matt: welcome to "bloomberg markets," i matt miller and let's start with a check of what is going on in the markets. just about an hour before we get the fed, 15 minutes after klaviyo starts trading. the s&p 500 up about .3%. the move -- mood is a little risk on here. investors are also buying bonds which might not be a surprise after yields yesterday rose to the highest they have been in 16 years. the tenure yielding 4.31. the dollar coming off at 1248.19.

crude trading up to $91.50. klaviyo, which priced in its ipo at $30 per share, is currently off more than 18%, trading at 35.46 in the first 15 to 16 minutes of trading and we will talk about that. right now, a bloomberg wall street reporter, sonali basak, has been covering all of the major ipo's. we had three so far this week. three and the last two weeks. arms holding was last week, last week we had instacart and today klaviyo. the other two fizzled out. they look weaker than the first day of trading. what to expect from this one? sonali: you already see it opening more than 20% higher than what they priced at. our own bloomberg reporter reported how much interest had come into this idea of 200 investors roughly left on the table with no allocation at all. the 22% pop is not surprising in that vein. ed: i don't think -- matt: i don't think it is that

amazing. they aim for a pop, it is engineered for a pop. instagram -- instacart was up 43%. sonali: they don't leave too much on the table but the pop is fading. the 22% is 17%. we have the fed decision coming too so where it ends the day will be enormously important let alone the first trade. matt: they wanted to get it done before the fed and these are coming later and later. it was a risk i think that it did not get traded until much closer to 2:00. sonali: a few things interesting, timing is interesting. in the next couple weeks, this will set the tone for what investors can expect in terms of new listings. birkenstocks, they were seeking a valuation of $8 million. can they go to market and expect more from their investors? klaviyo was a peer play, more peer play than other listing ai focused companies. a sass company tested the water for the suss companies in the pipeline for next year. matt: so much sass. sonali: so much sass.

[laughter] matt: you are beating software-as-a-service. sonali: i am. this is the year for goldman, they let all three ipo's, a top underwriter. but fun fact, if you look at the bloomberg ipo tables, you have goldman with a 30% share of mandates. who else is up with a 30% share? barclays. that arm holding was such a big ipo. ipo go, you can see the table information for this year because the biggest ones are pretty much getting out of the way. interestingly, even though these were biggest technology listings, there have been a whole other set of listings across different industries, follow on to happening so this means bankers are busy again, they want to keep the window open, q1, first quarter next year might be even more if they can keep this exuberance. volatility is low but the market is choppy. matt: thank you so much.

sonali basak quashing up -- walking us through this order. work in stock, the next big wimp let's turn back to the fed because it is coming in less than an hour. earlier, a rep from principal global shared her expectations. >> we are seeing inflation move in the right direction at least for now, on the core inflation side. for us we think it is a pause. we think rates have peaked but i think from the fed's perspective, for powell today, it is important to maintain hawkishness. matt: michael mckee joins us from the federal reserve live. i guess what we are really expecting or what we really are looking forward to is a new summary of the economic projections which we get four times per year as well as a new dot plot. >> i think that is what everybody will turn to first. they want to see whether the fed retains the idea of one more rate move this year.

they probably are going to. why not? it does give him at least the option of raising rates without market angst. then they will look at 2024, does the fed raise the number of dots? do they project few array cuts next year than they have? the median is 4.6, almost a full percentage point down. or do they see inflation coming down faster? that is what people are going to be looking for today into what comes next rather than anything they do today. matt: thanks very much. we will check in with you throughout the afternoon, michael mckee, our bloomberg economics and politics correspondent out of the federal reserve in washington, d.c.. i want to bring in joe davis who is here with me on set. thank you for your time. >> things for having me. matt: we don't expect any actual movement, a hawkish pause is the term everyone is using watch i like and it is a good band name. we want to look for the dots to

see if they have raised the expectation of another hike this year and what they are looking at in terms of possible cuts next year. >> as mike said, they will leave the option open to raise rates again. i think it consists what their economic forecast. matt: the dots are there forecast with each what member expects. >> it is their best estimate i think we see higher for longer. whether they move long-term dots is up for debate but now will be a move. we will see this continue to be priced in the bond market. this notion of the fed cutting rates anytime soon i think is misplaced. matt: a lot of it comes from the dot plot. they priced in for cuts or they got the majority of the dots in cuts four times next year which is kind of at odds with what powell himself has said. he said it will be years. >> there's a little inconsistency that i seen the forecast.

