Wide, but the main event is fixed income. Treasury yields at new highs. Lisa the highest levels going back to 2009. Around the globe you are seeing this push upward in yields. Is it because of inflation, because there are not going to be as many buyers for this debt . For is this the wholesale figure out as people capture this yield for a longerterm . Jonathan what a pain. The fx market right now, this might hurt. Lets have a look at the offshore human, taking a move lower. China told state banks to escalate human intervention this week. What is that about . Lisa beside father the lowest level in 15 years. That is as you look at Economic Data coming out that was weaker than expected. The intervention has been settled or growing has been subtle but growing. We heard that the peg was unusually below where it was supposed to be trading in the free market. At what point can china control the narrative through market manipulation . Jonathan lets see if that exit difference. We have been reporting, house prices are much lower according to private data providers and property agents and china is leading us to believe. Statistics say new home prices are down two point 4 from the high in august 2021 2. 4 from the high in august 2021. Lisa this is not new. No one trusted the chinese official data but there is Something Different about the tone of this distrust. Not only is it trying to cast a good paul over everything in china, this is more. This is trying to craft a new narrative with data that is not reflected the reality people are feeling on the ground. I wonder domestically whether people are buying it, whether this is a message resonated with anyone who can see the actuality. Jonathan how many people come on this program say they are underway and not touching it . It is an economic giant, is a Financial Markets minnow. What are the benefits of a contagion from the stress we are starting to see over there . Lisa the Housing Market is not not a minnow. In all of these details i was reading overnight was this private wealth manager. You are starting to see protests percolate of people saying we want our money back. We dont understand. The fact that there are protests visible to the western world is notable in a country that tries to discourage public unrest. Jonathan we are seeing the gdp downgrades. The goal is something about 5 . The view on the southside side, Morgan Stanley is down to a 4. 7 . They think china will miss their targets. Theyre looking for 4. 2 . It is next to downgraded as well. Lisa this isnt just about a gdp figure, this is about Going Forward, china is not going to be the engine of growth for this world and it is unclear what the ramifications are and how much this economy can decelerate before you start to feel a ripple effect. Jonathan china is determined to the bond market to bring wall street back from the beach. Lets get to the price action. Equities on the s p 500. There is a lift here, he lived for yields. Lets call it 4. 30. New highs for the cycle, new highs for this year. Lisa people are wondering how long can it continue given so many people have said lets buy. Retail cell yields in focus, walmart is coming out. Tapestry about 15 minutes before walmart. This is the irony of the moment. We are talking about china dragging everyone down, this feeling of inflation and people moving away from sovereign debt and u. S. Consumers keep spending. 8 30, we see jobless claims come out. When do we see the jobless rate tick up . It has been steady around 3. 5 . Do we need to see a tick up . The economics and dexcoms out. It has remained so high relative to history. The data is coming in above expectations more reliably than it has in a long time. What does that mean about how much people are feeling negative about the economy and how that is not reflected in the data . Jonathan compare that to europe. It is ridiculous. We have a lot of earnings, walmart later. The target cfo came out yesterday and he said Something Like student loan repayments would strain already strained consumer budgets going into your end year end. The white house has instituted this onramp of 12 months. Is that going to kick in . Lisa everyone looks at it as the bogeyman that is going to come out and hunt for spending. If you look at studies come half of all obligors say they dont have the means to pay it, they plan to default. Straight up not pay. They have 12 months to not be penalized. Will this matter . It is a good question at a time where people are saying it is on the prefers fresh the peripheries on the peripheries. Jonathan when are we going to burn out fee pandemic savings . The San Francisco fed, have they made the call yet . It is this quarter. Lisa how many people are going to strut this off going to shrug this off and say you said this before . We will see. Jonathan that is the question mark. Equities are up, yields are higher. Joining us is linda from federated hermes. Is it a Financial Market minnow we dont need to worry about . Linda it is the secondlargest economy in the world and the fact that it is the secondlargest economy has implications for economies around the world, putting aside their stock market. Interestingly, a lot of people thought we should run over to china earlier this year when they opened up after china after covid and enough people invested over there overweight about that. It reminds us that the u. S. Is a safe haven. We have our august correction. This remains the best place to define reasonably safe to invest. Jonathan we dont know how much longer they will be done at the beach. You mentioned doubling down on the u. S. , is that the way you see it . These events dont lead you to pull back on risk and exposure in the u. S. Equity market . You think more people look to the market as a haven . Linda yes. If you look at the growth of economies, much of the world now is moving in contractions are poor in contractions on and the u. S. Is booming. When you talk about Student Loan Debt and concerns, we calculate that as 0. 2 of the gdp. People say the economy is in bad shape, i say hogwash. This economy is strong. Retail sales are at record highs today. I dont know how much longer we are going to call this revenge but we have a tight labor market. This is a great place to invest. There are certainly pockets of value out there here in the u. S. As we rake our as we make our way through a more interesting time in our market. Lisa this sounds great and when people look at the bond market and say maybe not, especially given the multiples. How do you understand the bond move going back to 2008 . Linda we are definitely in the camp that says what is going on with this bond yields with these bond yields . Why open today around 4. 3 on the 10 year. It really does not make sense if you think it has to do with an inflationary problem. I wonder if it has to do with the fact that markets are starting to realize that you get efficient below 3 is going to be much more tough then you might think, particularly with the job market as tight as what it is. Yields be going up and you may be losing money, but they probably should be at the high end. I would like to put a shout out to the cheapest areas of this u. S. Market which sees earnings growing this year 10 . That is the highquality dividend trade. If you were to worry about stocks, you can worry about growth stocks. Those are the ones that get hit when Interest Rates go up. They are fully valued. The utility sector, the real estate sector, these are unexpected these are inexpensive sectors. They dont seem timely and therefore there are very good value. Lisa i want to build on what you are saying. The fund has the bond market is saying the fed has more work to do fueled by the growth mimics a positive on the equity market. At what point does this undermine the thesis if the fed has to create real pain and he waits have to be more instructive to this Economic Growth more destructive to this Economic Growth in a way that will hamper earnings . Linda the fomc minutes came out yesterday, they dont want to make the mistake of over tightening so they may take a break. We think theyre done raising Interest Rates for this cycle and they want to watch and see. They have been lucky with inflation coming down as much as it has. I think it is going to be sometime. It might even still be a year from now when we wonder do they have to get to 2 before they call victory . We can live okay in a 3 inflation world but they insist so much that we at federated hermes are taking their word for it and that is still hanging on. Certainly not this year. Jonathan you dont see them tolerating a high renovation number. Pimco thanks for start tolerating something on cpi. Does that resonate with you . Linda they keep insisting they want to back down to 2 . Even if it is 3 , we were between 2 and 3 for 40 years. They can get it down and around that. Is the core cpi they cannot get down around enough. That goes to services and goes back to the very extremely strong consumer. The word is resilient. I think that is a great word for what is going on with this country and this consumer. Jonathan the ingredient does not sound like the equity market. Why is that . Linda it would be along the equity market if you said inflation is coming down, we can live with this. The consumer has the wherewithal. I have to laugh when they talk about this excess savings gone in a quarter. Excess savings over between 19, which we were doing just fine. The consumer is strong. On employment is reasonably good. Inflation is slowly coming down. 2 is not a magic number. If it continues to come down and corporations can see they can push through price increases and earnings look good and consumers are seeing income come up. I saw statistics that say if you look at the price changes come all the prices we have to endure this year versus last year with real disposable income, we have a percent more this year than last year because real income is higher. Jonathan i have got to run. We could do this forever. Linda duessel of federated hermes. Well bond market yields, 4. 30 on a 10 year. Coming, choi of Fs Investments troy of Fs Investments. Booking. Com, booking. Yeah i need it cool at night. You trying to ice me out of the bed . Booking. Com, booking. Yeah baby, only on game nights. You know you are retired right . Am i . Ya save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. I made a set of different decisions and i would agree china resents a headwind. We are better prepared to deal with that because of faulty choices made here in america that are allowing our economy to grow and create jobs. Jonathan that was the u. S. Deputy treasury secretary catching up with the team here on bloomberg tv and radio. A bitter breaking news, allow me to share some of that. According to people from the within matter, chinese authorities have told stateowned banks to step up intervention in the currency market this week in a push to prevent a surge in volatility in the human in the u. N. This currency pair is negative, a stronger chinese currency. Lisa it comes after the official government came out saying they wanted to ban something more shares of stocks then the manipulation of the message percolating into the markets more and more as they try to grapple with an economy that is overwhelming. Jonathan is a sufficient . Is a misplaced comfort here in u. S. Markets . . Linda was talking about the comfort is another reason to double down and u. S. Exceptionalism is backed up by data we have seen so far. I remember when we had a cold or flu in china and there were big problems abroad. Lisa even if it is not marketbased, the interconnectedness of the economists everyone agrees is greater than many people would like and more the people would realize. At what point does it have to factor into expectations when people are banking on american exceptionalism . Jonathan we probably should not use sniff, cold, and flew as an example of chinese markets. I am talking with the issues in 2015 and 2016. Was a 2015 we had the currency difficulties . Lisa yeah, and we are still going through some of those levels. This is the problem we are facing. Looking at these markets, is it a free market and an accurate reflection of where we are . No. It is unclear what the ramifications will be. Jonathan lets get the conversation started on china. We can do that with susan thornton. We have given the chinese policymaker the benefit of a doubt that they can resolve these issues in an orderly way. Is there any reason to believe it is different this time . Susan there are a couple of things going on. They are running into structural problems. We have seen them try to reform and they have run into difficulty with that. You see the lack of confidence and faltering trust in the economic officials and the chinese leadership after the covid lockdowns and the unwinding of covid in china. I think we are looking at a loss of confidence on the part of both chinese participants in the chinese economy and foreign participants. Jonathan the state council promised annual income of target through targeted and forceful macroeconomic adjustments. What does that actually mean . Susan they have been struggling to find policy responses that are going to bring about what they need. They need households to start spending and this has been a problem in the chinese economy going way back. They have the highest level of savings in china and they cannot seem to unlock that from households. What we have seen as they have tried to lower Interest Rates, they have tried to push out stimulants pushup stimulus but they are loath to pushup stimulus because push out stimulus. They are limited. They need to try to get some confidence back to the private sector which is sitting on the sidelines looking to see what is going to happen. Lisa part of this is international because there was International