jonathan: from new york city for our audience worldwide, i'm jonathan ferro. bloomberg "real yield" starts right now. coming up, treasury yields drive lower on the retails report. emerging markets resilient amid concerns in china. one white house fed nominee facing even more doubts. we begin with the big issue, low yields in the drivers seat. >> the bias is to lower yields. >> lower yields. >> yields move lower. >> lower global bond yields are certainly giving the u.s. some attention.

>> that is the crux of the market. >> software happens to fall neatly in that category. >> do equities need to re-rate because rates are so low? >> are they giving us a signal that equities are at risk? >> they are able to issue whatever they want in the corporate bond market. >> you can see that has caused a change in strategy already. >> it is like everything becomes a bond. >> bonds are rallying, gold is rallying because of the nature of these things. jonathan: joining me around the table are james keenan, winifred cisar, and peter tchir. it feels like a buy everything situation. the 10-year increase below 1%. u.s. corporate borrowing costs at an all-time low. is that what this is right now, just buy everything, get when you can?

winifred: everything but high-yield energy. it seems investors have a lot of cash, we see record inflows into investment grade but the bias is very much to be up in quality. we don't want to buy ccc's haphazardly, buy energy haphazardly, but we have to put the money somewhere. jonathan: do you share that view? >> they are idiosyncratic issues. some risk playing out in the high-yield energy space. as a whole, last year, what you saw was weakening in economic data relative to 2018, tightening that you saw from the fed and pboc. from january on, you saw weakening in the market. now the story is you are seeing the stability of earnings, so everyone is comfortable that you're not going into a recession environment and people are going to buy any kind of yield at this time where they can get stable earnings. all returns will be low, based on today's valuations.

peter: the markets are being rational. the credit that are not priced well are not priced well. i don't get this bubble mentality. i'm looking at what is next. i think you'll see a push into structured products. if you are not, you are supposed to get in. if you are in, you are supposed to get more. it takes a little bit more work. that is where i'm focused now. jonathan: people will struggle to digest the line that this is rational when they see the 10-year increase below 1%. how much is justified? peter: last year, everyone was afraid of bbb. one question i asked everyone, what were the last three investment-grade companies to fall within the last year? it doesn't happen very often. people get scared about credit. default rates are very low. we are moving back to what our long-term averages for credit spreads are. we are stable around here. you'll see good companies, bad companies.

i keep coming back to what is next, and i think that is structured products. jonathan: whether we are long central banks and short growth. he wrote this. for a decade of qe and declining nominal interest rates, this is not working as planned. they continue to outperform versus assets whose performance depends on economic growth. what do you make of that? we are long central banks, short growth. winifred: you see a pretty significant divergence with the up in quality of the credit markets and also equities continuing to make new highs seemingly day over day. not today. i think what we are really banking on is the fed. this low interest rate environment is here to stay. you don't necessarily want to have growth in that environment.

you want to have enough growth to keep us credit worthy, and that we will not see meaningful downgrades and defaults. but at some point, yields have to rise if we saw growth pick up. on the other hand, credit spreads start to blow out once you see the 10-year treasury go to 1%. that signals there is a fundamental challenge in the economy. jonathan: at the moment, the attitude to low yields is that it is supportive of risk assets elsewhere. at some point, it goes the other way, where we look at rates and we say, let's think about why they are low. growth is not good. germany is flirting with recession. when does that turn start to happen, this year? james: i don't think this year. i will change your words a little bit, that growth is not good. it is all relative. you mentioned qe policy. we had a world that was over-levered. there was a level of asset liability mismatch. qe and fiscal stimulus over the last decade have helped to

stabilize the market, reduce volatility of economic data. when you look at growth, it is low because of the headwinds of the aggregate leverage in the system, but the stability of that low growth is higher because of those policies. if you are going to try to price assets over the long-term, discount the volatility of earnings, if you look at several years and you think you have a high conviction of a 1.5% to 2% growth rate, what does that mean for 3% to 7% earnings growth? you can put a better price on that. whether spread compression or multiple expansion -- it is low rowth but not bad. peter: another thing that's been going on is the shift over the past two years. people used to view their equity portfolio and fixed income portfolio as both. now they are looking at it holistically. what is my entire portfolio?

