>> unfortunately, even though the situation in the middle east is volatile, the market has gotten used to it. >> the market is trying to find his equilibrium right now. >> if inflation gets down to 2%, then a 10 year treasury of around 4.5% sounds right. >> you are going to see some form of yield control brought in to stabilize the bond market. announcer: this is "bloomberg surveillance," with tom keene, jonathan bramo -- jonathan ferro

and lisa abramowicz. jonathan: this is "bloomberg surveillance," on tv and radio, alongside tom keene and lisa abramowicz's annmarie hordern. the s&p 500 is negative by 0.3%. under surveillance this morning. boston fed president susan collins saying the rise of long-term yields surprising tightening financial conditions and persists which reduces the need for further monetary policy tightening in the near term. that is where our focus begins. lisa a: what we saw yesterday in the market did not have to do with fed speak with an auction that did not work well. there is a question of whether the fed has lost control of the narrative. then speakers can keep coming out. we heard from patrick harker today. they have lost control of the market is what sign around with

what they perceived to be inflation. jonathan: it is easy to blame inflation but they came in soft. annmarie: they will point the hands at congress for a number of reasons because they don't have a speaker. when you look at what the congressional budget office continuously puts out, our interest payments are growing. in 20 years, it will be paying off our interest. more than entitlements and security. that is a problem. jp jp morgan leading this out -- jonathan: jp morgan leading this hour. the new bank and next trying to still recover from the they collapse earlier this year. the write-offs, big fortis -- they focus going to jp morgan this hour. lisa a: it is much more simply

to understand where we are in terms of credit at into small businesses in terms of consumers. it is sort of the macro question rather than the micro question of will banks collapsed back in march? jonathan: they are far more interested in bank of america next week. that stock has been hammered this year. lisa a: they cater to a broader range of businesses. there has been attrition in the lower income players in the business space and banking space. which banks are more leverage to the smaller players? i am curious about the pnc coming at 6:30. jonathan: also our top story all week is israel calling for an evacuation of roughly one million civilians in gaza city, indicating a ground invasion could be possible. they say it is impossible that such a thing could take place without devastating humanitarian

consequences. thomas said it will begin killing hostages if a ground invasion comes. i'll difficult will the next couple weeks be? annmarie: it will be incredibly challenging. the u.n. says they cannot move this quickly in terms of moving palestinians and everyday civilians out of gossett. this will be challenging and the images will be horrific. lisa a: it is igniting so many passions around the world today. hamas is calling for a day of rage. when you talk about, is this contained? maybe in it has not escalated into a regional fracas but globally, this is percolating into every city around the world. jonathan: around the table this morning is greg vandal, head of u.s. equity and regional strategy at bnp paribas.

this bond market seems to speak investors. i am not sure we have had to deal with this for a long time. what do you do with this? greg: it has a weight on the say it's investors, it has not injected any equity at all. we have had decent down days but they have been flat or rebounded. we have not had a row volatility. jonathan: people want to see row stability. when they say stability, do they mean smaller yields or smaller moves? greg: smaller yields. given the strength we have seen recently in the data and a lack of volatility from the fixed income space might be enough for equities in the short term. lisa a: this is not saying that when yields bounce around like penny stocks that this is a problem for stocks. you are saying, if they stabilize, stocks can rip.

this seems to be what michael harding was saying. as long as 10-year yield do not breach above 5% again, we will avoid the worst case scenario and things will chug along. ? greg: it appears that -- what matters is over the back of the year into next year is really the affect of the economy. if we see a macro slow down from the effective higher rates, it could be a much more difficult environment. in the short-term, a lack of a move higher in rate is enough to get short-term equities. lisa a: do you feel people are getting more confidence in risk appetites because nothing has broken yet? greg: there is a credit soft approaching cycle that when you have news and the market does not respond, the thing people think to do is buy on dips. when we saw this in june, we saw

huge inflows into the market. and capitulation into the more recessionary bearish narratives. behaviorally, being underweight stocks has been the more difficult position. ironically, this increases the downside risk a little. jonathan: is the fed done? greg: it is obvious the fed has put in its last hike but that depends on what happens with the data. jonathan: so december is a live meeting. november is dead. the fed speak has pushed cold water all over that. do you agree? greg: there is always rest depending on what happens with the data and oil and inflation. there is always risk they have to go again but that is not base case. lisa a: when you say there is risks, that is pretty wide parameter. they came out and said there is a risk that if iran does draw, oil could go up to $150 per

barrel. how do you plot the potential for something that could be a scenario, but is an unclear likelihood? how do you frame what we are wondering? the existential questions. greg: the thing they have been dealing with on your is the reason why people, including ourselves, have been to bearish on the market. ultimately, the thing we have been focusing on is trying to set up trade ideas such that you can whether a more benign environment for equity but get exposure to what is details to protect yourself from a more recessionary environment that even absent that evolutionary event, we still think inflation is coming regardless in q1. lisa a: what do you think of bank earnings? greg: bank earnings will be interesting. when yields rise and yield curve steepen, the banks have been the

best performing sector in the environment but that has not been the case this year, given what happened in q1. one of the most interesting things is absolutely massive volatility premium in the stocks so the market is concerned about what they are going to do. the question for us is, is the concern were related to something idiosyncratic for the bank balance sheet or is it more reflection of slowing on the back rows to broader market? jonathan: what do we think of how the bank marketplace into broader stocks? greg: the disorderly move in rates and volatility and dislocation we are seeing is not something they have been able to digest. lisa a: how are you looking at charge-offs we have been getting and are expecting to see with respect to credit write-downs? how important is this from a macro perspective to paint your impulse on the economy? greg: it is important because

for the end of the year, our outlook is the economy will slow. that the tightening will make its way into the economy. so far, we have not seen a ton other than manifesting. if we do have negative surprise in terms of the detailed thing earnings, i think this four-way on the market. lisa a: what is your highest conviction call right now? greg: our highest conviction call is to shorten consumer discretionary. looking for any relief rallies we see through earnings for next year. we think the affect of the slowing economy and higher rates will affect subsectors of the market. jonathan: lvmh calling to the top? is that what you think? i am looking for indications but i do not see it outside of custom -- outside of company saying we are a little softer. greg: it has not started to manifest yet, but the issue is

they can start slowly and then accelerate quickly. the affect of higher rates will more mechanically have an impact on the consumer. we had the story of excess savings that we were working through. the fact this is taking longer to play out is not mean the effects are not in the view. jonathan: let's go to the bond market. the 30 year at the moment is 4.78. it was almost 20 basis points higher yesterday is still 27 basis points below where we were a week ago friday. lisa a: it was the biggest one-day pop in yields going back to the heights of the pandemic in march 2020. this is the volatility we are talking about because even though the u.s. sold higher bonds, the highest going back to 2007, they could not attract buyers. is this a buyer strike that is

temporary or something more permanent and structural? jonathan: i think it was the lead of pgim who spoke to us about the sensitive buyer is taking a backseat. are we still figuring this out? lisa a: 100%. it is still a question mark. people are solidifying on a sense that we are topping out at some level. it does not have to do with the fed but other things. the fed is a part of it but they are losing control over the long end which is why we heard michael say maybe they will try to get control. a very controversial idea. i got pushed back to this but these are discussions you are hearing. jonathan: i was speaking to the head of pgim yesterday and the bottom line is this. why would you want to take on a longer date of maturity with less yield in an expansion? until we get soft economic data, people will not be willing to do that.

maybe that is why we are seeing the curve change like we are. lisa a: have you seen any signs of the consumer softening? not really. if you look at all the different parameters and economic data, it has been stronger than expected again. the fact we have not seen higher yields is because the risk appetite has waned in light of the conflict. this might be substantially higher and more disruptive. jonathan: are we close to officials in washington waking up and checking the price of the 10-year yield every morning? annmarie: we think so but not really. we still don't have a speaker of the house. the issue is, there needs to be more fiscal discipline. that is reigning in spending but also increasing taxes. when you look at the makeup of washington, neither of those things tend to be possible.

lisa a: what you are hearing from investors is that they will not get their act together. they say we can look at the actual live with this as long as it does not get too out of control. jonathan: what comedian says, aren't you embarrassed? that is why feel about washington, d.c.. they do not seem to be embarrassed at all. annmarie: it is sausage making in real life. lisa a: it is not sausage. it is bolognese. jonathan: coming up, gerard cassidy of rbc capital markets. good morning. ♪

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support it has gotten from iran. right now, as we speak, we have not seen direct evidence that iran participated in or helped plan the attack. that does not mean it did not but we do not have evidence to show it. jonathan: that was antony blinken, the secretary of state, speaking on israel. the latest on the israel-hamas war. israel calling for evacuation of gaza city. the u.n. has 24 hours to move staff which means a grand operation could be coming soon. lisa a: the u.n. saying it will be very difficult to move 1.1 million people of gaza city in 24 hours and is asking for more time. there is a bigger question. how do you protect the maximum amount of civilians? this has been a situation

escalating from antony blinken to use some discretion and restraint at time of incredible conflict. jonathan: the professor emeritus at tel aviv is here. can you run us through the scale of what you imagine will play out? >> i think there are a number of alternatives. i think one has to remember that part of what might be said publicly is not what is going to actually be implemented. one has to be very careful of taking everything that is said publicly as what the final word is. what has happened here is this is a different kind of conflict than any israel has ever faced. this is defined very much in terms of the holocaust where there was a real attempt to wipe out the whole of israeli society . in that kind of situation, and i

note it may be hard for america to imagine how it is from the israeli side, but we believe that if hamas managed to get further into the country, it would have been the end day of the state of israel. we are speaking about a war of survival, not a war that is only about who gets killed and is not. it is much greater than that. in that context, the general opinion of israeli society is actually saying, we will have to show hamas once and for always going on. what is hamas? it is the accepted political body of the gaza strip. in 2007, they were -- there were elections and hamas was invited. they were told by the public that they should be the government in power.

