jonathan: bloomberg real yield starts right now. coming up, a payroll shocker competing with a solid waste growth picture. plunging chinese exports fueling worries about the global economy and the latest central bank you turn stimulating concern much more than it stimulates markets. we begin with a big issue, if recovery payrolls number. little surprise. >> a gold market would surprise.

is a very odd jobs report. >> this is mainly a shutdown effect. weather sprinkled in. >> people are looking at the weather and looking at the government shutdown. >> there was always going to be noise as a result of the shutdown. >> the trend is in tact. >> we should look at the trend discountis why you can this. >> not unreasonable that we would have a pullback in february. it is probably a jobs report the fed should feel pretty good about. >> not so bad. herehan: alan watson is and kevin guinness head of fed -- fixed income. how do you read that payroll report? >> it was not that bad, when you look at the three-month numbers averaging 106,000 over months for an economy that has a tight labor market, you're seeing an increase in hourly wages which

is great. is a positive thing, the fed should be happy with that. >> i agree with the wage pressure comment, if you are talking politics or the economy, we are i polar and you are seeing very good data and very bad data. that i is sam number was fantastic but we are seeing most of the oecd leaders and indicators roll over so there is this time when the lack of clarity is striking and the markets are in a challenging spot and it is a hard job these days. >> every shot makes someone happy. if you are a bond bull, you have 20000 and jobs. if you are a bear you have plus .4 in average hourly earnings, it will take a few more months to see which of these manners the mouth -- most. i would still be longer come a not shorter.

rangehave had such a bound market through 2019. yieldsek became -- when broke out and we were talking were going to drift and we rolled over again. >> we like treasuries still and diversifieda very portfolio. the fed will be patient for the first half of this year if not beyond. inflation is contained. so we like the yields and it does still offer a good hedge and a risk off environment. we like treasuries. >> inflation expectations, a little bit of a inflationary impulse. even no -- though the data has not been great. >> i read into the market is looking through this temporary time of noise and we have to think about a push higher in wages, a push higher in oil.

touching on this treasury comment, it is important to mention that with our trade dynamic in sending fewer dollars the treasury market is in the process of crowding out the u.s. consumer. that is something we need to pay close attention to is the increase in the savings rate and pressure on consumption. right,ink marilyn is where inflation is currently, where current yields are, i miss that big move last week and yields, told the missed it. i'm looking at december data going this is december's data. and the move that would not take us to three quarters did. has less surprised at what happened since then and that is the trend. we're closer to 2.25 there we to three. >> the other is this man here,

mario draghi delivering a dreadful assessment of the eurozone economy. decembered with the 2018 macroeconomic projections, the outlook for real gdp growth has been revised down substantially. in 2019. it is likely in 2020. >> what was interesting about a subsequent price action, i was trying to figure out to what degree that was about policies that had been announced and to what degree that was about the market. the policies will not work area which one was it? >> a bit of both, the market has been expecting in the next couple of months, they have been expecting that they would push out forward guidance. the market was expecting a little bit, the timing was unusual. the market was not prepared for

that but i think when you look at the growth forecast, everything that mario draghi was saying, the eurozone is weakening, it does not have the growth that you have seen especially in the cycle that you saw in the u.s. so the market is not pricing in anything anytime soon. the market found it more dovish than accepted -- expected. it happen because there have -- they have been so behind the curve. why did they get dragged kicking and screaming? >> haven't we seen that with central banking, abrupt about-face is in policy. what caught my eye in this is we had whatever it takes and now we have as long as is necessary. they got really dovish and i think more so than the market is

appreciating. they have a jam on their hands, northern european banks do not want the negative deposit rates, southern want the term financing. to balance that will be a challenge and to get imbalances out of the system as far as germany's current account deficit, they have a lot of wood to chop. out of every region in the world they have headroom to do something, to make structural change, i do not know of the will is there, but they have the headroom. just watch that. you just saw how limited the policy options just by walking -- watching what they did do. this is how limited the policy options are and how much lowered ae equilibrium might be on global basis, dramatically lower. we were joking around about normalization. ecb stuck at negative -- 40 negative basis points. very few people think it will happen next year. thisdoes that say about

