continue to grind higher from here as long as we don't have a big negative surprise. >> i think we are certainly in the midst of a slow moving policy mistake. >> i've never heard fed officials basically beg for fiscal policy the way they are now. >> be careful now because most cycles are probably going to end chaotically. >> every minute that goes by is compounding the losses. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: from new york city for our audience worldwide, good morning, good morning. this is "bloomberg surveillance ," live on bloomberg tv emblem or radio. take time to appreciate the sound of silence. tom keene is on vacation. [laughter] on, abramowicz, rotation rotation off again. lisa: nasdaq leading the charge after underperforming for the past couple of days, leading to

people saying we are going to get this rotation out of growth, into value. that rotation seems to be overdone. i wonder if you are still going to get people trying to push that narrative. jonathan: yields higher off the back of the ppi data yesterday. friday.y, retail lisa: we are expecting a little bit of an increase, kind of like what we saw yesterday. it is going to be interesting to see whether we've got a further selloff in bonds. we will get another record sale of u.s. treasuries on the long end, selling 10 year notes. yesterday we saw that three year auction come in very strong. interesting to see whether that happens again. today we are going to be hearing from the vice president afterate kamala harris joe biden selected her as his running mate. they will be speaking in delaware later today. jonathan: let's start with the fx market. euro-dollar starting to push just a little bit higher, up 0.3%.

in the equity market this morning, equity futures up by around 25 points, up around 0.75%. there is the move in the bond market for you. treasury yields higher to 0.67%. we did this in early june, where we saw the 10 year get to about 70 basis points. we are seeing it in germany, too. lisa: is it an inflation bet? is it a bet that perhaps the fed won't buy up as much as possible? i just don't see the narrative behind this driving substantially higher. jonathan: let's get to our first guest of the morning, jared oodard, bank of america head of the research investment committee. draw the distinction for us. jared: we keep it simple here. i think any move towards value, any rotation to cyclical sectors is going to be a tactical short-term flash in the pan

until some changes in the economy that can provide meaningful growth higher. until then, i think these are noisy moves higher that a lot of investors can endure. lisa: because yields are higher, that should be good for the cyclicals. that should be good for the banks. why is that not another sign about performance, given that there may not be any reason behind this rally? jared: there's a lot of crosscurrents in the bond market right now. there's a lot of confusion about what it will be like in the future. most importantly, the sense that if yields really do rise in a meaningful way, the fed will come in with yield curve control and cap any big move anyway. so the long-term benefits, the correlation you might expect between yields and banks and other cyclical sectors, i think is not going to be what it once was, again, until the economy is

structured in a very different way. jonathan: you mentioned financials. we saw an yesterdays session, financials can outperform on the way down. up?they perform seed: if you start to deposit growth slow, loan growth pickup may be in the later part of this quarter, i think there are some moves that can happen that are worth taking a peek at. but for a medium or longer-term oriented investor, we are much more concerned that secular stagnation plus epic stimulus equals a really epic bubble in growth stocks, tech and health care. it accounts now for more than 54% of the market cap of the s&p 500, the highest ever. incidentally, if you sustain the current pace we have seen this year, tech and health care would

account for the entirety of the market by 2024. jonathan: let's have more faith in a sustainable rotation if we had a deal down in d.c. we don't. jared: investors are watching this really closely. they understand that more stimulus is necessary. weeknderstand that $200 a unemployment insurance is a disaster. $400 might keep us on the footing we are at today. but right now, we've got none of it. i think there's a real sense of watching and waiting. if we go into another week of no progress on talks, i think you'll see the markets start to care a little bit more. lisa: how does that translate? how big of a selloff could we see if there is no deal? 2008, when the house voted down tarp, the s&p fell about 23% in sessions after that. not saying we get the same move this year, but i think there's a

