matt: welcome to "bloomberg markets." on this day will we have the treasury refunding announcement, so much going on. have not really seen it move the needle too much. the s&p 500 up. it is the third day in a row for the green on the screen.

a percent or 9% up from the beginning of the year. the further out the curve, i think you see more movement and terms of a reduction in yields, growth in price. the 10-year gilts. -- the 10 year yield. we see nymex crude gaining about $.65 to 81.68. it is all about treasuries. that makes sense on that day we got the refunding announcement. bank of america address the concerns about supply. >> you should not fear the physical system because the economy will still be robust. there will be buyers, just a matter of what level will they stepped in.

we have had a lack of buying recently but that has meant the yields have had to adjust and that should incentivize more to think about owning bonds. matt: let's bring in torsten slok. thank you for coming on the show. i first want to get your take on the refunding and the amount of deficit and debt we have, what does it look like to you? >> an important backdrop is we're still trying to figure out why rates have gone up so much basically since july. matt: janet yellen says it is not a concern. >> you see the average size of treasury auctions next year will be more than 20% higher. someone needs to buy 20% more cross the whole curve in terms of the options that are going to come through and that is a substantial increase in supply. the worry has been maybe rates have not only gone up because economic data has been holding up but maybe they have gone up

because there are these increased worries about the supply being so significantly increased over the next 12 months. matt: i was talking with a professor at duke a little bit earlier and he was saying interest rate -- debt servicing costs are going to be $900 billion next year, more than we spend on the military. it seems to me unsustainable yet no one in washington is really talking about decreasing spend. >> the problem is if we have trillion dollar payments and interest debt every year, that is money we have to find somewhere. that either has to be taken out of common spending, alternatively by increasing taxes, the implication is that will weigh on growth and there is a lot of experience internationally when you have high debt levels, it begins to weigh on growth and you have to spend so much money in your economy on debt servicing costs rather than other things. matt: commodity traders say they

care for high prices is high prices. i suppose that could be true in rates as well. what do you think? >> if it is the case treasury supply is a driver of why rates are so high, it becomes important for markets because the indication is rates are not only higher because the economy is better, but also higher because treasury supply and if that is the case, the real test will be on friday. let's say the report comes in like adp suggests around 100,000. that is quite a slow down. if rates don't go down and we see rates only stay higher or even go up in the worst case, the market would be concluded rates have not been driven by fedex rotations but now driven by treasury supply worries. matt: what happens to the u.s. economy? we had a 5% on you to read you to pre--- q3 gdp, even accounting for inflation. i saw it was said if you look at

our net worth, you can see wealth has increased across the demographic. 37% i think since 2019. we are in pretty good shape. >> the fat hikes are working for households and firms and banks. -- the fed hikes are working for households, firms, and banks. for banks, we're seeing in the weekly data every friday, beginning to see more signs of slow down. the textbook would have predicted consumers are responding to fed hikes and that is what is happening. it is just taking a bit longer time. we have excess savings left and also fiscal stimulus. once those things begin to wear off, the fed will conclude today this is hawkish. they will say, let's keep rates

higher to let those mechanics work out so households and firms and banks continue to respond to higher rates. matt: you brought a fascinating chart. i have been asking questions about high-yield credit spreads all morning long. why aren't they wider if we are steering into the best? what are the credit markets telling us, it's cool? >> what is going on his people look at the level of yields and say this is really high. it is but the main reason is because the base rate, treasury rates, have gone up. what credit investors should be asking, are you compensated by buying the passive index according to the risk you are taking? or might you be taking more risk in lieu of credits and high-yield but also lower rate credits in ig where the spread this coming up because the pace rate has gone up? i would expect to see the economy slows down, the fed is trying to achieve, expect to see credit spreads

widen over the coming months. matt: how much of a slowdown do you expect? what do you see when you look at the sorry state of the consumer, how much money they're putting on credit cards, the default? does that mean we are in for a deep or mild recession? >> if i go on the bloomberg screen, it is expecting 0.8 percent, 0.5% for numbers that are just above zero. that is telling you the consensus has the expectation we are about to see student loan payments begin to have a negative effect over the next several months and also households running out of savings having an effect. on top of that, to liquidity rates, credit cards and auto loans. more stories about companies that can't get financing company including wework that have to rework the corporate finance structure with the consequence you're looking at it saying, fed hikes are harder and harder.

