>> we still see there being more to go in this restart narrative. >> we are still being affected by concerns. >> the biggest risk for me is that i underestimate how inflation is going up. >> the fed doesn't know either when this transitory notion is going to go away. >> the fed has to be very careful about its communication, not just verbal communication, but all types of communication. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. a simulcast, bloomberg radio, bloomberg television. we welcome you on a day of turmoil in the markets. there's no other way to put it. equities, bonds, currencies, commodities all have a dynamic story to tell, and all of this around fed speak this week. it is a theme this hour. ben emmons to join us. let's get down to it.

what does the fed not want to say this week? lisa: i don't know. honestly, i don't know what message they want to send. maybe they are doing a victory lap because frankly, they have been adjusting a little bit of caution in markets without injecting turmoil. is this what they wanted to avoid some kind of bubble or asset prices fear? tom: kailey leinz joins us this morning to straighten me out. thank you so much for being with us. i thought the early morning hours in london were very valuable, talking about the market. the tendency for me is steve major at the team at hsbc still predict 1% 10 year yield. kailey: got a little more ways to go, looking at 1.43% this morning. but the picture looks a lot different than it did when i came into the office around 3:00 a.m. futures were lower. we had a flatter curve again. the 30 year broke below 2%.

now the story is looking very different, back above that level on the 30 year. we have a steeper curve and futures around the high of the session. tom: to me, it is the wall of money that is out there. tony crescenzi of pimco addressed that. lisa: the idea here of where is it moving too, right? if we've got the ball of money rolling around china, it is now rolling around the entire globe, what do people move into risk assets? at what point do people just i stuff -- just buy stuff and buy experiences? tom: if you are confused, join the crowd. i'm confused, too. let's do the data check. dow futures up 200. the vix goes to 20.19. kailey, what do you see? kailey: in bonds, the 10 year

yield is going nowhere from friday's price, 1.43% right now after it was pretty substantially lower earlier, right around 1.36% at one point around session lows. the 30 year yield, the longer end has been getting a bit over the past several days. that is not continuing today. we get a steeper curve, not a flatter when. tom: the 10 year real yield, that is important to a lot of our viewers and listeners. we will dive into that any moment -- in a moment. let's get briefed. lisa: we are going to go 50-50. you asked one of the key questions, what message does the fed want to be sending? perhaps we get some sense of that today. we get a slew of fed speak, including james bullard. jim bullard had a very hawkish tone friday. will he continue with that message? john williams of the new york fed and robert kaplan of dallas. how much dispersion is there among members of the federal reserve?

is there consensus forming that inflation is a significant concern, letting the market run hot enough to get employment to a full enough picture? yet to be determined. president biden is meeting with financial regulators, talk about climate change and how this could affect the financial system. what kind of existential risk is being posed here? tom: wait a minute. is he going to talk to gensler about memes, about gamestop? lisa: presumably he will go beyond the purview of just global warming, but it is being headlined as being the major focus. yes, i would guess that he will be talking about a whole host of issues that are a threat to the financial system right now, especially due to all of that cash sloshing around. some people getting concerned we have a glut of cash. what happens if that reverses suddenly and we get a shortage of cash? ? how do these flows really get translated at an unprecedented time? today we have the bloomberg qatar economic forum. a host of key speakers.

ray dalio, larry summers, stephen schwarzman. my question is how do they look at inflation down the road? how do they look at the fed's reaction function? ray dalio said a little bit more than a year ago, is there a sense we are in a new regime after printing all of this cash, or are people backing off that now? tom: right on the screen now. green on the jewish -- red on the screen earlier. green on the screen. it is wonderful to have been emmons with us on this monday. then things blew up on friday. this is a genius booking. ben emmons of medley global advisors with a note over the weekend. what did you write? ben: i was looking at the dynamic of the curve on friday, and you get guidance through the top loss, which was different than in 2013, when the fed didn't do that. the options effect that has on the low end of the yield curve,

