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coming up the fed delivers its final rate hike even though the labor market still red hot. all regional banking stress continues to spread. we begin with the big issue china takes the edge off. >> we beat across the board. >> the employment rate at a multi-decade low. >> job creation, wage a -- wage growth and unemployment rate. >> tight labor market means one thing. >> this is not getting back to the sewing the bond market is expecting, that the fed is hoping for. >> you're looking at a potential downturn in the economy. >> an economy that is trying to avoid a recession. >> what are the fed does not start cutting? >> escalator into the year, the fed will not cut -- as we go later into the year, the fed will not cut. there were not a cut their spanking turmoil. >> this fed is hard to predict.

>> there is no roadmap for where we are at. katie: joining us now a black rock and wells fargo. let's start with you. was that it? have her reach terminal or do you think today's payroll print changes the calculus a bit? >> i thought the likelihood of additional fed rate hikes this year was in the cars. i do not think the markets have it right that we are going to tip over in the economy and see things slow where we start getting a fed rate cuts. that does not happen and inflation stays above the fed target, which seems likely, i see no reason why they may pause in june but -- in the future they may go further. katie: were going to get to the cuts but you come in on this,

you think we would have gone different have you gotten the payrolls print before that a press conference? >> good afternoon. it is great to be here. in terms of your question around would we have gotten a different jerome powell with one data print, no. i think the fed and the markets are very forward-looking and they know one months the data can be revised up or down as we saw this month with previous two must prince getting revised lower. i think the fed signals to us they're going to be on a pause for the next couple of months but the pause is not the same as a pivot. while they have gotten rates higher for longer, that's been a theme we have been talking about, the higher part is here. now we stay or get to the longer part. we stay here for a long time. they do not cut by do not think

today's number it makes a difference. had they known it last week i think it would not have made a difference at all. katie: for a point pause is different from a pivot and one data point does not move the needle. we did hear from bmo capital markets earlier today. he says today's shot -- today's job numbers will keep the fed on hold. we continue to like fading near term rate cut expectations. on that point, perhaps it does not change us from a hike to a cut but what does this mean in how long we could be on hold for? gargi: let's look at a couple of things. today's wage number shows wage pressure remains in economy. where looking at a 4%. that is meaningful.

a lot higher than what the fed would like to see and at the same time what we see in core pce and core cpi data is there is a moderation. we have to acknowledge there has been a moderation but at the same time significantly above the fed target of 2% on core pce. what that means when you take the entirety of those two with unemployment rates being at the lowest since they were in may 1969 that means they can keep rates at current levels until the end of this year. historically all of the hiking cycles have average a pause of about 10 months. could we see about that or maybe shorter than that? perhaps. but at this juncture there is nothing in the data to indicate they are likely to cut from here especially when the job market holds in as well as it does and wages continue to be pretty significantly higher than what

we expect. katie: that is helpful context looking at past hiking cycles. for on pause for 10 months on average that gets us well into 2024. two the idea we could get another hike maybe we did not see the final hike, what do you think it would take you? that we need to see inflation reaccelerate or would it be not coming down quickly enough? brian: if it does not come down quick enough, the job market stay strong and the main think of nothing breaks, i think the market -- they're expecting multiple fed rate cuts this year as the markets are, you are expecting something to break. it could. the time and place of something breaking is an unknown. but if nothing brakes and those other factors continue to chug along i think as you get into late summer we may be talking about additional fed rate hikes to get impatient down to their target levels. katie: more than a few people

have said we start to see things break a little bit at least when it comes to that regional banks. we heard from bill dudley earlier saying there is one main culprit behind the banking turmoil. >> my own personal view is going to be fairly weak because the problems of these banks, not that they made bad loans, the problem they would out with interest rate risk. katie: that was former new york fed president and current a bloomberg opinion, this bill dudley. on that point how much of a tightening impulse is coming from what is happening in regional banks? what do you think that is worth? brian: it is difficult to quantify. credit conditions are becoming tighter. while a lot of the problems that we are seeing are related to the long data maturity of buying, as credit conditions tightening we may see those loans, may see

