>> bloomberg real yield is brought to you by pimco. jonathan: from new york city, i -- "bloomberg real yield" starts now. coming up, payrolls deliver an upside surprise. chairman powell sticking to script. we begin with the big issue, a solid jobs report. >> 531,000 jobs added in october. >> the job market is continuing to heal. >> strong report overall. >> labor force participation.

>> people are focusing on the demand side. >> we have a supply-side problem. >> how fast can you bring people back in. >> the fed will be patient. >> the fed will wait and argue they need more data. >> they are waiting on a full employment rate. >> let's get the individual reaction to the payroll. >> i think it was a good reports, very solid and big upward revisions, which is consistent with an expanding job market. you tend to get the big revisions when you have a growing job profile. some of the key components like women ticked up a little bit. all and all a solid report.

we are seeing people back to the job market. by next summer and next fall, hitting pre-pandemic levels. george -- jonathan: george, your take. george: the labor market is clearly doing well and we are in recovery. people have pointed toward the participation rate as being a particular weak spot and that is certainly true. from a jobs perspective and most want a job, there are jobs to be had. it is very clear that companies and hirers are looking to add jobs. jonathan: what about you, sir. >> a strong report but unsurprising. we expect it to be strong. a difference between the establishment survey and household survey. payroll numbers were coming week

from the establishment survey. that was going to be resolved with a strong report across the board with payroll improving and net revision. the labor market, very strong right now. if we continue to edge out at this pace, we will be back to pre-covid employment 28 months from the peak pretty look back to 1980 recession, that would be the quickest time back to full employment the peak number of jobs back to 1980. jonathan: it is going to happen quickly. when you look at how the market has responded to this data pushing through the bond market, back at 146. this is what goldman had to say. i would love your response to

it. the report itself says affirm our nation for high-yield but a broader environment of markets we think how aggressive central banks make it with regard to inflation giving -- given the bank of england meeting. kathy: if you're worried central banks were going to fall behind the curve, a concern when we got the mixed information from the bank of england that you would see it statement and not flatten. i think what is happening is a, addition was off and b, overconfidence in the fed. i think that yields are too low across the curve relative to the pace of economic growth that we are expecting in 2022. i think the market reaction is

not indicating some sort of concern that central banks are going to slowly or will go to slowly and let inflation really bubble up. jonathan: george, is that mission accomplished, less reaction in the market based on the payrolls report? george: you can make a very strong statement that what powell hasn't done his avoided the taper tantrum. he has been able to launch that tapering without rattling the market, a huge sign of success. combined with what he said of the last meeting highlighted his ability to finesse the markets to get things moving as it relates to pulling liquidity out of the system and getting the tapering program up and running. he learned the lessons in really executed. you contrast that with what happened in the u.k. earlier this week, we had more of a botched message, and you get to

very divergent stories. the underlying premise is where we get these very powerful moves and bond yields are low compared where fundamentals are eerie the technicals in the fixed income -- are. the technicals in fixed income and the need for yield is still very high. quantitative easing is still in place. tapering is going to come. we have not fully fleshed this out. you get extreme moves. the market is simply recalibrating. the fed threaded the needle in avoided the taper tantrum but they really are trying to recalibrate the bond market in a slow and steady pace. this is just one more step on that road. jonathan: george come in many ways, so far, so good. it was after the bank of england meeting when yields came in

under two in the u.s. by four. the reduction of qe, we talked about it for days. maybe it is mission accomplished. going and the decision, how would the market react? would be offset by what happens with the taper story out of the treasury customer take a look at what he had to say. >> the fed and other central banks are buying and when you get down to 120, eludes lose the will to be long, because -- you lose the will to be long. you start to set shorts again and you are left with fed buying. i think it is the large-scale asset is that are the relentless dynamic in the bond market. you're going to miss that 120 billion in additional purchases. jonathan: you are going to miss that 120 billion in additional purchases.

