Speaker 1: Welcome to the Bloombergs Surveillance Podcast hometom Keene. Along with
Speaker 1: the Jonathan Ferrill and Lisa are Brownwitz Jaylie, we bring
Speaker 1: you insight from the best an economics, finance, investment and
Speaker 1: international relations. Fine Bloomberg Surveillance and Apple podcast SoundCloud, Bloomberg
Speaker 1: dot Com and of course on the Bloomberg terminal. The
Speaker 1: instally of JP Morgan as management alongside us today. Great
Speaker 1: have you with us in the building. I wanted to
Speaker 1: start here because I think this is really important in
Speaker 1: the United States. Ask about the debt ceiling and people
Speaker 1: shake their heads and they're like, not this again. Is
Speaker 1: anyone asking about that? When you go around and see
Speaker 1: clients in London and UK across Europe, are they asking
Speaker 1: about it? To be completely honest, No, not not really.
Speaker 1: Maybe there's the the odd person is starting to think
Speaker 1: about it. But I get the sense there's a case
Speaker 1: if we've been here, we've seen the movie, there will
Speaker 1: be a bit of twoing and throwing, but the reality
Speaker 1: is at the end of the day there will be
Speaker 1: some resolve around it. Do you think they should care? Um?
Speaker 1: Not yet. I think ultimately you need to get you
Speaker 1: need to wait until we get into the stage where
Speaker 1: actually there is going to be a material impact that's
Speaker 1: going to be later over the course of this year.
Speaker 1: I always look at the bill market to see there's
Speaker 1: any spikes in certain certain maturities. We're not seeing yet
Speaker 1: that yet, so the market's not really particularly focusing on it.
Speaker 1: And I feel that we've had over the last few years.
Speaker 1: This isn't the first time we've had these these conversations.
Speaker 1: There's a lot about there's a lot of other things
Speaker 1: going on in the world before we get to probably
Speaker 1: worrying about the Well the Ottoman test of that is,
Speaker 1: if the debt ceiling hits the fan, do we buy
Speaker 1: the ten year treasury? The answer in years gone bias yes.
Speaker 1: Do you see the answer changing probably even more so
Speaker 1: now just because actually you've got some yield on the
Speaker 1: ten uere treasury. We were happy to buy the ten
Speaker 1: year treasury back in twenty eleven when there wasn't much
Speaker 1: yield on on the ten year and at this time
Speaker 1: there is, so I definitely think that will be the case.
Speaker 1: In the flight to quality, will will favor those those bonds,
Speaker 1: you know where there hasn't been any yield and hasn't
Speaker 1: been for several decades is Japan. I know it's a
Speaker 1: massive focus for a lot of people here in London
Speaker 1: for you as well, looking at fixed income. There was
Speaker 1: a meeting back in December. We had the meetings minutes
Speaker 1: and it suggested that the government official they're actually requested
Speaker 1: a recess suspended the meeting. What do you think is
Speaker 1: going on at the b O J and do you
Speaker 1: think the government is happy with it? I think the
Speaker 1: reality is when you look at where inflation is in Japan,
Speaker 1: it's not what we've seen in the US, it's not
Speaker 1: what we've seen in Europe, but it's it's going up
Speaker 1: and at the moment, their policy looks at odds with
Speaker 1: with what's happening. The reality though, is they don't want
Speaker 1: to cause untowards volatility in the market. I'm not I
Speaker 1: don't want to liken what's happening in Japan to me
Speaker 1: what happen in the UK a few months ago, But
Speaker 1: they don't want to see that level of volatility. So
Speaker 1: I think what we've learned from the Bank of Japan
Speaker 1: over the last couple of months or so is that
Speaker 1: I think we're going to get there, but they're going
Speaker 1: to do it on their own terms. They obviously widened
Speaker 1: the band when the market wasn't expecting it. The market
Speaker 1: was hoping for something last week they didn't, And they're
Speaker 1: actually doing these facilities at the moment to try to
Speaker 1: keep financial stability. We're going to get there, it's inevitable,
Speaker 1: I think, but they also want to do on their
Speaker 1: own terms. The two words I want to talk about
Speaker 1: normal and market. Those two words I could with Jeremy
Speaker 1: Stretch in the last couple of hours of c ib
Speaker 1: C and he said, Japan's the next one to normalize,
Speaker 1: And I said, what's normal? I've got no idea what's
Speaker 1: normal in Japan when they've been doing this now for decades.
