>> the consumer is let loose, they're going to start spending. >> going forward, the service side of the economy, not the economy side. >> the market overly priced for that inflation risk in the near material. we're going to have higher inflation to come. >> they're not doing anything. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: you've made it. from new york city for our audience worldwide, good morning, good morning. this is "bloomberg surveillance" live on tv and radio. alongside lisa abramowicz, i'm jonathan ferro. tom keene taking a long weekend. we have made it to the end of the week. retail sales and a ton of bank earnings. lisa, what stood out for you this week? lisa: the week is not over. we still have plenty left.

bank earnings highlighting the lack of loan demand. why? is that a sign of weaker forward look to the economy or a sign of how much cash consumers and corporations have after incredible stimulus programs? jonathan: overwhelmingly story is the latter. consumers, businesses flushed with cash. it's a transition as we pair down to savings rate that's economy reopens. we start to spend again. what does the demand look like? john cassidy of said we should see some sim improvement. for me, at least is the data and how we've responded to that data. so not just the data itself, how markets have reacted to it.

c.p.i. half, treasuries rallied. lisa: and this really raises the question about later in the year why are stocks confident and why are analysts confident? it's a blip and a siphon all the cash. and we'll just add to the momentum later in the year where as bond investors, they're saying i don't know. it's scary. is that the message we can take the fact that foreign buyers came into the market and the fact that people are getting squeezed out of the short position. jonathan: treasury yields have come down. and i do think the cyclical rally is stalled. we saw the commodity story really start to go into end, beginning of march. so that big consensus stories, they have stalled out. that's in the numbers.

lisa: there's a question and you raised this with bank earnings. if we have a lack of loan demand, does that encourage more risk taking by banks and individuals if certainly seeing that in markets. the risk has been not being exposed risk enough. and so how much does this affect risk taking and how much does it create potholes in our markets? i'm not saying the world is falling. this is definitely something on alabama's minds. jonathan: risk runs both ways. i'm with you. it is the third biggest year-over-year move in the last 100 years. what a step that is. lisa: it's been tremendous. and the reason why 2021 has been so interesting is because just because we haven't seen the headline figures of the indexes roll over in a dramatic way like

in 2020, the underpinnings of the market, the internals have been turning just as much to get right at every turn. jonathan: let me run through things. we will be at the weekend before you know it. and the eck tib market, futures up two. we advance to 4165, less than . 1. yields jung changed this morning. lisa: today, we are looking at about 30 minutes time, maybe, morgan stanley coming out with earnings. they have doubled to give you sense of how much good news is priced in.

a lot of them coming from the capital markets and we're looking at how they incorporated e*trade as well as their acquisition of eaton vance. we get housing starts. we get building permits expected to be very hot. people want new homes. builders are responding. could this ba driver of loan demand if people take out more mortgages later in the year? and today, president biden kicking off his discussions with the prime minister of japan who is going to be joining him at the white house discussing taiwan, discussing china, perhaps coming up with some strategy in the region, john. jonathan: matt miller has been all over this in the last few weeks. lisa: really? jonathan: tweaf japanese master champion. i do think we need to congratulate matsuyama. i guarantee you in the news conference it has to come up that we have a japanese masters champion can. i think it's fantastic. congratulations to mr. matsuyama

and his caddie as well. from new york then, this is the setup for you. equities all time high. down by about nine basis points. we've been talking about this for about a month now. has the cyclical trade taken a pause? or are we in a new stage of this market cycle? that's what jason draho thinks. jason, let's start there, how do you identify between the two? a pause and a turn in this market cycle. jason: we've had an inflation trade, carried on roughly mid march. that began in february by the start of the year and once it got to mid march, the 10 year was in 1.67 range. and the moving bond market was

done in the lag. late last year, we had really good news. treasury markets didn't move very much. for this stage of the recovery, now that we've consolidated to some extent, we see the pull tpwhak yield, more for position than any fundamental reason. i view this as more of a pause. all of it is consistent with consideration better than expected. i view this as a pause the -- it may not be the same impact but there is still more room. jonathan: you touched on what led and what lacked. what has when driving seat for you? jason: what's done very well in terms of a inflation trade, small caps did very well. the performance was spectacular. over the past year, over the past six months.

