'Bloomberg Real Yield' (05/27/2022)
>> FROM NEW YORK CITY, FOR OUR VIEWERS WORLDWIDE, I AM MATT MILLER. BLOOMBERG REAL YIELD STARTS NOW. CONSUMER DEMAND REMAINED STRONG WHILE INFLATION STARTS TO MODERATE FEELING HOPES THAT THE FED COULD SHIFT A SMALLER RATE HIKE, COMING SEPTEMBER. BRINGING SOME REPS BIT -- REP -- RESPITE TO THE CREDIT MARKET, A MESSY MONTH FOR THE MARKET. >> THE PAIN OF FIXED INCOME. >> THE LOSSES THIS YEAR HAVE BEEN THE BIGGEST ON RECORD BRITT >> AFTER A REALLY TOUGH SIX TO 12 MONTHS. NEXT THE BOND MARKET HAS REALLY DECLINED.
>> SOME VALUE BEING RESTORED. >> POLLENS HAVE REPRICED SUFFICIENTLY. >> THIS IS A TIME YOU WANT TO EMBRACE BONDS. >> THERE IS A LOT OF GOOD THINGS HAPPENING, A LOT OF BAD THINGS HAPPENING BRITT >> YOU HAVE TO ACCEPT THIS IS A DOWN YEAR. >> RECESSION IS COMING. >> GROWTH RISKS ARE GROWING. INFLATION RISKS ARE PEAKING.
>> WE HAVE A LEVERAGE SYSTEM ON THE FED. >> THE FED IS GOING TO HAVE TO SLOW A LITTLE BIT. >> IT IS DEPENDENT ON WHAT THE FED ACTUALLY DOES. >> JOINING US, MARYLAND, MADELINE, AND FS INVESTMENT SOLUTIONS. IT LOOKS LIKE WE HAVE REACHED SOME KIND OF TURNING POINT. CERTAINLY, WE HAVE SAID THERE
ARE SEVEN WEEKS IN A ROW OF LOSSES PRE-THE LONGEST STRING SINCE 2001. THIS WEEK, WE ARE FINALLY GOING TO RECOVER. IN TERMS OF FIXED INCOME, REALLY, THE FED SEEMED LIKE THE TURNING POINT. I WONDER WHAT YOU THINK OF THAT. WE WILL START WITH YOU. IS IT POSSIBLE TO READ THE FED MINUTES IN A DOVISH WAY? WE THINK THAT IS WHAT THE MARKETS HAVE DONE? AMANDA: THOSE MINUTES ARE CONSISTENT WITH THE BASELINE VIEW THAT AFTER TWO MORE BASIS POINT RATE HIKES, THE CASE WILL BE TURNED TO A 25 POINT RATE HIKE AFTER THAT. THROUGH THE MIDDLE OF NEXT
YEAR, AND ULTIMATELY ENDING AT A RATE OF 3.75. WE THINK IT IS A COMBINATION OF THINGS. IN ADDITION TO PERHAPS THEM SIGNALING ON THE MONETARY POLICIES I, IT IS A RECOGNITION OF THAT VALUATIONS HAVE'S STANDARDIZED. AS NOTED, LAST NIGHT, 65% OF BONDS ARE TRADING DOWN 10 POINTS OR MORE SINCE THE START OF THE YEAR. OF COURSE, A LOT OF THAT IS DRIVEN BY THE RIGHT MOVE, BUT IT HAS INTRODUCED A LOT OF UPSIDE CONVEXITY INTO THE CREDIT MARKET, AND A SIMILAR PATTERN IS PLAYING OUT IN IG. I THINK THAT, COUPLED WITH
ENCOURAGING DATA POINTS AT THE SYNCRETIC LEVEL FROM RETAIL SECTOR, FOR EXAMPLE, HAVE EMBOLDENED INVESTORS TO RAMP UP THE RISK APPETITE A BIT, WHICH IS WHY YOU SEE SOME OF THE TIGHTENING AT THE INDEX LEVEL. THAT BEING SAID, WE STILL THINK THE UP IN QUALITY STANCE WOULD MAKE SENSE. OUR ECONOMISTS ARE EXPECTING GROWTH TO CONTINUE TO ACCELERATE TO THE END OF THE YEAR, SO WE THINK THAT INVESTORS WILL START TO FOCUS ON QUALITY, AND THOSE COMPANIES THAT COULD MANAGE THROUGH A PERFECT STORM OF HEADWINDS WILL. MATT: IF YOU USE A TERMINAL, YOU CAN SEE AN INDEX. GLOBAL AGGREGATES, TREASURY, CREDIT, IT IS DOUBLE DIGIT LOSSES YEAR TO DATE.