Speaker 1: The other world I want to talk about with you
Speaker 1: as well is the word market. Is there a market,
Speaker 1: a sufficient market with private demand both domestically and internationally
Speaker 1: for Japanese debt for when this bo j backs away?
Speaker 1: Does it exist? Is there any sign of the one
Speaker 1: actually being there right now? Um, that's going to be
Speaker 1: a challenge because obviously the Bank of Japan own a huge,
Speaker 1: huge piece of the market, particularly in the in the
Speaker 1: shorter dated ten years and in where they've obviously been
Speaker 1: looking to control control yields. So I think that's an open,
Speaker 1: open debate. Obviously we're going to see the market repriced
Speaker 1: to where to where it should should do. But the
Speaker 1: reality is there is a huge amount of securities owned
Speaker 1: by by the bank repriced too. If we don't know
Speaker 1: if there's a market that actually what you get. What
Speaker 1: you can do is if you track the tenure j
Speaker 1: GB yield and put it on top of the ten
Speaker 1: year treasury year and you see treasury yields move higher
Speaker 1: over the course last year, the tenure j GB suddenly
Speaker 1: hit hit the upper bound. If you before then there
Speaker 1: was a pretty good relationship. So if you reach continue
Speaker 1: to track that, you're talking somewhere seventy seventy five basis points.
Speaker 1: Given where the tenure treasury is, that probably seems as
Speaker 1: a as a good started point. As I said, inflation
Speaker 1: in Japan isn't what it was in the U S
Speaker 1: and Europe, but it's going up. We've got, you know,
Speaker 1: wage negotiations coming up in April. I think they're going
Speaker 1: to have to let that go. So don't find the
Speaker 1: fair used to be the phrase I know they've been
Speaker 1: reflected on that. Should I fight the b J I
Speaker 1: think the interesting thing is, as I said, they want
Speaker 1: to do on their own terms. So there at the
Speaker 1: moment they're trying to push some of the shorts out
Speaker 1: of out of the market. If you've got a long
Speaker 1: term view, I think you can hold that and actually
Speaker 1: yields will be higher over the medium medium term. What
Speaker 1: kind of number are you thinking about on the yields,
Speaker 1: I think only five base points on the tenure. I
Speaker 1: think then they go beyond that kind of number. Though.
Speaker 1: In Japan, I'm looking at the things right now that
Speaker 1: are taking place across fixed income and with central banks.
Speaker 1: You're talking about the b O J backing away from
Speaker 1: the YELD curve control. These eb is doing QT. They've
Speaker 1: got officials running out all over the place. Sound fifty
Speaker 1: basis points? Fifty basis points? I think the bank agrees
Speaker 1: pushed back a little bit in that world. Is that
Speaker 1: bullish your bearest for fixed income at a time where
Speaker 1: I've got pretty much everyone is fixed incomes saying buy bonds,
Speaker 1: all these things taking place Japan, the e C b
Speaker 1: QT all over the place, is that bearish your bullish
Speaker 1: fixed income? It depends what part of the fixed income
Speaker 1: market you're talking about. Because the US, where people are
Speaker 1: looking to buy bonds, has seen the bigger repricing. We've
Speaker 1: got more evidence over the last week or so that
Speaker 1: we are having a slow down retail sales. We're gonna
Speaker 1: have the FED who want to slow down from their pace,
Speaker 1: the European Central Bank, the Bank of Japan, they're behind
Speaker 1: the FED. We've only just got too neutral in Europe.
Speaker 1: Is as you said, what is neutral in Japan? Maybe
Speaker 1: we'll find out got no idea, So they need to
Speaker 1: do a little bit more. And I actually think Europe
Speaker 1: is particularly interesting at the moment because we were in
Speaker 1: a world where they were hiking rates to deal with inflation.
Speaker 1: Now inflation is coming or likely to come off because
Speaker 1: what's happening in energy prices that should be good for
Speaker 1: the economy. Growth is supposed We're supposed to be be in
Speaker 1: recession in Europe at the moment, and we're not. So
Speaker 1: are The e C began and maybe have to go
Speaker 1: slower but further as they tried to battle this. So
Speaker 1: I definitely thin there's a dynamic between wanting to own
Speaker 1: US fixed income and then being a little bit more
Speaker 1: cautious and some of the other markets around the world.
