WEBVTT - Surveillance: Jobless Claims with Dutta 0:00:09.880 --> 0:00:13.840 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jai Leie. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.440 Bloomberg dot Com, and of course, on the Bloomberg. Let's 0:00:27.480 --> 0:00:29.680 head straight to the global capital of foreign exchange, shall we? 0:00:29.760 --> 0:00:31.600 Tom King to London we go and catch up with 0:00:31.680 --> 0:00:34.199 Kitchukes of selk Jen Kit. Let's just start with the 0:00:34.240 --> 0:00:37.159 economic data ninety minutes away in the United States. What 0:00:37.159 --> 0:00:40.160 are you looking for, kid, I'm I'm hoping we don't 0:00:40.200 --> 0:00:44.240 get another uptick in new claims and even more so 0:00:46.120 --> 0:00:50.800 another uptick in continuing claims, just because this would be 0:00:51.000 --> 0:00:53.239 this would be an awfully high level of unemployment for 0:00:53.280 --> 0:00:55.760 things to stabilize with the unemployment rate, get level of 0:00:55.800 --> 0:00:58.920 getting stuck around here. There's an awful big hole still 0:00:58.920 --> 0:01:02.960 to fill in. And you've had decent number on on I, 0:01:03.240 --> 0:01:04.880 S M and on. Quite a lot of the data 0:01:05.000 --> 0:01:07.240 has said that yes, there's been some battens on the virus, 0:01:07.280 --> 0:01:10.480 but had to return to loth Dantons carry on um. 0:01:10.480 --> 0:01:12.600 So the labor market data have to have the capacity 0:01:12.640 --> 0:01:15.440 to really put a dantoner on on that kind of story. 0:01:16.080 --> 0:01:17.400 You know, kid, I look at this and I love 0:01:17.440 --> 0:01:19.520 your morning. Note the acuity of it as you look 0:01:19.560 --> 0:01:23.679 at the granular data around all these political emotions, including 0:01:23.720 --> 0:01:26.000 the claims report at eight thirty, and I got to 0:01:26.040 --> 0:01:28.240 go to the bond market kit and we go out 0:01:28.240 --> 0:01:30.560 to four digits here on Bloomberg Surveillance. We call these 0:01:30.680 --> 0:01:33.679 Roman numbers in honor of Roman who made this happen. 0:01:33.760 --> 0:01:36.360 But going out to four digits on the ten year 0:01:36.440 --> 0:01:39.679 yield is just simple point five one five zero. What 0:01:39.800 --> 0:01:42.039 does it say to you, Kit Jukes? And where is 0:01:42.080 --> 0:01:46.520 the critical ten year yield? I guess the critical tenure 0:01:46.560 --> 0:01:48.360 yield is when it does negative and joined for the 0:01:48.400 --> 0:01:51.000 rest of the planet. That's where That's where we're just 0:01:51.040 --> 0:01:54.040 going out. But I mean it's you know, we are 0:01:54.040 --> 0:01:56.840 in we are in pretty new territory in terms of 0:01:57.120 --> 0:01:59.000 this movement. And that's what I mean to say that 0:01:59.320 --> 0:02:01.080 some of us the day data has shown, you know, 0:02:01.240 --> 0:02:03.960 resilience would be with the sort of the widest spread 0:02:03.960 --> 0:02:07.160 around the United States of the pandemic. But there's there's 0:02:07.280 --> 0:02:11.959 just a continued hunk for safe hunts, for safe assets 0:02:12.080 --> 0:02:15.160 and a continued belief that rates for staying low for 0:02:15.280 --> 0:02:19.840 just as far as the eye can possibly imagine. Uh, 0:02:19.840 --> 0:02:22.880 and you know that doesn't look as if it's going 0:02:22.880 --> 0:02:25.840 away anytime soon. But but say look at tit shields. 0:02:25.880 --> 0:02:29.440 I mean they are they are just accelerating away. So 0:02:30.080 --> 0:02:33.160 today I think that market is clearly we're frightened of 0:02:33.240 --> 0:02:37.040 bad numbers as opposed to brace for strong ones. What 0:02:37.160 --> 0:02:40.359 strikes me is the incredible divergence and the widening divergence 0:02:40.720 --> 0:02:43.280 in developed markets ability the U s is ability to 0:02:43.360 --> 0:02:46.240 lower rates and even issue more debt, and the lack 0:02:46.320 --> 0:02:48.919 of that ability by a number of developing markets. Turkey 0:02:49.040 --> 0:02:52.520 is its own idiosyncratic story, but how representative is it 0:02:52.960 --> 