♪ >> from new york city, i am tom keene in for jonathan ferro, with 30 minutes dedicated to fixed income, this is "bloomberg real yield." ♪ coming up, a busy show. yields move higher after a mixed jobs report. august will be revised higher. where is the wage growth? draghi and the ecb struggle with delaying balance sheet adjustments until december. is it real yields lower for longer?

the city and wall street consider how fixed income research will survive as we know it? we start with the big issue today, without question, the u.s. jobs report. >> one month is noise, and the next few months will be noisy bigs of disruption with the hurricane. >> it is on the softer side. it benefits all their positions in international markets where we think returns will be higher, but we should not forget that this number will be back on track before long. >> claims are much more stable than payrolls, and they are not showing any problems. we have had ulcers of numbers. when it is not confirmed by other data, consumer confidence remains strong, i think the market is going to blow this off. >> that which number has been flat for a long time. we need to put more money back

in u.s. consumers pockets. that is what we're trying to do by wage growth and tax efficiency. >> i think the fed is focused on wages and inflation. eak report. tom: the best thing about bloomberg today, the jobs report and those important voices. when i talk to jonathan ferro, i set 30 minutes, you got to be kidding me. we could do three hours. we have a great lineup. andrew chorlton joins us from schroder investment management, lisa abramowicz from bloomberg gadfly. she really didn't want to join, but she said she would. david riley with us in london, an important one for fixed income and credit strategies, bluebay asset management. we are going to dive into the news flow.

lisa, i have to go to you first on harvey. it has been an emotional time. the damage and the many deaths. as you go into september, what does harvey mean for the fixed income market? lisa: the question is does it have a broader effect on the u.s. economy? when you talk to economists, they say it could have a depressed affect over the next few months, but over the longer term it could lead to higher inflation investor growth as people put money into infrastructure. the scope and scale, the population of houston, but the answer is the fixed income market is so deep, even the fourth biggest city does not move the needle. lisa: that is right. it is not really fixing into their best fitting into their expectations. tom: before we go to london, let me turn to andrew chorlton. how is august?

did you survive in august? it is always a difficult month for fixed income. what does it look like? david: august showed a correction for fixed-income markets. which is only appropriate, we hit post crisis lows in credit spreads in late july. it is important that we gave a puase. we would still suggest remaining cautious. tom: today we will look at the issue with mnuchin. let me go to you on the broader strategy. there is any number of ways with the jobs report and the like, let's go us to the ecb, the bank of england where you are, and the fed. in september, what central-bank action will matter for you in

fixed income? david: i think the ecb and the fed will matter a lot. expecting preparation for an october announcement, but your own reporters today have been suggesting unnamed sources will be pushing that to december, which would potentially be a surprising and even risky move to leave it so late. theerms of the fed, despite weak payrolls report, if you step back, there's nothing in that that stops the fed from announcing it is going to start ininking its balance sheet october. if it did not make that announcement, i think that would be bad for risk assets. i think people will start thinking, what is the fed concerned about that we are not? tom: price down, yield up.

is that one of the concerns that we see finally yields higher? the challenge with the u.s. treasury market is it is the only safe haven in the world with liquidity. you still get the risk from geopolitical events, you have the fed taper and ecb delay. that is appropriate. 2018's qey said before they know what to thousand 18 will look like? tom: let's go to the chart now. this is two-ten spread. we have been using this time after time. we go to the trump election, up we go. then we rollover. you have done this really only on gadfly. the ramifications of the rollover and the clarion august retest of new curve

flatten this. it is not recession. lisa: this flies in the face of a lot of optimism we are hearing from analysts saying the stock market has more to go, dismissing the disappointing jobs report this morning, saying we will see better wage growth next year. this contradicts that. this says you are wrong. this creates real tension in the market. tom: i love that. david, are you wrong? the idea of curve flattening. we had a dollar bull market. that worked out. we have had a dollar bear market. are you humbled as we go into september? david: we have not been humbled in the summer. we are long in terms of a lot of our assets. the treasury yield combined with

the weak dollar has been a favorable backdrop for emerging markets. it is interesting in terms of that flattening. the one question i would raise is, if we saw the 10-year move substantially below 2%, what is the tail in there? when we look at the data, we have a great ism today, so all the data suggests the global economy and u.s. economy is doing great, and we should have higher yields as a result. tom: are we going to get to a point where the real yields are at issue? are we going to see inflation rise? david: there is certainly a skewed towards higher inflation breakevens are

currently priced. the global economy, the u.s. economy, emerging markets, china always report somewhat higher real yields than we have at this particular juncture. to some extent, it is deflating the disappointment trade around and theflation geopolitical risk, hurricane harvey, temporary factors as well. tom: it is a huge conundrum, this idea of whither inflation. we talk all day nominal. are we going to see diminishing real yields as we see diminished real wage growth in the u k the summer? think wage growth is is surprising and continues to surprise as strong as the jobs market is. the people that really wants inflation are ironically central banks. the easiest way for them to

deflate these asset bubbles is to use inflationary pressure to do it. tom: is inflation good for schroders? i think we can obviously manage assets in many market environments. we think this can be used as a , but against risk asset whether it is good for schrod ers, i think most things are good for schroders. tom: we are going to come back and look at the malaysia. lisall come back with abramowicz, andrew chorlton, and david riley. coming up, a look at the auction block. u.s. treasuries offering more than $200 billion in notes and deals this week. this is bloomberg. ♪

