Speaker 1: Hello, and welcome to What Goes Up of Bloomberg Weekly
Speaker 1: Markets Podcast. I'm Mike Reagan, a senior editor of Bloomberg,
Speaker 1: and I'm Emily Barrett, a bonds and currencies reporter, and
Speaker 1: I'm filling in for a vacationing Theraponte this week on
Speaker 1: the show, has the trade war turned into a currency ward?
Speaker 1: On Monday, China led its currency weakened by the most
Speaker 1: since two thousand and fifteen, and that triggered volatility across
Speaker 1: all markets, and it's sent US stocks to their worst
Speaker 1: losses of the year. Then on Thursday, President Trump weighed in,
Speaker 1: putting more pressure on the Federal Reserve to take measures
Speaker 1: to weaken the US dollar. So why is everyone fixated
Speaker 1: on foreign exchange rates this week? And what exactly can
Speaker 1: Trump do about it? We've got some smart guests on
Speaker 1: the show to unpack it all for us, and then
Speaker 1: we'll close out the episode without tradition. The craziest thing
Speaker 1: I saw our markets this week, and Mike, I believe
Speaker 1: that we've got now what goes Up hotline? Indeed we do,
Speaker 1: and that number again is six four six three to
Speaker 1: four three four nine. Oh, so please do give us
Speaker 1: a call and tell us the craziest thing you saw
Speaker 1: in markets this week, and if you have a question
Speaker 1: for the hosts of the show, uh drop it on
Speaker 1: our voicemail as well, and we may even play your
Speaker 1: voicemail on the podcast. But Emily, let's introduce the guests here.
Speaker 1: The first guest, now, this is a guy who started
Speaker 1: out in the pits in Chicago back in the nineties
Speaker 1: making those crazy hand gestures. But he's had a variety
Speaker 1: of buying sell side market rolls over the last quarter century.
Speaker 1: He's a macro portfolio manager at Graham Capital in the
Speaker 1: US and Nylon Capital in London, but we're lucky now
Speaker 1: to have him here at Bloomberg. He's a market strategist,
Speaker 1: he's the author of the Macroman column, and he's a
Speaker 1: blogger for Bloomberg Markets Live Blog. Cameron Christ Welcome to
Speaker 1: the show. Always a pleasure. Also joining us this we
Speaker 1: Katie Greifeld. She's a rising star reporter on the bonds
Speaker 1: and FX team here at Bloomberg. Katie, nice to have you,
Speaker 1: Thanks for having me and Katie, I wanted to start
Speaker 1: with you because obviously f X is the story of
Speaker 1: the week by far, and you've done some some very
Speaker 1: interesting reporting. Yet a Business Week story a couple of
Speaker 1: weeks ago, I just want to read the headline. Chaotic
Speaker 1: messaging makes it hard to decode Trump's dollar policy. I
Speaker 1: gotta say I think President Trump may have read that story,
Speaker 1: because on Thursday then he tweeted this quote. As your president,
Speaker 1: one would think that I would be thrilled with our
Speaker 1: very strong dollar. I am not exclamation point. Yeah, he
Speaker 1: definitely answered the question for us, So we would have
Speaker 1: to tweak that headline if I wanted to write again today.
Speaker 1: But I kind of heard it from the horse's mouth
Speaker 1: there that he doesn't like this strong dollar. You know,
Speaker 1: that's echoing things we've heard before, but now we have
Speaker 1: the added twist where he's starting to take action. I mean,
Speaker 1: he labeled China currency manipulator. That's why I wanted to ask,
Speaker 1: if you get the currency market. There wasn't a huge
Speaker 1: reaction to that tweet. Um. You've also reported about how
Speaker 1: there is a lot of speculation in the market that
Speaker 1: the US will intervene and try to weaken the dollar.
Speaker 1: What exactly can President Trump do to accomplish that, other
Speaker 1: than to continue to put pressure on the federal reserve. Well,
Speaker 1: exactly that the US could intervene. I mean Trump complaining
Speaker 1: about the dollar strength, tweeting about it, you know, attacking
Speaker 1: the Federal Reserve. We've seen all of that. Now what
Speaker 1: markets are really waiting for is to see if you
Speaker 1: actually put some muscle behind that and directs Treasury to intervene,
Speaker 1: which would involve selling dollars to try to drive down
Speaker 1: the price. It's like, Kelly, my question to that quickly
Speaker 1: is you've written before, I think that investors have every
Speaker 1: intention of trying to buy up the dollar if there
Speaker 1: is a sign of the US heading to an intervention.