>> we agree that the path of rate hikes is going to be higher. the point wasn't inflation. in one short term goal, avoid a taper tantrum. it makes it easy. the fed has never been more important and easier to call. they telegraphed everything. it was an unsurprising meeting. but yes we are moving the taper will have an effect on higher yield, certainly assuming inflation stays and an above trend rate, which we think will happen. we think there is a definite misdiagnosis. it is not just covid-delta supply chain issues. there is too much aggregate demand. people are relying too much on the covid supply chain

disruption and not enough on aggregate demand causing too much supply shortages. as long as inflation continues, you pullback taper and rates should be higher. jonathan: kathy, your response. kathy: i think real rates are low relative to where our expectations are for the economy and they will tend to move higher. we are not as concerned about the taper process or even about inflation. we think it will stay high and is sticky for a while. by the second half of next year, we will see deceleration. we will start to see that on the service sector as well once things balance out. this has been a tough period of time in order to try to forecast anything. is it a recession or a significant shut down and reopening? that being said, i think that

the path of least resistance will be higher in yields and particularly in real yields as far as inflation expectations built in at the short and a little high, but as nominal have to rise over time to meet where the economy is going to be. jonathan: george, final word on this. as we look forward in the next week i will get a ton of emails in your inbox about what is for next year. i want to think about where we are another month looking back with the spread on wall street for payrolls was always to 700. the number is great, 531, who on. but it seems we are struggling to get a decent range of the economy. the range of economies never mind chair is wide. a final comment on that. george: the expectation for 2022, we are still in a healthy economy.

job growth remains persistent as we head into 2022. the ongoing deceleration will be the big, long drawn out flatten her and a bear flatten her, so higher yields, flatter curves. excluding a meaningful shock, that is where we are headed, deceleration coming off about the stimulus, proactive activity from policymakers over the last year or so, you start to fade and you start to get closer to what you consider more of a natural rate of growth and unemployment. that is directionally where we think we are headed. jonathan: george bory from all spring. kathy jones from schwab and matt diczok sticking with us. getting ahead on the payrolls

report. that is next. this is bloomberg. ♪

jonathan: i am jonathan ferro. this is "bloomberg real yield." corporate accounting for 70%, volumes falling to 20 billion euros in the strongest week since august. sales pricing 16 billion in two days with j.p. morgan and american express leading the charge. high-yield, rising over 5 billion with pharmaceuticals highlighting the action. michael collins weighed in on the market action and the reaction. this was the quote, although markets seem to have drawn a

conclusion, perhaps to some degrees stemming from the fed chair -- and i caught up with him in this is what he had to say. >> the jobs numbers and the chairman's comments are not the half of it. i think the news from pfizer on the covid side are a game changer. this is the real positive for the supply side of the economy and demand side. jonathan: with us now is matt diczok, cap jones -- kathy jones, and george bory. the jobs report that looks good but not enough to bring the fed it. -- fed in p how good is that? george: look at the equity market -- bring the fed in. how good is that? george: look at the equity

market. bond prices have gone up. there is a goldilocks kind of rally happening across the board . gold is up, oil is up, bonds, stocks are up. credit spreads are tighter. it comes down to the fact that through the fears of central banks over tightening too quickly, that he started to put a new lease of life into the run-up in asset prices if the expectations for yields are moderated and the data looks good. the job market looks petite healthy here the economic drop looks solid. corporate earnings continue to come in. there are good reasons to be optimistic. the only weak spot we would say is you have to watch the quiddity and volatility. measures of volatility in fixed income starting to up. coming off low levels, we are seeing evidence that is anticipation of less liquidity

starting to work its way in. it is not manifesting itself in any meaningful selloff or shift in risk appetite. but you are starting to see some degree of volatility start to notch a little higher and that is something we are watching. jonathan: for my perspective, i was surprised that the move higher we have seen in rates until recently in the front end of the curve didn't lead into risk more broadly. did that surprise you and what did you learn? kathy: i would have thought we would've seen more vol. a tiny amount of spread widening and the high-yield market, but overall, i would agree that the outlook for credits is very good. corporate earnings, corporations flush with cash. risk appetite is very strong from the investor side. everything is great in credit except for the yield.