sense where if it really does look like ellis he is going to .ail, the market and care a place where the market has to impose a little bit of discipline on washington. we told investors this week we think it is a q3 hedging risk or buying opportunity, but we wouldn't be surprised if we get a lot more volatility before there is some peace in washington. lisa: what jared just said come of the idea that perhaps the market will impose some discipline on washington, goes to something you said last week with larry kudlow. you said, isn't it problematic that you have sony people losing their jobs at a time when you have markets rallying? down in washington, they don't care about the jobless rate is much as they do in terms of a signal from equities. you just have to wonder, what does that say about the deliberation process down and

wash? jonathan: i think it is embarrassing. if this market was to any percent lower, if the equity market was down hard like it was in march, i think we would see some follow-up in washington, and we don't. it makes me wonder, for you, what is the cutoff point at inch you look at things washington and say, it is not happening? jared: it is a tough call because our conversations is that everyone involved understands the need for more stimulus, for more aid. they are just haggling about who gets what and who gets credit for pushing things through. a little bit of real stress can overcome some of those challenges, so we do expect, whether it is a week from now or two or three weeks, at some point we expect there will be more stimulus. i guess it is a question of the past to get there -- of the path to get there. if there was a calculation that may be some more economic

stress changes votes in november in a way that they think is favorable, that is something to really worry about. have a senseto that people are thinking in those terms, then it is a very , some of situation that you raise cash on the back of. jonathan: we need to talk about the 60-40 split, something you at bank of america have been talking about for a while. plenty more people talking about this now, what to do with the 40% portion. the correlation between treasuries and growth, and more broadly, the equity market as well. can you speak to the problems there? jared: we wrote this week that the secular stagnation, this economic malaise has really started to blur the lines between asset classes yet in some sense, a long-term treasury bond is not that different from a tech stock that pays you a

high dividend. they both start to look really unattractive we see either stagflationary populism or a world in which industrial policy and other investments to boost productivity really change the game. that is why we suggest investors think of the kinds of risks they want to take. that means you can own gold. riskould also own credit in a way that has less to do fixedts design is a income instrument, and more with what we see is potential for fundamentals. in any world, those conventional methodologies start to make a little bit less sense. investors need to be a little more flexible in their thinking. lisa: gold. a lot of people saying it could be a hedge against equities, and yet they are moving in tandem. can you reconcile that? inflation've got 1.6%

. it's a modest recovery, not a huge breakout. got the fed on hold. yields 0.6% or so. the real yield is kind of a signal from the bond market and from gold moving in tandem that you could buy basically anything but nominal bonds, and you would be better off. in that sense, gold is a kind of get out of here trade from the perspective of the bond markets. you season rotating not just gold, but other secular things, cryptocurrencies, all kinds of assets that otherwise wouldn't make sense if the cost of carry wasn't really meaningful. if growth rates are able to normalize, you will see investors continue allocating two things that maybe they would not have done in the past. jonathan: great to catch up. our best to the team. coming up on the program, we will talk more about the fixed income market with rob waldner of invesco.

just at the epicenter of some of the shifts we have seen cross asset worldwide in the last couple of days. asa: we are definitely seeing bleed up in the benchmark 10 year real yield. leading to questions, is the ,elloff in the treasury market does it have legs? jonathan: tom on vacation. those vacation days are racking up for tom keene. on the bond market, treasury yields higher by three basis points on the 10 year to 0.67%. in foreign exchange, the euro $1.1770, up 0.25%. 0.7%e s&p, we are positive . good morning. heard on bloomberg radio, seen on bloomberg tv, this is "bloomberg surveillance." ritika: with the first word

news, i'm ritika gupta. china wants to discuss tiktok and we chat at upcoming trade talks with the u.s.. the chinese will bring up president trump's perspective trump's president perspective bans. joe biden is counting on, harris'-- on kamala harris' ties to the progressive community. he made history by selecting the california senator as a running mate, the first black woman and the first asian-american on a major party ticket. tycoon jimg, media eli has been released from jail, the most prominent figure detained yet under hong kong's sweeping national security law. daily"spaper "the apple