Speaker 1: Is it even a realistic proposition right now for the
Speaker 1: dollar weaken much on that basis? Probably not. I mean,
Speaker 1: that was one of the most fun stories I've written
Speaker 1: in the past few weeks, is that if the US
Speaker 1: did actually try to enter the market try to sell dollars,
Speaker 1: that would just create a great by the dip opportunity.
Speaker 1: Because the foreign exchange market trades over five trillion a day,
Speaker 1: so it's pretty huge, and the US and the Treasuries
Speaker 1: Exchange Stabilization Fund only has about ninety billion or something,
Speaker 1: so that's a drop in the bucket. Uh, And especially
Speaker 1: when you compare that to the reserves of China they
Speaker 1: have over three trillion. Uh, there's just not a lot
Speaker 1: of firepower on the U. S side. O Cameron, if
Speaker 1: you were back in your seat as a trader, I
Speaker 1: don't think you're a fan of this type of tweeting
Speaker 1: by our president. Uh, you know, can you trade on this? Um?
Speaker 1: How do you sort of get through this type of
Speaker 1: environment where the president is sort of unprecedentedly trying to
Speaker 1: force markets to to bend to his will. Well, it's yeah,
Speaker 1: I mean, it's the whole thing is broken. It's so depressing.
Speaker 1: It's like every day I come in and I've got
Speaker 1: a new rent about how the market. You know, markets
Speaker 1: don't clear anymore, they're not allowed to clear anymore because
Speaker 1: of politicians and central bankers and what have you. How
Speaker 1: do you trade it, Well, you don't really until they
Speaker 1: demonstrate that there's actually an action behind the words. All
Speaker 1: it is is kind of empty rhetoric, and as we know,
Speaker 1: the President sort of likes to hold mutually incompatible views simultaneously.
Speaker 1: You know, this is the greatest economy ever, but it's
Speaker 1: being killed by the Fed because interest rates are too high,
Speaker 1: the dollars too high, what have you. I mean, at least,
Speaker 1: at the very least you can say that the preference
Speaker 1: for a weaker dollar is consistent with his preference for
Speaker 1: narrowing the trade deficit with China, because I think, broadly speaking,
Speaker 1: it's fair to say that extreme currency strength or extreme
Speaker 1: currency weakness does lead to a decline or an improvement
Speaker 1: in export growth moving forward. Um, but let's face it again,
Speaker 1: certainly against developed market currencies, dollars not doing anything. I mean,
Speaker 1: we've been in what seems like a three big figure
Speaker 1: range against the Euro all year, so kind of what's
Speaker 1: the what's the point? Trump's had a pop at Mario
Speaker 1: drug and unfairness. Druggy does like to play his own
Speaker 1: little games. But we're not going anywhere on that point though.
Speaker 1: I mean, when we're talking about invoking the FED and
Speaker 1: how we know that Trump has obviously bashed the Fed
Speaker 1: an awful lot, um, do you see this being a
Speaker 1: sort of a counter productive effect. Do you think that
Speaker 1: it's possible. I've heard some people say, for instance, that
Speaker 1: you know Trump has actually possibly averted a deeper cut
Speaker 1: because of his attacks on the FED and the wish
Speaker 1: for the FED to stay independent. Well, the problem is
Speaker 1: we you know, we we never know the counterfactuals. Um. Certainly,
Speaker 1: the FED has changed course pretty dramatically this year from
Speaker 1: where they were at the end of last year, and
Speaker 1: it has had a demonstrable impact on financial conditions. Obviously,
Speaker 1: yields have gone down, equities have gone up, and I
Speaker 1: think you could argued that that, in turn has given
Speaker 1: Trump a platform upon which to keep sort of re
Speaker 1: upping the trade war rhetoric. And I suppose there's an
Speaker 1: argument to be made that if the FED sort of
Speaker 1: didn't deliver what Trump wanted, which is easier montary conditions,
Speaker 1: than Trump wouldn't have the wherewithal to keep sort of
Speaker 1: tweeting every few months that he wants to put more