that says maybe the future rate hikes are efficient to control inflation around that 2%. so the market has given some credit ability on that front to the fed. also, those technicals at work. this positioning that took place prior to all of this flattening we have seen was really predicated on markets expect in growth. tom: when we invented "surveillance," we said what we want to do is get short-term guy like chris enzi -- like tony crescenzi, and then longer be blue like you, and frankly jerome powell. what do you thing about -- long-term people like you, and frankly jerome powell. what do you think about the rest of it? ben: it will compress short-term interest rates over time. as much as you want to communicate that you're going to raise rates, you can't really expect the yield to jump all the way out to this projected rate

the fed has put out. i think it is more like a very slow normalization, and markets notice because we experienced this in 2014 when we went very slowly with the two-year yield over time. i think that is what you can expect. on the low end of the yield curve, it is the dynamic of the technical positioning and the fact that maybe these rate hikes are sufficient to keep inflation in the future under control. lisa: if it is technical, are we almost through with the technicality? are we moving into a period where perhaps long and rates can possibly rise on the prospect of less fed accommodation? ben: i think the way it is communicated this time compared to 2013 is that we were missing guidance on rates in 2013. if we had this idea that it is going to go that trajectory, you take some of the risk premium out of the low end. at the same time, probably there is some scope for rising rates as new data comes in and surprises still to the upside.

we have an economy that is really strong. it is not normal to have rates at these low levels. as we talked about a few weeks ago, it looks dislocated. so i would expect core pce data this week surprises to the upside. probably a catalyst for rates to somewhat normalize again back to where we came from. kailey: did we already get the taper tantrum? was that what march was? ben: maybe, but in 2013 it was really a communication that confused markets and led to this repositioning. we didn't really expect you to go this fast, ending qe and going to rate hikes in the future. in that respect, the fed i think has done a really good job controlling that aspect, but i think what the markets were not inspecting last week was to see this topline shift. i think what really happened on friday was completely recalibrating what we saw in march, with the expectation for rate hikes the same as they are

now today. the difference that the markets understand what the fed is potentially planning to do, including working towards the start of the tapering process. lisa: isn't it surprising that you are not seeing a bigger wobble in risk assets, given the fact that people are starting to thing about tapering sooner? ben: i think there's two things going on because yes, tapering means removal of accommodation over time, but we also have to discount the fact that the fed is still super accommodative. we are looking at $20 billion a month, so we will continue on that pace for at least a number of months, if not longer, until that tapering actually happens, and presumably in 2022. you are looking at a balance sheet that is going to expand beyond $9 trillion. tom: very quickly, what do you

need to hear from fed officials in the coming days? ben: i think what they put out as projections, they are looking at the economy that will be protected against the surge of inflation. this forecast they put out on the dot plot has always been considered to be an individual. that is are emphasized. they are still at the starting phase of considering future normalization. tom: been emmons, thank you so much -- ben emons, thank you so much. what is the part of the bond market, lisa, you look at right now? what matters to lisa abramowicz? lisa: the belly of the curve. that is where people were looking in terms of their was potentially value there. i know you're looking down, tom, but that is not my application. i'm just saying that people were looking at the idea that five-year yields climbed to the degree that they did disproportionately, and whether that was perhaps a place of value. i thing that is an interesting conundrum in the bond market.

tom: kailey, jump in and insult me as well? [laughter] kailey: i would never insult you, tom. lisa is watching the belly of the curve, but is the flattened or over? last week's really dramatic action, with the steepener coming in today, i wonder how much longer that trade is going to persist? tom: how did she get on the show? kailey: someone let me and. take it up with manage -- let me in. take it up with management. [laughter] tom: thank you so much for joining us. we look forward to the coming minutes, as we flattener and steepener and all the rest of it as well. we will have our economic team really steeled for the fed coverage this week. i believe john williams is on the docket. that is always important, the gentleman who gave us the gift that keeps on giving. the vix, 20.29.

futures up 17. dow futures up 185. nasdaq up 0.4%. stay with us. on radio on television -- on radio and television, this is bloomberg. ♪ ritika: with the first word news, i'm ritika gupta. national security advisor jake sullivan says the u.s. is working on additional sanctions against russia for the poisoning of opposition leader alexa navalny. president binder -- leader alexi navalny. president biden says he made it clear russia would face consequences if navalny died in prison. the main contenders for next year's french presidential race was fared worse than expected in the country's regional election. marine le pen's national rally was almost 10 points behind her score in the last election, with president macron's party taking 11%. turnout estimated at 80% was at an all-time low -- estimated at 30% was at an all-time low.

