>> the market is the fed as to whether or not it will be able to hold the line. >> we are seeing adjustments in how far it goes is the question. >> that is where the central banks will allow it. >> we will get higher inflation but mostly because the economy will come soaring back. >> it is good for the re-inflation and cyclical trade and that is where we want to be. >> this is bloomberg surveillance. jonathan: we just have to get

through one day. from new york city, this is "bloomberg surveillance." i'm jonathan ferro along abramowitz. -- alongside lisa abramowicz. we are up by four or five basis points on tends to 1.47. lisa: please stability is somewhat tenuous. we are not conviction on what happened yesterday which is leading for calls from the federal reserve there is a question about the fragility of the markets and given how traded based on the macro economic picture. jonathan: let's talk about timing. people could argue this has happened a little too early. it is not about inflation

expectations, it is about real yield. we have been told repeatedly that when you get that inflection like what we had in the last month at some point it bleeds into risk assets. the moral -- the most supported markets. then things changed. it was a more broad financial market and broader equity market. lisa: when you have central banks saying we are not going to change anything for a long time and let the economy run hot, we are going to borrow short-term. this leverage, what happens when it gets squeezed out? how fragile our markets with volatility that is unexpected that we will see yet again? jonathan: the s&p 500 down eight point and down .2%.

joining us now drew matus is drew matus from metlife, chief strategist. drew: the results will be fundamental. higher yields mean higher yields and it doesn't really matter to people who are trying to borrow why those move. jonathan: the question is whether the fed should respond? drew: let's hope not. you had mentioned it was a real yield move. if you wanted to be an inflation move, try extending purchases or increasing purchases because people are worried about the inflation story but that is not the reason for the move. they will worry is if the fed worries and buys more.

you raise shields in the front and in if you talk about the leverage story that would be wait to go in the current environment but they won't do that. lisa: let's talk about technicals to understand how prone this market is to disruption akin to what we saw yesterday. what were the technical underpinnings of yesterday's disruption? drew: your talk of hedging and positioning themselves. you have an emerging story of increasing supply at the fed and everyone at the treasury has seen coming and one of the reasons white people are looking at this large stimulus package moving through the congress. that will mean things. you have the treasury secretary talking about longer dated securities way back when, which wasn't the cause for this move but could potentially be a reason for yields to move next. lisa: given the lower inflation

over the long-term and perhaps a spike up in the near term, are you a buyer of 10-year treasuries? drew: my main focus tends to be on things like credit and structured finance in the so-called spread products. i would say this about 10 year yields, just because they have been up and where they are is not necessarily a bad thing. i have talked to you and jonathan about this before, low yields create their own problems. they tend to encourage savings and if you look at the savings rate in this country, the thing we don't need is more savings. we need people going out and consuming. some of that is just inability. you can't go out and spend on the restaurants and go on vacation and do all these things in most parts of the country. so you are just saving that money. i think that is another reason for this inflation concern.

people wonder when -- what happens when all the money is held back and gets released into the wild and allowed to run free. jonathan: what you just said for many people who just heard your argument, it might sound counterintuitive, that higher rates are the story that we need to develop to discourage savings. a lot of might see at the other way around. can you walk us through it? drew: there is an optimal level of interest rate that discourage savings. you go below it, why are people saving? they are saving for a retirement goal, let's say, if it is too low they look at the amount of money they need to save and if i can only get 1% on 10 year yields, i need to save more because i know what my income goal is. at 1% 10 year yields if i'm not meaning it but at 3% i might.

