this is bloomberg real yield. coming up u.s. gdp the fastest growth since 2014. the president says there is more to come. looking ahead to a big week of decisions. isbegin with the big issue this as good as it gets.

>> this is about shifting the growth away from the lower for -- everybody has this growth fading over the next two years. while this one part is interesting and it gives us information i'm not sure it is going to fuel a level of exuberance that isn't supported by the fundamentals. you are talking about global turbulence. the market is starting to anticipate some of the factors. maybe were seeing signs that you nothave sustainably higher necessarily for our five but not going back to two. -- lobal head victoria let's begin with you.

is this as good as it gets or can we break out? >> i think our trend growth will be high absolutely we will be closer to the 3% growth that we have been striving to have on an annual basis. today, i don't anticipate is going higher from here. there is a lot of talk that it is a sustainable number and to an extent there are things that are sustainable. things that will be one-time charges. the exports were higher because of the increase in exports so there are things that will back off a little bit. on a trend that basis we were previously. extent extent can it be sustained? >> we have seen economic activity higher largely to do with the fiscal stimulus. as the fed continues to raise

rates, you will start to see this growth rate come down. you will start to get an equilibrium. you will start to look again at the stable growth rate. thingspresident setting up to blame the federal reserve is growth rolls over. >> the fed has its job. it is independent. it has an inflation target. inflation is where it needs to be. the growth rate is very strong. the labor market is tight. the fed has laid out a very steady path of rate rises. it will be hard to see him moving away from those rate rises. >> the labor market is not incredibly tight. maybe the fed needs to slow down

to see the results of their effort come through. how do you see that tension between the fed in this administration playing out? >> they are not the first administration to blame the fed. two pushback on the fed so of this is normal politics to me. as she said the fed has a job to do and they will do it. toeveryone i have spoken says were going to have a fantastic q2. things will get worse to 2019 and 2020. the fed will carry out hikes next year as well. does that still make sense you? >> if you look at the forward spots it is already placed in. it is there. i think the risk of inflation coming, there could be a surprise. i like the idea of the fact that the market is pricing in flat and no inflation forever and i

like to take the other side of forever. and a sense yes, when you look at the inflation numbers look at the food numbers. ppi food numbers are now negative year-over-year. that will flow over to cpi at some point. anticipate that we will see the inflation numbers start to come down on a headline basis. you have seen on the shoulder compulsion -- component for inflation, the vacancy rates have hit. around a little bit as well and should bring back some of the inflation number. the fed i don't think will be in a rush to raise rates but they have a mandate that they choose to with the strong growth numbers that we received. walk us through quickly. >> currently we still say that being long on the front and the belly of the curve.

at the long end of the curve we think you will start to see some steepening of the curve. i know it is held down by some de-risking by pension funds and it's hard to see when that well decline a little bit. particularly also when you look that willk of japan, feed through to the u.s. treasury curve. we expect the increase in supply coming through we expect to see -- eepening eventually will that steepening the policy driven or by the economic fundamentals? will the catalyst be a bank of japan moved to change the yield curve control that they have had for quite a while now? >> that is right. they have had control for quite some time. we know that they want this to start to steepen.

we are -- inflation is still pretty lackluster but they need to see profitability. they need to see the banks prop of life insurance. targeted on inflation monday -- mandates. the profitability requirement for banks. >> that's am thinking about. the policy objectives of the bank of japan were clearly to the portfolio transmission mechanism. they want pension funds to take more risk to get out. if you change the yield curve control. are people going to start buying jgb's again? you'll have to do more than a minor change to make that happen.

next week they will say they're moving towards removing the yield curve control. i don't think they're going to give a big number that will scare anyone. it plays into the overall q2 picture. the fed then a ecb and the boj was lacking. for rates toe case be rising a little bit over run the world. >> let's talk about the spread that has been superwide. it has widened much of this week as well. could see that spread start to tighten. do you expect to tighten? >> i think it will tighten. this issue globally through the next 12 months. with the balance sheets that you have. obviously the thread is -- fed is tightening.

we just spoke about bank of japan, you see it there. that should moderate as well. over the next 12 months if you look at the whole group of central banks, you have quantitative tightening going toward the end of 2019, that will make that spread come lower. i was speaking to clients of the conference this past week and we had a chart up that showed the otherr u.s. against the tenure sovereigns. there is a huge gap there. that gap is holding our long and down and that will have to narrow as quantitative tightening becomes part of anyone's. >> expectations are so low to the ecb. very little was priced in. we will start to see that play through a little bit more.

expectations are so low the bar is so low that you concert to see a little more forward guidance from the ecb and you --rt to see or an adjustment we concert see that spread narrow if you start season more forward guidance from the ecb as well. program johnthe fox continuing to vote outperform. that's up next. this is bloomberg's real yield.

andand him and him

bloomberg real yield. the treasury $190 billion through this week. 36that we focus on the billion dollars sale of five-year notes. quickly moving past the threat of additional u.s. sanctions. the bulk of the notes more than three times oversubscribed. high-yield bond issue so far as 22% lower than the same. last year and the lowest since 2009. to what extent does the supply story is what it's really supporting the junk is to jump? yes the supply story is there

but you also see strong earnings going on. plus earnings growth right now. the combination helps to keep that low. theegards to high-yield is spread between high-yield and investment rate. that stay consistent as well. that is one of the canaries in the coal mine that we watch. we have not seen that yet either. it is strong on investment grade and high-yield. >> morgan stanley recommending to avoid triple freeze. our answer is the credit markets are forward-looking. i want your view. overall we're relatively cautious toward high-yield at the moment. --ot of it is down to supply more supply and ig and the lack

of supply and high-yield. when you look at the risk-adjusted returns it can get to high-yield versus emerging markets versus the supportive debts of european ige issuance, we have a preference for those rather than high-yield. an argument that growth rolls over next year the corporate earnings start to this . we're having that conversation of the core were just delivered gdp growth of north 4%. >> all the markets are forward-looking looking. you look in group he is going to be strong but the fed continues to hike as rates increase. models. at the business that has to be a factor the take into account. from a high-yield story, there are a couple access -- aspects to this.