that government has said very clearly that they are determined to wipe out the entire state of israel. i have in front of me the documents of the charter of hamas from 1988, which is the basic principle of what hamas believes in. they say very clearly, and i will not bore you with all the sentences there, that their goal is to wipe out israel. we are fighting a war of survival. certainly tough things will happen. lisa a: there is also a question about israel's survival without the international support. there is a question of what kind of international support israel could use -- could lose if some images come out and a significant toll is taken on the civilian people.

what do you see as the proclamations of taking them as messaging and not the final word? how do you understand how israeli officials are trying to limit human casualties while also preserving human survival? paul: that is a difficult situation. in war situations, unfortunately, civilians are killed. we know millions of people in dresden were wiped out and they broke excepted regulations of war. israeli society would want to remain within the broad acceptance of what should be done and what should not be done. until now, the approach has always been in gaza, telling people in certain buildings that they will be attacked and should move out. because we have not wanted to

kill vast amounts of people. from my point of view, that would be the last thing i would want. but in a war of survival, we would like to remain within the excepted regulations of what happens in a war. by the way, very few countries have ever done this. although there are regulations, very few countries actually abide by it and it is a war of survival. i believe that we will try as much as possible to remain within the regulations until it seems that we will find ourselves in a situation in a few months time being under attack again. do not want this to happen a second time. i think hamas has to bear the burden of responsibility. when we are looking at any war situation, you have to ask who started it?

if you start a war and try and kill in an -- and try and kill innocent civilians, the results on the others i'm might be problematic. i am thinking about support. for 50 years, i can never member the level of support which israel has received from some countries as has been the case. the presentation a few years ago -- a few days ago from president biden was without a doubt the most important statements of american support to israel. i hope that support will remain. at the same time, i hope on our side that will be as careful as we can to not cause damage. lisa a: hamas said this morning that 13 hostages were killed this morning due to israeli airstrikes. will israel take hostages into

account before they start what is looking like a ground invasion? prof. liptz: i want to say something about ground invasion. it is not always what one expects it to be. it can be a whole lot of in-between actions as well. we have a major problem. we want to destroy hamas because they have designated their goal as destroying the state of israel. at the tame time, we -- at the same time, we have hostages there. this is a delicate situation. i do not take hamas' calls seriously. we are caught in a difficult situation. one point of view would be just to give into all hamas demands and then we won't get hostages back. that would mean in a few months

time, we once again would have terrible conflict. where do we find something in between? i will not go to the possibilities but they do exist where i think we can say most -- where i think we can hopefully save most of our hostages, well perhaps at the same time, causing damage to hamas. the terrorist organization would hopefully not harm the wider civilian population. jonathan: professor paul liptz of the television university. israel give a the u.n. 24 hours to move civilians out. strong indications of an impending ground operation. the u.n. considers it impossible for such a movement to take place without devastating humanitarian consequences. this is a really delicate moment right now. annmarie: incredibly delicate.

secretary blinken said yesterday how israel does this matters. he says democracies distinguish themselves from terrorists by striving for a different standard. it will be difficult to get people out. lisa a: it will be difficult for cities worldwide as everyone deals with heightened emotions. this is not a conflict isolated to one region. jonathan: will stay on conflict for the morning. gerard cassidy of rbc capital markets will be joining us to anticipate the numbers just around the corner area and look ahead to next week with of america results on deck. this is bloomberg. ♪

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jonathan: a four winning waiting string of the s&p 500. this morning, the follow-through is negative. down by 0.3%. on the nasdaq, down by 0.5%. lisa a: trying to get a message is like trying to read something out of the cloud. it has been difficult at time of such diverging pressures. data comes in harder than expected. some people said the rise yesterday was because of the ssdi. jonathan: i think the chart

speaks for itself. you cup i start to climb a little and then bank. i trade starts to spook investors. lisa a: two people really care about ppi and cpi? that people are saying, we do not feel stable so we cannot get in and will stay on strike. jonathan: people are confused about what is happening with the options and are spooked. you see a lot of treasuries and weak options. even with the highs like for a 30 year, demand is not there. lisa a: you also have what you have with banks not having the appetite to come in with any heft and pick up slot. they were forced to have 18% of the auction yesterday. that is not significant but they were forced to. jonathan: even with yesterday's moves, yields are up aggressively and we are still 20 basis points higher than where we were yesterday.

10-year yield is at 4.6165, yields lower by eight basis points. this morning, the euro-dollar is back at 1.05 but just about unchanged at 1.0523. lisa a: we were supposed to get pnc earnings. i will bring that we get them. everyone is looking at j.p. morgan. we are expected to get them around 7:00 a.m. and citigroup around 8:30 a.m. at 10:00 a.m., we are getting the facebook live presentation from shawn fain even after the surprise strike and after ford said we have offered what we can offer, forget anything additional. where will they say? this is really a question. what do they want? jonathan: it felt like an escalation yesterday. saying we are going after these

trucks and ford saying, that is it, you had were offered. lisa a: i cannot tell whether it was an escalation of emotion or tactical planning. 10:00 a.m., university of michigan sentiment. jonathan: and did not get the call. i will be so happy when i finally get the call. lisa a: and you will give them ridiculous estimates. [laughter] jonathan: i will give real estimates. like 3.2567. something like that. lisa a: that at 10:00 a.m. jonathan: we get earnings this hour as well. j.p. morgan coming up in around 50 minutes time. good morning sonali. sonali: we are looking for how much net income is facing pressure. you are looking at an expectation for it to decline from record levels that you saw

a quarter ago and the booster they got from first republic. even j.p. morgan is facing pressure online flight training. the overall picture of what it looks like is starting to turn around into next year. citigroup is estimating it will be the second quarter of next year before we see these rise. there is a lot of question about how much capacity consumers have to take on more loans. credit cards are being backs out. how much does this feed into credit quality as well. for j.p. morgan, how much are they willing to take the pain and it comes to credit losses because it will be a bellwether for the rest of the energy -- the industry? jonathan: citigroup, j.p. morgan, wells fargo are all combined. boasting roughly five point $3 billion in our audience charge ups. for those watching, what are net charge ups? sonali: it is when people have a

harder time paying back loans. the $5 billion looks scary, the worst since 2020, but for banks, it is a calculus. are they making more money than they are losing? are they willing to lend to a market and take $5 billion off those loans? that is not a bad sign. lisa a: i was thinking about what you said yesterday and how we are all conditioned to thinking the banks will fail. jonathan: existential crisis on the one side, often ability crises on the others, make of america in the middle. whenever treasuries selloff, they go down. what is happening at bank of america? sonali: timing the markets in treasuries, you have bank of america taking deposits and flowering those into treasuries. when they were still at interest rates 70%.

now you have all these bonds they bought expensively being sold off which is weighing on the stock. lisa a: this is something they will all be dealing with. the flipside is, when will they have to start paying depositors more? as a banking customer with a major institution, i am not seeing it in my checking account or savings account. a lot of of people are not. people protest? is the inertia starting to change? sonali: they are protesting other things but the 1.1% savings rate to get at these big banks, have to get into promotional things or even fintech her rates are higher because they want to bring deposits in. but bank of america and j.p. morgan are still saying we do not a drug money yes, we have plenty of money. jamie dimon has been weighing the risk of rates going to 7%. is this the point to get to the

markets morris dies what you believe the risk is? jonathan: there is the difference between a ceo of a bank worrying about race going higher and making sure they are insulated from it, and a bond market specialist saying we have 7% on the 10-year yield. lisa a: he was later asked, could you see 8%? and he said yes. like why not? jonathan: somewhat of a bob michele strategist. lisa a: there is this feeling that he is just saying that we are absolutely bulletproof and that was the message he was trying to send. sonali: that preparation has prepared him to buck the pain bank of america saw. he did not time the markets but he did avoid the risk of rates going higher. jonathan: joining us now is to ride cassie, the head of u.s. bank strategy at rbc capital markets.

wonderful to catch up with you. what are you looking for from j.p. morgan in about five to eight this time? gerard: it is a great company to look at because the readthrough's are in all the different banking businesses. j.p. morgan is a revenue company. we are going to look at the consumer lines and how are they holding up. looking at the charge-offs he talked about and investment bank on that spanking activity. then you are looking at bank management. they have one of the premier taking managements. then we are going to look at the industry and come and deposit rates on line items. jonathan: the economy looks good on headline numbers. what do you think they will set aside to cover those bank loans? gerard: i think we are going to be surprised on the positive

side. i think you will see the provision to the point of money being set aside. have the new accounting role that went into effect in 2020. they have to look through the cycle in preparing for these potential losses. i think with the third quarter real gdp number coming in better than expected, maybe there will be some backing up. i was looking to the model and if you go back to 2019 to 2020, the company was charging off to billion dollars of loans every year but that number dropped to less than half of that in 22. today, you see a normalization of credit. even though it is going higher, this is where we were pre-pandemic. lisa a: on one hand, you can say that fewer charge-offs mean the economy is not doing so badly and loans are safe.