at 3% you are not saving money and at 1% you are. jonathan: central banks don't agree with you. the federal reserve does not agree with you. i am not advocating a position, you know i'm not. there is a difference between what we think the fed should do and what they will do. what do you think they will do? drew: i think they are going to do as much as they can to follow the guidance they have given us, is keep the race extraordinary low and waiting for targets to get hit before they moved rates higher. it is harder and harder to read those -- to reach those. i like my track record. lisa: if you think that higher rates are a good thing, does that mean this makes you more excited about risk assets rather than less? are you buying more as we say -- see a bit of a selloff in times of turmoil? drew: that is where it gets a

little funny, lisa. we don't what this recovery is going to look like. there is going to be a big recovery this year which is almost in the cake, so to speak, assuming nothing horrible happens. you were talking about where growth expectations are. some have real economic growth expectations which could hit double digits, it's not possible. the problem is though that we are heading out of a very odd scenario that no one had seen before and we are coming into an environment where the traditional mechanisms for consumers to reengage with the economy, which would be buying goods out of a recession, getting a new car, that has held up ok. the area where everyone is expecting them to pour money is the service sector, which is a amount of goods. if you think about going on vacation, there are only so many places you can go and so many

airline seats that can be filled. there is a limit if everyone is out to try to spend money at the same time what they can do. as much as i think the economy is going to do very well this year, growth is going to be very strong, i am also not sure it is going to necessarily translate into the kind of long-term, sustainable growth pattern we need to see. in that regard, if you think about risky assets that have a lifespan of 10 to 20 years, i think you still need to be careful. the other component of this is how sustainable is this improvement? i think it is more likely you see a big spike this year and kind of a renormalization back to traditional levels in 2022, then sustained 5%, 6% growth over the next years that people are talking about. jonathan: good to check up.

some controversial, drew matus. the wall street journal importing the canadian pension plan investment board chief executive officer to the united arab emirates to receive the first dose of the pfizer vaccine. we understand the ceo is out. lisa: this is a really interesting story. it is the vaccine tourism we have seen as people try to arbitrage where they are getting the vaccination and the controversy over which countries have gotten more supply and how it gets distributed and prioritized. it is kind of a mess in a lot of places. jonathan: looking at the data in canada, 2.2% of the populate has had at least one shot. 1.3% are fully vaccinated. just think about that, the controversy in canada during the finance department was not aware

of the travel. they are trying to stay out of what happens with the pension plan investment board, but mr. trudeau, his approval rating has gone the other way. compare how the vaccine rollout has gone across the border. 6.5% are fully vaccinated. you can see how this has put pressure on the government and the leader of the pension plan investment board. lisa: it is a sensitive topic and it comes at a time when some of the pensions underperforming last year because of private equity owners. where the biggest pensions in canada yesterday reported one of the worst losses since 2008, coming at a highly political moment for these tensions and they are called to pay the obligations they owe in addition to being at the helm of being public servants. jonathan: this is exactly not

what governments around the world wanted to see. the ceo of the canada pension plan investment board is out. from new york city this morning -- lisa: i am going to florida to get vaccinated. jonathan: you are going to florida? lisa: [laughter] jonathan: can i go now? lisa: yes. jonathan: thank you. lisa: i am just keeping it real. futures down. -2/10 of 1%. this is bloomberg. ♪ i'm emma -- emma: with the first word news, i am emma chandra. the house is expected to approve the coronavirus relief bill, $1.9 trillion leaving americans one step closer to receiving the $1400 payments.

it cannot be rolled under the fast track to get it through congress. president biden has undertaken his first use of military force since taking office carrying out , airstrikes in syria. the targets were iran backed groups believed to have made -- believed to be involved in recent rocket attacks. multiple facilities have been destroyed. bloomberg has learned a u.s. intelligence report implicates saudi arabia's crown prince in approving the murder of "washington post" journalist jamal khashoggi. the report could be declassified as early as today. that release reflects the biden administration's decision to recalibrate relations with saudi arabia. the prince has denied any involvement in the killing. bitcoins rally hit a speed bump. it is heading for its worst decline in over a year. bitcoin has been down as much as 21% this week, skeptics say it

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>> we've done nothing but see hate reductions in bonds,

yields, and increases in prices for 37 -- but see reductions in bonds, yields, and increases in prices for 37 years. to think you're going to continue is irrational. jonathan: bloomberg wall street week appears in full. alongside lisa abramowicz, i'm jonathan ferro. what it has been for the week. equity futures stabilizing on the s&p, unchanged, down a point. weighty loss on the equity markets for the month. yields come in for basis points on the session. i think we are up 40 on the real yield. we will talk more later. crude lower and copper heading south. dollar stronger lining up with that move in the fx market.