0:02:56.600 of emerging market nitions that are not able to ease 0:02:56.800 --> 0:02:59.880 some of their monetary policies to juice growth for fear 0:02:59.880 --> 0:03:02.360 of capital flight. Yeah, we have to be precise about 0:03:02.360 --> 0:03:04.840 which emerging markets that there's more than one. I actually 0:03:04.840 --> 0:03:07.480 think that where we've got through this year, in a sense, 0:03:07.560 --> 0:03:10.680 the weakest the weakest currencies, it goes um. You know, 0:03:11.000 --> 0:03:14.200 we still have a considerable weakness out there for the 0:03:14.240 --> 0:03:16.360 Turkish lear of the South African rand, and we do 0:03:16.440 --> 0:03:19.640 for the Brazilian real This year, the Morgan family folks 0:03:19.680 --> 0:03:24.040 talked about the Fragile five. India and Indonesia further east 0:03:24.480 --> 0:03:29.520 are in much better shape than than the Terrible three 0:03:29.639 --> 0:03:32.920 or the fragile three. If it's if it's G three 0:03:34.000 --> 0:03:38.560 um developed currencies which are all resilient, it's really those 0:03:38.640 --> 0:03:41.360 G three em ones that are together weak. And but 0:03:41.360 --> 0:03:44.280 but if you, if you are dependent on foreign capital, 0:03:44.800 --> 0:03:49.880 you do not have the ability for quee aggressive fiscal 0:03:50.000 --> 0:03:53.800 responses to the pandemic. And you and you live in 0:03:53.960 --> 0:03:56.920 danger of what sort of global environment is. And here 0:03:56.960 --> 0:03:59.680 we are in August, and you know August is his 0:03:59.760 --> 0:04:02.360 star coortally not a good month to need to go 0:04:02.400 --> 0:04:04.640 to the world and borrow money. And this is what 0:04:04.680 --> 0:04:06.840 we see. Get your worried about the month of August. 0:04:07.040 --> 0:04:08.960 Aren't you just walk us through that what you're looking 0:04:09.000 --> 0:04:12.280 for this month? Well, so you know, we put out 0:04:12.280 --> 0:04:14.360 a bunch of a bunch of pieces separately at our shot. 0:04:14.400 --> 0:04:18.040 Whether the rates guys were worried about risk aversion in August, 0:04:18.279 --> 0:04:20.400 the emerging market guys are worried about risk aversion. And 0:04:20.440 --> 0:04:23.120 I was looking at various currency trades that do well 0:04:23.120 --> 0:04:26.919 in August and The currencies that do badly in August 0:04:26.960 --> 0:04:30.520 do include you know, the turkishly Hera, the Brazilian rail, 0:04:30.640 --> 0:04:33.520 the South African rand. What does well is the dollar 0:04:33.640 --> 0:04:36.000 and the yen and gold historically. I don't know if 0:04:36.000 --> 0:04:39.160 gold can do well starting from here, but um, but 0:04:39.160 --> 0:04:41.320 but what you know what happens in August is that 0:04:41.400 --> 0:04:44.840 it's a liquid um and volatile. You see it pick 0:04:44.920 --> 0:04:48.880 up in volatility typically and therefore uncertain. And what you 0:04:48.880 --> 0:04:51.440 can see is then he is that in an liquid market, 0:04:52.040 --> 0:04:57.799 these fragile emerging market currencies can gap wider incredibly quickly 0:04:57.880 --> 0:05:02.200 on on really no volume at It's just a daft market. 0:05:02.240 --> 0:05:04.120 And that's what's happening. I mean, you can I think 0:05:04.120 --> 0:05:06.080 this is brilliant and it's great to go around the world, 0:05:06.120 --> 0:05:08.560 But the answer is your own powers central banker to 0:05:08.600 --> 0:05:11.080 the world and to go back to where you said, 0:05:11.480 --> 0:05:14.000 I guess the tenure yield is important in a negative 0:05:14.000 --> 0:05:17.680 statistic point five zero, folks are getting very near the 0:05:17.720 --> 0:05:20.760 workout of a couple a week ago or so. But 0:05:20.760 --> 0:05:24.040 but kit there's a point here where the central bank 0:05:24.120 --> 0:05:28.039 has to say, okay, the markets finally testing is that 0:05:28.160 --> 0:05:31.480 a point for zero? Is it a point to zero 0:05:31.800 --> 0:05:35.040 or is it really they're gonna wait for a negative statistic. 