Speaker 1: I wanted to squeeze this in because I asked this
Speaker 1: question earlier, I'm going to ask it a week. Does
Speaker 1: the ECP hype more than the FEDE Yes, it seems
Speaker 1: to be the takeaway at the moment and stably this
Speaker 1: was fantastic. It's good to see it from JP Morgan
Speaker 1: Asset Management. Right now, Alfia dor Walla joins us with
Speaker 1: Rock Creek Group. They are an exceptionally thoughtful group with
Speaker 1: real hydrocarbon focus and also with an E. M. Bent.
Speaker 1: We're thrilled she could join us this morning. If what
Speaker 1: is cash right now? Is cash an asset? You know?
Speaker 1: Last year cash was definitely an asset. We were overweight
Speaker 1: cash and it helped our portfolios. This year we are
Speaker 1: starting to put a little bit of money to work
Speaker 1: incrementally within fixed income more than anything else. UM a
Speaker 1: little bit too early to be really chasing fixed in cup.
Speaker 1: We think that at some point we're gonna want to
Speaker 1: start extending duration, so fixed income is a big focus today.
Speaker 1: What do you do with the energy is the only
Speaker 1: survivor of an ugly two thousand twenty two You people
Speaker 1: have got terrific natural gas history. How do you how
Speaker 1: do you frame that or how do you bet on
Speaker 1: that out three years? Yeah? And you know, Lisa, you
Speaker 1: mentioned two of our main themes, will the energy shock
Speaker 1: from the war in Europe continue to be contained or
Speaker 1: do we see part two this year? You know, we
Speaker 1: saw winter warmth, We've started seeing European subsidies, We've seen
Speaker 1: the US tapping into the Strategic Patrol reserve support containment.
Speaker 1: And then we see China on the other hand. You know,
Speaker 1: demand for oil is going to increase as China reopens,
Speaker 1: and so we're kind of looking at all of these
Speaker 1: factors and saying, is the second half of the year
Speaker 1: going to be a little bit like we were seeing
Speaker 1: some of the tensions in the last year. So let's
Speaker 1: put those two ideas together. You were saying it's not
Speaker 1: time to lean into duration, but you're waiting too, and
Speaker 1: the cuential for the energy crisis to rear its head.
Speaker 1: What are you waiting for? We've seen a rally already,
Speaker 1: so yields are already almost a percentage point off the
Speaker 1: recent highs for the tenure. What are you waiting for
Speaker 1: to say it is time? Yeah, and it's a continuous
Speaker 1: conversation as markets are moving, But we've seen a disconnect
Speaker 1: right between market expectations and the fed's hawk is announcements.
Speaker 1: The tenure seems to be stuck a little bit around
Speaker 1: three and a half percent because markets think that the
Speaker 1: FED is going to have to pit it and reduce rates.
Speaker 1: We think that the tenure could retrace it around four
Speaker 1: percent at some point early this year, and then that's
Speaker 1: going to signal a good opportunity to slowly start buying
Speaker 1: duration again. We're looking for good entry points to start
Speaker 1: extending duration in our fixtingcome portfolios, but we don't want
Speaker 1: to chase anything because we do think that we're still
Speaker 1: a long way off from the FED really signaling any
Speaker 1: sort of even pause. What's interesting to me is the
Speaker 1: idea of a four percent ten year yield and the
Speaker 1: implication for equities that previously sold off when yields went up.
Speaker 1: But if we have an environment where pausitive, where it's
Speaker 1: a positive look at the economy at could potentially happen
Speaker 1: with growth, is it also couldn't be positive for equities
Speaker 1: in the short run. You know, I think equities are
Speaker 1: gonna be maybe potentially a tale of two halves this year.
Speaker 1: You know, we think kind of middling for the next
Speaker 1: six months, but I think you're gonna have to pick
Speaker 1: your spots. You have to remember the SNP is still
Speaker 1: trading around eighteen times, whereas Europe's trading around twelve and
Speaker 1: a half and e M in certain countries even lower.