Investment from u. S. And european companies. We have seen u. S. Companies pull back a bit or significantly. How much do chinese authorities want to see International Businesses come back versus embrace the isolation and domestic focus that seems to be more front and center . Susan i think you see them trying to do everything they can to encourage foreign businesses and Foreign Direct Investment to come back into china. It has been a tough five years for four businesses trying to work in china for foreign businesses trying to work in china. Not just covid, but the regulations that have come out, chilling rules and laws that have been passed, especially on crossborder data flows. It has been hard for companies trying to deal with the data they depend on back and forth across the border. There has been a whole slew of problems that has kept people wondering what they should do about their China Business and how they should be looking at this market. Susan with all of your your stash lisa with all of your years as a diplomat, i wonder if the difficulties china is facing makes it more or less difficult for the u. S. To negotiate. Does the u. S. Have more leverage or less leverage as a result . Susan what i have seen since the chinese have started to face up to the fact that the economy is not going to bounce back after covid, there has been a big change and mindset about the need to maintain connectedness with the rest of the world economy. I think there was a question about that at one point. There may still be a division inside the chinese leadership. Certainly the technocrat Economic Experts understand that the chinese economy needs to maintain those connections. Jonathan the president of the u. S. Referred to the chinese economy as a taking timebomb. He referred to some government officials as bad folks. He said when bad things start to happen, bad folks do bad things. What do you reckon he meant by that . Susan it is hard for me to get inside the head of leaders when they say thanks, xi jinping were joe biden. Were joe biden. Or joe biden. My sense is he is thinking that the chinese economy is not as impregnable as we were thinking. There may be risks here. The chinese economy is important to the stability and psychology and predictability of the Chinese State and chinese leadership. I think what he meant is 50 chinese economy is not going to be doing well, the whole Chinese Government is going to be getting more desperate. We may see things we might not otherwise see. He is worried about some kind of incident or accident that might cause some conflict or crisis we would not normally see if the chinese were more confident. Jonathan i have a feeling we will be talking more soon. Susan thornton of Yell University law school. There is a hope this can be dealt with for obvious reasons given what the president said. Lisa and given the fact that the market is not necessarily independent from the rest of the world given it is the second biggest economy. I keep going back to the fact that we saw two dozen protesters outside the offices of this private wealth manager. This is unusual. This shows it is not going over well with the locals who are watching these problems. Jonathan not totally unheard of but it doesnt speak to the social unrest, together with the youth unemployment figure. I dont want to labor that pointed too much, but it is important. There are some concerns around that issue. That is why some people think we are not getting access to that data point. Lisa how do you game out chinese buyers of luxury goods internationally . How do you game out buyers of chinese properties . How do you game out of the market implications at a time and there is a lot of opacity. Have these have been Major Players around the world that have been infected by impacted by policies . Jonathan it is not in the treasury market right now, there is no rally. The haven you might expect is not developing. We will talk more about the bond market with yields and new hires for 2023. We will do that with dominic konstam. This is bloomberg. Hi, im jason. Ive lost 228 pounds on golo. So when my doctor told me i needed weight loss surgery, i knew i had to make a change. Golos helped me transition to a healthier, sustainable lifestyle. Im so surprised just how crazy my metabolism has fired up. I have a trust in golo cause i know it works. Golo isnt like every other program out there, and im living proof of it. announcer change your life at golo. Com. Thats golo. Com. Jonathan two day losing streak in s p 500, attempting to avoid making that number three. Your equity market is that the positive, futures hired by. 2 . Nasdaq is higher by 0. 24 , heading for third week of losses on the equity market. For this be 500, that would equal the longest losing streak on the year. 4. 30 on a u. S. 10 year yield. For those of you interested potentially very close to a new intraday high for this cycle. Lisa i want to understand when the pond. Throwing in the towel. We have not seen it and i wonder how much theyre buying given the fact that we see yields moving higher and people keep scratching their heads and giving five different answers to why. If they are so convicted, why would now not be a screaming buy . Jonathan this is day six of yields higher. Yesterday was the 12th consecutive session of yields closing above 10 . When we ask if we can sustain life above 4 , it appears we can. Lisa this is not just efficient expectations. Blog Inflation Expectations have been coming in. This is the real yield. When you strip out expectations which has surged to the highest levels since the financial crisis, how much are we looking at people looking at the physical package of the u. S. And i dont know about that . Jonathan lets turn to the fx market, three currency pairs. I will touch on the euro which has been a snooze around 1. 09. We want to go to dollaryen, 146. We went through the levels which triggered intervention. No sign of intervention yet on that currency pair. I will talk about the third currency pair in a moment. The doj is off the radar because treasuries in china are on the radar but there are reasons to be following what happens next at the boj. Lisa what i have been interested in is the reports of people saying maybe they will wait, maybe they want intervene as quickly as last time because weaker yen helps them with exports and inflation and they want to see more of that. There is a counterintuitive discussion there. How do you trade this thing . How do you have conviction to go against their will . Jonathan tough. Minutes of the fed july meeting ensuring officials are still worried about bringing down inflation and for the rate hikes could be needed. There are some cracks in the consensus and becoming more and more apparent. Two officials favoring leaving rates unchanged. The committee is increasingly divided going into jackson hole next week. Lisa when i read this minutes, i was left with this drug that with a shrug. I was left with a shrug. There is no conviction. They said they were willing to allow the Balance Sheets to continue to roll off, even if they have to cut rates. It seems to game out that theyre going to cut, but there will still be quantitative tightening with respect to the Balance Sheet. I dont really feel a cohesive theory here. Jonathan the way to get the shift in direction of the committee is a simple question, the balance of risk between undercutting and over tightening. It was clear what their view on that was last year. It is coming into balance. It was important that the decision balance the risk of an inadvertent overturning a policy against the cost of insufficient tightening. At that point, you move more slowly. Lisa are they concerned about long end yields rising . Maybe that indicates they are being too sanguine about inflation risk . If there more hawkish, will that actually bring longerterm yields in because people stop making on this idea that inflation is going to run above the 2 target . Jonathan is chairman powell confirmed for next week . Lisa you are still going to go with this . Jonathan i believe he is very likely to speak next week. Lisa if you would like to clarify some belief in corners of wall street jonathan it would be nice to have it confirmed. Lisa give us a call. Jonathan i understand he is probably going to speak, i am just waiting for confirmation. And may be a sneak peek of the speech. China wrapping up efforts for stem losses in the currency. Authorities telling stateowned banks to step up intervention in the fx market to ease volatility in the yuan. We have a chinese currency longer entity last 30 minutes. Lisa why push against what the central bank is saying to do . How much can inability market to give a different impression that what everyone is saying is a weakening economy . We saw housing processes housing prices drop more than what is happening on the ground. At a certain point they cannot change the narrative with market manipulation when everyone knows what they are doing. That is one of the big takeaways for me. Jonathan we are falling developments over the last couple of weeks. Officials defending their decision not to use public sirens to warn lahaina residents about the wildfires ahead of maui about the wildfires. The headset this evidence could have led people fleeing into the path of the flames. There is a question about the response to this. Lisa reading about this is heartbreaking and seeing images, it is difficult. The idea of what do you want residents about is going to be a growing russian. It was synonymous with longterm. His sirens were put these sirens were put around the borders of the island. Do the risks have to change goodie warnings have to change as the risk grows the warnings have to change as the risks grow . We have to start with the jonathan we have to start with the bond market, what is behind this one, yields up and away on the long end. Dominic this selloff is being led by the back end. It is also being led by real Interest Rates rising and is not being led by the front end repressing by the fed over the next year. The bond market is adding a lot of risk premium to it. The risk in the one year or two year, the fed will have to resume tightening. It also reflects supply concerns around the deficit projections and also cutie, the fact also qt which affects the supply. Lisa do you think it is fair to give narrative to this or do you think there is something technical going on with selling from the bank . People are talking about new trading methodologies, to you by any of that . What you think this is reflective of beliefs in the market . Dominic it has been the case for a while that this others of treasuries have basically been banks, foreigners, and the fed. The people who need to buy treasuries by the Domestic Household sector, including money managers. The trouble is that it is enough to do from the front end. It is quite easy for the transition to take place. The problem is when the treasury comes out and says you want to issue longer dated debt, that creates a problem. Technically speaking, yes, there may be some technical programs affecting our market this summer. Fundamentally, there needs to be this transition whereby we need to domesticate our market and focus it on the household sector. The fed is selling and banks are not buying. That is just this grand qe program of the past. Lisa how much further does it have to go . Dominic if you look at the models and risk premium in the back end, it has been too low for a while, reflecting this overhang of the treasury Balance Sheets. A one standard deviation is about 20 or 30 basis points. We are crossing into the slightly cheap. Now let me chi variant now. The slightly cheap area now. It should be done in real rates. You have to be careful because this is very insidious. A bear flapping driven by the fed hiking rates, that was less insidious for risk assets. This is much my problem for risk assets. Something similar happened in 2008. It started to break higher and led by real rates. The risk premium has to be competed for and unfortunately it is a repressed lower. Every price lower. That maybe with the fed needs to break the labor market. Getting the equity markets down and getting ceos worried about earnings again. Maybe that is what finally gets us into a proper landing. This makes harder lending risk even harder. It is all about timing. Jonathan there are questions about the durability of steepener, the ability to would you push back against ibu against that view . Dominic only if we are wrong on the macro. If inflation is a problem and if inflation is good to go back up again, maybe the consumer is accelerating because there is more money and a wage price spiral, that would be the only problem. The macro thing the macro side of things looks in place. We discussed the minutes, the fed is in transition. It is less clear on a macro side. As long as that is the case, the labor market, there is signs of labor according and slow in labor demand. I think that is already changed. It is this risk premium story on the back end of the market. If that is going to bring down the market, i see no reason to push back. There is a limit to how far you can selloff. I would think people would start coming in to buy front end rates, especially as real rates continue to rise. Five year real rates are chucky at the moment and if they go up, that is going to be attractive. Jonathan this was a clinic. We are reporting this morning that chinese authorities have told stateowned banks to step up intervention into the currency. Can you tell us how that would happen . What would they be selling to strengthen the chinese currency . Dominic they would have to be selling some kind of dollar hole next they have. There are plenty of those. That would feed through indirectly. My guess is in the end it is more about verbal intervention than