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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis and I'm Doug Prisner. Here are the

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Speaker 2: stories we're following today. So we had the CPI data.

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Speaker 2: The numbers seem to support the few of the Fed

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Speaker 2: being nowhere near declaring a victory when it comes to

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Speaker 2: fighting inflation. So we had a big spike in yields

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Speaker 2: right across the treasury curve. Now, this blame for higher

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Speaker 2: yields go well beyond the inflation story. The auction of

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Speaker 2: thirty year bonds was a very, very disappointing. We had

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Speaker 2: the yield on the thirty year jumping sixteen basis points

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Speaker 2: to four eighty five. Brian, all right, let's get to news.

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Speaker 1: House Republicans have been enclosed a session again today trying

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Speaker 1: to figure out how to elect a speaker. That Baxter

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Speaker 1: is covering that story and has all the rest of

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Speaker 1: the news from the nine to sixty newsroom in San Francisco.

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Speaker 3: Ed.

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Speaker 4: Yeah, that's right, Brian. Well, of course I get to

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Speaker 4: Israel as well.

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Speaker 5: Here.

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Speaker 4: The strife of the House today though in the US,

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Speaker 4: has just gotten more and more frustrating. Now the Republican

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Speaker 4: nominee steve's La says there has been some movement The

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Speaker 4: good news is.

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Speaker 6: Our support continues to grow. We're continuing to work to

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Speaker 6: narrow the gap.

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Speaker 1: And that's going on, and we're going to continue the meetings.

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Speaker 4: Yeah, but not anywhere close to this point. And House

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Speaker 4: Minority Leader Hakim Jeffrey says, it's.

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Speaker 7: Simple, Republicans need to end the GOP civil war.

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Speaker 6: Now, what is the problem.

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Speaker 4: Well, the problem is that the Speaker chair is being

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Speaker 4: held hostage by that same small group of Republicans. And

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Speaker 4: Bloomberg's Julie Fine says, they're not closer.

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Speaker 5: Yeah, it certainly doesn't seem that way. I mean, you

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Speaker 5: have one representative essentially saying a Republican that this is

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Speaker 5: like an episode of Veep that turned into the House

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Speaker 5: of Cards. I mean, that is not where you want

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Speaker 5: to be when there is a war going on in Israel,

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Speaker 5: aid is needed, there questions about aid for Ukraine. So

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Speaker 5: at this point it appears they are no closer. You

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Speaker 5: even have Mike Rogers basically saying we're going to need

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Speaker 5: Democratic votes. Nothing that I ever thought would happen this week.

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Speaker 5: So they have a long way to go and a

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Speaker 5: lot of work to be done.

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Speaker 4: Now that Republican congresswoman to whom she Julie referred as

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Speaker 4: Congresswoman Nicole Melaya Takas.

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Speaker 8: It's not gonna be Steve. We need to figure out

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Speaker 8: who it is. But somebody has to get the two

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Speaker 8: seventeen that is needed so we can proceed with our

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Speaker 8: legislative business. It's only going to make things worse if

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Speaker 8: we don't get to pass the appropriation bills that need

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Speaker 8: to be passed and send them over to the Senate.

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Speaker 8: Now that's delaying a process, and then they're gonna be

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Speaker 8: all upset in a month when we get stuff back

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Speaker 8: from the Senate that we're unhappy with and there's no

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Speaker 8: time to negotiate.

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Speaker 4: So House of cards Israel Hamas US Secretary of State

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Speaker 4: Anthony Blinkin today with Israeli Prime Minister Benjaminett and Yahoo.

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Speaker 4: People of Israel have long and rightly prided themselves on

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Speaker 4: their self reliance, on their.

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Speaker 7: Ability to defend themselves even when the odds are stacked

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Speaker 7: against them.

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Speaker 6: The message that I bring to Israel.

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Speaker 9: Is this, you may be strong enough on your own

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Speaker 9: to defend yours, but as long as America.

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Speaker 2: Exists, you will never ever have to.

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Speaker 9: We will always be there. By the massacring of young

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Speaker 9: people in an outdoor music festival, the butchering of entire families,

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Speaker 9: the murder of parents in front of their children, and

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Speaker 9: the murder of children in front of their parents.

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Speaker 4: That Yahoo says Hamas should be treated like Isis. They

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Speaker 4: should be spit out from the community of nations. Nobody

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Speaker 4: should harbor them or protect them. Blincoln saying aid will

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Speaker 4: continue while there's been no direct tie to Iran. He

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Speaker 4: says it is complicit, which is a reason Bloomberg's Nick

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Speaker 4: Wadams on Bloomberg Sound On Today says Secretary will expand

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Speaker 4: his trip to the Middle East for more countries.

