kailey: from -- caroline: from bloomberg world headquarters in new york and from london, i am caroline hyde. romaine: joe weisenthal will be joining us later. at the moment, the s&p 500 index fractional is a but the russell 2000 small caps closing in a record high. the question is, "what'd you miss?" caroline: paper talk.

talk of more stimulus, the russell 2000 at a record high, there is growing chatter from some fed officials that tapering bond purchases might be the future. speculation that the yield curve is poised for steepening. we saw the spread between the two-year and 10-year note rising above one full percentage point for the first time since 2017. some fed officials thinking about how best to scale back asset purchases. romaine: the idea that we have seen this increase in the curve basically every day now this year so far, you see us over that 100 basis point level for the first time in quite some time. a lot of folks are saying, look, at some point this is not what is happening on the tens, the 30's, it is really what is happening on the short end of the curve. that is where the comes into

play. we have heard from a lot of members of the fed that seem to be suggesting that there could be some movement. caroline: it is notable that today, we do not see that yield curve steepening as we have been we did have a big 10 year bond auction. we have been hearing from rafael bostick, definitely open to the possibility. with discuss all of this brian chappatta, who wrote so eloquently about all of this. what is sparking this? is there talks of bubbles, worries about financial stability? >> when you start to see fed officials come out a little bit they otherwisean would, he started see undertones

of bitcoin surging, tesla surging, the bubble talk is pervasive right now throughout market. but there also forecasting a much better growth outlook for 2021, seeing the back half of the year being strong. that is why a lot of these officials are calling on the idea of tapering their purchases. they are getting the markets see theble, we start to labor market improve and growth take off, you should not expect 80 million in treasuries and 40 billion of nbs every month going forward. romaine: the bubble aspect, if that is true, why is there concern now. monthsn't there concern or years ago? brian: the one thing that jerome powell has made clear is that

they don't have a set asset price target where they say, this is too high. but when you look at the indexes , whether it is bloomberg or sachs,sex -- or goldman it is all very easy. you have prices at record highs. that is one of the things that the fed ultimately is responsible for, in addition to promoting maximum employment and stable prices, they also have financial stability on the plate. it is something they keep an eye on. caroline: we keep a close eye on the high-frequency data. the jobs number was ugly on friday but of course, if you dug beneath it, you could see which sectors were hurt. overall, what did they think is the real fuel? the fed's basic line has

been that the future of the economy will depend on the path of the virus. that is really true. but i think, with the vaccine rolling out across the country, i think fed officials are starting to see the light at the end of the tunnel, ok, let's see what we have here. what we have are the underpinnings of a potentially in no smallnd, due part to fiscal stimulus. president joe biden will be coming out with another large fiscal stimulus asked. i think that they realize that is going to be a real big help to jumpstart the economy once everyone starts to get vaccinated. romaine: what did you make of the 10 year auction we saw a little bit earlier, particular where yields were and where they ended up? brian: they built in a concession as they do in most auctions.

it was the highest yielding auction since the pandemic really started getting underway. i think at a certain point, you reach a lot of overseas buyers. it surpassed its pre-2020 record low. yields are actually, at the longest end of the curve, getting to a point that people have seen before, which is kind of surprising. we are no longer at unprecedented levels. romaine: you write the headlines on your columns or to someone else do that? brian: i write them. romaine: they are always very good. coming up on the show, we will continue the conversation. julia coronado will be joining us to talk a little bit more about the fed speak.

