jonathan: from new york city for our viewers worldwide, i'm jonathan ferro. "bloomberg real yield" starts now. ♪ jonathan: coming up, very little in the u.s. economic data to test fed chairs patients. looking at china and focusing on the silver lining. we begin with a big issue, space in the global economic turnaround. lex the consensus is the u.s. is about to slow and slow and it doesn't. >> we are at a bottoming phase.

>> we gone through a process in the equity market. >> reversal and sentiment of the dark days of december. >> the market is confirming we are getting good macro data. get the chinese and stabilize.tabiliz >> it is telling a story that it is not getting significantly worse. jonathan: joining me around the is portfolio manager of atc global. london, a fixed income manager joins us. a glass half full week, even though the data has not been great. pok hope springs eternal.

investors are feeling it. i do not think it is about the data right now. it is about the comfort around the fed not moving, ecb backing away and central-bank driven. we have to ask ourselves -- at what point will the slowing record data rear its head? myathan: through the week china has been rough, european data not great. thebottom of the chart and surprise index in the chart for data, and then this happened. 10 year government bonds in german are weaker u.s. treasury yield starts to take up. what is happening, and what does that tell you about investor prices at the moment? i think markets try to be as

forward-looking as possible and responding to not only the stimulus from china, that the fact that the fed seems to be on hold for the foreseeable future. the early signs from the stimulus from china may be starting to come through, credit is the key that fixed income investors were watching and that ticked higher in january. one data point is that make a trend, but these are early signs investors are looking for to get comfortable. the other key thing to remember is where we have come for in q4, where markets were in panic mode. what we have seen so far this year, was getting investors closer to neutral. jonathan: through the data -- week, the data has been --

is starting to kick higher. is at a glass half-full silver lining or is at the market trying to get ahead for the rest of the year? barry: it is too early to tell. we do not have a significant amount of data points out. i agree, it is the market coming off the panic from what we saw at year end. jonathan: has the data changed or just the way we respond to data that has changed? this.rying to explore changed withbuys more support from the banks? >> it is absolutely the rate of change that matters. throughout 2018, not just in q4, week data and china is slowing

throughout the year and we had capitulation in 2018. even those these are early positive sentiment, markets will respond in a major way. jonathan: greg? greg: there was a much cheaper proposition then today. you look at s&p ratios and you have seen a rise in multiples of four pe points. that changes the dynamic when the economy is slowing and earnings are slowing. it makes a much more difficult path going forward. jonathan: a lot of people have ,ooked at v-shaped recoveries s&p 500 is one. what is interesting is that in foreign exchange and treasuries, the range has been tight. do you see any reason to break out of the trade we have seen in the 10 year treasury?

mary: it happens -- depends on what happens with data coming out, but for risk assets, yeah, we have seen a v-shaped. there are also other factors that are from outside of the u.s.. jub, what do you think about that? : post the fed, we have had a collapse in volatility across assets and that is one of the primary factors driving people into credit and emerging markets where itg them offered is low and we need to go search for coupons. that is by design, with treasury volatility that was moving higher. this is a signal we are on hold for the perceivable future and inflation andt

that pushes people into risk assets. jonathan: that has been the story for the first of the year, does it lead to the rest of 2019? jub: growth data is on a declining trend third it is difficult to where we would see sharp inflationary impulse. that could cause banks to foot back to more a more posh -- to a more hawkish stance. think that we see this opportunity and risk assets as being a window that will not be open forever. bowers. we do seem to have some blue skies. jonathan: i asked you if you liked jay powell, and you said you did because he makes mistakes. he has corrected his path radically in the last couple of months. do you see him carving out a new path?

it is a constant struggle as he communicates and changes often and is trying to regulate the markets. what is different today versus several months ago is it seems increasingly so that he wants to support the markets. he is almost exclusively saying that, but the testimony this week was uneventful. maybe he is learning along the way but i think he will be a source of volatility this year. jonathan: what are your thoughts? agree, there is less opportunity. in high-yield, spreads have tightened and there is no major catalyst for tightening. jonathan: as you say, spreads are tight a model 400 basis points on high-yield. a lot of people are trying to wonder what brings them back.

tongue-in-cheek ask, is the s&p 500 a factor in this as well? jub: i think we have seen over recent years whenever the fed feels like markets are getting to frothy, they will try to talk down asset valuations slightly. if high yield spreads were approaching the 300 level, which is where we got to in 2017, they will want to take a little air out of that rally. where they sit, around long-term averages, we are far away from the fed feeling that they need to deflate asset bubbles. coming up on the program, the auction block off to the best start of the year since 2001. that conversation coming up next. this is "bloomberg real yield." ♪

i'm jonathan ferro. this is "bloomberg real yield." we begin and russia, a banner month for bonds sales. $2.5 billion worth of debt, and back in the united states, the seven-year auction to the biggest amount august. largest year since 2014. wrapping up the month, junk-bond supply picking up with $21 billion priced in, the busiest month since march of last year. still with us to discuss is mary bowers, greg peters, jub hurner .

mary, high yield debt issuance up. ofthat a thing for the rest the year or just for q1? mary: you have to follow the fund flows. they have been strong for high-yield this year while toerage loans have continued come down in the last couple weeks. the demand that was there for leverage loans was sucking the supply for high-yield and that is now bringing the supply back to high-yield. we expect to see a large amount of secured issuance coming back to the high-yield market. jonathan: what do you think greg? gerg: it is about coo's coming back. -- clo's coming back. it seems like the desire for floating assets is not what it once was. with the fed on hold talking about a hike in the marketplace, you are not seeing the same

demand for floating rate product and there is not the same demand for loans. this makes a lot of sense when we see what was done on the back of it. jub: that is absolutely right. leverage issuers typically follow where the flow is. last year they were right about rates with the fed hiking. this year, that is not there and the flow comes back to the fixed coupon product. that has been a key driver in credit markets over the last couple of years, and we are seeing it play out in the investment grade issuance is down 25% this year versus last year. we speak about the quiddity in this topic, it can be very one way. toward spreads, but supply dynamics will be key to watch in the coming months. jonathan: i want to get your ideas on higher versus -- high-yield versus loans.