it could also be they are not banking with riskier and more lucrative clients. a much is this part of the story and challenges the ability to capture yields at higher levels? gerard: that is a good point and they have to risk their balance sheet following the financial crisis. the big banks go through an annual stress test. as part of that, there has been de-risking of the banks balance sheets and they have stepped in more aggressively and taken on those risks. it is risk-reward that jamie dimon and brian moynihan and all ceos do. they measured the level of risk and profitability and they are far less risky than they were in 2006. lisa a: given the fact there is less risk and also less potential for profit, they keep complaining that debt is eating their lunch, if there are material and lower charge-offs and they say -- so much safer

business models, will this be good or bad for their stock? gerard: that is a good point. we have to go through the cycle because if this industry, led by jp morgan and other bigger banks, can show that will get through a recession without depreciation of book value, they will lend a value higher. almost to utilities. not as high as utilities, but they may turn into financial utilities because of the idea they can get through a recession without dividend cuts. though it could be less, and could help with valuation because it is safer to be in this. annmarie: after the collapse of several lenders earlier this year, you hear that lenders want banks to add more cushion to their wire minutes. how are banks preparing for that? gerard: you are likely to see that they will lower the size of

their risk-weighted assets. they will put some of this through downsizing different lines of businesses. these roles, as you know, will probably start being implemented in the summer of 2025 over a three-year period. it will raise capital through return earnings. with a shift on the balance sheets, but on the other hand, it will be growing profitability through the next two to three years. you are right. they are going to get it and the industry will be able to reach it. profitability will be affected. jonathan: where justice capital returns? gerard: good point. once we get to targeted levels on capital, capital returns will be very robust. the industry grows earnings at a rate or they cannot redeploy effectively on an organic basis

and returns. they have to give it back through share returns and dividends. you think the initiative will get there by the end of 2025 and you are very likely to see the big banks giveback anywhere from 70% to 75% of their earnings in dividends and buybacks. jonathan: thank you. jared cassie. sticking with us. j.p. morgan year is up by 9%. bank of america is down by close to 20%. the difference between those two names has been remarkable. lisa a: and the idea they have huge portfolios of treasuries restricting their ability to lend and they are more highly leveraged to smaller businesses. it raises this question, does bank of america have a bigger chance of surprising to the upside? and a lower bar to beat them j.p. morgan?

the fortress of jamie dimon? sonali: there are trading most expensively from a price basis. they are trading 1.5 times and every other bank except morgan stanley is below. they say when you are trading below book value, you are burning value every day you are alive. you cannot imagine this from the biggest banks in the country. lisa a: i hope i am not burning value every day of my life. jonathan: j.p. morgan results coming up next. s&p is down 0.33%. ♪

j.p. morgan wealth management knows it's easy to get lost in investment research. get help with j.p morgan personal advisors. hey, david! ready to get started? work with advisors who create a plan with you, and help you find the right investments. so great getting to know you, let's take a look at your new investment plan. ok, great! this should have you moving in the right direction. thanks jen. get ongoing advice; and manage your investments in the chase mobile app.

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reduces the need for further monetary tightening in the near term. this includes that we may be past the hikes for this cycle. jonathan: susan collins. big moves. we saw her yesterday at the big end of the long yield following the soft oxen. we have wells fargo numbers. revenue coming in at 26 billion dollars. sonali is working through these numbers. sonali: we knew this would be a tougher quarter. they are just above their estimates on revenue figures. that is a good sign because we are looking at things to hold up. wells fargo is lending into this environment and capturing the benefit of higher interest rates. efficiency is still above 60%.

that is an important number because we are looking at job forces coming across these banks and what this looks like in a very pressured profitability environment is also large real estate footprints when you look at most fargo, citigroup, and j.p. morgan. they may want to get a handle of this. jonathan: we talked a lot about provisions for credit losses. 1.2 billion dollars for wells fargo third quarter and the estimate was 1.3 3 billion. how important will they never be over the next few weeks? sonali: it is true what analysts are seeing that the provisions air probably people -- the provisions are probably the bulk of it. the question is, are we going to see more pain? should the economy turned more or are they already baked in? lisa a: we are seeing that they

also came slightly below estimates. there is a question of whether they are making fewer loans. they might have fewer charge-offs. we saw this with wells fargo coming in with fewer loans being underwritten than before. how much are people caring or are they liking the caution? sonali: there is a sense things could get much worse for they can get better. the caution is being rewarded in the market. they want to make money off loans but the interest rate story has been a double edged sword. they want to see banks getting out unscathed, beat on the estimates and charge-offs and net income figures. that is enough in an environment like this. most fargo is faring better than most other banks -- then some other banks, especially bank of america. you do see optimism in wells fargo. a couple years ago, you saw

different stock. the turnaround is taking storm. jonathan: most fargo is up by 3%. let's turn to jp morgan. i.b. revenue comes at 1.4 billion dollars. the estimate was $1.48 billion. breaking it down to equities. 2.07 billion dollars and the estimate was 2.2 $7 billion. break this down for us. compare fixed sales and trading to what is happening with equities at j.p. morgan. sonali: this is pretty clean. there investment banking revenue coming in just a little bit over. for it to come in at 4.5 billion dollars versus four pray $3 billion is nice a huge is different -- versus $4.3 billion is not a huge difference but is

nice. for them to show numbers in core institutions that are better than expected is a decent sign because it is telling you they are making money from the businesses and consumers. to the point you are getting at, the reason fixed sales and trading data matter so much as there is a question of whether it is stifling or making the some money? j.p. morgan is saying it is making the money. jonathan: wells fargo seeing the impact of a slowing economy. jamie dimon at jp morgan says u.s. consumers and businesses generally remain healthy. those can be talking to the same thing. things are slower but still healthy. sonali: that is more positive than what you heard from jamie dimon earlier in the year. he told you you were potentially facing a cliff in the u.s. consumer. for him to say things are slowing down is not saying

things are drying up and something, but that the economy is trucking along. they are showing you they are still making money. the return on equity is 18%. this is a profitable he -- profitable bank for sure. jonathan: j.p. morgan said $1.38 billion for the third quarter and got one point -- got 1.3 8 billion dollars and estimated $1.2 billion. sonali: conservatism, conservatism. you have seen that. this idea that you are preparing for the worst but hoping for the best. the way this is progressing is the worst has not materialized for the summer but you are starting to see cracks. to the point lisa has been making, these banks that we have been talking about like jp morgan, wells fargo, and bank of

america have been avoiding the riskiest consumer and are not feeling the pains of the u.s. economy. jonathan: now might be the most dangerous time the world has seen in decades is what jamie my nhan said -- what jamie dimon said. lisa a: we have heard this before. we are seeing the potential for a lot of risk but right now, it does not look that that. there are pronunciations about the potential outcomes of geopolitics that way less than they are right now. i will make a note that pnc came out. their third quarter revenue came slightly below expectations. provisions for credit losses came in below but the revenue missed a tale of two banks continues. jonathan: gerard cassidy of rbc. what jumps out for you? gerard: what you were talking about a minutes ago which is the

credit side. they identified the provisions for low losses coming in much better than expected. revenue came in better than expected. stocks are showing in premarket trading is up. so far, the very quick read of the numbers is generally better than expected. lisa a: the facts of jp morgan shares are lower edifies the point they are making. they have a much higher bar to clear. is this basically the readthrough that any beats for the likes of wells fargo could lead to a 3% pop? j.p. morgan has been baked in so they will always have enough upside surprise? gerard: you said it well. j.p. morgan has had a great year relative to the other banks. we talk about institutional banks around the country and canada and europe, a vast majority of investors are underweight banks except jp

morgan. as he described, it is showing this way because they have done so well before the others, the bars much lower. jonathan: gerard cassidy of rbc capital markets. we have to turn back to the communication and language id jp morgan people exist -- and language by the j.p. morgan chief executive jamie dimon. do you think israel has far-reaching effects on banks? sonali: absolutely. if you are jp morgan, you are thinking about risks you cannot control. let's talk about it from a training perspective. these banks make money and jp morgan wants to be the intermediary for that. we have been talking about risk and the idea banks want to put up capital to mediate markets. at what point does this become conflicted and risks banks ceasing under pressure from

political -- from geopolitical concerns. right now, they are making money. one more thing about the consumer is with jp morgan, average loans are up 17%. that is better than they were last quarter. the are still lending into what they think is a very terrifying environment was in the u.s. and global economies. jp -- jonathan: j.p. morgan down . citigroup still to come. amh, the language might be the most dangerous they have seen in decades. annmarie: they have around 200 people in their offices in tel aviv and he said all their employees are safe, it is a dangerous time. in the last two weeks, have we even talked about what is happening in ukraine and what is going on in the taiwan strait? jonathan: more coming up. jp morgan is a little softer in

the premarket, wells fargo is rallying, citigroup still to come. from new york, good morning. ♪

