>> stocks and bonds both under pressure, investors repricing what the federal reserve might do for the rest of the year. bloomberg markets starts now. ♪ kriti: sell the news, that is what is happening right now. down .6% on the s&p 500 but not the stock market alone. the two-year yields, we are looking at 4.11 when it comes to rising prices. looking at the 5% terminal rate,

if we get there, what happens today? and the seven basis point move on the curve. pushing the dollar higher on the session, some of the gains are apparent, flat on the session but wondering as we finish the trading day ahead. even with the stronger dollar, you want a little bit of a rally in oil. $90 on brent crude, .9% on brent crude. not a ton but still something to keep an eye on. a picture of what the federal reserve will do into year-end. and dissecting across the globe, especially from the federal reserve as chair jay powell delivered a hawkish but determined message in the market. >> we just moved probably into the lowest levels of what might be restrictive. in my view, and the view of the committee, there is a ways to go. we have got to get inflation behind us. i wish there were a painless way. there is not.

the fomc is strongly resolved to bring inflation down to 2% and we will keep added until the job is done. --at it until the job is done. kriti: the traditional action off of the federal reserve meeting -- yesterday, not so much, today not so much. joining me to discuss, what is going on? jess: another ugly day in equity markets and looking at the technology sector, discretionary shares and investors, following the selloff after the fed moved. but this is not even just the fed. really trying to divest -- digest what is happening. it has been over 500 moves by local banks right now. traders are really trying to plan. even looking at the dot plot yesterday, it did not look like they were anticipating rate cuts until 2024.

but it looks like investors are still adding on the fed potentially cutting rates in the second half of next year. but there is a divergence between what the federal reserve saying. kriti: what is interesting is yes we have this deepening dot plot, but it almost feels like what you are going to see in november, it was supposed to taper off. 75 to 100 in november, two a consensus of 50 in november. do think the extra 25 priced into the market has shaken the core of some equity investors? jess: it is and along with that is the steepest moves in treasury yields, looking at the 10 year and the two-year and how that impacts technology and growth companies, especially when you are looking at the projection for forward earnings and how that affects stock prices ultimately. that is another big weight and especially if you are weighing on the technology stocks since the middle of august. we are in the worst time of the

year seasonality-wise for the stock market, but along the back half of the month of september. have to gear up for the third quarter. you are looking at the s&p 500, it is giving up all its gains for the quarter. we did see that especially in july, but now heading into the final week of the quarter, they will have to see how they will position into the final months of the year. kriti: just mentioned -- jess menton, thank you. let's bring in michelle meyer's, mastercard institute u.s. chief economist. let's pick up where jess left off. the concept of 75 basis points is now penciled in into november. how big a difference does that make from the consensus? michelle: it is less about what is happening in the next meeting and more about the past.

that is taken from powell's comments yesterday and his resolve to fight inflation. and the realization it is going to take a lot of work. we are still in an economy that is coming along. we've got the jobless claims this morning at these levels, job growth is continuing and the consumer, while certainly we are looking at high inflation and higher interest rates, they are navigating it and it will take a lot to cool down the economy and bring down inflation. kriti: part of the announcement i want to say is this gdp. you saw a decline when it came to what they were actually seeing. what kind of timeline are we looking at? michelle: there is a lot of big bend because of q2 and analyst basis. some of that has to do with the inventory cycle. it is great to add in q1, q2 is

more a function of the decline in things like residential investment. that is continuing. part of the economy is already adjusting in a meaningful way and housing is front and center there. the more good side of the economy a little more strapped on the results of higher interest rates. but it is that path forward, what the fed is assuming for next year that was interesting to me was assuming below trend growth. not a contraction, but certainly an economy that has to blue -- grow below the trend for a period of time to reduce inflation and they are saying that is acceptable and expected given their commitment to bring down inflation. kriti: you brought in a key factor, the housing market. it is something powell spoke about in his press conference. what is interesting to me is the last time. when the housing market does start cool down, it is not flooded until eight to 12 months later. you are seeing from the high-frequency data some pockets

and urban areas where the cooling period is starting, but how is the federal reserve positioned for that when they don't have the visibility down the road? michelle: they are starting to see that. home sales peaked at the beginning of the year. we have been seeing a steady drop in home sales in terms of volume. when you look at the builder community, they are starting to cut back. look at the building data we had for single family homes, reacting on the buy side as well. and you do have that moderation in home price growth, potentially outright on home prices in areas where you have the most amount of over valuation. i think to some extent that is already playing out and is somewhat for castable. what is more challenging for the fed and what they are trying to get a handle on is the spillover. when you have that downturn in the housing market but it is not fueled by the credit excesses or foreclosures as we have seen,

