>> there is an unprecedented amount of liquidity everywhere. a lot of it seems to be on the sidelines. >> consumers are seeing a stronger economy but are less likely to participate in it. >> it is not so much about the inflation but with the fed is going to do about it. there are definitely signs they need to be tapering it. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. bloomberg on a friday. it has been an interesting week. it has been an interesting three to four fridays. kailey leinz in for jonathan ferro, who deserves a well-deserved sabbatical. he is doing research, lisa.

does that spring to the internationalist of the moment, whether afghanistan or the markets, it is an international friday. lisa: or whether it has to do with the pandemic and how international it is, not only in reply to health but supply chain. it has to do with supply chains out of china, partially closed due to one diagnosis of covid among the workers. and then you also have, of course, an increasing number of wall street firms coming out and delaying the return to the office. it seemed like we baked in a couple of months of the pandemic. tom: i agree. we are getting a little bit of good news, maybe china supply can ease up or the margin can ease up. lisa, i take your point on the margin of this pandemic. goldman sachs did in their gdp marked down a couple of days ago. they started with the delta variant. lisa: this has become suddenly a

new theme to marcus. i think we have been talking all week and this has more to do with tapering than the potential for shutdowns affecting supply chains and growth for longer. we are seeing that consistently. we also saw the downward surprise of retail sales following last friday's survey that came in at the lowest level since 2011. tom: the shift from 170 in may, to 112-ish and then that rollover through august has been extraordinary. next support year at 123. kailey leinz, the dollar is correlated. kailey: absolutely. the dollar is stronger for the fifth day in a row. this is versus the highs we saw last november. we were around these highs earlier in march where we saw yield speaking. now it is a very different story of dollar dynamics. this had nothing to do with

dollar yield anymore. this is the desire for safety and the dollar getting that haven bid. this goes to what lisa was talking about. there seems to be a total this week. tom: one of the round numbers not spoken of his that chinese women b, 6.50 -- reminbi 6.50 quickly on the data features, -20 dow features. makes 22.23 is up a solid big figure. some of the angst we saw yesterday morning and another reversal on the markets yesterday afternoon, and returning, as well to radio and television, lisa abramowicz. what do you have? tom: you are sending me back to -- kailey: you are -- lisa: you are sending me back to the wall. a key question at jackson hole next week is this shift in tone and how much it really encapsulates the increasing dovishness of fed members.

will the prolonged there tapering because of this? robert kaplan has come out in front as being one of the more aggressive members of the federal reserve. angela merkel plans to meet with russia's vladimir putin. this is the last couple of weeks of angela merkel's tenure as chancellor of germany. what will she say about russia's continual presence in afghanistan despite the removal of u.s. troops? how much will she press them for some kind of concession for their involvement in that territory? at 1:00 p.m., we get the baker hughes u.s. rig count, and you can grow me why it is important. i am watching the oil markets in terms of supply and demand. this week has been about the demand dynamics and how much that will influence supply given that a lot of the shell companies in the u.s. -- shale companies in the u.s. have gotten a lot of new discipline. tom: it will be interesting to

see. next week, tom keene, lisa abramowicz and michael mckee leading our conversation in an odd delta variant jackson hole. we are very aware. we start strong with arguably the most important interview we are going to have before we travel to wyoming. vincent reinhart owns the research of the american economy with 24 years at the federal reserve system, he is the one who literally codified and invented modern research at the eccles building. he is with mellon, their chief economist. vince reinhart, explained to radio and television what jackson hole really is. a bunch of phd's dissenting to dead serious papers. describe what really goes on. vincent: it is the biggest concentration of central bankers. central bankers love to talk amongst themselves. that is the opportunity for them to address what they are all

concerned about and what they are all concerned about now is how the global economy is going to pull itself out of the pandemic and moreover how they are going to pull themselves out of the unconventional policies they have got themselves into. tom: i had the honor of sitting on the lawn years ago with alan meltzer getting the summer soiree started with the carnegie rochester series, decades and decades ago, and it goes to the emotion of the serious event. a controversial paper of 2016, what will be the controversy this year? vincent: i think the big issue is find out where jay powell is relative to his committee. what did we learn this week? we learn that the fomc by and