Speaker 1: So it could be a valuation story of the half
Speaker 1: of the Here Lifia with you and our Sanny, let's
Speaker 1: just talk about the Vogue again. I believe it was
Speaker 1: a vogue twelve months ago, twenty four months ago, thirty
Speaker 1: six months ago. You get the theme e M in
Speaker 1: international are back. Is this time different? You know, it
Speaker 1: feels like a little bit of a consensus trade because
Speaker 1: you're starting to hear people really talk about it more
Speaker 1: and again. You can't generalize yet. I mean China to
Speaker 1: Brazil to India. These are completely different factors, completely different
Speaker 1: time horizons you have to have. But as an institutional investor,
Speaker 1: you have to be in emerging markets a to some extent.
Speaker 1: You have to get China right because that is the
Speaker 1: still the biggest determinant in a NIM portfolio. Alifa, thank
Speaker 1: you so much. Olivia Dorwalla with Rock Creek Group there
Speaker 1: on the allocation mystery, what we're gonna do right now?
Speaker 1: You speak to someone who invented it. I really can't
Speaker 1: say this enough. I'm gonna go back to the shot
Speaker 1: gun aw of point figure charts of eighteen eighty and
Speaker 1: through the early part of last century, and then in
Speaker 1: the nineteen forties there was dropped upon us someone who said,
Speaker 1: you can plot a stock and you can draw lines
Speaker 1: of support in resistance. His name was John Maggie. One
Speaker 1: of his great disciples was Relf and compora to say
Speaker 1: he's a chartered market technician. Co Farnder barely describes his
Speaker 1: contribution to looking back at what Price tells us about forward? Ralph,
Speaker 1: honored to have you with us today. I want you
Speaker 1: to discuss the modern idiocy over catharsis. We need Catharsis
Speaker 1: to make a bottom in the equity market. Have you
Speaker 1: observed catharsis that drags us out of this bear market? Absolutely? Tom,
Speaker 1: Thank you for that kind introduction. I have to have
Speaker 1: I have to stress Octobert. Tom, the Dow had an
Speaker 1: intra day price wing of fifteen hundred and two points.
Speaker 1: No one's talking about it. In technical parlance, that's called
Speaker 1: a key reversal day when the low of the day
Speaker 1: and the high of the day precede the previous days
Speaker 1: high low, and that to me was a major turning point.
Speaker 1: And since that October low to the December thirteenth high,
Speaker 1: that DALLA is up about the S and P s
Speaker 1: up about eighteen. So there's been a nice recovery and
Speaker 1: since then the market has been consolidating. I think we're
Speaker 1: making a bottom long term in this bowl market. Well,
Speaker 1: if the study of technical analysis, with great respect for
Speaker 1: Dow theory and the rest of it, was done of
Speaker 1: a time of non derivative instruments, we now live in
Speaker 1: a world of E t f s, of massive indexation,
Speaker 1: and all to the formulas of support and resistance that
Speaker 1: you helped invent, do they work in this time where
Speaker 1: the New York Stock Exchange really isn't the New York
Speaker 1: Stock Exchange we knew. Yes, I appreciate that question, Tom,
Speaker 1: But remember what technical analysis is all about. It is
Speaker 1: following the laws of supply and demand bias versus sellers,
Speaker 1: and that has never changed. The emotion of investors has
Speaker 1: never changed, fear and greed. It is all manifest and
Speaker 1: what we follow. So if you believe in price, which
Speaker 1: I do, that's I don't own and indicator an own price,
Speaker 1: and I follow the trend of price. Buyers push him up,
Speaker 1: sell us push them down. It's that simple ralph on
Speaker 1: the spectrum of risk versus fear of a risk, appetite
Speaker 1: versus taking all your tips off the table, where are we? Um?