actually setting a lot of dollar assets for than actually selling a lot of dollar assets. I would not think they are the first things they want to sell it things are going badly. Jonathan you know what the next question is. I am wondering if this stuff in the treasury market is somehow connected. Dominic it is possible. A lot at these little things, like ycc in japan was another thing. People are concerned. These are all reasonable concerns. The optics of it to be honest, japanese investors have not been big buyers of treasuries so they are not all selling on their heels. You start with something that was obvious to everyone, the long end was being held down by people being very complacent about the supply issues in the states and ongoing cutie ongoing qt. We did not get a sense it was a massive selling, it is not really that. It is sort of appropriate repressing appropriate repressing. Repricing. It could just feel the blow off and then things will settle down. Jonathan thank you. Dominic there. High on a on the tenure, on the 10 year. Getting closer and closer. Coming up next, dan ives of wedbush on whether this tech will is still bullish on a fixed income. Live from new york, good morning. If youre trying to get a view of the whole organizational Financial Health and youre trying to do that through multiple systems, that makes it very, very cumbersome. Its not just tech, its not just people. Its how they Work Together to provide that experience to the customer. As a finance organization that is what you want to do. How can you sleep on such a firm setting . Gab, mine is almost the same as yours. As a finance organization that is what you want to do. Almost is just another word for not as good as mine. Save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. Was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com google, facebook, alibaba, they want eyeballs on their sites. They are now a player for programming. The won thing theyre missing is content and that has exploited exploded. It is good to be a messy transition from the old to the new. Jonathan the cochair of stick capital speaking with ed ludlow back in july. It is amazing how undervalued some of these clubs are. We are talking about valuation to 7 billion on institutions that have massive recognition, Brand Recognition worldwide. The more you get into these football clubs, you start thinking they are badly run. Really poorly run. Guys that are taken interest in football clubs figure that out and can work out how they can extend brand value. Lisa who is next to come in . Is it saudi arabia . Or is it going to be suddenly the content providers plow in, try to lock it up, make sure they can capitalize on it because it is going to drive a lot of encouragement it is what you drive a lot of engagement. Jonathan he is running it for business purposes, he has involvement in an italian club. The salaries are not, they are doing that for soft power. When you have two sets of factors, some driven by Market Forces and their pricesensitive and that you have someone in the market who is present sensitive who is present since div. That is the price insensitive. That is the saudis. Lisa that is why anyone else looking to buy is looking at the to be about. That is going to get interesting. They are going to see if they can compete with the saudi arabias of the world. I am excited. Jonathan that has not been confirmed, right . Lisa i am just spreading the rumor. Jonathan messi is drawing a lot of attention to apple tv. Ptech trend be a player for disneys the tech giant could be a player for disneys espn. It potentially could be on the table depending on the disney strategic overview and alternately where bob iger and the portland. Dan ives over it wedbush, tripping on the phone to talk to us about this. Always good to catch up with you. Are these just rumors you are starting over at wedbush or do you have a reason to believe this as it is up for sale and apple would be an interested buyer . Dan it is a matter of when, not if, in our opinion. Apple, what theyre looking at for sports content, it is the perfect marriage. The strategic view is that it was even clear that espn could be on the block and apple is the natural fit for live sports content. That is the golden goose and it could be a strategic partnership. We believe this is the start of what could be a very Strong Partnership that him between apple and disney. Jonathan the next question is price. What would the price be . Dan apple has not done big m a, 60 billion would be the initial price tag. That generates another 150 billion, that is actually affordable. It is really about the asset. Mls has been the eyeopener for apple. Pack 12, they tried to do that deal and it fell apart. I really truly believe cupertino realizes this is the window. It is the golden asset and it would add if they did this. Lisa at what point does their become another bubble in content . If you have the behemoths in the Tech Industry sing incredibly value and hitting this up sing incredibly seeing incredible value and hitting this up. Dan there is a lack of kressas it there is a lack of core assets. Facebook and others, you are going to see more. Tech is going after these assets because that is the scarcity. That is what is good to drive eyeballs which is why i think for apple, the clock struck midnight. They realize now is the time to do this and it comes to to a bob iger, cook, at what happens at the disney strategic review. Lisa right now, the background noise we hear is some bustling beautiful town in crete, an area where you are doing a victory lap after getting the tech trade completely correct. I wander from your standpoint how much longer you can see this rally gets confirmed at a time when people are shrugging their shoulders given where yields are . Dan in my opinion, it is in your turn pause before a tech rally it is a pause before a tech rally. Ai is the biggest information we have seen in 30 years and we continue to be macro where, my processed macro aware, micro obsessed. This is not the time to pause. I think it is halftime of the super bowl. Jonathan i would not have disclosed your vacation location, but lisa is brutal. The bond market, the 30 year, 4. 42. This is a big move. We are talking about highs we have not seen going back to 2011. Is there a challenge to your bullish this is for tech stocks . Dan there is no doubt with the 10 year, we saw it last year. That is a headwind. I believe it is a nearterm headwind. The fed is going to have to cut. There is a risk on trade there. It is a temporary White Knuckle period. It may be groundhog day to a year ago, i dont do this continuing over the coming months. I dont do this is a repeat to a year ago. Jonathan thank you, enjoy the break. Dan ives jumping on the phone to tell us about that call he made. Lisa i was not being brittle. Jonathan brutal. Do you want to talk about this broad market this bond market . Lisa the 10 year yield is higher than highest since 2008. Dominic konstam saying we can get to before it starts to settle down. This feels different given the granting nature of it. Ashley grinding nature of it. It is not the granting nature of it. Jonathan there seems to be a lot of confusion about why we are up here. If you ask people why yields were higher 12 months ago, they will give you this in recent. That is not where we are at. There is disagreement about whether it was supply, whether it is yield curve confusion, whether it is development elsewhere. I dont think anyone believes it was a downgrade. Depending on what you think it is, that is going to ship your opinion on what you think risk assets should be. Maybe you have a more constructive you are the equity market and credit. Arguably that is going to be a pet story for valuations elsewhere. I think theres confusion about this bond market moves and i have noticed that over the last two weeks and i know you have, too. Lisa it is unclear how much is tied to that policy. If they stay on hold, you could see more persistent inflation, persistent growth and concerns about the deficit not coming down in the u. S. That underpins this. This is coming from real yields. It is not coming from what people are expecting for inflation. Jonathan we have got the wrong way when we think about china. Detail is fighting the dark at wondering why it is not shaking up u. S. Markets. Real rates are higher, the dollar is stronger, putting the squeeze on the dollar currency on the chinese currency when it is finding problems in the economy. Underlying fragility in china and japan with the move we have seen on dollaryen. Lisa i wonder how much this is a dollar squeeze versus an economic squeeze. There was a story overnight talking about tyson, the meat processor, looking to sell their chinese business. Apple is looking to move more production to india. We have seen this so consistently but it is quiet because no executive wants to say publicly we are moving away from china because if theyre not fully out, they will be penalized. We are not hearing about it on calls but that is what is happening. How much is that part of this whole story . It is a big driver that people appreciate. Jonathan tim cook is the ultimate diplomat. He is phenomenal the way he never gets these issues. Happy in her how he navigated the Trump Administration was phenomenal. Your equity market is positive on the s p 500. Bond yields at new highs for the cycle at the long end. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. When people come, they say theyve tried lots of diets, nothings worked or theyve lost the same 10, 20, 50 pounds over and over again. They need a real solution. Ive always fought with 510 pounds all the time. Eating all these Different Things and nothings ever working. Ive done the diets, all the diets. Before golo, i was barely eating but the weight wasnt going anywhere. The secret to losing weight and keeping it off is managing insulin and glucose. Golo takes a systematic approach to eating that focuses on optimizing insulin levels. We tackle the cause of weight gain, not just the symptom. When you have good metabolic health, weight loss is easy. I always thought it would be so difficult to lose weight, but with golo, it wasnt. The weight just fell off. I have people come up to me all the time and ask me, does it really work . And all i have to say is, here i am. It works. My advice for everyone is to go with golo. It will release your fat and it will release you. It does feel like equities or topping out a little bit. There is a lot of dry powder for equities and fixed income. Inflation is still marginally higher. Inflation remains above trend but it is a growth story. I dont think we are at the point where you need to throw the recession call away. This is bloomberg surveillance with tom keene, Jonathan Ferro, and lisa abramowicz. Jonathan we are shaking up this bond market. Good morning, good morning to our audience worldwide. This is surveillance. The numbers you need to know, the 10 year yield, new high for the year, the 30 year yield, new high for the decade. Cycle highs on a high this morning. Lisa the why is a mystery. You could ask people and explain differently depending on who you ask and that will determine if it sticks or not. The readthrough to risk assets is interesting. We were speaking to linda earlier in the show, and she was confirming her conviction there would strengthen equity market, even with higher yields. How long can it last given the nature of the rise . Jonathan it is getting difficult to find a consensus in the fomc. Most participants the upside risk to inflation which could require further tightening of managing policy. Everything came out yesterday, the fed minutes and Economic Data provides fuel to the bond market selloff. Lisa thats true and we will hear more from jackson hole next week. You have to wonder if it is selffulfilling. Two dominic konstams point, it has a selflimiting factor that causes buyers to come in, especially given the bond houses who see this as a buying opportunity to lock in yields. Where are those convictions now . Where is the mass buying and newly domestic market . Jonathan it is a beat and a raise. Adjusted eps for second quarter, 184, and the outlook its a lift, as well. The new range for the full year, 630 stage 6. 36 to 6. 46. Lisa we will parse through this to understand what degree is for the grocery side of things from staples versus discretionary, looking at gas, sales were up 3. 6 versus the estimate of four percent. Again, just confirming this fact that people have money to spend, despite the fact it was supposed to run out by now. Lisa it was meant jonathan it was meant to run out six months ago, maybe nine months ago. Lisa i know. Jonathan 2. 7 up in the premarket right now. On the s p 500, futures positive by 0. 15 . And there is a moving yields. The 10 year yield high by five or six basis points. Here at 430 4. 