is critical to china's communist party. the british economy suffered more than any major european nation during the coronavirus lockdown. that followed a 2.2% drop in the first quarter, and it officially pushed the u.k. into its first recession since 2009. airbnb going public. bloomberg has learned the home sharing startup plans to file paperwork for a stock listing in the next few weeks. stocks could start trading as soon as the fourth quarter. airbnb's business has rebounded after being hammered by the coronavirus lockdown. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

pres. trump: one of the reasons it surprised me, she was probably nastier than even pocahontas to joe biden. she was very disrespectful to

joe biden. it is hard to pick somebody that is that disrespectful. jonathan: the president of the united states weighing in as the former vp joe biden completes in vp pick in, harris -- kamala harris. by 0.75%.s up the euro with a lift. it is just the treasury market this week. we have tenure supply today and 30 s tomorrow -- and 30's tomorrow. lisa: we are getting the record low yields, so it doesn't hamper money.lity to borrow i do wonder if it factors into the selloff we are seeing in treasuries, exceeding any increase in expectations for inflation. jonathan: joining us now from washington, d.c., bloomberg's kevin cirilli, our chief

washington correspondent. in many ways it is historic. it is also safe. can you speak to the former vp's vp pick? kevin: on a range of different policy issues, she is worlds apart from vice president mike pence. when they get up on that debate stage in the next couple of weeks, it will be remarkable to see the contrast. on foreign policy, she has advocated to rejoin the iran nuclear disarmament deal. on energy policy, she has advocated for the framework of the green new deal, something this administration has said is a nonstarter. on domestic issues, pertaining to fiscal stimulus, she has advocated that certain families that are less than $140,000 a have $2000 per month during the remainder of the pandemic. that is something that we are still at an impasse here in washington, d.c. on.

but whether it is social issues or your point about the glass ceiling she could very much shatter, senator kamala harris, the junior democratic senator from california, is really poised to electrify the base of the democratic party, but she does it at a time in which there are challenges on the campaign trail because of the pandemic. jonathan: we know what the playbook was for the administration. it was to basically paint this pick as a trojan horse for the radical left. i am not sure how effective that is going to be with senator harris on the ticket. kevin: well, she has really crafted her political message as a bridge of sorts between the far left of the party, as well as the centrist wing of the democratic party. she is a generational bridge as well. she is now at the forefront of the next era of democratic party leaders, regardless of the outcome on november 3. but to your point precisely about that type of attack, she

is also someone who, during the last presidential primary, the crowded democratic prisons will primary, really took it head on on the issue of health care. she at one point had been a cosponsor for bernie sanders' m edicare for all plan, and then put out her own plan that allowed for some type of private option to be included. i think on the issue of the middle of the road, as it relates to something like china, she has sponsored legislation that would make it easier for the united states to go after officials in china who steal u.s. intellectual property. i mention that because you are absolutely correct, she has worked with republicans on certain issues like china. she worked with senator mike lee on immigration on a wonkier issue. she does have a somewhat bipartisan streak. lisa: the fact that this is a generational shift, for a person

who is 55 years old, really indicates something about the leadership in the united states congress. i will say, just going forward, how much will she actually catered to the undecided votes, given the fact that she also is going to, as you say, energize the base? kevin: we talked about the policy. now let's talk about the politics. when i was talking with strategists throughout the last night since this has happened, how will senator harris play in wisconsin, michigan, pennsylvania? how will she play in those battleground areas? we don't know. this is someone who came to washington with that political it factor. whether it was then senator barack obama or senator marco rubio, certain senators arrive in the upper chamber with that political it factor, and she always had that about the

future. of her political ambitions. she loves to campaign -- the future of her political ambitions. she loves to campaign. now we are in a situation where there is virtual conventions, there's no pomp and circumstance. we are anticipating a joint appearance sometime later today or over the next couple of days, but there won't be the confetti. there won't be any of that. . pomp and circumstance. so how she is able. that through the videoconferencing will be interesting to see because, quite frankly, when you talk to her team, she wants to get out there and do the self-reliance. but right now -- the selfie lines. but right now, this is not the option. jonathan: that's what the senator brings to the table, the energy. it is what the former vp does not have compared to what he's up against. kevin: i look at this in terms of today until november 3. you've got the debates.