how does that filter through the broader economy? what does it do to housing related spending and the workforce? how do people respond to challenge -- changes in their balance sheet if they are seeing that loss in housing? that. but the idea that housing is slowing in a meaningful way is to be expected in some way and how they are transmitting that monetary policy to the economy. kriti: let's talk about the bond market, the front end of the curve catching attention. major selloff, 4.11 on the two year yield. does that mean there is indication the terminal rate might be at 5%? michelle: before, bloomberg economics was suggesting that a lot of market participants are sorting to price that in. if you look at what the fed has said, they are saying it is heading higher. a pretty significant revision in

the path of the funds rate and the terminal rate from this meeting relative to the june fomc meeting. yeah, at the end of the day it is going to be a function of when do you start to see the cracks develop in the economy when it feels like they have done enough and they are not showing yet. which means continuing to move on, move ahead and try to adjust monetary policy, normalize this if necessary in order to get the rebalancing. kriti: michelle meyer, mastercard economics institute u.s. chief economist, you are great to have on the show. let's go to the first word news with mark crumpton. mark: protests continue in iran as unrest crosses the country. at least 17 people have died since demonstrations began last month following the death of a 22-year-old woman who fell into a, after to ron -- coma after a

tehran force had an issue with dress code. ireland trying to settle the dispute over northern ireland. the minister last weekend tells bloomberg television they see the possibility of getting it done ahead of the 25th anniversary of the good friday agreement. >> what i detect is a renewed sense of determination on all sides to get this issue resolved once and for all. there is a more immediate deadline in october in terms of the restoration of the executives and assembly, which is critical to the sustainability and the agreement itself. mark: the irish prime minister

was referring to the northern irish protocol, the part of the force that keeps the region in the european union and provides checks on goods coming from the rest of the u.k.. the south korean president was overheard insulting american lawmakers after a meeting in new york city with president biden. the video broadcast on south korean television used fuel sent to the foreign minister, quote, and embarrassment if these idiots refused to grant congress. they met to discuss issues including u.s. electric vehicle subsidies and south korea wants change. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. ♪

kriti: this is bloomberg markets, i'm could gupta -- kriti gupta. the weakness of the boj bucking the global central bank trend, with ultra low interest rates. joining us now to explain, this

is a historic moment when it comes to the boj. but i want to go back to 1998. that was a time when it was a coordinated effort with u.s. treasury, european authorities. this time, not so much. how sustainable is it? liz: that is the question. we have been talking to folks all morning and the answer is people feel like that ministry of finance won the battle but not the war. they whacked down the dollar but as far as ending the sustained dollar strength, it does not seem ugly. we don't see any coming into the fed, like you were talking about yesterday, the treasury department is not going to go against that. it seems like they may have taken some heat off of the weakness but it does not seem

like it will be sustainable until the macro fundamentals will change. kriti: we are looking at a 1.42 spot to five -- 25 on the right now. in terms of how effective it actually is, you said it is a temporary solution but in terms of how effective, how much of a difference does it make? liz: it make some difference. it kind of creates a two way market on a one-week train of dollar strength. some of it does include analysis to say there is also a lot more reserved to the ministry of finance, maybe they can go a little longer. some people may need to -- u.s. markets are pricing about where it is. next year they get to 4.6, the market is there but maybe they

can ride it out. the fed hiking is over but i'm not sure that is true. we don't know exactly what is going to happen. i think they might be able to sustain getting in their and like 150, they just don't want it to go there. but the u.s. inflation numbers are coming out next month for the new meeting, so it is hot. all bets are off. more hawkish and us for the fed. they had the curve control so they are going in different directions and it is harder to work with that with what is going on in the background. kriti: i'm going to put you on the spot, there is a trade in the market especially on hedge funds, you are short at the end and bet on the fact that the boj will rescue you. will that work in the long term? liz: i don't bet on any central

banks rescuing anymore. that is the old era. people would come in and i don't think that myself. not that i am the head. i would lean against it. kriti: bloomberg's liz mccormick always great, i put her on the spot. we thank you for your insight. optimism, a potential deal. what we hear from the financer next. this is bloomberg. ♪

kriti: this is bloomberg markets. i'm kriti gupta. something we don't talk about when it comes to inflation, egypt. this is a chart of egyptian inflation. we look at that in the white line. and the deposit rate. today is significant because we know there was an egyptian rate decision. this is coming at a time when

egypt is dealing with a food crisis in a way a lot of other countries have managed to get around, the grain story, the wheat story coming off the war in ukraine. one of the biggest customers for russia and ukraine when it comes to the grain story. then on the current impact, there is a lot to digest. i spoke to the ministry of finance about the impact of a weakening egyptian pound. let's take a listen. >> it is between two. much this year, one is 16.6 the egyptian pound. when we finished the financial year on june, the exchange rate was 16. we have on our government about

