jonathan: bloomberg real yield starts right now. coming up fed officials open to a big move. goldman is forecasting un-inversion. 50 is the new 25. >> they go 50 that's the new hike. >> i don't see what the argument is to not go 50. >> they're going to keep going

50. >> this is inflation around 8% set to pick up closer to 9%. >> inflation is going to be insane for march. >> 40% of the american public has less than $1000 in savings and they rent. >> there is a huge question over how the housing sector responds. >> this is a fed that is in inflation fighting mode. jonathan: joining us now, let's talk about the month. we now expect the fed to raise rates 275 basis points in 2022. they are looking at a 50 basis point move at each meeting.

amanda, what is your reaction? >> it's indicative of the complete volatility we have seen in the market over the past few weeks. our own economists are expecting 50 basis point hikes. things are moving quickly. it's been very volatile. our colleagues are responding to the fed commentary that has been focused on the inflationary backup. >> there setting their cells up for 50 at the next meeting. -- there setting themselves up for 50 at the next meeting. i think it's going to be data-dependent.

they may actually miss the curve. >> when you're in inflation fighting mode, you need to get rates to a level that provide some restraint on the economy. that's the big picture. what's behind the change in the rhetoric from the fed is the need to bring inflation down. jonathan: what is restrictive? what level of rates would be restrictive? >> we need to get well above neutral. the key to understanding with the markets are doing, the market is finally listening to chair powell. he first set us up to tell us we are behind. at the end of the last conference, he said he wanted to get to neutral as soon as possible.

that means they want to get above to -- above 2% very soon. then i think depending on the inflation path in the second half of the year, that will determine whether they need to go restrictive. that's what he said in that same press conference. jonathan: do you think 2% is neutral? >> two and a quarter is a good guess for what neutral is. at the same level as what we think potential growth is in the u.s.. inflation will peak out and come down over the balance of this year. i think we will end up with

inflation lower than where we started. you need to look through the short-term headline. i'm not saying inflation won't be a problem. but you have to look through the near term inflation to get a longer-term neutral. jonathan: the last time we did this, the markets told chair powell where they thought neutral was. wendy think policy becomes restrictive? were talking about massive moves in the rate and the balance sheet reduction. >> we have a long way to go. our economists don't view it as mutually exclusive to announce the balance sheet reduction and may alongside a 50 basis point hike. terminal rate of three and a quarter over the long run, our economists have said something similar for a long-term rate.

there's a lot of policy tightening between now and then in order to get inflation under control. we expect the fed to remain in restrictive policy and rate hiking mode. jonathan: do you see the market pushing back anytime soon? >> it has been resilient. the backdrop while nominal rates have repriced swiftly, you had the backdrop of breakeven inflation going higher. what are rate strategists have emphasized is that it's not so much the inversion and the nominal yield curve that should be concerning in terms of signaling recession risks but watching the real yield curve and that remains upward sloping because the inflation curve is still inverted. that has allowed credit spreads to digest this in a resilient way. the high-yield index is below 400 basis points.

that is not really indicative of recession risk. i think the market understands the fed needs to get inflation under control. jonathan: this is a massive move. earlier this month, we were down in the one 20's in the middle of the session. now we are in the two 30's. that's a massive move. can you reconcile that and doesn't tell you about something -- the work the fed needs to do? >> i think they have work to do. markets have been beating the two drums. you have what the fed's trying to do then the war in ukraine. the one thing we haven't focused

on, jay powell hinted the minutes are a good indication of what the balance sheet reduction is going to look like. i think that's going to have more of an impact on the risk assets than the hikes. once you start with the balance sheet reduction, that's going to impact all risk assets. jonathan: goldman came out earlier this week, took the two-year forecast to 290. next year, curve inversion again. the year after, curve inversion again. amanda, i hate to put you in competition but help me's understand all this. how unprecedented would it be to have credit resilient in the

face of all of that? >> the reasoning for the curve inversion for the next two or three years is that are rate strategists are expecting monetary policy and the fed to remain in restrictive territory. that is reflecting the policy moving. for credit in particular, one of the key fundamental anchors that we have had throughout this time of volatility and fast-moving backdrop has been the exceptional amount of liquidity on corporate balance sheets. we have seen credit metrics and improve substantially. while we do think the peak in credit quality is behind us, we are unquestionably entering this time from a position of strength. people get leverage metrics, coverage metrics, cash on hand, they all tell a similar story.

a large part of this will be determined by corporate capital management philosophies and whether or not they are appropriately conservative if we are entering a time of much slower growth. if we enter a recession, that slower growth backdrop is a real risk for credit especially if it is coupled with persistently high inflation or stagflationary invasion -- environment. we do still of expect defaults for 2022 to remain low. jonathan: coming up, the auction block companies flocking to the investment grade market at a record pace.

