Buying longer on that curve . If so, that will keep rates lower. The path we are leading down is not a good one. What the fed is trying to do is what every central bank is trying to do, which is engineer growth. Tyler george bory is with us now. Talk to me about what you have been noticing, your take on the big reflationary trade yesterday but then a little bit of a comedown in yields again today. George thank you for having me on, always great to be on the show. Powelll question is, is seismic shift, or more of the same . The reality is there are some significant factors here. The biggest is the acknowledgment that there has been a Material Change in the economy. Unemployment can go lower than policy makers expect without causing inflation. They have issue is, also kind of acknowledged there is a limitation of Monetary Policy. Those two factors we view as material. Shift,terms of a policy what they are likely to do going forward, it feels like it is very much same game. The way we are interpreting yesterdays announcement, how the markets are reacting, it is Forward Guidance in the extreme. What they have told the markets is that we dont want to breach the zero Interest Rate bound but we believed on the same tools we have been leaning onto date, but we are going to do more of it and for longer. Big exercise be a in pushing out expectations and using the inflation targeting as very, verytion for extreme Forward Guidance. Tyler what does that mean for the steepness of the yield curve . Seen, as youu have go out the curve, it means the fed will allow inflation to move higher, or it will not respond as aggressively as it may be would have, if inflation moves higher. Now there is more of a term premium in the yield curve. 10, 20, 30year bonds have sold off. However, there is still a big question as to whether or not the fed can create inflation. We would argue that the fed cannot create inflation. They can create the conditions that lead to inflation but at the end of the day the velocity of money is determined by the economy and how people are spending their money. Forill be very difficult inflation to suddenly materialize. Seen supply push inflation. We are still waiting on that demand pull in inflation. Do we need good inflation . What is the difference . George excellent point. If you look at the two components of inflation, Services Inflation for services have been going up at roughly 3 for the better part of the last decade. When you need to get something done, it is costing you an increasing amount of money. However, when it comes time to buy a hard we see actual deflation. Your point about is their supplyside shock working its way through the system on the backside of covid, there is some evidence that may be occurring, but it would have to be global in nature, sustainable over time , and very broadbased. To really create the backdrop of a material increase in inflation. We are hopeful that better growth is going to lose policy will lead to inflation, but we are not expecting this runaway inflation, or this kind of consistent pattern of running above the feds target for an extended period of time. That still remains to be seen. You are seeing that already today in the bond market. You have seen bonds selloff, the curve has steepened nicely, but already today we are seeing bonds recover, the curve flattening. As you mentioned before, people are starting to reach for yield again. Low yield at the front and will be with us for a long period of time. It is probably premature to assume rates will run away from us at the longer end. Now if im a fixed income investor, i need to think about how am i generate income in this very low yield environment. Do that,d how do you sliding down the credit scale . George there are a few levers you can push, the curve is steeper, so extending out the curve helps a little bit, not tremendously, but a little bit. Been pretty strongly advocating going down the ratings spectrum, whether Corporate Bonds or municipal bonds, or even parts of the structured credit market. We do like to go down in quality, where we can. It is very over simplified you say just reach for yield. That is not what our strategy is built on. However, when we look at a recovering economy and a very loose monetary system, then you asrt to see pockets of value individual companies and individual sectors start to recoup, recover, and then ultimately, we think we will start to perform. Aergy is a good example of sector that got hit pretty hard earlier this year, bounced back nicely, but still has a lot of challenges as we see consolidation, production shutdown, a meaningful number of restructurings. But that is where we think you can find good value as a bond investor willing to hold lower rated bonds. Tyler we have two points to make, you mentioned munis, which is where i started my career, so any time a guest mentioned that, they are welcome back to come on the program. My second point, we were talking about this rotation underway in the equity markets. Youking of the bond market, mentioned energy, with an Investment Grade and high yield, what cyclical or value or growth sectors you mentioned energy are you looking to outperform . George as you know, as many of the viewers would know, the Corporate Bond market, the structure is slightly different from the equity market. Growth is very hard to achieve in the cohort of basically the entire Corporate Bond market. Not impossible but challenging. What we need to look for our recovering sectors, rather than simply growth sectors. These are sectors that may be have bad Balance Sheets, heavy debt load, but are still in a functioning sector where you are likely to see improvement going forward. Energy is one. Industrials, that is the value trade on the equities side. When we look at both investmentgrade and