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>> what is more surprising is the degree to which the fed is linking themselves to realize

inflation data that they themselves are suggesting will be transitory. to me this isn't really a change in their monetary policy strategy or reaction function. this is actually execution of that strategy to focus on realized data at the expense of forecasted that i -- forecasted data. tom: matthew hornbach there. red on the screen earlier when kailey leinz entered the door. we have seen a very nice advance. what is the why for the green on the screen we have? kailey: i don't know. it started with the european open, down on the stoxx 600, then you so that bid coming in. now we see futures around session highs, climbing. with asia playing catch-up to what we saw in the u.s. on friday, now we are seeing some of those reflation bets, maybe a little bit of dip buying going

on. tom: that overnight repo surge we saw over the last week has just been extraordinary. it is really unprecedented. lisa: this is the conundrum right now. we have so much cash in the system, banks don't one companies' deposits. what happens with all of this? how much does this suppress bond yields and keep risk elevated? at what point does it have to stop? tom: still $74 on brent crude. new weakness in turkish lira, out to eight 8.78 with a velocity of the move. we are on eight lire to the dollar watch. i've never said that before. emily wilkins with us out of washington, and beneath the third fold is the strength of

infrastructure, which we have been focused on. it is not iran. it is not biden act from the big trip to europe. it is not even the washington nationals relief pitching. what is happening to infrastructure on this monday? what gets done on infrastructure? emily: there's monday, and at the end of the week there is friday, and after friday, the senate and the house take off for the july 4 recess. that means that once again, the pressure is on president biden to make a decision about how the democrats go forward. a bipartisan group has offered a $1 trillion infrastructure plan. the white house has said no way on a gas tax. there is still a question about working out the details on that particular thing, but there is a question from the white house on going forward with this bipartisan deal. do they wind up tracking the larger interest or to package?

how do they get senators like bernie sanders on board, who's not happy with that bipartisan agreement because it doesn't have enough for climate change and other priorities? lots of priorities that all start with answering that one, does president biden want to shake hands and make an agreement with these bipartisan senators and get a bipartisan bill done? lisa: let's talk about these numbers as we talk about the fed potentially tapering stimulus. president biden is reviewing $879 billion plan -- reviewing a 579 billion dollar plan. it is a far cry from the others proposed. is this what we are looking at now, a likely situation where we see a sub $600 billion plan passed and then a battle into other priorities? emily: even if they do wind up saying yes, let's go ahead with that bill, democrats are still going to want to pass another $1

trillion plus legislation, and that is going to include things such as childcare, the child tax credit, expansion of medicare, potentially things like preschool, so the fact of the matter is even if they passed the smaller bill in a bipartisan manner, democrats are going to want more. . lisa:lisa: they are going to want more. whether they will get more is another story. i am thinking about the fed in tandem with the physical spending. as people are searching to worry about inflation, it is not just monetary policy members. it is also the folks down in washington, d.c. it is also people going to the gas station and seeing more in terms of the price at the pump. at what point has president biden run out of room for his most ambitious spending plan, as people look at an economy getting back on track? emily: when you talk to democrats about inflation, they will pretty quickly pivot the topic to saying we got elected. the american people elected democrats. we control the house, the senate, the white house. they want to get something big

done for the 2022 midterms. i think that, particularly for progressive democrats, that is what their eye is on more so than inflation. they feel that if they can get something big done, they stand a chance to win in a midterm election heavily favored towards the republicans. that is something they are thinking about very much, even a little more so than inflation at this point, particularly as you hear individuals like the treasury secretary still downplayed the risks from potential inflation. kailey: yes, the democrats control the house, but not by an overwhelming margin. are democrats going to be on board with a smaller bipartisan $579 billion proposal? emily: that is the $1 trillion question here. for a number of progressive democrats, including senator bernie sanders, they have already said they are not on board with this bipartisan plan. that could potentially change if they come to some agreement

