jonathan: from new york. this is "bloomberg real yield." jonathan: solid revisions and a 48-year low unemployment rafmente treasury bears having their moment and some. yields breaking out for multiyear high and junk bonds looking rock solid. spread grinding down. we bring with a big issue. >> this is a report that's consistent with being pretty close to full employment. >> the wage numbers are continuing to point in the

right direction so to me this is a perfectly good number. something and 30 80,000-plus revision. the increase in the love for september is, what, 211, 215,000. that's an awful good number. >> what i see is a continued strong job growth. we saw pretty positive revisions to previous months and seen the unemployment rate come down. continuation of a really strong economic -- strong u.s. economy. >> the economy is running hot. why? because of a trillion-dollar deficit and because, you know, corporate tax cuts, etc., etc. >> ultimately to the extent we're using these figures to read the tea leaves around the race and what will happening to them and the u.s. market and globally. it was an irrelevant number because it's just one in the stream of really strong data points. >> take a lot of risk when you get 90% of the yield in the front end, why do it? you take the duration in the

next downturn, it may be three, four, five years out, i think rates will be significantly lower than where they are today and you will have the most bang for your buck by having some duration. >> it takes some time, 12, 18 months for them to react. 3 .40 on the 30-year, no thank you. miller, victoria fernandez. coming to us from atlanta is sean newman. victoria is this the long end of the yield curve aligning with a strong economy in america? victoria: it's what is driving the market. i have a friend over at raymond james, thinking of holding a ball underwater for a long period of time and then when you let it go it spikes higher. i think that's what we're seeing. we have really strong economic numbers. you have some trade issues that

have come to pass with the u.s., whatever it is now, n.c.a., in italy. i think we're finally seeing that strong growth flow into yields. jonathan: bob miller, do you see the same thing? bob: yeah. what's different in this rise compared to earlier 2017, the curve hasn't flattened in the last four, five weeks. it's not stephened a lot but it's stephened. -- steepened. it's not pricing in acceleration and pace of fed tightening or change in the magnitude of incremental tightening but a higher applied terminal rate and we're waiting for that to unfold. as you know, we like the front end. we have not liked the back end for a while. it's been a long while coming but i am encouraged to finally see some steepening of the curve. jonathan: sean, is this how you would characterize the move we've seen this week, would you

characterize it in the same way as the other panelists? sean: yeah. you have to think of cholesterol levels, right? this is a good cholesterol that body needs. rates are going up because growth is strong. and not because there is a big inflation concern. looking out the next three, six months, we should expect the growth impetus start to roll off and this is good for the emerging markets. jonathan: where does the demand come from? 30-year around 3.40. do they like it now? bob: we are approaching levels we said were four. we had a 3/4 market. 2 1/4 break. my is 3.25 is a reasonable expectation for the long end of the next six months. jonathan: i am trying to understand the bias when sellers start to become buyers,

when you like the price at the long end, do you like it more or do you need to see more? victoria: i know no one wants to talk about the neutral rate. jonathan: carry on. victoria: i think you're getting close. you have the 3.01 level that was a benchmark you want to bypass and look at the range you were before that, move that much higher to where your limit should be. if our range was about 20 basis points, we move about that, we are right where we should be. the move we saw this week was mainly due to term premium moves, not necessarily to growth expectations which is what we have been seeing previously. that shifts your outlook on the longer part of the curve. jonathan: i think you agree on that situation. john williams, the new york fed if president this is what he had to say. >> neutral is just one piece of information that we think about when we think about monetary policy. we talk about wage data, inflation, job growth, g.d.p. growth, we look at a lot of indicators both at the u.s.

policy and abroad. neutral is just one of those. it's an important one, one i follow closely. but to me it's just one piece of the puzzle. jonathan: increasingly the communication coming from the federal reserve, don't worry about the neutral rate, it's unobservable, what do you think of the communication coming from the reserve on something that was quite important? sean: it is in line what we're thinking. it's not ahead of what market is pricing at this point. f you actually look at the three, four weeks, the comment -- we are seeing spreads tighten in the back of the fed's comments. i think the market is fully priced. nominalization factor we've seen in our markets for quite sometime. it's not a new phenomenon. jonathan: bob, do you agree

with that? bob: i think the front end represents -- has a fair amount of rich premium in it relative the most likely path for the fed. i think in the risk back end we could overshoot a bit. we had a flat curve for a long time. the structural flattener has been a popular trade for a couple years. as victoria said, we are starting to reintroduce term premium and still not sufficiently positive, in my opinion. i can see some overshoot as we have long-held views that real rates and nominal rates can't go higher. they can go higher. we do have a growth and an inflation impulse that's likely to get better before it gets a bit worse. at least the inflation impulse will look better than worse. jonathan: what we see on the screen is 12 months ago on the yield curve compared to where we are now. victoria, what does the picture look like 12 months out? can we do this again? victoria: i don't think we'll