YOU THINK THAT WE HAVE SEEN THE PEAK IN YIELDS THIS WEEK? MARILYN: I DON'T THINK WE'VE SEEN THE PEAK IN YIELDS. I THINK WHAT WE HAVE SEEN OVER THE PAST SEVERAL WEEKS IS THE MARKET TRYING TO DIGEST A HUGE AMOUNT OF INFORMATION AND UNCERTAINTY. OBVIOUSLY, WE HAVE AN EXTREMELY HIGH INFLATION RATE LOCALLY. WE HAVE CENTRAL BANKS THAT ARE NOW TRYING TO NORMALIZE, AND THE FED IS LOOKING AT COMMENTS FROM THE ECB, AND THEY ARE GOING TO START TO RAISE RATES AS WELL. THAT IS VERY SOON. WE'RE ALSO LOOKING AT THE MARKET, TRYING TO GAUGE THE PROBABILITY OF A SLOWDOWN IN GROWTH, PARTLY BECAUSE OF THE CENTRAL BANK POLICY, AND PARTLY BECAUSE OF THE COST AND IMPACT OF THE WAR IN UKRAINE, AND A SANCTION OF THE POLICY IN CHINA.
SO I THINK WE ARE SEEING SO MUCH THAT THE MARKET IS TRYING TO DIGEST. I THINK THE FED MINUTES GAVE COMFORT THAT THEY WERE RELATIVELY HAWKISH, AND SENDING A PRETTY CONSISTENT MESSAGE. THERE REPRICED TO SING -- THEY ARE REPRICING IN 50 BASIS POINTS, AND IT WILL SLOW DOWN TO BE MORE DATA DEPENDENT, BUT AT THE MOMENT, WE COULD SEE YIELDS A LITTLE BIT HIGHER, I THINK THE MARKET IS STARTING TO STABILIZE, AND IT IS BEGINNING TO DIGEST ALL OF THIS NEWS. IT IS BEING BOMBARDED WITH IT. MATT: THE MARKET IS PRICING AND FEWER HIKES, OR LET'S SAY FEWER 50 BASIS POINT HIKES. WHAT IS YOUR TAKE, TROY? TROY: YIELDS PEAK LOCALLY ON THE 2.7% 10-YEAR SUSTAINABLE, AND THE INFLATIONARY ENVIRONMENT THAT WE ARE SEEING FOR SEVERAL YEARS. BUT AS YIELDS ARE PEAKING OUT,
WE ARE SETTING THE STAGE FOR A MARKET RALLY WHICH WOULD GIVE EQUITIES, AND THE IMPORTANT THING FOR FIXED INCOME INVESTORS IS THAT IF YIELDS HAVE PEAKED OUT, WE ARE SEEING A VERY PALTRY AMOUNT OF INCOME WITH A TREMENDOUS AMOUNT OF DURATION, SO IF INFLATION DOES STAY MORE SUSTAINED, YOU COULD HAVE ANOTHER RUN-UP IN YIELDS. NOT BY 200 BASIS POINTS, BUT CERTAINLY 50 TO 75. SO, IN AN ENVIRONMENT LIKE THIS, IF YOU CAN FIND A STABLE PRODUCT THAT HAS MID TO LOW SINGLE-DIGIT RETURNS, YOU SHOULD CHASE THAT LIKE AN OASIS. THE YIELDS THAT ARE OUT THERE TODAY ARE STILL TOO LOW FOR CLIENTS TO ACHIEVE A LOT OF THEIR ASSET ALLOCATION GOALS. MATT: DO YOU EXPECT INFLATION TO BE SUSTAINED? PRESIDENT BIDEN IS OUT WITH A STATEMENT ON THE APRIL DATA. A CLIENT INFLATION IS A SIGN OF
PROGRESS, EVEN AS WE HAVE MORE WORK TO DO. IT IS BY TOP ECONOMIC PRIORITY. WHEN YOU HAVE NOT ONLY THE WHITE HOUSE WORKING ON THIS, BUT THE FED WORKING ON IT, AS WELL, AS BASE EFFECTS. DO WE SEE INFLATION SUSTAINED AT THESE LEVELS. >> INFLATION IS PEAKING. WE THINK IT IS A HIGH
PROBABILITY THAT IT IS SPEAKING. IT IS A QUESTION OF HOW FAST IT COMES DOWN. CLEARLY, THE SUPPLY SHOCK WITH THE BIZARRE COVID POLICY HAS EXACERBATED THAT.
