>> central banks hope by now, there would be clearer evidence of surge of inflation. that does not seem to be happening. >> i am not sure we will be getting back to an expansionary environment. >> we are going to see prices going up. that is the main event. >> i am median term -- medium term of the opinion that the economy will -- in the future. >> this is bloomberg surveillance. jonathan: hello, 4%. good morning. this is bloomberg surveillance

alongside tom and lisa abramowicz. futures down .5% on the s&p 500. one hour ago, eurozone cpi a record high. tom: the trend of the last number of days and we, this screen i am looking at now i have never seen. not 1994, not 2006, there is something moving here. convex it he, french for car acceleration. if you are alpha whatever, you match up with martin. jonathan: well done. good start. tom: you break down accelerate, we are seeing it in 7% above mortgage years -- mortgage rate. jonathan: what does the ecb do? do they have to take it up another 50 basis points? it feels like that is the direction it is going in. tom: this is not about the central banks.

this is about observable data. it is not slowing down, not transitory. there is going to be a new urgency to this. all the comments talks about, all i can do is go to the screen and the screen is new. the comparison of the two month and the 30 year is extraordinary. never seen it. jonathan: let's go through the curve. to year and the last 24 hours through 490. we break for percent on a 10 year for the first time since november. 10 year this morning hanging around 4% up around two or three basis points. lisa: how far do central banks go to go to neutral? the fact inflation is accelerating has people concerned. maybe we have not gone as far as we think we need to go just to stabilize the economy. that, i think, is the fear. what is interesting on the heels of that data out of europe, why is the euro losing versus the dollar? indicating the ecb will raise rates enough to diminish some of

the economic trajectory. tom: you cannot look at the pair in the vacuum. you have to triangulate. 40 minutes ago, i triangulated euro-yen. jonathan: what did you find? lisa: [laughter] tom: euro with convexity is a strong euro. japan is with -- is being left behind. if you have euro-yen breakout to new euro strength, that shows how they are both ratcheting up along these rates. jonathan: a story between europe and the united states. inflation looking stickier. interesting about the ism yesterday, the headline number was not terrific. it was a sub 50. the prices paid component spooked people. deutsche bank wrote about this yesterday, anything that speaks to sticky inflation, this market does not like it one bit. lisa: which highlights this is the new narrative.

sticky inflation. anything that confirms that is going to spook markets and they will more the other data. are we going to far on that as we went on immaculate disinflation? jonathan: let's whip through it. starting with the equity market softer, negative on the s&p. bond market yields higher by a couple basis points. get used to this, 10 year four point 2%. foreign exchange euro-dollar confronting a record high, causing cpi read out of europe this money. week on the euro side, 1.016. lisa: which is fascinating. we saw a hotter than expected print. today, we get retail earnings that do include macy's right before 7:00 a.m. eastern. best buy, kroger before the market. after the bell, nordstrom and posco. do we see what we saw yesterday from polls, and negative outlook

going forward, negative margin compression basically seeing a lack of profitability in a time of inflation. retailing index, we have gone full circle this year. we saw bigger recoveries. people said, by the beaten up stocks. that has almost been completely given up as we get earnings. 8:30 a.m., we get initial jobless claims. could this be the way the market is moving? if it is some 2000, does this only confirm what we were talking about before? stickier inflation, stronger labor market longer? today, fed speak does include chris waller, minneapolis fed president talking about how he is open to a 50 basis point move at the meeting later this month. this is new. we accelerating rate hikes rather than staying at the 25 basis point mark. jonathan: also i'll -- also rafael bostic talking up maybe 525, well into 2024.

pushing that story right the way through next year. lisa: this is new trajectory. the data has clearly concerns the fed numbers. this feeling they have perhaps underestimated the strength of this inflation. i am curious about permeates the conversation today. tom: i believe no murray yesterday began to voice 50 basis point lift. how money others will join? my answer a somewhat we have seen, a lot. for week moving average of four week claims, a member -- a number i have never mentioned. 191,250. that is just as i cannot say it enough. have never seen a screen like this. jonathan: next week, chairman powell semiannual testimony to congress. let's see if we get a shift from chairman powell. apparently, you can look through the whole of the summit and get to september. wake me up when september ends.

what happens in september? >> rate speak according to the forward curve. the only question is, how high do they have to get? this is the beast. there has been no progress in inflation economics since 2000 until recently. we did not have any to analyze. we are in unprecedented times in terms of volatility of economic data. we are doing our best to interpret numbers that are permanently surprising us on all the bits of the economy. the one thing we know, they've got to go harder. the one thing that most of us feel is in the end, they are going to go hard enough somebody's going to break. and, wake me up when we know that is. tom: can't we have a financial discussion? we live on the i.s. curve. what happens to our assets, to our property, to the things we

own with the convexity we are seeing in interest rates? kit: this is put simply, back to these margins, variable lags we talk about lightly. how do you slow something down you do not understand except by eventually leading on the brakes hard enough something breaks? what brakes are asset prices, nearly always. this is dangerous. not dangerous because the fed is doing a good or bad job. but because they do not understand, we not understand, it is very new. the data are all over the place relative to expectations. they have no choice but to talk about going 50, but to risk doing too much, tell us that is some idea of neutral. have no idea what that is and go too far. tom: i was talking about triangulating foreign-exchange pairs to get out to september to see you in september. which pair is most efficacious,

which pair cannot profit from? kit: right now, you can start profiting out of euro-yen. the japanese are talking down rates even as they are facing up to the need to come back with further yield curve control. we saw it at the end of last year. clearly, short-term rates moving in-line of expectations of where boj policy rates would go, in line with rising yields. first thing mr. wade has done is reverse that pretty convincingly. that means the moment the u.s. and europe are seeing rate expectations move in the opposite direction from what they have been doing in japan, the yen is vulnerable. we can break through some levels that looks scary on charts in yen crosses today. lisa: i think a lot of people would want to go to sleep and wake up in september, especially the way this market is going. i am curious what you do in the meantime. perhaps the euro-yen is cross --

interested in. do you have a safe place to hold on and wait until there is more clarity in the market? kit: i am tempted to say in terms of currency, this might be the time the swiss franc should be doing well. the swiss do not want cheaper currency at this point in time. they are going to be leaning against that. just because they do not like inflation. possibly, they like -- a dislike inflation more than any of us. i think they will benefit. i would not be surprised if the market comes back and revisits some of the places like australia, new zealand, particular early australia who have been perceived to be less keen to fight inflation then some others despite the fact there economy is not in bad condition in terms of trade. if they are forced to look at the world and think, yeah, we need to get on a bike and start hiking rates, they've got catching up to do. i do not want to hide in emerging markets right now if

this starts to get dangerous. it is probably too late to just hide in the dollar in a sense that we have had such a big run, the dollar is strong up here. the swiss franc is not the worst place to go when things get scary. jonathan: we have got to squeeze this in. you were at the imris --and rid us last night. watching that goal, looked awesome. clinical, top-quality stuff. what did it feel like in the stadium last night? they have been waiting for this moment a long time. kit: the mood was good. it was not raining. we were not beaten. we are at the top of the leak. we did score at the other end. that is my only objective. tom: does it look like arsenal is going to beat jeff field tonight and last night? [laughter] kit: i have not watched that game yet. tom: neither have i. jonathan: double good news.

arsenal one, top of the league. it looks real, starting to look real in a way it did not. start of the season when you start to build, there was a feeling they would not get this done. tom: next time in london, lane's borough. every single guy in the cigar bar is an arsenal fan. [laughter] jonathan: kit, wonderful to catch up. lisa: you sounded like a mets fan. it was not a hurricane, we are not blown away. we didn't lose. [laughter] jonathan: it has been a long time since they were up here and may well close the that his son. -- of ubs to join us. and esg showdown between the senate and the white house, next. >> keeping you up-to-date with news from around the world with the first word. inflation in the euro area fell less than anticipated last month . underlying price pressures rose

to a record. that reinforces expectations that the european central have to raise interest rates again at consumer prices hit 8.5 percent. core inflation, which is what policymakers are focusing on, rose to 5.6%. biden administration is on a potential collision course with big tech companies. it is coming out today with an aggressive new cybersecurity strategy. the plan seeks to shift the blame from companies that get hacked to software manufacturers and device makers. the process will require congress to pass legislation. in the u.k., conservative lawmakers say former prime minister boris johnson's prospects of returning to power have been killed off. he reason, richie sunak's success in securing a new settlement for northern ireland in the european union. johnson had refused to back sunak's efforts. china has set the most fighter jets to taiwan in almost two months. the move came after the u.s. approve the sale of $619 million

of weapons to taiwan, almost two dozen chinese fighters were detected in the southwestern part of the islands air defense and invocation. elon musk much-hyped master plan for tesla fell flat with investors. the presentation failed to offer any firm detail on the company's next generation of electric cars. musk said what he called a proper product event will be held later. shares are lower in premarket trading. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ factory. go sensors and software. go find leaks. go fix-em. emerson technology detects compressed air leaks to save manufacturers, like colgate, over 20% in energy costs. go brush your teeth. go boldly. emerson. and move the energy that our world needs.

♪♪ welcome to a new era of energy.