$82 billion in foreign debt. so each exchange and currency it would have an impact. and we always mention 87.2. in his a reflection of the exchange rate. without it, it should be 83.2. so yes it will pay back. >> are you saying currency devaluation is on the agenda? mohamed: -- it was one dollar, but now it is 19.5. so there is some. kriti: but the dollar is continuing to rise, that seems to be the consensus. mohamed: most international

currencies in addition. kriti: so it is fair to assume the egyptian pound will weaken? mohamed: i am not sure about it. we have experience in 2016 when we thought it was imf. it went to a very different pound, but the market at this time -- but it is down to 15.6. i cannot talk about how the market will go but this is a time when everything is inflation, accommodating prices and such situations in the capital markets, europe, the

money coming from emerging markets. kriti: certainly inflating the emerging-market base. you are in deals or in talks getting closer to a deal with them. walk us through a time when you are expecting to get that deal. mohamed: we hope one to two months we can finish with imf. kriti: and for side -- the size of the deal? mohamed: not yet. kriti: a range? mohamed: i cannot. it is a negotiation which can determine how much. hopefully it can be not exacting. kriti: one big thing the imf has on their agenda, rising food prices. egypt has had that going on with the war in ukraine. i believe they have talked about

hedging weed crisis, that is still something the countries planning on doing. mohamed: we did hedging before, but currently, prices are very expensive. we have to wait, but hedging is one of hours for volume and others. kriti: what are you looking at when you look at wheat price touching? mohamed: when it exceeded $500, the prices were very expensive. so we examined wheat prices coming back to mostly $100. but in his not because for hedging. which can support us to go for such a decision. kriti: what would be the catalyst? what are you waiting to see? mohamed: as i said, prices.

it would be critical to decide. prices, he would not think it would be a good decision. kriti: what is the point hedging that higher prices, if they come down to reasonable prices what is the point of hedging? mohamed: if you think about the costs and the price of wheat, it would be very expensive. as you can see, volatility is hard. sometimes you have to make the decision either to take the risk or not. with this high cost of wheat, the decision is to take the risk until the cost of the hedging risk. kriti: egypt finance minister mohamed maait.

some breaking news, the federal reverse repo facility climb into a record $2.36 trillion. now hitting that key record. we have more markets ahead, the s&p 500 stays in the red. this is bloomberg.. ♪

mark: welcome, this is first word news. u.s. secretary of state antennae lincoln is calling on the yuan security council members to send a clear message to russia that it must stop its nuclear threats in the war on ukraine. vladimir putin said earlier this week his country will use all means available to defend itself. addressing the security council, secretary blinken criticized russia's invasion of ukraine and urged other countries to join the u.s. in resolving the conflict. in puerto rico, officials are struggling to reach hundreds of

people that are stranded by hurricane fiona. the storms smashed roads and bridges and caused historic flooding. more than 60% of puerto rico's residents are without power. the hurricane is now on track to hit bermuda before driving toward atlantic canada. hong kong doesn't expect to return to zero covid 19 cases. they have some of the strictest quarantine policies. the daily trend is going downward in hong kong is looking to relax its covid. the true freedom moment --

movement will begin saturday. if convicted, he could face up to six months in prison after being ousted in april. he has been drawing massive routes at rallies as he demands early elections. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton this is , bloomberg. jon: welcome to bloomberg markets. kriti: stocks are in the red. investors are repressing what the fed will do in the months ahead in the as an e 500 is down

but it's not just stocks and bonds. the two year yield has a move about five basis points higher. the dollar index is not doing anything right now. it was higher earlier. brent crude is a 90 handle, only up 1%, and anomaly. jon: in terms of stocks, if you need another example of how in laois and is fighting the bottom line, companies like darden, those shares have been under pressure. companies that can give a bold outlook for their own margins seem to be faring relatively well. investors are looking for best in breed soap eli lily has been a standout. that name got a nod within the sector and we continue to track robinhood shares which came up to early highs today which were

