we could be getting on a path that is actually greater, the trend of growth being greater than we had pre-pandemic. >> there i just know stabilizer's. >> the underlying global economy is just more resilient and flexible. >> economists are picking up on this idea that the super cycle has turned, commodities are moving higher, and inflation looks like something that is coming back. >> the bull market has begun. it is starting and is not going to go away anytime soon. >> this is "bloomberg surveillance." jonathan: from new york city to our audience worldwide, good morning. this is "bloomberg surveillance." i am jonathan ferro. equity futures, advancing .2%, on the s&p 500. our economists capitulating to

the view the market has been telling them, that things will get better? tom: no question about that. in the first interview with ellen zentner, you saw that. we will be talking to robert tipp about the bond reaction to this belief in better gdp statistics. jonathan: and that is the story, talking about better growth, but equities are down and down hard on the wrestle and elsewhere. yields higher, 1.30 percent on the 10-year. tom: i was remiss in not talking about the real yield this morning. there is a different show this afternoon, because the real yield is finally moving to a lesser negative number. jonathan: i might send in emailed. lisa: why don't you promo the real yield? jonathan: looking forward to that and about six hours time.

this is an early promo. great lineup, nevertheless. tom: let's do it for bloomberg radio. there it is. it works. jonathan: let's sit on those thoughts from bob michaels, the view that things get better, and his view is to stick with it and do not wait for the correction. stick with risk. lisa: this highlights the idea of risk getting turnouts its head. it is the safest insurance right now. that is the belief in markets, that yields will go higher on the benchmark treasuries. outperformance of the risk's assets, both in the bond and the stock markets. we wonder, at what point are we under pricing corporate credit rates, potentially underpricing economic growth? tom: people are talking about interest rate risks, duration risks. here is the price action this friday morning. good morning as we count you down to the opening bell come

about two hours and 27 minutes ahead -- away. equity futures taking a small bite out of would -- out of the weekly loss. the 10-year up. crude coming back online a little bit in the united states. plus, we might have a meeting eventually between president joe biden and the iranians, perhaps some talks on the table. crude back about 2%. euro-dollar 1.2136. gable, one point 40. lisa: and you will be purchasing us some fantastic -- fantastic christmas presents because you are paid and the pound. we have been getting upside surprises, which have been confirming the view, but we are not expecting necessarily to see that kind of boom in manufacturing and services. we will get that pmi data at 9:45. at 10:00 a.m., existing u.s. home sales.

i find this interesting, as special as lumber prices rise to the highs levels on record. how much is affordability going to eat into the ability for people to buy homes? how will the slow purchases we have seen at record pace is? and joe biden will be speaking at a pfizer plant in michigan, and there is discussion about how one-shot has a great deal of protection without getting the second dose of the pfizer biontech inoculation. at one point will -- at what point will the u.s. change its approach to get more shots into more people quicker and not emphasize the need for two doses? jonathan: the good news is supply is set to increase in the united states, and hopefully we will see more of that. i am already on next week, so out to tuesday, wednesday already. we will hear from chairman powell and others tuesday through wednesday. tom: and from the gentleman of

columbia university, i am really going to listen to the vice chairman for that one single sentence of nuance of how they adapt to a 5% or 6% run rate real gdp, a nominal rate of, what, 6%, 7%, 8% gdp? jonathan: let's bring in robert tipp. when does robert tipp become a buyer on the long end? >> this is a great environment, and i like answering that question when we have crossed above fair value in terms of yield. in terms of the long-term outlook, i cannot tell you if it is today, tomorrow, or the fourth quarter, but i think we have clearly topped fair value in terms of treasury yield. what is going on here, kind of looks like a behavioral finance fiesta, where people are looking at rapid rates of growth, looking at high rates in cpi,

rates we saw back in the spring, summer, extrapolating that into the future and pricing in a string of rate hikes that is unlikely to be a sensible central scenario. so i do not know whether we're going to get up to 1.50% or even maybe higher, if you get another infrastructure bill coming through, but i think we have already topped for value. so looking at five years in terms of return, bonds will be likely to be outperforming cash. jonathan: so what have you been doing the first couple months of this year with this craziness around you? >> yeah, we have to try to stay with what makes sense, what is easy, what is doable. and there is a good balance of the market between the economy doing well and spreads coming in, picking up yield in spread product across a range of sectors, while steering clear of any of the sectors that will be having problems. and that area of activity in