3058. Lisa will this bring the u. S. Economy in check when it comes to inflation and Consumer Spending . Will it crack the labor market . That is what people are interested in retail sales. Walmarts shares are popping. A beat and the raise. We can see that in the share prices across the board. Very strong. If you look at what we saw moments ago from tapestry, not so great. They missed their forecast Going Forward. Shares lower by about 1 . Ross stores report after the bell. Getting a sense to what we are looking for, we will look at Consumer Confidence expectations, which come out around 10 00 a. M. , the leading indicators at a time when Economic Data has surprise the upside again and again. At what point can this continue given where longerterm rates are . Builders have the restrictive feel many are expecting will this have the restrictive feel many are expecting . Later today, we are expected to see more out of the Federal Reserve. We have been hearing from them consistently. We are going to get a bit more of a sense of that with initial jobless claims coming out of 8 30. Jonathan six days of treasury have sold off and yields are higher by almost 30 basis points. Troy gayeski joins us now, chief Market Strategist at Fs Investments. What is behind the bond market move . Troy great question. When you step back and think about the path of how economic forecasts and how price Market Action evolved, you can go back to last november. Almost every bond Market Participant called for an imminent recession, which helped justify an inverted yield curve. It has only been more inverted in the late 1970s. And that persisted for a while. However, clearly, its Economic Data has come in stronger and stronger. That has caused a major rethink of the thesis. Even though inflation has come down, you have a curve flattening out in the backend, you recall, significantly, and this is one of the reason why yield curve steepeners has been a favorite expression because there are two ways to win. Either we have a past recession in the fed has to cut, or in the event that the economy stays resilient and then the backend has two up has to popup. It is a bear flattening, which is much worse for risk assets. To lisas point, it puts even more stress on forwardlooking Debt Service Coverage ratios for those who need to borrow. Whether it is households corporations. Jonathan the fear people might have right now is a repeat of last year, where we go into a drop that is poisonous for bonds and equities simultaneously. Is this a different flavor . Do you see the ingredients emerging that could hit Risk Appetite and credit and equities, as well . Troy there is going to be some feedback. We got up to 19. 9 times forward earnings, only one, two multiples below coming into 2022 and we compress that down to 19. You have seen spread widening so far, but because the technicals are so favorable in terms of dearth and you supply and strong to the end, credit hezbollah this cycle. We do not see anything to the same degree but it has been low this cycle. We do not see anything to the same degree. The fed moved aggressively when they were draining their Balance Sheet at a record pace. Going forward, it would put pressure on risk assets and limit upside. We have already made the next major downside driver, either we ultimately role in terror session next year roll into a recession next year, and those forecasts keep getting pushed back further and further, andor as the fed drains the Balance Sheet back at an aggressive case, then they are finally on the original pace they intended, at least with some type of liquidity access. Those are the two most obvious Downside Risks now. Big picture from an Asset Allocation standpoint, as we discussed with clients, the tough thing that was that everyone expected fixed income to at least not lose money this year and you are back to the barclays high of being down through todays price action. If you look at equity multiples today, relative to riskfree, they have only been richer in the dotcom bubble. And in terms of absolute valuations, they have only been richer in 2021 entering the dotcom bubble. It is hard to see material upside to equities, even if we do not have recessionary outcome. And it is much more challenging it again to have confidence you are going to get any upside from fixed income anytime soon. Lisa so what do you buy . Troy it depends on the strategy. From a private lending standpoint, there is what i call a goldilocks larry a emerging goldilocks scenario emerging, where we could avoid recession, meaning we never have a dramatic increase in the fall, but the friend and frontend stays higher longer, and these are strategies where you benefit from higher income longer. And with a pullback in bank lending, you are not only seeing better opportunities in commercial real estate but also banks that are offloading assets, such as auto loans outright to deliver delever. You need dry capital to take advantage of that. In more liquid strategies, our favorite expression continues to be benefiting from slow prepayment activity. This cycle is different than 2009 and 2013, where slow refis were triggered by declines in home prices, so it was tougher folks to qualify. Now it is driven by exceptionally high rates, and the probability of rates dropping back to a level, and then on top of that, because affordability is plunging it again because of high mortgage rates, there is more than likely going to be at least one more lay down in home prices. If you think about the carnage in different markets, there has certainly been the most by far in see nbs in particular cnbs, in particular and that is something we are watching. You finally have spreads wide enough where you can turn the screws on the space and look at realistic default range and pickup excess yield there. It is not as liquid as i owes or passthroughs ios or passthroughs, but something you can trade around and add value. There is a lot of stuff to do, you just have to continue to focus on the northwest an efficient frontier. 79 should be pretty competitive. Maybe not tech, as dan pointed out earlier, but certainly competitive with most assets. Lisa were looking at 10 year treasury yields of 4. 3 , 30 year treasury yields north of 4. 4 . At what point does that offer something attractive . Potentially disruptive to this view and other assets that are less liquid that hinge off these rates . Troy yes, look, so if you think of this cycle, the major moves and Asset Allocation, there have been two. One has been the cash. You have seen cash levels and investment activity go off the charts, north of 1 trillion of capital moving. Also from smaller and Regional Community banks, the too big to fail banks, those are the major allocation stories. To your point, the reason is now cash and increasingly tbills and treasury notes and bonds are becoming competition for their assets. Certainly, one of the major drivers of all the asset inflation we have seen the last 40 years has been lower and lower rates, which justified paying a higher and higher price for every asset of planning. As that moves into rivers, naturally, you should have compression, demand higher yields and demand higher total return, even in private Equity Private equity secondaries, in order to keep that spread to riskfree and as attractive as it has been over the last 15 years. So cash tbills, tbones, tea notes, our competition now t notes, our competition over all strategies. Jonathan the lows of the bond market yields at the lows back in march, 70 basis points on a 30year. I said, wait a couple of years for 42 on 30s, you would not have believed me, would you . Troy go back to march. You would say objectively that recession probability by the end of the year, starting by q4 or q1 into a 24, was somewhere near 60 to 80 . If that was the assumption, than the 10 year yield had more than likely peaked at 4. 23. Now Recession Risk has been pushed back so much, credit to the strong labor market primarily, but also states and local governments in the Inflation Reduction Act, that that just means that obviously 4. 23 is not the peaking yields, and we have had another surge, which leads to more competition with all other assets right now. Jonathan we have been so wrong over so many things the last few years. Troy humility. Jonathan you need a ton of that. Thank you, troy gayeski. On the s p 500, leave it or not, even with the moves of the bond market, just about positive by. 25 . Coming up, looking forward to catching up with Scott Chronert of citi on the stock market in about 47 minutes. I am from mars, the fed is from venus, this line here, how can these people possibly know that the startup policy is a restricted territory . How can they know . Lisa because rates are a lot higher than two years ago. That is it. This is the key question, do you believe in long invariable legs . Do you think we have not seen the ramification of this or do you believe it is not having a significant effect as people previously thought . This is the key debate. It will be interesting at jackson hole where they really weigh in on this. People still say they see signs of weakness. They still say, if you look at the retail sales, it is in bargainhunting, even with walmart. Jonathan recession, three months out for the last 18 months or so. I have a difficult time seeing how policy is restrictive when the Unemployment Rate is low in the economy is growing above trend. That is the view from a macro. Equity futures just about positive on the s p 500. A major move in the bond market, a 30 year yield at high we have not seen in more than 10 years. When differences are winnifred cisar is up next. One year ago, with your leadership, i signed the Inflation Reduction Act into law. We now have more jobs than we did before the pandemic, and workers are not just finding more jobs, they are finding better jobs. Higher pay. Higher job satisfaction. Unemployment is down and so is inflation. I am not here to declare victory on the economy. We have more work to do. Bidenomics as another way to restore the american dream. Jonathan that was the president of the u. S. Lets get the price action, equity futures are just about positive. There is a look to the equity market with interesting moves in the bond market. We have had six days of yields higher. Higher by 30 basis points on the 10year, 4. 30. Yields higher by five basis points. That is the 10year. Check out the 30year, the long end of the curve that is the 10year. Check out the 30year, the long end of the curve. 4. 42. Just short of that now, levels we have not seen going back to 2011. Lisa we are grappling with windows when does it crack the equity market and chug along without any serious pullback . What rate of the levels we have not seen in 15 years challenges the idea that we can head towards a soft landing . I have not gotten that connection established, and markets are struggling with it. Jonathan here is another curious move, credit, high yield, we are talking about the risk of refinancing next year at much, much higher Interest Rates , if you truly believe in this high for longer story, highyield spreads, 3. 74 at a close. Lisa there is a conviction that the fed will have to cut rates. Clearly, people are grappling with this. Is going to cut rates or are they not going to call and say, we will give you some sort of tailwind at a time where there is already a ton of strength . It is not make sense. As we heard troy gayeski say, if you can lock in yields for a longer time, why not go into it . You hear number of people talk like that. Jonathan just want to finish on foreign exchanges, dollarchina, the offshore yuan, that currency is stronger against the dollar this morning. It was on about one hour and 20 minutes ago, and then this happened. We reported at bloomberg best chinese authorities have talked state owned to step up intervention reported out bloomberg that chinese authorities have talked stateowned banks to step up intervention. What does that look like in the week ahead . Lisa if it is not verbal intervention, do they try to sell reserves for sure that up . A lot of people think it is verbal intervention. The drip, drip of chinese officials coming out with half measures, threequarter measures , to try to stave off negative sentiment circulating over the chinese economy is causing consternation. Why cant they get the message under control . Are they unwilling to bring in a bazooka or are they unable to . That is probably underpinning some concern. Jonathan easing posture, insufficient at the moment, based on the price action. Annmarie joins us down in washington for you caught up with an official yesterday, what did he have to say about china . Annmarie he went one step further from what we heard from janet yellen, who called china a risk factor. She still thinks the u. S. Is best placed to deal with spillovers we are seeing from the slowing china economy. What you heard from her deputy is that he really blamed what we see in terms of chinas policies as part of the reason, so little more of a sharper tone coming from the deputy secretary what he sees coming out of china. He still what it to maintain that he thinks the u. S. Is in the best place to deal with what we are seeing coming out of china, but you can see consternation developing at the Treasury Department in terms of what is going on in china and every day the latest news and headlines out of beijing. Lisa until this year, there was a feeling in washington, d. C. , antichina, a look for a divergence between the u. S. And chinese economies. You talk to businesses and they were gung ho about china, saying the administration, or any administration has to understand that china is a major economy that helps their businesses. I we seen any shift on that front at a time are we seeing any shift on that front at a time when china is not engaging in internationally is as friendly activities on a regular basis . Annmarie the administration has made it clear their stance regarding china. We have seen them over the course of the year really tread a fine line. They went to make sure they have dialogue and engagement between washington and beijing. We have seen a slew of officials go over, including blinken, yellen. At the same time, we see the rhetoric rampup, and it is only going to get more divisive and hot as we go towards the 2024 election. What did we see most recently at a fundraiser event from a current president . He called what xi jinping and his economy, a sickly saying it is a mess and disaster basically saying it is a mess and disaster, and had hot rhetoric towards china at the moment. That is only going to increase as this u. S. President is going to be a candidate for the 2024 election. Not just from the democrats but the republican side, as well. Potentially, that will be uncomfortable