they are comfortable owning equities, and they don't feel the need to sell them because they have long dated treasuries as their hedge. there are all sorts of easy ways to take advantage of that. that allows people to be much more patient. the past year and a half, every time stocks went down, bonds rallied. while that works, we are in this low rate, good equity environment. jonathan: let's talk about high yield. how much of the market is trading above its core price? james: the high-yield market looks more like the loan market. 60% is trading above it's called price. we talk about low yield or high-yield, tighter spreads. we think they are supported by the growth profile and earnings profile, but that said, your aggregate total return is based on that. you are going to get a 4% to 5% carried market, where if the market rallies and people are more optimistic on growth and equities will outperform credit

in a sizable way and rates will selloff. right now, even at these levels in the carried market, 4% to 5%, is still a pretty nice relative return in aggregate. winifred: we have been less constructive on high-yield. it is all valuations to start the year. when you look at what is going on in the high-yield market with issuers taking out their debt and continuing to issue at lower coupons -- we have seen higher yield deals since all of 14, the all-time low. prospective returns keep getting more and more ompressed across the high-yield market. on the other side of that, the high-yield market has a much higher quality than it historically has had, given the surge in bb, ccc's segmenting off into another part of the market. part of the new issue that's

been more hairy has gone into the loan market. high yield is inflated and has a nice technical. peter: the high-yield people have to look at some of the bbb credits. bbb has been the weak end of investment-grade. you'll see a lot of investment-grade portfolio managers underweight bbb. bb have been squeezed a little bit. look for that. jonathan: coming up on the program, the auction block. the u.s. issuing 30-year bonds with the lowest subscription. this is bloomberg "real yield." ♪

jonathan: i'm jonathan ferro. this is bloomberg "real yield." i want to begin here in the

united states, where the treasury's $19 billion offering of 30-year bonds to a record low of 2.06%. the highest bid to cover ratio since august 2014. a busy start to the year for junk issuance. selling bb rated debt at the lowest coupon since 2009. deutsche bank selling its first bond since 2014 with a reduced coupon. orders 11 times higher than the $1.25 billion issue. citizens private wealth still making the argument to look outside the united states. >> the u.s. is pretty much priced to perfection. if we want meaningful gains in the balance of this year, you need to see earnings pick up. europe, the expectations are so low, stability in a market downturn will occur. jonathan: back with us are james keenan, winifred cisar, and peter tchir. there was an appetite to go abroad, get outside the united

states, and then china happened. what do you make of that trade at the moment? peter: you still want to do it. there will be some things that go on. obviously, a lot of em has been hit hard, what is going on with oil prices. we were already starting to see people pull supply chains out of china and look to move elsewhere. that will accelerate. there will be emerging-market countries that benefit from that. at the same time, we would avoid the middle eastern debt and turkey. one of the generals that we talk to -- our thought was that iran would not retaliate right way. we are starting to hit that window. we think we could see something in the cyber front in the coming weeks. as a whole, i like the asia-pacific. i don't know when the right time will be but local currency will be interesting after that

big selloff. jonathan: are you part of the v-shaped crew? peter: i think it will take much longer. everyone is talking about the supply chain but i think it's more about tourism. china is the biggest consumer of outbound tourism. they are shut down, flights cannot come in and out. that will have a bigger impact on the u.s. economy than we are aware of. the supply chain will be a much more difficult thing. winifred: this really amplifies what we have seen in china over the past 18 months with trade wars. tariffs on steroids. companies are urgently trying to figure out, how do we get out of dealing with issues like epidemics with supply chain issues? james: certainly something to watch. e are all evolving and information flow is coming out. at the same time, i think there's a big opportunity. we just talked about the

financial easing we have seen over the last 12 months. ultimately, that will find its way into a flow of capital in the emerging-market. you will see some level of cyclicality, depending on the timing of this, but you'll see some bounce back post coronavirus. at the same time, you'll see ome dispersion, not just because of the virus, but commodities, certain regions have a different impact. that being said, in a low growth environment, and beyond that dispersion, there is some decent yield and return you can find. jonathan: that is what i find intriguing. when you think about what is lacking, it is commodities, base metals, energy. when you speak to clients and people in the markets, there is a consensus about a v-shaped recovery. yet, there is a reluctance to get into the commodity trade while there are things attached to it. if you believe china will go

through stimulus, why wouldn't that be a trade you want to get ehind? james: i think the v-shaped recovery is around the chinese economy. the rest of the world has had a drag but not necessarily a real headwind to growth. if you look at this, we think that you will see a recovery. this is probably going to be more prologue, have an impact on certain sectors more than others, you'll see a stimulus. you have a huge economy that is still growing. you will see a bounce back. the further the pullback, the further recovery you'll see, and the timing of that. from a commodity standpoint, there's a correlation associated to that, but there is more being paid into the commodity space.

china has a demand that has been weakened as they slow their economy, but you have a supply impact, we have seen this over the course of the last five years. that is a bigger issue, the secular changes and technology hanges, certainly around energy. peter: every time the fed has expanded its balance sheet, it has shown a strong ability to inflate financial asset prices. that is probably what we are seeing here. financial assets are responding well to the new awareness that central banks will be helpful. that goes into financial assets. jonathan: would love your assessment on the scope of easing in e.m. right now, where yields and rates are relative to inflation. is there much capacity to ease in emerging markets at the moment? peter: i would like to say no, but history has taught us, whatever we thought was rational in the normalization has gone out the window, and they continue to push lower. it's impossible to bet against the easing.