global economy? >> it does not give you great confidence in central bankers especially in europe. they, you guys were saying they were the last to the party, it is their party that they came in at the latest point. from here, you had to convince these -- the ecb they did not need to tighten and then not just that there and wait, and it is going to be very difficult since most of these are starting to turn over now that they could never catch back up with any kind of rate move, how much more negative can you go? is that is what is happening in europe, given the ecb is stuck where they are currently. >> to an extent. the takeaway is we are setting like the 1950's and 1960's were we had yield caps and are going to get a highly expansionary policy. you need to have monetary and physical -- fiscal policy

coordinated to some extent, of sitting policy does not work and that coronation probably gets us to a much more higher inflationary environment whether this is in six months or two years or five. i do believe that. that is the coordination of policy and expansion of balance sheets has to happen on the government level, it may happen after a crisis on the corporate side so that may happen first but it is something that needs to happen and we are in a tough spot. >> by treasuries. >> we are looking for assets that offer a bit more income. it is hard to find that in large parts of europe, we like italian government bonds. like some of the bonds that do offer but it has to be on the bottom-up perspective, you have to pick which ones you like. we like income, it is finding

the ones that offer a good risk adjustment. >> we will talk about that a little bit later. coming up on the program, and the auction block, the rally in emerging markets continuing. be overheating. that conversation is coming up next, from new york, this is bloomberg real yield. ♪

johnson: this is bloomberg real yield, we begin over in europe and we start with greece, returning to the market once again, the country agreed to sell $2.8 billion of tenure yield bonds -- 10 year yield

bonds. qatar returning to market and racing 3 billion -- $12 billion. finally incorporates, tapping the investment grade market and selling $4.5 billion price to yield seven percentage points above treasuries. sticking with corporate credit, another warning. possibility.e -- warning of the possibility. witht participants investment grade mandates could be forced to offload large amounts of bonds quickly. our guests or so with us. i can't find a single person who

is worried about this. there are so many people outside of fixed income warning about this. what is the big concerned? >> the biggest concern is we have a huge increase in the size of the triple be market. riple b market. where theyred to were before, you could see more default risk and a downgrade. scenario.t our core we have seen a huge increase in the sector but when you look at the leverage in those companies, when you look at the underlying fundamentals, we still do not see a huge amount of risk. statement is the worst case scenario. we don't think we can see this wholesale downgrade in terms of triple b's.

few points to make, our research team did a fantastic job looking at this and found that a large chunk of the market is first time issuers, those new issuers tend to be underrated. there is a little bit of that there. all that said, this is a bigger, a larger story on leverage. to be mindful of. all those measures are getting stretched, it is not an asset class. on the triple b, the concern i have is not the size and we talked about the size and the wait, it is the duration and you are moving thirty-year debt into the high-yield market. we will learn amount -- a lot about the behavior of the high-yield market when duration moves to that market.

>> the chase for yields is on. where do you go, you go out in duration or you go down in credit. that is what has happened, of the 92 in dollar corporate font market, a third of it is triple b's. dad aspect down to 230. the stretch in the last 30 to 40 days would indicate that flying is still there, people are not as concerned about credit and spreads are tightening. >> we have some options so they have an incentive to run the balance sheet so they did. if they do not have next -- an incentive to run one they want and they can flip the switch. it can make that decision quickly, it can happen quite fast. much harder to do the opposite,

isn't it? >> it is. not impossible. >> i have been told multiple times this could be the year for debt diet. i wonder if it is or not. >> you are seeing some of the largest balance sheets do lever. it is not systemwide. you are seeing equity investors call for deleveraging. deleveraging,gful to be bought in, you have to have a protracted move lower and have a be critical -- credible. your behavior needs to change, capital allocations change in that does not happen quickly. to go down. >> you mentioned the equity investor, i wonder if this is a problem that much more so for the equity investor who has benefited from the very friendly triple b allan's sheet. a lot of that debt was used for the equity investor.