for the Business Community. Lisa did you see the story that ken griffin was pushing back against ron desantis, saying that you are being too harsh on china at a time where that is the popular rhetoric Going Forward . Let that he was going to push for changes but that he was going to push for changes. This goes to the point that there is pushback from the Business Community that still wants to go into china, the worlds secondbiggest economy. Jonathan what did ken griffey say about ron desantis that would not get him elected . Lisa there were certain things in terms of investments. I am wondering whether this is increasingly tempered, and whether the current u. S. Administration things they have more or less leverage based on where chinas economy is. Annmarie i think the u. S. Feels they are in a good place when it comes to the chinese economy. One, on the economic front, they think they are better placed than any other country when it comes to combating china visavis the economy, even though you heard from secretary yellen saying there is a risk factor. But she said she wants to be clear, it is just risk at the moment. She does not see spillover effects happening immediately or touching the u. S. Economy. Also, the administration has been trying to build out a more secure supply chain. This will be top of the agenda, especially tomorrow, when the president will be sitting down with the leaders of japan and south korea in this trilateral summit at camp david. Part has to do with security when it comes to north korea. But a big part for this administration is making up making sure they are having a collective way to combat china with some of their most closest allies in the end pacific indo pacific. Jonathan former president , is he showing up next week . Annmarie i still dont know, to be determined. One thing is for sure, he has to show up in georgia to turn himself in, along with the other 18 defendants in the case before august 25. Some people are saying maybe he does that wednesday, and that the debate basically comes, once again, about him. And he takes all the oxygen out of the room, whether he is physically there or not. Jonathan what is new . Thank you. I am not sure anyones interest in china will unravel in a disorderly way. At the same time, i am not sure it is in anyones best interest running for the presidency right now to say anything other than what they are saying. There is disbelief, to be elected in america now, this is the stance you need to take on china. Lisa which is why i thought it was interesting ken griffin went after ron desantis and said, stop it with banning foreigners from buying property, particularly from china, because that affects his business, and he is probably one of the wealthiest people, if not, the wealthiest, in florida when he talks. We can see that in iowa, too, with republican policies. How do you talk about immigration when they need workers . These are issues testing classic talking points. Jonathan sometimes good Economic Policy does not make for great economic fodder. Sometimes. Winnie cisar joins us shortly. Positive on the s p 500 and yields higher the last month or so. From new york city, this is bloomberg. Jonathan two days of losses in the equity market and plenty of headlines in the bond market. Futures positive by 0. 2 . Lift on the nasdaq, poised for a third week of losses. Two sessions left of the week to do something about it. Yields higher for six consecutive sessions on the 10year, short of 4. 30. There it is, 4. 3018. Lisa and the comes with the two year coming in, the idea that it is not necessarily driven by fed rates going higher. It is driven by over a longer term, a feeling that there is going to be less demand for u. S. Treasuries relative to supply. It is not really clear exactly why. It is not exactly clear how far this can go, but that is the mood right now and markets. Jonathan when did we last see the 30year this high . Lisa 2011. Jonathan early this morning, 4. 42. Amazing that this was 70 basis points in march 2020. Here we are 3. 5 years later, looking at 4. 40 something. Lisa i think about private credit and assets that yield 9 , and people are saying it is great to lock those in. If you look at the 30year yield 4. 30 , where the obligor is the worlds biggest economy, full faith and credit in the u. S. Government, at what point does it change what risk you are willing to assume for what yield in a more material way . Jonathan the whole curve shifting higher has been amazing to see the last month. Dollarchina, dollarcnh, dollarreminbi, they have told states to step up intervention in the currency market this week, but that Movement Starting to fade the last 10 minutes. Lisa wheres the conviction there will be some action to backup the rhetoric . That is lacking right now because there has been a very big noise from chinese officials but not necessarily the actions to back it up. That has been consistent the past weeks. Jonathan china the story every morning the last couple of weeks or so. A treasury selloff in the spotlight this morning, pushing bond yields to 15year highs. We have had stronger data, confusion along yield control, more supply, the boj all over the place, problems in china, take your pick. Lisa i am unclear why theres not were buying . If you wanted to lock in yields, here is your moment. Where are they and who is selling . This is something technical . Right now, the feeling that there is a c change in terms of quantitative easing changing and being reversed on a global scale with all those underpinnings been released. Jonathan getting closer to 5 on the 10year. U. K. 10year yield, 4. 71, higher by 28 basis points the last month or so. Plenty of issues in china at the moment. 1, 1 of chinas largest private Wealth Managers is telling pete tmg to restructure debt amid a crisis. They are looking to renew their Balance Sheet and sell assets in order to repay investors. Rear protests of about two dozen people rare protests of about two dozen people breaking out in front of one of the shadow banks, as investments worry about missed payments. These things are coming to the surface again and again the last few days. Lisa and one video clip, a woman is seen saying, why doesnt the company pay us back . This is a country that wants to manage the masses, especially in it message, especially at a time of distress. When does this highlight the risk of the Housing Market, which underpinned a lot of these investments . How far does this go and at what point does it go outside of china . We dont have a sense and markets in the u. S. Are shrugging it off right now. Jonathan walmart out with earnings, annual profit forecast raised for the second straight quarter, after scoring the new sales gains with bargainhunting u. S. Harpers. The stock is up u. S. Shoppers. The stock is up 1 . If walmart is raising their guidance, is that good for the u. S. Economy . Is that a good sign of what is happening . Lisa great question, i dont know. Why is it that the companies doing the best in retail are the ones who sell discount products . Why is it that the bargainhunting types of places are really showing the gains whereas the mid tier, luxury, only those who cater to the ultrawealthy, at a certain point, doesnt this indicate there is softening and perhaps cash that is going to get run out at some point . Jonathan lets hear it from walmart. Bloomberg spoke to cfo. I will share a quote, we are getting share in our Value Proposition continues to resonate, both for value and convenience, there the corporate speak. Heres a line of interest, the consumer is still spending but they are being discerning in their spending. It is not obvious but there are signs. Lisa does this eliminate Pricing Power and for who . Does this lead to consumer pushback . We are seeing it in certain areas and not others. Restaurants are packed. Have you seen how much more cost . Jonathan it depends where you go. Lisa it is all more expensive than one year ago. Like twice as much. Jonathan it is serious money in manhattan. It is expensive if you wanted to go there. Lisa you are just trailing t. K. Jonathan winnie cisar joins us now, global head of strategy at credit sites. Lets talk about the other side of fixed income, credit. Why are credit spreads so tight still . Winnie good morning. Thank you for having me. Credit spreads are on the tight end of the range which is shocking when you look back at when the 10 year was at 4. 24 last october, Investment Grade spreads were making their wives around a hundred 70 basis points wides around 170 basis points. First factor is the material shifting expectations for fundamentals, getting a little more positive, seeing the path for a potential soft or no landing is generally a positive thing for credit spreads. Second, it comes down to positioning for much of the year. At the beginning, people were still beared up on the outlook for the economy. People were not necessarily putting a lot of cash to work in Corporate Credit. It feels like a lot of investors have been chasing the trade as spreads have tight over the course of the year. And in the last is just technicals. We have not had enough new issuance supply to put it into the demand there has been for fixed income put a dent in the demand there has been for fixed income. It still looks attractively valued. We think there is a marginal demand that will continue to support credit spreads. Although, we do not think we will get much tighter from here. Lisa jon said, how do we know rates are restrictive . I try to come up with something to say in the moment. It is a great question at a time where risk assets are saying, this economy can look through benchmark borrowing costs at 4. 3 . At what point do yields rise to a level where it is clear that they will have an impact on the ability for some of these companies to refinance . On some of the economic momentum that everybody keeps relying on . Winnie great question. I think there is a lot of can usually around restrictive policy and what it really means. When we look across the Broad Spectrum of Corporate Credit, we are seeing that rates or policy are restrictive for lower rated, highly leveraged borrowers that do not have Sustainable Capital structures. Defaults are rising, not at a super rapid clip but at a pace that indicates there has been tightening in the economy. We have also seen a shift in how management teams are talking about their Balance Sheets. A move to a much more prudent and disciplined capital structure endeavor, so we are not seeing a lot of pressure on the rating side of things, trying to avoid a downgrade to Investment Grade to high yield, trying to maintain ratings and access to capital through a bunch of different avenues. We are seeing not just management teams issue Corporate Bonds but also seen unique structures through securitizations and other transactions. Lisa i am hearing from you that a lot of corporations have immunized themselves against rates going higher. We heard that with the consumer with respect to mortgages lockedin for 30 years. We hear that incorporations readjusting Balance Sheets and reducing their need to borrow. Is the implication here that right now longerterm rates at 4. 3 are not sufficiently restrictive to put a dent in any Business Model we can see right now out there . Winnie i think it is putting a dent in some Business Models. In the leverage loans face unlikely in the private credit space, where they are running into liquidity challenges, where they are running into challenges around capital structure sustainability. It is just not the big u. S. Issuers who are running into trouble at this point. Eventually, higher yields will become an issue. So long as earnings are good enough for credit and growing at an inflationadjusted pace, then much of the Corporate Credit universe should be in fundamentally sound shape. In the feds restrictive policy is not necessarily intended to cut off access to the Investment Grade world. They want to see Investment Grade companies able to borrow and highyield companies able to borrow. They just do not want to see risktaking or highly risky behavior within the Corporate Credit market. Jonathan within the loan market you mentioned, how pronounced is the default cycle that you are seeing emerge . Winnie the loan market on a default basis is actually not particularly pronounced. That has to do with the structural considerations in the loan market, where you have the ability to amend and pretend, so Capital Structures can be amended and push out those maturities, and we do not necessarily have to see a true default event. What we are seeing is on a fundamental side, very low interest coverage ratios, especially for triple c rated loans, which are now a higher percentage of the market. When we are not seeing the defaults necessarily piled up, we are seeing a lot of sponsors kick money back into their Portfolio Company to make sure they can make it through this what is perceived as a relatively shortterm spike in borrowing costs, especially for floatingrate aligned Capital Structures. Jonathan i guess they hope it is shortterm, wouldnt that be the right way to frame it . Winnie very true. They hope it is shortterm and hope has not necessarily been the best strategy. Jonathan winnie cisar. Winnie cisar, thank you. That is the hope, this socalled maturity war, particularly in highyield yield, is something we do not have to worry about because the fed will be in the business of reducing Interest Rates because inflation is coming back down and we will talk about the economy recovering over a downturn. Lisa what i just heard from winnie cisar is that a lot of companies, and i would add consumers my words are able to handle higher rates because of how they handle Balance Sheets. Which raises the perspective that we could see rates higher for longer. At a certain point, that wave of refinancing becomes a real issue because it is coming up next year and the year after. You start looking at this and connecting the dots. It is not all adding up in the right way. Jonathan note. On the equity market, we are positive by 0. 