morgan stanley was doing that. there was a caution and we shift back into loans relative to high-yield while we remain concerned about fundamental challenges specific to the loan market. the seller should of reminded investors that high-yield is still the high market. let's start with the premise of that. is it still the high data market? mary: it still does have more retail investors than the loan market which is more supported by clo's. looking at fundamentals, the shape market is as good a as loans. you have to be careful at this point in the cycle on credit selection. jonathan: i spoke to my colleague, mark collins, and he is behind this. i would agree with that, but it's not about the beta, but

valuation on loans that were hit hard. the issue we have had around loans is that if you were right on the credit, it was called away and if you're wrong you owned it down to zero. now trading at a discount, it is attractive. we see value in the bb space. it is valuation driven and not beta driven. can you compare the credit quality of bb and loans to bb in credit? is that an apples to apples comparison? gerg: there are nuances. it gets complicated that you can do it. it is a zero sum game. for the capital structure and all the complaints around loans, it forces you down the capital structure on the bond side. these are all considerations. i think doing that relative

value is something we should be doing. jonathan: is there a liquidity consideration? they arey are --gerg: both terrible and bonds are worse than loans and tied to flows. you ultimately have to start with fundamentals and get the call right and then liquidity is secondary. jonathan: what did you think about that trade, jub? loans forearn high-yield bonds in a multi-strategy portfolio we think it is more advanced and other markets. cashes in investable asset in the u.s. and it isn't in europe and that makes us lean towards european high-yield rather than the leverage part of the u.s. market. jonathan: greg? gerg: "first word news." we see more value in the u.s. as well. jonathan: very?

mary: not as much. they have typically traded inside the u.s. at even. it is lower duration and higher market. with seen deterioration in the credit metrics across european high yields. it has a larger component of autos, which has been suffering. the data continues to be week. -- weak. to beld prefer for credit where it's at. jonathan: coming up on the program, a market check at where treasuries twos, tens, and 30's, have been. twos, tens, and 30's, the 10 year yields are up. 3.12 on the 30% yield. a decision from the ecb. focus shifting to mario draghi.

this is "bloomberg real yield." ♪

jonathan: this is "bloomberg real yield." we will hear from mario draghi. the u.s. jobs report is the main event. still with me are mary bowers, greg peters, and jub hurner. let's begin with the ecb. what do you expect? jub: the key thing for us to toch will be any revisions the projections on growth and inflation. they look high in terms of

expectations for 2019, given the recent growth weakness we have seen. they have projections of one point 7% for 2019 versus a consensus of roughly 1.3%. thatarket will we watching to see how the ecb is thinking. there is expectation about an announcement or further news on the banking sector. it is a big meeting. ecb are unlikely to maintain a more dovish bias. european andhe mystic economy, is -- and domestic economy is we some strength at almost precrisis loads. that largely points back to china. the ecb will have to make and extends to which they think are

longer-lasting. jonathan: it has been going on for a while. mary: in terms of how the ecb will come our next week, they continue to be patient like the fed. what tools they have additionally i am not sure. toend to agree that we need look at where the revisions are for growth. jonathan: the ecb has tried to be patient for the last several minutes and that has paid off. where the fed, the growth is decent in the united states, it is terrible in europe. this is true and they do not have a lot of tools left other than the bank program. they have china stimulus and that has a big impact on europe and the u.s. that is a wildcard. we learned last year that the trade war and the slowdown in

china had a larger impact on europe than it did the u.s.. decisionrio draghi's is to sit and -- and do you see mario draghi's decision to sit and wait? gerg: there are some positive things externally they can think about. it is all around advising the forecast lower to give them more room elsewhere to do more policy. , on the policy they have, if they reach next help thishe optics market in europe? wasn't forld if it the fact that there is optimism baked into some further news. your -- foror

--ope is on the the export sector was helping as china was we inflating. then we had deleveraging from china suffering. you need to look east for outside eurozone growth going forward. the ecb will be patient in terms of exercising policy tools until they get more clarity. jonathan: let's get to the final round. we start with europe. quick answers. does the ecb pull the trigger on next week tell troicki? >> yes. >> yes. >> yes. jonathan: have you seen the lows on 10 year yields? >> no. >> no. >> yes. jonathan: supertight range for 10 year treasuries through 2019.

are we going to break out, and are we higher or breaking out of the range with yield lower? higher or lower? >> lower. >> higher. >> higher. jonathan: interesting stuff and great to have you with me. mary bowers, greg peters, and jub hurner. itm new york city, that does for us. we'll assume next friday 1:00 p.m. new york time and six clock p.m. london. for our viewers worldwide, this was "bloomberg real yield." ♪

mark: trying to portray democrats is out of step with ordinary americans, vice president pence said in a speech that the conservative conference nextthe choice in the

election is between freedom and socialism between personal responsibility and government dependence. urgedce president also the attendees to support president trump's push for a wall at the southern border. want us --ics democrats want to say it is manufactured, but the only thing that is manufactured is their outrage. [applause] every day we don't secure our border we allow the crisis to worsen. scheduledpresident is to address the conference on saturday. another democrat enter the race, washington state governor jay his emphasis on climate change and criticism of president trump here the parents of auto one beer blame the -- ot