Speaker 1: For me, I've taken I've become a little I've become
Speaker 1: very aggressive coming out of that October thirteenth low, and
Speaker 1: I think since then, if you look at foreign markets
Speaker 1: like Europe, and you look at emerging markets, they have
Speaker 1: been leading the US market. So UM, I think it's
Speaker 1: broadening out. So I'd say, put chips on the table,
Speaker 1: play the game. What makes you feel like this has
Speaker 1: staying power? Like this is the early stages of something
Speaker 1: more sustained versus a head fake ahead of something that
Speaker 1: a lot of people say as an a very byproduct
Speaker 1: of monetary policy. Good question. Um, Remember I was talking
Speaker 1: about October thirteen low and rallied in two much to
Speaker 1: December thirteenth high, and that since December thirteenth we've had
Speaker 1: a pullback. The doll was dropped about uh six percent
Speaker 1: the so I think the SMP had an eight percent
Speaker 1: decline and those levels right there, we are looking at
Speaker 1: that would be a thirty two thousand, five eighty one
Speaker 1: on the Dow and three thousand, seven sixty four on
Speaker 1: the SMP. Those are very short term support levels. That's
Speaker 1: where the buy and she could be in. I I
Speaker 1: keep my eye closely on that on a short term basis,
Speaker 1: and I think we're holding up well. Well. I want
Speaker 1: to get back to the arch issue of the day,
Speaker 1: which is the failure of the American retirement system because
Speaker 1: people are in and out and in and out of
Speaker 1: the market. We're at one of those moments right now.
Speaker 1: We're millions of people are literally saying, how do I
Speaker 1: summon the cur to get back into the market. And
Speaker 1: I'm gonna go to the to the crew that you
Speaker 1: and I are weaned on in Large Mountain, New York,
Speaker 1: Mike Burke, Chartcraft, Mr. Cohen's work, and of course Earl Blumenthal.
Speaker 1: They knew when to have the courage to get into
Speaker 1: the market. How do you get into the market like
Speaker 1: you did in nine Uh, when you say get into
Speaker 1: the market, you mean participating and trading. I'm in cash
Speaker 1: and I need to go long. How do I get
Speaker 1: back into the market if I'm scared stiff? Well again,
Speaker 1: I I again being a technician, I think you gotta
Speaker 1: look at levels, and I think in the days ahead,
Speaker 1: literally excuse me, in the in the very short term,
Speaker 1: the next couple of weeks, just watch because we're in
Speaker 1: the early seasons right now, and we've still got a
Speaker 1: lot of dialogue about whether it's a recession and not
Speaker 1: a recession um and you've got the war in Ukraine.
Speaker 1: If we can hold above that October low, which I
Speaker 1: think we will, that to me would be the final test.
Speaker 1: So the next couple of weeks volatility we hold above
Speaker 1: those loans, I think, looking out towards the second half
Speaker 1: of this year, I think we're going to be in
Speaker 1: pretty good cheap never enough time Ralph and Compourer, they're
Speaker 1: on technical analysis. Just honored to have him on with us.
Speaker 1: I'm happy to say here in London I can catch
Speaker 1: up with Jeremy Stretch, the head of Detail FEC Strategy
Speaker 1: at C I B C. Jeremy great to catch up
Speaker 1: with anybody. Good to see it from page to the
Speaker 1: ft this morning for all to see. Europe can avoid recession?
Speaker 1: The Eurozone can avoid recession? Can the Eurozone avoid recession? Well?
Speaker 1: Suddenly the movie music has materially changed because of the
Speaker 1: retreat that we've seen in European gas prices, and of
Speaker 1: course we've also seen that Chinese reopening narrative which is
Speaker 1: providing a slightly more constructive backdrop for the German exports sector.
Speaker 1: So the combination of these two factors does suggest that
Speaker 1: Europe might and Germany and the leadership of that might
Speaker 1: just avoid that negative GDP print. And that's obviously one
Speaker 1: of the one of the catholics which has really been
Speaker 1: driving this euro recovery narrative, alongside the presumption that the
Speaker 1: ECB is seemingly much more hawkers than the defeat. And
Speaker 1: it's a relative story, isn't it stagnation versus recession? Now
Speaker 1: we need to talk about stagnation versus expansion and recovery.
Speaker 1: It's a big difference between the form and the latter. No, indeed,
Speaker 1: indeed there is so in a sense, I think what
Speaker 1: we had is that obviously, going through the third quarter
Speaker 1: last year, we had an enormous degree of negativity pricing
Speaker 1: or baked into the sort of the Eurozone recovery narrative,
Speaker 1: because of course we were talking about the potential of
Speaker 1: gas rationing. Now here we are at this stage in
Speaker 1: the in the in the winter period. Now it is
Speaker 1: remarkably cold here in London as we know at the moment,
Speaker 1: but the actual winter itself has been relatively mild thus far.
