i finally have my life back. my wife used to worry about me having diabetes before my dexcom g7. but now, she doesn't worry as much, because she knows. it gives me a lot of peace of mind. i want him to be around forever. ♪♪ no other cgm system is more affordable for medicare patients. don't miss out you may be entitled to this valuable benefit. call the number on your screen now to talk to a real person. sonali: from new york city, i am sally graseck and -- sonali basak and bloomberg real yield starts right now.

♪ coming up, inflation fears rising. consumer expectations for long-term inflation are at their highest level in 30 years. the data sending stocks sliding and treasury yield hitting two week lows. scott bessent says the u.s. is a long way from debt sales. treasury yield stuck in limbo. >> 10-year treasury yields are stuck between a rock and a hard place. >> we have not seen bond yields come down that much. that looks mispriced. >> the economy is an extension. the 10-year treasury is still relatively stable. >> growth expectations are very high. >> what the bond market is ultimately going to be trading off of in the long end is what

the growth impulse is. >> it will be a well before the crowd they want to see lower rates from the fed gets any kind of pleasure. >> we reassess and rates drift lower over the course of the year. >> you have seen yields have been in limbo, kind of pegged to 4.5%. >> i would be shooting sub 4%. loaded 3.5%. >> the conviction level is a -2. nobody has a clue what is coming next. sonali: let's look at the consumer inflation expectations. at their highest levels since 1995. what is fascinating about this move is it is driven yields on the longer end of the curve lower. you would think higher inflation would mean higher yields. if you have a weaker consumer, another question about what it means if the consumer is not willing to spend to prop up the economy. look at the term premium that exists on the 10-year note.

it is at the highest levels since 2023. it has come down a little bit .the treasury secretary has been watching this come down and happy about it. it is quite elevated relative to recent history. this is showing you the cost investors are expecting when it comes to buying into the 10-year and the higher this is, the more expensive. you have higher government are a wing cost the future. does that remain elevated? we were saying treasury secretary scott bessent, who just joined bloomberg surveillance yesterday, this is how he is watching it on his radar. >> i thought the rate cut was oversized. the market responded but now we are seeing term premium come back down. we will see what happens from here. the 10-year has come down. the rates have come down every week since donald trump has been president. if we can continue that for 52

weeks, that would be great. sonali: joining us now is brian rehling at wells fargo investment institute, and jonathan duensing. let's start with brian on where you think the 10-year is going to go. different treasury secretary is watching every day and there is a spread that is significant from investors, is it higher or lower at the end of the year and how much? brian: our expectation is for rates to move higher. we have a pretty positive outlook on growth and also expecting inflation to tick a little higher. rates higher. the target is around 457 by year-end. 4.5% to 5%. really positive things going on in the economy going to push rates higher. sonali: where will this land at

the end of the day? do you stand in that category? are you in the yields driven lower camp for now? jonathan: if you look at the longer end of the yield curve, the 10-year is a reasonable place to land on the conversation. if you think about the drivers of where those yields tend to be over a longer period, it is highly correlated with nominal growth in the u.s. if we are into percent real growth -- 2% real growth, 4.5% on the 10-year does not seem that unreasonable to us. going forward we will need to see a big change as it relates to growth trajectory or the inflation trajectory to see significant deviation as it relates to where we are now in the market. sonali: let's talk about growth. what role do consumers play in the growth story? if you have so many in the university of michigan survey worried about inflation, are

they going to be adding to the growth story? brian: here in the u.s., consumers are a part of the story. if consumers feel good about their personal finances, which generally relates back to their employment situation, how comfortable they are in their job, their likelihood of being able to gotten find another job, they can feel comfortable there and they are willing to spend and continue to push both higher. good news for the economy. it is when you get some of the shocks and see people concerned about their personal situations as a comes to employment that you start to see a real pullback in the economy. we don't see that now. sonali: do you think there are growth risks out there? do they come more from the consumer end or the government side of things? when you see government spending being reined in, there was a sense for years now stimulus has

been holding up the economy in significant ways. does that drag down the growth story? jonathan: as you said, stimulus from the government has been a big part of the last couple of years. may be the persistence of growth in the u.s. as many were calling for recession. it's been a positive dynamic around immigration. if you look at the near term, as immigration has started to slow into the united states, that is going to have somewhat of an impact as it relates to overall consumption and productivity measures. if you think a little longer term, we still need to wait until we see what the impact is going to be of the eventual physical plant the trump -- fiscal plan the trump administration will put in place. we believe the second half of the year you will get more meaningful legislation on that front. it will come down to, as brian mentioned, how consumers feel

and businesses feel as it relates to some of the uncertainty emanating right now from washington, d.c. you are seeing that dynamic play out when you look at activity surveys, confidence surveys. there was initially a postelection bump across all fronts but now we are starting to get more recent readings where you are seeing consumers as well as businesses start to show less confidence as they think some of the flurry of activity that is going on right now has created a level of uncertainty that is maybe somewhat slowing down business activity. i don't is a paralyzing but it is having an impact on decisions that consumers and businesses are making right now. sonali: brian, what do you make of the decisions made in washington? when we think about the weeks ahead of us and the conversations around the budget, about the debt ceiling, the idea that could be a dollar increase

