The 10 year yield going in the other direction. A little bit of a lift in yields. 457 on the day. We will keep our eyes on that. There was a bit of a messy auction people had looked forward to. A lot of dynamics going on under the bond market. Midday movers. We will look at shares of rent the runway. It reported fourthquarter revenue and topped average analyst estimates. The for your outlook was mixed relative to wall streets expectations. Shares slid 90 in the past year through wednesdays close. We are looking at a stunning gain in that stock. Alphabet shares are climbing as investors are becoming more optimistic about its ai strategy. The companys market cap inching closer to the 2 trillion mark. Nvidia, microsoft, and apple are the only other companies that hit that milestone. Back to the economy. That is driving the story. The Producer Price index increased by the most in 11 months in march. Still below wall street estimates. We will discuss how it impacts the feds Interest Rate path with michael mckee. When you look at the ppi and the softer pieces of information, how do you pair that with the hot inflation print we saw a day ago . It looks like some of the input prices are going down now after a jump for a month or 2. Which is what we cannot say about cpi. Markets seem to be taking it as well. It could have been worse. The statistic on the timing of the increase is for the yearoveryear number. On a month over month basis, the numbers came in better than forecast. 2 rise for the headline and the koran a core on a yearoveryear base. It was up by 2. 4 . Which is more than the 2. 1 last month. 2. 1 compared to 1. 6 for headline, which is the timing statistic. U. S. About the relationship between the two. What we are looking at is a relationship among all of the free main inflation indicators people watch. Cpi, ppi, pce. They broke down during the pandemic. We saw three of them running in tandem for years until 2020. Then they split apart. Ppi is what im talking about. This is the relative change in each one. It is not the level of prices. The ppi on top. Cpi is coming closer to it. The pce numbers are still way below both of those. The fed looks at the pce. If we get a mild pc, do we forget all about what we have seen with cpi . Sonali basak we Sonali Sonali have not we have not forgotten everything. You have to wonder how much the market is also reacting to a lot of fed speak. Susan collins speaking at the Economic Club of new york. John williams earlier today. How do you put all this together . The messages are becoming similar. Susan collins just out with her Economic Club of new york speech. She said we may have fewer cuts this year and we may have cuts later this year. Which is pretty much what most of the rest of our colleagues have been saying. Similar to what John Williams said, phrasing it a different way. Saying there is no need to adjust rates in the near term. Both of them saying they made a lot of progress. But there is more to be done. Williams suggesting they want to see more progress on the labor front, as well. So theres a general agreement among fed officials that maybe we are not going to see this kind of rate move wall street was expecting. Which is interesting because today we got an assurance from the European Central bank, christine lagarde, that they will move as soon as june. Sonali michael mckee, thank you for the data with a dose of reality. We have a Federal Reserve economist and chief economist at new Century Advisors joining us now. Also to react to the flurry of the data we have seen in the last couple of days. And how you think ahead to the pce. When you look at what happened in Consumer Prices, Producer Prices, how does that factor into how the fed is able to move moving forward . In all likelihood, they will see a better pce month over month. Theres a lot of dark matter that goes into those pce numbers. We really dont have a good read on it. At the end of the day, there are sticky places in inflation. They are going to be focused on that. They looked under the hood and there are problems. Having office because ppi and Motor Vehicle insurance prices are less then cpi does not change the fundamental story that they are not in a sustainable 2 kind of place, or even moving towards it. Sonali it begs the question, will they be able to cut once this year . To me, when is the fed going to cut and how much in some sense it has become into a parlor game. At this point, the inflation data are driving. It is as reactive as any of the rest of us. They dont have a read on where they should go with policy. Weve all been thrown for a loop these first three months. The big question is we have problem parts to shelter inflation, just grindingly slow. And we have some other auto cases like the Motor Vehicle insurance that also have a connection to before covid. And really how long is it going to take to get those down . That is the case because the fed will follow the answer to that question. Sonali do you see more areas where you even see reacceleration of some forces in inflation . When you look broader picture in terms of category, there is a lot to be encouraged by. We have many categories that seem to be really stuck. Stuck in a place that is not consistent with sustained 2 cpe. In 2022, we had it all over the place. We narrowed it up a lot. And frankly, for a lot of these components that are in a 2 consistent place, we want them to get stuck there. That is what sustainable inflation looks like. We cannot have these oneoff special offsets of our big problem children in the cpi. We have to get it all together. Some of that sticky is good. They are where they need to be categories. Then there is a handful that are not in a good place right now. Sonali i want to pull up this comment from jason furman about a day ago. He said a huge asymmetric uncertainty is a problem. He said if hes too optimistic and inflation is 3 , we are in a world of hurt and they need to