♪ tom: tom keene from our studios in new york. this is "bloomberg real yield." this past monday, the u.s. treasury issued more than 130 billion in notes and deals. -- and bills. we're focused on the five-year 1.72%.lion debt sell at just 17.5%,ers took an all-time low. the next day, four-week $25

billion treasury bill auction in the final moments of calm. congress returns to work next week. that matures september 28, the day before the deadline that the treasury secretary has laid out for lawmakers to raise the debt limit. , thanks tothe north a recent canadian dollar debt auction by apple, foreign companies issuing in loonies, the canadian currency, have sold more than 15 billion canadian dollars worth of debt this year, the biggest year for maple bonds since 2007. chorlton, me, andrew david riley, in london. we will keep it going here. and lisa abramowicz from bloomberg radio.

here to translate. there are two items i want to talk about in this section. i want to get to the canadian apple thing in a minute, but that low ratio at auction. what does that low ratio mean? nobody wanted the paper? lisa: there is a lot of question right now about what the real rate should be. just as we have been hearing from david and andrew given the fact that what we are seeing from manufacturing now seems like we should be getting more inflation. people are getting a little jittery. tom: david riley is doing strategy. i'm doing the tv radio thing. lisa is in the trenches on bond coverage. schroders.ctions at what is it like on the floor? andrew: we are trying to take a longer-term perspective.

takenk you have got to with a pinch of salt a lot of the data in august. data, peopleolls are saying that to school kind of messes with payrolls in august. timinget closer to the of the debt ceiling, you will see more noise, but mnuchin's comments on bloomberg tv earlier this month, they are going to get it done. volatilityotentially picking up and some opportunities as a result, but we don't see something catastrophic. tom: you're trying to talk like me. be careful with that. david riley in london, one of the comments i always remember from john templeton, the idea of the shortage of paper. that is a critical concept. is there a shortage of paper in

the core bond market now? there is a shortage of safe assets in the eurozone. that is something the ecb is having to shoulder with in terms of their bond buying program. andsafe asset is the bund, the german government is running a balanced budget, so not really doing the issuance. in terms of a corporate supply, one of the reasons, and sort of alluded to this earlier, but a inson we have seen spreads u.s. investment grade over the summer months are two reasons, because supply has been so strong, and we expect another cream of supply coming into the market in september. we have been moving more into euro investment grade paper. tom: you want to mention

something? lisa: people talk about the glut of investment grade issuance, but we haven't seen the same high-yield issuance in the u.s.. 2014, 2013. the blue lines in my terminal show it is up year-over-year from the same time last year. we are not seeing record bond issuance. this is great. you can navigate all the custom dates you want. you can do the same year-over-year period. i find it fascinating this conundrum. this is why yields in the junk-bond universe are going down even as we are getting outflows. tom: are apple and other companies in the u.s. still going to go abroad to other

companies to issue paper? lisa: they are diversifying their balance sheet. if you have other businesses, one at issue in loonies? providingabramowicz wisdom from bloomberg gadfly today. let me look at the markets now. , andat twos, tens thirties. that green number, that should be three basis points lower on the yields through the week. it has been a tumultuous week to say the least. there we are with the one week you. ♪

♪

tom: i am tom keene. this is "bloomberg real yield." up overl spread, coming the next week, the interesting flow of news to get your september started. debate, andection the united states congress returns from recess. canada,ision later from and the ecb. still with us is andrew chorlton, schroder investment management. lisa abramowicz of bloomberg gadfly, and david riley in a london that will forever be changed, with bluebay asset management. i want to talk about how important -- in crisis, guys like you and andrew, the fixed income people are out front of equities. how important is fixed income lowerch with the new

2?cing of mithet what is going to happen with fixed income research? david: it is a good question. we don't know the answer to what is going to happen to research into fixed income for brokers. right now, we and many others are going for a protest of assessing what is available for toearch, how we're going absorb those costs, what it means in terms of our clients, but fundamentally what we have been doing and reflects our basis as a house is strengthening and building our in-house research capabilities. one thing about fixed income capabilities when dealing with

macro, a lot of that information is public good, it is out there. we have good access to policymakers as well. we think we can absorb this impact. tom: andrew, you are in the trenches on this. how are you speaking? you are on the buy side managing money. they are on the sell side. tell us what that dialogue is without giving away the secrets of schroders. have internally produced research, a strong income and equity team. that is getting most of the investment. as the negotiations with the banks continue, i think there will be a quality element to it. tom: fewer people. andrew: some people not willing to pay a penny for it. lisa: this is why you are seeing

banks lowering and lowering their prices. credit suisse lowered their price to a competitive rate of zero for their fixed income research. tom: i interviewed james sweeney there, and he has children that need to be fed. lisa: this is my question. how does this also follow the mifid guidelines? how do they provide it for free? i don't know how that works. they will set an interesting model. tom: can we go longer? i think this is absolutely critical. do you end up talking to only five big firms or do you go back to boutiques? two was designed as an investment to trade. we don't trade unless we think

we think we're going to make money for our clients because the performance pressure is such. i think you will see higher quality research produced internally and externally, and the weekends will not be with us. -- weak hands will not be with us. tom: lisa abramowicz, andrew chorlton, thank you for joining us. david riley in london. thank you for joining us. we never see each other. people think we do. we sort of like go down the hall. ♪ york, that does it for us. we will see you next friday. jonathan ferro. "bloomberg real yield." ♪

>> it's 12:30 p.m. in new york, 5:30 p.m. in london. i am vonnie quinn. welcome to "bloomberg markets."

from bloomberg world headquarters in new york, here are the top stories on the bloomberg and around the world that we are following this hour. it's jobs friday. the economy added fewer jobs than expected. wages once again disappointing. we will take a deeper look at the data. ceos and business leaders across the country are urging president trump to keep the so-called dreamers program. what tim cook and jeff bezos are saying about to the program that prevents the deportation of young people brought to the country illegally. today, retail stores will promote their movie collection in a jedi toy blitz. let's get a check of