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>> unfortunately, even though the situation in the middle east is volatile, the market has gotten used to this in the past. >> the market is trying to find his equilibrium. >> is inflation gets down to 2%, then -- >> you will see a form of yield control brought in to stabilize the bond market.

announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning. this is "bloomberg surveillance ," on tv and radio, alongside jonathan ferro and lisa abramowicz together with annmarie hordern. yields down but oppressively higher. down by about eight basis points on the 10-year yield to 4.62. jp morgan beating revenue. wells fargo gaining and beats estimates as well. citigroup expected in about an hour. goldman sachs, morgan stanley and bank of america next week. lisa a: we are looking at the potential for some sort of gain in terms of this interest income of around $88.5 billion, above the previous $87 billion. this is definitely a beat and

you can see them clawback losses from earlier. jp let's talk -- jonathan: let's talk about this. the risk of interest rates rise further from here but we still don't know the long-term effects of qt. lisa a: this is the truth and speak to what jamie dimon was saying when he said they could see 7% interest rate. how are banks dealing with this? are they treasure -- are they hedging? is this the reason we might not get some of this demand at treasury auctions because banks are not the big buyers if they do not have to be. jonathan: the central banks have stepped back. if we go to what he said at pgim, they have dominated things for the last decade. is there any surprise we have seen this at the long end time again? lisa a: this piece to them be more price-sensitive. they might be saying that you need to speak to us big time

because you need to offset eligibility and the risks of assets we have on our portfolio that might be totally underpricing inflation as well as physical premium. jonathan: are they talking about physical premium in dce? -- fiscal premium in washington, d.c.? annmarie: they are not. they are still trying to get a house speaker. it remains unclear who in the republican party can get 217 votes. jonathan: sonali: will join us in a moment. one million civilian -- israel: for one million citizens in gaza to be evacuated, hinting at a big move. today, defense secretary lloyd austin is expected to meet with benjamin netanyahu. who isn't secretary blinken

meeting with? annmarie: he is doing a regional tour. who is missing on the list is turkiye. lisa a: especially because already one has came out very publicly for the palestinians. annmarie: and criticize the u.s. for sending in gerald r. ford. he said the school because massacres. jonathan: you mentioned this already. the search for the speaker of the house is going in the wrong direction. steve scalise dropping his short-lived campaign after failing to secure the votes. can republicans get this together anytime soon? annmarie: it does not look like it. what you heard from steve scalise is it will not happen today or tomorrow so i am withdrawing my name. 30's to be someone who is completely out of the leadership.

but they can only lose four votes. at some point, you might see a moderate republican say, i will have a bipartisan ruling coalition with the democrats, that we are not there yet. lisa a: things have gotten so dysfunctional that's not only to be have members contesting the election and going against it, but we do not have a name. we are talking about someone coming in that might not even be in leadership. and there is talk of patrick mchenry to be given a 45 day or 60 day time as a speaker. he says he does not want this. annmarie: patrick mchenry could be smart for the republican party. november 17, we are intensely going to have an other government shutdown. that is house speaker mccarthy lost his job. they will maybe throw it on the camry. we will have to deal with a

stopgap and then next year, will find another speaker. jonathan: will talk about this again later. let's talk the banks. vicky morgan results out in the last 15 minutes. a new outlook. a net income interest of around $89 billion. they previously had seen $87 billion. the income is better than jp morgan. annmarie: you are seeing them really bland and the consumer is taking on more loans. excluding credit card loans, you are seeing consumers rise on jp morgan. sonali: how much demand is there? how much propensity for banks to lend to the u.s. consumer, given concerns about the economy? jamie dimon strikes a very dire tone about the global politics and geopolitical tensions we are seeing. the numbers are showing you something more rosy in terms of what they are able to do by

servicing u.s. consumers. lisa a: square this with dire calls that if they are regulated, the profitability goes down the toilet. jonathan: what -- jp morgan said speaking to this regulatory and marie picked up on, put this into perspective about what this does? sonali: i am dreading the conference call because he will not get answers in terms of the direct financial impact that will happen over time with impacts coming forward because banks are still fighting these rules. they are taking to washington and storming the hill and saying, we don't need these. that is all you hear about because the uncertainty behind these new roles could be damaging and could wipe off a significant amount from the bottom line as well as restrict the capacity. we talked about the treasury market, that is relevant to these new roles.

you are saying that intermediate capacity is further threatened by new roles. jamie dimon really clamped down on we don't know what qualitative tightening looks like yet, so why constrain further? jonathan: dreading as as hendley young, director of equity research at cfra. you have gone through numbers for jp morgan and jamie dimon, -- and wells fargo. what stands out for you? ken: through the end of the quarter, we did not see gains. both held their own. operationally, this was a good quarter for the consumer and commercial lending bahrain real estate is still very good with double-digit growth for jpmorgan chase. it sets up the bigger story. we talked about capital risks and rising rates. but the market thinks if we have a soft landing in second half of next year that financial tend to do better nine months before and

jp morgan is one of the top three for the sector. this is the cornerstone for the bank's story. then we have to go through what the rates due to the consumer plus what eventually happens as it relates to credit risk. which seems to be everything is under control. as we say with reserve -- as we see with reserves and reserve leases and landing for jp morgan. lisa a: given results for the big banks, and this has been pretty strong, the credit for loan losses put aside but chp is cutting by around 4% and we are seeing a lower than x acted -- but citigroup is cutting by around 4% and we are seeing a lower than x acted target. how much does this affect the health of the consumer and corporate america and their effects -- the reflection of that? ken: as you go from the global

aspects to the super regionals, you will get to see the really stronger waiting to landing and also net interest outcome because they are not diversified. it does put pressure on them. i would think questions on the regional bank calls will be about regulation and higher capital risk after the banks with more than $100 billion of total assets. it is a new regime coming in for these aspects. as you get to the various all banks, then you begin to seize some poachers to deposit risks or narrowing of spreads. this is basic bank fundamentals. the other regime is a conversation for another day and private credit. but we are seeing is, how many times on the large banks that we hear the word that we want to go

balance sheet like and want to find partners to offload some credit where it might be to fencing to keep for credit regulation. lisa a: does this mean from your perspective it makes sense to value banks like volatilities? of the big banks showing great deals of safety and for coffin? ken: thanks are directly moving to being more -- banks are directly moving to being more regulated and utility like. but use me up at night is when you look at securities -- what keeps me up at night is when you look at securities and you have to have capital and everything at this time, across the regulatory agencies of the fed and fdic who is looking for reserves. the only way you can out run this is having a soft landing of the u.s. economy. jonathan: sit with us. ken leon.

we will be breaking down citi in around 10 minutes. wells fargo is up by 1.8 percent. what you heard from ken is why it is so difficult for big stock bearers to change their mind on these names. lisa a: exactly. it will not change the scenario that they cannot change these things because they are increasingly regulated. they will have to have increasingly conservative profiles that limit the upsides for big banks. jonathan: if you are joining, welcome to the program. you probably want to know where the bond market is after the selloff yesterday. yields are lower by double-digit , 10 basis points lower on the 10-year yield to 4.60. the s&p 500 is negative by 0.1%. if you want bond market stability, what do you really mean? do you want yields lower or just

slowing? lisa a: how about both? this is a market that grew up under a regime that was both with the incredibly low rates that were incredibly stable and the idea controlled by the fed that would at inflation forever. there has been a regime shift. nothing has broken yet. is this giving people confidence or more fear that the volatility will perpetuate and become that much more extreme in the near term? jonathan: to your point, something did break. he stocks broke. to these means make it worse? sonali: you are seeing deposit start to stabilize submitting will not see the same drastic pressures. there are ideas of whether we will see more failures or not. the worst is probably over according to most market participants but this does not change the story about pressures you are seeing. we are talking about loan growth which is fine but expenses are

growing. the flipside is you have jp morgan and the count is up. they are higher and willing to spend more on things. but investors do not have a story to latch onto until the story starts to turn around. jonathan: stocks of change on jp morgan. just a little bit up on wells fargo. we'll talk about this abroad and at home with greg valley air on the search for a new speaker of the house. the comedy of washington and dysfunction continues. sonali: is this funny? jonathan: not very funny. from new york, good morning ♪ use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside -

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the longer it goes, the more the risk of spillovers grow. and where we are as a world, we simply cannot afford more uncertainty, more hate. jonathan: that was the imf director catching up with tom keene. we will catch up with them later today. should get numbers from citigroup in the next hour. the s&p 500 is negative by 0.1% on the s&p. let's start with the fear first that we got from jp morgan. earnings season, alarm bells, consumers hurting cash. ultimately, the race this year and net income force -- the net income forecast. which piece do you want to focus on?

lisa a: if you are an investor, you focus on the fact they are making money and more than they expected to. if you are a policymaker, maybe you will hook into the other. for us, we have to look at numbers. you all know about the uncertainty and that there are a great deal of unknowns. jonathan: tom talks about this all the time, they are almost hiding the numbers they are making by leading with dreadful headlines. you see this on every single quarter -- on every single corner. greg valliere joins us. wonderful to catch up with you. we have a phrase we borrowed from a famous comedian in the last hour. is washington embarrassed by what is going on given what has happened in the world? greg: we should be. it is a clown show and a circus. the serious part of the story as

there are three big things that need to get done. one is the budget. i think the november 17 deadline will slip. it will do another extension into next year. we really need more aid to ukraine. and now a third story is israel. the irony here is that a vast majority of the houses in both parties what to do all three but cannot get it done. sonali: who can get to -- annmarie: who can get to 217 votes within the republican caucus at this point? greg: you got me. i thought steve scalise would be sore. jim jordan does not have much personality. i think they will go with someone perhaps from minnesota or oklahoma. maybe they go for a fresh face who is not as badly damaged as these others.