tighten more. If it is more like 2 refined and there is no reason to worry unless it fell below one point 5 . Im curious how you would react to that . I would frame our world of hurt the sectors that are still problems. There is an interesting study that looks at the categories. I think we absolutely have to go under the hood to figure out the inflation dynamics. We are down to categories that are not Interest Rate sensitive. If we see a pickup in those sectors, we are in a world of hurt. What rate increase are you going to do that will get all of these people to move back home with mom and dad and get rent down . What will it take to get these insurance structural changes done more quickly . We are in a place where the feds tools, they can do it, they can destroy enough demand in other places. But that is where the hurt comes in. I dont see that as the base case. My base case, the bad base case is we just grind along this year. It is slow. We talk so much about the idea of hurt being seen in the Inflationary Forces in the economy, but at what point do you think higher for longer rates will lead to more hurt in other parts of the economy . Labor weakening here . All eyes should be on the labor market. Last friday should give us a lot of comfort. It probably will take longer to get to a place where Interest Rates can come down. They have been causing some pain. What we have enough strength in the economy to push back on it. Even the strongest of labor markets, you put enough pressure on it long enough, bad things will happen. Nothing can withstand forever. And i think a lot of the problems we are still working out, like the Interest Rates are in the mix. But we are readjusting from a lot of disruptions over the past four years. We have a very strong labor market. If we have a strong labor market, a strong american consumer. If those things are going together, we will push through it in a good place. That is what we want to see. Sonali claudia sahm, after a wave of Critical Data that will inform what we see out of the fed. Thank you for your time. Coming up, we will talk to the blue owl copresident on the latest move in commercial real estate of the company. A lot of ties to banking and the Interest Rate environment. That is up next. Super excited to open up my diploma from Southern New Hampshire university. Im nervous, im excited. [man] okay, lets see it. Lets see it. Oh my gosh. Jesus suarez, i did it and its here. group cheers [narrator] next term starts soon. Visit snhu. Edu. Visit snhu. Edu. Sonali this is bloomberg markets. Im sonali basak. Blue owl is launching another real Estate Strategy with the purchase of prima capital advisors. They are to pay 70 million, prima manages about 10 million of assets. We will bring in the blue owl copresident who runs the real estate side of the business. It is interesting because blue owl got deeper into the real estate business by acquiring your business a number of years ago. It begs the question on what the play is . It is a phenomenal entry point to Real Estate Finance. As traditional lenders are slowing down, and you are seeing a pickup in rates and spreads, we think it is a great time to enter that marketplace. Sonali when you say traditional lenders, are you referring to the slow of regional banks that are feeling pressured . Correct. Sonali how big is the opportunity . Marc zahr 5 trillion plus from our perspective. One point 2 trillion over the coming 12 months. Again, a great time to enter. Sonali how much of that is something you can tap into . There are so many concerns about the real estate environment. I know when we talked to a lot of your rivals, they say you cannot treat property or commercial real estate all as one. You cannot even treat office as a monolith. How do you think about that . Marc they are exactly right. Commercial real estate is painted with an extreme the wide brush. To do commercial Real Estate Finance, you can tap it a number of different ways. You can do your traditional mortgage, buy cps securities, or loans from banks looking to get them off of their balance sheet. All of those opportunities present an unique entry point. Sonali it shows you have an appetite for taking on some risk. What type of risk will you not be willing to take on . If you look at the market now, will you be wondering what dive deeper into distress . Marc if you look at our history, 15 years of doing single tenant, triple net, great credit, we have been extremely riskaverse. When i think about the entry point into Real Estate Finance today, i dont view it as a distressed opportunity play. I view it as a great value play. For the first time in a long time, we are getting substantially higher riskadjusted returns while taking less risk, i. E. Risking . 50 or . 60 in the stack and delivering 8 on better yields. Sonali you said single tenant. This is a good place to talk about the leaseback business you do. How do you choose the right credits, the right tenants, the right counterparties . When youre looking at who is in the buildings you are actually in at a time where people cannot even bring people back to work, who do you choose . Marc great point. Historically, the vast majority of our tenants have been investmentgrade companies. When you think about our tenant base, walgreens, amazon, whirlpool, johnson controls. When you think about other real estate strategies, we dont even spend time talking about the credit quality of their tenant base. With single tenant, you do. The way we mitigate risk substantially is focusing on great credit quality. What is even more important is the triple net lease. And theres not enough time spent talking about that. We have seen the data come out with substantially higher rates, sticky inflation, the triple net lease is the perfect information instrument to mitigate risk and give you predictable income while protecting your accounts. That is what we are focused on. Sonali you mention higher rates. What is the impact of higher for longer rates in your business and industry . Marc you have to think of the buy side and sell side. From the buy side standpoint, that is a very good thing for us. As rates creep up, especially with the combination of higher rates, you will see less Credit Availability and spreads increasing as well. You take that, nation it makes it harder for groups to transact. It makes it a better buying opportunity. We are lucky enough today to be to raise our fund in excess of our heart cap, which puts us in a good position to be a buyer of assets. Something to mention on rates, it is not just rates. It is the combination of the three things i mentioned. If you think about the rate environment over the last two decades, the highest Interest Rate environment we have seen was actually 2006. 