THE CONCERN IS ONCE YOU GET INFLATION EMBEDDED IN THE LABOR MARKET, WHICH WE HAVE HAD FIVE MONTHS FOR THAT TO HAPPEN, YOU CAN STAY AT A 4% LEVEL FOR FAR LONGER THAN EVEN WE THOUGHT SEVERAL MONTHS AGO. NO ONE IS CALLING FOR A ZIMBABWE STYLE INFLATIONARY OUTCOME. IF YIELDS HAVE PEAKED, YOU ARE SIR -- STILL EARNING A PALTRY YIELD. IF IT STICKS AROUND A BIT LONGER, THE MARKETS WILL PRICE IT IN TODAY IN THE BACK END YIELD CURVES. THERE COULD BE MORE MARKET CONTAINERS, AND STILL, A LOT OF ELEVATED DURATION IN MARKET. MATT: WHAT DO YOU THINK?
IS THE END OF MAY AND THE BEGINNING OF SUMMER A MEMORIAL DAY WEEKEND THAT MARKS A TURNING POINT FOR MARKETS? AMANDA: OUR VIEW IS THAT INFLATION WILL START TO MODERATE AS THE YEAR PROGRESSES. I THINK WHAT IS KEY OR CREDIT INVESTORS IS REALLY THE IMPORTANCE OF INDIVIDUAL ISSUES AND SELECTION. WHAT WE HAVE SEEN IS THE PRESSURE ON THE BOTTOM LINE IN TERMS OF MARGINS AND MANAGING THESE VARIOUS INFLATIONARY COSTS. LABOR, FREIGHT, TRANSPORTATION. REGULAR RAW MATERIALS. IT HAS BEEN INDISCRIMINATE ACROSS THE QUALITY SPECTRUM, SO WE HAVE HAD BELLWETHER REALLY MISSING CONSENSUS EARNINGS DUE TO THAT MARGIN PRESSURE, JUST LIKE THE HIGH-LEVEL PEERS HAVE. MOVING FORWARD, EVEN IF WE EXPERIENCE A MODERATION INFLATION, WHAT IS REALLY GOING TO BE IMPORTANT FOR PERFORMANCE IS PICKING THOSE COMPANIES THAT WILL HAVE THE SUCCESS TO MANAGE THROUGH THAT, WE ARE SEEING SIGNIFICANT DISPERSION, NOT JUST ACROSS THE MARKET, BUT WITHIN SECTORS, DEPENDENT UPON WHERE THOSE COMPANIES ARE FOCUSED, TO THE CUSTOMERS ARE. HOW MANY SUPPLIERS THEY HAVE.
IT HAS REALLY PICKED UP WITH VOLATILITY IN THE CREDIT MARKET, AS WELL AS DISPERSION, WHICH IS VERY CONSISTENT WITH OUR EXPECTATION. MATT: HOW DO BLACKROCK CLIENTS DEAL WITH THAT? MARILYN: INFLATION IS PEAKED IN IS TRYING TO COME DOWN. BUT THAT BEING SAID, INFLATION EXPECTATIONS HAVE INCREASED. OVER THE COURSE OF THIS YEAR, AND ALSO, THERE IS A PERSISTENCE OF ELEVATED INFLATION, EVEN MODERATING A LITTLE BIT. I THINK THE KEY, AS OTHERS HAVE MENTIONED, THERE'VE BEEN MANY SOURCES OF INFLATION. IT IS STILL YET TO BE SEEN.