the yield and spread very low. that set you up for some surprises down the road. at this stage in the game, it is too early to pullback. you have to pick your spots more carefully. jonathan: this conversation is going so well, it might make people nervous. matt: except for that, how was the play, this is lincoln? sure, yields are great. but on risk assets, it is a good environment for risk assets. we want to be careful with the caveat that there is always short-term volatility, but the risk assets are in a very good place. moderate inflation, 2, 3, four, even 5% inflation is fine for equities. we look back to 1920, very little difference, if any, between nominal and real

returns, 2% inflation environment or 2% to 4% inflation environment. there are two big factors driving corporate earnings, there is additional aggregate demand. the inflation we are seeing is a gap we real and nominal growth with inflation filling that gap. there is access demand. to get higher revenues, you don't just need to sell more goods and services, you can increase the price of goods and services. inflation without selling more goods and services will lead to higher nominal revenues and lead to higher earnings. we have aggregate demand and higher prices, selling more at higher prices. this is good for corporate revenues and earnings. the stock market anticipated this. big chains -- change in equities is the earnings component. the stock market sniffed this

out early, faster than us or the forecasters. jonathan: what i'm hearing from you is the credit market is lapping with the equity guys are doing. is that what you just said? matt: as usual, they are having more fun than we are. jonathan: it used to be credit leads equity. what we -- what have we learned on that side? george: what we are seeing out of the credit markets, default are pretty much at zero and over zero the last few months where there has been virtually no corporate defaults. the trend from a corporate credit fundamental perspective is very strong. as kathy mentioned, the valuation in our market is very low. let is where equities takes over and becomes more dominant in the

market because what credit is telling you is we are pretty sanguine. the chances of you getting your money back on time is very high. credit spreads are tight but they are not tightening. we are bobbing along at the bottom. that is one of our key assumptions as we go into next year. the carry trade which is dangerous, seems to be the most likely scenario. that can last a while, that is the way we are thinking about the market and look being to see if defaults are picking up. if all -- if vol goes up, credit spreads could go up. jonathan: they are in china. kathy jones, george bory, matt diczok sticking with us. fed speak, that is next.

this is bloomberg. ♪

jonathan: live from new york city i am jonathan ferro. , this is "bloomberg real yield." time for the final spread. chairman powell, on the calendar. jobless claims and the u.s. bond market will be closed for veterans day on thursday. a consumer sentiment survey out on friday. for the fed speak, anything you need to hear next week? kathy: i think i will -- they will try to reinforce the message that powell sent. we have had a lot of dispersion on opinions on the part of various fed speakers. we have the renomination or maybe not renomination of powell coming up. i think is where the focus will

be is will he be around in a couple of months. jonathan: and reportedly, chairman powell at the white house yesterday. and a report is that the white house is meeting with chairman powell. does chairman pol get a second term. yes or no. kathy: george: george: yes. yes -- kathy: yes. george: yes. matt: yes. jonathan: is tapering tightening her or no? george: yes. kathy: no. matt: yes. jonathan: could we wrap things up with the bank of england. whose fault was it, the messenger or the market? kathy: messenger.

matt: with apologies, the messenger. george: 100% the messenger. jonathan: governor bailey will not be taking your calls. from new york city, great to catch up with all of you. same time, same place. for our audience worldwide. this was "bloomberg real yield." this is a tv. this is bloomberg. ♪

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matt: matt: ritika: president biden

considering a release to increase crude production. the biden administration is very concerned about the prices at the pump. >> on average, gasoline isis will be about $3.05 -- gasoline prices will be $3.05 at the beginning of december. they will do an adjustment and we will see if it will hold. but the biden administration about the price at the pump and people's wallets for natural gas including propane and heating oil, particularly in the northeast. ritika: allies ignored pleas and stop for plans of monthly output of 400,000 barrels a day. it has been compared to a shakespearean drama but this real family drama