saying go ahead and vote for this bipartisan deal, and we promise you we are going to be passing another larger reconciliation bill. that is what a number of progressives are looking for right now. but you are right in calling out the fact that the house has a very slim majority. democrats can only lose four individuals before they are not going to be able to pass anything. as you are looking at your joe manchins and kyrsten sinemas, you also have to keep an eye on your aoc's, as well as moderate democrats facing tough elections. tom: emily wilkins, thank you so much, and washington. an eventful week to be had. we will have full coverage through the week as well. we talked to matt miller, and i guess he went out and sold it all. bitcoin has really lost a bid, under $32,000. i am going to call that not a quote of the moment. really, i $29,000 quote would be more important. but nevertheless, bitcoin can't find a bid today. lisa: matt found it interesting,

perhaps that it was a more risk off tone, a move away from this regime of ever printing money and expanding the monetary system. that that was more the reason why there has been a selloff in bitcoin. if that is the case, why are we not seeing a commensurate decline in other risk assets? tom: i am not sure they are linked. lisa: but that is interesting to me. how is that possible is bitcoin is considered the marginal risk-taking major -- risk-taking mr.? -- risk-taking measure? tom: i don't hear that from people who question bitcoins veracity. lisa: you've got the likes of troy gayeski saying this is the key potential for the underperformer in your portfolio. there is also a degree of regulatory scrutiny, particularly from china. tom: what did you learn about bitcoin? matt miller wanted to do one of those ours all on bitcoin -- one of those hours all on bitcoin, didn't he? kailey: that would be his

choice. i would say keep an eye on the technicals. just watch it. tom: listen to us. the death cross. coming up, kailey leinz on the death cross. futures up 13. ♪

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tom: good morning, everyone. yes, trillions of dollars of cash sitting out there and what it means for the fed optionality . kailey leinz in for jon ferro today, in for romaine bostick and taylor riggs and 47 other people as well. we will get to kailey in a moment. it is not a normal monday, is it? lisa: i think people are just trying to understand the fed's reaction function area honestly, this this and it's between lower yields indicating slower growth and a bid into risk assets i am just not understanding the permanence of heading into a choppy rest of the year. tom: george sarah vallas at

deutsche bank writing about -- kailey leinz is with us on the equity markets and a company from sioux falls, south dakota, raven industries. kailey: a little m&a in the ag tech space, getting bought for $58 a share. in premarket trading, it is almost at that level right now, up about 49%. that price tag with a 50% premium to friday's close. another stock surging in early hours is torchlight energy. this is one of the new favorites of mima traders on ash of mima -- of meme traders. that stock is up around 40%. amc getting a little bit of a bid as well. remember, it fell 38% last

friday after that poor efficacy data from its covid-19 vaccine trial. it was bought on friday and is being bought again this morning. whatever it is, bitcoin is moving lower. as a result, it is dragging on stocks tied to bitcoin in premarket trading. marathon digital, microstrategy, riot blockchain all down more than 8% at this point in early hours. coinbase, the cryptocurrency exchange, down by about 3%. tom: thank you so much. right now, a very cogent note. everybody publishing over the weekend on the challenges within the market in the oddity in the asia open today, and over we are now to futures up 14. gene tannuzzo with us from columbia threadneedle. i am going to steal from lisa. i am really good at stealing

ideas from lisa abramowicz, particularly on a monday. that is the dispersion of the fed decisions to come. you suggest that this is an original uncertainty. scuffs the challenges these many fed officials have. -- discuss the challenges these many fed officials right. gene: the market was obsessed last week that the average fed forecaster was predicting higher rates than we would have otherwise expected were previously expected in 2020 three, but that dispersion is exceptionally wide, including some officials like james bullard who expect higher rates as early as next year. i think what the market is trying to grapple with here is trying to figure out, is the fed actually committed to average inflation targeting? remember last year, when this was introduced as a policy reaction function, they basically said we are not going to focus on short-term realized