Speaker 1: tariffs on China. So it's it's you know, it's it's
Speaker 1: it's it's a very difficult environment in which to operate
Speaker 1: because there's so many political levers that are that are
Speaker 1: being pulled, and it's not an easy thing to necessarily
Speaker 1: predict when the President is going to come out with
Speaker 1: some six pm tweet that now sends your beautiful trade
Speaker 1: down in you know, in flame. So you're really missing
Speaker 1: being a trader right now. I take it. Well, Um,
Speaker 1: I mean, I sleep a heck of a lot better
Speaker 1: than I would if I still run a portfolio, that's
Speaker 1: for sure. Katie. You also had an interesting story recently
Speaker 1: that you helped report. Um. Obviously, a lot of people
Speaker 1: sort of we're maybe not expecting, but speculating, worrying that
Speaker 1: China would take a step like this with its currency,
Speaker 1: and the other shoe that people are waiting to drop
Speaker 1: is uh, China's holdings of US treasuries. Tell us about
Speaker 1: that story. Are people worried that China could eventually unload
Speaker 1: its massive pile of treasuries? Would that backfire on them
Speaker 1: if they did? Um? You know, they call it the
Speaker 1: nuclear option, mutual assured destruction. What is sort of the
Speaker 1: thinking about that issue from the people you talked to, Well,
Speaker 1: it's definitely still seen as that nuclear option. It would
Speaker 1: hurt a lot for both sides, maybe more for China
Speaker 1: because uh, you know, if they sold a whole bunch
Speaker 1: of their treasuries holdings, that would sort of erode the
Speaker 1: value of whatever they had over But I mean talking
Speaker 1: to people on Monday after you know, we got in
Speaker 1: and saw that you wanted really screamed through seven the
Speaker 1: people we were speaking to said, if they let that happen,
Speaker 1: if they decided to stop holding the line at seven,
Speaker 1: you really can't rule out the treasuries option because I mean,
Speaker 1: there's a lot of pain that could come with a
Speaker 1: big devaluation in the currency. And uh, clearlyly there there
Speaker 1: was some calculus that they were willing to withstand that pain.
Speaker 1: So that's what people were applying that same logic to
Speaker 1: that huge pile of treasuries. It would still hurt, but
Speaker 1: it would send a pretty big message to the U
Speaker 1: S too. So, Katie, the trends that we've seen in
Speaker 1: terms of treasury auctions recently, there's been Uh, I know
Speaker 1: that you've been following a little bit of kind of
Speaker 1: the TIC data and that sort of stuff as well. Um,
Speaker 1: how can we sort of draw a line between China's
Speaker 1: behavior and actually buying versus holding treasuries. I mean, it
Speaker 1: does seem as if they've stepped back from auctions a
Speaker 1: little bit. That seems to be the theory, although it's
Speaker 1: hard to trace. What what kind of clarity do we
Speaker 1: have on that? Well, we spoke to Sebastian Gallle at
Speaker 1: NORDAIA and he said he will be watching the US
Speaker 1: treasury auctions for any signs of back. Of course, it's
Speaker 1: a little murky there because China can bid directly indirectly.
Speaker 1: But I mean, even with that in mind, if you
Speaker 1: just look at the bid for treasuries over the past week,
Speaker 1: clearly there's been demand. Maybe it's not from China, but
Speaker 1: people are really looking to scoop up treasuries here, Cameroon,
Speaker 1: let's bring you in on sort of both of the
Speaker 1: things Katie was just talking about. You know, A, is
Speaker 1: this nuclear option science fiction? Uh? And be talk about
Speaker 1: that level of seven you want to the US dollar? Um?
Speaker 1: Was it actually that sort of magic number being crossed
Speaker 1: or was it more basically that big rate of change
Speaker 1: in the weakening that we saw on Monday that sort
Speaker 1: of spooked out the rest of the markets? Well, the
Speaker 1: treasury sales stories nonsense, um. And people have been talking
Speaker 1: about this sort of thing happening for a dozen years. UM.