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Speaker 6: You know, if you have further evidence of Iranian involvement

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Speaker 6: in the Hamas attacks, what's Israel going to do to Iran?

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Speaker 6: You know? And so it could get a whole lot

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Speaker 6: work and a whole lot bigger.

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Speaker 4: Next, says he that Blinken is trying to prevent that.

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Speaker 4: Of course, already expanded a bit as Israel's missile strikes

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Speaker 4: have hit put Syrian airports out of service, sending a

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Speaker 4: message to Hesbillah and Syria, and the US has confirmed

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Speaker 4: twenty seven Americans mckilled in Israel. Fourteen are unaccounted for

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Speaker 4: global newspowered by more than twenty seven hundred journalists and

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Speaker 4: analysts in over one hundred and twenty countries. In San Francisco,

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Speaker 4: I'm at Baxter in This is Bloomberg, all right, Brian.

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Speaker 1: Thanks very much, and we will continue our coverage on

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Speaker 1: this story all throughout the day here on Bloomberg. The

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Speaker 1: US has reached an informal understanding with kontr to hold

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Speaker 1: off on distributing six billion dollars in oil revenue to Iran.

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Speaker 1: Iran was allowed to access the money as part of

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Speaker 1: a prisoner exchange with the United States. Today's news comes

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Speaker 1: as the Biden administration probes Tehran's potential involvement in the

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Speaker 1: Hamas attacks.

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Speaker 6: Last week.

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Speaker 1: At a White House briefing, US National Security Council spokesman

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Speaker 1: John Kirby did not directly ends sure if the funds

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Speaker 1: were inaccessible to Iranian officials, but he did stress that

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Speaker 1: all six billion dollars remains unaccounted.

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Speaker 9: For, still sitting in the cuttery bank, all of it,

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Speaker 9: every agreement, every dime of it.

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Speaker 1: And that is John Kirby. Cotter has been asked by

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Speaker 1: the United States not to approve applications for the funds

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Speaker 1: Iranian organizations were meant to spend this six billion dollars

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Speaker 1: on medicine and other humanitarian goods.

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Speaker 2: China made its first public contact with Israel today since

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Speaker 2: last weekend's attack by Hamas We heard from China's Special

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Speaker 2: Envoy on Middle East issues, he Is Jai Jun. A

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Speaker 2: statement from the Foreign Ministry said the Jais said China's

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Speaker 2: condemning the actions that led to the deaths of those civilians.

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Speaker 2: The statement went on to say that China is willing

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Speaker 2: to work with the international community toward peace talks. Earlier,

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Speaker 2: Israel's ambassador to China had called on Beijing to leverage

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Speaker 2: its close relationship with Iran to rein in Hamas. Irit

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Speaker 2: ben Abba told us she has expected China to say

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Speaker 2: a little more on the war.

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Speaker 10: If it really wants to see stability and to be

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Speaker 10: more active politically in trying to bring peace in the region,

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Speaker 10: it has to be more involved and to take a

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Speaker 10: more balanced, much more balanced, a much more realistic approach

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Speaker 10: to the situation on the ground.

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Speaker 2: That is Eric ben Abba, the Israeli Ambassador to China. Now,

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Speaker 2: By the way, China's Foreign Ministry said it was saddened

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Speaker 2: by those casualties However, Beijing has not criticized Hamas in

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Speaker 2: its statements.

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Speaker 1: Brian and Doug it's the type of statement that has

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Speaker 1: drawn criticism in the past on charge that China sits

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Speaker 1: on the fence all too often in stories even like

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Speaker 1: this where there was a lot of carnage. And again

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Speaker 1: Israel tried to get beyond it by simply saying China

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Speaker 1: should press Iran to reign in Hamas. And the reason

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Speaker 1: I mentioned this is we'll have this with our guests

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Speaker 1: all throughout the program, whether or not the Chinese response

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Speaker 1: has been appropriate well. In some other news on China,

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Speaker 1: consumer price inflation is likely to have remained near zero

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Speaker 1: in the month of September. Bloomberg's Bonnie Ou has the

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Speaker 1: story from Hong Kong.

