Washington, do something, and do something on this august 7. Jonathan 1 away from alltime highs on the s p 500 coming into this one. Equity futures off by 0. 4 . The data 90 minutes away. Lisa we are getting the u. S. July jobs report. This is backward looking, and only goes back to the first half before the virus started to reshutter businesses. How much urgency is there for negotiations about the fiscal second round of support . I hear someone will be speaking on bloomberg television, national akamai Council Director larry kudlow, speaking with some guy that is on at that point. Tom oh really . Jonathan thank you for the promo. [laughter] lisa then tomorrow, Berkshire Hathaway reporting earnings. Really interesting to see what they are going to do with their 137 billion cash pile. This is a microcosm if the u. S. Economy. Interesting to see any guidance about how some of them are weathering this period. Jonathan the price action shaping up as follows. In the bond market, treasury yields come in not even a basis point to 0. 58 . , down 0. 5 . Have you picked up on the correlation . It is an equity market on a five day winning streak on the s p 500. Equities up and zero urgency in washington to get some thing done. If the equity market looked different, do you think the urgency displayed in washington might look different, too . Tom it would definitely look different at the white house. There is a tangible history if the president watches the stock market. Im not sure if the congress does. What we will focus on and all of these conversations today, including the conversation with Lawrence Kudlow later, is the inequalities that have happened in this pandemic, and the inequalities will be tear within the jobs report. Jonathan lets start the conversation with subadra rajappa, socgen head of u. S. Rates strategy. What are you looking for in the paper report at 8 30 eastern the payroll report at 8 30 eastern . A our forecasts are a little above consensus at 2. 6 million come up there is huge variance between the numbers you are getting from economists, anywhere from down 600,000 to over 3 million, so i dont know if the consensus numbers really are something we should be focused on. It is the actual number that i think ultimately matters because we could see some very strong deviations on either side of consensus, which is around 1. 5 million. Tom what i find fascinating is conservative economists are on the same page as liberal economists. Washington has to do something, and they have to do that about the imperative about the apparent inequalities in jobs. How is this going to skew towards the havenots, really struggling, while the affluent Service Sector still does really well . Subadra i think that has really been the story of this post covid unemployment picture. It has been the lower paying Service Sector jobs. That is the ongoing theme because these jobs are very dependent on business is being open. I can work from home, but a lot of people cannot. I think the inequity is really going to be the highlight of the report today as well. Lisa howdy Bond Investors trade this . How do Bond Investors trade this . Subadra very cautiously. You are seeing a skittish bond market today. 10 year treasuries are near the low for the day. The bondare seeing is market is concerned about downside risk. In some respects, if you get a good number today, the bond market is going to likely shrug off the good data, but if you get a bad number, you could potentially break the 50 basis point level and had even lower from here. Jonathan so you think there is an asymmetric balance around tenure right now . Around 10 year right now . Subadra absolutely. Bonds are at or near historic lows, but theres not really that much of a you know, it is not going to take a lot to go even lower from here. Jonathan talk me through what you are talking about with your clients with regards to replacing treasuries in the portfolio. So many people have brought this up on the program. The inverse correlation to risk assets, were to become aware not to be. Subadra i think it is a huge concern because the last four to six weeks, the place to be has been in real assets because of buying tips, gold, safe haven currencies like the yen. Really running out of options. At some point there is not going to be a hedge. Do we go from 1 in 10 year real yields to 2 . I just dont see this as being a forever traded bond. At some point, Inflation Expectations are going to get completely out of line. Inflation expectations are Holding Around 1. 50 . Tom jon did not slide in until 6 49 this morning, so he probably missed hsbc, but this is a really important issue. They are saying the real yields are residual, and you have to look at the Inflation Expectation dynamic versus the nominal yield. Is the surprise for the rest of the year that Inflation Expectations come in and are reduced . Subadra that is really the key risk because a lot of it is already baked into the Market Pricing for Inflation Expectations. 1. 50 in 10king at year breakevens. The risk is if we do see weak data in the third quarter, we see a reversal in this trend, lower Inflation Expectations, perhaps lower gold prices as well. That i think its a key risk. I just dont know how you can actually ignore the messaging you are getting from real yields, which is what a lot of economists are saying. Why even track it . There has to be some information value for trading. So i am just not in the camp that would ignore the messaging you are getting. Tom we track real yields because it is the name of a tv program. Jonathan subadra is familiar. She would prefer to be on that one and this one. [laughter] tohink you are referring what steve major at hsbc had to say about an hour ago. I was listening, and i spoke to it we week ago. He is basically saying they could go a whole lot lower. There isnt a limit here, and they have been deeply negative in europe, so why cant they go further into negative territory in the United States . Does that rose with you . Does that resonate with you . Because inflation expeditions cant continue to rise. , the fede get to 2. 