s. yes you do. a kohler walk-in bath provides independence with peace of mind. call... for fifteen hundred dollars off your kohler walk-in bath. visit kohlerwalkinbath.com for more info. joe: from bloomberg world headquarters in new york, i am joe weisenthal. romaine: i am romaine bostick. let's look at where the markets stand. anothehe market is looking for direction. the s&p down come of the russell higher. market watchers still grappling with our tego -- with artego's capital explosion.

-- capital implosion. another round of spending from the biden administration. 24 hours, we are supposed to get details of the plan to improve infrastructure. with that in mind, they are doubling down on their bet on the u.s. economic recovery. giving the group its worst start to a year since 1980. joe: i was barely alive. romaine: do you are doing? joe: i was zero but i was watching rates. i was tweeting about the 10 year in 1980. you mentioned, rates having a terrible quarter, selling off today. of course, one more day in the quarter. 10 year yield actually at one point was closer to 1.76. there it is around 1.7.

romaine: you wonder kind of what this all means. some optimism about the economy. at the same time, you have got some concerns about what is going on. joe: joining us, katie grayfield. thank you for joining us. one of the quieter days in recent times but we did get a pretty interesting selloff at least overnight in the 10 year and that seemed to set the tone. katie: it is interesting. over the last month, rates in u.s. hours at you have ended up with a selloff. even though the narrative this morning was that the bond market is starting to react to biden's spending plan that he will reveal tomorrow. they will be a focus on infrastructure. we are very unchanged. the 10 year yield is back at 1.7%.

it is unclear at this point where the next big selloff is going to come from. we had the spending narrative today. as romaine was discussing in the previous segment, at a certain point you will see demand -- you will see overseas demand come in, particularly asia, japan in particular. those are price-sensitive and volatility sensitive buyers. as it 10 -- as it begins to calm down, you can see that impulse. romaine: first of all, thanks for watching the previous program. this is a new program. we have seen this before where you get this big pop in the morning and by the end of the day, it is back down. what can we read into that. is that people saying, time to do some dip buying? or is there some other dynamic we should pay attention to?

katie: it is hard to read too much into one day's move. we know that the treasury market has been oversold for some time. the relative strength index. it get back to what i was saying. the market has moved a lot to price in, raising anywhere from 7% to 10%. it feels like the market is trying to grapple with that. you are seeing that shakeout in the equity market in terms of where leadership should be next? joe: tech badly underperforming. i don't even know if it is up on the year, which is extraordinary. what is the view towards -- basically years and years, the hottest if not the hot corner of

the market? katie: it feels like with tech, people are starting to realize that you can't talk about it as this monolithic block. there are still areas of tech that look attractive. it is important to separate the faang from sources of companies and the nasdaq 100 benchmark and other benchmarks. the faang's will feel good in pretty much any environment. some growth names with longer duration cash flows, a will be hard to justify evaluation if we are truly in a rising rate environment. romaine: i was having this debate with abigail doolittle about the vix and what we can read into some of the moves we saw there. i think we were around 19.72 around the close of trade today. there is some concern that

because we have not seen the vix fall from these levels is a little bit concerning from the absolute levels where they stand. katie: the fact that the vix is so sticky right now, right at the 20 level, can break below it, it speaks to what -- cannot break below it, it speaks to what an interesting place the volatility is in. volatility is not that low. the case that so far in 2021, the total market cap being lost or gained in extreme swings in the 500 is on par with the first half of 2020. even though the benchmarks are not changed, the vix is not doing much, there is a lot of volatility under the surface. i think last friday is an example of that. you saw stocks loose $35 billion

in market cap but the s&p 500 was pretty much unchanged. romaine: bloomberg's katie greifeld alpinist break it down. we will talk about u.s. treasuries. for -- worst first quarter loss since 1980. jp morgan head of u.s. rates and derivatives strategy will join the program next. this is bloomberg. ♪

romaine: this morning, we came in with the big bonds selloff. it cut a lot of folks off guard. some say it has a lot to do with what is going on with additional stimulus, infrastructure plans.