>> i called on the prescription drug companies to bring down the price of insulin to $35 to everyone, not just seniors. today, eli lilly, the largest manufacturer of insulin in the united states of america, agreed to do that. $35. guess what that means? every other company making insulin is going to have to lower their prices to early five dollars because they cannot compete. jonathan: a win for the president of the united states. the policy effort in washington, the latest. and esg showdown between the white house and senate. u.s. senate passed the was they

were department from enforcing its new esg retirement investing will. if you are not familiar, this is what the world does. it permits private sector place retirement plans to consider esg factors when slotting and monitoring investments on behalf of participants and beneficiaries. when we talk about esg, they have been using the term loosely. this comes down to one thing, investing in big oil in america. that face-off is ramping up. i thought it was interesting to see ron desantis in the with an op-ed piece on esg. lisa: basically saying a woke ceo can use the bully pulpit to exert influence over society, basically trying to reduce the corporate rule over how people are supposed to live. that is a pushback. jonathan: this is a showdown now. tom: i think showdown is the right word. in a lengthy campaign, both sides have to find topics to topic about. this is a showdown topic around

climate control, all adjusted by the war in ukraine. here we are this early. i'm going to go back to a wonderful summary about betsy atkinson in forbes magazine eight number of years ago. with annmarie horton joining us. annmarie, may 2017, the shareholders of exxon mobil put the management of exxon mobil and the esg -- in the esg timeout chair. they said, you are going to look at this. who holds the cards right now? who holds the corporate power on the ees g debate? annmarie: i think what you are seeing is this debate that has been taking place on wall street really coming to the forefront of the political stage, especially ahead of 2024. governor desantis mentions this "woke" capital and is on a national tour promoting this. he has -- this has become a hot

button issue. republicans are trying to shed light on how corporations are using what they deem social issues when they come to investing. the bottom line is, you already see places like black rock, state street, already taking esg into consideration when they are talking about investing. also, this labor rule is not a mandate. you really get that point across when you look at senator schumer's op-ed in the wall street journal. and saying this is something they should be allowed to look at. while, yes, this is in vocations -- hasn't locations for the financial community, this is going to be either virtue signaling or a way to get out a completely different message on the political end. tom: i've got eight ways to go. because of time, i'm going to cut to the chase. there is political polarity. do you have any sense, does gallup have any sense or any

polling or academics, do they have any sense where the middle of america is on this topic? annmarie: i have not seen polling specifically on esg investing. to my earlier point, i think what politicians are trying to do is use this just to talk about other issues like governor desantis is using this to then talk about a number of other issues in terms of what he thinks democrats are using in terms of "woke politics." i do not know if everyday americans, even know this rule in the labor department exist. jonathan: this goes beyond virtue signaling in washington. i think you have to get to the state level to think about how this hurts businesses and banks at the moment, asset managers maybe stuck back, in the middle of all of this. there is a list in texas, state law that limits government entities from doing business with firms that restrict business in oil and gas producers.

on the list are likes of ubs and blackrock. texas comptroller plans to add one more firm to the list of companies on that boycott list. i am wondering how you expect this to play out state to state in this country in the coming years. annmarie: at the moment for this senate to block this, the president will veto this. i imagine dependent on whether or not it is a red, blue or purple state, that is how it is going to play out. when you talk about the oil and gas industry, it is interesting because it puts the biden administration in a hypocritical position. at the same time, they want to make sure this rule stays intact and these finish areas are looking at things like esg when it comes to retirement planning. they have been begging the oil industry to pump more. the issue in the oil industry, they say we do not have the bankers. we do not have the investment in new york, in financial capitals

around the world. lisa: jon pointed me to this ron desantis op-ed. one line highlights the bigger issue. yes, this is a esg issue. ron desantis writes, the regrettable upshot of the woke ascendancy is publicly traded corporations have become combatants in battles over american politics and culture, almost invariably siding with leftist causes. how does this tilt toward esg, environmental, social and governments concerns, made the republican party traditionally the corporate -- of america pitted against corporate america that used to support? annmarie: i think that is the heart of what governor desantis is getting at. this also comes down to when you want to run a presidential election, you need massive amounts of money in america to do that. what we have seen over the course of a decade, but this was incredibly quickly during the

prior administration, that corporations push top management to make different decisions and make sure they were considering social decisions. managements have moved on it. this is something that governor ron desantis is trying to poke a hole in. he is taking this message nationally. jonathan: thank you. we will continue this conversation in the next hour. interesting to see the governor of florida on a media talk at the moment with a new book. that was the wall street journal opinion piece to kick off the week. i think there was an interview with times in london on this book. getting more familiar with the man in florida. tom: it is a media tour, also visits to states and wrapped around the primary season. is -- on a media tour in the u.k., the head of labor? jonathan: no. it is interesting to see him engage in the international media outlet.

-- ? has he tom: what are we in store for, a 10 canon? lisa: where is the gravitational force for both parties? that seems to be one of the big questions that gets raised for the discussions in washington. is it china where there is bipartisan agreement? is csg, this social signal to the social issues that have galvanized a number of the parties on both sides? tom: i have no idea how the middle of america polls on esg. i have absolutely no coal -- no clue. it is a mistake. jonathan: it is clear how they poll on energy. they do not want to pay a lot for it. tom: absolutely. it limits my travel to below lisa: 59th street. i personally think it has become a trigger phrase. you say esg, some people will say yes, some will say no. it has removed scientific analysis of what needs to happen

to reproduce carbon emissions in a logical way while preserving enough of a lifestyle that people want to perpetuate politically. jonathan: agreed. this is what i said at the start of the segment, esg is being used loosely. for a lot of people, it is whether you support fossil fuels are not. whether you want to support a big energy in america. lisa: when you talk to investors, it is more nuanced. fossil fuel companies are in on the transition. tom: are they esg at formula one? seriously. jonathan: at the end of the day, nine months, city to city? en they expect it. it's having an ecommerce solution that scales with your business as you grow. it's using innovative technology that manages your inventory and orders. discover how ryder ecommerce makes your customer's experience

ever better.

jonathan: equity futures softer. we are negative by point 4% on the s&p 500. facing a test in the bond market. nasdaq right now down .6%. your test in the bond market, starts with four on a 10 year. yields higher by three basis points. for handle on a 10 year for the first time since last november. the two year looking at 4.90. a single basis point up. more signs inflation is looking stickier. i see -- ism reading, the price

component, which was not about the headline -- this was about the prices paid component. a lift spooked this bond market. in the fx market, the data point out of europe 19 minutes go spooked a lot of people. we knew it was coming based on the regional breakdown of things we saw. france, spain, italy, germany. inflation still elevated. across the euro zone, core cpi all-time high. negative -- 50 basis points from this ecb this month, it is whether another 50 after that. a lot people think it is. tom: a lot of data dependency as we hang onto every interest rate topic. 10 year real yield. not a breakout, doesn't give me the drama of 4% 10 year yield. the real yield at 1.58 percent is grinding ever higher, which is not a breakout. jonathan: with sufficient restrictive. lisa mentioned earlier, keeping

it neutral. lisa: [laughter] yeah. exactly. if you take a look at real yields or inflation expectations on two-year bases come in the u.s., they are back to the highest levels going back to november. a concern of stickier, longer inflation in the u.s. tom: the founder and ceo of macro risk advisors rights an adult, pro, mouth driven note on where we are in the markets. lean forward and we will try to sort through the jargon. there is a banded trending of two standard deviations up, two standard deviations down. my calculations this morning on the 10 year u.s. yield is two standard deviations up as an elevated 4.1 105%. does your body of work suggest we will get there? dean: i think we are certainly all beholden to the data at this point. we've got a raft of incredibly

important data incoming. i think there is no precedent for the big three macro catalysts from a data standpoint occurring in just nine trading days. you've got nfp cpi and fomc within nine days. it is exceptionally important for the market. the vulnerability to me seems to be better news, it is as good as bad dynamic that crept back into the market. as we look at the different segments of the yield curve, three-month two-year, two stans, three-month two-year flat. that was a head scratcher for a period of time, the speed with which the fed was supposed to be cutting rates after raising them so quickly. that did not make sense. that is normalized a bit. the curve has flattened out. the next one to wonder about is two stans. if twos are up near five and tens are at four, at some point, the 10 year is a succession of

two years. we have to ask ourselves, what does higher or longer mean? fed commentary the last couple of days, someone like bostic is not a voter, but it is hockey stuff. basically sing, we are going to be in restrictive territory in their mind for a period of time into 2024. what we are all asking is, what does this mean for the economy and corporate earnings? tom: are all the trends you see, do they suggest controllable, measurable trends, or do you worry about a disjoint or jump condition? dean: i'm going to use the word skew in the equity driven's parlance. we are talking about the extra premium the market is willing to pay for out of the money insurance. once our experience with the 1987 crash, the great financial crisis, markets tend to crash down, and up. the thought of buying insurance

and charged an extra amount for acceleration for down moves that risk during -- that happened during a risk off event. new premium is low. it is low for a good reason. it is low because it did not perform last year. the folks that are good sponsors of out of the money puts on s&p found that it was not working. probably by middle of last year. you adjust and try to take what the market is giving you. right now, it is not giving you those deceleration moves to the downside. a real quick statistic. last year, we have -- had four to 6.2 moves down or up in the market. as of this year, we are on pace for 12. that is the engine for long volume. you note -- you need those 2% moves. if you don't, the vix is going to struggle to get back into the high 20's and 30's. lisa: you talked about following the data. if he and -- even if you get the data right, you will get the market wrong, potentially.