THE FULL IMPACT OF THOSE. WHETHER IT IS THE COST OF ENERGY, THE COST OF FOOD, OTHER SUPPLY CHAIN ISSUES AS WELL. SO, I THINK IT IS TOO EARLY TO SAY THAT INFLATION HAS REALLY GONE TO MODERATE BACK DOWN TOWARDS THE TARGET, FOR EXAMPLE, SO I THINK, WITH A PERSISTENT INFLATION, IT IS THE KEY, AND IT DOES MEAN THAT WE WILL CONTINUE TO SEE RELATIVELY ELEVATED VOLATILITY AS THE MARKET CONTINUES MORE CLARITY. >> WE HAVE PASSED THE PEAK, BUT WE WILL SEE INFLATION REMAINING ELEVATED. CERTAINLY HIGHER THAN THE FED TARGET.
I WANT TO TALK ABOUT THE DISPERSION, AMANDA, THAT YOU BRING UP, AND THE VOLATILITY, MARYLAND THAT YOU MENTIONED. AMANDA, MARILYN, AND TROY ARE IN THE STUDIO TO STAY WITH US. UP NEXT, THE AUCTION BLOCK. THE U.S. DEBT ISSUE IS REMAINING ON HOLD FOR THE HOLIDAY WE CAN THAT CONVERSATION IS COMING UP NEXT. THIS IS BLOOMBERG. MATT: THIS IS BLOOMBERG REAL YIELD.
THE TIME IS THE AUCTION BLOCK, WHERE WE KICK THINGS OFF IN EUROPE WITH A HOST OF SOVEREIGN DEBT DEALS BOOSTING ISSUANCE ABOVE TRADER ESTIMATES, OFFERINGS FROM ITALY, FRANCE, AND AUSTRIA PUSHING WEEKLY VOLUME TO ROUGHLY 46 BILLION EUROS. THEN, IN THE U.S., HIGH-GRADE BOND SALES ARE MISSING WEEKLY ESTIMATES BY THE LARGEST MARGIN THIS YEAR. JUST ONE BORROWER COMING TO MARKET AND RAISING FIVE MILLION DOLLARS, HEAD OF THE MEMORIAL DAY HOLIDAY. AND HERE IN THE U.S., JUNK BOND MARKETS REMAIN FROZEN AS WELL AS ANOTHER WEEK OF ZERO ISSUANCE. CAPPING OFF A MONTH OF MAY WITH TWO HIGH YIELD DESPERATE CREDIT HAS MARGIE PATEL MAKING A CASE FOR JUNK BONDS AS THEY CLOSING ON THE BIGGEST WEEK OF GAINS IN TWO YEARS. TAKE A LISTEN.
>> CORPORATE BONDS, ESPECIALLY HIGH-YIELD, ARE PRETTY ATTRACTIVE. WHEN YOU LOOK AT HIGH-YIELD BONDS, IF YIELDS EIGHT AND A HALF PERCENT AND TRADES AT $.90 ON THE DOLLAR. FOR A LONGER-TERM INVESTMENT, A
YEAR OR MORE, THAT LOOKS LIKE A PRETTY REASONABLE RISK RETURN ALTERNATIVE. >> AMANDA, FROM GOLDMAN, AND MARILYN FROM BLAST GROK, AND TROY FROM FS, IT'S INTERESTING. I WAS TALKING WITH ERIC FROM BLOOMBERG INTELLIGENCE EARLIER ABOUT MUNIS, AND HE WAS SAYING THAT THERE IS BEEN A SIMILAR LEVEL OF OPTIMISM IN THE LAST WEEK, AFTER THEY'VE BEEN IN THE SAME TROUBLE AS EVERYONE ELSE IN CREDIT. YEAR TO DATE.