is this a bigger problem for stocks earned his for bonds? >> absolutely. it will put pressure on equities and pressure on the most important thing, it liquidity. as a trader it is a lot easy to sell a aaa bond than to buy one back. the court -- liquidity part of this equation is where this market could collapse much like it did in 1987 and 1994 and other years along the way. that will affect debt. have a great scenario for a big potential problem, i don't know if it ever comes to fruition or not. it is there. i most people would agree and am sure you do, it will take a longer time to play out and the spread between triple b and double be has gotten high. a lot of evil looking at this and wondering if this is not for 20 to go long triple b's as everyone is freaking out.

is that the opportunity? >> you're likely to see volatility in both those sets of markets. we are bottom-up so we are not allocating based on a ratings bucket but i suspect that given a relatively rich triple b and double be market, when we do see slowing, those will be areas that investors will command liquidity from, you want to stay away from where the quill it -- liquidity will be commanded. liquidity can be challenged and you can be whipsawed so caution is warranted. i want to get you up market check on where bonds have been. yields look like this on a two-year, we come all the way in by 10 basis points, quite a rally down 13. and a 30 year flirting with 3% all over again, 3.01% is the 30 year yield. the week ahead featuring more important data out of the u.s.

including retail sales and cpi, that is next. this is bloomberg real yield. ♪

jonathan: this is bloomberg real yield, time for the final spread, coming up over the next week, the 10 year anniversary of the u.s. equity boom market this weekend, more data out of the u.s. next week including retail sales, cpi, and ppi. and voting on theresa may's revised deal and the -- the closing news conference in china wrapping up. about 10 years since the bottom of the equity market? it was a couple of days ago we had the 66 610 years ago. andook back at this moment

it looks easier with hindsight to say it made a ton of sense to buy then, how difficult is it to apply that knowledge of those events to the growth scare's we have had, and what we're working on now. ,> it is difficult to predict it would be great. we have seen so many different idiosyncratic events on the corporate and the macro side. it is incredibly difficult and no one could have predicted the monetary policy response we've seen whether it is in the u.s. or the ecb or japan. the political decisions that are almost impossible to gauge into now this is the time to buy or sell. >> the discipline you have to toe to maintain discipline, not freak out, to have faith that things will stabilize. buy thesier to say to

december weakness of a couple of months ago, can you learn those things? >> i think so, it has to be part of your philosophy and strategy and you need a good client base that understands that. to question a moment ago, i would say that we may be prone to hyperbole and let's not over and expect lessons the next crisis to be around the corner. that is contributing to one of the biggest problems we have had since then which is consumers unwilling to borrow again. in any substantial fashion which has hindered monetary policy. assetisis was not only an -- and asset price and liquidity event but also psychological that has had a great impact to consumers and investment behavior. is, when i entered this business in 1983, i could not sell 16% 10 years because they

wanted 20% two years. you could not come -- convince anyone to take the bigger yields. what we misunderstood is 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 for -- more to get 3%. i remember saying how would you look back in 10 years back at this era, what would you think about a negative yield in debt and he said forget about that, in 10 years you would have wished you bought the 30 year because it will look different. that is one way of looking at bull markets. let's get to some quick final questions and begin with this prefer,se job would you mario draghi or theresa may? >> draghi. >> draghi any day. >> draghi. >> we have seen the high on

treasuries for the year and we have seen the high already. no. >> no. >> yes. seen the types on u.s. high-yield for the year? >> no. >> no. -- yes. >> no. >> great to catch up with you. thank you very much. that does it for us, we will see a next friday at 1:00 p.m. new york time, that will be 5:00 p.m. in london with the clock change in the u.s. this is bloomberg tv. ♪ want more from your entertainment experience?

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>> you are watching "the best of bloomberg daybreak: middle east" . inclusion it nears for saudi stocks, but has that been priced in? president defies syria protest and says he will run for election again. he will make one concession. we'll have details. shares soar as the burger bar beats. we speak to the cofounder and coo. ♪ first, saudi arabia and stocks are about to