four point zero five four.
Speaker 12: When you take it out to three digits. So just
Speaker 12: barely rounding up to four point one percent. And you
Speaker 12: look at the number of people who lost jobs and
Speaker 12: got jobs in the household survey employment and unemployment, they're
Speaker 12: almost exactly the same, one hundred and sixteen, one hundred
Speaker 12: and sixty eight thousand.
Speaker 8: What really stands out is.
Speaker 12: A very weak performance for service providing industries and manufacturing.
Speaker 12: Manufacturing lost eight thousand, construction gained twenty seven thousand, but
Speaker 12: for service industries only one hundred and seventeen thousand jobs created,
Speaker 12: and most of that was in the healthcare field that
Speaker 12: we normally see adding a lot of jobs. Instead the
Speaker 12: big number is government seventy thousand, and so the loss
Speaker 12: of service sector jobs suggests that maybe we'll see some
Speaker 12: inflation come down in the service industries because labor costs
Speaker 12: are the biggest issue there.
Speaker 8: And it also may.
Speaker 12: Mean that the government the government hiring maybe a seasonal
Speaker 12: adjustment problem, and it could end up being revised lower.
Speaker 12: So at this point, it's definitely, as Randy said, kind
Speaker 12: of a picasso here. A lot of different things in
Speaker 12: here that tell you the economy has slowed.
Speaker 8: But where we go from here is going to be
Speaker 8: the interesting question.
Speaker 7: I think there's a couple of other numbers that are
Speaker 7: coming through on the tea love that various colleagues are
Speaker 7: pointed nine temporary help is done a massive forty eight
Speaker 7: nine hundred gene that is the most in twenty twenty one.
Speaker 7: And the time that it takes you to get a job,
Speaker 7: the median time that it takes to get a job
Speaker 7: has gone to nine point eight weeks, and that's up
Speaker 7: from eight point nine weeks now. Look, these are idiosyncratic
Speaker 7: in those revisions. The powerful message is going to be
Speaker 7: in the revisions, and it's going to be in the
Speaker 7: unemployment numbers. But that temporary help, that's quite quite a
Speaker 7: flashing amber number, especially given services dropping so significant into
Speaker 7: a four year low.
Speaker 1: Going into this.
Speaker 12: Well, temporary help is usually sort of thought of as
Speaker 12: a sort of Canarian the coal mine, because if you're
Speaker 12: going to be adding workers, you go to temporary workers first.
Speaker 8: In this case, that doesn't seem to be the case.
Speaker 12: The interesting counterpoint to that is average weekly hours didn't change,
Speaker 12: and you would expect that to start to go down
Speaker 12: if companies were seeing business slow.
Speaker 8: So that's something to keep an eye on.
Speaker 12: We did know, we did have a pretty good idea
Speaker 12: about taking longer to get a job because the continuing
Speaker 12: claims numbers have been going.
Speaker 8: Up nine weeks.
Speaker 12: Yeah, that's what it's been telling us. But it is
Speaker 12: interesting to see that maybe this Canary just sort of
Speaker 12: cheaping a little bit.
Speaker 8: Here.
Speaker 4: A slight tweet coming from the Canary. Jeff, I want
Speaker 4: to bring you back into the conversation.
Speaker 3: Black Rocks.
Speaker 4: Jeff Rosenberg is still with us. Jeff, I want to
Speaker 4: touch on what Mike was talking about of particularly the
Speaker 4: services sector being weak. This is the part of inflation
Speaker 4: that we had been worried about about service inflation not
Speaker 4: coming back in If you look at the contours of
Speaker 4: this report, does it give us more confidence?
Speaker 3: Is it enough to cement September?
Speaker 8: For the Fed?
Speaker 11: Probably not quite enough to cement September. When you look
Speaker 11: at the services, it's what the conversation was just on.
Speaker 11: It's that big drop in tempell minus forty nine, you.
Speaker 9: Know the three month average. It's just a little bit.
Speaker 1: Below that.
Speaker 9: So it is one of the highlights. You know, there's
Speaker 9: some other industry highlights there.
Speaker 11: You got a kind of a big offset government that
Speaker 11: Mike talked about, So there's some cross currents there.
Speaker 9: There's a pretty strong construction.
Speaker 11: Number that could be seasonal, that could be weather affected,
Speaker 11: and the seasonals that Mike mentioned are particularly tricky, especially
Speaker 11: around the government data given the.
Speaker 9: Education flows in and out, so there are.
Speaker 11: Some cross currants that make it a little bit tricky,
Speaker 11: and I think when you're when you're looking at those details,
Speaker 11: it's hard to say that that cements it. I think
Speaker 11: what will cement September is really, you know, another round
Speaker 11: of data and more importantly, what we see in terms
Speaker 11: of the inflation data next week and what we see
Speaker 11: next month.
Speaker 9: I think that's going to be the case.
Speaker 13: As long as we're seeing trends towards slow down in
Speaker 13: top line, the unemployment rate, broader measures of labor markets normalizing,
Speaker 13: I think that'll be enough, not enough to say that today,
Speaker 13: but I think.
Speaker 9: Once we get to September that that'll be there.