2 . Joining us shortly, matthew rossetti, of Deutsche Bank luzzetti, of Deutsche Bank. It is intriguing what is happening in fixed income right now. The comfort people have about the maturity wars and the problem we do not have to deal with that is out there and we dont have to deal with it because rates are going lower in the future. Right now, that is not the story at all. Lisa in order for rates to go lower, there has to be some reason for the Federal Reserve to cut rates and for people to game out slower growth. There has to be some pain, to use jay powells word from last year. Where does it come from if companies see a better Economic Opportunity . Their Business Models are stronger. We see stocks rallying. Something is not adding up because there is not a reason for the fed to cut rates, which is why i want to understand, what is the threshold . Jonathan you know who might want a rate cut . The treasury. We had a massive transfer from the sovereign to the consumer throughout the pandemic. That is why they are so strong. Rates were so low, which allowed corporates to lock in low borrowing costs and extend the maturity wells. That happened with credit but not with the treasury. The treasury did not do that in a pronounced or material way in any shape or form. If you really think it through, the sovereign Balance Sheets got weaker to enable the consumer Balance Sheet, residential one, to get stronger. Here we are looking at the treasury Market Selling off and spreads are still tied the consumer is still doing ok . Lisa when this outbreak . When do the sovereign yields matter more than the strength you see elsewhere . Jonathan from new york city, this is bloomberg. He snores like an angry rhino. Youve never heard an angry rhino. Baby i hear one every night. Every night. Okay. Ill work on that. Save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. It is the consumers at the lower end of the spectrum that i think are being a bit more cautious, so when you look at our business and the growth we are talking about, the marginal profile improved because the consumers that are further up on the chain are actually performing a bit better than consumers at the entry level. I would argue the u. S. Has felt pressure on the consumer side, but the travel is tremendous. Jonathan absolutely tremendous, from the samsonite ceo, who knows something about travel demand. Intriguing to get the corporate view on the economy, particularly in china. If you dont trust Economic Data, it is good to get a look through a company into their lands through china. Lisa what we have seen, price cuts, we have seen downgrades, concerns, possibly pulling out. That is the reason you see this negative feeling right now around the worlds secondlargest economy. Jonathan s p 500 futures elevated, still doing ok, positive this thursday morning. Treasuries down hard the last month or so, six consecutive sessions. This time by four basis points. 4. 30 after breaching that level, 4. 2919 on the 10year. Lisa this is not adding up. I am not understanding if there is a level on treasuries established as being sustainable in the u. S. Economy for risk assets to keep doing well. This connection has not been established and it plies against what everybody said six months ago, rates at this level should disrupt risk assets and risktaking abilities. Jonathan not happening this morning. Walmart is doing well, once again raising its annual profit forecast for the second straight quarter. The stock is hired by 1. 1 . Better numbers, a beat on the top and bottom line, andy raised in outlook. The assistant director of research at telsey advisory group, Joseph Feldman joins us. We know you have the answers, if all martyrs doing well, what about everybody else . Joe it reflects there could be some concern for others in the economy. We continue to see the highend doing well. The lowend is seeking value. The middle income consumer is trading down. We have seen that with walmart. Amazon recently had good results. Even target yesterday in their food and consumable side of the business was healthy, and people were trading down there in that area. We are seeing increased traffic at walmart, higher sales of groceries, and basic consumables. The consumer is still putting food on the table, and that is an area of focus, but discretionary has been soft. Jonathan how much clarity do you have on where margins will be the next couple of quarters . Joe walmart keeps putting up your margins and expected. The lower frame cost are helping. That is helping everybody. Remember two years ago, costs were through the roof, especially ocean freight. That has come down a bit and helping to give some context for walmart to raise numbers for the backend. Others are not doing that but walmart, the race they gave is confident in the fact raise they gave is confident in the fact that they are getting sales on the top line and they are getting profitability and they need to drop to the bottom line. Lisa when you look beyond walmart, target and look at other retailers, do you have a sense of Discretionary Spending money that people have parked in the bank . Do you have a sense of whether consumers are running out or doing just fine . Joe our view is that the consumer is under some pressure and they have some money to spend, but it is only in pockets, so if you have planned a trip, owing to europe or other parts of the u. S. , going to europe or other parts of the u. S. , or planned a big event, that may take up a good chunk of discretionary dollars that you otherwise would have spent on goods. During the pandemic, when we saw people spending a lot on goods, coming out of it, you saw a lot of spending on apparel, those dollars are shifting elsewhere. We have looked at credit. I know Consumer Credit has been rising, but not alarming levels as of yet. So the consumer is able to spend at the moment. Wage growth is still pretty solid. Employment levels are good. But they are not spending broadly. They are spending within different silos. Food is one. Right now, services, going out to eat, that is starting to moderate. You know, they have been spending there versus good. Lisa this sounds prudent and like Consumer Spending habits that are responsible. Does it remain sustainable . It does not speak to the slowing down that some people say has to happen for the u. S. Economy to soften. Joe that is a fair statement. When you look at retail broadly, you know, anybody offering value , those catering to essential goods are doing well. Where there was a lot of pull forward of demand over the pandemic, we are still in a normalization phase coming off of that, and i think the consumer has been prudent without they have been spending. With how they have been spending. I am confident we have a decent Holiday Season. You will hear from walmart when they speak in a few moments, but it seems that consumer has been more resilient than i think a lot of us have given credit at this point. Jonathan before you run off to that call, target yesterday said this, that the resumption of student loan repayments would cause additional pressure on strained consumer budgets. Lisa has said this week. The white house instituted a 12 month onramp. Are they setting up a decent thing to blame later this year . What is your read on that . Joe yeah, well, so we did a deep dive and reported on this analysis of Student Loan Debt, and 17 of the u. S. Population has federal Student Loans that need to get paid back. They will not be penalized for a year, so there is a grace period. Our thought process is that the middle income, middle to upper is where you start to see more of the pressure. Those are the people who do have Student Loans, and it targets that customer. We called out in our report that we thought target was among those who might feel a little more of an impact from students, maybe less so at a place like walmart which sells so much grocery where people have been seeking value. You dont quite have that at target, so there is some reality. I dont think the student loan will be broadbased for everybody. Theyre very high loan will not be an issue for everybody. In the lowend may not be as much of an issue either. Lisa i am curious where we are in the durable good sectors, which a lot of people are wondering how long it can keep contracting. Army at an Inflection Point to the other direction were certainly people are going back to things that they shunned after the mass binge buying during the pandemic . Joe we started to see through the summer some early signs that you might be seeing a little bit of a shift from the Services Back towards goods. We are hopeful that will continue into the fall and holiday, christmas will come, kids will get gives. So that spending will happen. We are hoping that shift is a little more aggressive back towards the goods on the resale side of the sector. It seems there are initial green shoots that the good spending might start to come back. Jonathan i thought you were going to break into a christmas song. Lisa kids will get gives jonathan thank you. I hope they get gifts. Lisa just complete monotone, kids will get gifts. Jonathan Holiday Season is coming up. I notice deep into august. You are going to walk into the store in two months time. In fact, in one months time, you will see the christmas trees. Lisa this bothers me. I am already seen halloween candy. Are you kidding me . As soon as halloween is over, it is easter bunnies. It is five months away. Jonathan easter bunnies, january. Lisa it is ridiculous. The second thanksgiving is over, Christmas Carols everywhere. Jonathan i like them before thanksgiving. Lisa but constant . Jonathan jonathan i love the christmas song. Lisa are you going to sing . Jonathan no. T. K. Word. Tom, i miss him. Equities coming up very shortly. That conversation around the corner. Equities doing ok in the face of the bond market that keeps selling off. Treasury yields higher by four basis points on a 10year, 4. 2919, and the highest yield we have seen on the 30 year, going back to 2011. From new york, this is bloomberg. Welcome back to another special western and southern update. Team phenom coco graph moved into the third round in cincinnati with a victory under the lights wednesday night. It was her second win in eight matches after she took her second title of the season in washington, d. C. You can watch all the action live at 11 00 a. M. Eastern on tennis cha the first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com i dont want you to move. Im gonna miss you so much. You realize well have internet waiting for us at the new place, right . Oh, we know. We just like making a scene. Transferring your services has never been easier. Get connected on the day of your move with the xfinity app. Can i sleep over at your new place . Can katie sleep over tonight . Sure, honey this generation is so dramatic move with the xfinity 10g network. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. The market has become callous it. Inflation will be back to target the end of next year. Are they done . I dont know theres probably some room to move higher. Decade highs on early year yield live from new york city this morning. This is burke surveillance bloomberg surveillance on bloomberg tv and radio. Bond market continued. Lisa where people are thinking about bad news is good news good news is still not terrible news. At what point does that shift. Jonathan a week away from Jackson Howell and chairman powell from. Lisa dessie say the market has been waking up does she say the market has been waking up. If you doubles down, does that create a more sustainable field that we have in the market . Jonathan his view of the start of the year has stood the test of time. He said phase i, lets get yields of weekly. Phase two, hold. Pushback against that, eight months ago when people were talking about its cant go too far. This view has stood the test of time pretty well this year. Lisa this market has been consistently wrong about how high yields to go and how strong growths could persist. How much companies could adapt and adjust. I feel terrible saying this. I am in receipt so i have to say it i am in the seat and i have to say this. How does that shift the entire investment regime if rates stay above 4 for the next decade, for the next three decades . Jonathan numbers from walmarts in the last hours or so. Walmart is doing well and i just had the conversation. Ok, walmart is doing well. What is that mean for everybody else . Lisa consumer Balance Sheets are being prudent, responsible. U. S. Consumers are doing what people should do, balancing their budgets and deciding where they should bend. Spend. Lisa it is insane. Their views are reviews are really positive for people when they go. That is only for certain premium seats. Jonathan lisa then you get Central Banks reporting saying the reason why nation is so high is because of taylor swift or beyonce. Jonathan these are the problems we have stateside. In china they have real albums problems weird chinese authorities have asked eight owned banks intervene in the fx market. The potential, i stress potential over the japan. We went through levels that we breached in the last 12 months. All of this stuff developing in fx. Lisa you raised a point earlier when you said maybe the u. S. Is doing ok. Maybe things are starting not to break but to reach a breaking point outside of the u. S. Because of the moves we are seeing in yields. Because of the moves we are seeing with dollar strength. It is a good question to understand the interconnect of this year at what point do yields break everything