you really could not have more of a contrast on the policy, on the politics, and quite frankly, the personality between vice president mike pence and senator harris. last night, i we watched the debate -- i re-watched the debate between tim kaine and mike pence. tim kaine is a very different debater than senator harris. jonathan: i mean it politely, tim who? that's how inspiring that pick was. kevin: then you rewatch the way senator harris and the democratic debate took on biden, took on tulsi gabbard, it is going to be really interesting to see. and joe biden knows how important this pick is. if you want a safe pick, she does have some unpredicted billet he and her record and her campaign style, good or bad. and just a final point i would note on this, remember, joe biden debated sarah palin, so he

knows exactly the type of attacks that the republicans are already set to be trying to drum up, when you got the president's reelection campaign already debuting that nickname. lisa: did kevin just conflict sarah palin with mike pence? is this a sort of comparison? are they analogous? kevin: no, i want to be clear. what i am saying is that joe biden knows how important vice presidential debates are because was onhistory, when he barack obama's ticket, so there's that. also, vice president pence has always used a more steady, stoic debating style in this entire --st term, and a rather first term, in a rather unpredictable trump first term.

jonathan: why are you coming for kevin this morning? [laughter] lisa: tom is a tear. someone's got to do it -- tom isn't here. someone's got to do it. jonathan: this is bloomberg. ♪ businesses are starting to bounce back.

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♪ jonathan: from new york city, this is "bloomberg surveillance ." we are live on bloomberg tv and radio. tom keene is back with us in a few days. i understand he is moving. he's in the middle of a move right now. it's not just a vacation. i should characterize it a little more specifically. he's moving up a single floor. lisa: evidently that is incredibly difficult. actually, i can testify that it is. also, he might be selling some of that jewelry he bought in a rush. jonathan: people think i'm kidding. he's going to the floor above him. he can tell you all about it on monday. let's get to the price action this wednesday. we bounce back on the equity market, up 25 on the s&p. euro, $1.1764.

in the bond market, this is where the action has been. yields up by two or three basis points this morning to 0.67%. ton of supply coming through the week. yesterday, tends today -- yesterday, 10's today, 30's tomorrow. lisa: a lot of people saying the fed is going to come in and buy if we see any increase on the long end. there's also a question of how much people are pushing back against negative real yields, the idea that inflation expectations are starting to creep into the bond market as we are seeing real yields start to increase a little bit. hard to know what the dynamic exactly is. jonathan: let's get to rob fixedr, invesco chief income strategist and head of multisector strategy. any jitters around the august supply? rob: great to see you, and thanks for having me.

as you point out, bond yields have risen the last couple of days. we are getting supply now. but i think the more important thing is we are starting to see some signs of growth continuing, the recovery continuing. importantly, we are starting to see a peak of infections in the u.s. we see countries like sweden show a fairly substantial decline in infections. i think the market is looking through this and wondering, we've got the vaccine news, potential vaccine news yesterday, wondering whether this recovery might have more legs than it ever so -- then it originally anticipated. jonathan: what we saw in the bond market topped out at about 90 basis points on the 10-year in early june, and faded it. many people will be looking at this and wondering whether they should fade that, too. what would you tell them? rob: i think the action is really going to be in real yields.

the other important thing going on here is the fed is really committing itself to this kind of long-term inflation averaging policy. what that means, we think, is essentially that comes with aggressive forward guidance to say the fed is not going to do anything for a bit of time. the short end of the yield curve, and should put a bit of a cap on the top end of where yields can go. they could go higher, but we are not expecting a massive spike higher. we really looking real yields, where the continue action should really be. if you want to fade this market, i would fade in real yields. lisa: does that mean they are going to go more negative? lisa: yes --rob: yes. lisa: how low can 10 year real yields go? rob: it is just about 1% right now. i think we could probably see 10 year real yields go another 20 to 30 basis points lower at