large wants to head to the taper. ask rob kaplan that later today. wants to start slowing asset purchases. we heard preferably in the minutes, but when jay powell in his press conference was asked about it, he did not seem anywhere nearly as convinced nor did he really convey that view to his committee. which is it? his jay powell really wanting to head to the exit or he doesn't? this is his opportunity, if he wants to, to confirm where his committee wants to go to follow them up. lisa: how closely do you think jay powell and the other members are watching the variant, whether it is toward closures or delays to the return to office for a number of companies? vincent: delta is the ace card jay powell can pull out if he wants to slow the committee. you, lisa, and kailey, had it

exactly right. what have we learned the last 18 months? bad things can happen to good people, and they are very bad. in that environment, you want to buy insurance. it includes treasury securities, rates are low, that includes staying away from market activity. that is serious, and from a monetary policy standpoint, it links into the question of risk management. do you want to head for the exit, if in fact, something bad could happen in between and you are wrongfooted? sorry. lisa: thinking about the alta variant informs fed policy, we know they are prioritizing the labor market and that takes precedence over inflation. we heard from aarti walsh yesterday saying that in some cases, they have rolled back those enhanced benefits and may put them back in place because of the delta variant. how do you think about that factor into the jobs recovery?

vincent: that is a really important point and it tells you the problem of leaning forward in an uncertain time. we may just be leaning in, and the really interesting thing about the minutes, kailey, was, in fact, they were less hierarchical of their dual objective. for the last year, it has always been employment, employment, employment and price stability. the second half of the don't mandate was in the background. in the minutes, they said they were worried that they had made further progress toward employment and probably were at their price of gold. so they were bringing back that mandate. now, the question is, if they are really worried about the outlook, do they push concerns about inflation further into the background? lisa: in terms of concerns about inflation, how much do you expect them to highlight this

has been a k-shaped recovery and people hampered in the lower brackets more than others? vincent: that is what everybody forgets about the 1970's, that inflation is a regressive tax. part of it is what it is doing to real wages at the lower end of the spectrum. jay powell has been extremely good at framing policy more inclusively than any of his predecessors. he identified an opportunity for him to complain about inflation, not just because it worries the bond markets. tom: i have got 30-seconds. i am so sorry. you and carmen reinhart wrote the paper of the summer last year, "foreign affairs on the pandemic depression." did we exit the pandemic depression? vincent: absolutely not. a message was rebound was not recovery. we still have a lot of lost

output in the u.s. importantly, what we have done is forbearance, not forgiveness. that is at some point, all of those payments is going to come due. what is going happen then? tom: we are out of time, let's do it again. vincent reinhart, mellon investments chief. thank you. the vix down not to points, but 1.63. stay with us. lisa abramowicz, kailey leinz, this is bloomberg. good morning. ♪ laura: for first word news, in afghanistan, more chaos at kabul airport. the u.s. is rushing to evacuate people but taliban forced a

checkpoint around the airport, picking at tougher people to enter, raising concerns of citizens will be prevented from leaving. meanwhile, the white house says evacuation reached almost 3000 people yesterday. in australia, sydney's lockdown will be extended until the end of september. the delta variant outbreak has gotten worse in the country, the biggest city. meanwhile, the city outbreak is linked to three local cases to the three-day lockdown that was ended -- do to end today has been extended until tuesday. the biden administration' is most high-profile trip to asia. vice president harris will look to bolster their military and economic cooperation and china's backyard, sitting singapore and vietnam this weekend. they will look for harris to reassure them of america's role as a major trading partner. she will be able to raise her international profile. china has taken the next step in

claiming big tech. lawmakers of past legislations setting out at tougher rules for how companies handle user data. no details on any immediate release, but earlier drops to get the content to use and share information. more pay hikes for junior bankers on wall street. this time, according to the financial times, it is goldman sachs who reportedly increased salaries of some employees in a sales trading research and asset antigen offices. salaries are such arise from $85,000 to $110,000. global news, 24 hours a day, on-air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am laura wright. this is bloomberg. ♪