joe: i love theories about month end, quarter end, great explanations. very useful. treasuries having their worst quarter since 1980. you see that selloff, absolutely brutal. rise in yields. on the absolute level, they are still extremely low. 1.7% among the lowest ever on the 10 year. compared to where we were not long ago and last year, still a pretty dramatic quarterly selloff. romaine: number one song in 1980, "call me" by blondie. joe: joining us for more, jp morgan head of derivative and interest rate strategy, josh younger. your big picture, how much of it was essentially a market recognizing that a u.s. economy

is poised to grow much faster than people thought three months ago? josh: i was not alive in 1980. a couple years later for me. what happened this quarter i think was a recognition that things have changed. not only treasuries have had a record quarter but also our forecast index which tracks how we change our growth forecasts. that has had its best quarter since we started tracking those numbers. the move in treasury yields is rapid and large. but the move and the expectation has been the same. this has been mostl an -- mostly an inflation's expectation move. infrastructure plan that is 10%-plus of gdp. a lot of inflationary pressure. that makes sense that yields should be higher.

if there is that risk out there. romaine: this seems like the kind of moving yields that is a positive, or at least the underlines are relatively positive. that does not mean that folks on the market will not freak out. all of the talk is about convexity. as taylor riggs says, about the pace of change that may be is a little bit concerning. what that could mean for the positioning that some folks had? josh: i think the freak out is mostly talk at this point. the convexity hedgers, people have to head -- have to hedge whether they like it or not and and up chasing the market. there has been some rebalancing and reallocation. things like mortgage hedgers, they play a role. broadly speaking, the moving

yields has been fundamental. the question is, are they disconnected from the fundamental outlook? that is what markets should reflect. joe: we were talking about it earlier, this idea that at certain levels company 10 year yield starts to look more attractive to foreign buyers. at 1.7% or roughly where it is, how does the math work out from your perspective such that foreign investors can get a big pickup in yields going to u.s. treasuries? josh: it is not just the level, it is the hedge level. if i am a en-based investor, i ultimate -- if i am a yen-based investor, i ultimately want yen. a foreign investor who wants to hedge into their currency. there is a ton of cash in the

system that can flow around. a ton of dollars in circulation mostly due to the fed expansion of its balance sheet and liquidity facilities. yields are often high compared to that cause. i think broadly speaking, we are there. it has been much more attractive in the past. we are kind of looking at 2015 levels for a foreign private investor to hedge it back to yen , euros. it plays a role but those flows are not in our view big enough to drive rate levels. it is more about the pricing of the foreign exchange futures. the thing that will stop the selloff is probably not going to be a foreign buyer. romaine: with regards to the liquidity conditions, there seems to be some concern that

could tighten in a meaningful way. it is not appear to be anything on the horizon. do you anticipate, with some of this recovery trade and some of the reflation trade, that could be an issue down the road. josh: it could. i think broadly speaking, liquidity has done pretty well. it is something we track closely. if there is $100 on the screen to trade, 80 of that is typically coming from a high-frequency style trader. that includes ptf's the citadels of the world. it also includes banks like jp morgan. the liquidity providers that drive the ability to transact at size, they pulled back a bit in late february when we had that 20 point day. even though depth is lower, the

microstructure of the market, the underlying availability of liquidity is pretty good. it is not something we are particularly concerned about. the only thing i would point to is the risk of jobs has increased. over the course of the day, it has been gappy. that is more of a long-term trend. when prices are capp -- gappy, when you get some exhaustion shock, it could be to the bearish side for growth, the bullish side for treasuries, a scare could be hard for the market to digest. joe: do you have a theory for what might have changed? josh: i think it is this growth in height frequency trading activities. it is very hard to be a

high-frequency trader really close to the treated level during really volatile times. liquidity is only available far from the currently traded price and that means there is an air gap between the current market level and all of that available liquidity is just disconnected a little bit more from current market prices. romaine: we talk about what is happening on the longer end of the curve, what the fed can control at the shorter end of the curve. many have been pointing out what has been going on with the five-year in the middle part, some of the risks they are starting to see. josh: the long and is interesting because you have demographic demand from pensions and so forth. when rates rise, there is natural demand from that category. the belly is where it is really most sensitive to the fed outlook.