how do you know how to interpret the data? right now, data is being skewed to, good data is bad data. how do you know what the right interpretation is at a time where you are trading on sentiments so significantly like you? dean: this old quote, the best economist i know is the stock market. what that is saying is market prices matter. they can be wrong quite a bit, that happens all the time. we try to take the tales from the market. we look at correlations. one of the things we talked a lot about is stock bond correlation. it was negative for the better part of 20 years. it formed the basis of the institutional portfolio construction where in a risk off, you get your bond market rally to differentiate your losses in the stock market. last year, that came undone in epic fashion. it has not ended. we are still in a positive correlation between stock and

bond prices. that is one thing i look at closely. another one is correlations to the dollar. it has been the anti-s&p for the better part of the year. i think that is something we are supposed to watch. the high point of risk last year was late september, early october. it was the guilt prices, but also the chokehold the dollar had on the system of risk taking. we have obviously sold off in the dollar, but it is starting to creep act up. we are supposed to watch that. the good old bloomberg wirp page, look for -- we are now north of three tightening's. that was supposed to be zero as of a month ago. getting into four, and introduction of discussion of a 50 basis points, that is a new thing for the market to grapple with. i try to look at market prices rather than predict the next economic lisa: -- lisa:right now, the market pricing is not necessarily

confirmed this belief that earnings will be a driver of some of the downturn ahead. i point to what mike wilson was talking about yesterday with jon. i am thinking about what a lot of people are talking about in earnings recession. macy's just out where even disappointments are met with gains. there is sort of a bias to the upside. is there a message and that from the stock market, or is the stock market wrong? dean: we have made an adjustment to the pe ratio last year. i think that was consistent with higher inflation and higher rates. most of the damage done to the s&p was the multiple. what folks will say is, this is the year where the impact of higher rates starts to flow through to the real economy, corporate earnings. you get currency levels of the s&p around the 17.5 forward pe and 230 on earnings. that is not my forte. it seems to me keeping the short break up near 5%, knowing what that ultimately does to critical

aspects of the u.s. economy likely housing market, it is going to ultimately matter. f i am thinking about volatility and hedging, the brightest line i can draw in terms of what moves the market is a deceleration of earnings. perhaps what is happening is, the market is waiting to see. you are going to have to see the decline in earnings for the market to start to move. but, i think it is coming, especially if inflation is just not going away. it is going to be a long haul to truly get back to 2%. it is going to be an incredibly long hall for policymakers and for the market. jonathan: final word on this, august 2021. dean comes on this program and turns around and tell us, transitory is the new subprime is contained. you just now that -- nailed it. when we look at the disinflationary process that started, a comment from chairman powell in the february news

conference, how do you think we are going to view that phrase by the end of the year? dean: i think he was half right. it had started. the question is, how do you get to 2% if you are serious about getting to 2%? it is the qe period of the post crisis era flipped on its head. trying to get from 15 to two using zero rates is similarly difficult to get from the .5 to two using five plus in -- it is going to take a lot of time. we are in the immediate gratification business of investment these days. it is going to take a long time. jonathan: thank you, buddy. some headlines moments ago. another retailer reporting, macy's in the united states. rather like target, a beat in the fourth quarter. they take what they called a prudently approach to the outlook. here is the beat on eps for the fourth quarter.

188, the estimate was 158. here is the outlook, they say fully sales to 24.2 billion. off the back of this, stock positive by more than 5%. lisa: which highlights people are going to look past the prudently approach of kitchen sinking it. they are given a clean state -- slate and saying, is going to be better than that. one thing i want to note similar to other retailers, they said the margin declined due to markdowns and promotions. this is clearing out some of what they had in their stockpiles and perhaps that has compressed with their margins are in the past. going forward, it could be a brighter story. tom: let's put it in perspective. young lisa going years ago and escalator, iconic just before they ripped the thing out. 10 year track heard -- track record of macy's, called an

outrage. -3.3% per year over the last 10 years. what is stunning, this goes to the world we talked to dane about. this is apples to oranges. prices to cells lvmh is five times sales. macy's is 0.22. there is no other spread like that. jonathan: not quite apples to apples then. at all. i thought they still had that. lisa: i have been there. jonathan: on the top floor. lisa: you just have to not wear high heels. they will just get stuck in between. i have not been there for a long time. jonathan: they have taken that away? tom: maybe i stand corrected. lisa: maybe we will have to go on a surveillance field trip. jonathan: no. lisa: [laughter] jonathan: dan ives coming up shortly. lisa: aww. jonathan: tesla investor day.

we will get sorts on that next. ♪ lisa: keeping you up-to-date with news from around the world with the first word. spacex launch a four person crew to the international space station early today. it includes two americans, a russian and an astronaut from the united rap emirates. they will arrive at the space station friday and stay there for six months. it is the first victory for republicans in their crusade against the so-called woke capitalism. democratic led senate voted to block a labor department rule that allows retirement plans to consider environmental, social and governance issues in their investment decisions president biden's expected to veto the measure. the european union set to propose a plan to provide ukraine with much-needed ammunition. it calls for the immediate transfer of ammo, especially artillery rounds, from existing stocks.

proposal also inventions ramping up europe's capacity to meet current and future needs. u.k. pushing for a closer financial services links with the european union following the breakthrough on northern ireland. treasury minister andrew griffith will make the case for greater cooperation during a visit to lynn today. financial services were excluded from the post-brexit trade deal that took effect in wendy 21. -- 2021. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪

welcome to a new era of flight. >> we attempt to increase production at oil factors, affordability is what matters. if you make the car more affordable, we will have demand go crazy. the hard part is -- the cars.

and the entire supply chain that goes with the cars. this is a logistics challenge of extraordinary difficulty jonathan:. jonathan:that was elon musk, tesla ceo on tesla's investor day in the last 24 hours. many analysts is appointed by his presentation. tesla shares down in premarket close to 6%. dan ives of what bush disagreeing saying this was a showcase for the tesla community. we maintain our outperform rating and came away very impressed ivy tesla foundation and musk vision for the next decade. tom: i am lost. do we need a brief on this? how much is the average tesla. when we are looking down the roads? jonathan: depends on what features you get on it. tom: exactly. we have learned ev is pricey. jonathan: sure, 50 k+. tom: dan ives joins us now.

dan, i look at the desire for a cheap electric car. everyone else has the same desire. i will leave it up to you, nissan, etc. is it competing at the low price point with eight other vehicles? dan: no doubt, to hit the masses, you need a sub 30 k vehicle. i think what musk showed yesterday with the tesla vision is, from a production scale, batteries that i believe come down 30 percent, 40%, they are now going to be able to hit those and hit the assets. i think ultimately, it is a flex the muscles moment for tesla to allow the industry forward. tom: this is fine, but as jon mentioned, and i saw a stream of disappointment over this investor day. there was a stream about the goldman sachs investment day,

but it was nothing. what was your take on two guys in black t-shirts up with mics giving on investors day? i don't get it. dan: we have seen it with apple, cupertino. you tend to come out wanting more, more meat on the bone. i think for tesla as we have seen before, they lay out the foundation. sometimes, do not unveil the actual vehicle. he talked about two new vehicles coming up. the last thanks they want to do is get ahead. i think this will be a separate event. i think the foundation to get to 5 million vehicles and eventually 20 million is there. i think, ultimately, that is why i believe along with apple, most transformational companies in the market. lisa: there has been a lot of narrative of how the supply chains are moving out of china, including elon musk and his rhetoric supporting his cause and business in china.

how much credence to put in this? is this anecdotal, specific incidents that do not move the dial or is there a seismic shift out of china to insulate some of these companies from the geopolitical risk? dan: normally, it is smoke and mirror talk. i think this is real in terms of inflation reduction act. it is a real incentive. from a tax perspective. that is why you are seeing more of a buildout in and around austin. you will see that in fremont, as well. i think you will see more come to the u.s. no doubt, right now and for the next three to five years, china is going to continue to be the hearts and lungs of the supply chain. i think tesla is balancing between china and non-china. that is why you are seeing that in mexico as well. lisa: how do you game out the market risk tied to the presidents of a lot of these tech companies? i am including tesla in that loosely because it could be an

industrial company. how do you include the risk of increasing geopolitical tensions between the u.s. and china disrupting supply chains, forcing a more rapid shift in some sort of supply chain issue earlier that would cause some margins to compress? dan: to put it in context, apple. if they went fully and wanted to move production to china, best case in the next three years, they could move 5% of production out of china. this is such the hearts and lungs, almost cemented. it is something that would take a long time to start to move 5%, 10% production. that is why the reality you saw with tesla and apple in terms of the zero covert issues and december, are at the mercy of china and beijing for now or -- in moving in the opposite direction. tom: what were your checks on various tech banks? dan: it is holding much better

than feared. coming out of asia, not seeing any sort of supply chain cuts for iphone which i think is important. what you saw from salesforce and across the board, this is not necessarily the minute they yelled fire in a crowded theater. tom: in a crowded theater for some parts is, some of the asked us on the show. i do not know, nobody wants to mention how high the statistic is. apple, $150 a share. what is the sum of the parts? dan: some of the parts bull case gets you to 225, 240. base case 200. i think that is a permanent re-rating we will see there. now, when you start to see more -- with the iphone and you get 25 who have not upgraded, iphone is going to have a two in

front of the stock. tom: where does the two come in the numerator or denominator? what drives it over 200? dan: services i believe is 1.3 to 1.4 trillion. you have the franchise hardware business. you start to look at the capital allocation program. that is with jobs anywhere from that low to mid to level in terms of where i see the stock going. jonathan: finish on tesla. if yesterday was so good, why is stock down 6%? dan: a typical cell on the news. the haters come out. ultimately in terms of the path, in terms of record deliveries, i think this is more flex the muscles moment. will we be buying on the selloff? jonathan: what about the cyber truck? what is happening with that? dan: i think this is something by the end of this year, you will see all to mitt deliveries come out in production. it is important.

that is why this leaves the groundwork for what we see as the next vehicle from the tesla system. jonathan: did you get enough from them yesterday on that release? dan: i felt yesterday they basically doubled down to that, that target is going to continue to be there. the goalposts are not going to get moved up. a year from now, you're driving around manhattan and you are seeing cyber trucks. jonathan: in the wild. stocks down by 6%. would we say stock sells off, haters come out? tom: [laughter] jonathan: years flying year to date. in a major way. tom: it is a beast of its own. is it a car company, a tech company? i do not get it, granite, they have the -- to themselves. lisa used to drive a hummer. lisa: what else have i done?

please inform me. i am curious. [laughter] tom: with the reality elon musk has to face, a nissan leaf. even the name says bramo. a nissan loaded goes up to 35800 and bramo has to have the two tone paint job. jonathan: is that what you have been doing this segment? tom: kids do not want to be seen in it. lisa: i sit here for long enough, they will blame me for the weather. you are raising a good point. the barrier to entry is so high the competitors are struggling. though they are -- tom: nissan is a real company. i picked nissan because i thought it would fit bramo. jonathan: this is difficult. to transition the production line from one thing to another is not straightforward. tom: but he is going into

competition with how many? 6, 8, 10 vehicles? lisa: he is going into competition with china. that is one of the big questions for these companies dependent on china business. how does that get disrupted if you start to see back and forth political football in d.c. become policy? that is a key question i do not see priced in at any capacity. jonathan: would you rather have a portion of income? for me, personally. lisa: evidently, i am in a leaf. [laughter] tom: first person. she is driving a porsche with her birkenstocks on. lisa: [laughter] tom: i can see it. jonathan: -- is next. tom: i can see him in a porsche. jonathan: it is that ubs money. it makes a difference. futures negative.

