>> this is bloomberg really yield. "real yield." there is some stormy weather in charlottesville. treasury yields breaking out lower. putting much behind us. we look ahead to payroll friday. we begin now with the big issue of stormy weather. i tend to subscribe to the wisdom of crowds. 2% yield on the 10 year coming. it is an automatic slamdunk

guarantee. this could turn. it just need something to help it turned. >> sentiment matters and markets. recent action in the 10 year treasury is more of a flight to safety. in terms of this most recent move. i think there is a pain trade down to 2.64%. people have to be aware of that. riskth riffraff gets -- assets looking full, bonds look reasonable here. you might get 4-5% yield. that was pretty reasonable. >> during me around the table is greg peters. jim keenan. gaffney.herine

i want to begin with you. when we break out of this titrating race for treasury, where we break out to? we break down to the downside in a significant way. what your thoughts? >> i might have been one of those that is for the upside. we are seeing a bit of a conundrum here. some of it is a slight -- flight to quality. you have some demand coming in that is caused by the equity volatility. you have folks that are looking to be risk and reduce their equity exposure. they are actually coming back into the treasury market. >> do we have a pain trade developing? >> i don't know. bonds are doing exactly as they should. bonds are adjusting. there is a complete and utter

overreaction to the upside. a month and a half ago. the combination of those two factors with data being more mac and more expectations being hi, i think it was set up for bond yields to rally. >> it needs the move is temporary. if it the data, it could be something more fundamental and can have more longevity. what your thoughts? >> the level of the data matters as well. we had a pretty big global growth and a cyclical upside. you are starting to see some of that data weakening up. is some demand. of the last two years, you have seen a significant amount of clients pilot to that equity upside trade and avoid fixed income. you are saying that demand come back. yields are at a much different level right now. >> we have spent weeks talking

about the risk mitigation quality in the absence of treasuries over the last month. what has changed in the last week? the big game back into treasury. back. bid did come when you look at the magnitude of the volatility, i would have expected a bigger rally. i think it speaks to the demand int is coming and -- temporarily. we need to remain focused on the fundamentals. the data for the underlying economy is so positive. we are expecting a good job number. we have not seem rage group. things are really percolating underneath. >> this is a good point. i thought the same thing a couple of weeks ago. i was quite surprised that treasuries only dropped lower by 34 basis points on a 10 year yield. it was a dramatic. what you think that is?

everyone believes that rates are going to move higher. herehas reset the levels is the persistence of equity involved. you see this big spike in volatility. it persisted at a much higher level, relative to last year. that persistence and higher volatility has had a slow bleed into the rate market. >> the money is coming into the rate market? i think that is what is interesting about this. we are flat, flat, flat. flattening. it is interesting that despite , the rolling over of risk appetite, no one is taking out rate hikes for this year. money is going into the 10 year. you end up with 46 basis points.

at one point we start looking at the front end of the curve and say, risk appetite has been damaged to such an event -- extent that i want to start taking out rate hikes for this year? >> that is where the dots and frederick come in. the argument a month ago was, how come for is a being placed -- priced? there was a 100% probability of everything going right. if the data continues to come in the front will see end completely and utterly broken. a buy you saying, that is ? >> not at all. i think there is the potential -- it might be a low probability. you can see an inverted curve because of the technicals. a lot of what has driven the haset to where we are today

been the technicals. that incentive to take risk. i find it really interesting that, when the banks are starting to talk about raising rates and we're not sure if they're going to get behind the curve, all of a sudden you have the fiscal spending picking up. we have seen this tremendous issuance at the full -- short and. treasury yield supply has been overwhelming the market, to some extent. you have incentives from the tax reform that are encouraging money at the short end to be liquidated. there is a lot of selling pressure that is going on at the short end that could be continued to weigh on the market and put short rates higher. >> is that the reason you think the front and is broken -- and is broken -- end is broken? >> that is part of what you are

seeing. there is no bid. >> i think there are opportunities to get high-quality carrier or some income on the front end of the curve. we do like the bank loan market. there are opportunities that you can buy credit instruments globally. you can get a pretty nice carry associated with that. you are seeing a lot of volatility. you certainly are seeing a regime shift in regards where the markets are going. right now, on the front end of get a decentou can income play on the front-end. >> you said the same thing. >> there is no opportunity there. i am not sure you will get a lot of love over it. there is real opportunity. they do have this call to maturity. >> if you look at the aggregate

levels of risk. you think about the return scenarios. they're going to be far more compressed are lower than what we have seen over the last couple of years. andhave to protect yourself get some return profile. the front-end is a very good risk. >> thank you very much. coming up, elon musk creditors are having a serious bout of buyer's remorse. that conversation, coming up next. ♪

>> i wanted to the object what now where the united states treasury launches almost $300 billion of notes and bill through the week. it is the largest supply ever. with the biggest since 2014 with a five-year offering. looking closer at the two-year option, that sale had a yield of 2.13%. europe, corporate cells fell about 30% compared to a year ago. way down by a plunge in february issuance. we get to a flashing warning time -- sign from tesla. a bunch of setbacks,

tesla's notes have plunged. in august of last year, that tesla issue was a record low yield of 5.3%. it has fallen out of bed. is it a tesla issue specifically or is it something broader in the market? >> you have seen volatility increased significantly. it is a combination of aggregate volatility. the credit market is certainly in a high-yield market. on top of that, you have seen the yield merv -- curve move. you have seen some issues with the -- tesla in the unfortunate events of the crash.

