taylor: i am taylor riggs in for jonathan ferro treasure -- jonathan ferro. fueling a rebound in junk bonds ahead of the holidays. we begin with the big issue. how hawkish is the hawkish fed? ? looking at a more hawkish fed.

>> it is all about what the fed is going to do. >> short-term economic concerns are picking up. >> what regime are we going into next year? >> there is a prospect of monetary tightening. >> the question is, will the fed be hiking -- will the rates move 5 -- higher? >> we will not get anywhere near an inverted yield curve. >> what is the fed's reaction function? >> joining us now in our -- it is this push and pull in the market that is a big debate. how are you thinking about a

hawkish fed? ? going to see a lot of inflation. we are going to see all that, but it will not be soft. they have to keep washington happy. they will be slow to hike. >> interesting. do you agree? >> the mindset of the market is decided inflationary. this is a complete regime change for the fed. i think the fed is going to respond to the inflation pressures. this is a political thing now. the man and woman on the street see the price levels high. a rate of change inflation may slow, but this is taxing on

americans. i think the fed is front and center. >> i am curious. we had a political conversation. do you hear this from some of the sources that you are speaking to? >> if anything, it makes -- omicron is becoming more of the -- is becoming more of an impact . it is still very high, not so much in the long term. it still remains to be seen, where the fed is at. >> this is interesting. expecting that the omicron

variant will have a lasting impact. it is something -- people are adapting for the impact. that is the call that inflation is running hotter? >> i am actually pretty comfortable. the caseload is high, but when you look elsewhere, it develops very quickly. you are not seeing a lot of hospitalizations. i do not think you are going to see that here. it will be very mild. i think people will be able to get over coronavirus and covid and move on. my concern is how much of consumer spending was speculative because of site --

supply chain issues? we might see a little bit of inventory. we get this buildout. >> i have to laugh because i thought we would not see health experts -- it is 2021 and we are still talking about covid. is it transitory? are they doing the right thing? >> maybe the analog back to september is important. we had a little bit of a scare. this feels a little bit like that. we are looking at omicron hopefully. the u.s. is behind the industrial world and

vaccinations. they actually end up being a good thing. the supply chain is not changing anytime soon. we have at least a 10 month time , but we have juxtaposed difficult supply chain issues with this massive demand. is it permanent? we can simply not meet the consumer demand, which is off the chart right now. we have to remember that the amount of fiscal and monetary stimulus -- it is extraordinary. if inflation did not show up, we would have a real problem. all the other things that are long-term negatives for the economy. inflation is a net positive going forward. >> there has been a big debate.

is it tightening or less easing? we talked about the liquidity out there. how are you looking at a faster taper? >> i think we should have started tapering sooner. when i look at it going forward, i do it as we will see buildup and supply chain. we will see more share. area that have benefited, the people that the asset classes are really benefiting from this money splashing around, i think next year in the stock markets will start a little bit like this past year. the overall market will do one thing i'm looking at a pullback of all those stocks.

i am looking for much more of these quality stocks. >> persistent economic risk, the supply side is more reminiscent of a secular stagnation. this, in turn, prevents the market from aggressively repricing. looking back at this year, the word stagflation started creeping in. it is a dirty word that people do not want to talk about. what are you hearing? >> it is definitely hard to argue. we will hopefully get some better light on that tomorrow.

that is kind of what we were talking about before, pulling forward, so much in anticipation of supply chain issues. definitely in the fourth quarter with the shopping season. definitely supported that thesis, but when we see inflation and spending, it will shed a light on how much inflation is affecting consumer spending. hopefully, we will get a better idea of what we are looking for next year. >> if i told you at the end of this year we would be at 146 on the 10 year, you might have thought i was crazy. is that a fundamental story or is there -- or is there a lot of technicals playing into it? >> it is very much a tech story. they are going to begin sunsetting those purchases. we have had these six and starts

with the covid pandemic moving in. that is what is keeping a lid on it. as the fed began to normalize, you will see some on the long and of the treasury curve. i fully agree. some of these companies with great earnings, margins, great cash flow pushing through higher and higher dividend yields. the ownership side still looks a lot more attractive than the lending side. i still think it will stay overweight. taylor: is that a technical story? james just mentioned a real yield that is -1%? >> it is a mix. there are a lot of people with

30 year trades better. a little bit of fundamentals. we saw this flattening as people started breaking inmate hikes. it will be a policy mistake. let's get back quickly to your question of stagnation. i completely disagree. i believe we are in a paradigm shift. beijing olympics -- the winter olympics is them going back to focus on their own business. we are going to see more and more manufactured in the u.s. you are going to see semiconductor plants. i think we will see high inflation. how we build, who we do business

with -- i disagree that it will be a sign of stagnation. it will be the sign of a different economy. taylor: interesting. to follow up, what do you think of the u.s. versus the rest of the world within the equity market? is it -- does it continue to be the u.s. against everyone else? >> in the bond market, we will continue to do ok. it will not be as aggressive. i actually like foreign stocks. i am trying to pull the trigger. one place that i really wanted to put my money right now is mexico. there is a big shift in production that i see coming. taylor: u.s. versus rest of the world?

