jonathon: from new york city, i am jonathan -- jonathan ferro. bloomberg real yield starts right now. coming up, a solid wage picture. chinese exports fueling worries about the global economy. the latest central-bank u-turn. much more -- concern stimulates more than markets. we begin with the big issues, the payrolls number. >> a little surprised. >> the market was surprised. >> it is a one, but a shock.

>> this is an odd jobs report. >> i do think this is a shutdown effect. >> people are looking at the weather end government shutdown. >> there was always going to be noise. trend,should look at the and that is largely why you can discount this. >> not unreasonable that we will have a pullback in february. it is a jobs report that the fed should feel good about. jonathon: joining me is the head of head fixed income strategy at .lack walk -- at blackrock let us begin with you, how do you read that report? >> i agree that it was not that bad. when you look at the three months numbers, it was averaging north of 200,000. for an economy that has a very tight labor market, you are seeing an increase in hourly

wages, which is great. i actually feel it is a positive thing and something to be positive about. henry: i believe the wage pressure comment. the takeaway is that we are bipolar and you are seeing the data and bad data. number was fantastic, but we are seeing most of the leaders and leading indicators roll over. ofs period where the lack clarity is striking in the markets are in a challenging spot, and you have to look through it. it is a hard job. golf, they say every shot make someone happy. bull, if you are the bond you have 20,000 jobs. a dove, you got to point point average earnings. there is another 11 cent increase in the next month, but i would be longer than shorter.

jonathon: it has been difficult to know what to do. we have such a range. fakeweek, a total head where yields broke out. we talked about how we would drift high, and then we rolled over. your thoughts? marilyn: we like treasury and i diversified portfolio. we get decent deals. we are announcing that the fed will be patient for the first half of the year and not beyond. inflation will remain contained. liquidity, the yield, and it offers a good hedge. i think we like treasuries. , thehon: it is interesting inflation expectations and impulse over the last couple of weeks, even though the data has not been great. what do you read into that? henry: i read that the market is looking through this period of noise, and we have to think about a pole hot -- a push

higher in wages and oil. mention that,t to with our trade dynamic and sending fewer dollars overseas, and desires to do less, the treasury market is in the process of grabbing the u.s. consumer. we need to pay attention to the increase of the u.s. savings rate. it is really important. kevin: i think that marilyn is right. currently,tion is and where current yields are, i missed the big move last week. i am looking at december data going that is december's data. movee move -- and then the took us to where it did. i am less surprised, and that is the trend. we are closer to 2.25 than we are to three, and in the range of 260 -- 2.60 and 2.70 is where

we live. jonathon: mario draghi delivered a dreadful assessment of the u.s. economy. the december,th 2018, you will see some projections and the outlook for real gdp growth has been revised down substantially in 2019 as likely in 2020. jonathon: what was interesting, about the rollover, i was trying to figure out to what degree that was about the policies announced and what degree that was about the market. which one was it? kevin: potentially -- marilyn: potentially a bit of both. the market had been expecting the additional yields and that they would push out the forward guidance. i think the market was expecting a little bit and the timing was

unusual. the market was not prepared for that. when you look at the growth forecast and everything that mario draghi was saying, the euro zone is weakening and does not have the growth, especially at this stage in the cycle. is not the market popping in anything anytime soon. i think the market was more dovish than they expected. jonathon: i just spoke with forecasters about how to do this without there being a massive shock, and they say it has been because they were so far behind the curve. why do they always get dragged kicking and screaming and are the last ones the party? bout: we have seen abrupt -- about faces and polishes ships. -- shifts. what caught my eye in this was that we had whatever it takes and now as long as necessary. , and moreeally dovish so than the market is

appreciating. they have a jam on their hands. northern european banks do not want the negative and southern wants term financing. the balance that, that will be a challenge. ,hey have a lot of wood to chop but also bear in mind, out of every region they have had room to do something. i do not know if the will is there, but they have the headroom. jonathon: a look on the monetary policy side, there is no room to do anything. you saw how limited the options were by watching what they did do. the policyimited options are and how lower the equilibrium rate may be on a global basis, dramatically bloomberg. we did joke -- dramatically lower. we dig joke about normalization. there is no prospect of rates going up in europe, and very few people think it will happen next year. what does that say about the