that's coming up next. ♪

jonathan: the primary markets smashing initial estimates. investment grade bond sales nearing $200 billion in march. the u.s. junk bond market recording its lowest growth in two years. take a listen to what our guest

had to say this week. >> we are going to see a global stagflation. the depression in russia and ukraine. a number of countries running into debt problems. >> let's go through that piece by piece. a depression in russia in ukraine. massive debt problems in emerging markets. can you run us through the u.s. europe call? can we really get that kind of dynamic? >> our economists are expecting 3% growth in 2022 in the u.s.. the difference that we have held across geographies is that the euro area is more exposed and vulnerable to the risks related

to the ukraine russia war and the geopolitical tensions that could weigh on growth because of the considerations of europe like the dependency on certain commodities. preference from our side on the corporate credit market is to prefer u.s. spreads over european peers. our experts are not expecting the kind of environment that is stagflationary or recessionary. >> i agree with amanda. we are not expecting stagflation. what we have is incredibly strong topline growth in the u.s.. it's very supportive for credit overall. with negative real yield and double digit topline growth, it's supportive for credit. you highlighted in the intro, a

lot of technical headwinds, outflows and high yields that are causing volatility but the fundamentals are very positive. >> i think we are going to see a recession in europe. they will get hit harder by second-order effects. supply chain issues will creep up all over europe. i don't think we see stagflation. that's part of our growth strategy. as we reinvest in energy infrastructure as we rush to get more sustainable energy. i think it's going to be inflationary, but we are going to have the growth to match that. jonathan: to what extent heavy priced -- >> we are waiting to see. we are very optimistic. every time something comes out about possible peace, we react

strongly. anytime a warning comes out about weapons of mass destruction, we seem to shrug it off. yet they have taken step after step that we never thought possible. jonathan: i know you are starting to like high-yield. you aren't alone. >> we seem to have got a year of repricing. current valuations were too compelling to ignore. there is reasonable risk but it feels like a lot is already in the price. do you agree on that statement on credit in america? >> i do. spreads aren't super wide, but yields are the best they've been in a while. there is still a strong energy component. there's a lot of opportunity for high-yield to do very well. i don't think you're going to see a ton of issuance. we may see some m&a activity

again. i'm constructive right now. so much is built in. what people forget is that 6% or 7%, you are getting paid to wait. you don't need a big rally just to get the carry. ethic it's going to do well. -- i think it's going to do well. >> if you listen to what a lot of the issuers in the high-yield market are signaling, it's that they are still focused on maintaining strength and moving back into ig territory. we have held the view for a long time that the most opportunity for balance sheet duration is probably at the high end of the investment grade spectrum not necessarily in the high-yield market. last night, we downgraded our overweight allocation on

high-yield yield to a slight overweight. we are getting a little bit concerned about downside risks to growth and investors focusing more on quality. the peak in credit quality is likely behind us. i think the conservative capital management for high-yield will serve as a tailwind. the kick is for strong outperformance of high-yield versus ig. jonathan: when you think about review cycles, what typically happens? what does performance look like? >> it depends.

from the time in late 2018, there was a lot of focus on late cycle we leveraging risks and large-scale m&a. a big part of it matters on how a lot of the activity is funded for 2020 and 2021, that was pretty conservative so we saw leverage metrics decline. a lot of m&a funded with equity. that's shifting for 2022. the fundamental reaction tends to be somewhat volatile in the sense that if companies are acquiring for growth that could be a good thing. if they are doing it for emanate that could be a positive it depends on what the capital management money set is.

in my view, performance will tend to lead any sort of fundamental metrics that will likely come on a delay. >> i guess i'm a little bit less positive -- i expect we will continue to get headwinds that will keep volatility [indiscernible] i might think more about emerging markets where i think there has been a big -- jonathan: the connection is going back and forth in my air. -- in my ear. coming up, still ahead the final spread the week ahead featuring the payroll report. it's that soon? just around the corner.

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jonathan: coming up next week, the president releasing his budget next monday. a busy week of u.s. economic data. closing out the week with the payrolls report on friday. the estimate so far 480,000. our guests are back with us. the consumer confidence data is terrible. when you read the survey, it's

terrible. what point does that start to damage output? >> i've been looking at housing. the last little bit of economic data has been week. mortgage rates at multiyear highs. i'm really concerned that we have missed the curve entirely and were starting to see some things that have weighed on growth, inflation, and all we are talking about is inflation. jonathan: yet you are interested in high-yield. how much timing this year in basis points? >> 75 more. i think we will see -- >> 2% more in rate hikes. >> 2%. jonathan: when does the fed

peak? >> to handle. >> one handle. >> three. jonathan: pick a year for the first rate cut. >> 2027. >> 2023. >> 2024. jonathan: thank you. this was bloomberg real yield. this is bloomberg television. ♪

>> the united states has struck a deal to help europe replace

russian gas imports. that will lead to additional imports of lng from the u.s.. >> the u.s. together with our international partners, they are going to work to ensure an additional 15 billion cubic meters of liquefied national grass -- lng this year. mark: the aim is to help europe wean itself off of russian gas. this was the first face-to-face meeting for the two nations since tensions erupted two years ago. after the talks, india's foreign minister said ties will contain --