fueled by the bloomberg scoop and we will get more on that story a little later this half hour. kriti: earlier, bloomberg spoke with the wells fargo security managing director, take a listen to his take on rates. >> 2% plus with real yields that we saw years ago are probably out of downs. talking to investors who have a longer duration and typically focus on longer maturities, they been scaling in and adding to their duration positions and saying maybe this and's -- this isn't the absolute top but maybe it's a good level. they will not go skyrocketing. jon: let's keep the conversation going with michael mckee. a busy central bank week beyond the fed. let's start with the bank of england. with a key move in an indication more moves to come. michael: the bank of england has

powers the federal reserve doesn't have stuff energy prices are so much higher in their economies so much weaker that they have a kind of balancing act and they balanced it by going 50 basis points today instead of what some would thought would be 75. the inflation rate is forecast to go higher. they said 11% is where they will top out and it had said 13% but now the new government of the new prime minister is putting in an energy relief plan that could cap inflation but could boost growth. that could be an inflation to so they are waiting to figure out what the yellow line is on that. they will have two double where they are right now by middle of next year. kriti: speaking of what investors will do, the 50 basis

point for the bank of england was one price from the november federal reserve meeting an hour looking at more. how much difference does the 25 extra make? michael: you can seat in the currency translation between the bank of england and the that is the dollar continues to get stronger because the fed is doing more and the pound is weaker. it rallied a little bit today but not as much as people thought after the bank of england raise rates so it leaves a currency diversions. that's a problem for so many central banks. jay powell noted yesterday that each bank has its own domestic band-aid and take care of their own economy. when the fed moves, it hurts the rest of the world. you look at where interest rates

are in the markets were way ahead of where the fed was and now the fed is above where the markets were terms of where rates should go so that put you in a position if they need to go further order they need to go faster? there will probably be some arguments of doubt that and they are still pricing in about four .5-4.75%. kriti: the dot plot is pretty fascinating, thank you as always. joining us for more insight is the fixed income portfolio manager at j.p. morgan asset management. we are excited to have you. let's start with what the federal reserve said in terms of the terminal rate. we are seeing's consensus grow of a 5% terminal rate. how much of a difference does

that make to financial markets? >> we've been very focused on the terminal rate and we felt the terminal rate pricing was too low and the guiding light in terms of this is that the fed never stops hiking but the policy rate is still below inflation. right now, the fed does not have a lot to do. one thing i noticed is that none of the members of the bed projected the fed funds rate to get above five. the one thing that federal reserve members have not considered is if the rate comes down and they have to send the fed rate higher? we don't know that yet but we are waiting to see the real policy rate turn before the fed has done enough. jon: the market is also trying to figure out what higher rates mean for the broader economy and try to factor in recession

risks. when you look at the markets now and particularly high yields reds, what do you see that's currently baked into the market models? >> high yields are currently around 500 basis points. given the level of recession risk, we think it's rising in the fed needs to press on with its monastery -- it's monetary policy. look at the equity market. the s&p 500 is approaching the lows of the session and we still have a high-yield market below where they got in the middle of the summer. we are remaining cautious and defensive on high yield. where we find value is staying in deeded high investment grade. kriti: the two year yield

climbing once a given in the call from the two-year to get to 5%. what is the trade in the bond market right now? >> we have been position for higher yields particularly in the front and then we think that will keep going i think it also means more inverted yield curves. you saw the 2 and 10 test that level and we think the inversion in this cycle will be more extreme than previous cycles and you need to look back to the 1970's or 1980's for the type of yield curve inversion that we may see because inflation is much higher. on the other hand, the labor market is still very tight and initial jobless claims caught my eye this morning. they are still very low in the central bank has told us they need to see weakening in the labor market.

kriti: we thank you as always for your time. coming up, a firm is expanding its partnership with amazon and we hear from the firm ceo in an exclusive interview and that conversation is next. this is bloomberg. ♪

kriti: this is bloomberg markets. stocks have been sliding a bit in today's session step they are sitting near levels we haven't seen since back in july. one company announced its expanding its partnership with amazon in canada. we spoke with the firm ceo on

the announcement as out of an exclusive interview. >> it's exciting to bring the firm to the canadian market. there is a a lot of natural overlap and it's a way for us to continue being in north america our partners trust is not just in the u.s. but in other geographies and we want to capitalize on that trust. this is as much a cause for excitement as it is a call for the future. sonali: amazon said you would have exclusivity for certain mental times it was this a further launch into new markets or is this just something that can only be done in certain regions? >> definitely not, we think our

underwriting and capital market relationships scale worldwide. we want to be in as many places as we can step we are investing heavily and it's something to be aware of who we are live in australia. sonali: is that the first big tech company partner with? how much of a market does this create for you in terms of more future customers in the region and does it get a much larger customer for you overall? >> strategy has been very public about how the expansion is going