annmarie: are democrats just as much to blame for this paralysis we are seeing? greg: a little. everybody is to blame. a pox on both their houses. but i would say the hakeem jeffries and others are valid in saying, why should we build them out? they want to impeach the president. they have done a lot of things in the last year that have been asked usable according to democrats so they are not in a rush to help them out. jonathan: for a long time, this did not matter. does it matter now? greg: it does. people worry about government benefits and their salaries. there is one other factor that could come to the narrative which is the credit rating agencies like friendship and the s&p. i would not be surprised if we see a nether credit rating downgrade. lisa a: every investor who comes also as there is no incentive to

grapple with real issues that will cause serious problems for the u.s. economy and deficit with medicare and medicaid defense spending. how much do you see a greater willingness later this year or next year if interest rate payments start to sit the kelly be the main ends of this country? greg: you are speaking logically and logic is not always apply. i don't know that that will make a big difference. the problem is -- i go around the country and talk to investors and ordinary people. they all say that we have to reduce the deficit. and i give them a list of options and to everyone, they say these are not doable and not politically sellable to the voters. we can have a national consensus that we need to do something on that borrowing costs but there is not a densest on the plus -- on the specific prescriptions. lisa a: and no one wants to take

the poison. there is a question as the face off with a number of conflicts around the world where we have the u.s. calling for more money and resources to be the way, whether it is israel or ukraine. whether this will be more borrowing and an even bigger deficit. do you see this in the pipeline of incentive to cut but also incentive to spend more and the result will be held -- will be felt at the von options we have been talking about? greg: there are enormous wildcards. the first is, could we see this moving by hezbollah in the north? that would be horrible to open a second front. second is iran. once hamas is dealt with, i think the iranians will be targeted for at least some kind of increased sanctions because of their support for both hamas and hezbollah. these factors would make me think a lot more spending on defense is going to have to

occur. annmarie: yesterday, we saw the administration come out along with qatari officials and say iran could not the $6 billion that was unfrozen from the south korean banks for the prisoner swap. will this administration come under increased criticism for their strategy in iran specifically? greg: the iranians are furious. the new york times broke the story early this morning. this will be a big controversy but they will not get that money. that is inconceivable considering the political prowess the biden has. the last thing he needs is to give the iranians a billion dollars. annmarie: just a week and a half ago, greg sullivan said the middle east was the quietest it has been in decades. today we have jamie dimon, oh, saying the world is the most dangerous we have seen in

decades. will they face the consequences of what is going on in the policy sphere come november next year? greg: they may. the fact we are averaging 8000 illegal immigrants a day coming into the u.s.? average voters don't think inflation has been subdued. this could be another huge albatross for joe biden. he is in a different spot. i think link it -- antony blinken is good and sullivan is good. they may calm this down by the end of the year but we have several rocky weeks ahead. jonathan: it does not look great. greg valliere of agf investments. we are looking at key events any to talk about the privilege of acting recklessly. for a long time, the government has had a unique privilege given the issues of the treasury bonds. now look at the moves over the last few weeks.

i am not saying it is completely lost but there is clearly a deterioration in appetite for treasuries. lisa a: when you talk about the privilege of acting recklessly, when suddenly interest payments and expense need to be considered as a massive line item in the u.s. budget, so suddenly you have to care board. if you do not, you could get into a spiral where yields go higher. annmarie: you need to see this charge in the cbo. 20 years, interest rate payments will be the top line item the u.s. is paying for. it is both parties to blame. republicans like to bash democrats and say they love to spend but republicans love to spend too. jonathan: everyone is responsible until they get into the white house and get power and majority, then it goes away. lisa a: it is everyone's responsibility. i will get on my soapbox for one

second. i know you are probably rolling your eyes. jonathan: that is the show. [laughter] lisa a: no one wants to see their payments lowered. no one wants to see the resources you are used to getting pulled back. if you do not have a population who will vote for that, where will the incentive come from? jonathan: the treasury market will have to force the issue and that will not be pretty. from new york city, equities down 0.1%. yields in eight or nine basis points. 4.60 on the 10-year yield. new york crew picking up by 4%. let's call it $86 per barrel. ♪

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jonathan: equities on the s&p are pulling back just a touch, we are down by .01%. the lows are unchanged. on the nasdaq down .03%. yields are all over the place. 30 points higher on the 30 year. there is a two-part story. the auction came later on in the afternoon and did not go well.

lisa: every time i used to bring up auctions tom would roll his eyes and say who cares about auctions? every day this week the auctions have disappointed, have tailed and it move the entire market. this was the trigger for yields to go much higher. i have to say it if you looked at what we got. jonathan: i was always happy to do issuance. i agree it is very important. lisa: and right now, more than ever. this is the question, is it going to go up?

you've been asking an important question, is that the level or the way it is moving? they were talking about yield curve control. jonathan: when equity markets state security they mean lower yields. that would be my distinction. lisa: you are seeing analysts come out and saying if you don't breach 5% we are good. jonathan: we are at 4.62 on the 10 year. yields are higher this morning. the euro is negative, at 1.05. kailey: it seems to be where we are sticking at the moment. we did get jp morgan and wells fargo meeting expectations and beating the interest income expectations.

i am interested in the calls. we could city and jp morgan and citigroup. this may move the market. facebook live is another one. what more can he say after a serious escalation yesterday with the potential for them to say we are done negotiating. what more could he announce? jonathan: what was on the table 43%? another asking for 30 something. lisa: is it about the guarantees of employment. and ford has said they are at their limit. this was a huge -- jonathan: they are same this is the parameters, the total package. lisa: will there be further

walkouts? further strikes? we will have the consumer sentiment survey and this is what people will be looking at for sentiment but the look ahead inflation expectations. these move the markets to because we are in the dark with what is shaking things up. jonathan: we can speak to this -- we can speak to tom keene about this. i know you have a brilliant panel coming out. what have you got to look forward to? tom: the debate about economic growth but i will be honest, as we have seen over the years that davos and imf, when the events change, the meetings change. there is a somber notice here

with everyone glued in the eastern mediterranean. the managing director was emotional about it. lisa: there's a big question about how unilateral the imf brings the world together rather than trying to grapple with the splintering in the world order. how much unity do you feel in terms of resolve and goals? tom: this is an important question in that you don't hear davos speak. the managing director reaffirmed that there economic mandate, which is what they do they don't try to traipse upon what the world bank does. your point about the bond market , i was having a beverage of my choice last weekend at the hotel doing my jimmy stewart imitation

and i saw the japanese yen move with the bond market. that is the great unspoken, everyone is watching the bond market but no one is talking about it. jonathan: i know that you were in the bar pretending to work. tom: there is still time to go as we stagger back to new york. it's great to see you and lisa and the other person trying out in my chair. lisa: we miss you, tom keene is in the desert and marrakech, morocco. your seat will be here when you get back. on this panel we will have christine lagarde with tom keene as well as ngozi

. jonathan: that will be at 9:00 a.m. eastern time for that conversation with tom keene in the desert. mark, it's wonderful to catch up with you. let's talk about the monster move. the 30 year with the move of one point, 20 basis points. what do you make of these moves in the treasury market? mark: it is certainly volatile and even more volatile with the directionality of the moves in the market. we have had a retrenchment in bonds after having been blown out from the fomc meeting on the 10 year yield. it is coming in with song

investors that were worried we would test of five-year and it's come back in as hurriedly as it went back out. it is a function of a number of factors. the confluence of lack of buying interest in not knowing where these yields were subtle. issuance continues to play a role in the judgment is being applied on how much the effect of this is occurring because of the term premium and the uncertainty around inflation and the degree of growth might keep yields more elevated than what we have seen over the past 10- 15 years. leading to these movements that have kept investors on their heels. kailey: we saw this laid out into a regional banking crisis. lisa: what we have seen this

morning from jp morgan are upgrades to their income and fewer charge-offs than expected. a robust report when volatility is creating activity. our banks looking better or worse? mark: them money centers, what we've seen from j.p. morgan and wells fargo are in a better position to whether this inclement volatility in the market. it is very encouraging to see the results early on in how is possibly impacted their margins but i will be curious in terms of what management is talking about with regards to the consumers.

we have seen delinquencies in auto loans, subprime credit cards. we want to see if that continues to be a pattern if that is occurring so glacially it will not worry us about the state of the consumer. it is more the smaller size banks that will be important. with yields where they are, even where they were back in march with the initial small bank turmoil. it continues to be a problem for the small and midsize banking enterprises. to what degree they are continuing underwater and how it impacts their interest margins it will be a tell on whether we see in near-term recovery once the banks have sided with the major money centers. lisa: how much commentary on the

consumer will impact consumer discretionary? mark: very much so. we like to see with the ceos of these big banks are saying. these money centers are bloodlines to the economy and what they can see through by way of behavior and what degree of excess savings is being drawn down to support spending. to what degree they are seeing hesitation on the part of borrowing. increased lending standards influencing the ability of consumers to borrow for goods, automobiles, housing. last but not least, a delinquency rate and what degree they will have to provision for

them? jonathan: thank you for your perspective. let's talk about that range on the 30 year. more than 20 basis points. at the high 48837. at times it's like the 30 year has become a penny stock. it's been remarkable to see. lisa: we haven't seen companies have to bank the losses. when you have to bank losses because the move stick for long enough, then what happens? do we have to understand the ramifications of the price movement not just the yield move. jonathan: tk would be happy. at the bar, in the desert. getting some sun for health reasons. you think he looks after himself on tour?