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>> the central banks have been told that there is clear evidence of inflation but other than that, nothing seems to be happening. >> we won't get back to expansionary firemen -- environment just yet. >> we will still see prices going up and that's the main event. >> this monetary tightening should see the economy suffer in the future. > this is bloomberg surveillance. jonathan: we've got a four

handle on the 10 year for the first time since november, live from new york city, good morning this is bloomberg surveillance with tom keene and lisa abramowicz with futures trying to stage a recovery, down one third of 1% but inflation is front and center. tom: in december, two thousand seven, we had a spike recently but if you do a quarterly chart of the u.s. 10 year, you have great moderation and disinflation and then we go under 1%. what we've got is yields back to where we were near august 2007. jonathan: the 10 year is just north of 4% and we had a little look at 4.19 and getting closer to 5%. retail is out with earnings this morning. we heard from macy's earlier. lisa: best buy comes out and

here is the confusion -- talk about market reaction -- macy's gave a downcast overlook and their shares popped. best buy gave a lot of positive data. they talk about how in general, revenues came in strong and you so gross margins, and it 20% and those shares are down by 1.5%. people are looking for forward looks and how much can you show the potential negativity going forward. jonathan: best buy offers a full range of 43.8 billion for the year. the estimate was 45.74 billion so a lighter there. best buy in the premarket, no real drama,6/10 of 1%.

lisa: how many companies will come out with them most downcast view they can and is the market saying this is a messaging exercised by executives? there are a lot of different accounting shenanigans going on to try to goose up earnings. i read a really good story, taking a look at some of the hedging around the margins in terms of delivering these beats and projections. wonder if people argue being given the benefit of the doubt. jonathan: i don't know of many companies want to be associated with so-called creative accounting. more retail earnings still to come. on the s&p 500, no real drama, down a quarter of 1% off of the back of -- of a day of losses yesterday. one component sticks to's dish

looks at sticky prices but the ism manufacturing is a bit elevated. you gotta brand-new4 in front of a 10 year yield. tom: it's going back to 1985 and this gets my attention. the spike in yields carefully done is exactly four standard deviations. there is a difference between two standard deviations and four. jonathan: just to finish off with the data so far, a ton of earnings and the eurozone and cpi and inflation in europe at record highs which is not what the ecb president wants to see. lisa: we're looking at the retail earnings today. macy's and best buy gave a more

cautious projection for the year but delivering good fourth-quarter results and then we get nord stream and costco. how forgiving is this market going to be? how much will they look past the negativity for 2023 and say you guys are being prudent in terms of your estimates. the retailing index went full-circle this year and is almost flat after two tumultuous months. we get initial jobless claims today. people are not filing for jobless benefits the same way they had in the past. does this indicate some ongoinge that a 50 basis point rate hike is on the table for the third week in march? jonathan: i get a sense from

neel kashkari that he is ready to discuss it. one thing he said is that he wants to use the dot plot to convey the projection for longer. does that get down to market price? that's where the fireworks will be. lisa: i love that. jonathan: it's hard to explain to people. it could be somewhat market moving. lisa: you are not wrong, it's just that you don't hear that often. jonathan: if you accidentally tuned into business tv or radio and heard these conversations you would not know what is going on. the director of investment solutions at ubs asset

management joins us now. you came into a new year and you think the global economy will be better than people think and you think the economy will be more resilient. can you frame how difficult it's been to get the market call right off of the back of that since we had two different months to kick up this year? >> the thing we overlooked their was the extent of the pessimism on the u.s. and the fact that in january through most of february, you get data that was incredibly u.s. centric and strong and that contributed to a move in the dollar that i think undermined the positive global nature of the story. it's not just the u.s. pushing back because the labor market is tight, it's the fact that this year is the story of 2022

turning into tailwinds and the precious one is china. the first call for this year was all about u.s. centric case and the second half of the year will be about the china rebound. tom: you have never seen these rates including the four standard deviation 10 year move. when you talk to finance at ubs, have you frame the new regime we are in which harkins back to the pre-2006 regime? >> we love it, multi-asset portfolios, giving us a yield where we can have yield at the long and and capital appreciation but the yields on the short and from port olio construction especially since

stocks are in's expensive -- are expensive. in that case, you see with happening with u.s. ig and you say that's an attractive opportunity. in terms of what we do having that option with yields being where they are, it makes it easier after what was a tough 2022. we will take it happily. lisa: how hard is it to say go by chinese equities? >> the reason why it's part of a cell is because there is opportunity. the fact that chinese equities have been the proverbial lucy taking the football away from charlie been -- charlie brown. that's why we see so much opportunity and it's the sweet of volatility test volatility catalysts.

we think president xi can achieve some of his goals. those goals have been disparate and not related to economic growth. it's been reeling in real estate, controlling technology and the power of the internet companies and controlling the spread of covid. all of those boats are lined up in the right direction. it's just this multifaceted change that is progrowth. it's something that makes the sales pitch easier this time around. jonathan: u.s.-based investor is not needed to look abroad because things have been great at home. they look abroad now. we can talk about your dog in a moment. maybe they look to invest abroad for the first time, how do they manage the currency risk? >> i think that's the one thing

where a lot of the stars will align in the same direction. people put together market expectations and those strategic asset allocations are rich. from that perspective, it's going to be effectively an additive to trends going forward. what we have seen in the source of what's made this leg higher, the terminal rate was in a 15 basis point range around for -- around 5% broke to the upside. you have to say we were going to 5.5 but will we have the same move in the terminal rate like last year? there is simply not going to be that type of momentum. in terms of real rate differentials compressing and

from the equity standpoint in terms of real earnings rates, the biggest difference between the cycle in the last one is that the reliability in tech earnings will not be the same. that's your call to go outside. jonathan: we want to know if the dog is long on the euro. one bar for yes, 24 no. there it is. right on cue. that works. we should make a show of that. next hour, ms. young, this is bloomberg. lisa: keeping you up-to-date with news around the world -- inflation in the euro area fell less than anticipated last month

and the underlying price pressures rose to a record. that reinforces expectations that the european central bank will have to raise interest rates again. consumer prices hit 8.5% and core inflation rose zero .3%. the biden administration is on a potential collision worst with big tech companies. it's coming out today with an aggressive new cybersecurity strategy. the plan seeks to shift the blame from companies they get hacked to software manufacturers and device makers. the process will wire congress to pass legislation. in the u.k., conservative lawmakers a former prime minister boris johnson's prospects of returning to power have been killed off. the reason is the rishi sunak success in securing a new settlement with northern island and the european union. shares of macy's are searching today. they reported better than expected fourth-quarter earnings

and comparable sales. the midpoint of their forecast be consensus. it's the starkest 20 from a u.s. bank that caters to crypto, silver gate capital says it needs more time to access the extent of damage to its experience with the crypto route. shares are plunging in premarket trading. global news, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects. and when you book and pay throug you're covered by our happiness

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>> to raise the dividend, we are investing to grow. we are planning to grow another 10% this year. the balance sheet is strong and the excess we've always distributive back to shareholders. the stronger -- the company stronger today than it was five years ago. >> the white house is not called you yet? >> i haven't gotten a call yet. jonathan: that's the chevron chairman and ceo. second day of march, equities are lower, down a third of 1% on the s&p 500 adding to the losses of yesterday. we saw the ism manufacturing

survey elevated. the euro zone, core cpi is at all-time highs. 4% on the 10 year rate. the market has priced in a higher terminal rate, like 5.50. some people think this could hit an air pocket but we will see. lisa: i think you could make an argument that you are close to the peaked the tenure because you -- if you end up with more banks doing more now, it will have consequences longer-term. the more hiking you bring in the front, the more you can see the 10 year move on with -- unless we are in a new regime. jonathan: the inflation expectations are building again without a rally. it's happening with crude flat

year to date. lisa: we were just talking about china and the resurgence of china would cause a pop in oil prices. we are not seeing it. tom: mohamed el-erian is expert at this, the unknown unknowns out there are unquantifiable. what i find interesting is the financial analysis of standard deviations and trends and vectors. nobody is talking about the asset realities. the new world we are in at 7% mortgage, no one is talking about what it does to assets? . jonathan: this was published this morning. he was pushing for a 50 basis point move at the last meeting. this is brutal --

a multistage policy error in which the fed first mischaracterized inflation is transitory i caught up with him this morning any he reminded me of a note that bank of america put out on february 7 after chairman powell went down to the economic club in washington. he said volcker has left the building, that was the take away. we are still embracing this disinflationary process. it feels very foreign now three weeks later. lisa: do you think policymakers will look back and say they should have been more aggressive

even at the expense of the economy? are they trying to say they should have gone further? it's not like they haven't been aggressive. tom: they are data dependent and the data has been grim. i'm looking at a bloomberg's scream i've never seen before. -- a bloomberg screen i've never seen before. jonathan: they acted in 2021 as if there was only one. our last guest said in august of 2021, the inflation is transitory. 12 months ago, march, 2020 two, rates were still zero and they were still doing qe. it's not just about the mischaracterization of inflation, it's how quickly they move on inflation.