5 looks at it in conjunction with growth. We see 0. 5 growth for the quarter, and Inflation Expectations are 2. 5 , that is not necessarily good thing. That is not something the fed wants to see. They want to see a rise in inflation expeditions in conjunction with a rising growth. So yes, you can think of real yields perhaps as a residual, is the low before things start getting a little out of whack. Are, somegs already people would argue. A lot of people expect them to continue to accelerate bond purchases as the u. S. Sells a record amount of treasuries. How crucial is this . How much do you expect the fed to absorb even as Inflation Expectations to cap expectations tick up . Subadra i think you see the fed positioning to increase the average maturity of its portfolio. If you look at the treasury refunding announcement that came out earlier this week, the treasury is issuing a tremendous amount in the long and. Issue wasral 20 year supposed to be a size of 11 billion to 13 billion. That was the recommended size from the treasury advisory committee. Now we are looking at the 20 year close to 30 billion by the end of the years. To fed is probably going announce that it is going to try to increase the average maturity , i. E. By more of the long end and keep a lid on how high yields can go. Jonathan fantastic to catch up with you as always. Subadra rajappa of socgen. Payrolls about an hour and 20 minutes away. The median estimate in our survey, 1. 4 8 million in positive territory. The low, 600,000. The range is incredibly wide. We have talked about it all week. Incredibly unpredictable going into this print. Tom theres a standard error that is widely understood, with that huge job population of america, that the standard error is always wide. I would say it is not even correctly called a standard error. It is just mystery. Jonathan do you think it changes the dialogue down in when we gett 8 30 that job role sprint that payrolls print . Tom no i do not. There is a difference between the conversation at the white house and the conversation of those disposing on capitol hill. You may get a change from mr. Kudlow. Jonathan looking for to that conversation. 8 30 a. M. Eastern, we get the jobs report. One hour later, we catch it we check in with. Larry kudlow from new york city check in with larry kudlow. From new york city this morning, good morning. This is bloomberg surveillance. Ritika all eyes are on this mornings upcoming job report. After a surgeon coronavirus cases across the u. S. , all signs point to a slowdown in job gains last month or worse. It is following a combined rise of 7. 5lli million in may and june. Negotiations on a new arenavirus relief bill edging towards the break of collapse. A meeting thursday between white house officials and Congressional Democrats ended with each side accusing the other of being unwilling to compromise yet the main Sticking Point is the top line number. The democrats want 3. 5 trillion of aid. Republicans want 1 trillion. Shocked by it is the executive order barring americans from doing business with the company, and plans to challenge the order. Holding stumbled on the news. Hares fell as much as 10 a grim milestone in india. Health Officials Say the country has surpassed more than 2 million coronavirus cases. More than 41,000 indians have died. The spike comes as Community Health volunteers went on strike, complaining they were illequipped to respond to the wave of infections in rural areas. Switzerland has struck a deal with moderna to supply the country with 4. 5 million doses of a covid19 vaccine. If the u. S. Biotech firm successfully develops one. Global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Close to a compromise position, but i think theres a handful of very big issues that we are still very far apart. Rep. Pelosi not enough money for food. Nothing for housing, in terms of terms oforium rent. Moratorium is nice, but its not money for rent. Sen. Schumer we urge our republican colleagues to come back and continue to negotiate. Jonathan talks break down going into the weekend. From new york city this morning, good morning. Alongside tom keene and lisa abramowicz, im jonathan ferro. Your price action shaping up as follows, about one hour and 12 minutes away from the jobs were the jobs report. Equity futures are off 0. 3 . Lets stop the check right there. There are no talks scheduled on capitol hill today to resume fiscal negotiations. We have a completely unpredictable jobs report in about one hour and 12 minutes. We are 1 away from alltime highs in the market is barely adjusting this morning. Churning,arket is waiting for the data, and will absorb whatever we see. But we look for every single day is the right and left economists are on the same page. The former fed president of richmond is on the same page with the wonderful paul krugman from the new york times. Krugman says, how can this be happening . Kevin cirilli, let me ask, in washington, how can this be happening . Kevin it is the culture that has led to this addition, with both sides feeling there is no political willpower to make a compromise. Compromise in this town has become such a dirty word. I spoke with one wellplaced source who is very close to the white house who told me essentially that they are looking at the end of this calendar year beyond the election, and they are well aware of the economists predicting that massive furloughs, massive layoffs would likely be in the pipeline in the Fourth Quarter of this year. The stalemate is even more perplexing when you look at all of the