least, if inflation expectations pickup to historically where they have been because people buy into what the fed is saying, somewhere close to 2%. lisa: another way of expressing this is investors will see inflation picking up over the longer term, yet they will still buy bonds even at these very low yields because they are believing and that said backstop. what do you do if you are a fixed income investors, losing money investing in treasuries? where do you hedge against this dynamic? rob: the option in fixed income is credit. we do like credit assets because the same factor, the fed committed to staying easy and the long-term inflation averaging means that they will not be preemptive in raising rates. if you look as accredited investor, one of the things that has really hurt you in the past is the fed being aggressive in raising rates. look at 2018, look at 2013 with the taper tantrum, look at 2004.

all of these periods, you've got the fed raising rates or threatening to raise rates, and that causes a correction in markets. if the fed is not going to be aggressive in preempting inflation increases, that is relatively positive to credit. creditl look for investment to do well. jonathan: what would lead to wider spreads? what would it take? what would you need to see? rob: right now, at the current time, the technicals are so incredibly positive. you have all of this sort of funding that has been done by corporates. a very aggressive new issuance calendar. you saw companies draw their lines down. you have seen a term of this amount of credit put into the system. so the technicals are very

positive right now for credit markets. jonathan: i think we've already had a record august for high-yield supply. it is august 12. i mean, we've already had a record august, and we are not even two weeks into the month. supply just hasn't rolled off in the way people thought it would coming into the summer. lisa: you've seen dividend recapitalization deals. you've seen increasingly speculative deals. ,t what point do you pushback given the fact that we saw i can sell 10 year junk bonds at a sub 3% yield? is this a sign that things have gotten ahead of themselves and you are not getting any return for the extra risk you are taking? rob: valuations are tight. they are inside their 10 year averages, but not a tremendous amount. we have been concentrating much more on the high-grade market. looking at high-grade supply versus where we were in march/april, the zipline numbers

have come off quite a bit. some put net supply to be potentially negative this summer. are certainlys tight, but they are not that far inside 10 year averages. there still is spread to be had there. lisa: this is the point that jon has been making a lot, the idea that even though absolute yields are at record lows, you are seeing higher spread over benchmark rates that are above the longer-term average precrisis. i am wondering from your perspective how much investors have to lower their return expectations for credit. what is prudent in order to get the return they are expecting rather than a whole lot of potholes as they face bankruptcy? rob: with government real yields being negative, you have to bring down your return expectations. they are negative pretty much across the board. downo have to revise

return expectations. our view is to continue to concentrate on higher quality assets that are not impacted at renewal ofpotential the slowing where those spreads are just inside of long-term averages. but we are not advocating taking a lot of risk here. valuations tight here, even with technicals positive, you have to be somewhat cautious. jonathan: the average 10 year yield in g10 right now, you know what it is? 0.2% is the average 10 year yield in g10. that is 20 basis points. i'm sure it might have changed in the last couple of days off of this selloff. is that what we are pricing off of here, the average 10 year yield at ridiculous historical lows? rob: the average real yield is negative, so that is what we are pricing off. if you are going to get negative real returns in the risk-free assets, if you like, you will

have to -- jonathan: so you've got to play for total return. most people are looking to get a little more aggressive as well. you said play it safe. i've heard that from somebody fixed income investors. that capital, what is it going to earn? rob: of course, you get yield in fixed income. you can get a continued tightening of spreads because we are still just inside the long-term averages, so you can get total returns higher than the yield, and that is what we think you will get over the next six months. jonathan: great to catch up. rob waldner on this bond market. i think it was the middle of the year, high-yield spreads were just north of 300 basis points. if i told you the economic data points for the rest of 2020, would you have told me that going into the back end of 475 on u.s. be at high-yield spreads? i doubt it. rob: no one could -- lisa: no