they were playing catch-up, aggressive catchup because they relate to move. tom: you talk to executives at banks and other companies and they say this was the fatal error not raising rates further in 2021 and many have the concerned this was political because jay powell was not renominated yet and didn't want to make an aggressive move because of that. jonathan: here is the politics this morning -- we are reporting that antony blinken had a brief encounter with his russian counterpart at the g20 foreign ministers meeting. blinken's message was to urge russia to reengage on the new start treaty and release american paul weaver and a great with -- and engage with ukraine. that meeting happened briefly. tom: what is the relationship of

antony blinken and sergey lavrov? annmarie: this relationship is deeply front and they haven't met formally since this brief encounter. it was under 10 minutes this encounter on the sidelines. the russians are not even saying that this brief encounter even qualifies as a meeting or talks. what we are hearing from the state department is that antony blinken had this conversation about these three points, one about re-engaging stork start and you need to discuss peace plans and get out of ukraine as well as a message we will stay with ukraine as long as it takes. lisa: what is the take away that there was no memo from the g20

agreed-upon to characterize russia's work in ukraine? annmarie: i'm not surprised. central bankers also met at the meeting last week. there was also no joint statement, just a document. you see a reversal from china and russia on language they were able to agree upon in indonesia at theblai g20 summit in november and officials have been trying to avoid the use of war or russia's invasion of ukraine were just war in ukraine. a lot of this is semantics. it is prudent's invasion of ukraine but what is key -- it is vladimir putin's invasion of ukraine but this will be overshadowed by this issue. this is going to mean that in the global south which is struggling with food and energy prices, india once these major issues to play a role.

meet at the leadership level for the g20, ukraine will dominate but not just what happens next. it's going to be about things like what can these 20 nations agree in calling this conflict? jonathan: they can't agree on much now, thank you. the latest from the g20, the foreign ministers meeting and secretary blinken had a brief encounter with his russian counterpart sergey lavrov. tom: there had to finally be one i have to believe all three are non-starters but what else can you say? jonathan: how do you engage on a peace plan? tom: i take issue with this. there is a war going on.

that's the end of the discussion. jonathan: is there a discussion over territory? tom: some would that. jonathan: for ukraine it's a nonstarter. tom: i saw a map the other day on the missile ranges that ukraine will have. they have a reach now they did not have a year ago. jonathan: equity futures are down 0.4%, stocks are a little softer with yields a little bit higher. ♪ go. go lights. go big city lights. go spotlights. go stadium lights. emerson software helps clean energy become reliable electricity. go “good night." go boldly. emerson.

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jonathan: equities this morning negative by 0.3%. negative 0.6 on the nasdaq and this equity market has to compete with the bond market. on the two-year, 4.88. the 10 year with a four handle. inflation is looking sticky in the united states. on the european side, core cpi at an all-time high.

you got a breakdown of german cpi and it's looking sticky. the ecb will go 50 and probably 50 after that. lisa: if they have to go more, it's a serious question. did you find that surprising? jonathan: go back to the second of this month and the high was 110.33. then we get the payroll report with dollar strength as low as 105.33. we've come down from $1.10. you've now got a peak rate being praised in. -- being priced in. where does the upside surprise come from? lisa: 4% for the ecb or 5% for

the fed? there have been beats in the fourth quarter and the response and the response in market is fascinating. american eagle reported earnings yesterday and are taking a cautious view for the year but seeing positive signs of normalization, though shares are up 4% and they are concerned about consumer spending and they are still seeing some positive signs. macy's came out with a conservative look but seeing the potential to clear through some of the inventories and post some decent growth. though shares of 9.2%. best buy was a different story. this shows how the kitchen sink story does not always work of your -- if your fundamentals don't bear it up. soft sales at best buy and they beaten the fourth quarter and though shares are lower by 2.4%. it highlights that microeconomic does not cover the idea of

negative sales growth for many consecutive years and idiosyncratic issues facing companies. in consumer electronics, they face a lot of competition online. jonathan: if the stock is up, it's blah,blah, blah. you should edit press releases. lisa: the macro economic headwind is a catch all phrase. when you see the shares pop, you are putting that in as a way to hedge everything and throw out anything negative and show strength. tom: i would go to their income statement. they are on razor thin margins. if they are flat to down, the math doesn't work. jonathan: lisa cover that earlier with macy's.

lisa: they had to cut a lot of the prices but they cleared it out and that's the goal that if you clear it out, you can get those margins later on. i think we should take a road trip. jonathan: you can take tom. the big debate at the ecb, 50 and then 50 again? a couple of officials thought they should have gone 50 and one of those was the minneapolis fed president neil cache kerry. >> i am open-minded at this point about whether it's 25 or 50 basis points. with much more important is what we signal in what's called the dot plot. jonathan: that will be the focus of the fed's next meeting. there were wines against accelerated growth and says --

we had paul garvey with ing. what is the overcome by events thing you worry about out there? + what do we need to pay attention to? >> you've got to look at the shape of the curve to understand that this is a really unusual set of circumstances. we have not seen the degree of immersion we are seeing now in the past four or five decades.

that tells me that the backend of the curve is pricing in a huge degree of uncertainty. i'm not convinced it's entirely the rate cut negative. -- narrative. there is the reality that the central bank is holding lots of bonds. and i think there is anchoring. i have this conversation with traders all the time. they say we think the tends were going back to two but we are not going back to where we were. tom: there is a lot to him -- to unpack there. we are at a for standard deviation move off the great moderation back in 1985 in this part of the yield curve spread area if i look at two years compared to 30 years, we are truly in the territory. does is signal to press growth or a duration of subpar economic

growth? >> i doubt that very much. if you look at where neutrality is, i would suggest it's around 3%. that's 2.5% of elation and if i look at the backend of the curve, it's not discounting a break below three. i think we have had this unprecedented degree of monetary tightening. it's ill -- it still has us approaching 5%. if we get there and we are done in the next move is down, that's a very tolerable outcome. doesn't suggest anything like what you just described. lisa: which do you think is more concerning, the risk of an elation persisting at a higher level for the risk that rate

hikes could really kill the economy? >> the former is the biggest risk. i think the way the fed is pursuing policy here is smart. i know they get a hard wrap because of missing the early rate hikes. 25 from here is quite smart. you have to stay on 25's and level off. as certain point in time, this will hurt. you look at lending standards, they are as tough as they been since the great financial crisis. lisa: but we are not seeing that in the data and that's the concern. it's a schizophrenic nature of disinflation. how much do you look at the recent data and the stickiness of an nation and start question your thesis and question if perhaps it's not really restrictive if you look at policy rates. >> you are right, we are not

seeing it in the data for january if you stand back and look at the direction of travel for the data over the past year, we are seeing an impact. with the exception of the labor market which is where we have this remarkable anomaly where we still cannot get people to work which is incredible to be in that situation. that will crater. once we get to below 150, we are in recession territory. we don't have to go to a deep recession, but the indicators are we are heading in that direction and it will be over the next couple of quarters. jonathan: payrolls are friday. i'm not sure what the estimates are at this point.

we could have a monster revision anyway. so we are not going back there, there are still many people who think we are going back there. if you think about the ark of the last year or so, we cannot live with two or three or 4% but we are about to live with five. what has changed in this economy that maybe people haven't grasped and they say we are going back there, what don't they get? lisa: we are also comfortable with 5%. this is an unusual set of circumstances. there are so many anomalies compared to previous cycles and people are realizing it's tough. because back to the inversion of the curve and how unusual that is. the other big motley out there,

how calm the system is. you look at where credit spreads are, very contained. there is concern about anything breaking so when i say we don't go back there, show me a reason to go back there, something has to break and so for, something hasn't broken. until we get there, up to 5% and down to 3%? that's a comfortable position. jonathan: it's been a surprise to us in europe, the idea that we are talking for in europe and the italian bond spread market is lower. we are not going back to zero.

lisa: people say that but have they believed that? jonathan: they believe we can go back to pre-pandemic trends. your debt market this morning, he for handle on the 10 year since this for the first time since december. equity futures right now her down 0.4%. coming up, retail earnings and we will checkup with the at retail analyst coming up next. lisa: keeping you up-to-date with news from around the world -- spacex launched a four person crew to the international space station today which includes two americans, a russian an astronaut from the united arab abdomen -- emirates.

they will arrive friday and stay there for six months. it's the first victory for republicans in their crusade against so-called rogue capitalism. the senate voted to block a labor department rule that allows retirement plans to consider environmental, social and governance issues in their decision. president biden is expected to veto the measure. the g20 foreign ministers failed to agree on language to describe russia's war in ukraine. instead of a formal joint statement, the diplomats will release an outcome statement. the same thing happened last weeding -- last weekend. russia and china objected to the use of the word war. best buy is predicting that sales will fall for a 2nd street here in the consumer electronics chain can out with a forecast that missed estimates. high inflation is forcing shoppers to think twice before buying televisions, computers and appliances.

in most u.s. cities, homes are still selling faster than they did before the pandemic. the typical u.s. homes sold last month and spent 67 days in the market which is 20 days faster than the years before covid. areas like las vegas, phoenix and austin are seeing homes sit on the market longer. global news, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> they have restructured, they are more cautious but they are not concerned about the future.

once the consumption started because consumers will have to adapt to higher energy prices and we don't have the savings like we did in the past, at that point, we see a sharp slow down. jonathan: he knows a little something about the european central bank. as you wake up this morning, down a little on the s&p 500 and in the bond market, levels we haven't seen since 2007. haven't seen this level on a 10 year since november. the next stop is jobless claims 45 minutes away. tom:vinny smoghi is one of the

best in europe. that the kind of tone that's making him lean forward. jonathan: it's not about where we are going, it's about what were not going back to. he doesn't think we are going back to sub 3% on fed funds. still -- a cohort of investors are still waiting for that. does the 10 year makes sense? some people think it should be lower. he said you can't live with five but the range is 3-5, not 0 -2. tom: what is the great moderation or are we into something new or is it a new great moderation.

these bankers with the public faces have to consider that even if they don't talk about it. jonathan: does the kansas city fed have a new president yet? lisa: i don't think so. jonathan: we were hoping him to narrow down the data. tom: we will drive forward the conversation and the focus is retail america. the real focus is how narrow the margins are. joining us is someone deeply experienced. thank you for joining us this morning. these guys are not luxury goods makers, they are working on almost grocery store margins. if they have revenues flat either with unit differentials

are price differentials, do they survive? how did they create profit if they don't have the old revenue growth? >> it comes down to inventory management. that's really what is setting macy's apart from its years. inventories were down 3% to end the year and they are expecting the trend to continues. as long as macy's continues to manage their inventory correctly, we think they can hold margins up. jonathan: if you look across american retail, i will let you decide who's good and who's average. they just have historically low margins, how they maintain that in this environment? >> comes down to inventory management and managing your sales within your store effectively. historically, the margin profile

has been low and that will probably not change, probably a low double-digit ebit topper macy's. today, we are excited for how they exited the year and the guide for 23 looks appropriate so casting calms her down 3-4%. the surprise is the eps guide for the year which is better than people anticipated. when you unpack the line items they are giving us, it's on the gross margin line. that means their inventory levels are clean. lisa: will this be the quarter of housecleaning any potential risk and giving a more negative forecast that stock traders know this and will look as that and see glimmers of hope behind caution? >> that's what we have seen over the past week from just about everybody.