do it to the same extent. you will see the curve shift higher. it takes about 18 months for rate changes to flow through to the economy. so we still got about five rate hikes we have not gone through on the economic numbers. yes, we will see rates continue to move higher. again, closer to the 3.25, 3.30 neutral rate you are getting close to that right now. jonathan: you don't like it when rates go up. you don't like when the curve flattens or steepens. for the fixed income market, i'm just wondering, how much more of this can go forward without the economy coming under pressure, what's the data point you'd be looking for to say this is going too far? victoria: well, there are a couple sectors. we've seen it in autos. e've seen it in housing. six straight months of existing sales coming down. we have the hurricane hit and that will affect it. when harvey hit houston a year

ago, half a million cars, you know, were destroyed and so that, you know, kind of changed the way you look at the auto sector for the last 12 months. look at those. look at credit card delinquencies, those things we'll be watching. jonathan: any sign that this economy can't stomach high rates? sean: i think from a leveled perspective, some of your hosts mentioned earlier, there is little risk we do overshoot from here. in terms of key rates, we're watching the 3.40 or 3.50 on the 10-year are levels we will eassess. it's going to make it -- risk assets, not just emerging markets. jonathan: sean newman, bob miller, victoria fernandez. coming up on the program, comcast pulling off one of the biggest corporate sales ever in the u.s. this is "bloomberg real yield."

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jonathan: this is "bloomberg real yield." comcast has the second biggest deal of 2018 and the fourth largest u.s. sale on record. selling $27 billion unsecured bonds in 12 parts in order to finance the $39 billion ack which vision of sky. the longest portion, a 40-year security yielding 1.5 percentage points. till rate announcing to raise $450 million through a private placement of convertible bonds. largest publicly traded marijuana company will be due

in 2023. in europe, a little nerve showing up in the market. this year two-year bond sells reported and russia cancelled short-term debt due to lack of acceptable bits bids. u.s. junk bonds, the lowest level since july, 2007. high yield sales are about 30% lower than the same period of 2015. on pace for the slowest year since 2009. still with me to discuss is bob miller, victoria fernandez, and sean newman. sean, what are your thoughts on what's happening at credit at the moment? this really interesting dynamic taken place where investment is really soft and high yield is really solid. what do you make of it? sean: there has been a big trend towards domestic markets overall, whether you are looking at equities or u.s. credit. you can look at u.s. credit, especially on the high yield side. my colleagues are telling us

it's at the tightest levels seen. reflects the global marketplace. uncertainty around tariff olicy has led to more un sureans and that's affected the domestic markets. jonathan: postcrisis -- you wonder how much room for error there actually is? sean: i don't think there's a lot more. one of the fradse we've been pushing this year is we believe you should take advantage of the massive compression we've seen in some of the credit markets to go long on the e.m. pace both on the corporate side. take advantage of these valuations. victoria: if you look, h.y.g., we had $2 billion come out, the largest amount in 2 1/2 years. i think there is some

nervousness that's building when it comes to credit but the spreads just aren't moving. it comes to the fact we have a strong economy. normally you see spreads widen when you have a weak economy and we're not seeing that. we are looking at strong economic numbers. that's why spreads are staying tight. bob: i think the growth piece is critical in the difference of i.g. and high yield. i.g. is more rate seasons sens tiff. we had a decent move flates. it's not a shock your higher grade, more duration sensitive bond market, corporate market has suffered relative to high yield which is -- has a much greater sensitivity. if you look at high yield returns by rating, the highest quality, double b, which is the most rate sensitive, is flat on the year. the triple c has been all the performance. that strikes me as fair given the growth impulse that's going through the economy right now. i do think it's critical to keep in mind some of this -- no doubt some is organic growth.

some is fiscal impulse that will start to fade, likely peaking in the fourth quarter. jonathan: how do you allocate over the next 12 months, bob? bob: less willing to allocate in high yield. you are likely to earn your coupon if everything goes well. i.g., some of the sectors that have traded poorly look a little more interesting as long -- given our vute fed will keep going a bit, not likely to meet the rising expectations for 3% to 3.5% funds rate. there are others that look reasonable. jonathan: victoria, it's interesting in i.g., it's a big discussion being a lot of risk. just look at the triple b's. morgan stanley got attention. follow the money and look where the issuance is. $2.5 $2.5 grown to

trillion. a 27% increase since 2009. along those lines we see elevate downgrade activity when the cycle eventually turns. you have to wore bee the worst type of credit within investment grade, perhaps more so than what is happening in junk right now. victoria: you have to be concerned if downgrade look at the leverage that these companies are generating. there is always a place with this within your total portfolio allocation. a few months ago when we were speaking, we have been reiterating, you can have the fixed income component but you have to be careful where you're positioning yourself. you do the same thing with corporate. shorter duration with corporate, coupons, high liquidity, those will bode you well. bob: we have the same bias. until we get to levels that represent better valuation for, you know, medium term adjusts returns. jonathan: what about you, sean, the liquidity, how much of a critical element is that right now? sean: it's a critical element, jon. it's one of the factors that we