you've seen it pull back. they're overshot on the upside. but if you look at what's underperformed, it's still value. and while it outperformed growth, a little bit of return. that's where there's still opportunity. plenty of skepticism that this is a fundamental change which is justifiable. but the debate in the market is in a multi-year move. i think it's more than a six-month trade. and that's where there's still an upside like financial and energy as well. lisa: what's your allocation to bitcoin? jason: we don't have a allocation. if you look at it as an asset class, it has properties that are difficult to make it al came. it is highly volatile. so, it's almost like gold.

the return potential is low. when you think about do i want to allocate at a bond, it gives you a lot of volatility. you can put into bitcoin but you have to be prepared that over six months, you could lose 50% of that. i don't think it's there yet that you want to feel comfortable allocating to it. lisa: i imagine you get that a lot from your compliants. have you been having this conversation more frequently? jason: it's ebbs and flows. it's been very consistent or common question in the past six months. bitcoin ander to currency rallied quite a bit. people are just trying to wrap their heads a bit. am i miss ought? is this something they need to be invested in? so there's an investment of crypto currencies in general in

the future. and it is an issue that -- and went to take the emotion out of it and have some thoughtful conversations. jonathan: thank you, sir. jason draho, head of america's al indication. that question, am i missing out? we've all missed out on this rally. i say we all, i'm talking about myself in bitcoin. it has been a rip roaring rally so far. lisa: yeah. we will say it has been a hard one to get right. it either made your year or broken your year.

this raises the question do you jump on the train or do you flee? and i ask that question just now to jason because a lot of wealthier individuals are just asking the same questions. jonathan: it's a new asset class and it's a growing asset class. always trying to tie things back to fundamentals. this is just a new growing asset class. and kink sitting here trying to tie back up to inflation, maybe too immature to do that. individuals are conditioned to believe that something like crip to -- cryptoand bitcoin replaced and maybe bemove somewhere like gold and traditionally having that inverse correlation to risk and inflation as well. it has not done that so far this year. lisa: that's what i was going to say. if people want to make this bet and they tried gold, they fasme what do you do with that information going forward? jonathan: it has not worked.

for aliens worldwide. from new york city this morning, i'm racing towards the weekend. i'm sure you are too. lisa wants to take her time. i have no idea. 4166 on the s&p 500 in a beautiful new york city at record highs on the s&p. we're up about 1%. this is bloomberg. ♪ >> that was a fedex facility in indianapolis. eight people were killed and at least five others were hospitalized. authorities say the shooter killed himself. the next operation is located near the indianapolis airport. it's not clear whether the shooter works there. in china, there's not been an economic rebound quite like this one. first g.d.p. rising 18.3% from a year ago. but you've got remember that's when the economy washed down in an attempt to control the

coronavirus pandemic. so china tees economy improved only slightly from the four quarter of 2020. consumer spending has lagged but it picks up in the first quarter. in hong kong, media tycoon has been sentenced to 40 months in prison. he was convicted of attending two unauthorized protests and he was charged with more national security offenses. authorities have been pursuing cases against hong kong's most high profile dissidents. and the european union will not in the in the contract with astrazeneca and johnson & johnson. both vaccines have been linked to rare blood clots the e.u. has already started talking about contactses with moderna and pfizer. this is bloomberg. ♪

>> we're early on this year. under outcome based policy, we really want to see that. >> i know we have a long way to go before the job is complete. >> there's to textbook for this. you don't want to be too preemptive but i also don't want to be so reactive that we're late. >> i think it's too early to talk about changing monitor while we're still in the pandemic tunnel. ♪ >> for all of us, it's been a long journey to this moment. there is a great deal of work

we're planning to do in months ahead to ensure the withdraw is possible, deliberate, and safe. but that work is going to be matched by our enduring support for afghanistan economically, diplomatically, politically. jonathan: tony blake in there, the it's secretary of state on the withdrawal of troops from afghanistan. from new york city this morning, good morning. alongside lisa abramowicz, i'm jonathan ferro. tom keene will be back with us on monday. equity futures drifting higher up at five. record highs. 4167 on the s&p 500. into the bond market, down another basis point. crude doing ok. 63 handle in. and euro dollar, we approach. up at 119 -- 1.1987.