>> we are looking more and more towards europe and developed countries outside of the u.s. because of lower valuations. as we look to the income space and look for exposure, it makes a lot of sense for us. taylor: everyone will be sticking with us because next, it is the auction block. corporate issuers are awaiting the new year. that conversation is next. this is bloomberg. ♪

taylor: one of these years, i will be named this, but i don't think they would be happy with me.

it we will get to that in a moment. $61 billion for the first to be a weeks of the month. pricing nearly about $9 million this. marking it as one of the slowest decembers in three years. strong demand for the treasury action 20 year, taking down a record portion. joining us around the table, maybe in person, one of these days. talking about not having a stagflation environment. only 300 and high-yield.

is this adjusted return? >> yes. i think tight yields will do well. i think people will be looking. i think it will be a boring market. as a whole, i am very comfortable. you will not get hurt their. just look for odds and ends that are not picked over already. >> we look at it more agnostic leave. it will do fine.

what corporate capital structure is actually doing, in terms of rewarding shareholders with growing dividends -- some of these are compounding. it is not style boxed it will allow them to generate a compound. we do not have a concern of default risk or massive spread widening. there has been a relative spread. taylor: molly, are you hearing that as well? having to take on some of the extra yield, given how tight the spreads currently are? >> it is hard to get excited

about credit right now. it is priced to reflect everything that is going on. it is so incredibly strong. thinking about how it is strengthening, it makes it easier to get excited about the equity side. taylor: this is a good segue. particularly junk or high-yield, is it equity light or is it a diversifier? what is the role and how are you thinking about that next year? >> when i think about it, i look at it as a replacement for treasury yields. you have to be a little bit of trouble with investment grade bonds. on a high-yield, i agree right

now. i agree with what james just said. probably a little overweight dividend stocks. they are paying decent dividends. that might be more interesting than high-yield leverage, but depending on what you are forced to do, i am more concerned about that area. it is more equity than investment. >> de worry about them acting equity like? >> what is interesting about 2021 is the one market that we have not spoken about is decoupled almost completely. it was a non-correlated anchor for the investment meeting. they have been a terrific asset class from a performance standpoint and diversification

and non-correlation standpoint. i think that is probably a better deployment of fixed assets as a diversifier. taylor: when you say tax-free -- that is not the way to go. everybody will be sticking with us with one more segment still ahead. featuring some local pmi's. that conversation is next. this is bloomberg. ♪

taylor: time to take a look at what is coming up. there will be some economic data on the new home sales and

another round of jobless claims coming up tomorrow. of course, we have those u.s. markets that will be closed for the holiday on friday. hopefully, inventories will be coming next wednesday, followed by china pmi's on thursday. finally, bond markets are closing early on friday because of new year's eve. happy just to get through this year. molly smith is still with me. this year, there were a few curveballs and surprises. what is the biggest risk that you see on the horizon? quest we underestimate how much we will have to spend and how quickly china is wanting to get supply chains to us. that is my theory. taylor: what do you think is the

biggest risk for bond markets next year? quest i always watch deleveraging. they -- i look at what kind of accidents show up. inevitably, they will. we have had some suspicions about where they might be. but i do think that we are looking at value in terms of securities. taylor: what is the biggest risk for bond markets? ? in this global tightening cycle right now. when you are tightening policy and interest rates, it is not really meant to address the supply-side shock. he could have evident -- negative shock, which will not cells -- solve the problem that

we are in. taylor: peter, where do you see the 10 year yield by the end of next year? peter: probably 175. taylor: james? james: i do think we will be on the low end that year. taylor: to still think we are at 147 -- we did not get to 2%. thank you. from new york, that does it for us. this was bloomberg real yield. this is bloomberg. ♪

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mark: u.s. regulators gave

emergency authorization to pfizer's covid-19 bill for people with severe complications, given more treatment offerings to patients. the drug is the first at home medication authorized for covid-19. it is expected to become a potent weapon in battling the virus once production gears up. giving high-risk patients an easy to use treatment they can take from home. president biden says his administration together with labor unions and companies succeeded in averting a holiday season supply chain crisis. >> we brought together business and labor leaders to solve problems. the much predicted crisis didn't occur. packages are moving. gifts are being delivered. shelves are not empty. mark: companies have warned that an