spend time analyzing. two perspectives. one, your the colleagues on the show mentioned issuance. and it's been done 35% on the corporate side as well as on the sovereign side this year. fund flows are tracking about negative $2.5 billion give or take yesterday's number and this in turn feeds to liquidity environment in our market. data, have somewhat one that will stay in quality in places like the middle east where they should be benefiting from higher oil prices. also looking for some opportunities in our markets whether it's looking at turkish argentina. jonathan: bob miller alongside victoria fernandez and sean newman. coming up on the program -- a

market check on the 10's have been. there it is. there is your moves on 10 eansd 30's, a wow move. still ahead, the final spread. a fresh round of data on u.s. inflation and more comments from the fed's john williams. this had is "bloomberg real yield." ♪

jonathan: this is "bloomberg real yield." final spread. coming up over the next week we have the first round of the brazilian presidential election and first round of u.s. inflation data, bank earnings and the fed's john williams will be speaking. still with me is bob miller, victoria fernandez and sean newman. brazilian election, i know you have been itching to talk. tell me what we should be

looking for. sean: jon, it's a classic election. we have never seen an election like this in brazil. what we have here is the . pporters elections are this sunday. we'll have a contested election. polls released overnight it will end in a second-round runoff. the field has 13 candidates that are contesting the election. probably will be a race between two individuals. jonathan: sean, in terms of capital, exposure to that then? sean: we are somewhat flat right now, jon. we think the market is somewhat overprigse. possibility of a good result. i think looking at b.r.l. right now, maybe a 5% move here.

we see more of a 15% move in the b.r.l. in the event this goes to the second round and the p.t. candidate looks like they have better odds. given this risk tradeoff will be on the sideline here. jonathan: we talked about credit and quality. what about emerging markets? what are you thinking right now in e.m.? bob: e.m. stays similar to what we said for a while. there is no broad e.m. index anymore. it requires a very clear disaggregation into each of the countries. there are few places. we have some argentina risk, brazil risk. brazilian currency has rallied 10% in the last 10 days. the market is pricing a higher probability of a good outcome or more favorable outcome than it was a month ago. nonetheless, the challenges remain.

if u.s. rates are going to press a bit higher, u.s. growth starts to decelerate a bit next year, the key question for the e.m. basket is the degree to which the chinese deceleration has been a bit of a surprise this year which has impacted european growth expectations, stabilizes. if that stabilizes, u.s. decelerates a bit but maintains a good level, e.m. probably does pretty well. without that, i think you got some legitimate questions que. jonathan: any word on italy? bob: the italian budget processes, the new government has taken a fairly confrontational approach with the european commission annual budget bugt process. our expectation is that it will get a bit noisier before it calms down. jonathan: yeah. bob: the market has moved a lot, but i would expect further volatility in italy over the next couple weeks creating some overall ball in european bond market. jonathan: final word, victoria? -- victoria: t to

you will see quantitative numbers. there is a lot of things going on but i think you have to take that 12-month outlook. let things calm down a little bit in e.m. they do have better f.x. reserves than they had before. we have brazil, turkey, a few countries specifically to look at. look at the general 12-month plan. just like what we were seeing a moment ago where to invest in order to reduce your risk. jonathan: that's a good part to wrap this up. three questions. you know the drill. three quick answers. the 10-year, 3.23. as i ask this question, do we see 3.50 before we see 3% again? 3.50 before we see 3% again, yes or no, bob miller? bob: yes. victoria: no. sean: 3.50. jonathan: narrower or wider by year end, treasury spread,

narrower or wider? bob: wider. victoria: narrower. sean: is low. jonathan: how many hikes left in the cycle? i will say fewer or more than four? fewer or more than four, bob? bob: fewer. victoria: i am going to go more. sean: fewer. jonathan: at least you have a market. bob miller, victoria fernandez, sean newman, thank you for joining us. that is it for us from new york. this was "bloomberg real yield." this is bloomberg tv. ♪ >> the housing sector impacted the entire economy. >> the research process here is analytical and bottoms up. we take a very active approach.

mark: i'm mark crumpton. it all comes down to tomorrow. brett kavanaugh's nomination to become an associate justice on the supreme court will advance to the full senate for confirmation vote. today, lawmakers voted to limit

debate on the nomination setting up tomorrow's drama. >> on this vote the yeas are 51, the knows are 49. the motion -- the noes are 49. the motion is agreed to. mark: lawmakers can vote differently during saturday's final confirmation roll call. meantime, alaska's lisa measure could you say keerks the only republican senator who -- murkowski, the only republican nator voting against, said kavanaugh is not the best man for the court at this mind. indicated she will change her mind, she said she won't. she will have more to say in a speech on the senate floor this afternoon. arizona republican jeff flake said he would vote unless something big changes. he doesn't expect anything to change. last week the senator forced his fellow republicans to order an expanded f.b.i. investigation on