>> we are aware of congestion around airports. we are working closely with the department of defense to order a

safe and orderly access. u.s. military and other country flights continue throughout the last 24 hours, and american citizens and permanent residents will be given the first opportunity to board with other priority groups from there. tom: ned price with the state department, managing the message in washington on all fronts, through an exhausting week. on this friday, many people writing, richard haass, who started the week strong with a council on foreign relations,, to out with a scathing tweet, emerging reality of questionable policy, charitably executed, goes on with his critique of the week. as well, of the post-american world, i cannot say enough about this book. i told my kids. the nsc met every six time since april to discuss the afghanistan withdrawal. process has become policy.

precious time in meetings talking rather than executing whittle down to the lowest common denominator, preparation and memos a substitute for effective action. the top five tiers of the pentagon have gone from 363 people in 1998 to 870 euro go. emily wilkins knows a bureaucratic washington and joins us now. it is a stunning essay of what we become, not biden, trump, obama, but the entire 10 years or 15 years. how bureaucratic is your washington? emily: washington, to a certain extent, has always been bureaucratic. i think the point that was made in the op-ed was something you are not going to just see now but potentially could come up again and again and again in the following month and years as congress investigates what went wrong.

you are seeing committees led by democrats come out with tough criticism for the biden administration on their withdrawal, saying they want to get to the bottom of what happened. why was this so rocky? why are american citizens struggling to get out? why are those afghans who helped the u.s. struggling to get out? there are a lot of questions, and if republicans take the house next year, which there is a real chance they do in 2022, you can expect to potentially see more investigation into this. tom: what does a post-afghanistan world look like? emily: i think going forward, there are still questions on how exactly things shake out. the biden administration is trying to pivot focus to their current mission of getting americans out of the country and getting as many afghani's who helped the u.s. out of the country. that is what they are focused on. we expect biden to address later today with his remarks at 1:00

p.m., but there are many questions on how this bodes. right now we are in the middle of the story of the u.s. withdrawing, and i think there are a lot of questions about what happens with the tal-led afghanistan, what does that look like? right now they are marching this pr campaign saying they will be heard women and it will not be like before, but there is a lot of skepticism that those things will come to pass. lisa: also a question of how this is received internationally trickled back to domestic policy at a time when the delta variant is front and center. i want to have you weigh in on this, labor secretary marty walsh saying some states could reinstate enhanced unemployment aid as a result of the delta variant and ongoing pandemic. what are we hearing about how much the federal government will push that? emily: right now, the federal government, that enhanced aid for everyone is expected to run out around labor day, and there is a question on whether or not the white house may say we need to move this forward.

if they do, how soon do you need to implement that? the house is coming back next week but only for a week. the house is supposed to be out until mid-september, so if they want to move on this, they need to move quickly if they need to expand it because there isn't a lot of time. you do not want to have something like what occurred with eviction moratorium were at the last minute, the white house was like, congress, you need to do something, and it turned out, kratz did not have the votes to get it through the house or senate. there was a week of hot potato, bad press and then the white house finally moving forward. that is expected to be struck down in a lawsuit at some point. kailey: you mentioned 2022 earlier, and what is going to inform voter's opinions when they had to the pulse were the midterms? is it politics or things that are prioritized by the american populace?

emily: that is such a great question. it comes to the delta variant, a couple of months ago, we were not talking about the delta variant, we were talking about the end of the pandemic and how people were getting vaccinated. what the delta variant reminded us is we really do not know what this pandemic will look like at the end of this year, start next year, we are in november of 2022. it could play a major role with the election and there is a discussion about how democrats handle this. that is why when you look at democrats in congress, the are focused on this structure plan and reconciliation, it includes childcare, eldercare, the expansion of medicare, because they think that will resound with constituents and those are the things that will help them win reelection is next november. tom: emily wilkins, thank you. on bloomberg radio, television and the markets, we are looking at a little bit of weight and beginning to shape a fed policy of a sort of kind of like virtual jackson hole.