we should expect to see the fed gets what they're trying to achieve, maybe get the slowdown in the economy. matt: commercial real estate getting hit much harder. i wonder about employment. i wonder about when we will start to see the unemployment level rise and trigger real recession worries. >> it is surprising jobless claims have been so strong for so long. we will see on friday. if you look from the 12 month basis we are gradually seeing a slowdown in the pace of hiring but we will see if that continues or whether there is more needed from the fed terms of either staying higher for longer or being more hawkish. hire for longer and cutting coupons on the front and is still the. main theme for investors. matt: and wait for cuts at the end of next year? >> figure out if something does break. we have a lot of conversations in market about if something needs to break war will break. can this be done in a soft

landing way or is a risk you suddenly have mean people say, well, i don't want tobuy a car or house or furniture or on the corporate side saying we are not going to hire. we could have a sharper slowdown. at the moment, it looks like it is more manageable. intentions are growing across the economy as the fed continues to tighten and keep rates higher for longer. matt: torsten slok, greatly appreciate it. thank you for coming in today. coming up, we will talk to luke sarsfield neff ceo of p10. he joins us to discuss his outlook for alternative assets. this is "bloomberg." ♪

matt: this is "bloomberg markets." once a high fire cap to lead the multitrillion dollar money manager at, sex, luke sarsfield is now -- at goldman sachs, luke sarsfield is now at p10. built on the heels of acquisitions, his job is to find fresh ways to grow and joins us

now alongside our wall street reporter sonali. thank you for getting us the best guest. you just started your new job a couple of weeks ago and already have a huge pile of assets under management most of >> thank you for having me. so excited to be here and excited to tell you about the story. i just joined last monday so i am brand-new on the job. we have a great foundation with the assets we have, with the wonderful strategies we have. all of these strategies have really impressive records. you have great people. when you put that impressive platform together we have already built, we believe this guy is the limit. we see the opportunities as we continue to partner with a broad range of lps and attract new ones to the platform. the performance has been really

wonderful. this is a platform built with m&a as an important tool and we look forward to continuing to and the right discipline by use m&a to continue to build, and has come grow our platform. sonali: how big are your ambitions? we are seeing it ramp up and selling, frankly, people who have owned companies forever looking for liquidity. . >> these are large platforms. >> great question. our focus is really in the middle market. to get liquidity, to have the opportunity to partner with the franchise leading platform and grow and scale their business. they don't have a lot of opportunities and we really are the market leader in providing that for them. we think there is an opportunity to do it across a broad range of strategies so we really are just getting started. sonali: you have an interesting

window into the world. one thing you have is a fund to fund into venture capital. there's a lot of questions about valuations in private markets. are you seeing a lot of pressure downward especially because of the ipo's you have seen this year? let's call them a flop. a lot did not work out that well which could close the window further. >> creating volatility in the broader markets, whether we call it higher for longer or whatever. we are focused on very deep analytic fundamental investing. we have extraordinary partners. we get access to some of the greatest firms in silicon valley. they are making smart, prudent decisions. some of our other strategies are private equity strategies. we think there are a lot of defensive characteristics relative to the upper part of the market.