0:05:36.320 --> 0:05:38.080 I think they have very little choice. But you know, 0:05:38.120 --> 0:05:39.960 the Fed has made it clear they're either adding more 0:05:40.000 --> 0:05:42.960 money or you know, they'll wait for inflation to come up. 0:05:43.000 --> 0:05:45.520 They know that the dawn side risk of the economy 0:05:45.560 --> 0:05:47.680 is still there, so you know, sort of mean the 0:05:48.200 --> 0:05:51.400 Fed is on easy, staying easy. That the day to 0:05:51.480 --> 0:05:54.960 protect the markets, they came in and delivered, you know, 0:05:55.200 --> 0:05:58.599 massively accommodative policy globally in March, with all the international 0:05:58.640 --> 0:06:00.400 moves they did on the treasury we PO and on 0:06:00.440 --> 0:06:05.080 the swap program, hugely positive in turning around sentiment. That's 0:06:05.160 --> 0:06:09.080 weakened the dollar, but it's weakened the dollar more against 0:06:09.160 --> 0:06:12.320 developed market currencies and these fragile ones because it hasn't 0:06:12.440 --> 0:06:16.599 unlocked global capital and that's really a problem for growth 0:06:16.600 --> 0:06:19.080 in those sides. If you're just joining us on Bloomberg Television, 0:06:19.080 --> 0:06:22.720 Bloomberg Radio, Worldwide Surveillance with you this morning, Lisa Bramwa 0:06:22.760 --> 0:06:25.599 was John Farrow and Time keen markets are on the 0:06:25.680 --> 0:06:28.400 move before the claims data which we see here in 0:06:28.400 --> 0:06:31.080 an hour in twenty minutes, Fran seeing the Quase interview 0:06:31.240 --> 0:06:33.560 with Governor Bailey scheduled at the top of the eight 0:06:33.560 --> 0:06:37.480 o'clock hour as well. Okay, the bond markets on the move, 0:06:37.960 --> 0:06:41.440 but the dollars shows that persistent resilience even within a 0:06:41.440 --> 0:06:46.120 week dollar regime can suck and call week dollar. Yeah, 0:06:46.200 --> 0:06:48.400 once this comes down. At the moment, the dollar is 0:06:48.760 --> 0:06:50.640 still slightly stronger than it was at the start of 0:06:50.640 --> 0:06:52.839 the year in trade weighted terms on the b i 0:06:53.000 --> 0:06:55.880 S measure of up some broad trade weighted terms. It 0:06:55.960 --> 0:06:58.240 will weaken, but I don't know if it can weaken 0:06:58.600 --> 0:07:02.680 until we can stabilize these fragile emerging market economies, because 0:07:02.680 --> 0:07:06.159 what weakens the dollar is American investors looking for higher 0:07:06.240 --> 0:07:09.360 yield somewhere else. The said on its job and give 0:07:09.400 --> 0:07:12.440 made sure that there's no yield unavailable at all in 0:07:12.560 --> 0:07:15.040 the United States. I don't know the NATS back has 0:07:15.080 --> 0:07:17.160 done his job to get equity. Bryce is so high. 0:07:17.400 --> 0:07:19.720 I'm not sure if many people have the stomach to 0:07:19.760 --> 0:07:22.320 keep on chasing. But but we have to get this 0:07:22.360 --> 0:07:25.080 is where the pandemic hurts. Can we can we make 0:07:25.200 --> 0:07:27.280 the rest of the world at active to sell the 0:07:27.360 --> 0:07:30.400 dollar into buying really in a proper way around emerging 0:07:30.440 --> 0:07:33.720 market a bit, you know, without getting a vaccine or 0:07:33.800 --> 0:07:35.760 some some kind of solution to the barrus. That's the 0:07:35.840 --> 0:07:38.200 key question, Kit, before we let you go positive or 0:07:38.240 --> 0:07:43.280 negative print in pay rolls tomorrow. I hope positive. The 0:07:43.320 --> 0:07:45.240 fact that it took a while to answer that question 0:07:45.240 --> 0:07:48.160 speaks to how uncertain tomorrow is. Kit. Great to catch up, 0:07:48.200 --> 0:07:54.280 Sir kt Jukes, a sock gen Blimberg's Francine lack work, 0:07:54.320 --> 0:07:56.440 good friend and Carlie catching up with the bank, aving 0:07:56.480 --> 0:08:00.480 the governor Andrew Bailey take a listen. The things we've 0:08:00.480 --> 0:08:05.960 looked at, probably further QUEI, further quantity of easing, potentially 0:08:06.160 --> 0:08:09.680 use some negative rates, and full guidance. Those are the 0:08:09.680 --> 0:08:12.240 things that we've looked at. So your curve control has 0:08:12.240 --> 0:08:15.040 not been discussed or is it something I mean, obviously 0:08:15.040 --> 0:08:18.160 your control is quite interestingly discussed in in central backs 0:08:18.160 --> 0:08:20.920 and we do, we do discuss it. It's it's something 0:08:20.960 --> 0:08:24.560 that I mean, we've we've preferred to to look at 0:08:24.880 --> 0:08:28.280 quantity of easing and forward guidance as tools in that respect. 