10 year treasury, on average 4. 8 . 20 blips higher than where we sit today. But that was a frothy market. At that time, you had banks lending . 85, . 90 on the dollar, 10 years interest only, with 25 to 50 bit spreads. Rates are one piece of the puzzle, but need to be taken in, nation with credit spreads and Credit Availability. Sonali you just agreed to buy a new company. 10 billion in assets on the table for you. Plus you mentioned the fundraising you have recently done. As you look to deploy fresh capital, what are the check amounts you are looking to write . How much money are you willing to put to work at one time . Marc that is a good question. It all depends on how much we like the opportunity. But we also want to be a holistic provider to the companies we are dealing with. If company a wants to do a sale leaseback for 50 million, we want to accommodate them. If they want to do a 2 billion transaction, we want to accommodate them. In this environment, being able to have that scale and speed to capital and deliver a proposition that reduces risk for the company is a tremendous error on our equivalent. Sonali blue owl has been regarded as one of the Fastest Growing firms on wall street. Do you see acquisitions ahead in the real estate business to gain more scale . Marc i think we are doing fine. Never say never. But we are focusing on the acquisition we currently have and deploying the capital base we just raised. Sonali thank you for your time, that is blue owl copresident marc zahr on a very complicated market for investors. Still ahead. A bloomberg analysis on more than 1500 nonprofit colleges showing the return on investment at many elite private institutions. It is actually no better, or far less than select public universities. We will talk about that data up ahead. This is bloomberg. Sonali this is bloomberg markets. Im sonali basak. Harvard university is planning to reinstate standardized test scores for admissions requirements. It follows some of its peers after a pause caused by the pandemic. Since a Supreme Court ruling last june that said colleges cannot use race in admissions. They have been trying to figure out the best ways to recruit students. The new policy would be for students applying for fall of 20 to five. It brings us to todays big take, whether these schools are worth the rising costs. New analysis from bloomberg shows the typical tenure return on the investment of a socalled ivy, a list of 63 top colleges, is 40 less than the official ivys, and known as public flagships. Bloombergs reporter reported on this, and i recommend anyone to look at the data. I put my own statistics in to see the return. It is ready ugly. It is a really great tool, not only for High School Students trying to make decisions about where to go to college, but also for graduates. I know i personally put in schools that i was i School Senior and it was fun to look at. What is the easiest way to think about the return on the investment numbers in the bloomberg story and how would you explain them . What we did is we worked with the Georgetown Center on workforce and education. They put together roi calculations which presented in a dollar amount. They took the average earnings minus the average price it took to attend that college after aid packages. All of the data is publicly available and includes information of people who took out Financial Aid to go to school. I guess to run through some of the numbers pretty quickly, the average roi for all colleges is about 98,000 10 years after they first enrolled. Then we looked at more than 1500 schools and grouped them into categories like ivys, hitting colleges, flagship schools, public and private schools, so that people can get a sense of how these schools perform. Sonali what surprised you most out of the findings after looking through so many universities, dozens, really . The most surprising thing is we know every student wants to go to the most Prestigious School that they can. But for those students that dont get into an ivy league school, and realistically, most dont, these other elite private colleges the roi starts to fall off. So the official 8 ivys have an roi of about 206 he 5,000 after enrollment. Elite private colleges have an roi of 135,000. The public flagship schools, which are fraction of the cost, have an roi that is higher at 148,000. Kailey how do you think about this relative to the amount of debt people are paying to go to the schools . One of the biggest things that ate away at the r y of these colleges was the high sticker price. For students enrolling next year, the average cost of attendance is stretching past 90,000. If you think about that, that means to earn a four year degree at an elite institution, a family will pay more than a quarter of a million dollars. When you think about how much debt it takes for you for a student to attend that school and paying it off after, it really eats away even though those students might have a higher income after graduation. Sonali thank you for your time and reporting. A really thorough story out there. And for anyone who went to college and is looking to go to one still.