commodity complex weaker, euro-dollar down by .4%. we talked about the pushback in australia and the pushback for the ecb in europe and the eurozone and the lack of pushback we have seen in fed speak. lisa: d think the chairman of the federal reserve has gotten calls from christine lagarde and other peers at central -- do you think the chairman of the fed has gotten calls from christine lagarde and other peers at the central banks? jonathan: i don't have the answer to that but i did raise the question that the chairman of the federal reserve has acted like the chairman of the federal bank. some tears in the past -- some chairs in the past have acted and if -- i wonder if they worried about the -- lisa: a huge loss at the long

end of the treasury curve. take a look at the index of treasuries for the united states. the loss will be 4% year to date for a blended index. that is for securities that are supposed to be safe. at what point do people look at their balance sheets and statements and rotate into riskier assets? jonathan: the austrian market down one third from the highs. our bloomberg intelligence chief joining us. what a moment to put a forecast together. 150 was the consensus view and that was your view. 150 was the view for goldman for year end and we are at it right now. what i would love for you to do for all of us is walk us through the process a strategist goes through now when you have had a move like this and you have to think about a path forward. >> the first thing you have to

think about is why did we get here? what was the impetus for the strength in the move? there are a variety of technical factors we think went into this particular move and what of them certainly chairman powell and the idea we might have a stronger economy in 2022 and maybe the possibility of tapering forward it bit. then you get technical factors. for example, banks have been big buyers of the reason i have been able to hold them on their balance sheet is that treasuries have been exempted from the leverage ratio. this rule that is going away at the end of march and if it does, it means banks are going to be shutting. some people are front running and selling treasuries. yields have gone up a little bit and the risk in portfolios has

gone up because of things like mortgage-backed security durations have gone up a year from two years in total risk to three years in total risk which is a massive move in two weeks. all of these things probably go away once the froth is taken out in the market. from here you have to say, when will fundamentals catch up to the market or what is the market pricing for those fundamentals and is that realistic? those have to be your thought processes when you are trying to reevaluate where you think yields are going for the next 10 month or so. lisa: let's to -- jonathan: let's talk about fundamentals. a forecast came out and talked about the delicate dance of the reopening story of the long-term secular issues. one is bearish rates and one is bullish bonds and treasuries. how do you think about those competing forces? ira: you have to take the whole

mosaic into account as you are evaluating the market. ultimately the market is going to continue to bear steep because i think the idea you are going to pull forward rate hikes for example is probably a narrative that is going to go away. it wasn't that long ago where you and i were sitting on this very television station years ago and we were talking about will the fed hike in 18 months and we kept on asking that question everything a month and it kept getting pushed out 18 months and it was seven years before they ultimately hiked from the time they went to zero. i think we will likely be in that type of situation where we will price hikes 18 months forward but keep pushing that and pushing that again. what that means is we will find a stabilizing level in the

market were things like 5-year note and three-year notes might have somewhat higher yields than today, once they find a level that seems consistent with a two-year forward series of rate hikes, then we will stabilize. i think the selloff has a little legs but not much further. lisa: what are those levels, the stabilizing levels you are looking for? ira: in the 10 year yield, 1.64% is an important technical level and if we break that, you are looking at yields that might pass the 2% mark. if you go back from the low of the tantrum to the top of the taper tantrum, that would lead us to 1.9% 10 year yields. not crazy highs. you can't call to percent hi, but that would be a -- you can't call to percent high.

it is hard to love the market here. jonathan: it is a complex time. looking out for the new forecast contrasting now and 10 years. radically different. the outlook for rates was radically different. most assume that in the next 18 points rates would have to go higher and it didn't for six years. a lot of economists think we can bounce back quickly. but on the right side we have capitulated on the idea until recently of higher rates. in the fed has shifted as well. you have to put all of that together when you think about historical parallels. lisa: and when you think about that we don't understand inflation and people think it will never pick up like it did in the 1970's and now people are thinking this is different. jonathan: coming up, chetan ahya