just a brief preview what you're looking for. lisa: the bar is super high for that equity trading business. we seen nearly 100% rises at j.p. morgan. what do we know about the head of trading over at morgan stanley? high levels of paranoia. that will be showing up today. the bar is low as far as analyst estimates go but after we saw throughout the week, we are going to want to see them perform as well as keep those margins nice and tight at that management division that has grown. jonathan: looking forward to the coverage. those numbers due out because we've seen so many early report this week. lisa: it's like they're so

excited to get there they couldn't resist. jonathan: something like that. our bloomberg government reporter joins us right now. infrastructure. keep talking about foreign policy. what's happening to infrastructure talks, negotiation, bipartisan efforts? >> it's been underway on capitol hill. you're right. it's been a huge week for reform policy. that continues with the prime minister's visit. but over on capitol hill, away from 1600 pennsylvania avenue, it is all about infrastructure. and there's a lot of discussion at this point about exactly how this package is going to pass. you saw republicans yesterday come out and say that they could support a smaller infrastructure package, perhaps $600 billion to $800 billion for roads and highways. and it's interesting because that amount that republicans are talking about, you look at biden's plan, he's already proposing about the same for

traditional infrastructure. there is an idea that perhaps if they decided to move just the traditional infrastructure piece on its own, that could garner bipartisan support and then democrats could perhaps use the budget reconciliation project to move tax bills and other items with only democratic voteses. lisa: i'm curious about the democratic debate. the idea of the salt tax caps that have gotten a lot more attention in congress. what's the latest there in terms of the willingness to appeal to some of the caps implemented under president trump? ritter has really ramped up. we saw a bipartisan group of 30 lawmakers really get together and say we need to make sure that salt caps are lifted and removed in this up coming infrastructure plan. but yesterday, we heard some pushback from new york congresswoman. she said these cameras caps are not going to wind up benefiting

lower and middle income individuals. and that's what is shared by a number of progressive tcheaments the tax bill needs to sort of -- they see it as needtology make eke a little more the american tax system benefit lower and middle income earners. lisa: you help with us the benchmark events. how quickly so much these infrastructure plans are moving forward. >> so right now, the time line is to get an infrastructure bill through one of the main house committees by around mid may. and remember, at this point, we haven't seen the text yet. there's still a lot of requests going on behind the scenes. lawmakers jockeying to get their priority into this piece of legislation. so this by default is still getting made. we're going to see results around mid may. speaker nancy pelosi promised the house will get their work done by july 4. at that point, it will go over to the senate and serve the --

are additional complications there meeting all 50 snoornts board. -- senators board. jonathan: it is the belief that the staff will get smaller. do you think it will get bigger? >> about what we saw with that last coronavirus package, that package very early on, they were tossing around that $1.9 trillion number and it wound up being that amount. $2.25 trillion is something that the biden administration has thought about in terms of size. there are more than enough proposals to reach that mark that democrats are putting out there. and so it does seem like i would assume, at least that, we see something similar this time in keeping with that $2.25 trillion number. the bigger question is how much of that is going to be paid for through taxes and other revenue sources and how much of that is going to be increase the american debt? jonathan: emily wilkins on the

latest. so much talk about foreign policy. and let me be clear. we have to cover the infrastructure story side of things as well if anything else. we got to do a couple of things before we get to the weekend. and now i'm trying to get there quickly. in about seven minutes time, we're getting morgan stanly numbers. after the execution at goldman in the first quarter and a tremendous performance, the high for lisa: the bar is high. they could own ply meet it. it will be really interesting to see how they have brought in eat on vance, e*trade as they try to get on this retail trading trend. basically, is it a template for what's to come in terms of consolidation and acquisition as banks look to deploy cash.