are they communicate in the right message at the right time? this is bloomberg. ♪

romaine: is it a tantrum or will it just be talk. ist taper talk at the fed starting to be the story. bloomberg spoke earlier with howard marks about the impact of the fed's moves. >> the fed and treasury actions,

and specifically the reduction of the fed funds rate to zero, has required people to invest. because they do not want to sit around with their cash, money market funds, bank deposits, all earning zero. they don't want treasuries at less than one or high-yield bonds at less than two. so they have had to push out into risk assets. romaine: howard marks speaking a little bit earlier. i think we can do two shots at once, bring both of us on screen. this is a serious issue. there is a lot of talk about, if you start to see a meaningful rise in rates, when does that start to eat into some of the returns you get on equities? is there an equilibrium out there? that isno one knows but what they want to find out. isoline: it is true, there

an issue that people seem to be pushing across assets. we have the s&p 500 still lingering near the record high. healthyus to talk about federal reserve sort of communicates this, julia your perspective here on some of the taper talk we have had. it front andk led center, we had the vice chair sort of clamp it down. are they just trying to get us used to the word taper once again? julia: i think there was a little bit of a novice mistake. he was not around during the taper tantrum of 2013. he casually threw around some notion that they might end asset purchases early given how good they expect the economy to go. and that sort of fueled what was

already a steepening of the curve that came from better expectations for fiscal support, the vaccine, and expectations that the economy can get going this year. i think what i am detecting today is a little bit more discipline the vice chair came back out and calm things down. he said he is above the medium consensus forecast. very bullish on the outlook but more cautious on inflation. outlook, he does not expect to taper until 2022. we too soon to start the conversation. enjoy the ride, stay bullish, don't worry yet. romaine: i am curious, even if bostic got a little bit ahead of himself with some of those

comments, there is a bigger question about when the fed gets to a stage where it finally has to think about tightening monetary policy, what should the process be in communicating that to the market? this is not something you will just drop on them and say, we will do this tomorrow. powell hasr indicated they want to give a long-run day -- long runway. substantial financial process is what they want to see. that sort of gives them a framework. someer progress, then further progress, they can evolve the language to let us know that we are getting closer. out have already laid 2013-2014 as a benchmark for how long it might take. it might take nine months to a year to exit the program. want toyou don't even

start that discussion. until we are on the others. they don't want to prematurely bet on this pandemic ending and everything be in great until we actually see it happening. we need people vaccinated, we need to see that that is effective. we need to see that cases are down, hospitalizations are down. that people are starting to move around, schools are reopening. all of that has to happen before they start the conversation. then they give us maybe six months heads up that it is coming and then they initiated. we are expecting in december they announce it and start in january of next year. so right now, pedal to the metal. they are going to hold it here until we really see the actual data confirming that bullish forecast. tweeting, ion you think on thursday, the rafael

bostick video of him saying that maybe tapering bond purchases earlier than expected. were you surprised that the market did not react more to it? there was definitely volatility in emerging markets. that is when we see it. when the fed starts pulling back accommodations, it is the riskiest assets before we see it in the s&p 500 index or even in the 10 year. so we definitely saw a reaction out on the frontier to his remarks. again, something alongside. we all welcome higher rates that come from better growth and inflation dynamics. we don't want that dynamic ticket out of control. justnk that, again, it is

too early to have that number station. i feel like probably chair powell made a few phone calls, reined in the message a little bit. and we are likely to see that on thursday. romaine: so that is sort of the fed and its relationship with communicating or not communicating with investors. i am interested in the -- the fedp with the chair and secretary. do you think that relationship will continue, should continue, and can continue? julia: i think in the near term it will continue. there is no conflict here. we are still in a pandemic. now, getting the economy to the other side, we have got janet yellen likely to have easy confirmation.

i think that her debt management policies will be very transparent and predictable, and the fed will therefore be able to calibrate its balance sheet policy in a transparent fashion , think as the recovery unfolds we will see that fed independence come back onto the front burner in terms of -- they some of the will be fiscal objectives that the biden administration wants to achieve, the fed will be there to guide the temperature on the overall economy. right now, there is no conflict. they will stay well coordinated, and they should. as the baton is passed back to the private sector and we have more of a self reinforcing positive dynamic in the labor market, than the fed can move to

the sideline gradually. caroline: that baton being handed back to the private sector, how addicted do you think the market and investors are to forever lower policy in terms of interest rates? do you think the federal reserve will be able to smoothly and slowly get us back to any sort of normality? julia: we are in a world of lower neutral rates. we probably will not see rates get very high. .alance sheet policy does that mean they can't taper with and purchases? time,ey did it last albeit with a few bumps along the road. they shrank the balance sheet a little bit. economy grow into the balance sheet.