you don't have much deterioration in the labor market, it aside for longer, or you have deterioration but then you have the thickness of inflation. so something that is not in full circle. they are also involving in terms of the data map but i think we will see at the end of the day optionality where we are not potentially fully done and not cutting rates anytime soon. matt: do they choose one mende over the other, joe? if they are having trouble with inflation but unemployment starts to take higher, do they continue to hold rates high? joe: i think they do. they know inflation expectations don't talk about how persistent it is pure it i think it goes back to the labor market, it is still in balance. it will be hawkish the rhetoric be more hawkish than policy. i think at least in terms of the next year or so. when push comes to shove, you have to stick to 2% because of the downside tales if you get that embedded. matt: the question i get a lot is what makes them cut? what to they need to see before

their like we have got a move rates down? is it 4.5% unemployment? is it a recession in terms of consecutive quarters of growth contractions? what is it? joe: i think it would be labor market deterioration. less growth. 4.5% unemployment, we will will have had flat payrolls by then. nonfarm payrolls would -- she would open the door for that, particularly of core inflation comes down and you see wage number softening. leading indicators would play to that but we are not there yet. it is later next year. matt: what do you think about long and variable lags? we hear from some people, danny blanche our says 18 to 24 months and others say much shorter than they have been in the past. joe: it is not much shorter. you look at 100 years in the last 30, it is 12 to 18. what is lost is policy was so accommodative when you raise rates so they have raised over

500 basis points but they were deeply negative in inflation-adjusted space. matt: and everybody adjusted, everybody did refinancing. joe: we were the most appealing to a since world war ii and now we are only getting into the restrictive zone. we could have that debate. matt: on the fiscal side, the money is still hemorrhaging out of the federal government. joe: i could show you graph it says when you put the two policy measures together, fiscal and monetary, we may not be -- we are not as restrictive as we think and you could even argue that we are barely restrictive. that will play into the stickiness of inflation the next six to 12 months. matt: and there are those that argued that they don't believe the fed is in restrictor territory and think the economy is bullish -- bullish on the economy. what about those worried about things like student loan payments coming back online, credit card debt lowing up,

credit card delinquencies rising ? we have rising oil prices, a uaw strike, a government shutdown looming. you can make a bearish case easily. joe: and you just used to hands be a that is a lot. there headwinds are building but the economy still has strength. that is where we see the crossroads and financial markets. we will see, it is wait and see from the fed and then update your priors accordingly. i think the labor market has resilience and we are not really entering the fulcrum with policy tightening you can trace to softening labor demand. matt: great to have you on, really appreciate your insight. the chief economist at vanguard. coming up, new warnings about the rise in leveraged trades against u.s. treasury futures. i think this is a fascinating story and gets a little into the weeds but fortunately we have the smartest people in the world to help you understand. details next.

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matt: this is "bloomberg markets." i matt miller. the bank for international settlements warned hedge funds about a buildup of leveraged short positions in u.s. treasury futures. let's talk about that as a risk in -- an economic risk with

bloomberg chief correspondent of global macro markets, liz mccormick, joining me on set. a lot of the stuff is different for the layman to understand but this is the central bank to central banks. and so what is the problem with hedge funds having this huge short trade on treasuries? liz: hedge funds being short in and of itself is not a problem. it is when it is used with a lot of what we call average. you and i buying something, we have the cash that is the one thing and we might have risk but if we are borrowing from your brother and things go bad, then not only bad in the trade but you owe your brother. that is of the bias and other regulators have been looking at and it is a hard thing to kind of fine-tune exactly how much is out there. by looking at the net short position and futures, which hedge funds tend to short features and they have to deliver a cash bond into it, they are saying there is a buildup in the net short so that makes them think and you can look at repo, one of the rates in repo because you are

borrowing money. a lot of people do that in the repo market with treasury repo. if this trade blows up, there is a lot ofeverage meaning you are scrambling. you might have margin calls, you cannot pay that back. remember march 2020 which we don't want to again? that is part of what blew up and we know the fed came in massively and had to buy bonds and they don't like to have to do that. they would rather stay out of the game of buying bonds. matt: they are trying to do the opposite now. liz: exactly, they are doing qt and trying to get out of the bond holding business. they want financial stability so that was the reason they came in. it is the leverage in the system. matt: right now we have so much supply coming, i think i got quoted a figure of $1.5 trillion that is seen and we don't have primary dealers holding is much as they previously had on their balance sheet but they are trading -- there trading has gone up massively. liz: it was interesting you

bring that up because coalition brandished it a piece on that and said dealers matter but not in the way they used to. in the old days they held bonds and there was a customer who needed them and they would have them and sell them. now they are like a broker, they are moving them between clients but they are not holding them so their holdings have really gone down but they are trading more so yeah. and we have this massive amount of paper, i know you were talking earlier about the deficit and fiscal backdrop, and as far as i can see there has been -- there will be more treasury issuance because our deficit is funded trajectory to deftly not get better anytime soon. matt: i read your byline, bio liz mccormick and then read the stories. liz: i have one reader. matt: liz mccormick talking to us about risks in the treasury market. the sec just voted to toughen rules for misleading esg labels in an effort to have fund names better reflect their holdings.