0:08:29.480 --> 0:08:31.400 But it's but I would make the point that we 0:08:31.440 --> 0:08:33.920 will go on looking at the toolbox. You know, nothing 0:08:34.040 --> 0:08:37.240 is fixed down forever, but it's not in our planning 0:08:37.240 --> 0:08:40.400 at the moment. I think it is true that I 0:08:40.440 --> 0:08:43.160 think when you look at the experience of other countries, 0:08:44.559 --> 0:08:49.920 they appear to have worked more effectively in the recovery phase. Now, 0:08:50.640 --> 0:08:54.920 I would however, qualify that a bit by saying, I 0:08:54.960 --> 0:08:58.040 think there's a there's a tricky identification issue at that 0:08:58.120 --> 0:09:02.160 point as to what extent it's negative rates that are driving, 0:09:02.200 --> 0:09:05.280 for instance, the recovery of the banking system, the lifting 0:09:05.320 --> 0:09:09.800 of the release of provisions, and therefore the ability to 0:09:09.880 --> 0:09:11.720 lend into what it's that that would have happened anyway, 0:09:11.760 --> 0:09:14.000 because it's it's a cyclical point, it's a it's a 0:09:14.120 --> 0:09:18.240 rather tricky issue in that respect. So the evidence is there, 0:09:18.320 --> 0:09:21.080 but it's a little bit hard to identify the causes. 0:09:21.280 --> 0:09:23.400 But then again, in terms of sequence, it's not something 0:09:23.440 --> 0:09:26.400 that that you would rule out, but it could happen 0:09:26.440 --> 0:09:29.439 at that phase. Oh, definitely. Message we're giving today it's 0:09:29.559 --> 0:09:32.920 it's there in the box. I mean there are other 0:09:32.960 --> 0:09:34.480 central banks that have so they're not in the box 0:09:34.520 --> 0:09:38.000 because again their financial systems have got different properties and 0:09:38.000 --> 0:09:41.160 they draw different conclusions. I can understand that are in 0:09:41.160 --> 0:09:43.680 the box. We're not considering using them at the moment. 0:09:44.400 --> 0:09:46.679 The Governor of the Bank of England with Francine looked 0:09:46.720 --> 0:09:52.959 quite Neil data with us right now, Renaissance Macro. He 0:09:53.040 --> 0:09:56.560 has been a great optimistic voice over the last decade 0:09:56.679 --> 0:10:00.520 or so, Neil Dada, this was a relatively optimistic statistic 0:10:00.640 --> 0:10:03.320 is and I said, we're beginning to set up a 0:10:03.440 --> 0:10:08.439 set of data points did show some trend towards healing. 0:10:08.679 --> 0:10:11.440 Is that what you observe I do? I mean, if 0:10:11.480 --> 0:10:14.640 you look at the jobless claims number today, Um, you know, 0:10:14.679 --> 0:10:17.600 the non siically adjusted claims, and remember the seasonals matter 0:10:17.640 --> 0:10:19.520 a lot right now, just given the sheer volume of 0:10:19.559 --> 0:10:21.439 claims that are being processed. But the n s a 0:10:21.600 --> 0:10:26.240 number tom that actually dipped below a million thousand. So 0:10:26.240 --> 0:10:27.880 that's something to keep an eye on. So that's I 0:10:27.880 --> 0:10:30.440 think the positive development. You know. Look, I mean, I 0:10:30.480 --> 0:10:33.200 think the virus this is something that J Powell said. 0:10:33.200 --> 0:10:35.680 The fet statement has it the course of the economy 0:10:35.679 --> 0:10:38.760 and reflects the virus to a large degree. And we 0:10:38.840 --> 0:10:43.560 know the virus spread more rapidly across the country starting 0:10:43.600 --> 0:10:47.440 sometime in the middle of June. Uh and it's coming 0:10:47.520 --> 0:10:50.920 under some control, some signs that that it's beginning to 0:10:51.160 --> 0:10:54.319 EBB a bit now. Uh, and so I think the 0:10:54.400 --> 0:10:57.360 labor market basically hit a big pothole in in July. 0:10:57.960 --> 0:11:01.200 But we also know that at ativity, you know, there's 0:11:01.200 --> 0:11:03.439 still a bunch of sectors that are still doing reasonably 0:11:03.480 --> 0:11:06.920 well all things considered. I mean, auto sales picked up 0:11:06.960 --> 0:11:09.760 better than expected. We obviously know. You know, look at 0:11:09.800 --> 0:11:12.040 any chart type to the housing market, whether that's home 0:11:12.080 --> 0:11:18.199 builders or Worldpool. Uh, they're all showing very strong recoveries. 