Speaker 1: We do have a little evidence of it happening in
Speaker 1: the past with Russia, who basically completely pulled out of
Speaker 1: the US fixed income market um, and really ran down
Speaker 1: their holdings of treasuries a couple of years when they
Speaker 1: had some sanctions apply to them. But the thing is
Speaker 1: that China's stock of treasuries is so big there's literally
Speaker 1: nowhere else they can put it. Okay, they can't put
Speaker 1: it in European fixed income A because the Payson negative
Speaker 1: yield and be because there's just not enough bonds for
Speaker 1: them to buy. So where are they going to put
Speaker 1: the dough? Are they gonna you know, get one of
Speaker 1: their diggers there that they're using to dig holes, uh
Speaker 1: for for infrastructure and just put a trillion dollars in
Speaker 1: a hole and hire some guys, you know, hire some
Speaker 1: guys to to guard it. Now, of course not well,
Speaker 1: but yeah, but say hypothetically they didn't unload it all
Speaker 1: at once, they sold a couple hundred billion, you know,
Speaker 1: big block trade one day at at a market. Would uh,
Speaker 1: you know, wouldn't that be enough to sort of get
Speaker 1: Donald Trump's attention? I mean, yeah, I theoretically, I suppose.
Speaker 1: But if it also were to submarine the value of
Speaker 1: their existing holdings, and let's fay, I mean, let's let's
Speaker 1: remember that a lot of these holdings are kind of
Speaker 1: they're trying to make some money off of it. Uh,
Speaker 1: you know, it's kind of cutting off your nose to
Speaker 1: despite your face a little bit in terms of seven
Speaker 1: of you want. Yeah, I mean it's a it was
Speaker 1: a big psychological level. I mean, people in the West,
Speaker 1: we all like to think of the function and all
Speaker 1: the sort of the mystical Chinese cultural things, but apparently
Speaker 1: eight is the real mystical number. Seven seven seven doesn't
Speaker 1: really hold much numerological allure, so there's no sort of
Speaker 1: hidden messages there. Um. Yeah, they did defend that level. Well,
Speaker 1: it's not so so much defending it as they just
Speaker 1: didn't you know, they didn't put the fix close enough
Speaker 1: to it that, um, the freely traded market would would
Speaker 1: push through it. That's obviously change, and it is a
Speaker 1: rational response to the tariff threat. The way that China
Speaker 1: can offset some of the impact of tariffs is to
Speaker 1: make the currency, um, make the currency more competitive, and
Speaker 1: if it comes in a context where it's not so
Speaker 1: severe that encourages capital flight. Um. Then for their perspective,
Speaker 1: it's a it's sort of a winning strategy. And you know,
Speaker 1: ask for the United States labeling them a currency manipulator.
Speaker 1: It's kind of like you've seen the movie Team America
Speaker 1: where Hans Blix is there in North Korea and he
Speaker 1: said we're very angry with you, and we're gonna write
Speaker 1: you an angry letter that essentially all that it entails
Speaker 1: is the US from Tea America. This is a family podcast. Uh,
Speaker 1: you know, it's essentially wagons. It's an angry wagging, an
Speaker 1: angry finger, um and and and nothing else. Um. But
Speaker 1: what is interesting actually is that the one has not
Speaker 1: only fixed too in sort of a new low against
Speaker 1: the dollar, but on his broad basket, and that has
Speaker 1: impact throughout the rest of the world. And we've already
Speaker 1: seen this week some of this impact materialized with sort
Speaker 1: of surprising rape cuts in a number of central banks
Speaker 1: in in the Asian region. The Kiwis did fifty instead
Speaker 1: of the expected rb I, preserved Bankiviny at thirty five
Speaker 1: by the expected, and Bank of Thailand out of sort
Speaker 1: of thin air that no one expected. So it's, you know, unfortunately,
Speaker 1: going back to the original question, Mike, we are kind
Speaker 1: of seeing the shots fired in a currency war. And
Speaker 1: the problem is is that if everyone cuts rates to
Speaker 1: weaken their currency, when you know, we're not on the
Speaker 1: gold standard, the whole world can't devalue against sort of
Speaker 1: a central peg. If everybody wants a weaker currency and
Speaker 1: cuts rates to deliver it. All you're gonna end up
Speaker 1: is essentially right back where you started on a relative basis,
Speaker 1: except with less ammunition in terms of conventional rate cuts
Speaker 1: to fight against the next global recession. So it's it's
Speaker 1: a pretty stupid policy in my opinion, just if we
Speaker 1: can backtrack to slightly, because I think this currency manipulator
Speaker 1: label is is interesting just from a political standpoint. Clearly
Speaker 1: the criteria aren't quite there right now, nowhere near there.