combination of events that have weight on my credit. when you look at the issuing itself, it is obviously a very significant market cap company. it is growing. it has to issue a lot of paper or raise a lot of capital. that is certainly going to weigh on the sentiment as well. >> their burning through cash. investors are willing to fund the dreamlike returns. you are a debt holder. you are not going to see the fruits in that dream. what was going on? >>investors are willing to that. i think it speaks to the penalty for missteps. maybe this time last year there was not the same kind of penalty. the benefit of the doubt, perhaps. we are seeing bradley in credit dispersion. we are seeing a separation of

winners and losers. i think that is a good thing. it is not just a single beta trade where you will get rewarded for selecting the right corporate and companies and you'll be punished for making mistakes. that is how it is supposed be done. we have come from 5.3% to 750. if they have to come back it is going to be pretty expensive. richis trading compared to some of their peers in the market. i don't see dispersion just yet. we are seeing some cracks in the high-yield market. the new issues that have it -- been coming to market have been struggling if they do not have strong covenants or if the company are highly leveraged.

the risk some discernment coming into the primary market. spreads have not really widened out. pressuresacing the that greg and jim have already mentioned. high-yield still have a way to go. if the short and keeps going up, it does mean that the corporate costs of borrowing are rising. sot is interesting about many folks who were jumping into the short end to pick up that additional yield, with high-yield credit, you want to longer runway if they have to grow into their capital structure. tesla is a good example of not having enough runway to grow into their capital structure. >> talk to me about that. the opportunities that you might see in high-yield at the moment. that is where the outperformance was.

continue? -- that continue? >> they can. if you just take a step back, growth is certainly an uncertainty. growth is still pretty healthy. corporate earnings are strong. inre is a regime shift regard to the structural volatility. that is going to have more volatility. when you look at the fundamentals, they are still pretty strong. you have seen some backups, they are still pretty tight. can you pay back the debt? it is so pretty good. we are debating the level of growth but not at recession. want the most equity like

products and securities and fixed income. the performance will come. the capital returns will come. this is where the high-security got smashed around. some people might be screaming at the tv and saying, that is a bank story. you see that start to move the other way this week. tell me why that is still going to be the story. why? buying, you are buying a solid growth story that is leading to good corporate earnings. there is not going to be volatility. you're going to be in a. of time or you will see more dispersion in assets. the winners and losers will start to play out. there's going to be spikes. credit and general does not have the upside. in this environment, you do have the ability to get some income that is now mid-single digits.

you are protecting against that throw down risk they saw in equities in february. >> you're going to have to give us a queue of what you have been doing. what have you been looking at? >> we are interested in the short end of the investment market. what is notable is that you are seeing stress and strain on investments on the front-end and not in high-yield. it has underperformed its data. have been more involved in triple c's. the part of the market that confuses me the most in high-yield is the short doubled the paper. i think it is well over owned. no upside it all. nothing but downsides. i think the rotation there is something to look at. >> there sticking with me.

coming up, we're going to run you through some of the markets. a big move it along and of the treasury curve. a very small bit of the front and leaves us with a much flatter curve. ahead, the week ahead featuring a new month and a new u.s. jobs report. this is bloomberg. ♪

>> it is time now for the final spread. it will be a short trading week and some areas of the world. mainly due to easter monday. we look at the march jobs report in the u.s..

our guests are still with me. up with awrap things conversation about what has been happening. the conversation continues because the grind high continues for how many days. what is a signal that is flashing for you? >> i think we want to watch and see how long this is going to persist far. that a market consensus when we reach april 15 and we start getting revenues and in the u.s., you are going to see that come down. we should pay attention to that. if it continues to persist, we are likely to start to see the market and credit risk react to tighter financial commissions. >> how close are we to that actually happening? i agree. i think it is about persistence.

the issue with this is that it is not a single factor. it is not just bill issuance. at play. other factors it is hard to disentangle what the true diver there is. if the continues to remain at these high levels, estimate that tightening is already happening. spreads tong credit tighten. that is something to really worry about. >> we shouldn't waste too much time if it -- talking about if it is a flashing sign regarding credit stresses. they say it is not. .f you have real consequences have you seen it starts a fight at all -- start to fight dental? all?art to fight at is an expense on it. you are seeing people shrink

their books because the cost of leverage and borrowing is mark spence of now. you are seeing some of that play again. part of the reason you see it certain we can out -- it has an impact when you think about some of the foreign buyers of u.s. credit or assets. you have seen some selling on that side. it is having an impact. the arbitrage of leverage does not work in our favor. >> i have put you on the buckets and we do a quick round of quick questions. have we seen the low for 2018? >> no. >> no. >> yes. note, the fedar is still coming. >> it on the way. >> no. >> get out of the way. both companies have burned

through cash. both companies had to raise a lot of capital. netflix. >> tesla. >> don't make me choose. netflix. >> there we go. thank you very much for your time. that doesn't for us. we will see you next friday at 1:00 p.m.. this is bloomberg. ♪ retail.

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