what is it, lisa? lisa: it is a hybrid model, a semblance of what we experience fall when everybody goes back to what is supposed to be in person but i expect will be hybrid and editorialized. the theme of this conference is economic policy in an uneven economy. if they are talking about the uneven wealth distribution, job recovery, how are they going to talk about fed policy with respect to that where their policies are propping up the upper tears in terms of wealth -- upper tiers in terms of wealth distribution? if this is the theme of their conference, how are they going to address this and look inward in terms of their role in this dynamic? tom: it is exactly right to get this started with trails evans out chicago with an important conference two years ago, to make a joke to be liked, a more sensitive fed. i do agree with you. i think we are going to see a

lot of that at jackson hole. i don't think anybody will be listening because they are worried about tapering. people think it could be a nonevent. lisa: i think a lot of people think it will be a nonevent. i wonder if jay powell will indicate a delay. if he comes out and says, we are not going to taper for as long as the shutdowns persist or he indicates we are far away from substantial further progress, that will move markets. tom: an incredibly important note to make, folks, this will be somewhere south of new york next friday. like a pre-party for certain wedding. i think 700 scheduled to attend. there will be television monitors there friday morning for the power will speak. kailey, you will have those lined up for your soiree. kailey: 100% so. my wedding weekend will be at jackson hole. tom: that is what we like to say. lisa: the most romantic thing i

can think of. tom: kailey, honeymoon to jackson hole. kailey: so romantic. lisa: jackson hole? [laughter] tom: it will be just spectacular. lisa: marital bliss. tom: this is bloomberg. ♪

tom: bloomberg surveillance. morning. futures at negative. the vix 22.90, somewhat like yesterday, some gloom there, and a bit here at 7:30 wall street time. the yield space a 1.23 on the 10 year yield. dollar stronger, and i do want to note overnight repo goes out to 1.9 trillion. that wall of liquidity. we will talk to gabriela santos about this in a moment. right now, as gabriela puts in a research note, there's china and that is where romaine bostick starts. romaine: that selloff has been going on in china stocks and the u.s., to unabated at this point.

they closed about 49% down from that all-time high yesterday. you talk about alibaba, all moving lower. the asia-pacific index on track for its worst week going back to february, and the etf on peace right now for what could be its worst week since its conception going back to 2013. that regulatory overhang is not clearing, lower by 1.7% in the premarket. adrs down about 1%. keep an eye on the vaccine makers. moderna moving in the wrong direction. "a washington post" breaks concerns about a heart risk with the vaccines, and the cdc finally signing off on biden's booster shot authorization. flip the board to earnings, one of the bright spots in the premarket, shares have been moving higher for the company. of course, they are benefiting on the back of a lot of that and prices we saw earlier this year.

you still have farm equipment out there in the u.s., as well as in latin america, and deer has been writing that wave. tom, pay attention, jason had a great spack. he was supposed to buy assets but instead bought a baseball card company called topps. i was announced in april. , be decided to and its 70 year partnership with topps to give the deals of fanatics. pretty bad timing for that deal and it is complete. tom: what about ackman? romaine: tom, you ponied up almost $4 billion, so going to the fact that bill said earlier this year, of course there was trouble getting it off the ground and finding a big deal for it, last night he came out with a letter and said, take your money back, tom. right now, where you are looking

on your screen, below that $20 offset price from 1975, the close below that yesterday. in addition to asking for money back, he said he is not abandoning the idea. tom: did you age last night? romaine: did i age? tom: did you age last night ordering school supplies? romaine: i did not know where this was going. have you been in a car yet and tried to buy anything and target, probably someone else in your house who goes the real work. tom: romaine bostick, thank you. on bloomberg radio, this played so well, i went into the closet this morning. my closet with my suits in the west wing, lisa, it is a good 30 feet long. they say blue is the only way to go, and i, indian, and lisa has got the blue thing -- to go, and i say lisa has the blue thing going, kailey has the blue thing