Speaker 1: So does this leave us in a really strange position
Speaker 1: where the government is now in the US is now
Speaker 1: kind of faced with a year of testing and and
Speaker 1: you know, thinking about whether or not this is a
Speaker 1: viable thing. What is the actual practical implication If it's
Speaker 1: possible that they're not going to be found to be
Speaker 1: a currency manipulator, what's the what's the upshot of Well,
Speaker 1: they they were found. Obviously I don't have insight information,
Speaker 1: but I'm strongly suspect that the state of play was
Speaker 1: that Donald Trump called up Steve Manusian and said, we're
Speaker 1: calling the most currency manipulator. And that was that because
Speaker 1: certainly on the basis of the criteria that the Treasury
Speaker 1: has been using in their semi annual report China. The
Speaker 1: level of intervention that China conduct which has basically been
Speaker 1: zero over the last several years on a net basis,
Speaker 1: is nowhere near where it needs to be, which I
Speaker 1: think is two percent of gdp UM to be called
Speaker 1: a currency manipulator. So I think Trump had tweeted out
Speaker 1: earlier that day that China was manipulating its currency isn't
Speaker 1: as awful, and I think he just rang up monutions
Speaker 1: said alright, bang, let's yeah, let's do it. Let's do
Speaker 1: this thing. Um. In terms of the practical implications, as
Speaker 1: I said, it's kind of just writing an angry letter
Speaker 1: of waving of finger and in in in disgust. The
Speaker 1: literal interpretation of the law is that they are supposed
Speaker 1: to consult with the I m F and with China
Speaker 1: hold talks about fixing this bilateral misalignment. But as we know,
Speaker 1: China and the United States are already engaged in sporadic
Speaker 1: trade talks of which the currency is one of the
Speaker 1: one of the issues. I don't think anyone expects Donald
Speaker 1: Trump to call him the I m F to adjudicate
Speaker 1: a dispute, because he's a master negotiator. So other than
Speaker 1: let's said about that the better, but but other than
Speaker 1: a diplomatic sort of chip that's now been kind of
Speaker 1: handed those. Yeah, that's the thing. Yeah, that the I
Speaker 1: and it is that it's now been played. And insofar
Speaker 1: as China was worried about weakening the currency so they could,
Speaker 1: you know, because I didn't want to be called a manipulator,
Speaker 1: Well now they've been called a manipulator. So what's to
Speaker 1: stop them from weakening the currency even further? There really
Speaker 1: isn't it. I wanted to get back to something you
Speaker 1: mentioned earlier, which was these shock rate cuts we saw
Speaker 1: this week. Well maybe not shocked, but India, Thailand, New
Speaker 1: Zealand all cut a little bit more than what the
Speaker 1: markets were expecting. We saw this uh, ferocious rally in
Speaker 1: bonds the world over in the wake of that. Now
Speaker 1: we're having people openly discussed and with a straight face, seriously,
Speaker 1: the idea of negative treasury yields in the US. You know,
Speaker 1: I know you've written before. Eventually people are going to
Speaker 1: just dig a hole and put their money in a hole.
Speaker 1: I mean, is there a real risk of sort of
Speaker 1: a major banking crisis if that, if if rates are
Speaker 1: to get too low, and especially say deposit rates on
Speaker 1: on savings accounts get deeply negative. I mean, how do
Speaker 1: you see this all going? If people predicting negative rates
Speaker 1: in the US are correct, well, I mean, we're all
Speaker 1: gonna have to find new jobs because frankly, there won't
Speaker 1: be very many Bloomberg terminal silver because a lot of
Speaker 1: a lot of people in our industry will be out
Speaker 1: of work. Um, the US is a very highly financialized economy.
Speaker 1: The money mark in industry by itself still runs three
Speaker 1: trillion dollars. If you basically impose negative yields at the
Speaker 1: short end of the curve, and that's the only place
Speaker 1: that these money market funds can operate, then why would
Speaker 1: I pay somebody you know a dollar today to get
Speaker 1: cents back in a year's time because he might get
Speaker 1: less otherwise? Well, no, I'll dig a hole. I mean literally,
Speaker 1: I'll buy a safe and dig a hole in the ground. Um,
Speaker 1: it's uh, let me, let me, Let me ask you
Speaker 1: guys a question. Let's turn the tables around. You make
Speaker 1: the okay, all right, So let's say, Um, we're just
Speaker 1: gonna I'm not I don't know what your wealth aspirations are.
