from new york city to our viewers worldwide. bloomberg's real guild starts right now.

sonali: the latest payroll report is coming in hotter than expected and sending yields spiking. we first begin with the big issue. mixed signals in the data. >> overall a strong report. >> payrolls. >> the market continues to chuck along. they are so focused on the labor market. >> i think the labor market is carrying more weight. >> it is very strong. >> resilient. >> the labor market has been the consumer.

the economy on the labor market side and inflation is going to moderate. >> we have to look at that cpi print. sonali: let's take a look at the two-year guild because we are seeing a move higher in yields by eight basis points above the 4.7 level. these are the highest levels we have seen since back in november and you did see a bit in the bond market. tons of volatility. more than a 15 base move and spikes really happening when you cap seeing that strong economic data. but see what i mean in terms of the fed swap.

you do see september being much more likely then you see even in the summer. the first rate cut is factored in for september and the odd for a rate cut has fallen meaningfully. there was a time where we saw 5, 6 cuts being priced in. dallas fed president said it was too soon to begin cutting and kashkari said no cuts at all. >> if we see strong consumer spending that raises the question of my mind, why would we cut rates? sonali: joining us is and how husseini --

>> we really believe the path for cuts have been pushed out later to the fall. we take some reassurance from jay powell's comments. he stood behind the three cuts in the dot plot. that is something he reiterated. i believe in the footage that the labor market is becoming important. there are other factors they are considering and not just broader market liquidity. while some of these statistics look good there are others that would support the idea of because. sonali: what do you think about what it means in perspective of the data we will see next week

with inflation given we have already seen hints of heat when it comes to wages? >> we are seeing a cyclical pickup in the economy and growth expectations higher. does it translate into upper moment of inflation? the argument for rate cuts continues to weaken. learning from last year high growth, healthy labor market can exist with volume inflation and we will be putting that to the test. sonali: do you find these as buying opportunities or do you wait before stepping and further? ed: cost average in something like this you have to be slow giving the momentum in the underlying data in the fact where we started the year

with aggressive rate cuts. where we are out today with this conversation with 2, 3 cuts seems reasonable to me and when you look further down the curve, you will find it attractive. sonali: what do you think is the biggest driver of the volatility we see in the market? there have been knee-jerk reaction to the fed speakers you see the headlines crossing on tape when you see the rate because we anticipate this year? >> the amount of swings and yields we have been experiencing in the fact that we have had a 3% loss in treasuries just to start april. it is just what you said, a lot

of marginal investors looking at every data point in trying to discern what is that the fed will eventually end up in terms of because for this year? we remain steadfast that we think is appropriate for some degree of cuts to occur through the balance of the year and back to the idea of what is attractive in this market integration and treasuries that remain attractive. real yields are extremely attractive. sonali: how do you feel about the ration? are you comfortable going out on the curve with volatility? ed: you are looking at this environment as an opportunity to get into the duration space whether it's through investment grade credit or treasuries. if you are a retail investor making a decision that her cash

when they are delaying the rate cutting cycle. the answer on our end, this is the right time to extend your duration what are two years and lock in this allow the fed to play out. sonali: how do you see the treasury market is a safety trade? do you think people are moving into the marketed any degree with uncertainty? >> it is to save trade. if you're talking about a few basis point moves. we suspect we are near the end of the peak of rates. you would have to see a significant raise upwards and inflation. you have these strong economic numbers play out into influencing inflation.

you are pretty much at the top of the cycle in terms of real yields. this is a time to go ahead and invest. we also like the idea of high quality banks. things to this opportunity if we have a near-term opportunity and raises reasonable to laboring integration traits. -- traits. sonali: what about cold, bitcoin? ed: to what extent do you think the valuation of the salicylates as opposed to what you have? of the treasury side, one powerful argument is that inflation has come down from seven changed to 3%. the notion of the fed put his

back on the table. now the heat is out of the system in the fed put becomes much more palatable. i think credit is going to perform much better had the wood of inflation rose higher. sonali: give a scenario where you see the fed not cut it all? ed: if we look at today's data, one of the silver linings from and inflation perspective is that wage growth has not accelerated. we are seeing riposte numbers in terms of hiring but wage growth continues to slow down. if wage growth picks up again the fed will really question their framework around inflation. thus where rate hikes come back online thus far from the base case. sonali: how do you feel about this idea of re-accelerating

inflation how do you read the data from next week? >> at this point we would be really surprised to see a re-acceleration of inflation. we are not changing the long-duration type of strategy we have been talking about. it would have to be a context shift for the fed to be talking about forget because, we will start to look at hikes. that would necessitate a rework of the whole framework. we are not in that camp. i want to reiterate we have been talking about strong labor data and strong economic data but i don't want to overstate there is concern on the ballot she's about previous creases being solvency issues. that is definitely something the fed is looking at.

even if all the data is wonderful on the service these or other consideration has to have thoughts about as well. sonali: a lot of big banks coming out with their earnings so we will get more information on what this means for the lending sector there. thank you so much for your time on a busy day of jobs data. we will talk about the auction block. we will discuss of credit can keep up this rapid pace. this is real yields, on bloomberg. ♪ ok y'all we got 10 orders coming in... big orders! starting a business is never easy, but starting it 8 months pregnant... that's a different story. i couldn't slow down. we were starting a business from the ground up. people were showing up left and right. and so did our business needs. the chase ink card made it easy. when you go for something big like this, your kids see that. and they believe they can do the same.