DOES IT SEEM LIKE EVERYONE HAS BEEN GETTING A LIFT OVER THE PAST FEW SESSIONS? TROY: 100% BID WE THINK ABOUT WHAT TRANSPIRED IN THE FIRST FOUR MONTHS, THAT WAS RESETTING EXPECTATIONS FOR HIGHER YIELDS THAT IMPACT ALTERATION BEARING ASSETS, INCLUDING GO-GO GROWTH IN THE EQUITY MARKETS, AND YOU HAVE A RESPITE FOR THE PAST SEVERAL WEEKS. TO THE POINT OF YOUR PRIOR GUEST, THERE IS MUCH BETTER VALUE AND HIGH-YIELD THAN THERE WAS COMING INTO THE YIELD, NOT EVEN CLOSE. THERE IS BETTER VALUE IN CLO'S, WHERE YOU HAVE CLOSE TO 10% YIELD. UNFORTUNATELY, WE COULD STILL HAVE A BALANCE OF VOLATILITY IN THE NEXT SEVERAL QUARTERS. IF YOU HAVE A THREE-YEAR VIEW OR AT LEAST A ONE-YEAR VIEW, YOU SHOULD HAVE A POSITIVE RETURN. THAT BEING SAID, I THINK IN
TIMES LIKE THESE, WHERE THERE IS SO MUCH UNCERTAINTY, WHETHER YOU HAVE INFLATIONARY ENVIRONMENTS OR YOU WILL INTO RECESSION, IT IS NOT THE BASE CASE. YOU CAN FOCUS ON THINGS WITH STABLE NAVA, AND YOU HAVE SOME FLOATING-RATE EXPOSURE TO BENEFIT FROM THE RATE HIKING, AND COMMERCIAL REAL ESTATE. AT OUR FIRM, WE HAVE A GENTLEMAN WHO DOES A GREAT JOB MANAGING THAT, AND WE HAVE 120 THREE LINE ITEMS WITH NO DELINQUENCIES RIGHT NOW. WE ARE STARTING TO LEND OUT AT HIGHER YIELDS THAN WE WERE SIX WEEKS AGO. THAT IS A VERY VIABLE OPTION
RIGHT NOW. MATT: THE DIRE SITUATION IN TERMS OF ISSUANCE IN THE U.S. CONTRASTS STARKLY WITH WHAT WE SEE IN EUROPE. WHAT ARE YOU SEEING THAT DIFFERENTIATES THE TWO? IS IT THE GEOPOLITICAL ISSUE? MARILYN: I DON'T THINK SO. IT IS PARTLY BECAUSE THE FED IS HURLING THE ECB IN TERMS OF ACTUALLY NORMALIZING RATES. RAISING RATES. I DON'T THINK THE HIGH-YIELD
MARKET BEAR IS CONSIDERABLY LARGER AS WELL. THE LEVEL OF UNCERTAINTY IN THE U.S., I THINK WE'VE ALREADY SEEN A LOT OF VOLATILITY THERE IN THE MARKET, CONTINUING TO DIGEST. IN TERMS OF THE EURO ZONE, IT IS HEAD OF THE MARKET.
THE ECB IS GOING TO START RAISING RATES SOON. THEY WILL GET AHEAD IN TERMS OF LOCKING AND THOSE STABLE RATES, SO YOU CAN SEE THE DIFFERENCE THERE IN TERMS OF THE CENTRAL BANKS. I THINK WHEN YOU LOOK AT SOME OF THE TECHNICALS AS WELL, OBVIOUSLY THERE IS BEEN A LIMITED SUPPLY IN THE U.S.. I THINK WE ARE FAR SHORT OF WHERE WE WERE THIS TIME LAST YEAR, AND WHEN YOU LOOK AT THE HOOD, THERE HAS BEEN A LITTLE MORE INSURANCE IN FINANCIALS.