Speaker 1: But let's say that you wanted to have a million
Speaker 1: dollars in twenty years. Whatever your income is. UH, say
Speaker 1: you make a hunder grand a year, and you've got whatever,
Speaker 1: kids and mortgages and all body body bob um and you.
Speaker 1: So you save a little bit every every you know,
Speaker 1: every month. You want to have a million dollars in
Speaker 1: twenty years time. If interest rates are five percent, consider
Speaker 1: how much money you would have to save every month
Speaker 1: for twenty years to get that million dollars. Now, consider
Speaker 1: how much you have to save if rates were minus one.
Speaker 1: Would you save more or would you save less? Would
Speaker 1: you spend more? Would you spend less? I would argue
Speaker 1: very strongly that you would spend less and save more
Speaker 1: because you aren't gonna get capital returns, or you're not
Speaker 1: gonna get returns interest returns um from that you would
Speaker 1: have had if you if ray where I say five um.
Speaker 1: So I think this idea that negative rates are going
Speaker 1: to sort of spur consumption and reflate the economy. There's
Speaker 1: been no empirical evidence that's happened in Japan. There's been
Speaker 1: no empirical evidence that's happened in Switzerland. There's been no
Speaker 1: empirical evidence that's happened in Europe. So the idea that
Speaker 1: it's somehow a good idea in the United States it's
Speaker 1: frankly absurd. Look at the banks in Europe, look at
Speaker 1: the banks in Japan, and look at the banks in
Speaker 1: the United States. One of these things is not like
Speaker 1: the other. Uh. The U S banks have done demonstrably
Speaker 1: better than banks in other parts of the world. I've
Speaker 1: had negative interest rates. Ask yourself why. Well, on that note,
Speaker 1: I think it's time to talk about the craziest things
Speaker 1: we've all seen this week in markets, and I'm gonna
Speaker 1: start with a call we got into the hotline from
Speaker 1: a character on Twitter known as Twiggy Sunday. Let's listen
Speaker 1: to what he believed to be the craziest thing he
Speaker 1: saw in markets this week, because I got amit. It's
Speaker 1: pretty goo. The tip of the hat goes to Tracy Alloway,
Speaker 1: who quoted at Quantaine stating that the biggest TTF in
Speaker 1: the world, s p Y, is organized around a secret
Speaker 1: list of eleven individuals age to twenty nine, and upon
Speaker 1: their death, the trust will be forced to delist liquid
Speaker 1: date and distributed its assets. I have no idea whether
Speaker 1: this is true. But if it's my definition of bonkers,
Speaker 1: that really does fit a definition of bonkers, I have
Speaker 1: to agree with Twiggy on that, and he's wondering if
Speaker 1: it's true and in fact is true. I asked our
Speaker 1: et F guru here, Eric Valcunas, about this, and he said,
Speaker 1: it is technically true with a lot of E T
Speaker 1: F s um, but it has to do with some
Speaker 1: arcane nuances of securities laws. But let me just read
Speaker 1: you the documents here. The trust is scheduled to terminate
Speaker 1: on the first to occur of a January or b
Speaker 1: the date twenty years after the death of the last
Speaker 1: survivor of eleven persons named in the trust agreement, the
Speaker 1: oldest of whom was born in nineteen ninety and the
Speaker 1: youngest of whom was born in ninete. So I imagine
Speaker 1: they'll fix that when eighteen were the death of those
Speaker 1: people approaches. But I don't think anyone knows who these
Speaker 1: people are. It's a very very bizarre thing in the
Speaker 1: weeds of the spy, the biggest et F in the land. Um,
Speaker 1: So good work Twiggy Sunday on that anyway, kemeron that
Speaker 1: one's gonna be hard to top. But let's hear what
Speaker 1: you've seen this week. What's the craziest thing you've seen
Speaker 1: this week? Oh man, I'm in I'm sorry, this is boring.
Speaker 1: I mean, twenty year Danish mortgage bonds offering a negative yield,
Speaker 1: you know, issued in a negative yield um. The yield
Speaker 1: on the European UM investment Grade Aggregate index went negative.