bond portfolio management, the sector allocation, security selection, is a higher information ratio the higher it ratio, and better area to focus anyhow. but the rate side is going to drive returns over the long-term, and i think what you had, frankly, in the crash of the covid-19, get offset between interest -- between interest rate and spread risks to the extent people were losing on the spread side and bonds, they were making money on the interest rate side. the recovery, we have had some increasingly yields, but there has been a mess compression in spreads. bottom line, bonds have done well -- there has been a massive compression in spreads. bonds have done well. looking forward, you will get income from spread product. so that will help. but i think what you will get now looking two to four years ahead is a realization that we will not get 6% gdp for the next five years. and after this money flows through the system, there will

be a slowing down, and the government markets will have to mark to market. but the sub rate hikes will not happen near the pace. lisa: there is a lot there i want to unpack. with respect to the treasury yield, i am curious, you say we are beyond fair value, but you did not seem like you were necessarily going all-in. you're talking long-term. short-term, how high can we go, and how much can it potentially challenge the flight into risky credit that we have seen here to date? >> i cannot tell you that, obviously. but i can take a stab at it. lisa: please. >> what we have seen from that period exactly a year ago, february 19, 100 basis point spread, swing in rates from 30 to 130, it went from the worst scenario to the best scenario that was likely at that time. but since that time, we have had washington, d.c., go down the

crack. we have seen that they are able to spend money. we have seen vaccines developed at a much greater extent than anyone would have guessed, i would imagine, in a timeframe not imaginable. more important, we have seen people take money they get from the government and their income and spend it like mad. so we are a few percentage points elevated in unemployment, but we are at record retail sales. the market has to price in that psyche. i think we are in the zone. i would think unless we get some other reg out of economic activity, you're not going to top 1.50% on the 10-year, but it would be the fickle to see that sustained if we did top 1.50%. i think we are in that last 25 basis point zone. tom: what i find fascinating is all the mass of berkeley does not matter, it of's what corporations do.

when yields back up like this, what does supply do? what does cfo's do? what do they do when yields back up? >> well, cfo's, fortunately for the market, already get it. raise money, right, that is what they do. when they are nervous, the raise money to make sure they survive. then when things are looking better and rates are low, they raise some more money in the case they need it for strategic acquisitions. and a lot of that has happened, and we have had some drop-off in issuance, so i think the supply is going to be manageable on the corporate side. i think there are signs of excesses in the market. there is a lot of liquidity sloshing around, and the problems that the fed and these central banks are going to have is not going to be that they are going to create systemic inflation, because inflation, underlying measures are already showing a tendency, after bursts of activity, to come right back

down. i think while these central banks are shooting for reasonably high inflation targets and creating very market , that that will be the problem, the gamestops and all of these phenomena that pops up and make them nervous, creating systemic risk. jonathan: you sound like a treasury buyer, but you're not a treasury buyer. it sounds like you want to purchase treasuries but something is holding you back. >> if you told me i had to get one trade now for the next two years, it would be long-duration. long fixed income versus cash on a diversified basis. if you said, well, do you want to go to a maximum position or wait until you see rates crash or something like that? i think you would have to go with that because the economy has a lot of momentum. even just this retail sales number we saw this week was spectacular, right? so you do not want to

underestimate reality. at the same time, what is going on in the market, as you can see, it is extrapolating this pace of growth too far in the future. we saw this exact phenomena play out 2016 to 2018, where the trump victory, people priced in a new reality of high-growth, a 3% 10-year note by the end of 2019, that was all over. may or may not make america great again, but it made bonds great again. right now, this rights in yields to 1.25% or whether it is 1.50% is still bonds better. we are in a zone where they are attractive, two years from now, it will be like a lot of this optimism never happens, back at the secular fundament. jonathan: lisa is looking forward to having that conversation with you. robert tipp, pgim chief investment strategist, thank you. from new york city, good morning. this is bloomberg.