i don't think so. if you're just joining us on the s&p 500, totally unchanged. negative by .03%. we will move lower across the curve, the 10 year is lower by 30 points. we can talk about the price losses, $.50 on the dollar for some of these bonds issued three years ago? lisa: if you use the fed's facility and get the face value back and you don't have to record them. to offset some of the risk. if you have investment firms and this is what we were talking about pre-missouri -- the balance of the portfolios are showing the biggest losses of her. jonathan: you might see

something elsewhere as well. how insulated are these banks given the policy moves we've seen? sonali: a lot of these moves are happening in the private bank. it's wealthy individuals who are borrowing more in. other parts of the bank tell different stories. jonathan: citigroup is about 17 minutes away. coming up next, mike lawler will be joining us very shortly. from new york city, good morning to you. bond markets are all over the place. were down eight basis points on the 10 year. 4.62.

>> i just shared with my colleagues that i am withdrawing my name for a speaker.

we have to have everyone put their agendas on the side and focus on what this country needs. this country is counting on us to come together. this house of representatives needs a speaker and we need to open the house again. jonathan: that was congressman steve scalise. joining us now is the congressman or new york. i'm sure this is frustrating for you. washington, d.c. tends to be projecting dysfunction. >> pretty frustrating. right behind the cam -- camera lenses the capital. this has been a tough time and we will get through it. we will be meeting this morning to reconvene and begin the

process anew to elect a speaker. we have to come together as a conference, 217 to elect a republican speaker in a republican majority. the american people elected us to service a check and balance from spending to the border and international policy. there is a lot of work to do and one of the first orders of business is to support our closest ally in the middle east, the state of israel to ensure that they have the resources financially, militarily need to do to defeat hamas. jonathan: what can you do to ensure that happens. there's a big issue for your party, not only should you be projecting power but you need to

demonstrate that you are able to govern. why is your party failing to do that? rep lawler: what happened with the removal of speaker mccarthy never should have happened. eight republicans teamed up with the democrats, both parties through assent to chaos for no reason. it was totally unnecessary, unwarranted and unjustified. so now, we are forced to pick a new speaker. this is not electing a class president. you need someone who is able to do the job. there is a lot entailed in it. we will get back into the room today and hashed out further and hopefully elect a speaker. ultimately, when we get back to the work of the american people there is a lot of critical work

to be done from the appropriations process to securing our border to the increasing aid to israel. we also have to deal with aid to ukraine. and i am focused on the work as a member of the foreign affairs committee. kailey: it's not just about who can get the job but who can get the votes. do you know an individual who can get to that number? rep lawler: we will come back in the room and see who puts their name forward. i believe our strongest speaker is kevin mccarthy. i said it this week, i said it last week and i said it in january. we will have to hash it out and obviously there is some anger and frustration and harden feelings in the room.

if we need to bring in a fe stivus paul so be it. kailey: your district voted for joe biden is it time for you to reach across the aisle and find disinterest speaker? rep lawler: respectfully, they helped to create this mess. everyone should remember that. 208 democrats voted to remove the speaker in the american people elected the house republican majority to govern. any deal with the democrats would be to elect a republican speaker. we need to exhaust all options within the conference but ultimately, as a nation and country we need to get back to work. frankly and my conversations with my democratic colleagues they regret their vote to remove

kevin mccarthy because they see the chaos they have helped create. lisa: are you getting close with your democratic colleagues to move toward some centrists candidate to elect more bipartisan measures? rep lawler: we are meeting again today. we owe it to the conference to continue the discussion, to see other candidates who have put their name forward. take a vote, see where it lands. we want to get back to work is expeditiously as possible and get back to governing. that is why we are here. the american people are not interested in enter party squabbles in the parlor game that goes on in this place. there is real work that needs to get done and that will continue

to be my focus. lisa: a lot of people talk about former president trump as the front runner. who is the leader of the republican party at a time when it desperately needs a leader? rep lawler: kevin mccarthy was doing a phenomenal job is the highest ranking republican official in washington. i think it was the single stupidest political act to remove kevin mccarthy as speaker. it undermined the majority and torpedoed the work we were doing and i said earlier this week, he is our best player on the field and should have remained speaker and ideally would come back. obviously, we need to elect a speaker. kailey: you have called on the

biden administration to start charter flights out of israel. you have hundreds of constituents stuck in israel. what are you hearing from them on the ground? rep lawler: there is a lot of frustration, angst and concern. people want to come home. many of my constituents were in israel for the holidays when the war broke out. they want to get back to the united states. i've been in touch with the white house, the state department multiple times to try and expedite this process to get these folks home. i had called for chartered aircraft's as well as military aircrafts to try and expedite this process. we had nearly 600,000 citizens in israel, many dual citizens.

any you are in a war zone you want to protect american people that are there. over 20 american lives have been lost and there are still people missing. we need to do everything we can to bring them home. jonathan: a lot of your constituents are on edge. hamas is been designated a terrorist group, calling for a day of rage across the muslim world. are you worried about the safety of your constituents and what are you doing to make sure they have the security they need? rep lawler: i am always concerned. i have one of the largest jewish communities in the country in the 17th district. unfortunately, threats of violence against jewish people are not new.

law enforcement in my community has always done a phenomenal job working with leaders in the jewish community and municipal officials to really ramp up the police presence at synagogues or jewish institutions to ensure that we don't have acts of violence. just a few years ago, we had an intact in our district during hanukkah killing an individual and we want to avoid any such incidents across this country but certainly in areas like mine where you have it large jewish population. law enforcement does a great job and i know they will step up. jonathan: thank you for being with us today. hopefully we can catch up with you again. a republican on the latest

dysfunction in washington. coming up, citi earnings are just around the corner. this is bloomberg. ♪ you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

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>> at the end of the day financial stability is the mandate out of the federal

reserve. >> the last mile to get us down to 2% on a sustained basis, that is tough and that is why the fed will probably remain restrictive. >> how long do you keep rates higher for longer? >> i think the bond investor is underestimating the strength of the investor. this is bloomberg surveillance with tom keene, lisa abramowicz and jonathan ferro. jonathan: good morning to our audience worldwide. let's get to the price action, it's totally unchanged. 6000 and trading revenue, estimated 3.2 5 billion. beating the estimate.

the stock is higher by 2.29%. turn to the numbers what is the story? sonali: you have credit losses coming in line with expectation. in terms of the big worry in consumer credit turning sour. it's just turning sour enough to keep lending. and for jane fraser, she got through announcing the biggest restructuring of her senior staff in 20 years. you are watching her when here. they have faced dramatic changes in personnel. for her to be in investment banking it is showing you that her changes are starting to take steam as she is in the middle of

it. lisa: jp morgan is missing on -- citigroup's operating expenses came in lighter than expected. what are we expecting to hear and later on in the investor call about how she plans to rearrange how it's orchestrated and where they want to be more aggressive? sonali: they have gone through every manager saying do we need these jobs? that is a painful exercise. from the investor perspective how painful could it be? these are the questions for citigroup in addition to jp morgan with higher regulation and what could investors expect out of citigroup with the jane

fraser's restructuring. the first phase is showing that she is delivering. lisa: we heard from jp morgan they are reserving with respect to potential regulation. citigroup says they plan modest buybacks. he was most behind with regulatory capital and who can afford to do capital returns? sonali: this is a positive story for them to be able to say capital returns. when we see these will start to take pace in 2025. you have seen a lot of job cuts on wall street and it's felt very painful. the question is, if this environment remains muted.

this is peanuts in the scheme of things. can they keep people on staff and will not become more painful in this muted environment? we have escaped the worst but when do things get better? jonathan: what are modest buybacks? sonali: don't expect a windfall if urine investor. jonathan: can from cfra. kin: some of their core franchises such as consumer and treasury services are doing well. on an operational basis we would give them a name. -- an a. with the jane fraser removing

management to speak to expense. lastly, let's not forget there are 9000 employees that are working on a u.s. consent decree to improve their processing and regulatory regime for compliance. this is important but it sometimes gets lost in the weeds. for many years, city did not have the best platform for surveillance but they are getting there. looking ahead for the investor, you are always tempted with any stock in large banks that are trading at half when others are above par. we need to see more traction with what jane fraser does with cost and an accessible ipo.