you think the fed will hike in the next two, three years, as the market moves around, the fair value for that five-year treasury note can move around quite a bit. at this point, as much as powell is out there saying they will not hike any soon, there is a big difference between 3, 4, 5 years for the next hike. joe: final question here. i think we talked to you just over a week ago right after that fed decision that they will not extend the slr exemption. that got people interested for about 30 minutes. now that there has been a little time to digest it and get a sense of how banks will react, what do you see as the impact, and where might it show up in pricing? josh: i don't think you will see

it show up immediately or at all. slr was in place in its prior formant for many years before march of 2020. this is about vulnerability and how banks will react to an exaggerated shock of sufficient size. in the absence of those carveouts, specifically for the market-making part of a bank operation, there is a risk of operating in a period of acute stress. the level of shock has come down. meeting a smaller shock relative to let -- relative to last year will generate -- this is a fast but totally understandable repricing in the rates market, not some exogenous factor coming out of nowhere like covid. romaine: always great to have you on this program for josh

younger -- on this program. josh younger. coming up, we will dig a little bit further into that proposal we are expecting out of joe biden. the victim for structure plan. -- infrastructure plan. this is bloomberg. ♪ rg. ♪

romaine: a lot of anticipation out there for president joe biden's infrastructure plan. donald they what it will do for infrastructure but more importantly, how much it will cost and how he will pay for it. many are on board and others are saying, this could put us on a road we don't want to go. joe: it is clear that within this bill, the administration wants to raise revenue. in some way, use it as an opportunity to pass tax hikes or rollback past tax cuts. of course, the politics will be

way more complicated than just giving people money. chris, before we get to the news that is going to come out tomorrow, we have data out today. consumer confidence looks really good. all of these expectations of a boom still looking pretty good, it looks like. >> absolutely, i agree. i think not a big surprise. a lot of economists are expecting quite a ramp-up of economic activity as we see the vaccination programs get a better handle on the virus. and as people anticipate that, they are getting out there, they want -- pent-up savings, people are receiving new stimulus checks, so there is a lot of money to be spent, new opportunities to do it. travel going on, leisure business.

i think we will see a real pump -- a real pop in the coming months. with consumer activity. romaine: that will be important get expected pre-covid economic levels. when we talk about the infrastructure plan and longer-term initiatives, explained to me what the long-term economic motive is. chris: that is a twofold answer i think. first of all, as programs are put online, if we are talking about classical infrastructure, which divided administration is talking about a lot more than that. but if we are talking about roads and ports and bridges and all of that, then you get a lot of construction jobs happening. the supply of materials and equipment necessary for that to

work gets ramped up. then, as the infrastructure is put into place and put into use, theoretically you are increasing the productivity and efficiency of your economy. that impact can last for many years. takei large-scale infrastructure -- pick a large-scale infrastructure project that relieves congestion in a big city, that can really help productivity. there are all sorts of examples for that. joe: we were looking at a chart in the previous segment about different breakeven tenors. more inflation expected in the short term, then over the long-term, not so much. infrastructure needs a lot now. you need rob materials, labor, equipment. but overall, if it expands the productive capacity of the

economy, that should be very good for continued inflation. chris: absolutely it should. it is important to note on the inflation outlook that we are obviously going to get a pop in the middle of this year. but, what what explained inflation stating that i are going higher in mid 2022 or 2023i think it is much harder to justify that kind of argument. romaine: of course, a lot of eyes tomorrow will be on the rollout of that plan. joe, i don't know if we will have a whole special on it. joe: we should. is that installed? joe: it is fine. they wrote it off. i don't think it is a big deal. i am sure we will be talking about it a lot tomorrow. that does it for "what'd you miss?"

"bloomberg technology" is next. romaine: this is bloomberg. ♪

emily: i'm emily chang in san francisco and this is "bloomberg technology." the global chip crunch. unveiling its biggest overall in chip technology in almost a decade with new designs targeting markets currently dominated by intel. i spoke with the ceo. plus, everyone seems to