you realize a lot of names are falling out. the back as a fallen out last year. that makes the index performance look better than it really is. they need has a move to leverage loans. the issuance of leverage loans is huge. but 2017.his year still that junk bit out there. that being said, we have been playing the front end of the high-yield curve and it is interesting to say the triple be sector is the one that's fixed floated. >> people going higher up in the capital structure, what he think of that? >> it is interesting because if there were leverage loans from five years ago with great covenants they would be a

wonderful place to rush into but because the market is rushing their, the issuers then don't that put the covenants and their and now it's not going to be as good as it is the past in terms of recovery rates. >> which begs the question sacrificing liquidity when it could be needed for yield pickup? absolutely doing that. they are searching for the yield we have seen that over the last couple years. they're trying to find the best place to do that and they're willing to take that chance. i think a lot of that comes from volatility so low last year. the thought they can do that without a repercussions. we focus a lot on doing more higher-quality high liquidity issues in our portfolios because we don't want to take the risk that many investors need the yield 80 the cash flow and they're looking for it wherever they can find it. >> to victorious point we are focused on liquidity.

it's important to understand as you district cbot to the volatility spike, it is important to understand the volatilityit's component when ye looking at the risk-adjusted as well. >> a lot of people have a problem with that concept. clearly when we started with mark late cycle. be due to the fact that it's coming toward the late cycle but there are a number of factors at play. we are seeing the slowdown of growth in china, the ecb potentially starting to move away from monetary policy. likeyncratic events emerging markets etc.. the threat of tariffs and trade wars. there are so many different risks out there not just the cycle but individual idiosyncratic risks that do pose

risks to investors if they're not aware of their investment. does market discounts risk that has been a problem. americans tied to the same thing. market discounting risk as effectively as it once did? >> you touched on a few great examples there is a broader peace which is when things move they move at six standard deviations as opposed to two. that points towards the lack of liquidity in the market that used to be there in terms of buffers. had he that is a more interesting element. the option markets already have a big skew and the tales a really fat. that is the world we are in.

i want to get you a market check on where bonds and been through this week. a two-year yield up about eight basis points. still ahead of the program the , august just around the corner already. this is bloomberg real yield. ♪

this is bloomberg real yield. it's time now for the final spread. the bank extravaganza beginning on tuesday. wednesday the federal reserve making its decision on monetary policy. thursday it's the bank of england's term.

ofroll data for the month july, who so august coming? are we going to get a height from the bank of england? >> it's pretty much priced in by the market anyway. we will serve to see a hike. one inflation is still above target, economic data growth we think is stabilizing. the labor market is still pretty tight in the u.k.. we saw that shift in that direction in the last decision on masala 63 vote. we could definitely see a hike. >> the bank of england has been criticized around the communication of interest rate hikes. have the communicated this one better? >> they have done as much as they can. they are in a difficult spot

with brexit and a range of things that are happening within the u.k. economy but also the politics as well. they are in a difficult spot. they've been criticized in terms of communication but as much as they can do they have been pretty on message with this. ,> it is a nonsensical argument the idea that you hike massie you can cut later. is that what the bank of england is thinking about here? >> i think they do. one of the messages is that they will be watching the politics unwind here. this might be of for a while. >> why hike into the messy politics? >> because the inflation numbers are if you're doing your job should be looking at those and hiking. economy andopen there are things to be said in hurting brexit not only

the manufacturing but how the prices follow-through. >> that's right. hike, notecting one to keep hiking like the fed is. inflation definitely does warrant a way rate rise. they have their mandate and their job to do and i think they will push through. >> payroll is coming up next week as well. week.on deck next i wants take the opportunity to run through some rapidfire questions or he. if i can tell you the outcome of one of the meetings next week, which would you choose? >> federal reserve. .> boj

>> boj. >> are you expecting to change yield curve control at the boj? >> no. >> they will do a little something. >> i'm been ago with yes. i think we will see something. bonds or jgb's? jgb's. >> treasuries. >> biomes. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. streaming must see tv has never been easier. paying for things is a breeze. and getting into new places is even simpler. with xfinity mobile, saving money is effortless too. it's the only network that combines america's largest, most reliable 4g lte with the most wi-fi hotspots. and it can be included with your internet. which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. world news. president trump's chief economic adviser says the boom in the economy will be sustainable as far as the eye can see. speaking to reporters at the

white house he disputed claims by some corporations that they are being hurt by trade tariffs. >> i have seen some companies reporting weaker than expected earnings. it is not true. >> president trump says he is thrilled with the latest gdp report that shows the economy expanded in the second quarter at the fastest pace in four years. the u.n. announced today the following weeks of hostilities, more than 180,000 people are in urgent need of humanitarian assistance in southwest syria. the violence has restricted humanitarian aid to that area. >> it is over a month since there has been a cross-border convoy from jordan.