jonathan: it's been a difficult choice, hasn't it, lisa? lisa: they both have a profile, less to have a relicense on lending to corporations and scumpletse but they are depend on the trading capital market's intensive areas which have been on fire. jonathan: goldman has had a bigger year. what are we in the middle of april so far. so morgan stanley out in about five minutes. we'll get a nice reaction from tour wall street correspondent. we'll get some reaction from bloomberg intelligence. before we get there, let me give you a cross-asset in the united states of america. going into the weekend. yes, the weekend. s&p 500 futures up four or five points. 4167. lisa: it's friday? jonathan: you're right it's

friday. lisa: i know. jonathan: stop reminding me. year over dollar, 1.1986. new york city today, isn't it just beautiful? just beautiful?

♪ jonathan: it is 7:30 in new york city. for our audience worldwide, good morning. lisa abramowicz and me today. tom keene will be back on monday. i'm jonathan ferro. futures at record highs against a year-over-year number. first quarter net interest income, $2.03 billion. for the wealth management side of the business, net revenue, six point billion dollars cash net revenue, $6.0 billion. -- net revenue, 6.0 billion dollars. the numbers just incredible. morgan stanley saying they are resuming their share buyback

program in the first quarter of 2021. another bank delivering some really nice numbers. lisa: i am curious how people are going to try to poke holes in this. the share is up more than 1%. the idea of 64% increase year-over-year, it wasn't like the first quarter was that terrible for the banks, but it just highlights how amazing it has been in 2021. jonathan: it is an upside surprise on morgan stanley numbers this morning. on the capital return program, resuming the share buyback program in the first quarter of 2021. repurchased 2.1 billion dollars of outstanding stock in the quarter. morgan stanley turning a little bit lower than the premarket, down a little more than 1% right now to about $80. so it is a slight move lower. getting commentary from mr. gorman over and morgan stanley, the ceo, saying eaton vance ex

investment management to over one point $4 trillion in assets. james gorman going on to say the firm is very well-positioned for growth. i know sonali bassett spent the last minutes -- sonali basak going through -- sonali basak spend the last few minutes going through this. sonali: you have them beating on revenue, beating on expectation at the asset management unit come up beating on pretax for that wealth management unit as well. they did come in short of expectations on their advisory business, though their equity underwriting, where they compete in an with goldman sachs, we do see them bringing in more than $1 billion in equity underwriting revenue. people will absorbency's numbers, look at how they stand competitively compared to their peers. equity and fixed income trading just below 3 billion dollars, beating expectations largely,

but in pure volumes, a bit lighter than their two bigger peers. jonathan: the company bringing in inflows of $105 billion for morgan stanley. just wearing through more headlines, the -- just pouring through headlines, the stock is down a little bit. if there is some early disappointment in any of these numbers, can you see it? sonali: let me give you some perspective. morgan stanley and goldman sachs competing on investment banking. you have goldman sachs giving you more than 30% return on equities. you have morgan stanley over 21%. compare that with jp morgan. a lot of their results also included that big reserve release. morgan stanley is a little cleaner than that, but you're comparing that with goldman sachs now on returns and investment backing. morgan stanley in the stock market has been doing better. their market cap is about $30

billion more than goldman sachs, and they are trading a higher multiple to book value. you can meet or beat expectations, but this is about competition, and when you look over to the other side of manhattan, there's a competitor keeping a better lid on costs, as well as competing just as heavily in those investment banking businesses. jonathan: stay close. i want to bring in alison williams of bloomberg intelligence. what you see in this statement? sonali: i think the negative --alison: i think the negative is the equity trading revenue. their growth in that business was only 17% versus their peers. it looks like there's a charge related to a hedge fund client, which we can only assume is archegos. i think that will probably bring some questions. and a subsequent 267 million dollars. so altogether, pretty sizable.