this comes as regulators face a potential shutdown. kailey leinz caught up with gary gensler about the possibility of a shutdown on capitol hill. i am sure she lobbed a few crypto questions at him as well. >> it will largely be a skeletal staff under the laws. so the normal oversight we have on markets will not be possible. just simply not. for how many days that happens. companies that want to go public may not find their filings could be reviewed by the sec. matt: kailey leinz joins us live from washington. kailey, there is so much going on there for you. you've got the uaw strikes, the looming government shutdown, now you have spoken with gary gensler since you and i coanchor a crypto show together, i am most interested in what you asked him about etf's. kailey: of course i asked him

about that knowing the chairman does not speak about ongoing litigation he also up then says he is one member of the five-member commission. and he cannot prejudge anyone product, he needs a process to play out. did i get a firm answer on the spot they coin etf application? i did not. i did ask him how recent court decisions we have seen collectively has changed his thinking about regulating the space and the answer was it has not changed his thinking much. he thinks it is fraught with manipulation and thinks crypto companies that have what he sees as securities need to come in two compliance so i asked is there any court -- anything any court could say that would change her mind on this? he said all i wish his court could make them come into compliance faster. i did talk about the distinction between a bitcoin spot etf and futures etf, considering his concerns on fraud and manipulation. i asked could he rule out revoking approval of a features based product and he did not say no he could rule out but he was reluctant to answer the question. matt: what about the shutdown?

how are regulators affected in the government shutdown? kailey: we heard a little bit of but he had to say, because of furloughs and so the nature, it would limit their ability to function as normal and to oversee the financial markets. i did ask him especially given remarks he made during the debt ceiling fight we were in a few months ago about the catastrophic impact of financial markets, a default could have, i said could we see significant market events emanating from a government shutdown? should financial markets be worried? he downplayed that part of it and said yes, treasury markets aren't readily important. that is the very base of our capital markets. he said however the treasury markets will continue to function, stocks will trade, it is oversight ability that would be impacted. he did say faith in the u.s. treasury markets, the ability of the government to commit to spending, is important. weighing in a little bit on the debate going on in capitol hill. matt: kailey leinz there in washington. still ahead, how the fed

interacts with i guess reporters in the press conference. that is one thing we will see at 2:30 because jay powell goes live. and how the fed in its rate decision affects the housing market. we will talk about that with our next guest, bess friedman. this is bloomberg. ♪

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matt: this is "bloomberg markets". i am matt miller. we are less than an hour away from the fed's rate decision. the central bank a certain to keep housing on its radar as a keeps rates elevated. let's talk about the housing market with the brown harris ceo, bess freedman p i love to get your insight on this market. you're focused on new york area did is the city's market different than other markets in the country in important ways? bess: i think there are differences. we are in florida, palm beach, connecticut, and new jersey. new york city, where there is a distinction, is we have ample inventory. we are not as tight as places like connecticut and palm beach. that has been part of the challenge. once we see in a meaningful way where rates start to go down, then you will start to see more

sellers put their homes on the market and we need in certain pockets of the country. that has been the chicken or the egg challenge right now. the inflation is too much money chasing too few goods and that is what it is like an housing for the most part. so people are kind of waiting, buyers and sellers. buyers think i will hold off until rates come down and sellers are thinking well rates have doubled and maybe i will wait because if i buy a new home i will have to pay double what i'm paying now. it is sort of a waiting game. matt: i can imagine people in homes with mortgages already would be loathe to move because you don't want to have a 3% mortgage and move somewhere else with a 7.5%. is it just rates coming down that will change that? do you think if we went into a recession, that stalemate would be broken as well? bess: it could.

there are a lot of factors that impact the housing market. i think rates are paramount because roughly 65% of homeowners in the united states have mortgages. when rates double, i think there is over a 20 year high, and even though it is not the highest they have an, we have seen them in the double digits, it is meaningful for people. i think it is great news we did not enter a recession. i think it is also good news powell decided to maybe skip another increase for the fed fund rate. maybe it will be a stop altogether as we see this sort of period of a slowdown. the economy has proven to be resilient, which has been a good thing in a way but we need a slowdown to get inflation to where they are targeting. matt: do you see a lot more cash deals? because if you are moving in high-end circles, greenwich, manhattan, on beach, a lot of those people can probably afford new cash deals and the numbers,

the sums are too high for mortgages anyway. bess: it is funny, i bumped into an agent this morning. we were chatting and he was telling me he did three different deals in luxury market and he told me they were all cash. so of course the people that have cash are spending it now. we are seeing more cash deals and seeing a decent amount of luxury sales happening. so that is a good thing but i do think overall people are impacted by what is going on with rates being higher and there is not enough inventory. people want more things to choose from and prices have not come down overall to where they need to be. that is sort of the trifecta of headwinds in housing right now but as i was saying, it is a decent market, just not great. and it is a bit of a seat change. matt: great to get your insight. i'm sure the fed has bloomberg tv on nasa maybe we are having some effect on the decision due in 22 minutes.

bess freedman talking about the housing market. coming up, the fed decides special coverage of "bloomberg surveillance" jon ferro and tom keene. this is bloomberg. ♪

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