i don't know if it is right or not, but there have been 8000 central bank easings in the past years. jonathan: let's talk about the dollar. where do you come down on the dollar? people thought it would be a weak dollar year. peter: it makes sense with what is going on with the coronavirus. the intriguing part to me is parts of the emerging-market, which will benefit from this shift away from china. i think there are opportunities, if you sift through the rubble. some em currencies. jonathan: still ahead, the week ahead, featuring a slew of fed speak, and the minutes of the fomc january meeting. that is next. this is bloomberg "real yield." ♪

jonathan: i'm jonathan ferro. this is bloomberg "real yield." coming up over the next week, u.s. markets closed on monday, long weekend for president's day. wednesday, u.s. housing starts and minutes from the fed's latest meeting. friday, fed vice chairman richard clarida speaking in new

york. with me for final thoughts are james keenan, peter tchir, winifred cisar. a hearing taking place for white house fed picks. one is going ok, the other one is more difficult with judy shelton. i want to gauge you as market participants. if judy shelton got a place on the federal reserve, would your thoughts about fed independence change in any way? peter: i don't pay attention to what they say anymore. i'm not worried about it. james: i wouldn't challenge the independence. the bigger question is, those who are on the fed or any central bank, are they more naturally hawkish or dovish? that is more of a focus of mine than independence. winifred: i think it comes down to the fed motivation and what they are looking at. with the u.s. deficits ballooning where they are, they have to look at the real-time borrowing costs for the u.s. if we keep yields low, that makes the u.s. economy a little

more stable than otherwise. jonathan: let's wrap things up by talking about the federal reserve and where policy is going. how low is the bar for a rate cut? winifred: we are at least going to have a few more months before we see a rate cut. the market is clearly pricing in a rate cut at the end of the year. if growth continues to hover in the 2% range and coronavirus is contained relatively shortly, i don't think the fed will be up against the wall for a rate cut. we are closely monitoring the shape of the curve on the front end. inversion is not super healthy for financial markets as a whole. it is something probably the fed is also trying to consider. james: i don't think you'll see a rate cut this year. i do think, because growth will be supported, the risk to that are a prolonged

coronavirus. but naturally, we will see liquidity infusions from the pboc in china. the fed will watch. i know it is priced in now. if you look at u.s. growth and the data, it's generally upported toward stability. i don't think you'll see the fed put liquidity in. what the bar is -- if they are forced to -- they will change language first. if you see declines from uncertainty, they will put iquidity in. jonathan: march 18th too soon? james: definitely. peter: unless coronavirus turned out to be worse than thought. we should be back to 1.80% to 2% on the 10-year. the economy has been doing ok, decent numbers. a rate cut is a bit overdone. jonathan: is this week just a couple of cracks? retail, stripping out a lot of noise, coming in at 0%. it is difficult to get your hands on the u.s. economy at the moment. it feels like trend growth round 2%, but certain things

that you struggle to reconcile. you look at what is happening with the jobs growth. it could be a weekly story, but initial claims look solid. peter: we have to remember, december, we didn't know we were going to have a phase one trade deal with china. that was not priced in. we had the attack in iran. it is difficult. you just go back to what it has looked like over the last four months. nothing seems to be changing that trend growth. james: i think you'll see cyclicality in the market. you will probably see more frequent cycles but to be more ild to the up and down side. you will see variance with regards to regions and industries, and that will play into the numbers. we will debate them every month, but as peter said, if you smooth them out, we are in a low growth environment that is mostly supportive. winifred: as demographics change in this country, people

moved to different regions, tax policies affect different regions, you'll see a big give-and-take. moving things out is the only way that you can get any sense of where we are headed. jonathan: three quick questions, three quick answers. 10-year yield at the moment around 1.60. what do we see first. 1.40 or 1.80 on the u.s. 10-year? peter: 1.40. jonathan: u.s. high yield on the barclays spread around 3.40. where do we go from here, 3.20 or 3.60? james: 3.20. winifred: 3.20. jonathan: greek 10-year yield, around 1%. 1.50 or 50 basis points? 50 basis points or 1.5% inifred: 50 bps. james: 50 bps. peter: 1.50. jonathan: jim keenan, winifred cisar, peter tchir, thank you for joining us.

from new york city, that does it for us. if you are stateside, enjoy the long weekend. over in london, see you next friday at 6:00 p.m. this was bloomberg "real yield." this is bloomberg tv. this is bloomberg tv. ♪

francine: mark carney will soon end his term as governor of the bank of england. carrying the u.k. economy through crises and years of brexit related uncertainty. a high-stakes, divisive issue that has been impossible to forecast. good preparation for his next job, tackling climate change. born in 1965, the young mark carney dreamed of greatness in the world of economics, getting a doctorate at oxford. carney spent 13 years at goldman sachs, then entered public service, eventually governor of the bank of canada.