clearly, less activity than before. clearly, and impact on valuation. the impact and are part of the market have been relatively muted relative to the much larger part of the market. we have got great opportunities. we think many of our strategies are countercyclical. this is a great time to be leaning in and applying capital whether it is in secondary strategy, credit strategy, or otherwise. matt: you step into p10 at the peak of rates. >> we will see later today. matt: maybe. how does that affect your outlook? >> i am just a student so i'm watching but my guess is we are getting toward the peak. i don't know if we are at the peak. we have an all weather portfolio and that can sustain and thrive in any market environment. if rates stay higher for longer,

that proves too many. if rates go down, we think that provides fuel to accelerate growth in other parts of our platform. because we have this great diversified platform of market-leading strategies, we think we are in a position to be successful in virtually any macro. matt: you have a big position in the middle market. >> we are solely focused on the north american market. matt: does it give you an advantage? >> i think it gives us a massive advantage. if you look at some of the structural, it is not as crowded. there's less capital and more companies and therefore less competition. the net effect, deals come at lower multiples and generally less leverage used in the market. once we have these opportunities now portfolio to add value is massive. these are family-owned businesses.

deal volumes are down in the middle market but down nowhere near where they are in the upper market. sonali: contrarian view that smaller is more resistant. what does that say about the big guys? there's a great story today about leverage on top of the leverage on top of the leverage that most of these large firms are deploying in order to make it through this environment. does that not exist to the same degree in the middle market or is it at risk of happening now too? >> when you have an attractive market opportunity, people look at that, what you enter it. that is opportunity for anyone. but one of the things we have is a very defensible position in this market. all of our strategies have been at this multi-decades, 10, 20, 30 years and build a lot of proprietary infrastructure around it. these data mining, deep expertise and that. we have longitudinal data going back decades around multiples

paid, around opportunities, managers. we think we really have a protected and defensible position in that market. it could be attractive to others as the upper market continues to get crowded and challenging, but we think we have a preparatory decision -- position. matt: thank you, luke. luke sarsfield, p10. hi rates mean high borrowing costs. now some americans are skipping car loan payments at the highest rates since the 1990's. the best i can. this is "bloomberg." ♪

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>> this is "bloomberg markets." with interest rates making new loans more expensive, millions of americans are falling behind on their auto loans at the highest rate on record with data going back to 1994. with the fed indicating a place to keep rates higher, the problem is likely to persist. we will discuss this with margaret rowe. thank you for your time. it is getting more and more expensive to pay these things which are more more expensive to

buy but now we are seeing delinquencies tick higher very much higher and that has got to be a concern for people like you at fitch. >> thank you for having me. it is true, our subprime delinquency auto abs index did hit the highest point at over 6% with september data, but it is important to understand the composition of our subprime auto abs index has really shifted over time. the subprime lending market competition heated up in 2015 and 2016 and there were no a lot of -- there were a lot of new entrants to the space. issuance of auto abs has been at record levels. so there is just a lot more transactions underline the index, including those from smaller, newer, deeper some

prime bloomberg's -- london composition is really change. the subprime borrower is under stress. rates are high. persistent unemployment -- excuse me, persistent inflation resulting in reduced real income. the subprime borrower has exhausted the pandemic-related savings they built up. delinquencies and defaults are rising. matt: it is important understand the composition and the change and thank you for pointing that out, on the other hand -- well in addition to that, we have gone through this pandemic where people got these stimulus checks

and they were allowed to work at home. many people may be finding ways to make more money with less work. reaching to a car private that maybe wasn't advisable. how much of this is a leftover, hangover from the pandemic? >> certainly, sort of mid to late 2021 when we saw government stimulus run out, we have seen incremental increases in dillon with c's, particularly in the subprime space. -- delinquencies in the subprime space. i think there are still a lot of utility in the vehicle and in the priority of making that payment. that could be a factor that mutes the effect of further deterioration. matt: what will this mean for credit? what you look at when you see these new entrants with

haidi lun conceives? are they more resistant and giving him credit were starting to pull back?" subprime lenders are pulling back. they're reducing or even eliminating that lowest credit tier borrower. they're are making changes to things like thresholds for pti and dti. subprime lending has really shifted to where underwriting is so automated that lenders can make changes in reaction to the environment very quickly, and we are seeing that. matt: margaret, thank you for that time. this is the kind of data we really need to watch and the fed is watching i'm sure as well in order to make interest-rate decisions for the future. coming up next, the surveillance team takes over as we await the federal reserve decision at the top of the hour.

tom and lisa joining you next. this is "bloomberg." ♪

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