from new york city for our viewers worldwide i m vonnie quinn.

coming up, core pce they are expecting the fed to cut once this year. the fed heads into its blackout we begin with the big issue. >> today has to be a good relief. >> inflation is starting to ease up. the fed continues to say we are data dependent. >> i notice a slow down and spending. >> inflation is still an issue. inflation is coming down but

expected to be sticky. we are hopeful we get further cooling and inflation. that should be enough for the fed to cut. perhaps they will find an opportunity to negotiate a rate cut. >> maybe one rate cut this year and look forward to 2025. vonnie: optimism that this is dovish data. some investors and strategies are talking about personals ending easing off but that could be considered a good thing for the federal reserve if wages began to decelerate and it hits the labor market. taking a look month over month, year over you are as expected

and not wildly out of control. i will leave the adjectives to our guests. let's see how the two year yield reacted. there was plenty of supply and those auctions and we saw precipitous drops we are at 4.88 and the two-year. nobel laureate paul romer spoke about inflation in the direction of the fed. >> if we stipulate we want inflation to go down lower. should we be happy with the process that this happens gradually over time or is it right away? my argument is we have seen steady decreases so there is no reason to be more aggressive and risk causing a recession.

wherever the fed fund rates stabilized it was lower than where we are now. vonnie: joining me now is misha. >> i would put it has been 93 inflation data came in as expected in thus not a bad thing. they were getting use to massive surprises to be upside. this is refreshing in the sense that this is more in line with expectations. you could have them reset lower but this is a wait and see game and i think you have a solid two months of data the fed will want to digest before giving any

change in course. if you look it up from a timing perspective it hits us right during that september meeting. as we kick off summer i think the data is a good thing. i want to set it and forget it and let the data role in. erik is this a done deal or cut inflation show re-acceleration before the next meeting? erik: even at the current pace of core pce is tracking stronger than a march. they are a little bit ahead of where the forecast was. this number came in as expected but i would not say it's a kind

of thing that gets me expected about the prospects of a fed rate. the message from wal lner it will take several positive prints to get there. he is not really a generous judge and it tells you the bar is high. it is pretty well priced at this point. 14 basis points for september and the market is already there. on the other sybase a is too early to get excited about pricing in more fed rate cuts. vonnie: some of this data can be bumpy and if we saw a reacceleration what that not give the fed pause given they needed to see several months of

lower inflation in order for them to be happy to start cutting? nisha: this makes it a lot more difficult if the data starts going in the other direction. the recent data prince around labor, inflation have been trending in the direction the fed wants to see it. but to your point this makes it a lot more difficult and if you see outlier data that shows otherwise, a re-inflation or reignition and inflation that will be a problem. the same with labor markets. we have those figures coming up soon and in that case, any chance of a rate cut being pushed back out to later this year or into 2025. this is where the fatah market is trying to keep a close eye on this. the market is notorious for

pricing things in preemptively. one thing we keep looking at, if we have prints that are pointing to a disinflationary trend as a function of less consumer spending you can see that being priced into the market before the fed changes its narrative and that's where the opportunity is today. vonnie: have we seen the end of the five handle for the rest of the year? i want to ask you, september has a slight problem attached to it because there is a election in november. we constantly hear we will go in september if it is right and well if it is not right. how much are you factoring in that there is election even

though we do have a meeting in september. nisha: i think it is a factor. i think the fed is going to be much more skewed towards looking at the actual data. in the year like this where the election is taking place, i think september time frame becomes a little more of a focal point. giving the fat enough data or time to process the data coming over the next two months. not gonna say is not going to be a factor but the fed is going to operate independently as well. these cuts are warranted and if there are enough disinflationary trends is not to say they could not go after september. vonnie: can we at least save the idea of an increase being

the next move is put back in the box? erik: at this stage, powell has been clear and most policy makers with the exception of kashigari is uncomfortable talking about rate hikes. looking at inflation expectation , thus at least 3, 6 months of very bad inflation. this is a real tail risk scenario. to me, the fed is happy to not cut and see how the market absorbs that. vonnie: the worst case scenario is to have to increase and then cut.

our investors to invest it in the short and? erik: the challenge for parking in the front end is really challenging. there is a lot of supply in that area of the curve so what we hear from a lot of investors is that they are trading the range. they are happy to participate. around here, 10 basis points lower they might want to go the other direction. we have to hear it in seen in the data and were just not here yet. vonnie: volatility has been subdued, is volatility trading a potential? do you look elsewhere? nisha: this recent inflation data in sub becomes a supportive macro environment. as we talk about in

conversations with our clients. you are either sitting in cash and looking back at that 5% yield. i think that has passed today's yield environment in relative times we are sitting at over decade highs and very opportunistic entry points and we would invest in a higher-quality basis. the carrier there is an attractive. preferreds is a market we prefer over high-yield credit because high-yield credit spreads are compressed. we have seen the economic environment being priced and spreads and we need a more liquidity ingredient, your higher-quality banks that make up most of the issuance.

those of the types of market as we start looking at those type of yield levels that becomes opportunistic. we are encouraging our clients this is a place to duration and your portfolios. the carrier is attractive in the market start pricing ahead of the fed doing anything if the data continues on the right direction. this could be a good opportunity. vonnie: exciting times. thank you to both of you for joining us today. up next, treasury auctions this month marks the lowest bid to auction since 2021. this is real yields on bloomberg.