inflation. we are going to be focused more on long-term inflation expectations, and these bumps in the road, this noise, we are going to consider that transitory. they kind of blanked and said we are reacting now, or at least may be in adjustment to our forecast based on short-term realized inflation, and i think the market is confused by that. lisa: it is really a view of a number of separate officials, this idea of disagreement on the fed leading to elevated fed decision uncertainty. how much is this being priced in? what are the market implications of this agreement that we are seeing brewing on the fomc? gene: we are seeing the market to bring forward rate hike expectations, and the market for the first time in a while is probably pricing in a more aggressive forecast, a more upward forecast of interest rates then what the fed itself is predicting. but i think if you are the fed, as much as they do have disagreement and uncertain, they

have to be pretty happy with the financial market outcome because when we were talking for the last several months, one of the biggest fears was a taper tantrum where yields should hire , and you see imbalance in risk assets like stocks and credit spreads. now as we look at where yields are, and as you talked about earlier, the long end has come forward, we have seen inflation premium drain out of the market and credit spreads are still exceptionally tight, and stocks are within spitting distance of all-time highs. as much as they have communicated uncertainty and there are lots of still unanswered questions, i think they are probably pretty happy with where financial market are these days. we still don't know what is substantial further progress in the labor market. that is a key variable that they have to find and put in their statement, and that is something they need to define for the market over the next several months.

kailey: you talked about how tight discredit -- how tight credit spreads still are. at what point do we get a read through and those start to widen out? gene: we always look at three things when we look at credit spreads. the fundamental environment, the technical backdrop, and valuations. what? ? are you being paid? valuations -- what are you being paid? valuations are the most difficult. the technical picture is still robust, and fundamentals are as supportive as they could be. we are trying to look beyond the reopening bump and see what sustainable growth looks like. i think there could be a little bit left in this carry trade, but it is really dicey to load up the boat on high-yield at this stage. we prefer shorter maturities within the high-yield space. kailey: so what do you put in a fixed income portfolio right now? gene: a mix of securitized

products like mortgage and asset-backed securities that can benefit from the strong state of the consumer. what we would not want to be exposed to are things like longer maturity investment grade bonds where there's really no price upside at this stage in our view, and this sort of volatile components can really detract from return. tom: within all of this, is this the time to reallocate, or the time to sit on your hands? gene: i think the best thing you can do is stick to your rebalance discipline. this is something we learned in early 2020 before the pandemic as well, which is even when interest rates are low, if your equity portfolio has appreciated to pretty high levels, or your risk asset portfolio, rebalancing to whatever your neutral allocation is is a pretty healthy thing to do. epically, when credit spreads are this expensive and equities are this high, and allocation to income is still beneficial and

will help you in the long front from a diversification standpoint. tom: we can diversify as much as we want, but as lisa has mentioned, you go back to the 60/40 model in the bond market. i don't have a clue what is happening. steve major at hsbc is telling me to load the boat on bonds. gene: i don't think you can just look at the bond market and say low interest rates are a bond market problem. we think low discount rates are going to be with us for a long time. they finished -- they affect all financial assets. it explains part of why we are seeing the elevated valuations we are elsewhere. i don't think it changes anything in terms of that discipline, whether you are neutral or any other balance. lisa: what is your biggest concern going forward, if it isn't a taper tantrum? where is the concern at this point? gene: all of the focus right now is on the tailwinds that come from fiscal. those come from the fed.

those come from reopening the economy through all of this excitement. i am a little worried about next year and the headwinds that start to come into place. i don't think fiscal is going to be as helpful next year, particularly if we are talking about higher taxes to pay for the infrastructure plans that were just being discussed. monetary policy is going to be going the other way, likely with a paper -- with a taper at the beginning part of the year, and will be exposed to whatever the underlying trend in gross is. i just inc. you've got to be a little bit careful out there. -- i just think you've got to be a little bit careful out there. tom: thank you so much. thrilled you are with us this morning. i'm going to go to the john williams idea. i deutsche bank, a wonderful tension between the more short-term at deutsche bank and more long-term analysis.

it just comes down to this idea of d-link into what economic growth will be. to me, that is the major focus. lisa: just in plain english, we just don't know where inflation is going. [laughter] tom: we also don't know where the economy is going. lisa: but that is key. we just don't know how this is going to extrapolate out into the future. whether the fiscal impulse will continue. we have been talking about what is potentially withdrawing monetary stimulus come aboard are the implications of a much smaller fiscal spending package in washington, d.c., which looks increasingly likely? how much have we moved back to the regime that we are used, which is slow growth and more debt that will slow it further? tom: what research did you see that caught your eye? kailey: i'm looking at oil. francisco blanch out of bank of america calling for $100 a barrel next year. tom: why didn't you tell us this?