0:11:18.600 --> 0:11:23.000 And that's mirroring the recovery we're seeing in homesale. Um 0:11:23.200 --> 0:11:25.319 and uh. And they still needs that there needs to 0:11:25.320 --> 0:11:27.520 be an inventory restocking of some kinds, so that's going 0:11:27.559 --> 0:11:31.840 to support manufacturing. So UM, I think the activity is 0:11:31.880 --> 0:11:33.720 doing okay. The labor market kind of hit a pot 0:11:33.840 --> 0:11:37.280 hole in July, but historically and generally, the labor market 0:11:37.360 --> 0:11:40.240 follows GDP, and so you should expect labor market activity 0:11:40.240 --> 0:11:42.520 to accelerate in August. Read in the and green in 0:11:42.559 --> 0:11:45.120 the screen, folks, SFP future is a negative two and 0:11:45.240 --> 0:11:46.880 we see green with a dow in the nails deck 0:11:46.920 --> 0:11:50.400 one as well. Neil Dutta, what is your unemployment rate 0:11:50.480 --> 0:11:54.000 statistic for tomorrow? I think you get another slight tick down. 0:11:54.080 --> 0:11:57.160 I mean, the thing about the unemployment rate, which which 0:11:57.160 --> 0:12:00.160 it was something I've been thinking about, is, um, you know, 0:12:00.200 --> 0:12:04.040 as we get to the fall, UH, labor force participation 0:12:04.120 --> 0:12:06.640 may not actually come up as much as it has 0:12:06.679 --> 0:12:09.520 been because parents are going to need to juggle work 0:12:09.559 --> 0:12:12.680 from home arrangements and their children's schooling and so do 0:12:12.720 --> 0:12:16.520 you see a scenario where the labor enforce participation rate 0:12:16.520 --> 0:12:20.199 isn't actually coming up that much? But the the upshot 0:12:20.240 --> 0:12:22.679 of that, it would be that's the jobless rate falls 0:12:22.679 --> 0:12:25.800 a little bit more uh than expected. UM. That that's 0:12:25.840 --> 0:12:29.080 something I think people need to keep in mind. UH. 0:12:29.120 --> 0:12:31.160 And whether that maybe leads to a little bit more 0:12:31.200 --> 0:12:34.360 wage pressure um for those that are working. Obviously, it's 0:12:34.360 --> 0:12:37.079 hard for parents that physically can't get to work to 0:12:37.440 --> 0:12:39.480 exert downward pressure on the wages of those that are 0:12:39.480 --> 0:12:42.559 still working. So that's something I think we should be 0:12:42.640 --> 0:12:44.160 keeping in the back of our minds. Certainly, if you 0:12:44.160 --> 0:12:47.520 look at something like the Conference Board labor differential consumers 0:12:47.520 --> 0:12:51.880 feel relatively buoyant about about the jobs market given some 0:12:51.920 --> 0:12:54.240 of the data that we've seen UH and now would 0:12:54.240 --> 0:12:58.120 point to a unemployment rate that probably goes below ten 0:12:58.200 --> 0:13:01.040 percent by you know, a few months before the end 0:13:01.080 --> 0:13:03.680 of the year. NaSTA future is positive on the session 0:13:03.679 --> 0:13:05.680 now a potentive one percent. The S and P just 0:13:05.960 --> 0:13:08.200 about a raising the losses of the morning so far. 0:13:08.520 --> 0:13:10.600 Now you mentioned some of the seasonal effects. Let's talk 0:13:10.600 --> 0:13:13.240 about that with regards to the payrolls report tomorrow. How 0:13:13.280 --> 0:13:16.679 should we navigate the numbers tomorrow with that in mind? Well? Sure, 0:13:16.720 --> 0:13:19.160 I mean the most obvious as the state and local 0:13:19.200 --> 0:13:23.800 government piece, right, So obviously the pandemic for state and 0:13:23.840 --> 0:13:27.720 local government layoffs much earlier in the year than as 0:13:27.760 --> 0:13:30.960 normal typically