if you look at the guidance these companies provided in a place like kohls, meaningfully lower than the street. what companies are doing is guiding conservatively. we are also seeing a deceleration in trends in the month of february and there are a lot of unknowns coming in march, the reduction in snap, lower tax refunds and you guys alluded to the inflationary pressures on the consumer now and they are not going away anytime soon. we are not clear sailing but we like police companies are positioning with 20 three guides so far. lisa: yesterday, we were talking about certain brick-and-mortar stores are being used as return centers for online purchases. . do you start to see that kind of activity at certain storefronts that they are used as the receptacle for packages and not necessarily as storefronts if they haven't fashions of that

way. >> kohls linked up with amazon to do amazon returns a few years ago and target announced plans to start to accept returns. what retailers are trying to do is draw traffic into their stores by all means possible weather is a starbucks out of target or amazon had kohls. getting you into the store is an important part of the business. that's been the case over the past couple of years with digital becoming a large part of total retail sales. lisa: do you expect to consolidation this year? >> we've seen a couple of bankruptcy filings with a lot of talk about bed, bath and beyond so the winners will continue to win and get stronger. some of the weaker businesses will get expose and that's what happens in a case like this. jonathan: good to see you.

on the bond market, look at the two year and 10 year and 30 year. 30 year code just seconds ago is three dollars $.99. there was a lift through this curve. tom: i'm doing some fancy math over here on the 30 year bond and i've never done this before. i cannot begin to say how unusual this is. the 30 year is out 3.7 standard deviations which completely unmanageable. what's important is the previous search was only one point three standard deviations. i have never said this word, we have asked up and healed.

is there, it's on screen. it came close to 4% in february and now we are looking at five? lisa: if we are not going back to 2% and go back to 3%, does that mean a 4% 10 year yield with longer-term u.s. borrowing costs is the right one? this is a reset because six of months ago, we were talking to people who were saying any kind of selloff you buy. oh we reaching a new realization and markets that this is a different era in a new way and it's going to be decades long? tom: the comfort feature here is that we were not a 2%. we had a huge run rate below 2%. now we've come out over that. you can decided the new to is

three. that comfort a motion of being under 2% is not there anymore. jonathan: i've got one question -- if you want to put some cash to work and spoke to your ad visor, you would want to get real return since pressures to get rates. we have to ask questions about what people need to be doing? lisa: that's exactly the question. in the bond market, do you lock in a 4% yield longer-term origin do you go for five months and believe you can just into something different. jonathan: we will keep trying to build on that team.

equity futures are negative 0.4%, this is bloomberg. ♪ lomita feed is 101 years old.

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>> you have to be disciplined, you have to respect market price action. >> we started this year looking at a market driven by better than expected data. >> the market is present in two

much for the fed. >> we are going to be getting back to normal rates of 1.5% to 2%. in the meantime we may go higher. >> we have more price increases to go but there is an end in sight. this is not the spiral in the 70's. >> this is global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -- this is "bloomberg surveillance" with jonathan ferro, tom keene, at least seven preventer was -- and lisa abramowicz. tom: 30 year yield, our words have changed. jonathan: for a moment in time, the whole curve getting closer to five. this builds on yesterday, yields higher and equities down off of what looks like sticky inflation. sticky. added into that, you have eurozone cpi, all-time high. tom: we welcome all of you here

and i cannot emphasize enough as we heard from fort garvey, we have never seen this on the bloomberg screen. the singular point here is the standard deviation move, the diaz -- the oscillation, the 30 year bond from the choir since seen months ago to where we are now is over seven standard deviations. jonathan: the two-year has gone from 4.03% intraday low to 4.19. what is interesting about garvey , for whom it is not just about where we are going to end up, it is where we are not going back to. he does not think we are going some 3% on fed funds. just 3% to 5%. tom: car was brilliant saying we can get back to something as mr. garvey talked about. the 30 year bond is about to put 3% -- about 2.3%.

is that when we get back to, above 2% but not much? lisa: if you believe garvey, mary -- maybe not. what gets us there? what is good to be different about this time? is it the reversal of disinflation? is it globalization or reassuring -- reassuring? what is the time and can persist for three decades? tom: on goods and services, david rosenberg and others say we will see that disinflation. can christine lagarde and jerome powell hope and prefer that? jonathan: now they start to look a little silly quickly. they have to be more open-minded about the two-way risk. i know people feel passionate about going one direction. other people feel confident about the other -- passionate about the other direction.

with that in mind, they're good to go again to five basis points and again after that. you want to know the average of the two years since march 2009? the average two year yield, 1.05%. we are at 4.90%. the low was back in 2021 and we were at 10 basis points. tom: let's get away from suits and bowties, what does this 7.1 -- 7.3% 30 year mortgage, we are not there. if we get there, what does it mean for our viewers? lisa: mortgage applications are at the lowest level in 20 years. people on refinancing, they are buying in--if they can. at what point does this cause -- they are buying in cash if they can. if the mortgage rates come down, people rush back into the market and buy again. this is the quagmire of disinflation because the second

you get a little softening in rates, advances back. tom: bring us over to europe with much higher inflation that here. this conversation in europe has to border on bizarre. jonathan: there's a different pass through the mortgage market. the fixed-rate mortgages are shorter in nature. there is a big proportion of a variable rate mortgages. when lisa was from the mortgage market, we were talking almost exclusive the about the demand side. there are people willing to sell when they have a mortgage 30 year fixed. i wonder how they supply side is going to develop in the coming quarters. tom: citigroup published the referred 5% on china. they elect a consumption model in china. brent crude, $85 per barrel. jonathan: what is amazing about this conversation over inflation, brent crude is flat. it has not participated in the hoorah rmve invasion sort.

you can: 4.03%. equity futures are softer and weaker euro-dollar, holding on to 1.06 after we saw core inflation in the eurocentric. tom: perfect time to talk to somebody really good about writing excessive notes about this turmoil. liz young is ahead of investment strategy at sophia -- at sofi. you say this is a louder and louder debate. what do i do with equities? what do i do with a boring equity account amid the louder and louder debate? liz: one of the things i think has been most challenging for investors and professionals is we are stuck in this range and the market continues to grind sideways between assistance,

support, new levels. everybody knows what technicals are and we continue to talk about them. we could be sticky for a little while until we have a real catalyst to move us up or down. my bet is still down. my question as to what you do in the meantime, we cannot tell people to sit in cash for the next month. however, cash is an okay asset class to use in a portfolio. i would be looking at the short end of the yield curve. other places and equities and think are interesting to look at even though i think we will have more of a drawdown before refined durable upside. i would look at things that aren't as affected by this growth scares. we have seen technology get hit, consumer discretionary communications. rarely are the sectors that get you to the peak same ones that take you out of the trough. you have to change your mindset and look at things like

financials, materials, especially in a higher inflation for longer environment. health care is always a good long-term play because innovation continues to impress me. jonathan: can we talk about the bond market more? if, that people haven't looked at this for 10 years and now they are shifting away from equities back to bonds and they hear you can get 5% on a six-month, 4.0 on a 10 year. they call you up and say what do i do? do i take the six month and think about it in six months again? what do you suggest they should do? >> i do think -- liz: i do think that is a good idea. people haven't thought about the bond market and rightfully so. there was no yield, no price appreciation opportunity. and then last year happened and the opportunity came back. when you look at bonds versus stocks, you look at what is the yield i can get on both. the s&p 500 broadly is under 2%. if you can get almost 5% on a

six-month t-bill, why wouldn't you invest? if you are yield hungry investor, treasury bonds particularly are the right option. talking about the term and how long you are going to put the money away, you could benefit from some price appreciation so the longer you go out, the more sensitive the price of the bond is. if you are looking for yield and you want to partly--in the meantime while we figure out what might happen with the equity market, six months or shorter is better. you can look at money market funds, six-month t-bills. it is important to look at what he said is and have that optionality. if we end up granting -- grinding sideways in the equity market -- if there is a drawdown, you want to have dry powder to deploy into those opportunities. lisa: have the big tech stocks that have drove the gains really

realized what the world looks like in terms of their valuations given a 5% fed funds rate? liz: if you take the nasdaq or the qs, tech stocks are still in a bear market so they have pressed in a decent amount of this skater and the monetary tightening -- this skater -- scare any monetary tightening. we saw in january grow theories of those markets so if there is market stress, tank communications and consumer discretionary likely give some giveback. if you want to look if the stocks have priced it in is inflation expectations. we talk about the fed funds rate and where the yield is really to year yield is. inflation expectations have gone up dramatically over the last 30 to 45 days and that is something the fed watches closely. they want those expectations to stay anchored. if they feel like those

expectations are going up and their losing control of them, you have to start pricing in a tighter fed or a longer higher rate. you have to think about that when thinking about evaluations of tech stocks. the market in large, tech stocks and consumer discretionary, i don't think they have priced in the higher inflation expectations level. jonathan: this was a clinic. thank you. liz young of sophia -- sofi. it is interesting to see what happened with events. without a corresponding rally in the market. typically we have a comes is about breakevens picking up and people would say yeah but this stuff is funky. you have got to rally in crude, this is the pass through. this is happening with crude flat today. lisa: this is an excellent point. this is about services, stickier gauges outside the volatile commodity sectors.