. and bloomberg real yield at 1:00 p.m. 25 minutes on fixed income. looking forward with some actual real yield negative at 68 basis point. this is bl

jonathan: a lot of economic data for america. from new york city this morning, good morning. alongside lisa abramowicz, i'm jonathan ferro. here is your data. michael: this is where we get the january numbers on inflation and we are just getting them now from the bureau of bpce index -- from the bureau. bpce index puts the year-over-year rate -- and put it over 1%. if you are making it trade, you have a ways to go. the core rate which everyone has been following, 2/10 more than had been forecasted for the core

deflator on a year-over-year basis of just 1.5%, unchanged from a month ago. we are not looking at a major difference in inflation outlook. i am not sure how that's going to affect the bond markets. personal income up 10% during the month of january and a lot of that vesely is the $600 -- that obviously is the $600. way up from the -4% revised figure for december we spent a lot less in december -- for december. we spent a lot less in december and spent more in january. the key number in today's report is the latest inflation figures showing inflation still very much under control. jonathan: state with us. equity futures on the s&p 500, slightly positive.

up a tent of 1%. -- 110 of 1%. the big number, 10% personal income. walk us through the disruption how policy has disrupted traditional relationships in the labor market. it is phenomenal to see a number like that. michael: we are getting much of our income changes month to month from the money the government is giving out, the 600 dollars checks that went out in january. it is a number that you see bonuses paid in many industries. some will be seasonally filtered out. the idea of the $600 checks is something new and almost impossible to adjust for. that is the impact we are

seeing. i am looking at other possible contributors here. i don't see anything that is really out of line immediately. compensation wages and salaries went up, but of course you get that in january because of people getting raises at the start of the year and that gets seasonally adjusted. i don't enqueue are seeing a huge sign of anything except the government giving people money. lisa: just quickly, the idea that you saw incomes go up more than people expected and you sought spending come in lighter than people expected seems to the savings rate. is it maybe accumulating and people might spend all at once as they tried to go to disney world or hawaii when things are back up? michael: i am looking at the savings rate and not immediately finding it but it has been around 13% and unfortunately this is one of those reports

with many, many pages. let me see if i can find a number on it. the dry powder is at the heart of the issue for people in the markets, the idea that people have money and once they feel safe they will go out and spend and put more money into the economy. at this point we don't know if they will or not. will they hang onto it and where do they go from here with it is a question that is yet to be answered we don't have any precedents. jonathan: stay close and if you want to talk, wave your hand. michael: personal savings, we go from 13% to 20.5%. lisa: oh, my goodness. jonathan: -- michael: you get that toaster at the bank. lisa: they don't do that anymore. michael: someone should tell tom, he is waiting in line to catch his $600 check. that is an enormous amount of

money on the sideline. if the dam breaks, we will see it going through consumption. jonathan: bonds are still better. a break at 220 on a 30 year. what is amazing at the start of the week we were talking about the supply-demand at the front end of the yields and it went hi, because of money market funds. so many savings building up. lisa: you do have to wonder the technical issue that will erupt with an open economy with all of the savings flooding into the economy. i think about what that means for both yields as well as the financial system, can it handle that massive cash? let's bring in chetan ahya. you just made a brave call that

a lot of people disagreed with you on your you had idiots questioning you like me asking are we owing to snap back. they have capitulated particularly over the last couple of weeks. let's discuss it now. we have a 20% savings rate in the united states of america. factor that into your call for this year. chetan: we are seeing excess savings that households are building will rise to $2.1 trillion by early april, close to 10% of u.s. gdp and that is why we expect gdp to grow at 6.5%. households will spend that money and we think this is akin to a natural disaster because they are confident they will come back. you can also see data from the spending.