can they get out of this asset purchase policy? yes, i think absolutely they can. that is going to be the marginal tool that they will turn to when a recession hits again. that leaves us with a tighter relationship between policymakers and markets. it is still a work in progress. instead of trying to figure out it's reaction function. some of the lines they crossed in terms of providing credit directly, that warrants a conversation. i don't think the fed was comfortable going there. i think we need to have a conversation with congress, with the administration, with the fed, about what tools are appropriate for the fed, about what can they do in a world of lower interest rates.

i don't think we want to find ourselves flat-footed. i think we need that are, may be automatic stabilizers on the fiscal side. thetal currency may be on monetary policy side. there are a lot of ideas out there on the table that i think are productive in managing monetary policy going forward. caroline: so much to chew on for another conversation. fantastic as always to have you with us. president and founder. we have got some breaking news. coming from the new york times. senate majority leader mitch mcconnell has told associates believesy that he trump removed -- leaves trump committed impeachable offenses. romaine: i am pleased to say,

coming up next on the show, the anchor, the former coanchor of the show, joe weisenthal, will join us for about four or five minutes. this is bloomberg. ♪

romaine: good news, our collective workload is about to decrease. we are joined by joe weisenthal, normal coanchor here, joining us today from an undisclosed location. i am glad you wore a suit today. not a tie, but something. yesterday, we were talking about my bitcoin tattoo, not right -- not quite ready to show it so i decided to cover up a little bit. caroline: what are you noting in the market right now? a crazy day in terms of some of the benchmark moves.

what really caught my attention was some of the stories about really tiny penny stocks. joe: this is so classic. i remember the penny stock craze in the late 1990's. i know it is dangerous to compare. but, starting to see more and more similarities including a massive interest in these penny stocks, starting to take a huge share, like a quarter or 86th of all volumes. yesterday, we were talking about that company, signal. app, but it has the same name, so let's drive it up. today, there was some company that surged because someone from tiger king or whatever that netflix show is got paid to mention it. caroline: don't pretend you don't know what it is. joe: i did not watch that show whenever one ousted. romaine: carol baskin, you are

not a fan? you missed a ton of great stock advice. joe: we are having some fun times on the stock market. about some of these tiny stocks sort of getting bid up here. in 2020,een at least sometimes these individual investors get it right with some of these names. of the story of 2020. when you think back to the spring, when the whole robinhood, dave portnoy thing happened, than on the others, the buffets and everything, super cautious. you had even like with signal yesterday committee ceo saying, i hope investors are doing their due diligence because some people are going to get absolutely burned. penny stocks that fly off because it has the name or

because somebody said it on a there is also means lot of speculative activity. one thing that was striking, russell 2000, that iw m russell 2000 etf gaining today, that is sort of your indication that robust growth, more fiscal stimulus, etc., is still one of the dominant themes. caroline: and time to taper? joe: your last guest, julia coronado come i think got it exactly right. it is a safe bet i think that the fed is going to be way more disciplined and way more elegant in its exit from its existing policies than last time around when it was all new. even though there is briefly a talk of taper, the market never went crazy because i think the fed, so much credibility to the

market now, maybe even some misplaced words is not enough to detract investors from understanding. weisenthal, work from home, he got smarter. that is all from "what'd you miss?" "bloomberg technology" is next. ♪

emily: chang in san francisco and this is "bloomberg technology." trump defiant. the president says he is at zero risk of being removed from office from the 25th amendment. lawmakers consider impeaching him for a second time. we will have the latest from washington. twitter deletes more