that is why it is notable you see the two year breakeven. the expectations of baked into the markets for inflation over the next two years go from a low in september to 3.3%. if you look at how big that increase has been even with the title policy. jonathan: dear member carl riccadonna? -- do you remember carl riccadonna? lisa: of course i river carl. tom: i remember. -- i don't remember. lisa: carl, don't hang up. jonathan: carl is going to join us from bnp paribas. ♪ >> keeping you up to date with the news from around the world, i lisa mateo. inflation in the euro area fell and underlying price pressures rose to a record. that enforces expectations the european central bank will have

to raise interest rates again. consumer prices hit 8.5%. core inflation rose .3% to 5.6%. the g20 for meeting and india has failed to agree on the grinch to discuss russia's war in ukraine. the diplomats will release an outcome statement. the same thing happened last weekend at a meeting of finance ministers. both russia and china objected to the use of the word war. the biting administration is unable little -- is on a potential collision course with tech companies. is coming out with a cyber chatterjee. it will require congress to pass legislation. shares of macias -- shares of macy's are searching, the department put it than expected earnings.

plus of the forecasted beat the consensus. best buy is protecting sales will fall -- is protecting -- is predicting sales will fall again this year. high inflation forcing shoppers to think twice before buying televisions, computers, and appliances. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪

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♪ welcome to a new era of flight. >> march can be seasonally positive or negative. we are seeing this pattern over the last year where we are in an earnings downtrend and there is a presumption by the market

because the economic data has been better than expected, that the earnings declines are over and that is not what we think. we think the worst is probably still ahead. jonathan:. to catch up with mike wilson of morgan stanley. he believes there could still be a 20% downside on the s&p. we are lower today, down .4% on the s&p. and that the bond market, your tenure is north of 4%. briefly this morning, -- the whole curve, north of 4%. tom: if i am able -- a bull, i am rereading michael wilson this morning. this is an original screen on a

standard deviation. you mentioned the present change mr. wilson is looking at. it is not that i am gloomy, i am sober about where we are. jonathan: we had a years and two months. january was a completely different story. this process, yields down the bit, equity off to the races. february starts, blowout payrolls report. in a month, that is almost 100 basis point move in a single month. tom: the movements are there means after talking to garvey, we can talk to someone who is an expert of movements. carl riccadonna is the chief u.s. economist of the beaker above. he understands tilted tea with aerospace engineering from a small school in new jersey.

you are like kashkari, some of the same curricula. none of us have seen these movements over dell 30. how does it change your economics? carl: it has been an exception -- carl: it has been an exceptional period over the last few months. what we increasingly is the policy prescription that looked like it was about right now seems like we need a bigger dose. tom: that is the goldilocks analysis. carl: it not exactly goldilocks given the persistence we are seeing in the inflation numbers, let alone the residents we are sing in and favor market. is no apparent it has to be something north of 5%. dividend income much the economy accelerates, we could look at a risk scenario towards a 6% terminal fairgrounds -- fed funds rate. jonathan: you are assuming it accelerates?

that your base case? carl: we have seen some signs of re-acceleration. narrative through 2021 through last year was deceleration. i think that is why the fed was able to say collectively we have the right prescription in place, we just need to wait it out. the likes may be shorter than they have been historically, but to refer those to percolate through the system. in doing so, they took their eye off the ball with respect to financial conditions. we saw this easing of financial conditions, that easing started in september and in january we see strong data. one month doesn't make a trend but it starts to look a little bit like the risk scenario could start to play out. january can be a very strange month in terms of seasonal factors. we have to wait to see little bit more signs from the february

economic data, not historically react to one month. jonathan: the next stop is determined powell after the march -- is chairman powell after march 10 to be the report and family get this ebi report. what do you expect to hear from chairman powell? are you expecting the february data to confirm what we saw in generate? carl: can we take one more stop along the way? i think the services ism is going to be a critical report. there were huge question marks around the january payroll print at what the real number should have been considering benchmark revisions, extension of the work week. it looked less like a 500,000 print and more like a 1.5 million print. we know some of that is distortion. i hope february doesn't look like what we saw in january because then we have to tour of the playbook -- then we had to tear up the playbook.

i think we will hear from the chair a lean in to a more hawkish narrative. some of them are teasing that 50's could be on the table. the fed doesn't want to do that when have downshifted and up shifted. you will hear a hawkish mean -- lean in from jay powell when he testifies. this resolute, do whatever it takes kind of thing. we will have 20 of timeframe to get that message across. lisa: usually the shorter he goes, the more clear his message is. when you look towards implemented, anecdotal evidence seems to suggest it is a tight labor market. what would you have to see, whether it comes to payrolls report or jolts. what do you have to see to game out a 6% fed funds rate. carl: we have to see compelling

evidence of acceleration. we haven't seen that yet. we haven't seen compelling evidence. i am looking for 240,000 on non-fund payrolls. let's say you believe in the long inferable lacks of milton friedman's area -- era. even if you think it shortened to 12 months, that is still zero. there is a lot of tightening that has not percolated through the system. i think if we are looking into new lows in the unemployment rate and every acceleration in average hourly earnings, those will be the compelling factors to help the fed think the prescription we have in place is not aggressive enough. there are compelling reasons to think there must be upside risk. jonathan: we have jobless claims in about seven minutes or so. i am so pleased that carl said that. months ago they were doing qe

and rates were still at zero. we have forgotten about that. a year ago, there were still doing qe and rates were at zero. tom: yes. the distinction between a year ago and 18 months ago, where were we in pandemic mathematics? i think there is a case they ignored better trends in cases, hospitalizations, and deaths. but they couldn't be sure of that. jonathan: i question this long and agreeable lags. there are a lot of people who don't believe in this, but where is it going to trickle through? carl: mortgage rates, auto loan drinks -- auto loan rates. lisa: people are going to send you can buy my home, i will transfer it over. just change the title. all sorts of shenanigans are going to happen. jonathan: precisely. in that case, they are just

superlong. carl: you want to be locked into your house for 30 years? jonathan: at 3%, yeah. tom: any article from newsweek magazine 15 years ago, we are not living milton friedman's economy. carl: it is a shorter. tom: the slower -- these the rates of change. carl: it is much more compelling than it was 50 years ago or 30 or 40 years ago. that arguably makes it a quicker transition mechanism. there is still some lag. tom: okay, fine. but all of the -- going around saying long invariable lags. it is baloney. jonathan: is just a way of saying i don't know. lisa: [laughter] tom: i could go on all day.

jonathan: stick with us. claims coming up in five minutes time. in the next hour, richard bernstein thinks this is a new regime. chris harvey of wells fargo recently said these fair market is over. and we will catch up with sarah hunt on energy after the opening bell. lisa, the fate of this program is in your hands the next 35 minutes. lisa: is going to be long and variable lags. jonathan: this is bloomberg. ♪

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jonathan: -- tom: lisa abramowicz with tom keene, the 10 year 4%. 4.91% on the two year yield which leads us to the economics of the moment. i'm riveted not by claims, by unit labor costs. michael mckee will brief us here is best as he can. we are waiting for the data. michael: it doesn't happen until 8:30. we do have a unit labor cost number coming in and it is very strong. we have the claims number coming in. i will give that first.

we will keep tom in suspense. 190,000. we continue to see jobless claims not rise because the economy is slowing but fall because the economy is doing who knows what. we will turn to carlton, meant to ask about that. tom: the long and variable lag. michael: labor costs, 3.2%. that is a revision to fourth-quarter productivity. we are doing quite well year compared to 1.1%. one point 7% for nonfarm productivity. that is down from the 3% while ago. it does look like there is a strong possibility maybe we are seeing companies pay up to get work done. right now, the amazing things --

amazing thing is the jobless claim numbers. they were 192,000, down 2000 from last week. jonathan: -- tom: i want to go back to before we go to carl riccadonna, yield search, four point 06%, up seven base -- 4.06%, up seven basis points. this is a lift to the curve. priya misra will join us in 10 or 15 minutes. this is a dynamic movement of fixed income off of economic data. lisa: what i find fascinating is where it is coming from. it is coming at the long end. this is a change from what we saw in previous times. this isn't just about fed policy, this is about a shifted view of this labor market and how sustainable it is. tom: michael, you are knee-deep

into this with interviews with presidents, governors, they have to be sobered by these deviation moves. michael: they have been as surprised as everybody else knowing that the economy is stronger than anybody thought it was. i go back to the fact that this is not your standard recovery from a standard recession and a lot of the models aren't working the way you think they would. we have seen more and more come out and say hire for longer. yesterday we had rafael bostic raising his view of where rates should go and kashkari laying 50 basis points as a possibility, kashkari being a voter. the fed is looking at this and thinking they may have to do more. they're coded to to get the meeting by meeting and see what happens. right now, they would not argue perhaps with people that are raising their bets in the markets.

if you are betting on higher interest rates in u.s. treasuries today, you are doing that based on information for the most part from a month ago. the numbers are new, but everything else, productivity and labor force numbers are for the fourth quarter. lisa: you have some people who might question the data, say that this area when anybody hangs up when a call to give them a survey, it is not as accurate. do you ascribe to the lack of accuracy of this data based on modern technology and the way these surveys have been collected? michael: they do a good enough job at the bureau of statistics that the jobs numbers are pretty good. the bureau of labor statistics is doing a good job of changing the way it gives the data for the cpi numbers. they're going to private sector providers because sometimes they

cannot get the data on it, basis the way they used to. the real question is perhaps under the unemployment numbers because that is in large numbers telephone survey but we have no reason to believe they're not making it statistically accurate . unemployment claims, the systems are sold in so many states. but the consistency which -- consistency with which we are seeing low claims is some sort of show that we are doing things accurately. tom: we will have mike mckee hanging us and joining us is carl riccadonna with bnp paribas. out eight beeps on the 10 year, 30%. i want to allude to the limits of productivity. lots of partial differentials there. the bottom line is people like

you are hoping and praying our post-pandemic productivity and efficiency is good. that it tells me, maybe not. through productivity into this about, a debate. carl: the productivity numbers are actually deep into negative territory. we have very strong job gains and an economy that is slowing. that is not really sustainable but it can run that way. the inconsistency can last for at least multiple quarters. tom: does unit level cost to a wage price spiral? doesn't lead to a gloom that we are not going to get wage growth? carl: let's look at that labor which cost. is 6.3% as i see on the bloomberg table here. 6% plus, you look at the cost index. these are the elements of wage

price spiral and i know chair powell doesn't think we are in the present spiral but what you are there it is too expensive. this factors into how the price is -- michael: productivity decreased from 2021 to 2022. the largest annual decline in the measures since 1974. tom: that is it. that gets back to five to four years before volcker and shows the scale of this moment. carl riccadonna can come back because he uses the bloomberg terminal. it is good how that works. lisa: aside from your usage of the terminal, as you parse through this, we were talking as the numbers came out that you were looking for more evidence there was something stickier in nature about his numbers prevent out in january. is this you -- is this leaning you closer to that moment? carl: we inconsistent inflation

everywhere -- persistent inflation everywhere, including in wages. there was a rollover in q4 so team transitory was putting on their sneakers to run a victory lap. it is clear that has washed out. we will have to see how far this is running, but see evidence of labor markets softening everywhere i looked except for the economic data. if you open the newspaper, you see hiring intentions down and all of those signals. in the macroeconomic data, you are not seeing the cooling of conditions. lisa: there is a wall street journal article about this. i am looking at 10-year gilts getting close to the 4.1%, 4.08% rounded up right now. i am. if we are getting to perspective where it is a new regime, productivity will be lower, labor costs will be higher. you have a different kind of labor market and workforce that is going to require more investment.