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yields and it is time for the auction block. in europe they topped a new record -- u.s. high grain notable names included alcoa and gm financial. in high guilds companies like herbalife got attention. it boosted the size of the offering by 60%. chris shelton says this year marks the golden age for credit allocation and wrote in a note that the economy is slowing, defaults will rise but not skyrocket and dispersion will increase creating opportunities for credit selection.

macon, when you take a look at what he saying with defaults rising and dispersion increasing where do you start to parse your bus? are there places you take your foot off the paddle given this idea that more things will start to break? >> i think credit spreads have tightened a lot this year. we have priced in a lot of the good news but we still have a view of a credit softening. we think we are seeing the signs of fundamental improvement that typically hint that credit is in a healing stage. we are seeing some increase in dispersion. one interesting stat we focused on his although credit spreads are in multiyear tight the distress ratio of the number of bonds over thousand basis points start to rise. we are overall constructive but

much more selective in the lower quality segments of the ccc area where we will have some companies perform well but others will struggle. sonali: how do you think about this dynamic? if the idea is that you have investors flooding into credit market searching for yields are there mistakes being made along the way. >> the flow picture has definitely been strong. we definitely have the view that there are stronger and weaker balance sheets and one of the telltale signs were getting too late in the cycle the duration and weaker balance sheets and unbalance the data has been stable with multiple signs of green shoots when you look at these statements we have through the end of the march in private

credit and term of default rates we think they are using and following. the data has been quite strong including this morning's employment report we have learned that higher funding costs are pressure for corporate balance sheet. a lot of cases we're looking for signs of cracks and on balance we are not that concerned in the cycle. sonali: both of you seem sanguine where do you see similar areas where you feel like you can double down? >> the main bear risk or tail risk we are watching which would cause problems for credit is an insurgency that inflation and with the hotter jobs report there will be more focus on that

and investors will focus more on cpi next week. we are very confident that cpi is not researching quite yet. david this week we have seen ism prices very contained in the fez preferred metric for core cpu came in with consensus. to see more problem we would need to see a resurgence in inflation for the fed to not cut rates and get to a discussion around rate hikes. sonali: do we need more data to get more comfortable putting risk of play or do you find areas where you can double down? >> is the latter case we think leverage loans are a nice place to be in terms of the rest of the year in the mid-six range. high rate and high yield as well we have an inflation that does

come down in the next three have informants provided a nice window and even then high-grade, high yield we look at rates between 4.5, 5.5%. we still like ccc's and high yields and it feels like to us the cycle has more room to run. client positioning is overweight but not excessive. people are not complacent, we are aggressively and longer risk. this is the time to add more risk into the sectors. sonali: i'd be interested about the risks on horizon. how do you feel about where things could start to change your mind about taking more risks? >> i think megan is spot on with no lending. the challenge in that

environment is the market really going to get concerned of the fed in terms of market pricing goes three cuts back to one. we have already priced in three because earlier in the year and credit persisted because growth held up. we certainly assume growth holds up earnings growth and economic growth. i think it takes some time for that to translate into the fed messaging not just that we will not cut but we may need to start hiking and i think that's the salient one. if they have to worry about another hiking cycle they would see credit underperform. we think oar encodes disinflation you will be running into the second half of the year with the election. i don't think the fed really has

time to shift dramatically in the markets ask about another hiking cycle until after the election or the end of 2025. it's a nice time to risk. we are certainly watching profits but i think growth data mean nominal growth will hold up well. systemic risk we are not seeing cracks and corporate credit, cre or consumer credit. sonali: how important is it to see deleveraging happen? if you don't see a rate hike but rates being higher for longer will start to feel a bite when companies refinance. >> we have seen leverage move lower in the high-yield market. of our fundamental database we

saw leverage move lower than long-term need this elevated cost of capital is already having an impact. halfway through the maturities we expect to have to get refinanced, that's a lot of progress already. to matt's point, the refinancing risk to really come back into the picture will be later in the year if we don't get those right because and then you have next year's maturities that will have to be addressed and investors will start focusing on it then. the risk around maturities and the rising cost of capital is still pretty muted. sonali: risk of the rise in both still quite far away. thank you for your time. still ahead, the final spread. the final inflation data gates focus. stay tuned for high-yield. ♪

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sonali: this is bloomberg real guilt it is time now for the final spread. coming up, the north american solar eclipse in neil kashkari sent the warning shot. we have delivery data from boeing. wednesday a big day with fomc minutes. on thursday we have the ecb decision and more fed speak. let's talk about that inflation data and what the expectations are. the expectation is .3% the same with core cpi. it's supposed to come in .4. how it jives with the data we have seen this year. we will be watching it all for you next week as well. from new york that will do it

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♪ >> welcome to "bloomberg markets," i'm sonali basak. and u.s. payrolls rise by the most in nearly a year the fed gets more evidence that a delay in rate cuts still be warranted. let's get a check. we do see a relief rally. the s&p 500 now up on the day. you have it up about 1.3%. nasdaq 100 tech heavy. the dow jones industrial average and russell 2000 also feeling some love. i should say in