I THINK THERE IS DISPERSION AMONG THE DIFFERENT SECTORS THAT ARE SHOOTING, BUT THERE IS A HUGE AMOUNT OF DRY LAND OUT THERE. THERE IS A HUGE AMOUNT OF CASH SITTING ON THE SIDELINES. INVESTORS WANT THE YIELDS. THEY NEED TO GET BONDS BACK IN THE PORTFOLIO. THEY ARE OFFERING THE RETURN YIELD. SO NOW, IT IS RELATIVELY ATTRACTIVE VALUATIONS. MATT:
THEY NEED YOUR HELP. WITH THAT KIND OF DISPERSION, INVESTORS ARE GOING TO RELY MORE ON YOU. ON TROY AND AMANDA. IS THAT GOOD NEWS FOR THE INDUSTRY? MARILYN: I THINK IT IS VERY GOOD NEWS FOR THE INDUSTRY. I THINK FOR A LONG. OF TIME, GIVEN THE SUPPRESSION OF FIXED INCOME MARKETS BY MAJOR CENTRAL BANKS, WE JUST KEEP SEEING AN ENORMOUS SUPPRESSION OF YIELDS, OF SPREADS, AND I THINK WE ARE STARTING TO SEE AN UNWINDING OF THAT UNCERTAIN SEE, A LOT MORE DISPERSION, AND REALLY, THIS IS PRESENTING A GREAT OPPORTUNITY FOR FIXED INCOME INVESTORS, GOING FORWARD. WITH VALUE TRADE, THEY HAVE TO TAKE ADVANTAGE OF LOOKING AT THE FUNDAMENTALS. THE UNDERLYING FUNDAMENTALS FOR
INDIVIDUAL ISSUES. YOU TAKE ADVANTAGE OF DIFFERENT STRATEGIES TO LOCK IN THE ALPHA. FOR THE FIRST TIME IN A VERY LONG TIME, WE ARE STARTING TO SEE A VERY POSITIVE ENVIRONMENT FOR ACTIVE FIXED-INCOME INVESTORS.
>> DO YOU EXPECT TO SEE A PICKUP IN ISSUANCE? THIS IS THE AUCTION BLOCK. LET'S TALK ABOUT WHETHER WE WILL HAVE ANYTHING TO TALK ABOUT NEXT MONTH. AMANDA: I TOTALLY AGREE. WE ARE NO LONGER IN THIS RISING
TIDE THAT LIFTS ALL BOATS ENVIRONMENT. THE IMPORTANCE OF ACTIVE MANAGEMENT IS CRITICAL. ON THE ISSUANCE FRONT, GOING BACK TO YOUR EARLIER QUESTION, ON THE DIFFERENTIALS BETWEEN THE U.S. AND EUROPE, IF YOU ARE TO ZOOM IN ON EUROPEAN HIGH-YIELD CORPORATE ISSUANCE IN BOTH THE U.S.
AND EUROPE, AND YOU LOOK AT TWO Q HERE TODAY, IN BOTH REGIONS, WE ARE ON PAR FOR ONE OF THE LIGHTEST QUARTERS SINCE LATE 2018. WE ALL REMEMBER HOW CONCERNING WE WERE AT THAT POINT ABOUT THE CYCLE RISK, AND THE RECESSION. FALLEN ANGEL RISK, AND THE MARKETS SLOWED DOWN CONSIDERABLY. BOTH MARKETS ARE SHOWING A SLOW DOWN. BOTH MARKETS ARE ALSO SHOWING AN UPTICK IN COUPONS. THE FEW COUPONS THAT DO COME TO MARKET, IF YOU LOOK AT THE AVERAGE COUPON IN U.S.
HIGH-YIELD, IT IS THE HIGHEST SINCE THE FOURTH QUARTER OF 2018. IF YOU LOOK AT THE COUPON IN EUROPEAN HIGH-YIELD, IT IS THE HIGHEST SINCE THE FOURTH QUARTER IN 2016. REALLY, THAT IS REFLECTING A SECONDARY MARKET IN THOSE HIGH-YIELD UNIVERSES WHERE THE SECONDARY BONDS ARE TRADING SIGNIFICANTLY LOWER RELATIVE TO THE START OF THE YEAR. THE NEW BONDS THAT COME TO MARKET HAVE TO OFFER A GENEROUS NEW CONCESSION.
I DO THINK THAT ENVIRONMENT DOES PRESENT SOMEWHAT OF A RISK TO THE HIGH END MARKET AS WE BOTH HAVE NEW ISSUANCE CYCLES THROUGH AT WIDER LEVELS BECAUSE OF THOSE REQUIRED CONCESSIONS TO A -- ENCOURAGE INVESTORS TO STEP IN AND BY THE BOND WHEN THEY ARE LOW DOLLAR PRICED BONDS. THEY ARE AVAILABLE IN THE SECONDARY MARKET. ON THE IG SIDE, IT IS ACTIVE. IN THE U.S., WE ARE ACTUALLY NOT RUNNING THAT FAR BELOW VERSUS LAST YEAR'S LEVEL. THAT PRESENTS SOME UPSIDE RISK TO OUR 1.3 TRILLION FORECAST AS WE HAVE NOTED.