[laughter] i'm telling you now, tom. tom: kailey is hiding secrets from us. [laughter] i'm hearing about this right now? kailey: that's the call, tom. demand is going to outstrip supply is the basic thesis from bank of america. we know those talks ended in vienna without a deal. do you need supply to come back to the market to meet all of this demand we are seeing at the world reopen? tom: lisa, i think she is one upping us -- one upping us. [laughter] lisa: i think it is a great string to bring up -- a great thing to bring up. are we going to see higher oil prices? are these coherent trades, given what we are seeing in the bond market? tom: chris verrone of strategic talking about $80 as the target, and i would suggest nobody has really framed $80 yet. then there is kailey leinz showing us up this morning with

francisco blanch at $100. lisa: there are other analysts as well. tom: can this not happen again? [laughter] lisa: kailey, it is fabulous to have you. happy monday. tom: how do you spell her name? lisa: really, tom? happy father's day. tom: yes. ♪ ritika: with the first word news, i'm ritika gupta. there is political chaos in sweden after the prime minister lost a confidence vote in parliament. that topples his minority coalition and leaves the leader with one week to decide whether to call snap elections. it would be the first time since 1958. authorities in hong kong will shorten quarantine times to seven days for fully vaccinated residents traveling from other places. they will also cut the requirement for nonresidents who are vaccinated.

other plans include lifting capacity restrictions at some restaurants and swimming pools. the board of next digital has reported a plan to spin off operations for the apple daily newspaper in hong kong, after police arrested top editors at the newspaper flagship of jimmy lai. the board will apply to hong kong's security bureau to unfreeze its assets and decide whether to cease operations. u.s. natural gas has seen an unprecedented rally to the highest level in nearly 13 years. the gain is fueling concerns about inflation. some utilities have turned to burning more coal, a setback for those fighting against climate change. israel's new foreign minister is set to talk to the united arab emirates next week, the first time ever to visit the gulf country for talks by an israeli diplomat. the visit comes after that who countries normalize relations

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>> if we are going to believe in a positive structural outcome

from this awful pandemic, it is that real yields become far less . this is not sending a very positive discount. tom: the battle of inflation adjusted yields. right now, the 10 year yield at -- jon ferro is off today. we are thrilled kailey leinz could join us this morning. what we are trying to do in the markets is give you a cross-section of views across assets. ira jersey will be joining us, scheduled in a bit. james foley at the last moment has come on board from rabobank. really pleased james foley -- pleased jane foley could join us today. all of this action dovetails into the banks. there's never been a crisis like this in the career of gerard cassidy with rbc capital markets. he has seen this before, angst and handwringing. what does all of this uproar mean for the big ask? gerard: you are right, we have

been through a number of different cycles, and each one has a different side to it, but this one is quite interesting because we have not seen this low rate environment persist for so long, particularly on the long end of the curve, with the likelihood of inflation heating up to levels possibly we haven't seen in over 25 years. so the industry right now is grappling with an excess amount of caused by the quantitative easing by the federal reserve. as you know, the fed balance sheet now is over $8 trillion, up from $4 trillion prior to the pandemic, what the banking system weighing on their margins, along with this rate environment. tom: we were talking about $34 lobster rolls because we were coming on with gerard cassidy of portland, maine. when you see a pullback at jp morgan of 11% are other selected

stocks is it time -- or other selected stocks, is it time to load the lobster back? -- the lobster boat? [laughter] gerard: i think it is a great time to pullback on some stocks. you're right, if you believe the was economy is truly growing at 6% or 7% and throw in 3% or 4% for inflation, loan growth historically going back to the 1940's is correlated to nominal gdp growth. low growth -- loan growth hasn't shown up yet because of consumers, but over the next 12 months, we expect to see loan growth the way it is projected today. tom: lisa, this is so important. a grizzled pro like cassidy who remembers when a lobster roll was $3.40, he's looking out 12 months, not 12 hours. lisa: i love that your priority