Speaker 1: And if you look at European gas short storage levels,
Speaker 1: it's they're running around twenty above the sort of levels
Speaker 1: you would have expected normally at this time of the winter.
Speaker 1: So that eases the burden in terms of the re
Speaker 1: refilling of those gas storage tanks through the course of
Speaker 1: this summer, and US we've seen Germany opening its liquefied
Speaker 1: natural gas UH ports in terms of William's Harving for example.
Speaker 1: So the ability for Germany to get those en ergy
Speaker 1: capabilities or or flows from the US in particular has
Speaker 1: helped to alleviate some of those recession risks far enough,
Speaker 1: coal as well over in Germany well, which is which
Speaker 1: is which is an interesting one. So in the sense
Speaker 1: that's one of the legacy issues. So that's why it
Speaker 1: was as fascinating to see, you know, the great of
Speaker 1: Thumberg narrative being put alongside at the World Economic Forum
Speaker 1: in Davos. You mentioned the CP is a question for
Speaker 1: you three, does the e c V hype more than
Speaker 1: the Fed this year. Yes, I think it does. I
Speaker 1: think we're very much in this steady and significant policy
Speaker 1: narrative the you know, the sort of paraphrase Madame Legarde
Speaker 1: and throw Margaret Thatcher into it's the ladies not for
Speaker 1: turning in terms of the interest rate story from the
Speaker 1: narrative that we saw from last week. So it seems
Speaker 1: likely to go along with the comments and class not
Speaker 1: over the weekend that we're going to see at least
Speaker 1: two fifty bases where most in the from the CD
Speaker 1: the next two meetings. Do they go beyond that in
Speaker 1: terms of into the spring? Possibly? Yes. So that I
Speaker 1: think does suggest that the c B is gonna be
Speaker 1: a little more hawkers than the Fed, because if we're
Speaker 1: if the market is right, and obviously markets attending to be,
Speaker 1: you know, very aggressive in terms of calling for a
Speaker 1: moderation in terms of policy timing for the Fed, then
Speaker 1: that does suggest that the c is gonna be more
Speaker 1: hawk kid Joseph salk Jen this morning, writing in London
Speaker 1: for sock Jen, saying, a spoonful of optimism house the
Speaker 1: dollar go down. You want to play that against the yen,
Speaker 1: against the euro? How do you want to play that story? Well, well,
Speaker 1: I think that I think the yen is is an
Speaker 1: obvious and in an interesting one because again we've we've
Speaker 1: seen a degree of policy uncertainty really written large after
Speaker 1: that adjustment in term of your curve control back in December.
Speaker 1: Now those minutes from the meeting there have been really
Speaker 1: so overnight suggests that a lot of the b o
Speaker 1: J members were worried about the communication aspects of that change.
Speaker 1: But I think it was it was always going to
Speaker 1: be the case, you know, to expect a degree of
Speaker 1: policy normalization from the bo J this year, but more
Speaker 1: so after Corona leaves office, because of course he's only
Speaker 1: got one more meeting to go. So I think, you know,
Speaker 1: I think there is some substantive scope for yet appreciation.
Speaker 1: So we you know, we'd be looking for runs up
Speaker 1: to maybe one one, one thirty two in the nearer
Speaker 1: term to provide better levels to start short looking from
Speaker 1: a return back to one twenty. The words we use matter.
Speaker 1: You said normalization and Japan in the first same sentence.
Speaker 1: So we've had several decades now see a rates in Japan.