>> with first word news, i'm teresa mitchell. the u.s. says it is willing to meet with iran to restore the nuclear deal. iran says not so fast. it wants the u.s. to rejoin the 2015 agreement and lift sanctions before talks. donald trump pulled the u.s. out of the deal in 2018, imposing sanctions that hammered iran's economy and infuriated other world leaders. president biden will dump mr. trump''s america first approach today. at a pair of international conferences, the president will call on industrialized democracies to join together to confront the pandemic and climate change. he will address the munich security conference and the group of seven. republican senator ted cruz is back in texas after a criticized family trip to cancun, jetting off while the state was dealing with power outages, and he revealed he did it because his daughters were cold but says, clearly, in hindsight, that was

a mistake. global news 24 hours a day, on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell. this is bloomberg. ♪ (announcer) do you want to reduce stress? shed pounds? do you want to flatten your stomach? do all that and more in just 10 minutes a day with aerotrainer, the total body fitness solution that uses its revolutionary ergonomic design to help you to maintain comfortable, correct form. that means better results in less time. you can do an uncomfortable, old-fashioned crunch or an aerotrainer super crunch. turn regular planks into turbo planks without getting down on the floor. and there are over 20 exercises to choose from. incredible for improving flexibility and perfect for enhancing yoga and pilates. and safe for all fitness levels.

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jonathan: from new york city to our audience worldwide, good

morning to you. it is the week where economists started to say, you know what, the market might be right, things will get a lot better and more quickly. equity futures positive, up .3%. up 11 on the s&p. interesting then when we start to see these forecasts, earnings come higher. yields around 1.30% on the 10-year, up by a basis point. this small and flexion of the negative yields enough to upset some evaluations. we have talked about this a lot this -- a lot already, euro-dollar weaker. sterling having a look at 1.40. the aussie absolutely flying as copper gets a massive bid in london. gold up. right now, 8.75% on copper. tom: commodities on a run here. looking across as set at the bloomberg terminal, it is simple, there is an ebb and flow, a correlated lift that is

ever so slight. futures up 11, was futures up nine an hour ago. jonathan: crude commodities flying, energy flying, financials flying, yields up, yields higher. then just a little bit of tension in the last couple of days. tom: no question. the shout out from jeffrey curry from goldman sachs has been on top of the move. we are on with kevin cirilli, and i think there is an international curiosity of the grace of leading a life if you are a visible politician. kevin cirilli, isn't there a better way to take the family to cancun besides just show up with a video on jetblue or whatever? don't you preannounced come my kids need a break, i am going to cancun for two days, and i will follow the texas story nonstop? isn't there a kevin cirilli protocol to how this gets done? kevin: look, when i was growing up, my parents had an

expression, what goes on in our house stays in our house. so as a journalist, i will not meander into their family politics. but i will say that this is the talk of the town in washington, d.c. here is a senator from texas who likely will run for president in 2024, is laying the groundwork to do such, and his estate is facing a massive, massive catastrophe, from an economic, from the pandemic, the economy, and now the energy sector problem. tom: what is important to me, kevin, is isn't there a method where these people can lead normal family lives by getting out front of the obvious disaster of a video of him going on a plane to cancun? there has got to be a better method to taking a break. kevin: i mean, there is no way to look at this other than it was a self-imposed foul.

lisa: kevin, just tell tom, if he pre-announces it, he can go to cancun with the family. that is basically it. jonathan: that is what this is about. kevin: just put it out, and it will all go through. tom: seriously, ferro's professional at this, capri to key west, amazing how you pull that off. jonathan: so how is it in texas? kevin: it is a developing story. no mistake, we can talk about mexico were one million microseconds are also without power as a result of what happened with the power grid down there in texas. yesterday i spoke with a congressman, and mark mcmanus is the president of the united states and canada plumbers union , and he met with president biden in the oval office earlier this week to discuss infrastructure. and he said pointblank that texas came up in that meeting as a result of the crisis down

there and that it only illustrates the need for there to be or infrastructure. republicans are saying they want infrastructure, but they are divided within their caucus how to best pay for it. that is where the longer-term debate is going. texas is really a focus right now because this is also the same week that the biden administration has announced an immigration proposal. when i was up on capitol hill yesterday and talking with sources in between covering the gamestop hearing, they are saying it is likely going to be in either/or scenario, either immigration or infrastructure spending, just because of how divisive these two issues are, especially after president biden gets that $1.9 trillion stimulus. lisa: that is what i was going to go to. are we getting past ourselves? everyone is moving beyond this $1.9 trillion stimulus. ellen zentner of morgan stanley saying they're pricing in a 1.9 chili dollars stimulus by march.