global economy? kevin: it does not give you great confidence in central bankers, especially in europe. you guys were saying they were the last of the party. it is their party that they came in at the latest point. from here, you had to commence the ecb that they did not need sitighten, and then they there and wait, and now you have to accommodate. it will be very difficult since most of these are starting to turn over that they can never catch up with any kind of rate movement. how much more negative can you go? jonathon: earlier this week, we talked about the japanification of the euro zone market. is that what is happening? henry: to an extent. like thetting up a lot 1950's and 1960's where we had yield cap and will get highly expansionary policy. you need monetary and fiscal policy by hook or by crook and

coordinated, because we have learned that offset policy does not work and that gets us to a higher inflationary environment. whether this is in six months, or five years. i believe that and i think the coordination of policy and expansion of balance sheets have to happen on the government level, and may happen after a crisis. that may happen first, it is something that needs to happen. buython: until then, treasuries and government bonds. marilyn: at the moment we are looking at assets that offer more income. it is hard to find that in large parts of europe. we like italian bonds. jonathon: we had a massive win for italian government bonds. kevin: -- marilyn: it has been very much on the bottom of perspective, you have to pick which one you like. it is just finding the ones that

offer you a risk adjustment. jonathon: we will talk more about that. marilyn will stick with us along with henry and kevin. block,up, in the auction the rally in emerging markets. the market could be overheating. that conversation is coming up next. from new york, this is bloomberg. ♪

jonathon: i am jonathan ferro, this is bloomberg, real yield. to in europe and start with greece, returning to the market again. has two point $8

billion of 10 year bonds. it is less in their initial target. they raised $12 billion with its three-part offering and the gulf state attracting $50 million in a man -- in demand as it took advantage of a u.s. interest rate. dow technologies tapping the investment grade market and selling securities as 10-year note price 2-year-old 2.7 percentage points. sticking with corporate credit, this one from a warning for the bank of international settlements. this is the possibility of a corporate bond crash. enough issuers were adeptly -- abruptly downgraded. market participants with mandates could be forced to offload large amounts of bonds and forced to do it quickly. marilyn, henry, and kevin. marilyn, i cannot find a single

person in fixed income worried about this, that there are 70 people outside of asked income worried. what is the big concern? marilyn: the biggest concern is that we have had a huge increase in the size of the triple b market. it has increased exponentially. as you get to the end of the cycle and rates are known to be high, compared to what went -- what it was before, you could see more default risk and a downgrade. that is not our scenario. we have you seen a huge increase, but when you look at the leverage in those companies and the underlying fundamentals, we still do not see a huge amount of risk. we put a huge amount of work researching them, and i think that statement is the worst case scenario. we do not think you will see this downgrade in terms ofbbb -- in terms of bbb.

it is just about being selective. henry: i think there are a few points to make. did a our research team fantastic job looking at this, and they found that a large chunk of the market's first time issuance. they have gone into upgrades. they tend to be underrated. if there is a little bit of that is a, all that said, this portion of a larger story on leverage, which is important to be mindful of. gdp, orit is debt to corporate balance sheets, all of that has begun to get stretch. isally, the concern i have not the size, and we talk about the size of the market, it is the duration. you are moving a lot of 30 year debt. we are going to learn a lot about the behavior of the high-yield market, when and if that occurs. marilyn: the quintessential --

kevin: the quintessential chase for yield is on. you either go out and duration or down in credit. out of the $9 trillion corporate bond market, about one third of it is bbb. when you add back in high yields, that is two thirds of the market. the flipside is that, since september of 2018, we have things spreads though back down to 2.30. the stretch in the last 30 to 40 days indicates that the line is still there and people are not as concerned and the spreads are tightening. jonathon: there is a belief that they have an incentive, so they did, and if they do not have an incentive, they will not. i have always thought it is easier to run a bbb balance sheet and go down. you can make that decision quickly. it is much harder to do the opposite. harder, but not

impossible. jonathon: you have that faith. i have been told that this could something, and i'm wondering if it is? henry: you are starting to see balance sheets the lever. equity starting to see investors calling for deleveraging. to have meaningful deleveraging and to be bought into by the credit rating agencies, you need to have a protracted move lower and have it incredible. this is not something you can flip a switch and do something overnight. behavior needs to change. to your point, much easier to go down. jonathon: you mentioned the equity investor. i wonder if this is a problem more so for the equity investor who has benefited from the very thatdly bbb balance sheet has been incentivize, because a lot of that money was used for the equity investor and the

growth friendly type of things. do you think it is a bigger problem for stocks? henry: absolutely. it will put pressure on equities and on the most important thing, liquidity. trader, it is- easier to sell a bond and buy it back. the liquidity part of this equation is where this market could collapse, much like it did in 1987, and 1994. that is going to affect equities. great scenario for a potential problem, and i do not know if it comes to fruition, but it is there. jonathon: most people would agree, and i'm sure you do around the table. if this will play out, it will take longer. here and now, the spread between bbb and bb is getting short. a lot of people are wondering if it is an opportunity to go along as people are freaking out. henry: i do not think so.