one could have understood it coming into this year because it is unprecedented. i have to say, if you look at the rally in bbb rated credit, it just blows me away. jonathan: this is the issue. i can tell you the data, but you can't tell me what the market is going to do with it because the data alone is not sufficient to come up with a trade. you need to understand the policy. i am going to ask a very basic question of credit investors. what would it take to get wider spreads? no one can really give an answer because of the fed's presence in this market. lisa: and yet you are seeing discretion. you are, for example, seeing the ccc sector underperform. you are seeing names lag behind the broader rally. so i wonder at what point you see capitulation on that front? people are still trying to have

some modicum of control on the risk, given the fed backstop. perhaps that is where you could see the data. jonathan: you've been very restrained the last couple of days not calling this market a bubble. lisa: how can you call it a bubble? you could have called it a bubble five years ago. it is highly influenced by federal reserve policy, highly influenced by credit sloshing around. you could call it a bubble. i'm changed. i'm not the same lisa you once knew. jonathan: you've changed. i'm not saying you're wrong. lisa: it could be a bubble. i am just not going to be the one to call it. jonathan: good morning to you all this wednesday morning. we shape up as follows. in around 50 minutes, we will get you some data for the bond market. treasuries lower for the fourth straight session. yields bleeding higher, up tens tothree points on 0.67%. euro-dollar up 0.2%. as you bounce back and equities,

equity futures a nice bed, up 22 on the s&p 500, positive 0.66%. from new york, alongside lisa abramowicz, i'm jonathan ferro. this is "bloomberg surveillance ." ritika: with the first word news, i'm ritika gupta. joe biden and kamala harris will appear together in a virtual fundraiser today, their first appearance since the democratic presidential candidate made to california senator his running mate. harris is the first black woman and the first asian-american on a major party presidential ticket. state officials concerned about slowing the normal mail delivery are extending mail-in ballot deadlines. they are also making backup plans to smooth early voting in the weeks before the election. still, officials warned that tens of thousands of ballots might be thrown out. the postmaster general appointed by president trump is being blamed for slower service.

the postal service says it is working with election officials. the u.s. government has reached a deal with another potential maker of coronavirus vaccines. moderna will supply 100 million doses of its export metal sho shots.ts experiment of in new zealand come the city of auckland is back in a three-day lockdown after the country's first local coronavirus cases were discovered in 102 days. authorities are now trying to trace the infection. new zealand wants to avoid what happened in australia, japan, and vietnam. those countries had early success in fighting the virus, but now they see it coming back. and a move that will make tesla shares less expensive for the individual, investor. the stock is rising today. tesla is up 220% this year alone.

global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> right now for some currencies, it could be a bit of a race to the bottom. nobody particularly once a strong currency when there is no inflation.

jonathan: jane foley of rabobank, the head of fx strategy, straight out of london, the capital of global foreign-exchange. equities with a bounceback. we move higher by 0.7%. the dollar weaker against the euro. $1.1760.ar, in the bond market, fourth session of softer, weaker treasuries. yields higher three points to 0.67%. here's the stock move of the moment. it is the only moment this morning i will mention it because whenever i talk about this stock, i get the hate mail. it is tesla, up 6.5%. the why, i don't to get really matters given what it has done this year. let's stop talking about tesla for a moment and leave that to one side. i can't handle the hate mail around this. lisa: i am going to have to mention this again, but carry on. jonathan: technically, they shouldn't. we saw this with apple.

i imagine we will see it as more as well. it is meant to democratize the access somehow. i don't get it. [laughter] lisa: there is this idea that you can already buy a portion of a share, so it shouldn't really matter how expensive each share is, and yet it does because if you think about it, there is some sort of, even if it is philosophical, the idea of just owning a share of something, and tesla caters to retail investors. if you look at robinhood accounts, tesla is such a huge portion of what people are going after. they want to make themselves more accessible to that individual trader and say we are more of the people. jonathan: you are up 229% year to date. congratulations. just no need to be so vicious about it. lisa: this is somebody who is scarred by the feedback. jonathan: i just don't get it. equity futures this morning up 0.7% on the s&p 500. a break in gold and precious