lisa: morgan stanley ficc sales for the first quarter did beat estimates. alison, we have been talking about goldman sachs versus morgan stanley. who won the first quarter? alison: i think the hedge fund hit is going to put in into things. it is interesting because goldman has been saying immaterial, and it did prove manageable. they had equity revenue up 17%. but we did not see the hit to goldman's equity trading numbers. they were able to grow their revenue up 17%. jp morgan up almost 50%. meanwhile, morgan stanley really taking a hit. had this not happened, they would have been very competitive, but i think there's going to be a lot of questions around this. lisa: one interesting note is

what jon was mentioning about eaton vance, the investment management addition to morgan stanley, brought the assets to over $1.4 trillion. how much are either banks going to look at morgan stanley, what they have done with eaton vance, with e*trade, as a template for how to make acquisitions going forward? alison: i think the other banks are interested in acquisitions. goldman has done some smaller things. united capital was perhaps the biggest thing they did on the wealth side of things. but in general, if you looked at morgan stanley's traditional asset management, they have been smaller than people like jp morgan and goldman sachs, and eaton vance is really helping to get them there. they have had really good equity inflows in recent quarters. i haven't seen the inflows today, but based on what we have seen in the could -- in the active equity area, we expect them to continue that trend. jonathan: morgan stanley in the premarket now positive by 0.8%.

there is the headline dropping, morgan stanley posting a $911 million loss tied to archegos capital. sonali? sonali: that is almost $1 billion on this single event, and subsequent losses of more than $200 million. on top of that, the revenue increase was less at both the fixed income trading unit and the equities trading unit. in terms of a percentage increase, they will get some questions about where they stand on market share, as well as why there was almost $1 billion of losses tied to archegos. jonathan: alison, we are positive on both goldman and morgan stanley. it is premarket trading at about 7:37 this morning in new york city. i want to talk about the year to date story. goldman is up about 20% year to date, goldman -- year,

morgan stanley up as well. how much difference is there between the banks right now? alison: i think the key difference is goldman's exposure to trading. morgan stanley's is probably the second-highest, but with these two deals we just discussed, they are really increasing the shift. the huge beats we saw this quarter were well above analyst estimates, but i think investors could see the trends and knew there was going to be some upside. i think going forward, the positive thing is this was the seasonally strongest quarter, and they mostly knocked it out of the park, notwithstanding some of the hits to prime brokerage area and the investment banking pipelines are at records at goldman and jp morgan. morgan stanley did have some pretty significant growth in fees. i think the fact that we do have

that sustained strength, in general i think it is hard. we see a lot of the stocks, by the rumor, sell the news -- the stocks, buy the rumor, sell the news. jonathan: morgan stanley slightly negative. if i keep doing this, it is going to be like a horse race. i am just going to stop. romaine is going to pick up in a moment. james gorman saying the firm is very well-positioned for growth. sonali, we had every big bank on wall street so far. it has been a big quarter for many of them, in terms of year-to-date, equity gains, stock price gains. these numbers have been absolutely stellar. sonali: it is still a long year ahead, jon. goldman said that prime brokerage was consolidating. what becomes of that archegos hit and their future in prime brokerage? any tightening moving forward? relationships with clients

changing? wall street will be watching very closely. jonathan: and we will be catching up with you on this story. morgan stanley comes out with some decent numbers, widely expected, and talking up a better outlook as well. ceo james gorman saying the firm as well -- the firm is very well-positioned for growth. a $911 million loss tied to archegos capital. that single-family office has had so much damage on so many banks, it has been quite remarkable. lisa: but it sheds a spotlight on risk management at the different banks. you have been talking about exit fusion. why did goldman sachs avoid it? why did morgan stanley get hit? why did credit suisse get hit? why did jp morgan not even get its foot wet in this field? jonathan: execution for goldman sachs because that was a tremendously executed quarter. that wasn't just about the climate, the weather. that was about doing things right and quick, and i think

with archegos, the quick part seems to be the key. i want to bring in romaine bostick to get you up-to-date on the horse race in this market right now with the price action. romaine: you made some great points on morgan stanley. we saw some of the same things out of bank of america. there was also stellar stock performance heading into this, both in terms of what they lost off of that trade, as well as the lingering losses after that. we did get our core earnings last night. there's a broader story about the reflation trade, about aluminum prices, and more important leave out china trying to tamp down production. that has been good for alcoa. the chief technology officer there since 2017, largely considered to be an architect of a lot of the good news out of that company, is moving on now. bring you your coinbase update for the day.