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this is bloomberg real yield's time now for the auction block where we look at saw friends and corporate credit. we start with treasuries and a trio of somber auctions. may was the lowest month for aggregate bids covered since 2021. moving to high-grade, this is the fit month where actual sales exceeded expectations. and over in europe, bond issuance tops one trillion euro.

just under half of it sold has been from super nationals, sovereigns and agencies. kathy jones sees opportunities. >> if you cannot get incorporate bonds or the agency paper of these fields even highly rated municipal bonds on a tax-equivalent basis are very high. where referring to not just the treasury market but other places in the fixed income market where you can hold onto these seals for 5-7 years. vonnie: joining me now is john maclean and meghan robson. vonnie: we are getting 85 basis

points is a spread is that enough? meghan: spreads out multiyear types but yields are so compelling. the motivation to buy credit is about carrying yields. from a macro perspective look at today's pc report coming in at expectation the second report that's in line with consensus and we think macro risks are more moderate and specific to credit you look at the elevators supply we saw this month. we expected to slow over the summer. seasonally supportive supply for the summer and credit means we can stay at the spread levels even though they are type. vonnie: how confident are you that is true? it seems strange that we have had this tightness on this

amount of supply and nothing is cracked or moved. we have seen so many new prices in the market. is there any possibility that there could be an episode from now two years and? we will get back to john in just a moment but i will throw it to make it first. meghan: focusing on the treasury market rates a key risk is going to be higher treasury supply moving forward given a living deficits. we will stability -- see stability in the long end of the spectrum. yes, there is upward pressure with the treasury supply and potential policy risks coming in and fiscal deficits. but you also have growth flowing . there will be an offset there and you will see more stability

in the long end of the curve. vonnie: more stability, let me return to that question. john: supply and demand is an issue here and we will see more supply down the road and i'm not sure about the actual demand. what we are seeing allocators shifting away from the core, the rate market into the lower quality of credit markets. the supply and demand technical around treasuries is not very good what we are seeing incorporate in high-yield, a lot of demanded not enough supply. we feel spreads are going to remain relatively tight over the next 3-6 months. vonnie: we are seeing a bigger proportion of potential fallen angels. we have seen that increase. any concerns about particular areas of the market or

particular companies or geographies he would want to stay away from? john: the ccc part of the marketplace has been talked about ad nauseam the access for capital isn't really there. there is some wearing on the tail end of loans in high-yield. in terms of sectors, media is an area that has been challenged and we think will continue to be challenged. we think there's a possibility that real yields are attached to resource rich companies. what we have observed historically that is companies fall into high-yield you are dealing with bigger, capital stocks and time into high-yield coming from investment groups.

we want to buy in front of the downgrade, the opposite of what people historically said. in terms of rising stars that are bid out before they go ig we see a relative balance. i'm not worried about downgrades. vonnie: would you agree, by the angels before they fall. meghan: we are focused on the lower end of high yields. spreads of multiyear highs but we have seen a rise in the distress ratio and high yields. 5% of the market is trading over a thousand basis points which gives us major concerns about those businesses. some in telecom, some in media. we are looking to avoid the biggest names i can fall into that tail. things like elevated leverage and revenue growth

below trend. those would key factors which names are more at risk next. we are still constructive on ig. whereas the risks are skewed to lower end high-yield. vonnie: favorite geography xus. john: i'm going to say europe. there has been no net issuance in european high-yield. meghan: we would always choose europe. vonnie: all right, that's a point of agreement for both of you. i think you've agreed on much of everything today. thank you john maclean and bnp 's megan robson. next we

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vonnie: this is bloomberg real yield and his time now for the final spread, the week ahead. monday features the meeting and we will hear from the airlines. it also sees fresh economic data out of the u.s. from manufacturing. then we will have jobs data and the bank of canada and the nonfarm payroll on friday. a look at expectation for the report. we will be looking for the overall number and if it will be softer than the previous month. this accounts for a gain of a hundred 80,000 jobs but the wages will be in focus after

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>> this is bloomberg markets. let's get a quick check on those markets in the midday hours of the s&p 500 and nasdaq hit session lows in the last few minutes. s&p 500 down .75%. nasdaq down 1.8%, similar to yesterday. the third a down day for the stocks index, similar companies moving this market around. some retailers doing well, some chipmakers not doing so