in innate time where in a time where china is in a difficult spot. Jonathan its really early days. Dollar strength is not a friend of what is happening in china or japan. Lets turn to the broader section of the equity market. It is just ok, no drama. We are positive. The drama has been in the bond market. Potentially new closing high potentially for the cycle. Today, you have to go all the way back to 2011. Were going to question how much of a challenge this poses. Scott, great to catch up with you. Lets get straight into it. Scott i think it is a big challenge. The shock effect on rates of my view is last year. As we are going from negative real to positive real in getting comfortable with the regime. That led to a very massive correction last year that drove the nasdaq lower. This year we got comfortable that a peaking fed is in sight. As the markets rally through the year, the market has gotten comfortable with rate after a percent 10 year, which is where most of the trading has been. As you begin move higher through four and a quarter and higher, you begin to introduce as you move away from the ai mary sue ai near to and reengage in other stories it has become in our view a reason for a pullback phase after the run we had in the first several months of the year. Lisa next week, nvidia reports. A major rally, also to the ai near to. If they disappoint, could this be a catalyst rethink the Interest Rate sensitivity of the biggest component of the index, which is tech . Scott i think that is certainly a part of the narrative. As we look at this narrative it is important as incremental road pattern in the next years growth pattern. I think the markets are giving it summer. Some room. A potential engine growth as we look in the 24 25 timeframe. I do think will continue to get tested in terms of, are you continuing to feed the narrative with enough incremental news to keep in moving. Our view is there will be enough information. You do have to be aware of set ups your at what we have been on his implied expectations for this company. In some case implied expectations there is some risk. Lisa i what point can this equity market or asset in general keep rallying with rates intricately higher . It seems the strength in earnings has defied expectations. In a world where people are not sure of a bond yield my equities have a haven. How long can multiples keep bending, even in the face of higher rates given the resilience . Scott the highest correlation i could find between equity, performance and drivers over longterm maturity. Longterm goal in the early 60s. Essentially what happens here, there is this move in the market is setting up expectations that you need to see earnings followthrough. In our work, we actually do think we are going to see earnings accelerates next year. We get there through several metrics. Essentially, that becomes the issue. I think we will be seeing this year more resilience. As we look ahead to 22 a for, you do need to factor in soft landing or not. When we think this is adding up is youre going to see the earning growth next year support this and we are starting to look at Free Cash Flow free cash low growth is critical. It really opens the door in terms of financial responsibility, whether it is repurchase activities in spending or even debt the down. The flexibility that comes with Free Cash Flow is important. We have to keep in mind, Free Cash Flow levels improved 50 in the two years coming out of the covert recession covid recession. We think there are some angles that provide the equity markets. Lisa at one point step in inlet some areas in some areas that have been beaten up . Scott if you have a run in this magnitude somewhere you have to get a five to 10 pullback. That is the metric i am kind of using. The starting point is in the mid 4500 level. Jonathan we have just heard from the walmart the. Walmart ceo. The headwind they becoming is one to come back in loan repayments. We heard something from target, resumption of the payments will call additional pressure on already constrained consumer budget. You have any take on what is going to happen for some of those names . Scott what i would say on this, with the retailers there are a couple of things going on. Expectations for Consumer Discretionary came down the hardest last year. He set going into this year is a interesting one regarding recession were risk is risk is priced in. Yes we are going to have to contend with higher inflation. Throw in Student Loan Debt issues coming in here. We still have rising wages and engle that there is a obstet two offset student loan payments in what youre earning on savings your at what i think is important is looking at the retail landscape. How these companies are able to manage a fairly next set up. Mixed set up. In so doing you invert a lot of traditional business affects. This is a theme we think it is underplayed in the market. The results so far seem to result this notion they have actually doing a really good job of what they can control in this in terms of earnings and margin profiles. Busy morning for everyone this morning. Coming up on the u. S. Consumer on u. S. Economy, labor markets, Deutsche Bank. Reacting to u. S. Jobless claims in about 16, 17 minutes. The blame game in wall street starts pretty early. It lisa what we heard from scott, they have at least gotten more efficient cutting cost at the companies to maintain headwind. We keep talking about how much of a headwind it is actually going to be if people are planning not to pay. You have to wonder if that is going to limit some of the damage and lead through. Presumably they would have to pay. Jonathan if there is a 12 month ramp, wouldnt you just up paying in the stop paying in the new year . Why wouldnt i just would . Lisa which is why a lot of people are gaining now. Evidently, walmart and target do. Jonathan as we get to the back in of the year. From new york city, this is bloomberg. You take to and i have, 75 basis points which is lower in history return premiums, you are looking at 475 on the 10 year. Obviously, it could end up being higher than that. I love larry. Jonathan that sounded like a chef making a meal. You take two and a half, you throw in 75. Lisa the way he talks is just obvious, come on, this is where we are headed now. A recipe for ratatouille. Jonathan like the bond market right now, lets call it for 30. I will slice and dice 30 year yield for you. A high we have not seen since 2011. Nice. James, great to catch up with you. What is it all about . What is behind this bond market move . James it is a good question. It has a strange few trading days. We have stronger u. S. Data in the market. Then we have seemingly got random cells of nowhere with no one behind them. It is all of a bits of false accuracy lay there. And they are. If you look at the 11 market. That looks like a pretty nice if not soft landing. You have this massive immersion in the bond yield curve. One of those is wrong, it looks like they are converging from both directions, which is probably reasonable. Lisa we are seeing risk assets hold in they despite some of the holes youre seeing in benchmark bond yields. James that is a loaded question, lisa. I find it difficult to explain or justify that the rally in the equity market a fundamental wei ght adjusted basis despite the Economic News has been better than its acted. I am expected. I am generally surprise are equities ignore micro drivers. Macro drivers. I think equities can hang in there. Lisa what about credits, we were talking about how narrow credit spreads were. How much companies have readjusted to prolong some of the payment structures and increase their cash. Their availability to maintain themselves this. For this. Are you getting the list on credit, bullish on credit, how do you rationalize russian . James most countries are ticking up to a far raider degree than we are use. Ticking up to a far greater component than what we are used to. I think that is reasonable. If youre being selective and choosing high quality or put credits, you have Nice Investment opportunities. A really interesting chance i have seen interesting, companies have benefited from higher rates and engaged in precautionary borrowing when rates were low. Now they get to part that cash or deposit rate is five and a half. Despite of the monetary tightening, it has generated positive cash flow. Jonathan we talked about the stuff before. If you asked someone like new york about china, a shrug in the shoulders. A stereotype would be before the bloomberg. In london, there is a much more different view. James, tell me about the view in the city . James i think people are more cautious and biased to believe we will see what we have seen. When china has little bit of a wobble, we should expect stimulus and that should lead to the apostle reaction in market. It is not something people are looking to play. The door swings both ways. China really is assuming domestically and exporting a lot consuming domestically and ask wording a lot exporting a lot. Most people want to. Jonathan are we thinking about it long way wrong way around . But how the u. S. Influences china given what has happened with real rates and what could happen with the dollar going from here . James we have seen the pboc really trying to i guess theyre worried about a similar situation to 2015 emerge in creating stability problems are themselves. They are fighting what looks to be a losing battle. The u. S. Data is holding up much better than everywhere else. Despite the market trying to carry risk on, the u. S. Market is trying to carry it upward momentum. I think we are in u. S. Exceptionalism. That does great problems for borrowers dollar borrowers. Lisa some people are saying we are at eight ocean point. Are at a inflation point. Do you believe that . James sometimes you look really clever and sometimes you look really stupid, it has been that kind of environment. I do think europe is starting to show its true colors. They have structural weakness and its technical headwinds because of a policy. I think the u. S. Yield curve is a good chance we could see them both ways. I love eight asymmetric session. A asymmetric position. Beyond that, it is difficult. Still trying to cling on the more mediumterm positions. Hoping that the indicators would give us a accurate indication. How much are people really on this equity market in a time where there is some real questions . James if you look at the surveys and varies various other surveys, there has been a shift. Sentiment has shifted. The cta, the risk clarity, these guys have not only been buying on rising prices, they have been adding gross risk growth risk. I do think we are getting to that stage where most folk are on the other side of the vote. Jonathan james, thank you. I love your new dress code over at aberdeen. Lisa i think they look so good. Lisa good. Be clear youre not being sarcastic. Jonathan definitely a night out for the team. Lisa you cannot let him go and spread rumors. Jonathan that is not a warmer. Rumor. Lisa trying to rearrange restaurants. Jonathan tuesday nights are a thing. Youre making that up . Lisa i am not making that up. Jonathan jobless claims coming up next. Matthew luzetti of Deutsche Bank up next. This is bloomberg. I need it cool at night. You trying to ice me out of the bed . Baby, only on game nights. You know you are retired right . Am i . Ya save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. Jonathan it was a bustling on a since might on the 60th street. It was bustling at lunchtime. Always is. Jobless claims just around the corner. Yields are higher by three aces three basis. The jobless claims looks Something Like this. 248 was the previous number. Im waiting for the number two drop. Jobless claims are at really low levels, even at 40. 240. It speaks this labor market is still tight. Lisa some people are saying it is labor hoarding, some people are singing it is supply and demand. Jonathan i will wait to see if we get a revision on the back end of the equity market. Yields are high still on a 10 year. Coming up on the open of the next hour, bank of america, i capital and we will catch up with mr. Oliver about retail. Lisa ask oliver you should wear next time we have a tuesday night outing for the team . We are going to go out. Anyway. I am curious. Thank you. I am curious to see whether tuesday will continue to be the next friday when they call everybody back to work, which is something that seems to be happening your we have been asking questions around how long the American Consumer can keep spending, whether they are running out of cash. Matthew has been upgrading his expectation for growth in the u. S. He has been spot on. He feels economists economist at Deutsche Bank. In terms of what we have seen live retailers, this rent, the labor market not cracking. Is this economy that can persist for rates really are right now . Matthew the question answer is yes in the new term. Near term. Would see the second half of the year growth slowdowns, that the tightening of initial conditions and Bank Lending Conditions would be impacting the economy. It is only a very little data for q3. Acceleration for the consumer, production, it goes against what we were anticipating at this point my time. It raises essence. Lisa how do we know if they are strict of . Restrictive . Matthew the fed leans very heavily on real rates. 10year gilts at any highs yields at really highs. In measure of our strong type estimates. All of these things have been rising sensually. When you transfer into financial conditions, most have been listening. The one area that there is tightening. Lisa before we get into the nittygritty and i ask you about student loan repayments and all other issues that are capturing attentions. If this is companies that have pushed out maturities, consumers that have pushed out their maturities and a lot of resilience were consumers keep spending. Is this a economy that can keep on humming along, even if we see 4. 