are you singing of signs that we are there? carl: when you have that kind of heat in deliver cost series, businesses have no alternative aside from making the capital investments and technological investments to drive productivity rebound. we searched on a coming out of the pandemic surged in part -- surged in productivity coming out of the pandemic. michael: bls notes they apply the historical revisions they put many jobs report and bcp puts to this release which is white is probably -- which is why it is probably so large. tom: the answer here is, does this shift the 50 beeps at the next meeting debate? michael: i would say no. we have too much data coming out that is more important than jobs and cpi that will have a bigger

influence on the fed. carl: i will be in harmony with mike. michael: you are not supposed to agree with me. carl: the inflation report will be much more critical. tom: what does the inflation report look like? look at germany, france, spain. carl: service sector inflation is driving the fed reaction function. it is showing little evidence of this visionary trent and you want to see that with wage pressures. lisa: tomorrow we do get at" e.m. the services index and that is good to be key. not just the index with processes -- but prices paid for that. code that movie dial? carl: the prices matter but it is an activity gauge so the new numbers will tell us more about his potential be acceleration. michael: the numbers were largely driven by food prices which has not been a big issue here.

we have had elevated food prices. it is a service prices. lisa: flying around. michael: you were talking yesterday about -- carl: core services with or without shelter. michael: you were talking about the differences in the way the u.s. and europe dealt with the differences in the pandemic. europe kept workers on the job by subsidizing workers so they did not have to go out and raise wages like they have in the u.s.. tom: let's continue this discussion. i don't see much spread movement, to see the 10 year real yield to 4.9%. nasdaq is down 1%. 4.07% on the 10 year yield is a stunning. jonathan: nominal yield is what -- lisa: the nominal yield is what i'm looking at.

we are looking at this real trajectory of hyperinflation -- of high inflation for longer. tom: thank you for continuing with us. priya misra will join us in a little bit. we thank carl riccadonna of bnp paribas and for michael mckee for driving this bait forward. dollars strength and renewed strength of this report. jonathan ferro emails in and says "stupid." this is bloomberg surveillance. ♪ lisa: keeping you up-to-date with news from around the world, i am lisa mateo. space x launched a four person crew to the international space station. kit includes two americans, a russian, and any? from the united arab emirates.

they will stay there six months. the first victory for republicans and their present against woke capitalism. the democratic led senate blocked a rule that allows retirement plans to consider environmental, social, and governance issues in investment decisions. president biden is expected to veto that. derek pascoe ones that russia may run out of money next year and his comments are some of the most prominent by a russian business leader. pieces roscoe needs -- moscow needs help from other countries to break the sanctions from other countries. china -- in the biggest taker of memory chips. the money is going to yangtze memory technologies. it may bring an influx of government support in an industry hit by sanctions. and double blow to the capital market, durham's largest building materials company has

picked new york for their main listings. crh plans to move its primary listing from a london -- it's primary listing from london and decided to share its shares on the london stock exchange. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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to keep on 25's and level of. at a certain point in time, this degree of tightening has got to hurt. tom: if you are part of global wall street, it is my requirement he must listen to our entire interview with garvey from financial markets. i cannot say enough about these station about the man from dublin with ing in where we are and modeling a new regime of inflation. its fixture to the short-term data. is other moments, the 10 year is up. to 30 year bond is up seven beeps. we are seeing heaven -- seeing huge moves. lisa: six months ago when people saw these levels, they said goodbye -- they said buy. this. is the key question, or watching inflation that suggests a new regime that means 4% for a benchmark bond in the u.s. is

actually fair value for a longer period of time? tom: priya misra and lisa abramowicz are too young to remember when bob referred stood outside the plaza hotel -- robert redford stood outside deposit hotel in "the way we were" and they sang the we we were. we are back to 1974. someone who has been an expert at measuring this is priya misra of td securities and she joins us this morning. we are looking at the history of this and looking at your brilliant call on inversion. some have been brave and said higher yields, i get a coupon along the way, i want to be brave here in february and march of 2023. did the bravery slip away this morning?

priya: thanks for having me on. you have to be patient. you're talking about having confidence, i don't have a ton of confidence on the front end. we know inflation is the key. we know all services are driven by wages. it is a tight labor market. it is possible inflation remains persistently high through the year and the fed -- we think 25 basis points, they may have to keep hiking. that very front end of the yield curve is driven by data in the near-term. end, that is your neutral rate if you -- near-term, that is your neutral rate. the fed funds rate across 4% only in december. you have to get the economy more than two months to keel over.

people think that interest rates don't matter, i think the matter, they just take a little while to show up in business investment decisions. tom: i want to go to the it takes a while. if i have a standard deviation move for very low 30 year yields of the high 30 year yield, stunning the above the great moderation and i go back to whatever the new central tendency is, how long does that take? is this a matter of six months or six years to get back to normal? priya: economic security ts. you can argue a little bit shorter, maybe it is 12 months or nine months. something that may be making the legs longer is that the consumer entered the hiking cycle with a large amount of -- those are running off. by the end of this year, we

think those third -- we think those savings will be gone. the consumer has to do with high interest rates, tight financial conditions, maybe a stock market that is not as strong as a -- a job market that is not as strong. consumer spending slows down, the job market starts to begin. i don't think you are waiting six years but we are watching those savings numbers. today, if i have a job and i making 5% wage growth gains and i have got savings, and spending. we are just saying you careful in extrapolating that because savings will run out. lisa: how much conviction to you have to load the boat on 10 year or 30 year treasuries? priya: i have more conviction on the 10. year that the 30 year. i don't know about loading the boat. i would lag in some of more.

with little to some at 4%. i think the fed is telling you they have to engineer a hard landing. it is hard politically to get that through, but how do you get efficient down without a rise in the unemployment rate? the fed will have to engineer in the unemployment rate and then these will look pretty cheap. maybe it goes to 4.25. you want to keep adding to it, but these levels in a long-term sense are started higher or the neutral rate should be higher. the fed should be contented -- should be committed to 2% inflation. i do think economy can handle high-yield rates in the long-term. lisa: garvey said people think we are going back to the same type of regime we were prior. you are saying we are going to go back to that. what gives you confidence other

than the fed is committed to a 2% regime? if a 2% inflation regime is different than the prior 10 years, it was a sub 2% inflation rate. priya: there are some structure factors -- that may be moving inflation higher. maybe the next thing is a 2% number. if the fed thinks they want to get to 2%, they will keep policy restrictive for a while. they will keep the front end. real equilibrium rate, those are driven by the economic -- ab is nonzero, may is 50 basis points. we are well north of that in terms of mortgage pricing. lisa: with respect to stanley fisher, who i would suggest codified washer accommodative as his work as vice-chairman, i've

never used this phrase before, and ben doesn't predict this but he would suggest does this data drive us out to ultra restrictive? is the larger pendulum from ultra accommodative to ultra restrictive? priya: i think it is fair. they move in real rates, look at where the 10 year real rates are0 the strength of tightening. we are noticing it in detail yet. this is where we need to be patient. i don't know if the fed can be patient. they're good you feel the pressure to go faster to go higher. we think they will actually go as 25 -- go at 25. we just got there pretty late last year. tom: priya misra, thank you for joining us from the fixed income

of follow-up shelter she is with, td securities. truly one of the great calls of the last 18 months on curve aversion. -86 points in the vanilla. lisa: was she's talking about is we are going to get back to entry-level to something we are familiar with. the reason she is legging into 10 year treasuries even as they rise. how high do real yields have to be to keep inflation around that to present a goal? if you look at the 10 year real yield for the next 10 years, is closing in on some of the highest levels we have seen since 2019. tom: grinding higher. this has been a nonstory and deserves study. lisa: this changes the risk reward valuation for stocks. at what point does that starts to shift things? tom: inside baseball to show you

what we do, we compare the percentage move of dxy with the percentage move of the bowe bergdahl index. with the stronger dollar here, i am seeing some of these he, currencies, including chinese. cny goes to 6.92. argentinian peso will enjoy 1.98. even the turkish lira after the horrific earthquake goes to new weakness. this is a global store we are seeing. lisa: is hard to extrapolate too much from these data points because it seems this market is a bit histrionic. tom: the nasdaq, -1%. jonathan ferro will have mr. bernstein of value and growth. we're looking forward to that. stay with bloomberg through this historic day. this is "bloomberg

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david: the whole yield curve, twos and 30's -- jon: the whole yield curve, twos and 30's. the countdown to the open starts now. >> everything you need to get start for the set of u.s. trading. this is bloomberg the open with jonathan ferro. [bell ringing] jonathan: live from new york, coming up, global rates shifting higher as inflation looks sticky. esg showdown between the white house and senate and chevron getting be