SIMILARLY, IN EUROPE, WE ARE EXPECTING 520 5 MILLION OF EUROPEAN IG GROWTH SUPPLY THIS YEAR. THE RISKS TO THAT FORECASTER ALSO ON THE UPSIDE. HIGH-YIELD, AS WE MENTIONED, BEFORE, IT HAS THE LUXURY OF BEING PATIENT. SO I THINK, THIS IS PROBABLY
MORE CONCEIVABLE THAT THE SUPPLY WILL REMAIN SOMEWHAT SUBDUED. I THINK YOU ALWAYS HAVE THE POTENTIAL FOR OPPORTUNISTIC ISSUANCE, AND IF WE DO NEED IT, WE WILL FIRST RUN BEYOND HER FORECAST. MATT: YOU WILL STICK WITH US, BECAUSE AHEAD, WE HAVE THE FINAL SPRINT.
THE WEEK AHEAD, FEATURING A BUSY SLATE OF FED SPEAK AND U.S. PAYROLL. THAT CONVERSATION IS COMING UP NEXT. THIS IS BLOOMBERG.
MATT: IT IS TIME FOR THE FINAL SPREAD THE WEEK AHEAD. COMING UP, MARKETS CLOSED FOR MEMORIAL DAY, AND ON MONDAY. THE CONSUMER CONFIDENCE KICKS OFF THE DATA, COMING OUT ON TUESDAY. THE FED IS SET TO START SHRINKING ITS BALANCE SHEET ON WEDNESDAY. PLUS, FED SPEAK IS COMING FROM A NUMBER OF SPEAKERS. WILLIAMS AND BULLARD.
AFTER WALLACE, IT SPEAKS MEMORIAL DAY, AND ANOTHER ROUND OF JOBLESS CLAIMS COMES OUT ON THURSDAY. FINALLY, ROUNDING OUT THE WEEK, THE U.S. PAYROLL SUPPORT ON FRIDAY. IT IS AN IMPORTANT WEEK FOR SURE. FROM GOLDMAN SACHS, BLACKROCK, AND FROM SS, STILL WITH US. THE BIGGEST? STARTS NEXT WEEK. IT WON'T BE ANSWERED FOR A
WHILE. THE FED REDUCED ITS BALANCE SHEET. HOW BIG OF AN IMPACT DOES THIS HAVE ON YOUR WORLD? AMANDA: IT IS CREATED SOME INTERESTING AND ATTRACTIVE RELATIVE VALUE OPPORTUNITIES FOR US. THE S MARKET, THERE HAD BEEN A LOT OF CONCERNS FROM SOME MARKET PARTICIPANTS THAT THE FED MIGHT PERHAPS ENGAGE IN ACTIVE SALES OF AGENCY MBS THAT IS NOT OUR BASE CASE FOR THE NEAR TERM, BUT NONETHELESS, THE UNDERPERFORMANCE SPREADS VERSUS IG CORPORATE'S, AND WE COME A FEW WEEKS AGO, OPERATED THE AGENCY TO OVERWEIGHT VERSUS IG BECAUSE WE SAW THAT AS A DISLOCATION. HOW THAT WILL CORRECT WILL BE AS TIME GOES ON, AND WE VIEW THE CONSUMER AS A PRETTY STRONG SHAPE. CORPORATE, AND WHEN YOU THINK ABOUT THE BETA SLOWING GROWTH, WE THINK THAT THE AGENCY MBS MARKET OFFERS A MORE ATTRACTIVE EXPOSURE, RELATIVE TO CORPORATE.
IT DEFTLY HAS CREATED OPPORTUNITIES. MATT: I WILL HAVE TO LEAVE IT THERE, BUT THANK YOU SO MUCH FOR JOINING US. TROY, GREAT TO SEE. YOU GOT THE FINAL WORD. FROM NEW YORK, THAT DOESN'T FROM US. SAME PLACE, SAME TIME. NEXT WEEK, THANKFULLY, JON FERRO RETURNS TO THIS CHAIR. THIS WAS BLOOMBERG REAL YIELD. THIS IS BLOOMBERG.
2022-05-30 07:50