things look promising but they are not hitting on all cylinders. jonathan: do they have a problem with expenses or strategy? ken: the strategy is in place and it takes time to get the right people in place in the c suite so they can execute the strategy. this could be a conversation with two quarters of a powerful bank as they paired off all of their non-us consumer banks except for in a few areas. i think overall there is a lot more work to do and that means what we have learned with the wells fargo turnaround, they don't happen over six months it takes 3-5 years. lisa: we saw jp morgan notch a

record of net interest income. citigroup also raise their expectation for their net interest income to 47 billion. is the take away that higher yields are now becoming a good thing for banks, a tailwind rather than a headwind? ken: one scenario that has not been talked about, with rates staying high and if banks can hold the line they can enjoy a interest growth, but one of the worries we have is that still 25-30% of the total deposit that are non-interest-bearing. that can certainly shift and go to a higher deposit cost. this is absolutely true on wealth and asset management but

not a problem with corporate areas where they have other reasons for keeping not interest deposits. lisa: we are not seeing it yet. these deposits have been sticky and it's a pain to move your money from one place to another that people are just not doing it. what makes you think people will start doing it if they start investing in other assets and they have not so far? can: we saw that and asset and wealth management that was down in deposits. there is lots of reasons for small business or consumers to keep large balances in their checking accounts. jonathan: i want to finish with the bond market. do these banks need lower yields or high-yield? people would tell us forever that they need yields higher and

rates up so they become more profitable. has that changed this year? ken: for the bond market, is what happens at the investment grade that is so critical. i want to state how many of these banks talk about getting to partnering with private credit partners given that they have some portfolios that don't make sense with higher lending rates. jonathan: thank you for breaking down city gate, jp morgan. sonali: bankruptcies arising, at some point with the banks. citigroup has debt underwriting which is way better than expected.

big banks want to lean towards safe corporations. lisa: this raises the question of what the bank's rules are? are they loan originators that they sell off to private credit. are they going to become de-risked. sonali: jamie dimon wrote about in his newsletter, what is a bank? in the future. there is a call to action to work with nonbanks so they could be the lender's and banks are the inner mediators. jonathan: this is tom keene

question. are they hiding how much money they are making? sonali: the banks are concerned about the public backlash and how much money they are making in this environment especially as they lean towards the big companies. credit cards, spending is plateauing which is a sign of strain on the consumer balance sheet. they can't keep maxing out their credit cards. jonathan: city is up by 2% on the back of those numbers. if you're joining us, on the s&p 500 we are down by 0.41%. we are eight points down on a 10 year. yields down nine points on the

30 year. this is kind of crazy over the past few weeks. lisa: when we were sitting here yesterday morning we were looking at 30 year yields that were down on the day and then it became the biggest pop in yields going back to march 2020. when you take a look at the market to understand the volatility, what will push it? will it be the -- u mich consumer sentiment survey. israel is calling for an evacuation of all civilians in gaza city giving the united nations 24 hours time to move their staff. they are working to establish safe areas in gaza. lisa: they're talking to egypt

about a safe crossing. annmarie: you will see a tremendous outpouring from the united states, and now we will have chuck schumer going over the weekend. jonathan: was the phrase standings sold her to shoulder? up next edward yardeni ,from yardeni research inc. the bond market with 30 year yield slower and 10 years are lower and equity futures are softer. from new york, good morning. ♪

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but it can be passed on to the next generation. (♪♪) an ever-changing landscape comes with challenges. from our vantage point, we see opportunities. as a top-ten real estate manager, we harness the power of a 360° perspective, delivering local insights and global expertise across public and private equity and debt. our experienced team and vast network uncover compelling opportunities giving our clients an exclusive advantage. principal asset management. actively invested. >> i am of the view that at some point in time you will see yield curve control brought into to stabilize the bond market.

financial stability is the mandate of the federal reserve. when things come to a head, financial responsibility is number one. jonathan: this conversation has received so much feedback, from the ceo of asset management. this was a 30 year bond auction that did not go well. here is the price action right now. 10 year is down eight basis points. on the 30 year down eight basis points but yesterday there was a move of nearly 20 points. lisa: it's good to point to that swing. we are not seeing any stability or ping-pong game shows the lack

of resolve and the lack of a consistent buyer base. this is what we were hearing. jonathan: this imperfect time to catch up with edward yardeni, he coined the phrase bond vigilantes. are the bond vigilantes back? ed: it's one of the reasons the bond yield has sword to over 4.5% recently. supply clearly matters and it is a result of fiscal policy out of control. monetary policy is under control.

you can see, they can even get a speaker of the house. jonathan: and sometimes supply doesn't matter. people would be able to finance the deficit. can this be addressed with bad economic data? with the auctions do better if the economy were worse? ed: the volatility we've had since the summer, we are looking for a yield level which the market will clear and 4.5% should do it. some of this recent volatility, as long as it is range bound it's a good sign that the bond market fitness is in balance with the output. the cpi headline were at 2% and

it's that shelter that is way too high that has been the problem. we know new leases have come down substantially. lisa: is what everyone is doing. a lot of people are looking at the volatility of the bond market, we heard that something could break and it will be problematic for the markets. do you have the same feeling or is your response that the resilience we have seen in risk assets in light of volatility is assigned to continue regardless of the bond market? ed: i've been in the soft landing camp since last year.

something is breaking in the commercial real estate market. i think it's one of the reasons the fed is done raising interest rates because they realize the bond market has been doing all of the heavy lifting of monetary policy. with the bond year close to 5%, that's a disaster for commercial real estate deals that need to be refinanced. this is reminiscent of what happened in the 1990's. we had a mild recession back then, it was the growth rate that was hampered by all of those problems. lisa: we heard from wells fargo saying that they expect commercial real estate losses to increase. they expect loan losses to

decrease. -- increase. it is here since that we are seeing things often and we won't see anything break and it has all been priced and based on where we are in the cycle? ed: i'm still in the rolling recession camp. in some areas it's starting to look like a rolling recovery. consumers may be coming back to buying goods. the single-family housing market looks like it is bottoming. i think the economy's resilience will be with us and it is largely because of the consumer and there is a lot of moving parts with the consumer. you have 75 million baby boomers retiring.

jamie dimon has been saying that consumers will be running out of excess savings but the baby boomers have a lot of retirement assets. something like 75 trillion and as they retired they will be spending those consumers. jonathan: did the boomers not like don jan? perignon. ed: retiring consumers are eating out, taking vacations and these are all the areas where industries are labor-intensive and that explains why the labor markets have been tight. it's hard to have a recession with record employment. it just keeps going on and rising to new record highs. as long as that is the case, the

economies resilience will be attributable to the consumer. we know the fiscal policy is out of control. part of that is because they are spending so much and because of the net interest payments they have to make. jonathan: you sound constructive. that is edward yardeni . have you seen the spirit spending? lisa: do you like champagne? jonathan: of course. lisa: pro psycho is so much better. i can't take champagne. annmarie: maybe dom perignon. jonathan: programming note, no

drinking for the next hour. in this next hours we will have tom keene's panel. he is sending down with i am a panelist and ecb president christine lagarde. lisa: especially given the stagflation talk. i saw a note from deutsche bank talking about a double-dip recession and germany. europe has been in the crosshairs of everything. the war from ukraine in the spill through from the middle east. that will be a really tough decision to make. jonathan: our good friend sonali

basick will be taking over real yield. sonali: do you remember when you ran it? jonathan: i do, i think it's at 1:00 but then it moved. lisa: you will have to stick around for the u mich consumer sentiment survey. jonathan: when is a coming out because i'll be straight out the door. we will have more from --sonali. this is bloomberg. ♪ j.p. morgan wealth management knows it's easy

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lisa: this is bloomberg surveillance. luckily annmarie hordern has not abandoned me. we have one hour away from the opening bell. we have the earnings calls from j.p. morgan. we are looking at a completely flat s&p futures. no one knows where to go. the euro is unchanged as well as

the dollar. 10-year gilts or lower. down nine basis points after yesterday. it was really weak compared to expectations. seeing crude more than 4.5% speaks to the concern as we hear all sorts of rumors. real questions around we will need -- see a massive escalation. annmarie: jamie dimon talked about the food market in energy prices. if iran was to enter into the conflict we will have a real concern on the energy front. lisa: at the same time we are one month into the strike of the

uaw. it is escalating the strike by walking out of of ford's most lucrative plant. ford saying the offer of a 23% raise is the best they can do. >> we have reached our limit. we are open to moving money around to seal the deal that might fit the unions needs better. but broadly speaking, with the cost of the deal we are there. lisa: this has been the question all morning. what do you expect to hear from shawn fain? >> he has been unpredictable. we didn't expect him to walk out of a plant in the middle of the week. it seems like a tantrum walk

out. he could have more plans to see if he could get any more out of ford or the other companies but it sounds like everyone is at their limit of how much they can spend on this for labor contract. they have a fixed amount of money they can raise their labor cost and they've gotten close to it. we will see at 10:00 if shawn fain thinks he can squeeze more out of them or maybe, -- i don't think we will see a deal but he could extend the current strike while they finalize the deal. annmarie: did he pull this wildcard too soon? david: i don't think he pulled her too soon.

it almost seems like there was some kind of misunderstanding between the two. ford said they could not add to the economics of the deal and shawn fain said the union was expecting ford to add more to it. they are added 23% and add-ons to the retiree benefits. at the open question is what will ford do for future battery workers? will they be paid the same? that could be an area of disagreement. this is a very rich deal as it stands from all three companies and i think it could be ratified easily. i'm not sure how much further the companies will go. shawn fain expected to buckle in

for a longer strike. lisa: how can they promised jobs plants they don't even have yet? david: there is some precedent for it. ford had a plant that made dashboards and ford degree -- decreed it would be part of the union. companies can pledge a neutrality promise where if half the workers say they are interested in the union they will recognize it. they can extend whatever wages and benefits they want. it's tougher to do in right to work states. particularly in tennessee and kentucky. it will be interesting to see how that works out but what the union wants is for the companies to recognize these plants and give them master agreements.