highyield, we see industrials as kind of a core opportunity set. Companies may have bad Balance Sheets but in good sectors. Those other types of strategies that we like to work into our portfolios. There is a fine tuning message there. Our market gets very segmented quickly, so High Quality Companies get priced up, and low Quality Companies stay cheap or an extended period of time. We are in that phase but we are optimistic that growth will do better this year and certainly next. So we are starting to look further down the ratings bactrim spectrum. Tyler time for the final spread. I want to look at the week ahead and get your take on it. A slew of said officials speaking throughout the week. Richard on monday. Pmis from the u. S. , china, eurozone. U. S. Auto sales for august. Another round of additional jobless claims. And then on friday, the u. S. Payrolls report. Any extrapolation you can make next week about that payrolls report, what it means for yield . George consumer demand in the payroll report will be critical. Transitionalas a economy. We are adapting to a new way of life. Covid has not been cured, we are still in the midst of a pandemic, it has shifted the way people behave, the way they consume, and importantly, a substantial number of people are still unemployed. These are meaningful factors. But the economy is adjusting. To the extent the consumer remains robust and active, and we see a recovering job market, admittedly up of a low base, that is a positive signal to us. That is kind of our central case as we go into the end of the year. Expectd investors, we yields to stay relatively low. We could see more steepening but the spread markets are where you get the extra yield, where you will get outperformance. Tyler time for our rapid fire. Three quick questions, three quick answers. High yield spreads, 400 or 6 . George 400. Tyler 10, 50, or 1 . George good one. I would say we touch 1 . Tyler real yield, negative real yields. Further negative or less negative . George i think become more negative. Tyler george boric, thank you as always. From new york, we will see you next friday at 1 00. This is bloomberg real yield. This is bloomberg. Lisa this is bloomberg markets. Im Lisa Abramowicz. Over the next hour, we are focusing on the feds new framework to the unrest in this world. We will do to Kristin Forbes as she weighs in on the feds new program. And i was picked to Patrick Rishe of sportsimpacts about the walkouts that called the cancellations of events this week. And you will hear from canadas highest ranked tennis player, milos raonic, who will talk about what it is like playing to an empty court. Lets get up check on the markets. Fedsf quiet after the announcement yesterday about the change in their inflation approach. The s p and nasdaq creeping back to their alltime highs. Yields rising on the 30year after people started to price in perhaps more longterm inflation. Really the standout of the day is the dollar, falling to the weakest since may 2018, if you look at the bloomberg thought index, with the expectation of very easy policy for a very long time. Speaking of which, japanese Prime Minister shinzo abe is resigning. Countrys longestserving premier, undergoing treatment for a chronic illness. He spoke earlier today. I am not ready to respond to the mandate from the public. I made a judgment. I should not continue my job as Prime Minister. I decided to step down as Prime Minister. Will stay on until his party picks a successor. With more insight into the future of monetary and fiscal policy is our own michael mckee, who has been all over today doing phenomenal interviews. Thank you for being with us. Does this change anything, given the fact that the real focus has been on Monetary Policy . He will be there until 2023 if he serves on his time, so it will not mark any significant change in the boj policy, in the idea that they are continuing to buy and a normas number of financial assets. They continue to keep Interest Rates slightly negative. However, the relationship corona shinzo abe and was a strong one, and they worked closely together, so some are wondering if a new leader would have the same relationship and if the bank work as smoothly with the fiscal authorities as it has over the past several years. Lisa since abenomics is coming to a close, what is his legacy . Mike you have to lop off the last couple of months. When you look at the totality of the abe term from when he took over, it looks like he is ending up where he started with growth and inflation very low or negative, but that is because of covid. If you look just before that, he had gotten the economy going again, but not very much. He had gotten inflation but not very much. By the standards of japan and the many Prime Ministers they had before him, several lost decades, it was an improvement. He had a three aero strategy of fiscal policy, Monetary Policy and deregulatory efforts. The combination of merck to little bit. Lisa it is interesting when people talk about the u. S. Policy of holding rates low for a long time, possibly indefinitely for the foreseeable future after jay powell spoke, is it a bad word to say that the ,. S. Is entering japanification if what you say is accurate . That if is also true you look at per capita gdp, because the japanese population is shrinking, has been going up at a more rapid rate than many other western countries. The average person may not notice a long period of stagnation, but Living Standards cannot rise as much over the longterm if you dont have a growing population. Japan is becoming more and more insular. That is the thing that people worry about here. If we are cutting off immigration and our potential growth rate has fallen and we cannot generate inflation, we could see the same sort of problems that japan has