Economic Data. Of course, we are quickly approaching another indicator. But when you look at that, juxtaposed with the inaction coming from the nations capital, it is going to lead to a palpable anger over the next three months. Avenue 1600 pennsylvania looking into next year and a minority Mitch Mcconnell . Kevin they are looking in the sense of what they can do in the immediate shortterm to pressure lawmakers in both parties to get to some type of agreement. The are looking from perspective of the executive orders as it relates to unemployment benefits, eviction moratoriums, and Student Loan Debt as a path that they can take. But the perception amongst rankandfile republicans is secretary mnuchin and leader mcconnell represent polar opposite ends of the republican ideology at this, and are looking at different constituencies in their negotiations. Jonathan for a threat to be credible, weve got to have a credibility test. The president is threatening to go it alone and use executive actions. I have no idea how long he is willing to wait before he does that. If he believes he can make a difference, why doesnt he do it this evening . What is the deadline for him to say i am going it alone . Kevin i think you will see the president be able to take that in the relatively short term. Think the Economic Data that could come out could actually really impact the timeline of those executive orders. The president tweeting yesterday, signaling that his staff is still working aroundtheclock on those executive orders, which would signal potentially some lastminute stages of those coming down the pipeline. But in terms of where this goes beyond that, it would allow for secretary mnuchin and leader mcconnell to continue to try to camps foreir negotiations with speaker pelosi. Lisa theres a timeline for how long any executive order could be an effect because President Trump would be tapping money unspent in the c. A. R. E. S. Act, because the power of the purse lies with congress. Haveong would negotiations if President Trump were to enact this exec it of water before they have to come up with some replace it . Kevin they could go along. When you are talking about an extension of an implement benefit of on and point december,hrough mid this is not even the final fight. You look at the fight that lawmakers, once there is a ,accine, could potentially have you look at the infrastructure battled the president still wants to have before election day, this is not even the fourth order. We are still in the Second Quarter in terms of actually contentious fights here. That is why it is even more perplexing to see inaction coming because they are not even at the halfway point. Email asking, is Lawrence Kudlow still believing in a vshaped recovery . I get he has a public official and hes got to spend the spin out of the white house. Does the white house still believe in some form of gdp recovery . Kevin based on my conversations ive had, they believe a vshaped recovery between now and november 3. But if you zoom out on the bloomberg terminal, that is when after november 3. That is when we are hitting the Fourth Quarter, where because of the inaction in washington, these companies are going to have to make furloughs and layoffs. Tom do you see how cynical hes become . Kevin im an optimist. I totally push back on that. Jonathan d. C. Is slowly killing his soul. Kevin no . Jonathan kevin cirilli, great to catch up with you. The v, i hate it. It is a marketing device. It is all about optics. It is about replacing output in the same time it took to lose that out. Theres no v. The constructive view on wall street is that we recover everything we lost maybe by the back end of 2021. Tom you go to a new level below. Elerian saidr. It is the square root thing. The point is the tangible suffering that is evident area it would be something that wasnt evident. It is tangibly evident. Jonathan for me, it is the labor market. Are we going to have a 3 yearend . Everyone needs to get real. It might be 10 at the end of today, maybe lower. Fed is at about 9 yearend. Who is seeing 3 , 4 . No one. It is a ridiculous conversation. You may see some recovered output, but to fully recover this labor market, that is what makes up for the people, it is going to take ages. Tom the claims number yesterday was a little bit better, but it is the level it is at. It is like the bathtub. Are we looking at the water in the bathtub . The water is in very good. Jonathan we are continuing the conversation with Ellen Zentner, chief u. S. Economist for Morgan Stanley, joining us shortly on this program. Equity futures down 0. 4 . This is bloomberg. Jonathan payrolls 60 minutes away. Heres the price action for you. 12, 0. 3 . 500, down a little bit of risk aversion here. In the bond market, unchanged. 0. 53 on the 10 year. Eurodollar to one dollar 18s eurodollar to 1. 1817. Tom it is a very typical churn, but this is not a normal jobs report. It is one thing to do the Market Economics game and get it right one year, two year. Then there is Ellen Zentner of Morgan Stanley. 2020 doing it again in with amazing prescience. Get a briefing from ellen center this morning. I want to look at the broader, bigger view this morning. Link the urgency of this stimulus into what we will see at 8 30 this morning. Urgency,res the trying to stem the bloodletting that is already begun from household Balance Sheets. Congress passed an important fixinge for unemployment benefits. We do believe they are going to pass something, but households are already going to be without than for the better part, if not all of august. Boulder,our tenure at colorado, a microcosm of how we all think about these jobs report in that the bars are closed. They are doing takeout at the sink in boulder, but not much else. Sectors thathese are in depression, or it is or is this a broader