see a big season will drop off in 0:13:31.200 --> 0:13:35.280 UM in June and July. Uh, you probably got that sooner, 0:13:35.720 --> 0:13:39.360 which led to disproportionate declines in state and local government 0:13:39.360 --> 0:13:43.160 perils over the month. So if non seasonally adjusted state 0:13:43.160 --> 0:13:47.160 and local government employment is flat in July, the seasonal 0:13:47.160 --> 0:13:49.360 factor will probably add at least eight hundred thousands to it. 0:13:49.480 --> 0:13:51.920 So UM, this is one reason why you know, you 0:13:51.920 --> 0:13:53.760 should be a little bit wary of using the ADP 0:13:53.920 --> 0:13:57.000 to draw a big sweeping conclusion about nonfarm perils in 0:13:57.240 --> 0:14:00.160 UM for July for tomorrow. And that's the as the 0:14:00.200 --> 0:14:02.040 stain local piece of it's going to show a large 0:14:02.040 --> 0:14:04.680 seasonally adjusted increase in my view. Neil, you were talking 0:14:04.679 --> 0:14:07.280 about consumer spending and how that's giving you some optimism 0:14:07.320 --> 0:14:10.120 the auto sales in particular, and I'm wondering how much 0:14:10.559 --> 0:14:14.760 the expiration of enhance unemployment benefits factors into this. Everyone 0:14:14.800 --> 0:14:17.479 was talking about how crucial this was for the continuation 0:14:17.559 --> 0:14:20.400 of it in order for the economy to remain up. 0:14:20.480 --> 0:14:23.840 Now it has expired. No deal in sight, How important 0:14:23.880 --> 0:14:25.800 is it that there is a deal or do you 0:14:25.840 --> 0:14:28.840 have to change your outlook? Yeah, I mean I think 0:14:28.840 --> 0:14:32.120 it's It's definitely something that that I'm worried about every 0:14:32.160 --> 0:14:35.480 I think everyone's worried about it. Obviously. Um, you know, 0:14:35.520 --> 0:14:38.120 you mentioned that no deal is in sight. Obviously the 0:14:38.120 --> 0:14:40.760 markets are disagreeing with that. The market do see some 0:14:40.840 --> 0:14:43.080 deal inside. Otherwise why would they be rallying on the 0:14:43.120 --> 0:14:47.440 expectation of, you know, apparently these fiscal authorities getting closer 0:14:47.480 --> 0:14:49.360 to some kind of an agreement. So, um, you know, 0:14:49.360 --> 0:14:51.240 I would sort of take issue with the idea that 0:14:51.240 --> 0:14:55.200 they're moving further apart. I think they're moving closer. Um. 0:14:55.240 --> 0:14:57.720 But yeah, I mean, you know, obviously people are going 0:14:57.760 --> 0:15:00.360 to pull back ahead of those benefits expiring, which is 0:15:00.400 --> 0:15:02.960 one one reason you probably have seen some stalling out 0:15:03.000 --> 0:15:04.840 and things like credit cards spending them on long income 0:15:04.880 --> 0:15:07.920 consumers over the last number of weeks. So uh yeah, 0:15:07.920 --> 0:15:10.880 I mean, I think the US has great physical capacity 0:15:10.920 --> 0:15:12.840 at the moment, so there's really no excuse to not 0:15:12.920 --> 0:15:18.000 extend them. So I agree, But it's certainly a downside risk, um, 0:15:18.200 --> 0:15:21.240 but I do think it'll it'll get resolved to some degree. 0:15:20.600 --> 0:15:23.920 And to catch with you, sir ahead of tomorrow never 0:15:24.000 --> 0:15:33.120 Nicelest Macro, thank you fantastic interesting dynamic and nuance in 0:15:33.200 --> 0:15:36.000 the markets today. And to give his perspective from black 0:15:36.080 --> 0:15:39.760 Rock head of Global Fundamental Fixed Income Strategy, Maryland Watson 0:15:40.240 --> 0:15:43.720 with us right now with a wonderful Transatlantic view. Maryland, 0:15:43.760 --> 0:15:46.480 I look at the bond market and there's a point 0:15:46.560 --> 0:15:50.320 where you switch from yield analysis to price analysis. Is 0:15:50.360 --> 0:15:52.840 all this is about, whether it's full faith and credit 0:15:53.360 --> 0:15:56.360 or it's a new Google forty year piece that there's 0:15:56.400 --> 0:16:00.240 a buying frenzy for paper. Um. I think it's really 0:16:00.280 --> 0:16:02.960 just really reflective on the environment right now. I mean, 0:16:03.280 --> 0:16:05.920 if you look at