Speaker 1: What's normal? Well, that's true. I mean I've been in
Speaker 1: the market for some considerable time and you know Japan
Speaker 1: and Japanese minetary policy has been generally the same. They
Speaker 1: but always attaining for this aiming for this two percent
Speaker 1: inflation target, which invariably they've missed other than and sporadic
Speaker 1: and exceptional circumstances. We're seeing now normalization that I think
Speaker 1: is a process of moving away from that negative interest
Speaker 1: rate policy. So I think that's going to be the
Speaker 1: dynamic that we're going to see. So if we start
Speaker 1: to seeing Japan moving away from those negative rates, that
Speaker 1: has enormous implications for fund flows because of course Japan
Speaker 1: being that major exporter of capital, exporter of credit in
Speaker 1: terms of looking for those higher yields. If there is
Speaker 1: a degree of dislocation in terms of those fun flows
Speaker 1: and that exiting from Japan, that I think that has
Speaker 1: in more normous implications. So as we look for treasury
Speaker 1: j UB spreads to continue to compress, that provides that
Speaker 1: to a momentum for Dolly and to move. Love talked
Speaker 1: to me about their limits, about how far they B
Speaker 1: I J can go, how far they can pull back
Speaker 1: from their your curve control. I was thinking about the
Speaker 1: ECB in Europe in the last year, and if you
Speaker 1: told me they were going to deliver what they have delivered.
Speaker 1: On top of throwing in QUTEI as well. I would
Speaker 1: have had real doubts about what could or couldn't happen
Speaker 1: to the bond market. I would have expected the periphery
Speaker 1: to face a real, real difficulty. I know spreads are wider,
Speaker 1: I know yields are out over the last twelve months
Speaker 1: or so, but not to the extent that I would
Speaker 1: have said, have you been surprised by that? What does
Speaker 1: that inform you about how far the BOJ might go?
Speaker 1: You're absolutely right, because if you think about what we've
Speaker 1: seen from the c B, you would have thought that
Speaker 1: B two B bund spreads would have been pushing to
Speaker 1: fifty basis points or higher and starting to really create
Speaker 1: some degree of fragmentation risk. So, in a sense, I
Speaker 1: think you know that we have seen a degree of
Speaker 1: relative calm, if you like, in terms of the movements
Speaker 1: that we've seen in terms of monitory policy. And I
Speaker 1: think that's going to be interesting in terms of Japan.
Speaker 1: So can they tolerate you know, long air yields, you
Speaker 1: know ten year olds moving up on one percent? I
Speaker 1: think they probably can if we get a more normalized
Speaker 1: yield curve in Japan. So I think you know there
Speaker 1: is this scope for an adjustment. I'm not suggesting that
Speaker 1: you know the bo J is going to be suddenly
Speaker 1: adopting a very aggressive place of balance sheet constriction. I
Speaker 1: think it's more about removing or easing those consideration terms
Speaker 1: of your curve control, removing that negative rate dynamic, and
Speaker 1: then encouraging some of those fun flows to remain on shore.
Speaker 1: I think that's the sort of the dynamic, rather necessarily
Speaker 1: going for a complete sea change, even with the confines
Speaker 1: of a new administration. Let's finish on the FED. The
Speaker 1: dove's got the last word, Governor Waller. I would have
Speaker 1: called him a dove last year, but certainly endorsed the
Speaker 1: twenty five basis quite moved this year. Are we done
Speaker 1: after that? I think we're then getting to a situation
Speaker 1: where we are literally right at the end game, and
Speaker 1: I think the data will then determine that. So I
Speaker 1: think we are still very much focusing on employment and earnings.
Speaker 1: I think those are the t that you know, the
Speaker 1: obvious benchmarks, and then of course looking within the CPI
Speaker 1: print to see how things like those rent dynamics play out.
Speaker 1: So I think we are very very close to the
Speaker 1: end game here. But I think the the other issue
Speaker 1: that we were still take take issue with from the
Speaker 1: market perspective is that degree of cuts, you know, that
Speaker 1: rate cutting, that's price into the market. Were very close
Speaker 1: to the end of the hiking cycle where we don't
Speaker 1: necessariything we should be pricing in cuts from the second
Speaker 1: half of the final question, Marcus have to grapple with
Speaker 1: ever changing probabilities and price them accordingly. Who's got more
Speaker 1: chance here the Federal's Earth get into five or Tottenham
Speaker 1: getting the top four finish this year in the league.
Speaker 1: We'll considering my son as a massive Arsenal fan. Then
Speaker 1: I really really cannot, I really cannot answer anything in
Speaker 1: the affirmative in relation to Tottenham. There we go, Jemmy Stretcher,
Speaker 1: CRV Sanks very much. Let's see you may Thanks for
Speaker 1: having us. This is the Bloomberg Surveillance Podcast. Thanks for listening.
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Speaker 1: Tom keene In. This is Bloomberg m