is that feasible with these distractions, whether it is texas, infrastructure, or emigration? kevin: i think it is. it really comes down to timing, specifically about how the committees have been able to move parts of the stimulus through congress. it has been fascinating that, in a way, all of these other issues , whether it is game stock or the immigration debate or infrastructure or whether it was the impeachment, that it has taken a lot of the pressure off the lawmakers who are debating the $1.9 trillion stimulus deal. that distraction has almost made it more likely that this deal will pass without too much scrutiny. tom: kevin, in our world, if economists, as jon mentioned earlier, say they have a better outlook on the american economy, does that mean your world will skew the trillions of stimulus toward income substitution for

the unemployed? kevin: look, when he have senator met romney, a republican from utah, saying -- really owning the fact, for lack of a better term, that a universal basic income is now part of progressive politics due to the political discourse, that he is suggesting that there be a dramatic increase to a child tax care credit. and i think that really shows you just how there has been this reshaping of republican, conservative ideology and economic policy proposals in not just the populist trump era but now in the pandemic era. that child tax care credit, mind you, will be coupled with senator romney and senator tom cotton of arkansas coming out to announce that they are in support of a gradual increase to the minimum wage. jonathan: this crisis has changed the conversation and maybe forever.

kevin cirilli, chief washington correspondent. hear him on bloomberg radio weakness at 5:00 p.m. eastern time. this crisis really has changed the conversation, how -- what becomes the norm, what we used to consider the norm and what we consider the norm now. tom: and do we get back to that norm? that will be the conversation this summer. you will be off on a three-week vacation, and that is what lisa and i will be talking about. jonathan: hopefully we will all get back to that norm. i hope so. but on entitlements, we have said it a million times, once you give someone something, it is hard to take it back. a lot has been given away. tom: we bust lisa's chops, but that buildup is jaw-dropping. my 20 of that chart is truly unimaginable. lisa: and when you start to get inflation in this borrowing costs go up, we will be talking about fiscal hawks them. jonathan: possibly, if there are

any left. tom: the red sox will win. jonathan: from new york, up next, bob miller of blackrock financial, looking forward to that conversation. equity market, 3923 on the s&p. this is bloomberg surveillance. ♪ (announcer) back pain hurts, and it's frustrating. you can spend thousands on drugs, doctors, devices, and mattresses, and still not get relief. now there's aerotrainer by golo, the ergonomically correct exercise breakthrough that cradles your body so you can stretch and strengthen your core, relieve back pain, and tone your entire body. since i've been using the aerotrainer, my back pain is gone. when you're stretching your lower back on there, there is no better feeling. (announcer) do pelvic tilts for perfect abs and to strengthen your back. do planks for maximum core and total body conditioning. (woman) aerotrainer makes me want to work out. look at me, it works 100%. (announcer) think it'll break on you?

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jonathan: from new york city, this is "bloomberg surveillance." three-day losing streak coming into friday. we push higher a little bit on the s&p, up .4%. on the wrestle, we snap back. the s&p down -- on the russell 2000, we snap back. a quick look here at the board. i'm still not used to this. the 10-year up a basis point, one point3076%. maybe we need to get used to these levels. high yield spreads, we touched 315 earlier in the week, to pre-pandemic heights just before the big crisis kicked off in

early 2020, and then it spreads throughout and then tightened up. spreads right now 3.21 on the high yield. i want to talk about this massive move lower. avis coming into market nine months ago with $500 million in debt. 11% where the borrowing costs. last 204i was, 500 million dollars, half the borrowing cost, unsecured debt -- last 24 hours. tom: you mentioned the issuance earlier, you wonder what cfo's will do with a little full faith in credit back up. we not there yet. it is an interesting day. also in the equity market are jonathan: some breathing room in the credit market. these are has something to say, i know she does. lisa: i want to highlight this, that companies do the middle of february had borrowed a record $139 billion of junk bonds and loans. a record proportion for the