the huge amount of demands for 0:16:06.040 --> 0:16:08.480 yield and for carry, you look at the enormous amounts 0:16:08.520 --> 0:16:12.000 of stimulus that you're seeing still coming through from the Eurozone, 0:16:12.040 --> 0:16:14.960 from the US UM At the moment, it's just where 0:16:14.960 --> 0:16:17.720 the investors put the money UM and I think particularly 0:16:17.760 --> 0:16:19.440 now as well, when you can move into August, you 0:16:19.440 --> 0:16:23.120 have typically thinner markets, more volatility. We've seen all the 0:16:23.240 --> 0:16:26.280 events in Turkey today and elsewhere. I think investors are 0:16:26.320 --> 0:16:29.480 really just scrabbling to find where they can find income 0:16:29.480 --> 0:16:31.560 and yield and where they can put their money. And 0:16:31.640 --> 0:16:33.960 so as you say, I mean, you know, looking at 0:16:34.120 --> 0:16:36.720 price for looking at the yield, I mean yield, aren't 0:16:37.680 --> 0:16:39.760 They're got to say local a long time. I mean, Lisa, 0:16:39.760 --> 0:16:42.120 it's great to Google forty year piece. You get a 0:16:42.160 --> 0:16:45.600 two and something percent coupon. It's up two percent after 0:16:45.720 --> 0:16:48.640 three day ago offering, which I think is a greater 0:16:48.680 --> 0:16:52.400 than one thousand percent total return per year. I didn't 0:16:52.400 --> 0:16:54.600 get into that at least. I'm glad you bought the 0:16:54.600 --> 0:16:57.160 Google paper. Yeah. I lovered it up with my triple 0:16:57.200 --> 0:16:58.960 average cash find that I have at the class it 0:16:59.000 --> 0:17:01.440 along with the oil. I am wondering though, at what 0:17:01.520 --> 0:17:04.239 point Google is sort of an idiosyncratic story with the 0:17:04.280 --> 0:17:07.000 idea of it being a pretty strong company that's enjoying 0:17:07.240 --> 0:17:09.800 a lot of balance sheet advantages, whereas there are a 0:17:09.840 --> 0:17:13.000 lot of investment grade companies on the cusp potential fallen 0:17:13.119 --> 0:17:15.920 Angels and Maryland. I pair that with the idea that 0:17:16.119 --> 0:17:19.359 yields average yields and investment grade bonds have plunged to 0:17:19.440 --> 0:17:22.080 all timeloads in the US of one point eight three 0:17:22.160 --> 0:17:25.760 per cent. Is this overdone? Um? Well, so at the moment, 0:17:25.800 --> 0:17:29.000 I don't think it's necessarily overdone. I think if you 0:17:29.080 --> 0:17:31.160 look at and say that a huge amount of demands, 0:17:31.200 --> 0:17:34.399 but you also look at declining issuance, particularly after as 0:17:34.440 --> 0:17:36.359 you saw that you have the huge supply some of 0:17:36.440 --> 0:17:39.720 some emergency issuance in Q one, UM, we're still in 0:17:39.720 --> 0:17:43.919 the world which is really starved of high quality yields UM. 0:17:43.960 --> 0:17:46.479 You know, and I think, as I say, given the 0:17:46.520 --> 0:17:50.680 amount of stimulus that we're seeing and support from monetary policy, 0:17:50.720 --> 0:17:53.280 but also we are expecting something else from the cysteal side. 0:17:53.960 --> 0:17:56.920 Then and you look at UM, you know, tech companies 0:17:56.920 --> 0:18:00.280 for example, or communications um the continue to do while 0:18:00.359 --> 0:18:04.160 during the pandemic, then I don't think it's necessarily overdone. 0:18:04.160 --> 0:18:06.080 I think it's just that, you know, investors are really 0:18:06.080 --> 0:18:08.760 trying to find where they can put the money. And 0:18:08.880 --> 0:18:11.760 you know, so we are still overweight tech in communications 0:18:11.840 --> 0:18:15.360 for example, um and despite the rally, I think, you know, 0:18:15.680 --> 0:18:18.440 we investors need to put the put their money somewhere. 