i think you are likely to see volatility. we are very much bottom up, so we are not allocating based on the ratings bucket. given a relatively rich bbb and bb market, when we do see slowing, it will be areas where invest -- where investors demand acquitted -- liquidity from. as you said, it can be challenged and whipped up easily. jonathon: it is great to have you with me. you guys will stake with me. -- stick with me. i want to get you a market check. a look at treasuries, and yields looked like this. we come all the way and by 10 basis points on a 10 year periods down 13 to 262 and a 30 year flirting with 3%. 3.01% is your 30 year yield. the final spread, and the week

ahead featuring more important data including retail sales and cti. ♪

ferro,n: i am jonathan this is bloomberg real yield. the 10 year anniversary of the u.s. equity bull market. this weekend, and then more details out of the u.s. including retail sales. u.k. has the comments voting on the revised deal and elon musk reveals a new model y. me around the table, marilyn, henry and kevin. can we talk about 10 years at the bottom of the equity market? we had that 666 10 years ago. the lessons of that.

it is always this moment of time and it is easy to say that it made a ton of sense to buy then, how difficult is it to apply the knowledge to those events to the growth scare is that we have had? what we are working our way through right now as well? marilyn: it is difficult to predict when a future will be great. manynk we have seen so different idiosyncratic events, on the corporate side and on the macro side. it has been incredibly difficult, and i think also, no one could have predicted that mont -- the monetary policy response we have seen, in the u.s. or the ecb. they are almost political decisions, and almost impossible to gauge and no that this is the time to -- and know that this is the time to buy and sell. jonathon: henry, the discipline you've had, to maintain it and not freak out. it is so much easier to say than to exit -- and to execute.

can you learn those things? henry: i think it has to be part of your philosophy and strategy, and you need a good client base that understands that. to your question, i would flip that around and say that we may be prone to hyperbole, and let us not over apply those lessons and expect the next crisis to be around the corner. that is contributed to one of consumersms, which is unwilling to borrow again in any substantial fashion, each hindered monetary policy. in assets was not only price and liquidity events, but also a psychological one which is have had an impact with consumers. jonathon: the scars are still deep. kevin: i think when i entered this business in 1983, i could not sell 16% 10 years because

they wanted 21% two years. you could not convince them to take a bigger yield. ist we have misunderstood how much stimulus it took to get an economy back, and how much it continues to take. with all the stimulus you have 2.5% growth. how much more to get 3% and if we drop the 2%? jonathon: i remember someone telling me and saying to him what would you think about this era? he said forget about it, and 10 years you would have wished that you had bought the 30 year with a 3% because it will work different. that is one way to look at this market. now the rapidfire round. and begin with this one, whose job would you prefer, mario draghi or theresa may? marilyn: draghi. henry: draghi. kevin: draghi. jonathon: have we seen a high of

10-year yeild for the year? marilyn: no. henry: no. kevin: yes. jonathon: have we seen the tie on u.s. high-yield for the year? marilyn: no. henry: yes. kevin: no. jonathon: it has been great to catch up. thank you very much. from new york city, that does it for us. we will see you next friday at 1:00 p.m. this is bloomberg yield -- real yield. ♪

>> i am mark with first word news. president trump is in alabama to survey the damage from a deadly tornado that devastated the account of beauregard, killing

nearly two dozen people. the massive twister slammed into the town with 170 mile-per-hour wind, leveling everything in its path. it was one of at least 38 tornadoes confirmed to touchdown across the southeast in a deadly weekend outbreak. the democratic-controlled house approved legislative -- legislation aimed at reducing the role in big money in politics and strengthening ethnic stance. >> hr one restores the people's faith that government works for the public interest, the people's interest, not the special interest. that faith, that confidence is a treasure that is fundamental to a democracy that people believe. little chance in the republican run senate where mitch mcconnell says it will not come up for a vote, and the white house issued a veto th