down slightly in premarket after falling slightly yesterday. an exit event for a lot of investors. cathie wood did pick up another 300,000 plus shares in the overnight hours. certainly some people still doubling down on the longer-term growth story. and interesting story last night, the nfl creating three new partnerships with sports betting companies. draftkings, caesar's, and flutters. they have really cap danced around the idea of just how much sports betting actually played into what was going on in the company. you see draftkings get a bit here. jonathan: great work as always. looking forward to the close a little bit later on bloomberg television. can i call it weekend yet? lisa: nope, not yet. jonathan: but that does wrap up the expected news so far. lisa: we've got more. jonathan: what have we got? lisa: we've got economic data, we've got building permits.

that's been the hottest housing market since 2007. but also we have some interesting conversations throughout the day as we try to reset. jonathan: you keep selling the show, lisa. lisa: i've got to say, the rates move was really interesting this week. jonathan: i agree. lisa: you did say that. i think there is so much good stuff. jonathan: i think bank analysts are just happy this is over, after the busiest week for them for the quarter. morgan stanley coming out with some really nice numbers. james gorman, the ceo, saying we are really well-positioned. the story is the losses tied to archegos, the family office. still haven't determined what we can call it right now. posting a $911 million loss tied to archegos capital. i can tell you i can see sonali bassett has been working the phones. we will get some action from sonali a little bit later. here's your horse race. we are down by a little more than 1%.

for our audience worldwide, what a week it has been. i think that's why i want to get to the weekend. it has been such a long week. yields, 1.55% on 10s, down almost three basis points. heard on bloomberg radio, seen on bloomberg tv, lisa selling it hard. [laughter] this is "bloomberg surveillance ." ♪

>> this fed, it started to lead, but out often -- but it often

follows the market. the fed has held its line so far. but the question is, can they can they continue to do that if the data not only surprises to the upside, but persists to surprise to the upside? jonathan: the data certainly did that this week on cpi and on retail sales as well. george bory there, wells fargo fixed income specialist. alongside lisa abramowicz, i'm jonathan ferro. tom keene at home for a long weekend. on the s&p 500, futures up five points on the day and up a little more than 0.1%. all-time highs at the close thursday's session. 1.5517% on tens. euro-dollar higher, $1.1989. stock story of the last 30

minutes, morgan stanley. that stuck down by a little more than 1% after a really tidy year-to-date gain. the story a familiar one. investment banking really decent on the trading side of the business. ficc sales and trading revenue. sales trading in revenue at the equity side of the business, $2.88 billion. the estimate, 2.6 billion dollars. what got a lot of people's attention was a clarity on a number, $911 million loss tied to archegos capital. lisa: it also raises the question of price to perfection. the fact that we are questioning a $911 million loss when they doubled profit, beat expectations, put out a really stellar earnings report. their shares are down in premarket trading. people are focusing on the archegos loss. the idea is we are looking for perfection and looking for any holes in that assumption. how much are we baking into the

valuations we are looking at? jonathan: i think a lot of people did that with goldman earlier this week. just saw the numbers and were like yeah, ok. monster upside surprise from goldman. some of these numbers have been tremendous, including morgan stanley. but it is that loss and the lack of clarity we have had around those numbers. we will keep an eye on that story. i need to stop doing this because this stock has been all over the place. lisa: i think you should do it in a horseracing voice. jonathan: i can do that really quickly. i am not going to go -- not going to do it now. mark cabana joins us now, bank of america head of u.s. rates strategy. some further progress. the fed will define them. are we there yet? mark: i don't think we are there yet, but i agree, i think they will be the three most important words for financial markets over the next quarter or two.