0:18:18.720 --> 0:18:21.479 Obviously we will see a lot of dispersion going forward 0:18:21.960 --> 0:18:24.960 as we do continue continue to see how the economy 0:18:24.960 --> 0:18:29.400 evolves and the judictory there obviously have payrolls um tomorrow, 0:18:29.440 --> 0:18:31.880 we have the day to today. So I think it's 0:18:31.880 --> 0:18:34.159 just really investors have really trying to find word to 0:18:34.160 --> 0:18:36.560 put the money. And you know, at the moment you're 0:18:36.560 --> 0:18:38.800 not getting any value in treasuries, so where do you 0:18:38.800 --> 0:18:40.920 put it? Yeah, in full disclosure, I did not buy 0:18:41.080 --> 0:18:46.040 Google or any single name anything, just in case any 0:18:46.080 --> 0:18:50.040 anyone was wondering. But I am wondering, Marilyn, from your perspective, 0:18:50.040 --> 0:18:51.920 where do you draw the line? Where is the risk 0:18:52.040 --> 0:18:53.919 too great to pick up the extra yields? I mean, 0:18:53.920 --> 0:18:55.760 if you really want extra yield, you can go into Turkey. 0:18:55.960 --> 0:18:58.320 Well yeah, so so you have to take a very 0:18:58.320 --> 0:19:01.679 clear view on your risk or profile and your tolerance 0:19:01.760 --> 0:19:05.639 for for volatility. And I think really, when you're looking 0:19:05.680 --> 0:19:09.359 at an overall fort of holistic portfolio like, volatility is 0:19:09.400 --> 0:19:12.200 something that you really have to take into account. Obviously 0:19:12.280 --> 0:19:17.119 in the measure markets or in Turkey in particular, then um, 0:19:17.160 --> 0:19:20.440 you know that's that's a specific case because of the 0:19:20.640 --> 0:19:24.280 dollar demand on shore and the huge funding requirements that 0:19:24.320 --> 0:19:27.800 they have for the capital account. But um, I think 0:19:27.840 --> 0:19:30.439 as I say, also just looking at the markets now 0:19:30.440 --> 0:19:33.399 in terms of volatility, it's really important, as you say, 0:19:33.440 --> 0:19:36.639 particularly now when you're looking at the moveses thing in 0:19:36.680 --> 0:19:39.240 the market, when you're looking at the tightness of spreads, 0:19:39.280 --> 0:19:41.240 but you look at the very quick moves that you 0:19:41.280 --> 0:19:45.080 can see when there's some sort of trigger, then factoring 0:19:45.160 --> 0:19:49.560 volatility into your analysis is important. And really understanding liquidity 0:19:49.880 --> 0:19:52.320 when I can't trust enough how important it is to 0:19:52.480 --> 0:19:55.040 understand the liquidity of any asset that you that you 0:19:55.080 --> 0:19:57.200 want to hold. And to give your perspective, there is 0:19:57.240 --> 0:19:59.240 a bram or, it's a sidle and into the nine 0:19:59.320 --> 0:20:03.760 year Turkish piece with seven and five aids coupon trading 0:20:03.760 --> 0:20:06.160 at ninety eight right now. It's traded ugly the last 0:20:06.160 --> 0:20:09.159 couple of days. No surprise of Turkey as well, Lisa, 0:20:09.200 --> 0:20:11.480 I just think you should hold out for a nine 0:20:11.480 --> 0:20:14.240 percent yield in Turkey than you, you know, Maryland. I 0:20:14.280 --> 0:20:16.639 look at all of this and it's great. But within 0:20:16.640 --> 0:20:19.640 an allocation it used to be equities and bonds, maybe 0:20:19.680 --> 0:20:23.800 a little cash as well. Are you finding bonds are 0:20:23.960 --> 0:20:28.439 part of an institution's allocation now or have they just 0:20:28.560 --> 0:20:31.119 giving it up because of the real risk? So they 0:20:31.160 --> 0:20:35.920 do still remain part of an institution allocation. UM definitely UM. 0:20:36.160 --> 0:20:40.400 And you know, you have seen a shift in terms 0:20:40.440 --> 0:20:42.600 of what investor putting the money within the six income space, 0:20:43.000 --> 0:20:47.000 but they still remain a very strong part of institutions 0:20:47.680 --> 0:20:50.920 investments for a pension funds and when you look at demographics, 0:20:50.960 --> 0:20:54.840 whether it's in the US or elsewhere, then you know 0:20:54.880 --> 0:20:59.000 there's an ongoing consistent funding requirement for for pensions, for 0:20:59.040 --> 0:21:02.400 retirement UH and for other things. And so I think 0:21:02.480 --> 0:21:07.159 six income remains a key part of an institution's portfolio. 0:21:07.320 --> 0:21:09.919 But you know, the risk rewards are different. And when 0:21:09.960 --> 0:21:12.240 you look at the prospect for the extra market versus 0:21:12.240 --> 0:21:14.760