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Speaker 11: Bloomber economists see the CPI rising zero point one percent

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Speaker 11: from a year earlier in September, the same pace as

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Speaker 11: in August. Higher energy costs likely offset weakness in food prices. Overall,

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Speaker 11: economists expect inflationary pressures to remain subdued for the rest

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Speaker 11: of the year. On producer prices, Bloomber estimates that they

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Speaker 11: probably continued to fall, but by a smaller margin compared

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Speaker 11: to August. Economists say it would take some time for

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Speaker 11: recent policy support to few enough to mind to lift prices,

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Speaker 11: but they add there have been some early signs of

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Speaker 11: green shoots in manufacturing in Hong Kong. I'm Bonnie Al, Bloomberg.

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Speaker 2: Radio and staying in China. Beijing is expanding its clampdown

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Speaker 2: on offshore brokers the story from Bloomberg zivon men in

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Speaker 2: Hong Kong.

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Speaker 3: China has told its security firms and their offshore units

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Speaker 3: to stop conducting illicit cross border business that would include

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Speaker 3: brokering shares and selling funds to domestic investors. And that's

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Speaker 3: as China aims to plug regulatory loopholes that could risk

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Speaker 3: financial stability. Chinese authorities are increasing scrutiny to prevent people

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Speaker 3: from evading capital controls. Meantime, authorities have also been rolling

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Speaker 3: out measures to restore confidence in local markets after stocks

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Speaker 3: tumbled in Hong Kong, i'm ivon Mann, Bloomberg Radio well back.

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Speaker 1: In the United States, consumer prices rose at a brisk

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Speaker 1: pace for a second straight month in September. The so

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Speaker 1: called core reading that leaves out food and energy rose

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Speaker 1: three tenths of one percent on a year over year

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Speaker 1: basis it was up four point one percent. We got

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Speaker 1: reaction from Ceramalik Cio at Nouvene Asset Management.

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Speaker 12: I think this just.

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Speaker 11: Puts back on the table one more rate hike before

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Speaker 11: the end of this year than the Fed pauses, and

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Speaker 11: Yale should start to settle from there.

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Speaker 10: So we're in the late innings of this cycle of

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Speaker 10: right high evement at this point.

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Speaker 1: Not Sarah Malek Trader is priced in nearly even odds

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Speaker 1: of a one quarter percentage point hike this year. Well,

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Speaker 1: let's get to our guest. Our guest is Edward Harrison,

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Speaker 1: Bloomberg team leader for the Americas on FX and Rates.

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Speaker 1: I'm Brian Curtis along with Doug Kristner and Edward. The

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Speaker 1: headline was a little hot, but core was was Perhaps

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Speaker 1: we could say ho hum. I'm not sure it would

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Speaker 1: have ruffled markets too much if if the headline was

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Speaker 1: also in line. But in any case, we have seen

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Speaker 1: oil prices trade down seven percent in last month and

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Speaker 1: even more than that in the month of October. So

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Speaker 1: I didn't lose any sleep over this report should I have?

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Speaker 7: You know, it's a good question.

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Speaker 12: I think that the real question is what's the state

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Speaker 12: of the market's given this, because that's sort of what

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Speaker 12: you're getting to is that the.

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Speaker 7: Markets reacted very violently to this, and I think that's

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Speaker 7: a statement to where markets are. But I would say

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Speaker 7: with regard to the data, that there were some negatives there,

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Speaker 7: in particular the super core services number. That's where you

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Speaker 7: take out you just look at services and you look

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Speaker 7: at the core part of services. The inflation levels there

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Speaker 7: for the month and month read were the highest that

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Speaker 7: we've seen in quite some time, and I think that's

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Speaker 7: what people were focused on that you know that there's

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Speaker 7: a sticky part of inflation, and so after one or

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Speaker 7: two days of respite, what we've seen there for is

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Speaker 7: the bond market selling off, a steepening of the yield

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Speaker 7: curve based on that, and more than that, it was

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Speaker 7: the actual thirty year treasury auction that caused bond markets

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Speaker 7: to sell off, and I think so it's a combination

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Speaker 7: of those two things.

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Speaker 2: Yeah, it's been a very tricky week for the bond market,

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Speaker 2: complicated by the fact that Monday we did in trade

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Speaker 2: given the banking holiday, and then with the developments in

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Speaker 2: the Mideast, what may have been certainly felt like a

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Speaker 2: massive short squeeze in bonds, the drove yield sharply lower.

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Speaker 2: Pretty dramatic reversal of that. Today, Brian referred to some

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Speaker 2: of the markets and how they're discounting the probability of

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Speaker 2: a future rate hike. It's kind of interesting because futures

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Speaker 2: are saying something different than what the swaps market is indicating. Nonetheless,

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Speaker 2: I think there is a really low probability of another

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Speaker 2: rate hike. What could scuttle that? What would force the

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Speaker 2: Fed's hand? Do you think?