it is substantial further progress, and that holds the key to determining when the fed will decide to slow asset purchases, which will pave the way for them to potentially raise interest rates. we believe the layer market -- that is the level of employment where we are today versus pre-pandemic. we anticipate a lot of progress in closing that whole -- that hole over the next few months. we end as bait one million job growth months over the next several months, and that allows the fed to assess making substantial further progress by the end of the year. we anticipate that the fed will be looking at substantial figure progress by the summer or fall.

we are looking at potentially be september fomc in when we could see a shift in the timing of when asset purchases will begin to be withdrawn. we don't think this will start until q1 of next year, but the fed will start sending the signal over the summer. jonathan: you took away my next question because that is what i was going to ask. so i will build on that. just some words you used, this will pave the way for rate increases. is it that obvious that that will be the next step in the imminent future? mark: this week, they started focusing a little more on what the path for accommodation withdrawal will look like. they stressed the tapering of asset purchases will happen before they begin to raise interest rates. we think they ideally want to stop buying before they raise rates. that is still going to be some time away. we think the taper process will likely be a year or so, and that

they won't start raising rates until at some point in 2023, we think the latter half of 2023. so it is going to be a long pass to get there. but what the market is going to care about is when the fed starts to signal that it is moving in that direction. the market is very quickly going to extrapolate from a fed cutting its asset purchases or at least setting the stage for that, and then extrapolating rate hikes at some point in the future off of that. lisa: what i am hearing from you is higher rates ahead. what i hear from almost everyone, higher rates ahead. looking at 10 year yields, they are aggressively lower on the week compared to the past few weeks. what gives? mark: you are exactly right. really since the start of the second quarter, we are down about 20 basis points on the 10 year. frankly, it has been a bit of a surprise, especially given the very robust economic data we have seen.

you're right, good retail sales report, solid cpi, and incredibly strong employment report earlier this month. so why? we think it is essentially three factors driving it. one, we are starting to see some pockets of demand from foreign investors and asset managers, especially with equities at all-time highs. two, we think there has likely been a technical squeeze here. some short positions got squeezed in the move and are now covering. three, we think there's an incredible amount of cash outstanding. the amount of reserves in the banking system has grown $100 billion since april. it has grown almost 25% to 30% just this year. we have seen a lot more cash and the banking system, and that is looking for a home. this also coincides with stimulus checks that have been paid out, and investors and recipients of those stimulus checks that suggest, at least to the new york fed, that 40% of that money is going to be invested and saved. that is finding its way into financial assets.

so to some extent, this is a rally where everything is reaching. equities original time highs. we know what is happening with crypto and other alternative assets. all of those are appreciating. so we do think that the rates market is a beneficiary of some of that, pushing rates lower. importantly, what we see in the rates move is that the majority of it is real rate led. we also anticipate that this will likely be temporary and short-lived. fundamentals will trump here, and fundamentals are going to be incredibly strong over the running to her of this year. so we have been encouraging clients to tics opportunity to reset your shorts because this will likely not persist. the economy is going to be really strong. inflation is going to start to pick up, and the fed will change their tune. as all of those happen, rates are going to move higher. jonathan: mark, looking forward to the conversation through the rest of this year. mark of america of -- mark

cabana of bank of america securities, head of u.s. rates strategy there. i'm told there is some data at 8:30 eastern we all need to wait for. morgan stanley behind us, they were better than expected. the ceo says we are better positioned for growth in the years ahead, but there is a $911 million loss tied to archegos. archegos.

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>> the consumer is, once they are let loose, they are going to start spending. >> going forward, what is going to power consumer spending is the services side of the economy, not the goods side. >> everything we follow would suggest every bit of inflation is being passed through, and then some. >> in many cases, it invites higher inflation. >> you are going to see higher inflation. the fed is going to be caught by surprise because it is really following the wrong model. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abmo