Speaker 11: And obviously, as Powell said, you know, any surprise slow
Speaker 11: down acceleration, you know, the earliernversation around perhaps there is
Speaker 11: a bigger revisions and benchmark revision that tells us that
Speaker 11: establishment says this is a survey has been much more overstated.
Speaker 9: Perhaps that that comes through.
Speaker 11: That's you know, the cement in an environment where inflation
Speaker 11: is continuing to deliver this kind of pace towards two percent.
Speaker 11: The power and the FED have've talked about a little
Speaker 11: bit too early to say that that's the read today.
Speaker 9: But as you can see and you got up on
Speaker 9: the screen, you know, the yield reactions are moving towards
Speaker 9: raising that probability of a move in September.
Speaker 8: So Jeff tell me this.
Speaker 7: We had premiss with us a little bit earlier on
Speaker 7: talking about the reinvigoration, the reincarnation of the FED put.
Speaker 7: That is certainly there when you look at the market
Speaker 7: reaction function today.
Speaker 8: User lower again.
Speaker 7: The bomb bulls have been handed, you know, a fig
Speaker 7: leaf to reinvigorate their bullishness because they've been slapped by
Speaker 7: politics in the previous week. Does it embolden you in
Speaker 7: regards to duration and does it cause you to be
Speaker 7: a little bit more anxious about credit?
Speaker 11: So I would say on the kind of the FED put,
Speaker 11: it is a big deal. And you know, while we're
Speaker 11: talking about policy, what we haven't really spent a lot
Speaker 11: of time talking about, and we haven't really heard what
Speaker 11: I mean by that is the FMC and the FED
Speaker 11: and Powell is talking about the impact of financial conditions,
Speaker 11: and so the proposal the way in which the FED
Speaker 11: has been treating its response function to inflation. If inflation
Speaker 11: surprises a little bit stronger, the whole grates here. If
Speaker 11: inflation returns to trend, they're excited to cut rates. It's
Speaker 11: an asymmetric response function, but it's very market friendly, and it's.
Speaker 9: What perhaps Pria and you were talking about earlier.
Speaker 11: Brings back a bit of the FED put that's led
Speaker 11: to much easier financial conditions.
Speaker 9: And when you look at financial conditions relative.
Speaker 11: To interest rates, which you see is a huge disconnect,
Speaker 11: that policy is much easier than what the interest rate
Speaker 11: would otherwise imply, Yes, that's good for risk taking.
Speaker 9: Does it embolden duration?
Speaker 11: I think you got to be careful when you talk
Speaker 11: about duration in a portfolio about where you hold that
Speaker 11: duration in terms of maturity.
Speaker 9: You mentioned earlier this week we saw a big bear steepening.
Speaker 11: We've got fiscal policy challenges in the back end, and
Speaker 11: so I think it emboldens the part of duration that
Speaker 11: the FED has its greatest influence over, and that's the
Speaker 11: front end of the curve, and maybe moving out into
Speaker 11: the front belly of the curve, kind of the two to.
Speaker 9: Five year part of the curve.
Speaker 11: But I think the back end of the curve, in
Speaker 11: that kind of traditional way in which people have thought
Speaker 11: about using the longest end of duration as its portfolio edge,
Speaker 11: I think we have to really rethink that in an
Speaker 11: environment of substantial changes to fiscal policy.
Speaker 7: And that's substantial change in fiscal policy. Even if it
Speaker 7: is Biden or An or the Democrat in the White House,
Speaker 7: there will still be a continuation of some of the
Speaker 7: Trump tax cuts.
Speaker 8: And if it is Trump on.
Speaker 7: A Republican switep, then the coupon sizes are going to rise.
Speaker 8: And the theory.
Speaker 7: Of the policy that he espises at the moment is
Speaker 7: for some very inflationary. So is it next year that
Speaker 7: the bomb market is really tested in terms of its
Speaker 7: appetite to take inventory on?
Speaker 9: Yeah, you know. Part of it is the is the
Speaker 9: pressure between kind of Treasury and the Fed.
Speaker 11: How much Treasury has been able to hold the coupon
Speaker 11: issuance back from the bond market by keeping these bills
Speaker 11: issuance high, and so that time period of when that
Speaker 11: starts to really be impacted in the back end of
Speaker 11: the curve, you know, One, it's a function of the
Speaker 11: expected path of fiscal policy.
Speaker 9: Two it's a function of the treasury issuance pattern.
Speaker 11: And three it'll be a function of where the demand
Speaker 11: falls in terms of global investors and more importantly global
Speaker 11: private investors, because that's the other piece of what is
Speaker 11: substantially different here, exiting the era of QE into an
Speaker 11: era of QT.
Speaker 9: Yes, I know we're.
Speaker 11: Normalizing that as well, but there's more reliance on the
Speaker 11: private markets to fund those increasing debt and deficits. And
Speaker 11: I think when that starts to hit and we saw
Speaker 11: this last year a little bit in the quarterly refunding announcements,
Speaker 11: and when you get that change in that coupon issuance
Speaker 11: that we know under current trajectories is eventually going to.
Speaker 1: Have to happen.
Speaker 7: Okay, Well, a lot of nervousness going into next year
Speaker 7: as well, isn't it in terms of the size there.
Speaker 7: Jeff Rosenberg with a very latest on his first take
Speaker 7: on those jobs.
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