Speaker 1: And that's the next that includes yes, government bonds, but
Speaker 1: also investment grade corporate bonds. If you look at the list,
Speaker 1: I looked at the stuff. Every single bond in the
Speaker 1: European corporate universe, there's like hundred bonds more than the
Speaker 1: thousand of them have negative yields. It's I mean, it's
Speaker 1: not even it's not even Wonderland or Oz because uh
Speaker 1: that those those countries are too normal for the for
Speaker 1: what's going on here. I'm not, and I know it's
Speaker 1: not exactly new, but it's just it's just every every
Speaker 1: day I come in and I feel like I've dropped
Speaker 1: an anvil in my foot. You'll get desensitized the anvil. Though,
Speaker 1: I got to say, the Danish mortgage bonds, I don't
Speaker 1: think I would ever have guessed that mortgage bonds, mortgage
Speaker 1: bonds would would go next. Now I did get I
Speaker 1: wrote something about this, and I did get feedback from
Speaker 1: a Danish reader who said that the mortgages themselves I
Speaker 1: was gonna, I was wondering, are the effective right? And
Speaker 1: the mortgages themselves are not zero or negative because there's
Speaker 1: a fee here and h you know, um punitive little
Speaker 1: thing there. So it still makes sense for the banks
Speaker 1: to issue these these these bonds at negative yield. Uh.
Speaker 1: And they're getting snapped up by European and Japanese investors
Speaker 1: because you know, I can get zero here minus five
Speaker 1: days was point here versus minus eighty there? Well minus
Speaker 1: five Emily, can you top negative yielding Danish mortgage bond?
Speaker 1: I can't even say it, Danish, Katie, can you say
Speaker 1: Danish seven times? I feel like I'm the Swedish chef?
Speaker 1: Oh that would be great? Um well, funny enough, mine
Speaker 1: also has a negative flavor. But this one is just
Speaker 1: about this bump that the German tenure bunt yield got.
Speaker 1: And this was from some sort of a misleading headline
Speaker 1: that was saying the government was considering raising more debt,
Speaker 1: which it obviously does very little love um to fund
Speaker 1: efforts to tackle climate change, and so the tenure went
Speaker 1: from negative fifty eight basis points to negative fifty three.
Speaker 1: And that kind of begs the question that if you
Speaker 1: could do it for that, why wouldn't you then start
Speaker 1: raising some money. And that's right, Why if you can
Speaker 1: raise money and get paid for it, why not I agree,
Speaker 1: and I would put out that headline I think said
Speaker 1: the government in Germany was mulling something. I you know,
Speaker 1: I hate. I don't think we're allowed to give trading advice,
Speaker 1: but personally I would never trade on any story about
Speaker 1: someone mulling anything. Yeah, that's that's the word to the wise.
Speaker 1: The other the other quick one that I have is
Speaker 1: UM is an interesting headline based one as well. UM
Speaker 1: that there was a story out from this zero hedge
Speaker 1: UM saying that they had been contacted urgently like this
Speaker 1: was in the subject line by a FED researcher who
Speaker 1: was looking for a piece of analysis as a cell
Speaker 1: side analysis that they quoted in a story earlier that day.
Speaker 1: And the analysis was on the possibility of the FED
Speaker 1: needing to launch QUI as soon as the fourth quarter
Speaker 1: to show up liquidity in the market. And so this
Speaker 1: caused a bit of a stir and they said, you know, actually,
Speaker 1: probably if the fit needs to find sell side analysis,
Speaker 1: they can find it somewhere out of Okay, not bad, Katie.
Speaker 1: What do you have first? So I'm going to take
Speaker 1: us on a bit of a tangent, but I'm going
Speaker 1: to bring it back to market. So just buckle up.
Speaker 1: So this is a story that's near and dear to
Speaker 1: my heart since I grew up in Westfield, New Jersey.
Speaker 1: Oh yeah, but there's this great article Thursday on the
Speaker 1: terminal and the headline is NJ couple spooked by watcher.
Speaker 1: So one point four million home at loss. Oh I
Speaker 1: know the watcher. Do you know who he is? No
Speaker 1: one knows who he is, But go on, go on,
Speaker 1: I want to hear your So in this idyllic neighborhood
Speaker 1: in Westfield, this there's this beautiful house. It looks to
Speaker 1: be yellow, and the family bought the home in and
Speaker 1: has just been getting creepy, spooky letters from a man
Speaker 1: who calls I assume it's a man I shouldn't by
Speaker 1: someone who calls himself the watcher, talking about the couple's kids,
Speaker 1: how he's just been watching them. As you can tell
Speaker 1: from the name, and they tried to sue the previous homeowners.