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Speaker 7: I think there are two things that the Fed probably

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Speaker 7: wants to think about. They want to think about the

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Speaker 7: PCE inflation. That's a different gage of inflation that they

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Speaker 7: track more closely. And they also probably want to look

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Speaker 7: at GDP, which is a backward looking number, but you know,

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Speaker 7: from an optics perspective, is very important because they put

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Speaker 7: out forecasts in September that said they were going to

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Speaker 7: get to certain levels on unemployment and flow, and we're

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Speaker 7: about where they wanted to be. But the level of

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Speaker 7: the Fed funds rate is twenty five basis point tigher

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Speaker 7: with that. So if we get a very hot number

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Speaker 7: in either one of those two, then likely they'll feel

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Speaker 7: compelled to between November and December, one of those two

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Speaker 7: meetings to throw in one last twenty five basis point

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Speaker 7: rate hike, but really everyone's now focused on how long

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Speaker 7: they're going to stay at that level, as opposed to

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Speaker 7: that extra rate hike that they're likely or unlikely to

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Speaker 7: put in.

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Speaker 1: Just looking at the daily chart, it seems to me

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Speaker 1: that the thirty year auction, the fact that that didn't

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Speaker 1: go so well, really caused a little bit more of

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Speaker 1: the dislocation than the inflation numbers. But I take your

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Speaker 1: point that both were contributing. I'm interested in your thoughts

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Speaker 1: on the housing side because if you look at information

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Speaker 1: that is seen as more real time, like the Zillow

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Speaker 1: numbers on rents, they show increases are really kind of

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Speaker 1: back down, almost in the high two percent range, which

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Speaker 1: doesn't seem that alarming.

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Speaker 7: Right, Yeah, And I think that the FED they're fairly

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Speaker 7: forward looking, so to a degree you could say that

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Speaker 7: they would look through these numbers that you know, most

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Speaker 7: of the things are coming back to trend, but not

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Speaker 7: quickly enough, and so the question for them is at

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Speaker 7: what level, at what plateau can they stop hiking and

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Speaker 7: then hold. So that's why I think there's probably you know,

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Speaker 7: one more hike as they said maximum, and then they're

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Speaker 7: probably gonna hold at that level and hopefully that will

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Speaker 7: do the trick for them. But going back to what

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Speaker 7: you were saying there, Brian, about the whole concept that

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Speaker 7: it was the thirty year I agree with you one

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Speaker 7: hundred percent that you know, we saw you know, break

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Speaker 7: evens would show inflation rising as a results of the

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Speaker 7: CPI numbers, but then suddenly when we got the thirty

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Speaker 7: year auction, uh, that completely reversed and it was really

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Speaker 7: all about the real yields rising. What is indigestion, if

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Speaker 7: you will.

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Speaker 2: No doubt about it. I mean, the bond market has

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Speaker 2: really been forced to absorb a tremendous amount of new

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Speaker 2: supply from the Treasury, so this is only going to

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Speaker 2: become even more challenging.

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Speaker 7: Yeah, and you know, I think the thing that people

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Speaker 7: are looking forward to is the November where when the

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Speaker 7: Treasury comes out and says this is what our refunding

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Speaker 7: is going to be for the next three months, and

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Speaker 7: the numbers there, if they're very high, then I think

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Speaker 7: the market could recalibrate expectations based upon that. And it's

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Speaker 7: the term premium. How much you're willing to pay in

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Speaker 7: order to hold a longer maturity asset that is going

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Speaker 7: to drive these yields higher.

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Speaker 1: Yeah, the spiking yields seemed you know, too too far,

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Speaker 1: too fast, and then the drop, you know, the consequent

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Speaker 1: drop of thirty three basis points in about twenty four

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Speaker 1: hours seemed kind of shocking too. Are we almost now?

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Speaker 1: Do you think finding an equilibrium level here with the

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Speaker 1: ten year yield kind of right around the four seventy level,

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Speaker 1: you know.

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Speaker 7: To be honest, I don't think that we necessarily are.

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Speaker 7: I've been tracking the move from April when right after

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Speaker 7: SVB went bus and the channel that we were on

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Speaker 7: up until maybe a week or two ago, we were

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Speaker 7: within a certain channel. We've broken outside of that channels

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Speaker 7: were slightly above. That means that we're accelerating in a

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Speaker 7: potentially unsustainable way.

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