run into with no growth. Whether that is a terrible thing if you economy is going up, but remember there is a huge personal savings rate in japan that we dont have here. Lisa the hardest working man at bloomberg. Thank you for taking the time, michael mckee. Those low rates that are expected for a long time are helping homebuyers. Yet, it is commercial real estate that is currently getting pummeled in some areas by the covid19 pandemic. The sector in some ways faces a moment of reckoning with rents and Property Values plunging, the sees rising, especially in urban centers. I took a deep dive into real estate. The commercial Real Estate Market faces its biggest moment in recent memory. In the near term, it was tough to Value Properties during a pandemic upheaval. Delinquencies among hotels and retailers kicked up. Real estate values began to drop. In some areas, the most since the last recession. There are pockets of resilience, and even price gains, particularly among industrial properties, with investors rushing to embrace physical infrastructure of a nor online economy. But in the longer run, there is concern about bigger losses ahead. And uncertainty has effectively paralyzed market. It is hard for investors to know whether they are getting a bargain or catching a falling knife. Buyers are demanding steep discounts and Property Owners are reluctant to sell. Transaction volumes generally sell 60 in the Second Quarter but the sharpest declines coming in retail and hospitality. Retail, Global Investment volumes talk to their lowest level since 2010. Theres a lot of money still out there. How it gets deployed will determine the fate of trillions of dollars worth of property. Tonight at 7 00 eastern time for that bloomberg special, the real estate reckoning, where we speak to experts on what they expect ahead in the uncertain future of commercial real estate. Still ahead, professional athletes take a stand. Players sit out games in response to police retaliate and to stomach racism. We will discuss, next. This is bloomberg. Lisa this is bloomberg markets. Im Lisa Abramowicz. Weeks,ional sports including the wnba, major league baseball, major league soccer, and the United StatesTennis Association all halted events yesterday as athletes took a stand against systemic racism and police talent he. This after the Milwaukee Bucks used to play the Orlando Magic following the shooting of jacob blake in wisconsin. For more, we are joined by Patrick Rishe, founder of sportsimpacts. With yourets start take on the decision to get back to business, get back to playing now, and how this whole turmoil has been received in general by the fans, the viewers. Wasick well, i believe it the correct decision for the nba to come back to play, not just i am a fan but they would have lost millions in media revenue, corporate sponsorship dollars, and the networks are breathing a sigh of relief because of the ad revenue they would have potentially lost. We are talking collectively in the billions. But being in this bubble, there is maximum exposure. Season,had ended the they would not have received the same exposure with the kind of messaging they are continuing to do. Look no further than the fact that the golden state warriors, you have not heard much from any of their players because they are not in this bubble. Bubble maximizes exposure, and brings in those billions of dollars. Lisa this comes at a tenuous time for these teams. Money less of an issue because of the covid pandemic. Can you give us a sense of how much that has pressured some of these leagues, some of their political responses that make them more willing to engage on that level, or less willing, based on the financial pressures. Beautifulne of the things from a player perspective and the activism, you are right. There are many times in history of sport where athletes steer away from activism because they are worried about the impact on their brand, their endorsements, potential in terms of income. But these players have been willing to potentially take a hit with respect to their brand. Because there are some folks out there in the community, across the country, world that may not agree with some of the messaging. But that is why i think you have to give players credit for standing their ground, being willing to risk millions and billions more the right cause. Lisa the idea of the sports world still reeling in the face of the pandemic. As the founding director of the Sports Business Program at Washington University in st. Louis, you expect to see a pretty big consolidation among teams and the ecosystem around them, be it stadiums, news channels that cover sports . Patrick i think the biggest change that you will see we already saw sports tech was having a huge impact on the industry but now that will increase tenfold. That will impact solely different aspects of the sports experience, when fans can finally go back to stadiums and arenas. You will have a more seamless experience, more touchless, to increase safety. Onterms of consuming sports programming, there has already been advancements in virtual, augmented reality to make the at home more dynamic, in case there is a prolonged stay away from these arenas because of covid. I think sports tech has taken center stage in getting us through and making a better experience when we get to the other end of this pandemic. Lisa perhaps we will get some better artificial crowd noises as well. Patrick rishe, founder and president of sportsimpacts. Coming up, we turn our attention to the fed and its new framework. We speak to Kristin Forbes, m. I. T. Professor p. This is bloomberg. Mark i am Mark Crumpton with bloombergs first word news. Coast areacosta gulf cleaning up. Across the gulf coast are cleaning up. Laura will result in as much as 12 billion in damage to rea