going, and find a guest in blue, gabriel assigned his joins us in jp morgan blue -- gabriela santos joins us now in jp morgan blue. thank you for joining us on a blue friday. one of the things you talk about is the drawdown. you say, and particularly with china, drawdowns are normal. we should not be afraid of the ferro drawdown. gabriela: this drawdown we are seeing in china is business as usual for investing in chinese equities. every year you should expect a 20% annual correction, and every three years or so, you tend to have an over correction. we had it in 2018, 2015, 2011, unrelated to the economic cycles but related to china's regulatory and reform campaigns that tend to happen every once in a while. it takes time to rebuild confidence, but three months

out, chinese equity is up 10%. in six months out, they tend to be up 20% during these moments. lisa: are you saying it is a good time to go buy chinese equities? gabriela: we fundamentally disagree with the thesis that china is now on investable. that is not -- un-investable. that is not what we are speaking to clients about or hearing from institutional clients. it is about building a strategic allocation to chinese onshore equities and bonds. to me, that is one of the most important themes of the next decade, the rise of china and portfolios. it is about navigating these moments of volatility and thinking carefully about how to invest in china rather than going towards an existential crisis every time we get these drawdowns. in fact, it is what one of your guests, the ceo of the region sovereign wealth fund said on

wednesday, not rethinking long-term allocations and chinese onshore equity. lisa: let's talk about how to invest in china, especially at a time when you have some crosscurrents, regulatory uncertainty around shipping priorities of the executive leadership in china, the slowdown we are experiencing, as well as the covid policy stricter in places like the united states. how do you parse through the noise and figure out how to allocate at a time of incredible uncertainty? gabriela: the noise is so high. the volume is extremely high. the trick is not to take each thing china says or does as an independent development. it is all a piece of a bigger puzzle. what is that puzzle? all about this new phase of chinese development, moving into a high income country over the last five, 10 years, and it really once to shift from the

quantity to the quality of growth. everything and has done the past few months is aligned with that long-term plan. and quality is growth focused on innovation. innovation is not internet and social media but deep technology and removable energy, and it is also quality in the life for customers. kailey: you talked about renewable energy. china is trying to reach carbon neutrality by 2060 with p carbon emissions by 2020 -- with peak carbon emissions by 2030. when you talk about a growth trajectory powered by the industrial economy, how do they do that? gabriela: an example of how we tend to think about china being very difficult from that perspective, and it is starting from further behind in other countries, this is an example of china moving in the right direction. china is serious about this

energy transition because it is focused on reducing pollution and improving the quality of life for people. this is going involve a lot of carrots in terms of developing its domestic renewable energy market, solar wind, boosting easy auto sales, and this is just the beginning. and it involves china launching an emissions trading theme to put a price on carbon and increase the cost for heavy industry. it is all about that transition tire quality growth and navigating the winners and losers in that space. lisa: we have seen this in commodities, and when you look at iron and futures in singapore, they are trying to pull back on field production. but, also, the other side is the growth concerns that lisa was alluding to. i wonder how you think about pboc policy and a decelerating china. gabriela: one quick comment on

the commodities. yes, they are losers, some of those heavy metal yields, but they are also winners, copper, for example, which is a huge product into the noble energy and electric vehicles. and in terms of policy, i think the way to see that, china, every time it has a growth slowed down, it is going to step on the accelerator less unless. so, unlike, china five years ago, it is very targeted easing. maybe a reserve requirement cut or two. it is very targeted towards credit and high-end manufacturing and private industry. it is not that old china. tom: gabriela santos, thank you. in china, so much optimism within aferro like drawdown. lisa abramowicz, i want to highlight the conversation we had earlier this week with jp morgan. i thought it was brilliant on the optimism of applied

technology in the coming 10 years. lisa: this idea we have not seen productivity really gain in terms of adding to growth in the united states and adding to wage increases, which really fuels positive and good inflation, saying that could change because of technological advances and using that as a guidepost of how to invest. certainly we have seen a lopsided market recovery and surge in some of these big tech names and others that have adapted well. you to think about how much are we exiting the pandemic with a different economy? this is one of the questions, a sickly, what is the post-pandemic norm and how much are we fast forwarding to a more technologically advanced time? tom: kailey, it speaks to the society that can be benefited by technology versus how many others left behind. again, the theme at jackson hole. kailey: it seems for elon musk and tesla, as well, yesterday. he was talking about humanoid