3 of sustainable basis . Matthew the real rates that we have seen, the headlamps that we have seen, the student debt is slowing headwinds that we have seen, the student debt is slowing. This is a coloration, but will be shortterm. Eventually youll see Monetary Policy take hold. When you look at the incoming data from the labor market, jobless claims not showing any uptick, softening. What youre seeing in the there are some elements that make you more cautious. Lisa to go fully towards the soft landing, we have a noting the prospects that have been rising. You need a new thing. D need a few things. You need to see the economy slow. They cant have confidence that inflation is going to come down to target. We heard that from powell. They need to see a slowing economy. The twoseat wage you need to see wage coming down. The pc report will be a little bit less so. We are not getting evidence on the front yet. I would anticipate from powell next week, jackson hole, from the fed, they lean onto a hawkish bias. The september sp still shows rate hikes in the profiles. There will probably hold that for longer than anticipated. Lisa lets talk about the anticipated drivers that might take hold next year. The as a caveat. Student loan repayments, this has been a highly debated topic. If students do not want to pay or former students, they do not have to. They will not be analyzed 12 month. Penalized for 12 months you fall on this . Matthew without this would be some meaningful headwind for the student we thought this would be some meaningful headwind for the student. A meaningful it to consumer income for paid in full. There has been some programs trying to alleviate pressures in terms of consumers trying to pay the over the next year. We can track it on a daily basis. You are seeing a meaningful uptick of it in place. You are paying their student debt. It is meant to be less than previously because there are programs that are trying to take away some of pain. Lisa a time we are seeing strength across the board, we have words of retailers, walmart, tapestry, target, all of them showing strength in the Consumer Spending. Are you seeing evidence that will are wholesale pulling back, or not able to spend with such of the recent . Matthew there is evidence that excess savings have been drawn down. Lisa we been talking about this forever. Keep saying it is going to run out, it is going to run out, it never does. Matthew i think that part is coming into fruition. I think you saw that rising of credit card borrowing are seeing larger delinquencies. There are some strains. It has not translated into retail sales data. It has not translated into the highfrequency credit card data. There is no evidence of that. The question, kenneth continue to run can it continue to run in excess savings come down. Our baseline, it cant run forever and you will see a slowdown that takes lace. Place. Lisa the u. S. , we can remain divorced with Everything Else that is going on elsewhere. I think about china and we open up with china and has everything that is happening there. When you look at the connections between the worlds two biggest economies, how divorced is u. S. From catching a cold from what china experiencing . Matthew economically as we look at the u. S. Economy today, i think it is domestically driven. It is about the services economy, u. S. Consumer. Whether or not chinese consumers are stronger or not. The direct Economic Impact the u. S. Is muted. For i think they could have more leverage is the Financial Markets. Certainly different about what we are hearing in the daily headwinds that would get out of china. If it was to impact the u. S. , i think it will be Financial Markets, you get time all that takes place there. I yields a be not impacting u. S. Highheeled maybe not impacting u. S. Highyield maybe not impacting the u. S. Lisa this is why people are wondering if things are getting close to a breaking point where a time where the fundamental, he to be doing fine. Seems to be doing fine. How closely do you watch that . The surveys that come out. Some of the having on the Financial Markets here . Matthew part of the reason that people are anticipating we can get to soft landing, have the Economic Data to take place. Financial conditions have not fallen apart. I think you will see equities come down. Financial conditions tightening in a short and aggressive way. It often leads to short narratives. I think you will see a downgrade of soft landing prospects. Lisa what do you think people are getting wrong right now she . Matthew if the economy is accelerating i think that is certainly something we are getting wrong. I still think we will have a recession your is not the prevailing market in the market right now. I think if you get that, the correction mark is we will need to be substantial. Lisa matthew, joining us over at Deutsche Bank. There is a question whether markets can see yields rising to this degree, the highest going back to thousand eight for the 10 year yields back to 2008 for the 10 year yield. We are still seeing risk assets hanging in there after two consecutive days of losses. Can it continue . What we have seen this morning is it has built. We have seen the s p up 3 10 of a percent. You can see even crude levels coming up. S p futures 4433. The real question i have from your seat over at Deutsche Bank is the work from home thing. I do not mean to put you on the spot. We were talking about tuesday is the new friday. I keep hearing about more and more the obituary was written maturely your how much are you hearing everyone coming back in the economy around the office also coming back . Matthew we have been back to the office for a while. We have a little more flexibility which is nice. We have a nice brandnew office on columbus circle. Lisa do you call it that . Do you correct your family members when they say the Time Warner Center . Matthew in certain areas they will be a there will be a pullback. There will be positive if us to see a result of that. There are going to be some elements that are more structural. Once that happens, you will have companies that are competing or workers which is still a pretty tight labor market. One of the benefits there were to provide is the work from home. Lisa are tuesdays the new fridays . Matthew i do not know about tuesday. Maybe thursday. Lisa thank you so much for being with feared we will dive further into the retail sales and into what is going on with china. Lupin rahman talking about the transition about the economies who have done really well leading up to this point. This is bloomberg. The first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com are you keeping as much of your investment gains as possible . High taxes can erode returns quickly. At creative planning, your portfolio is managed in a taxefficient manner. Its what you keep that really matters. Book your free meeting today at creativeplanning. Com. Heaven forbid we have the of 22. Central banks turn hawkish, that would be ready bad news from our strategy of general market in general. We are sort of seeing signs of reviving inflation in commodity markets, labor market staying strong. Even inflation and self can bring about. Lisa trying to game out how this is going to work in a time of rate confusion trying to make sense of yields at the highest levels going back decades, or at least more than a decade. Youre looking at a dollar that was strengthening today since the end of may look at the bloomberg dollar index. U. S. Equities could rally in the face of in place of china. Europe is feeling place of the china weakness. Crude, if we get that slow down, why is it continuing to rally north. Tories are kind of tight. China very much in the focus. John asked a question earlier where he was saying how much is this a china issue and how much is it ocean around currency and Financial Markets. Really the u. S. Rates picture kind of creating some issues for the developing word world and china. Joining us now to push through some of the concerns. Head of Portfolio Manager at pimco. How concerned are you as somebody focuses on the developing world about a stronger dollar . It is an effect for the emerging orchids, which can be quite negative. This time around, there are good reasons to think that emerging markets are going to be more shelter than before. One of the effectors is what is driving the dollar strength. Soft landing lay the u. S. Soft landing in the u. S. Emerging markets is playing out in terms of the Growth Outlook for em is. It is slowly slight given the drive from china. Lisa i do want to touch on china. It is the element in elephant in the room. It seems whatever message the Chinese Companies were to put out there, the company is struggling to perform, even with the expectations that have been brought in to perform. How much was anticipated for the entire region and debts and equities that there like. . China struggling is a concern. It is slightly different about this cycle is that it wasnt expected to be a lot more services driven. A lot more internally focused by being driven by the manufacturing cycle, which will have a larger in the rest of em and east asia. What is different now, we are seeing the ppi and that could have any impact of prices Going Forward for em. Lee continuing some of the this really continuing some of the is patient very trend. Having a china that is weakening without governing authority is really having a all in type of narrative is negative for em sentiment. Lisa lets picture some of these ideas. Disinflation might be positive, might allow for disinflation or deflation and other nearby regions. You are saying in of the margins it might be a positive than a negative. Lupin i think on the margin can be a positive factor. Really allowing that inflation us is to run through. Ems are in a goldilocks scenario. Growth is ill positive reasonably positive. You are not seen this immaculate disinflation were headline and morten nations coming down headline and core inflation is coming down. Lisa where is the strength coming from . Is coming from a time we do see signs in europe and china. The u. S. Has technology. Where does the strength outside of the u. S. Come from russian . Lupin the covid shock was a big shock. Many countries have to tighten their belts and see further these actual reforms whether it is mobilization or ask the nature of mobilization of nature or expenditure. It is growing extremely well and the policies it has limited the last couple of years. Lisa you mentioned latin america. That is a area that has not been iced in from priced in from some of the disinflation. From a time we are focusing on mass evaluation, where are you seeing the offices story . Lupin one of the countries where we are seeing positive developments is a country like brazil. You are seeing a central bank that is able to cut and is able to really take its a palm through the disinflation process with a economy that is relatively strong. A political dynamic, which is much more stable than it has been in the recent past. Those are some of the countries that are looking to be on a more positive trigger three trajectory that lay the past. Trajectory than in the past. Lisa how concerned are you in the beaumont area fomo era which was if you months ago. Which was a few months ago. Lupin i think the technicals in em are extremely clean. We have such a large outflow last year when we saw the fed hike. This year they are cleaner than going into other cycles. That limits some of the fast money flows you are speaking of. From that perspective my am less concerned. What we are seeing our institutional clients take advantage of the cheapness and in recent their structural allocations. Lisa what kind of yields you need to go into some of these countries for a 4. 3 percent . Lupin it is not only a matter of yield, youre asked to return adjusted in volatility. I think markets have their roles played which is quite distinct from the old em story. These emerging markets that have solid Balance Sheets, are doing the right things from a macro policy and framework perspective. They are offering you access yield. Those are the countries we would like to focus on your lisa what are you listening for next week in jackson hall . Lupin two what extent the u. S. Economy is going to continue to be datadependent in terms of the fed cycle, or whether there is a being hard landing coming back into question. Lisa what does datadependent mean . You can focus on any story. What does it mean for you . Lupin how the Inflation Trajectory is going to develop in the u. S. And u. S. Labor market. Also some signs that there is slack emerging. Continuation of both of those trends are going to be what is important for the u. S. Thank you so much for being with us. Lisa at a really tumultuous moment, were looking at bond yields that have been searching surging 2011. They are continuing 4. 4 on some recent highs. You the 10 year climb to the highest level since 2008. Coming up on bloomberg tv, tapestry ceo of the companys earnings and maybe some recent acquisitions. The s p managing to keep his head its head above water despite concerns of the yield space. Space. The euro every business deserves a great deal. Thats why comcast business is launching the mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 39 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Live from new york city, good morning. The equity market is positive on the s p. The countdown to the open source now. Starts now. This is Bloomberg Open with Jonathan Ferro this is bloomberg the open with Jonathan Ferro. Jon live from new york, global bond yields making new highs for the year. The fed leaves the door wide open for another hike. W