triple see. i find it amazing -- a record proportion for the ccc. i find it amazing. cfo's are borrowing. jonathan: they are pushing out. romaine: i'm right behind lisa here. there are stories tied to what is going on. there is a deal with an international line for covid-19 vaccine. lawyers making it clear that this is basically going to apply to any worker out there who wants to apply for benefits. uber said it will start a

nationwide consultation to figure out how to handle this. a lot of other nations and states here in the u.s. are keeping an eye on that. and the only publicly traded maker in the u.s. of rare earth materials, his story saying china is planning to sort of crackdown on its supply of rare earth minerals to the u.s. they are used in electronics and defense products, becoming a little bit of a geopolitical issue. i want to look at a couple other names. deere with an interesting forecast, actually raising their guidance for the current fiscal year by about 25%. in november, they said this would be a pretty strong year. they are basically saying now with prices higher and that demand out of china, it will be a blockbuster year. tom: deere is a company you use for accounting, and i still do not get equipment leasing. romain, what is so important on deere, it is considered a

bellwether. romaine: it is, absolutely. if you're talking about consumption at the consumer and producer level, it is a name to watch. they are saying consumption, at least for the current fiscal year, will be high. another bellwether is applied materials. i know a lot about fundamentals, and the fundamentals on applied materials are basically telling you right now that there is a demand for chips right now, but you are also talking about the margins and prices, the pricing power these companies have right now. this is huge, guiding 30%, 40% growth. b.e. semi in the netherlands also guiding at about a 30% jump. this will be a huge story going forward. tom: bit dog -- romaine: not a dog anymore. $53,000, flirting with about $106,000. buy a blockchain.

if you want to buy it directly or per -- or put it on your balance sheet, elon musk's says to put it on your balance sheet. are you selling cash? tom: please, triple leverage. bloomberg with an important conversation which mr. musk responded to. thank you for watching romaine bostick and our various properties romain, what do you think of that, were elon musk says, you know what, i am a shareholder, that is all. romaine: that is all. tom: an engineer. romaine: you got this message from others. all they are saying is this is really a relative play. they're looking at cash and what it is returning, looking at yields peer they are saying, why not? so far it has paid off. tom: the real yield you can look for and then into the close, as well come on bloomberg television this afternoon. bob miller joins us from

blackrock, head of america's fundamental fixed income, an important position on the speed of change. bob miller, i love your note where you say events are moving rapidly in the fed is not. when does the fed blink? >> great question. the conversation you guys were having the most recent rate would suggest we are reading off of each other's notes. i think it is coming but not immediately, certainly not next week at the testimony in front of congress. we think at the march fomc, the sep delivered, economic projections, our expectation is unemployment for 2021 will be marked down to 4.8, so a longer run rate. and pte will be marked up to 1.9 percent, approaching the 2% target. our simple conclusion is that the fed will find it more and more difficult in march and

april to continue and to further the discussion of recalibration of policy. as you guys have said, there is massive fiscal in the system now, likely more coming relatively soon with the $1.9 trillion package from the biden administration, potentially followed by infrastructure later this year. but the you will policy impulse is epic at the moment, at a time when vaccine rollout is proceeding at a very good pace -- the dual policy impulse is epic. think about what the vaccine rollout implies in just a few months forward. secondly, the weather is about to turn warm. i know it sounds mundane, but it matters. we're four weeks away from warmer weather, and it will allow people to get outside. so i think you will see the pent up demand unleashed in the next couple of months, and it will make it hard for the fed to say

that substantial further progress -- there phrase for what is necessary to consider recalibrating connotative easing -- quantitative easing -- that substantial further progress has not occurred. it is coming, but i think it will take a month or two. jonathan: talk to us about duration risk, what it is and how you think about it at the moment. >> you know, i think one way to think about this is the fed is really not your friend if you are a bond investor. after 40 years of being your friend, and we have been talking about this since the adoption of the average inflation target and framework last summer that was revealed at the august -- jackson. but the fed is explicitly telling you that they are going to be targeting inflation at 2% and will be willing to allow it to run above. that is a very different regime then we have had for the prior four decades.