that credit start to roll over. maybe we are not there yet. you look at the spreads in high-yield market. they do not flash or overly concerned levels. we could get there. that could be the next shoe to drop. the majority bad bad could roll into -- bad that could roll into a credit issue but that is something that could drive this narrative where the fed does have to start cutting rates. katie: a risk we have not talked about is the debt ceiling. i do not like talking about the debt ceiling. it feels like we talk about it every couple of years. it always kind of works out fine in the end. we are less than a month away from the exit date. is this time going to be different? gargi: i do not like talking about it either but here we are again. is this time going to be different? all we know what we

have so far which is president biden is meeting next week. they're going to be two important things. cpi was probably is not going to be the most important thing. i think sloughs are going to be more importantly cpi for once. and then the biden meeting. hard to say if it is going to be different this time are not but i will say the neighbor and near we get to the -- the nearer we get to the x date you see investors move towards quality, fixed income. we have seen that in fixed income flow so far this year. there is buying of duration. because investors want some sort of flight to quality assets and with negative correlations coming back in a fixed income market i think there might be

reason to expect more volatility in the markets the closer we get to that date. anyone's guess as to whether it comes down to the last hour or if this is something that gets pushed out by three months. katie: i got to get your take on that. what is more important next week? cpi or senior loan officer opinion survey, which is pronounced sluice? katie: -- brian: i still go cpi. i think the inflation story is important for the fred. katie: really appreciated both of you taking the time. up next, the auction block will be go into the metaverse to find a surge in high-grade bond sales. that is next. this is really old on bloomberg. -- real yield on bloomberg.

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katie: i'm katie griefeld. time now for the auction block where companies had numerous factors to navigate when considering offerings this week in europe but there is a renewed sense of a caution with weekly sales falling. this comes same time measure of credit risk for european ig rose to the highest level in a month. in u.s. metal lead a surge upon sales. helping to drag the -- weekly total to $30 billion. in high-yield fuel a $5 billion we making it the busiest since early april. they must total has already

surpassed may's total for last year. as a regional bank turmoil continues, says there's a few different red flag she is watching. >> for these to get concerning we need to seek capital stop flowing to parts of the market where it should flow. investment grade bond market is usually consistent with the big freezes and we saw that on the hills of silicon valley bank where the bond market issued zero bonds which was a little bit unnerving but we thought that was much more related to issuers saying we're going to sit on the sidelines. we do not need to step into this mess. we can wait it out and see and a lot of that is because they were proactive last year even amid the market volatility and issuing a lot of bonds and that two way flow is indicative of credit conditions while they tightened, they are not necessarily rolling over it at this point. katie: joining matt brill of

invesco and will smith of alliancebernstein. you focus on high-yield. let's start with the moment we are finally starting to see when it comes to spreads. where back to one 50 basis points on investment grade. for a closing in 500 basis points in high yield specifically. do you think there's more to go when it comes to this whitening? will: we do think there are risk that sprays could continue to widen. we are in this period now, a transition period, of moving from inflation concerns to recession concerns. there is a chance that banking volatility or some other aspect of the economy slowing causes spreads to go wider. overall review sprays as relatively attractive at these levels.

we think things are somewhat balance here. the risk that sprays are probably to the upside. katie: sounds like you're saying entry points are being created here? will: that is fair. if you are longer-term investor it is been pretty rare the last decades to buy high-yields at these levels and investing grade. spreads could be volatile. we think they will be volatile as we deal with a lot of macro uncertainty and issues like the banks we have seen. but for long-term investors we think this is a good entry point. katie: is that you in blue-chip bond market as we start to see a little bit of a selloff? is there more to go here or would you be buying the dip? king charles iii >> i think the technicals are going to remain strong. there has been a chaotic week but overall the trend continues to be for inflows and we think

they are quality spectrum within ig is going to hold in well and actually should be able to tie them from here. i would be a buyer in this selloff now. there are two parts of the markets, financial and the banks and the others are the non-financials. the financials are tough. i talk about inflows of what we are buying with the next dollar, that is going into these are not think related currently. katie: out in milk and this week we heard from tcw ceo saying there may be more risk than rewarded when it comes to betting on the regional banks. >> have look at companies 70% of their commercial industrial financing is dependent on banks with less than 250 billion in deposits. 30% dependent on banks with less than 10 billion in deposits. as we get deposit flight were going to have a credit crunch and that is going to put downward pressure on jobs. would be underweight, the