Speaker 1: Since the Watchers followed the house around, they apparently got
Speaker 1: letters as well, and the lawsuit was dismissed and they
Speaker 1: had to sell the home. They never moved in, and
Speaker 1: they sold it for less than a million dollars after
Speaker 1: buying it at one point four million five years ago.
Speaker 1: So they knocked off half a million dollars off the price.
Speaker 1: They sure did. I suspect whoever bid on that house
Speaker 1: is the Watchers. Yeah, this email them. But so my
Speaker 1: point is, if that's all it takes to knock half
Speaker 1: a million dollars off the houses price, I don't think
Speaker 1: that's pretty bad for the real estate market. It's that
Speaker 1: easy to drive down the value. And if you're worried
Speaker 1: bonds are ever priced, maybe send some spooky letters to
Speaker 1: the Treasury Department. You never know. It's kind of a
Speaker 1: Scooby Doo kind of plot, right, Yeah, get away with
Speaker 1: that one. You guys should read about it though, because, um,
Speaker 1: you know, if you look at the court filing, you
Speaker 1: can see the letters themselves, and they're they're pretty it is.
Speaker 1: It's an amazing story that New York Magazine had a
Speaker 1: story I think three or four years ago about it,
Speaker 1: so so google that it's a crazy story. These crazy
Speaker 1: things are all very hard to top. I'm not even
Speaker 1: going to attempt a crazy thing this week. I'll be
Speaker 1: back next week with my craziest things maybe of the
Speaker 1: last two weeks. I will also point out Emily that
Speaker 1: Sarah pon Zac, my co host who you're filling in for,
Speaker 1: is on vacation this week. She actually called the hotline
Speaker 1: to offer the craziest thing she's seen on vacation. It
Speaker 1: was We're going to play it, but I think it's
Speaker 1: a scheme for her to put her whole vacation on
Speaker 1: her expense account, so we better not play it. But
Speaker 1: we'll see Sarah next week, and uh we hope to
Speaker 1: see you all next week as well. Katie Gray felt
Speaker 1: can Christ thanks for joining the show, Thanks for having
Speaker 1: me and Emily, thanks for co hosting. Oh thanks having
Speaker 1: what Goes Up. Will be back next week. Until then,
Speaker 1: you can find us on the Bloomberg Terminal, website and
Speaker 1: app where wherever you get your podcasts. We'd love it
Speaker 1: if you took the time to rate us and review
Speaker 1: the show on Apple Podcasts so more listeners can find us.
Speaker 1: And you can find us on Twitter follow me at
Speaker 1: reag Anonymous, Emily Barrett is at Not That ECB, Cameron
Speaker 1: christ is at Fifth Rule, and Katie Greifeld is at
Speaker 1: k Greifeld. You can also follow Bloomberg Podcasts at at
Speaker 1: podcasts and that hotline number again is six or six
Speaker 1: three to four three f nine Oh. What Goes Up
Speaker 1: is produced by topur Foreheads. The head of Bloomberg Podcasts
Speaker 1: is Francesco Levy. Thanks for listening. I hope to see
Speaker 1: you next time. Hey guys, it's there upon Zack. I'm
Speaker 1: trying to reach What goes Up. I figure since I'm
Speaker 1: a way on vacation, maybe I would shay the craziest
Speaker 1: thing I've seen while here. So I'm up in the
Speaker 1: Canadian rockies and our first I was going to say
Speaker 1: the lakes, because they're all crazy blue and pretty much
Speaker 1: glow when you look at them. But then I was
Speaker 1: actually thinking, as we were driving along one of the roads,
Speaker 1: we actually saw a couple of black bears, and that
Speaker 1: wasn't the crazy part. The crazy part was that there
Speaker 1: were some families actually getting out of their cars holding
Speaker 1: their kids and their babies next to them, standing about
Speaker 1: five ten feet away from the Bears. So that was
Speaker 1: pretty crazy, maybe a little bit dangerous. Um, But I
Speaker 1: know I'm missing a pretty crazy week back in markets
Speaker 1: as well, and President Trump about field curve, so I'm
Speaker 1: sure when i'm back next week's games will be just
Speaker 1: it's crazy. You have a good show.