when looking at long-duration nominal bonds, you have got to be pretty careful that you are being adequately compensated for both inflation risks from the normal cyclical economy, which, frankly, have not been particularly robust in the last couple of decades, but nonetheless, the central bank is telling you they are now going to target higher inflation. so i think it really matters, and it calls into question the comfort in holding long-duration nominal bonds at relatively low yields peer lisa: the fed is not your friend, yet, don't fight the fed. these are the contradictory messages we are hearing at a time when, yes, the fed would like to see inflation run hot. but the fed's balance sheet rose to a new record high in the week that it did yesterday, $7.56 trillion. how much will they stay involved to suppress borrowing costs to

allow this fiscal impulse to gain control and to be a friend, frankly, to bond markets regardless of inflation? >> well, the fed as your friend depends upon the asset class you're talking about. look at risk assets as real number one. and support it for the cyclical output. that said, they have adjusted their reaction function in a way that makes them less friendly for long-duration bond managers. you have to differentiate between what asset classes you're talking about. that message is no longer as blunt as it used to be. the size of the balance sheets will continue to grow. it will start to grow slower sometime in the next few months. think about this, 120 billion bonds currently bind between treasuries and -- in order to

scale that down over time, they want to go really slowly and subtly want to avoid the 2013 experience, so our expectation would be to dial it back to $10 billion a month, over the course of the year. if you are going to dial back over the course of the year and in the middle of 2022 -- we expect that output gap in the u.s. economy to close this summer, and as new secretary-treasurer yellen said recently, with the upcoming fiscal package, she expects we could achieve full employment in 2022. if you close those two gaps, you still want to be buying a lot of bonds. so you need to slow the rate of purchase relatively soon so that they can do it over a long time horizon and not be buying bonds when you have achieved full employment. interest rates are a totally different story with the inflation outlook. so they have driven a wedge between rates andqe,

appropriately so, but the guidance around qe needs to change the next couple of months. jonathan: can you hold the line? we will bring you back. bob miller, blackrock head of america's fundamental income. from new york city, good morning to you all. this is bloomberg. karina: with first word news, i'm karina mitchell. iran says the u.s. must return to the 2015 nuclear deal and lift sanctions if they want to talk. that appears to be a rejection of an effort by the biden administration to begin discussions before joining the accord. donald trump pulled out of the agreement in 2018 and reimposed sanctions. the u.s. vaccine supply is set to double in the -- in the coming months, allowing a broad amount of shots administered. the number of vaccines delivered should rise to over 30 million a week in june.

that is enough for 4.5 million shots a day, almost three times the current level. and the blackouts that hit texas in the midst of a historic freeze are now easing. four of the largest refineries there suffered widespread damage from the freeze, and they could be down for weeks the repairs. in tact, apple is working on a magnetically attached battery pack for the newest iphones, and accessory that would charge the device and provide apple with another potentially lucrative ad-on product. in testing, the accessory's development has been slowed by software issues. nasa is celebrating the landing of the rover on mars. perseverance touched down in an ancient river delta. it traveled 292 million miles since launching from cape canaveral. global news 24 hours a day,

on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell. this is bloomberg. ♪

>> we have a 50-year transition. we're going to be living with

hydrocarbons. the experience in texas is a good example, we cannot be solely dependent on renewables until we have a national power grid. jonathan: from new york city this morning, good morning, alongside tom keene and lisa abramowicz, i'm jonathan ferro. equity futures higher on the s&p 500. s&p up 15, up .4%. we could take a decent chunk out of the weekly loss. to the bond market, 1.393 percent, yields about a 10-year. tom: it is a lift. it is correlated on a friday, and they are trying to digest like deere and like what ellen zentner said at morgan stanley. i'm watching carefully. jonathan: the outlook gets a little bit better, and we see that in the fx market. aussie dollar stronger by more than 1% against the u.s. dollar. tom: when the news changes in the dynamics change, this