regional banks. katie: it sounds like you probably agree with that point and i just regional banks, it sounds like you are cautious on the sector overall. matt: we think there is potentially a value in regional banks. it is always become un-analyzable and investable. there's additional framework you look at banks is not relevant right now. they had good earnings and she spoke of deposit flight but the regionals did not have much deposit flight. that's acute deposits in house but they had a pretty good quarter and they turned around and are getting obliterated since. it is not the fundamentals matter. liquidity matters and also it is a complete crisis of confidence. you need to get an injection of confidence back into the regional banks in order to that sector to do well. if you get that, you're going to do extremely well in regional banks but it is a gamble that most domestic buyers are not

used to having. katie: i like that point that is almost unanalyzable these regional banks. bring this into your world of high yield. are you see that crisis of confidence spillover? will: not really. if you look at issuance and what investors have been willing to buy this year, there still a very big quality bias to it. investors are concerned that there is a recession on the horizon. the banking crisis only really certifies that view because you think credit conditions will continue to tighten which makes refinancing short-term debt a lot harder when you enter this period and with a week balance sheet or is this prospect. we continue to see a lot more demand for quality rather than triple c bond which of those spreads remain very wide versus the rest of the market. we think for good reason. katie: we had a talk about the

emblematic triple c company, what does that name typically look like? what industries are your investors avoiding right now? >> there are some that are obvious things that are related to u.s. residential home construction. building products, building materials. those businesses did well during covid and they made a lot of money. we saw sponsor activity around that and there was a lot of leverage put out on the space. those businesses are going to struggle to get back to those levels of earnings. without being able to grow earnings enough, those balance sheets look incredibly stretched. that would be the most dramatic the cycle. i want to go -- katie: i want to go global. a quote from giese they are of socgen, he has low expectations for the u.s. credit market compared to europe saying, in

6-9 months i expect europe to trade tighter than the u.s. things will get worse faster in u.s. credit market than in european credit market. walk us through that. is that your view when you are taking that global linzie? matt: yeah. we have pockets of construction view of u.s. market, where much broader constructive on europe. there's no debt ceiling issue in europe. the credit suisse situation was of a just bank that has been pushed into ubs. that is off the table but minimize. the energy crisis that was going on there post-russian invasion of ukraine appears to be under control. you get wider credit spreads and you do not have three major issues, two's issues that are huge in u.s. possible issue you have a ecb is

still hiking versus we think the fed is at the end of the road. katie: that is a fair point. we start to see central banks move out of lockstep and when you look at the ig market in u.s., where is the most opportunity at this point? >> if you want to get the you're right, we have to get the banks right and right now regionals are too tough to play. you can go to the big six try to get your timing right there. if your franc you are wrong because your early. bank of america was updated this week. it was upgraded this week so to meet that. is the way to play this the turn is going to be hard to find but that's how you make money in u.s. if you think wider you have to get out of there. katie: same question. we look at the bond market, where is the best opportunity right now? will: we think cable tech satellite health care areas are

probably the most interesting to look at. that is nearly the playbook you use during a recession. those are the industries that have less cyclical sensitivity and if you're concerned about a recession they tend to be the businesses that hold up better. this cycle is unique because the bonds are trading wide and have other issues going on. if you're able to pick your spots well we think that is the chance to make the most money this year. katie: really great discussion. really appreciate above for your time. matt brill of invesco and will smith. have a great weekend. the week ahead. big data point to keep an eye on is the april cpi print. that is coming up next. this is really killed on bloomberg -- this is really old on

katie: i'm katie greifeld. time now for the final spread the week ahead of coming up it is the fed senior loan officer opinion survey out on monday. on tuesday we have president biden's meeting with congressional leaders about the debt ceiling. midweek it is the big one we get u.s. cpi before ppi on thursday. plus bank of england rate decision. u.k. gdp grounds out the week on friday. cpi would be the one to watch. let's go through some of the numbers here. year-over-year we are expecting cpi to come in at 5% the same as we got it from the prior month. the pace of disinflation is decelerating and were going to see a little bit of a disconnect between headline and core but from new york that does it for

us. same time, same place next week. this was bloomberg realyield. and this is bloomberg. ♪ ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪

>> welcome to "bloomberg markets ,". >> we are firing in all cylinders in u.s., the s&p right around the highs of the session, all the major sectors in the green. better jobs that is helping energy sector. up by two point8% -- 2.8%. regional bank index up by 3.5%, all this happening despite yields popping after a higher jobs numbe