metals in the last one he for hours. let's get straight to harry tchil -- let's get straight to uilrian.hiling what happened the last few days? harry: the question is when would be will be taking profit. but to mentally, what we are looking at bnp paribas is the breakeven inflation rate. removest of stabilizing one factor of support for gold. on top of that, you start adding investor flows into silver, which is a cheaper alternative than hedging macro risk. then you can see the consolidation that has taken place. lisa: yesterday's selloff in gold, really violent, considering the fact that there weren't similar kind of moves elsewhere. it was the biggest selloff since april 2013. does this indicate a positioning squeeze, something about the nature of this trade to give you

pause about how much higher gold can go? view, currently, and our trying to link go to the macroeconomic fundamentals, we watch closely what u.s. real rates are doing. it is a question of did it still have the fuel to move higher. oftentimes when you reach a historical peak and acceleration in prices, the question can be quite important. given that u.s. real rates on a five-year basis are still at -1.23%, there is support from the macro perspective for gold to hold onto its recent gains. we are thinking about gold before in the 1900s potentially having another rally next year. fundamentally, it is still good. lisa: so another rally next year. tom keene took today off to go buy some more jewelry to invest in gold.

how much higher could we see the price go in the next leg of this rally? harry: we are viewing in our forecast the next leg coming in q1 next year, especially as we see realized inflation year on year benefiting, which would help the famous breakeven inflation measure move higher. understanding that the fed is going to keep yields low, even adopting yield curve control. so on that basis, you get that further impetus for gold to successfully move above $2000. jonathan: are you having new conversations with a different pool of investors then maybe you would have in 2011? there's a new angle to this gold trade that wasn't there 10 years ago. harry: you guys were mentioning it. there's a lot of retail interest that is happening.

i don't talk to retail investors come but there is certainly a big shift in terms of retail looking at gold. but you have a number of institutional investors looking at gold is a very good macro hedge because the equity valuations being skyhigh if you , golde a correction there is there to hedge your portfolio. jonathan: how effective do you think that will be, given the positive correlation between tech and growth stocks at the moment? harry: the hedge comes in really if you take losses on the equity , which is seen a very big increase in price. that's really its primary function. jonathan: harry, great to catch up with you as always. great to see you.

bnp paribas on what is happening on this gold market. things have broken down in the last 24 hours, but i think the new conversation is the hedge, the replacement of treasuries in the portfolio with something like gold. we have heard that several times. lisa: you asked the right question, which is how effective is that going to be. we have seen gold trade very much intend him with equities. at one point, people will say longer-term, it will act as a hedge. overseeing the sing kind of demand on physical investors, or is this really a speculative trade by wall street? harry: it offers -- jonathan: it offers you that inverse correlation to the cyclical part of the equity market, not the growth part of the equity market that dominate the index like the s&p 500. that's where things get a little bit tough for me. inhink we talked about this the last 24 hours. how effective will it be if

growth makes up so much of the overall index and is correlated positively to something like gold? lisa: it is a good question. i am also struggling to understand how leveraged positioning is, how quickly you could see a selloff gather steam as we saw yesterday, based on the fact that you have certain funds trying to use this as a financial hedge. i wonder whether the infrastructure around gold trading is substantial enough to withstand the potential volatility. jonathan: just a quick update for our audience worldwide, this is how we shape up. up 0.7% on the s&p, positive 23 points, bouncing back from yesterday's selloff. in foreign exchange, the euro higher to $1.1760. this has been the move that got everyone's attention, the move in treasuries. real yield a little bit higher off the lows of the last year or so. nominal yields higher over the last four sessions.

yields up three basis points this wednesday morning to 0.67%. this is, this is "bloomberg surveillance." ♪

♪ >> markets can probably continue to grind higher from here as long as we don't have a big negative surprise. >> i think we are certainly in the midst of a slow-moving policy mistake. >> i've never heard fed officials basically beg for fiscal policy the way they are now. >> be careful because most cycles are probably going to end chaotically. >> every minute that goes by is compounding the losses. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: good morning, good morning to the second hour of "bloomberg surveillance," live on bloomberg tv and radio.