changes we were scheduled to speak with julie cohn of the baker institute in texas. she is definitive on texas on the grid. we will reschedule that, we hope, for monday or tuesday. thank you, professor cohn, of houston for that indulgence. bob miller from black records with us, and it is so important to talk with him -- bob miller from blackrock joins us now. when you look at the yield dynamics outside wall street, what does it mean for america? >> tom, i think the combination of fiscal and monetary policy coordination over the past year has been very good for main street so to speak, notwithstanding the fact that a lot of small businesses have been shuttered or certainly severely stressed due to the economic shutdown related to the

virus. but the targeted nature of the fiscal policies to try to fill the income gap that was created by having to shut down the economy has been reasonably -- not perfect, but reasonably effective. and the economy is on the cusp of coming out of this one-your nightmare -- this one-year nightmare in that there is a lot of cash in the system, a lot of pent up demand, and we need vaccinations to continue at the current pace. we need the warmer weather to arrive. and i think you will see a fair amount of pent up demand at least, that will be good for the main businesses. it will put a lot of people back to work in parts of the economy that were shuttered because of the covid strains. the yield rise -- yields are rising for the right reasons, i

guess is the short answer. this is a positive, and i think it will be better in this recovery than it has been prior. jonathan: the question is when we start to see that competition for capital between treasuries and elsewhere, and quite clearly, we have had people pointing towards the duration factor. high-yield pm set as a high yield per folio manager, i think the asset class needs to hire a branding consulted -- a high-yield portfolio manager said that. now we need to pivot again to limited duration. can you speak to that a little bit more? [laughter] >> you know, the landscape over the next year to two years is going to be particularly attractive. the likelihood of meaningful delicacies or defaults is going to be quite low given the cash

flows running through the economy. i think that, yes, credit spreads are tight, but i think they will stay tight for a while because it will be hard to create a scenario where you have a meaningful acceleration in defaults. that said, the beauty of high-yield is that it does not have a particularly high sensitivity to duration. closer to five or six years in that space as opposed to longer duration issuance that takes place. i think the asset class will do reasonably well, notwithstanding evaluations from a spread basis that are tight. as long as it is manageable in the u.s. and attributable to the economy getting better, so real rates remain quite low. the rice in nominal's, which have more than doubled since

their august low -- the rise in nominals, is a true middle -- is attributable to inflation expectations coming from a very low level. real rates remain quite attractive. lisa: i apologize for breaking in, but there is a question about whether credit rates will ever take on the same sort of meaning as it has in the past, whether people are pricing in an the fed will step in as a backstop, even a riskier credit, should there be a significant disruption? >> i would not bet against the fed using its balance sheet in the future in a crisis environment. i do not think that will go back . we will see that again in the next crisis, and i think it takes a crisis. if you are holding those bonds

today, these valuations, because you think the fed is going to value up within a 50 basis point back up, you probably need to rethink that strategy. it will take a legitimate crisis for them to return to the markets the way they did last spring and summer to shore up and suppress risk premium in a number of different fixed income asset classes. jonathan: thanks for spending a little extra time with us this morning. bob miller, blackrock head of america's financial fixed income. we're talking about two types of risks, two prominent risks in fixed income. duration, sensitivity to interest rates, and credit risks, quite simple. for fixed income pm's, the focus is on the former and not the latter. tom: i agree with that. on credit risk, we have heard

from guests here, and i would suggest limited duration is the new phrase as we rationalize yield of and priced down. jon, i know you did so well on your bumble ipo shares, but i see that limited duration being the way to go here. jonathan: that is my way out of all of this, limited duration, coming to an exchange sometime soon. lisa: i have to go back to the credit discussion. i am struggling with this idea of the optionality, the idea that if there is a bankruptcy, when you get back is so much less considering all the unsecured debt you're talking about, whether it is the avis issuance or it is the pricing or you're not getting compensated for that. individual bankruptcies will be tolerated. jonathan: coming up, french

hill, chief investment strategist tom: on equities. you just lift. jonathan: bond yields do, as well. up 15 on the s&p 500. from new york, good morning to you all. ♪

>> small business sector has really taken a terrible hit. things are happening much more quickly. >> a lot of buying power out there with the band continues to build. >> we have seen people take the money from the government and spend like mad. >> the bull market that will last for a long time has begun. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: good