to wherever largest partners are, where they have significant penetration in the market and bring what we done in the u.s. to other countries. you are right, we do help apple sell a large number of devices. it went from u.s. only to canada is a good point that our partners trust us. jon: a great conversation there. obviously, having a technology first business allows for the international scale. in terms of the regulatory uncertainty, did that play a role in terms of the international expansion? sonali: it's not just a regulatory issue. it's a tough market more generally because we know consumers have been a little

more stretched. there was a report last week in the u.s. that folks need to buy more gas and more groceries on credit more than in the past but it's a large global market and it still expanding. still a product that many banks have adopted and terms of installment loans but you see tech companies like amazon deciding to work with other tech companies. a firm has been under a lot of pressure this year. we did havemax lechvin speaking about no late fees. it's something that could change in the industry. kriti: this comes on the heels of the acquisition of pay right. sonali: they announced that deal

in late 2020. we saw a lot of market turmoil and it spoke to the potential for acquisitions. they want to be cautious but they want to be the wire of choice. it's important because we are seeing what it has done for them step it helps them expand with apple in canada and is now pairing them with amazon canada. where else would they go? they want to build their own financial services so how long to those partnerships or last for? the amazon partnership is explicit in the u.s. from certain amount of time with the firm but how many other terms decide in what kind of competition does that because across the globe? jon: more to watch, great stuff. coming up, the fcc -- the sec will keep their controversial

opinions for order flow deals. this is bloomberg. ♪

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jon: this is bloomberg markets. time now for today's what it's worth. we are focused on total payments which totaled 3.8 billion dollars for all of 2021. in the first quarter of this year, that came to $840 million for options related trades. we reported that the sec will stop short of adding payment for order flow. let's get more on this issue that's often tied to robinhood and retail trade. great scoop today. it is a controversial issue in the world of retail stock trading. walk us through this. >> this issue was brought up by

gensler and the sec and they identified it as something they would look at. this has been a model that allowed retail investors to essentially trade for free through brokerage firms that are allowing these trades free of commission because these brokerage firms are getting payments for orders from the actual trading firms themselves, market makers, citadel securities and intern, that's why the investors don't have to pay commissions on every trade. gensler and the sec have identified this model and said it's something they want to look into. they are concerned with lack of transparency and concerned with the players that have dominated this field and they have looked into the data to see where the money is going and if investors truly are getting the best price for every trade.

kriti: you mentioned some of the names that have to deal with all the profit and the easiest one is robinhood which rose about 8% earlier in the session. i'm curious about the regulatory hurdles that are still left. >> this is a portion of robinhood's revenue. if they were to dam this payment model and robinhood needed to institute a commission to make up for the revenue, that would change the entire incentive. even if it's not and, they will face other hurdles including different ways that execution will be looked at. they will look at various stock trading and how it's the size of the stock trading and on and off flow. gensler will be picking at things that will still impact

payment for order flow but wouldn't remove it entirely. jon: we saw the initial pop in the stock today on your reporting. in terms of what this could ultimately mean as robinhood is likely seeking clarity, what should we be watching? >> we should be watching for the formal proposal from the sec. it will be complicated i'm sure and we will have to look at all of the different ways that the retail model in equities could change. every single player will be impacted by this in some way. how they react to the changes is another question. there are firms that are well-equipped to deal with changes whenever regulations come out but there will be others that are slower to adapt.

we will also wait for a response and some firms a been vocal about how they feel investors are getting the best price for their trade and they want to continue seeing that model continue. kriti: catherine doherty is all over this story. it's crucial when we are talking about alexa robinhood but some of the retail volumes that follow as well. jon: absolutely and the sensitivity of the market in those former high wires, we've seen it as we watch these markets. investors have been very quickly shying away from the rate sensitive names whether it's to the technology universe or other groups in that category. kriti: volatility is not helping the retail space anymore. as we go to bloomberg markets the close, the s&p is down about

half a percentage point and the dollars not doing much of anything. stick with us. this is bloomberg. ♪ pst. girl. you can do better.

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mark: keeping you up-to-date with nusra around the world, here is the first word. u.s. secretary of state antony blinken is calling on every un security council member to send a clear message to russia to stop its nuclear threat on the war in ukraine. vladimir putin said earlier this week is country who use all means available if threatened to defend itself. addressing the un security council, secretary blinken criticized russia's invasion of ukraine and urged other countries to join the u.s. and forcefully condemn the conflict. the hungarian prime ministe