robots. he had someone announced the robotic movement but his point is we are heading toward a future where humans are going to have to do the mundane kind of taxing everyday tasks. we are going to have savino's to do it. tom: i am not there. i have heard this for like 30 years, kailey. kailey: you are not where? tom: robots. i have heard robots are going to take over since, what, 1975, i am guessing? robots taking over. lisa: doctor who. kailey: robot invasion. tom: thank you, al, for watching, he says, next year, a robot coming from you. thank you. lisa: that will be fun. tom: thank you. the markets are better than an hour ago. on a friday, stay with us, important conversations to set up at the end of august and onto september. this is bloomberg. good morning. laura: with first word news, i

am laura wright, the biggest tax hike on wealthy americans since 1993 is bogged down in congress. they are almost certain to miss that deadline for coming up with details. the problem is lawmakers do not know how big president biden spending package will be and lawmakers have different ideas about which attacks just to enact. i defeat in court for the biden administration on immigration. a federal appeals court told the government to reinstate the trump-era policy requiring asylum-seekers to wait in mexico while applications are processed. the biden administration had allowed them to wait in the u.s. the case is likely to end up in the supreme court. in texas, a setback for governor greg abbott as he suspends mask mandates. this statement supreme court has given local school officials temporary permission to require students to wear mask. advocates said it should be a matter of personal spots ability and not a government mandate.

the world's largest auto factory is being hit by the global semiconductor shortage. they will only offer an early shift following the summary because it cannot get enough of the chips. meanwhile, the audi brand is extending up one week as its two factories -- at its two factories in germany. deere raised its two your fiscal outlook. there has been demand for new equipment and there is a precedent that the ceo ones a massive price of steel prices could slow down the selling of tractors. global news, 24 hours a day, on-air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am laura wright. this is bloomberg. ♪

>> we need to just be true to our mandate, which is to say are inflation pressures arising, are

we above maximum sustainable employment, and should we be back more than neutral interest rate? what would change that view? you would have to see a significant shot to demand. tom: adrian orr, governor of the reserve bank of new zealand, of central bank great importance, particularly in the discussion of inflation targeting the leaders of research for decades and decades. governor orr in new zealand providing the messaging, given the delta variant. we welcome all of you on bloomberg radio and bloomberg television, particularly enjoying lisa abramowicz and kailey leinz. jonathan ferro off today. it is a friday, and everybody got the memo. lisa: yep. kailey: it just gets better and better. tom: ira jersey joins us from "bloomberg intelligence." on radio, it is teal, teal, and

teal. blue is the theme today as we think ira jersey for his wisdom. overnight repo, all sorts of stuff will be written friday afternoon in the press about overnight repo going to 1 trillion and now up that 1.1 trillion this morning. that overnight trust money grows and grows. why should we not be worried about that all of liquidity -- that wall of liquidity? ira: it should not be a worry, but it shows, importantly, that there is plenty of cash in the system. in fact, were cashed in investors and banks know what to do with. -- more cash than investors and banks know what to do with. it is one of the reasons the federal reserve continues to create this cash in terms of asset purchases. it is one of the reasons i think jay powell will talk about some of the reasons why it might be time to pull back asset purchases. we have been pretty firm we

thought it would start at the end of this year and in large part because we are going to see 1.3, one .4, 1.5 billion dollars -- 1.4, 1.5 billion dollars in terms of the asset repo. tom: if they put it on the asset market, that is price down, yelled up. is our experience that that is a manageable reaction function for glide path? ira: this is going to be significantly different than what happened in 2013. you probably will not have the tantrum. for one thing, you're 75 basis points off of the lows and 60 basis points higher in terms of 10-year yield from where we were at the beginning of the year. we have already done part of the work. the other question is, in the market reaction function might be different this time, and that we have an idea that you might get a bad outcome and some volatility and risk assets. for example, my colleague who you know well, gina martin adams, is worried that as the