i think that is where the fight will be because dvds don't make a lot of money -- evs don't make a lot of money. lisa: i'm sure we will speak with you soon to get the latest. we have been getting banking earnings and they have been beating across the board. there is net interest at j.p. morgan. joining us now is lauren goodwin from new york life insurance. what is your read through on the bank earnings we have seen so far and on the role of banks for investors who have been underweight this year? lauren: they are telling us what we already knew that we are seeing some early signs of weakness and low income segments

but overall, things are ok. bank lending conditions have been tightening for 18 months so the likelihood that we would see a surprise here was slow. i expect we could see more of the same. we know what has been going on the -- and the economic data and they have been revised down meaningfully so i think we may be able to see and average wave. annmarie: are you getting more bullish as you see these results? lauren: on the economy? no. what i am seeing in the data and the markets are signals of late cycle economics. until we see signs that recession is already here in the equity market doesn't tend to react to that.

rising unemployment claims, earnings deterioration are the signals i will be looking for but they are not here. while we may expect sideways activity, is important to be invested. lisa: so dancing in the twilight. capturing the dynamism of the late cycle that you're talking about. our bank still leverage to this economy or are they independent? can you get nonbanks if you see a downturn in the future because they can catch the upside from higher rates and have been insulated from losses? lauren: two things are important here. the banks are still leverage to the economy. bank lending standards have been tightening and they expect the economy to slow you see revenue starting to slow and the cost of

deposits is going up in the competition for deposits is going up. for big banks, they are diversified and they have a lot of ability to navigate cycle dynamics as differentiated from smaller and regional banks. lisa: how much are you concerned about paper losses from bond yield rising in the volatility we have seen? have we seen the fallout from that or is there something ominous about what we see? lauren: the fed's term lending program is still intact. if long rates are still high in march the program would be extended. paper losses as a risk to the broader equity market are not on the list. where they play a role as in capital considerations and that is something we will be hearing about today.

that is an area where we expect to see hemming and hawing. capital is so important for the securities stability of these big banks. what we saw in march was a lot more about liquidity. i will be curious to see what the bank say about the balance of fortress capital in the liquidity of that capital in the future. lisa: has a volatility changed any of your views? lauren: the reality is, until we had a recession we will probably not see a definitive macroeconomic narrative. this is a time to be thinking about quality, handing things

over to the stock pickers and acknowledge that sector or style plays are unlikely to last when there's so much uncertainty. annmarie: you are encouraging investors to be pragmatic. what did you learn from russia's invasion of ukraine that you want to keep in mind as we watch israel? lauren: the number one thing investors felt in real time is the initial shock, the initial assumptions that are made are not always what drive the market. the first couple of weeks after the invasion you saw russian assets being affected. two weeks later, the most impacted asset class was the german currency.

because it became a geopolitical risk entrenching. a little bit of a little bit of the bid and oil prices. what are the implications of what we are seeing in israel to the region? so far there has not been an impact to energy supply. with concerns there might be an escalation in the geopolitical picture changes. but there does tend to be a stronger narrative to become clear and we will have to watch and see what happens. lisa: lauren goodwin from new york life insurance. the s&p is unchanged as we fluctuate but now we are moving up .2%. yields are down 11 basis points on the 10 year at 45856.

sonali basak is going through what we are hearing. sonali: we knew this was going to be happening. the banks are fighting these capital requirements. those big banks will not be impacted as much is the smaller banks. that is a big part of the story. looking through his prior comments, the idea of how much things could get worse. this is the best third-quarter citibank has ever had. this is telling you about the risk appetite of some of these banks. lisa: we will get much more detail, is there any effort in washington d.c. to divert

focus. annmarie: when jamie dimon came out to say that this is a concern for the banks but bank regulators will do what they need to do after three bank failures. lisa: we will dissect some of these headlines including the cfo of jp morgan saying the pace of buybacks will be modest after capital proposal. the word modest is the word of the day when it comes to share buybacks. this is bloomberg. 1 ♪

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pause, with the rate staying high and if banks can hold the line they can enjoy net interest income growth. lisa: that was can leon after jp morgan posted another quarter of net interest income that reach records, 22.9 billion in the third quarter raising their expectations for the full year forecast. we are seeing that play out in the stocks as we see equities do better in the banking sector. jp morgan chase shares are 1% higher as they parse through the results and get a sense that we will get share buybacks, although modest. wells fargo up 2.67%. it is net interest income

higher-than-expected and banking revenues higher-than-expected. equities are the weak spot in the incredible strength is leading the shares higher. citigroup is up hired 2.67%. annmarie hordern is here with me and sonali basak has been parsing through the numbers. are there any larger takeaways before we dig into the details from these earnings that we can draw a conclusion on. sonali: one thing jp morgan says in terms of caution for the industry, he says these results benefit from our over earning. don't expect this to be normal. he raised his net interest income at least three times. can you imagine that many times saying they were going to make

more money? lisa: there is a bigger take away here. john was asking this earlier, how much is this pr saying don't look at us we don't expect to earn this money. or is this something that is a tea leaf of what they expected come. same to regulators, we are not really making bank is a court of the moment? sonali: they are taking to washington soon. the big banks will be facing lawmakers for their annual grilling. i love listening to this one. they are making stunning profits in this environment. they can also say this is the u.s. consumer. consumers still want to borrow and spend money. spending is starting to normalize.

the strength of the consumer is keeping the banking industry strong in the comeback of these institutional businesses aided by this dynamic market. lisa: they will push back on future capital bank requirements aren't they? sonali: from the banking perspective they will be pushing back against the capital requirements and from the lawmakers, there are other issues. why are you lending to my constituents who want to buy a home. there will be the constant push/ pull on esg matters with these energy concerns around the world and a lot of questions on headcount. most of these banks are cutting jobs, not adding them. annmarie: when there are hearings like this, you see lawmakers listening to every

question and answer. they are actually not listening. they make their point to embarrass an executive and then they leave. sonali: you want to buy them but drink afterwards. this sets us up for next week. we have goldman sachs, bank of america and morgan stanley coming in. the economically sensitive parts of the economy, auto lending, homes. morgan stanley has a wealthier consumer. they are still able to afford a home. lisa: one thing jp morgan ceo said, does this mean they are not passing it along as quickly

as they thought they would be to depositors? sonali: jp morgan is not passing it on as meaningfully as smaller banks. jeffries puts out this great chart about how much deposits have been repriced. lisa: at what point does not become a rallying cry? if you are getting so much money why don't you pass it on to your clients? at what point does it come under focus? sonali: do you park your money at jp morgan or do you park it out of smaller bank where there could be some worries? the smaller banks are getting a better rate on your deposits but this has been highly politicized. bankers have been asked, where is this money going if you're not giving the money back to consumers?

lisa: that's why you hear about modest buybacks. that's something we've seen is the game. how much will we see in modest buybacks? that will make investors happy but quell the critics. sonali: you can sit there and return a ton of money when you are laying tens of thousands of people off. the use of capital is a massive tension and only getting more so by the day because wade pressure still exists. lisa: there is also a big theme especially as we head towards jp morgan and goldman sachs white equity revenues have disappointed. do you have a sense of what is behind it? is this an execution issue for citigroup and jp morgan?

sonali: this is a theme for the industry. you have three of the biggest investment banks on the birkenstock ipo and lift. this scarcity makes it tough to keep equity training alive in terms of the fees for the banks. the goldman number versus morgan stanley is the talk of the town. goldman has been leading on financing hedge funds in trying to win business leverage while constraint is still alive and well. lisa: we will be catching up with you throughout the day and we will get those earnings from bank of her earning, jp morgan and goldman sachs next week. annmarie hordern i just have to think you so much. it is such a pivotal moment down

in washington dc and globally and i am looking at what you are looking for domestically to understand if we can create some kind of order? annmarie: the republicans are struggling to coalesce around one name. steve scalise had the majority but cannot get two to 17, they can only lose four votes. if this drug on's you have to think, will there be a centrist who comes out to reach across the aisle to give the democrats something they want to get a speaker. lisa: you mentioned the bank hearings in washington dc, people come and make a point they clip it put it on instagramming go home. there is a question of whether washington is losing relevance or whether they understand that? do you get the sense that people are watching the sentiment and

market moves? annmarie: they are always concerned about what happens in the markets appear on the financial services committee. in new york, people ask me why can't they get this done? that's just not how washington works. someone who new york is thinking in a pragmatic way. that is not how d.c. works. lisa: which is why policymakers are trying to figure out if they can coalesce around something which is why tom keene is in marrakech. we will be hearing from his fantastic panel coming up at 10:00 a.m.. including christine lagarde and the imf lieutenant general. right now and markets we see a little bit of a positive moment.

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jonathan: good morning, good morning. the s&p positive by .3%. the countdown to the open starts right now. >> everything you need to get ready for the start of u.s. trading. this is bloomberg markets: the open with jonathan ferro. ♪ jonathan: live from new york, coming up, jp morgan kicking off the earnings on wall street and treasury markets suffering from indigesti