consumers are holding back on the spending, which they can because of the constrictions of covid. as things open up, there will be a resurgence of spending and that is why we are calling for a surge in spending driving gdp to 6.5%. lisa: you have been correct, what do you say to drew ma tus'point that it is good for people to spend money. people are going to spend services and there are a limited amount you can buy. if you haven't gotten a haircut for six months, you are only going to get one haircut. how does that go given that services do not have the same types of dynamics as goods? chetan: i think you are going to see an increased amount of spending in services. you will see bunched up activity. for example, i have booked my

travel for the second half of the year, but a lot of people have not been able to travel will pick up travel. you will see pent up demand for services. you will not go for two haircuts , but lavish travel spending or you can go to restaurants more often in the week than what you were doing earlier. i think you will see a big pickup in spending on consumption, even with services. even on goods, you will see more spending. it does not have to be the disposable incomes they have accumulated and it will be used for more goods and services. jonathan: and the bond market, come entry -- commentary from all over. the rba doesn't like what they are seeing. the federal reserve called it a statement of confidence. the bank of england saying rising yields reflect good news on the economy. yields have moved woody six basis points, -- have moved 40

basis points with a statement of confidence. 46 basis point nominal move in the 10 year reflecting good news on the economy. central banks are embracing this in some places and pushing backs and others -- pushing back in others. what do you think about this? chetan: they will have to continue if it continues. so far the rising yields are in line with what they thought would be concentric -- commensurate with inflation. the fed market may have to come out and say it is more progressive than their liking. this is a very different backdrop compared to 2013, when you salt real rate rise by 130 basis points and 84 month time span. the fed will not want to see those financial -- when you saw the real rate rise by 130 basis points and 84 -- in a four

month time span. the fed will not want to see those financials. lisa: what is the trigger point in your view? chetan: i think the rise in real rates are still in line with the fed and what they expected. if it starts to get below 50 basis points, it is also the time adjustment is too rapid for their comfort in our view. anything on 50 basis real points in the 10 year space would warrant action from the fed. jonathan: great to catch up. congratulations over the next nine months on a fantastic call. here are the stats from michael mckee. and the other category which incorporates the $600 payments,

there was a 256.9% increase. do not get used to the 10% increases in personal income. personal savings rate has gone up to 20%. that is the intuiting factor to the savings rate. all this will change as the economy reopens and we reengage with the economy. lisa: it also raises the russian that if people are not getting money from jobs and cannot see how long they will have this income, will they spend their savings are have a bigger savings cushion for an amount of time to gird against fluctuations in employment. we are seeing younger individuals saving more because of what they just went through. jonathan: we have the bank of england and the fed basing the -- embracing the move. lisa: you have very different economic pictures in the u.k. and the u.s.. jonathan: coming up, bloomberg

opinion columnist on this bond market move. what a lineup we have for you. we will get the thoughts of blackrock. from new york, this is bloomberg. ♪ with the first word news, i am emma emma chandra. :one step closer to receiving $1400 payments. the house expected to pass the $1.9 trillion stimulus package. the final legislation will probably not include a raise in the minimum wage to $15 an hour. a senate commentary said the it could not be considered and they can't use the fast track. a panel of fda advisers will take a look at johnson & johnson's coronavirus vaccine today, a final step towards possible authorization of the

windows immunization against the virus -- a one dose in his asian against the virus. donald trump will declare himself to still be the leader of the republican party and will speak to a republican group in florida. a senior advisor said he is unlikely to say whether he will run again for president in 2024, but he will boast a crushing opposition within the republican party. in london, barclays has one a bitter battle dating back to the financial crisis more than a decade ago. a judge ruled the terms of the investment -- a year ago, job cuts as the coronavirus erected in new york. one by one, yesterday the bank of america erased assurances and

said they were cutting staff in the global banking division. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. ♪