fed tapers, equity markets might start to have some problems continuing to rally. that will probably be a little bit of a risk off move and benefit treasury yields. i do think treasury yields would be higher, but they are not going to go 100 basis points higher this time on taper. it is more like 30 basis points to 50 basis points, so manageable with sub two your percent tenure yields -- 2% tenure -- 10-year yields. lisa: there with me on this friday of teal to be a bit nerdy, if a federal reserve taper ends up with yields where they are now, and i am talking 10-year yields, and in the recent pronouncements, typically what we have seen is longer-term yield go down. if that is the trend, why would risk assets sell off if a lot of people justified low yields for the reason they are buying riskier security? ira: that is a good question, lisa, but a big question mark

is how far will the fed ? right now they -- fred go f --ed fed go? i think there is expectation on them changing as you get further into 2022, and as those expectations of how far the fed can go because the economy may be is doing pretty well, through delta and people learn how to live with having an end and make instead of a pandemic -- an endemic instead of a pandemic, and then we wind up with a situation where growth and inflation can be more sustainable and closer to decent levels. that is when people start to think about maybe the fed not hiking to 1.25% by 2% and that is when you see higher treasury yields. but we are not there yet. there is a timing aspect of this. as any central bank and an economist will tell you, there is a lot of uncertainty around

that at the moment. will we be able to sustain reasonable growth on a forward basis and allow it to be higher without dampening demand. kailey: i want to build on the rates stay low, and i referenced this a few times, but our colleague put a piece out about how it is not going away because of low rates but another issue alluded to his china and if you are worried about a slowdown in chinese growth on the ripple effects that could have across the world, what you are going to do is buy treasuries per how do you think about the foreign buying and that -- treasuries.how do you think about the foreign buying in that? ira: we have seen a turnaround. foreign demand, and general for foreign securities, stopped for five years. foreigners right now used to own almost half of the treasury market, and now they own less than 35%. but that has turned around quite a bit in june, in particular,

and you see private investors coming back to the market. that is that risk off flows that you have seen. i think you probably saw that in the 10 year auction a couple of years ago where you had unprecedented demand from indirect bidders as end-users of treasuries, and they bought 70%, which we had never seen that before as far as the data we have going back about 20 odd years. we will get that data on monday as to whether or not that was foreigners or domestic investment funds, and then the big buyer. but, yeah, i think when you have risk off and a smaller scale economy in china, you will see excess demand end up in treasuries. tom: ira jersey, thank you, bloomberg intelligence, chief interest rate strategist. lisa, it goes to the options and supply that may or may not come on. a lot of people painted on supply not coming on and be diminished. lisa: the treasury department will reduce issuance of coupon

security in the upcoming months. basically what you have here is you have got less supply, less securities for sale and a federal reserve on hold with $120 billion. tom: so yield down. lisa: correct. fantastic, tom. kailey, it was almost worthy. kailey: this is going to be one of the most interesting dynamics going forward. we talk about steve manger, who has been firm in his 1% call on treasuries, that is his point, even if we get the fed taper, it will be offset by the fact that the treasury will not issue as much supply. it is an interesting dynamic to keep an eye on, especially toward november when they might pull back on those issues. tom: it is an interesting friday show. i look at this and it is the pendulum of blue-ribbon blue -- bluer than blue, the late michael johnson's wonderful song, on radio, it is a sight to behold. everybody is bluer than blue,

satyr them -- sadder than sad. ferro leaving his sourcing ever had. lisa: sing, go on. tom: i am blue, drawdown blue. kailey -- kailey: this is bloomberg. ♪

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>> the economy will continue to not boom but really be quiet expensive and strong. >> we are not going to have what we think of as a normal cycle but see a steady growth in the economy. >> consumer still see a strong economy but are less excited to participate in it. >> it is not so much about the inflation but what the fed does about it. >> for the last year, it has always been employment, employment, employment. >> this is "bloomberg surveillance," with tom keene, jonathan ferro, and lisa abramowicz. lisa: a blue friday and down