right now is a lobster roll. i am right there with you, talking about the liquidity peon perhaps the beverage of your choice to accompany a lobster roll, but rather the liquidity in the financial system. you talk about the idea that there's $3.9 trillion of cash reserves at the federal reserve versus pre-financial crisis, $46 billion on average. a complete magnitude change. what is the trajectory of getting that money into lending at the same time that people are drawing down their deposits and actually spending that cash, perhaps taking that cash out of the banks and into the economy? gerard: that is the key metric, and you are very observant on the numbers. i would suggest that that is what the banks want to do. the banks, as i try to remind myself and the investors, banks are in the business to lend money. a want to qualified borrowers. right now the demand is not there. as the liquidity issues stop,

and the consumer has a number of benefits that are expiring in the fall -- for example, if you are a student and you deferred your loan payments, that expires in the fall. so i think you will find people will use them, their stimulus payments to help with monthly cash flows, and then revolve back onto credit cards, which we are starting to actually see, so maybe they are buying those lobster rolls, tom. kailey: maybe people are buying lobster rolls. i wonder if companies are going to start buying other companies because the consumer balance sheet is looking pretty healthy, but customers have a lot of cash on hand as well. jamie dimon was talking about the fact that trading isn't going to be as great. look to m&a as a driver. how much of a growth catalyst do you think m&a will be for these banks? gerard: that is a real good question. i think it will be a real driver because as corporate become more confident that the u.s. economy is out of the downturn that we experienced last year due to the pandemic, they will have more confidence to either build new

equipment or go out and buy a competitor to become more competitive. so we are seeing that is one of the accelerants to loan growth, as long as corporate loan demand. the building up of all of the new green initiatives, whether it is lust vehicles -- it is electric vehicles or other things, those are demanding corporate borrowing. that will pick up as confidence comes back into this economy. lisa: how much does your banks call get threatened by a flattening yield curve, as many people are now looking at the consensus call as being that continuing? gerard: that is a risk. i don't disagree with you whatsoever. if we are chatting here a year from now and the 10 year government bond yield is 110 basis points or 120 basis points, and there's more talk of the said raising its short end, that would be a very challenging environment. i don't disagree with you. tom: what i care about is connecticut or maine lobster

roll. are you going to go with the butter sauce and oliver -- butter sauce, or are you going to go with the mic mayonnaise? gerard: you've got to go with the butter sauce and a nice ipa, and we will call it a day. tom: i never thought. i'm absolutely shocked. lisa: really? tom: i thought he would go with ice cold mike mayonnaise. lisa: no, the butter sauce is quite superior. tom: i learned something finally today on this show. gerard cassidy of rbc markets, truly expert. we didn't even have time to go through his single best buy on the sell side. what i heard there is by the banks. lisa: yes, by the dip here as they expect -- yes, buy the dip as they expect loan growth to go

up. i don't know, $3.9 trillion of cash parked with the federal reserve. to me, that is shocking. i know you don't care. tom: cassidy is from maine. i'm from up north. lisa is from new york. you are the southern girl here. lobster roll with butter sauce? kailey: i don't even know what you're talking about. tom: this is like having -- this is like having ferro on here. kailey: all i know is this has made me hungry. tom: folks, this is actually a really big debate, as we launch into the summer season. do you have a cold, crunchy lobster mayonnaise, or do you go the a primos way the butter sauce? and a cold -- and a cold ipa. kailey: it is 5:00 somewhere. lisa: am or p.m.? kailey: does it matter?

[laughter] tom: who's this ferro guy? a little bit of lift on bitdog. i can't quote bitdog, it's too painful. [laughter]

>> the public's hype over inflation had gotten too high. the fed got spooked. >> we still see there being more to go in this restart narrative. >> we have an economy that is really strong. it is not normal to have rates at these low levels. >> the fed has to be very careful about its communication not just verbal communication, but all types of communication. >> i think what the fed is concerned about is that after 2023, you are going to see continued increasing inflation. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz.

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