>> however travel changes, we can adapt. people are staying longer and

getting in cars and traveling nearby. that is the travel people want with airbnb. they are saying they miss travel and it is not business travel and not standing in line to see a landmark. ms. spending time with family -- they miss spending time with family and friends. lisa: it is very real and they are trying to go on airbnb's. that is the ceo of airbnb and shares on a tear for a long time and responding on the desire for people to get away and be with other people. there is a question what the world will look like when the covid ends and not just the future of acacian sometime in the near term -- future of vacations in the near time, also for work. this has been in high controversy. susan lund has been studying and putting out a series of studies on how work will transform and

how covid has accelerated technical changes already underway. talk about some of the largest findings from your studies and what it means for the future of work. susan: some of the changes in consumer and business behavior that were forced on us in the pandemic are going to stick and the impact in the workforce is that we may see a lot of jobs that were affected by technology and other trends, like food service and retail. a lot of front-line low-wage workers could find demand for their services going down over the long-term. lisa: we figured this would happen with artificial intelligence and technological advances. is there something that has structurally changes -- is there something that has structurally changed? susan: covid-19 has been a

massive shock to consumers and businesses and we were forced to try new ways of interacting that people resisted. for instance, remote work. a lot of employers have resisted that people can be productive at home. when we look at the consumer survey results that we do around the world, we found a lot of the new users that were forced to try digital interactions are finding it is convenient and efficient and so it is going to stick. we saw this change in behavior during the last year, and that is why the disruption going forward is going to be different than the gradual evolution we have been experiencing before the pandemic. lisa: this is an incredibly important conversation we talk

about wages and the employment rate and what we are targeting in the united states. we have been talking about the federal reserve this morning and aiming for full employment. is that type of unemployment possible -- type of employment possible with the lower wage jobs disappearing? susan: it is possible in the long-term, but it will require people in the low-wage service jobs to gain skills to get into the growing field, whether it is more technical, marketing, or health care or a technology related job. the key is going to be can we provide opportunities for people to in a short amount of time, weeks or months, learn the skills they need to get into a career, get on the first wrong of the latter to move upward. -- the ladder.

lisa: what are the important skills for a technical backdrop that takes flexibility? susan: what we need is people with more job specific vocational skills. we will need a lot more people in technology, but good news for people who are not technology folks. we need more workers in the emotional fields. that is what machines don't do. they are not good at coaching, mentoring, training, teaching. we also need people with creativity and critical thinking. the vast majority of the workers weren't worried about which occupation, all they need is a foothold. there are a variety of jobs that you can teach someone to be a certified nurse associate or you

can go to a coding boot camp and get onto a digital path. we have to think about those types of programs. for people midcareer with families and mortgages, going back to school is simply not going to be possible. lisa: there is a real structural question about what this means for society. i was reading this project essay this week by a stanford professor he was talking about how we shouldn't be looking at greater unemployment as a result of artificial intelligence but a greater dispersion in wages and a widening in the wealth disparities. how concerned are you about that? susan: i am concerned. the findings of our research show it is possible over the next decade that all job growth

will be in jobs currently high wage, meaning the top 30% of the income distribution. what that means is that all the lower wage and middle wage jobs will see flat or declining demand for what they are doing. we see that in the employment data. the level of employment recovered by last october, where as we are still at double digit unemployment rate for people with low-wage jobs. lisa: susan lund, thank you for being with us on this very important topic. coming up next week, we are watching all the fed speak jonathan was talking about. monday we had the fed speaking at a virtual conference. a delivery on the economic outlook and speaking to the economic club.

also, beige book i will always talk up. plus, an opportunity to talk about yield move we have seen that has gotten a lot of people's attention. we are looking at people trying to figure out can we buy this or not? it is a viable dip, s&p futures up. dollar strength for the euro at 121. the 10 year yield getting a bid and raises a question about how much fed really wants to come in when there is a corrective mechanism already in place. we are seeing the vix come down. next week on monday, and exclusive conversation you do not want to miss. jamie dimon on bloomberg

television and radio talking about the consumer outlook for office space and the outlook for banking. thank you for joining us. have a great weekend. this is bloomberg. ♪

jon: from new york city for our audience worldwide, good morning, good morning. we begin with the big issue -- what a week in the bond market. >> we are selling off because of optimism for growth -- >> not the same thing as inflation -- >> it's a distinction illustrated by the rise in real yield. >> the market expecting a much stronger recovery. real yield will increase as the -- >> real yields will increase as the demand in the market picks up. >> the precipitous move in rates is definitely concerning. the belly -- >> the belly of the curve is ridiculously steep. >> it's not just the