was a successful meeting. the president was flanked on the one side by his secretary of state rex tillerson and defense secretary james madison. we know there was a decision --e to load 59 tomahawks flanked by secretary mnuchin. many of the top cabinet picks right beside the president there. let's go to kevin's a really, who is at palm beach reporting on this. after this bilateral meeting they go to a working lunch. any idea what may come up at the luncheon? a national security is the focus on north korea as well as trade agreements. the president is expected to depart mar-a-lago at approximately 2:30 p.m. but

president trump with national security council being cleared. they then got reports that syria's president bush are al-assad had used chemical weapons. he headed into one of the most if not the most high profile for since visits he has had he has become president and taken over the white house. the two leaders of the world's largest economies had given word 59military officials to use tomahawks to deploy a military strike in syria while meeting with president she. the drama that has unfolded here politically in the past 48 hours has been remarkable to say the least, given that we are just

under 80 days into this president's first term. >> we are getting reaction from leaders all over the world. verbal support to iran, criticizing this move. anywe act -- how we had reaction from chinese officials? are they keeping with happening in mar-a-lago separate from syria? the point thatde they are hoping the u.s. will use political avenues in order to address syria. of a tempered response compared to our european allies, who have praise president trump for what they viewed as a measured and appropriate response. it is still different from the russian response. russian officials had spoken out publicly against president trump's response, despite president trumhaving virtually all meers of congress supporting him today.

some argued he should have received congressional approval before. if you look at the table of folks seated around the chinese president, around president are the senior administration officials, people like treasury secretary steve , who will play a key -- when you talk about auto industry, these are the types of things that the conversation is being discussed. that is what i am told by sources. >> kevin cirilli there at palm beach florida. the relationship is outstanding.

the vote was 55 to 44 according to the supreme court. the swearing-in ceremony will occur on monday. justice roberts and kennedy will -- administer old the both. neil gorsuch our next supreme court -- >> let's look at how lumpy it is. just look at how lumpy the maturity profile is. 2017, 100 50 billion. 00 -- it is sevens, it is tens, it is stuff they bought a long time ago. how do you manage the rolloff of that passively?

want to be passive they won't be predictable and if they want to be predictable they can't be passive. the answer is we don't know because that will depend critically on rates and the economy. i think that is a challenge for the fed. the fact we don't to know more i think it is pretty ridiculous. >> if you remember back in 2013, , theonger they delay longer those holdings get. qe is distorting everything in the market. >> you have to put this in the context of bank lending.

you look outside the u.s., i or theuropean tapering japanese change of policy would be a much bigger deal. >> the federal reserve will pull back on rate hikes. >> delly deserves credit be honest. they are rolling off the balance sheet and put up pressure on longer rates. if we do more on the balanc sheet lead mutts -- sheet we must do more on -- that another wildcard on fixed income depending on the balance sheet. plot for what it's worth, i usually don't care much about 19 the significant way.

>> i think broadly. -- but saythey do they taper 10 billion. the part of the curve they want impact more than the fed funds. people think may the fed is behind the curve. maybe that is not a bad play and it gives them more firepower. >> what is the trade? divine -- we have to define they. i think you need to watch what is happening there. the curve continues to flatten the way it has been over the last two months. that is something we are watching very carefully.

>> we shouldn't take for granted. the markets are too relaxed. we have had transition to fed chairs before. don't think we ever had this much potential turnover. seats in next year. i think markets are too relaxed. >> does the composition change from the sense that they come from april -- from a professional background, or does it shift from a dovish to a hawkish? think db at -- i don't think academia versus non-academia is important. whoever president trump nominates better have a crisp and clear way of communicating the policy.

>> yields are going to go high, they are going to go high. the wall of money chasing fixed income assets is going to be a problem for things to move materially higher. and the u.s. isn't the most if youve bond market, look at the spread of italian 10 years versus italian treasuries, it has moved. but things over there look very expensive to me. it could come from europe. whether from europe and the u.s., that could be the pain trade. >> the question i would ask for you is if the reach is -- do think people are still

looking for return. with fixed income i think there are plenty of opportunities you you go away from the traditional asset classes. hugh basically need flexibility today. why constrain yourself to one subset when there are only a handful of opportunities? >> we had to the auction block bit of a. -- a political shock and south africa. this is bloomberg real yield.

mark: time now for a check of bloomberg first word news. today the international community is reacting to yesterday's in syria where -- excuse me, president trump ordering airstrikes on syria's military. according to president trump, it was an act that the international community had to take. the swedish prime minister says the country has been attacked in an act of terror. there are media reports the death toll was higher and an unknown number of people were injured. the prime minister spoke with reporters. >> the government is doing everything to find out what happened. the public to be

careful and to listen to police broadcasts. >> president trump said today thatis relationship and chinese president xi jinping is outstanding. says progress has been made. talks works but to do focus on trade and north korea's nuclear program. over 120 countries. i am mark crumpton, this is bloomberg. >> this is bloomberg, the real yield. $58 billion of benchmark eligible ea bonds. looking deeper into the numbers, that sector evening outpace

supply. more than six times the amount. a government bond sale this week. -- this blanket e.m. trade. what is the takeaway? offers value else come it is a consensus trade. prices important. e.m. but in the context of a risk portfolio. it is one of the few places we will take some risk. >> what you have seen with that, iss, mi doing that what is driving e.m.? or am calibring was goin to happen with china and say on

going to buy emerging markets because of tt. >> you are starting with valuations that a quite attractive. europe is growing, japan is growing. those things are all contributory. >> i only add that the china story is big. jinpinga year where xi wants everything to be nice and stable. we had a bottoming out of the commodity cycle. >> we hear a lot of guys talking about go passive, go passive. when you have a portfolio that forces you to drop out of south africa that, is a time to pick up the pieces?

>> rules driven investing and fixed income causes you to do the worst things at the worst time. the big downgrade cycle, those investors are for sellers just as the market turns. that cuts off between investment-grade and high-yield. >> i think it is a function that each of these asset classes has things that are attractive in them. yourself you anchor twin index created by technology companies? >> not to mention the perversity , if you are owning the index you are owning the countries that issued the most that. >> look at the most popular index. bloomberg barkley index.

-- whatbig elephant made that due to a passive investor? looking at e.m. right now. >> from our perspective you are supposed to look at these -- these will countries. i had a colleague that said if you do not know the capital of the country -- so where? been finding opportunities on mexico and brazil. >> do you want to buy into those things and hedge on the protectionism side of things? when the rhetoric was at its worst, we have similar views on mexico and brazil.

we see that transition in the developed world. the developing world getting more populist. i would reinforce in the context of the portfolio. >> i want to getn this week. it has en another rough week as we bring yields to new lows in 2017.

a shortened week ahead due to the good friday holiday but still full of activity. and banktary of state

earnings stash and the new york international auto show. with auto debt of all kinds climbing with the value behind , a 14% jump 30 days from a year earlier. i want to bring back the roundtable. the story with auto debt, you tell me why this isn't subprime. >> it is not quite subprime. it is more dispersed, it certainly doesn't affect the big financials. i think there is fine -- there is value you can find. it is certainly something to be concerned about. there are things building and building and building, which

don't that all your chips. don't that all your chips. >> this is another indicator that there is not enough yield out there. when people find something that works they eat it's like a seven-year-old eating ice cream. enough to get yourself sick throw up and go at it again. >> is it something else? is at the loans linked to an auto company? what is this going to affect the most? >> i think you need to look at each individual alone, scrutinize it. i would defer to my security. shows the benefit. you don't want to go in their blind. >> certainly it wouldn't be a great thing for retail either.

these are people running out of cash. thing fort a good retail space, which frankly doesn't have a lot of good things going for it. debt when loans, auto they are trying to boost the economy, what is the potential to do that without damaging your overhang? ofwe did have a lot deleveraging for five years ago. athink we are getting to where things are getting stretched. about a $30,000 car versus a 4000 or $500,000 house. i don't think we want to draw too big a connection. cars aren't going to be systemic like the housing. >> even though we do get the bigger wage packet, how are they going to spend it? >> they are going to spend what

is left of the packet after they paid a student alone. people seeing effectively spend future earnings to sustain their existing consumption. savings rates are being eat into to maintain a consumer led growth. iss the kind of thing that going to chip away over time. >> it all comes down to this, whether the bond bearers continuously under estimate the structural forces that are going to keep yields lower? >> i think they are. they forget about demographics, they forget about technology and impact it is on our country and on the world. >> it's a global bond market. rates are negative on a big part of the yield curve.

it was slow growth and these other challenges. >> one question, yes or no answer, is subprime auto the new subprime housing? >> no. >> it's now time to pick up the pieces in south africa. rich? >> i don't know. >> can the fed normalize the balance sheet? >> yes. >> andriy echo >> yes. >> higher low? higher. >> that does it for this week. bloomberg real yields. this is bloomberg real yields from new york. ♪ so you're having a party?

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>> you are looking at a beautiful sunny midtown manhattan from new york city. this is bloomberg markets. let's get straight to abigail doolittle. we want to check in for market reaction. a lot of news. we had the missile attack on syria and a lot of uncertainty for investors to deal with. an intraday chart of the s&p 500. small whip saws. not a lot of convection -- lot of conviction. treading water to some degree. has been a haven bid on all of this. we have bank of america. let's take a look at the defense contractors.