-- four chilean dollar increase --$4 trillion increase and how the treasury can pay its bills, will that create volatility in the bond market in the following months? brian: i think we will get off this 4.5% level in terms of volatility moving one way or another. i agree there's a lot of uncertainty out there right now. markets have digested this uncertainty pretty well. as over time we get certainty, markets like certainty. consumers, businesses like certainty. as the uncertainty turns to certainty, however it turns, i think it will be a positive for markets, for the economy. there's a lot of uncertainty. i expect a fair amount of volatility. markets in many ways already have become desensitized to a

lot of the rhetoric. you get some significant rhetoric in terms of tariffs and different things. early all you saw big moves and you see less of that now. i think the next key is to see how a lot of this turns into actual action. how it turns into certainty. in general, that will be a positive thing for markets. sonali: not list any potential future near-term volatility, you think about the treasury secretary's argument for lower yields ahead in the face of most investors thinking higher for longer, raining in the budget deficit, having non-inflationary growth, bringing down energy prices. jonathan, do you buy what the treasury secretary is putting down? jonathan: i go back to the comment earlier as a relates to potential growth in the u.s. economy, which we still see in the 2% area and how we think about the path of inflation over

the near and intermediate-term. the movement we have seen in treasury yields over the course of the last three or four weeks or so has been tied to investors adjusting some of their expectations as a relates to what the near term growth trajectory really could look like for the u.s. there's a lot of optimism coming out of the election around what potential growth could look like. now given some of the uncertainty as it relates ultimately to the policies and limited, it's under -- implemented, it's understandable they have ratcheted back expectations on the growth side. to the point you made earlier at the opening of your show, we have seen some inflation expectations moving higher. at the same time, yields have moved lower. i don't think we have seen real yields moving lower which is a reflection of how investors are thinking about the growth

trajectory in the u.s. economy. sonali: real yield is the name of the game. also the name of our show. thank you both for joining us. brian rehling of wells fargo investment institute and jonathan duensing. up next, the auction block. it has been a busy week for debt deals. that included a newer -- relatively new entrant into the market. michael sailor's company strategy with the sale of convertible debt that will help buy more bitcoin. this is "real yield" on bloomberg.

sonali: this is bloomberg real yield. time for the auction. we had a good pace of global debt sales this week. we start in europe.

primary market year-to-date volume reaching 500 billion euro. the shortest time ever. u.s. companies among the sellers this week as the trend of the so-called perverse yankee deals continue to grow. in the u.s., high-grade weekly volumes of more than $52 billion easily outpaced dealer expectations. notable names included hca, j&j, cisco and barclays. two high-profile offerings from the treasury this week. we had a 20-year sale and the 30-year tips sale with the highest yield since 2001. we will speak more about issuance this year, i guarantee you. secretary scott bessent on bloomberg surveillance affirmed his goal to boost the share of longer-term securities, but that will be a long ways away. >> that is a long way off. we will see what the market wants.

the fed said they may stop their balance sheet runoff. easier to extend duration when i'm not competing with another big seller. it will be pack dependent. sonali: joining us now to talk about corporate credit, ashley allen jp morgan private bank and wini cisar at credit sites. wini, i feel like it's always about the love of the market for risk and the bond market. as though nothing is going to go wrong. is that warranted? wini: we think no. there's a lot of optimism that is still priced into credit spreads. not enough of caution. we are seeing economic data coming with our expectation for stickier inflation. perhaps not enough momentum on the manufacturing side of things

to offset that and continue to grow gdp above trend. when we think about how that extrapolates the corporate credit, that leads to some attentional margin pressure. perhaps leverage points going a little higher. interest coverage coming down. when we look at historically tight threat in all pockets of the credit market, it makes a lot of sense to us. sonali: what is the potential for gains? you can also understand why investors are looking at high-yield and leveraged loans to the degree they are with stock market valuations where they are. this is the hunt for returns. what is the good, the bad, and the ugly? ashley: i want to acknowledge i would generally agree with winnie that spreads are at all-time tights and investors should exercise caution with choosing where they want to be in the fixed income markets. what i would say is that yields look attractive. on a historical basis when you

look in some asset classes investing greater high-yield, yields are at 15-your post goc highs. pretty compelling -- gfc highs. pretty compelling. you can get mid single returns from carry. that is where we think investors will get through, the carrie component. i would say fixed income is attractive in the sense it is i diversifier within an asset class or compared to other classes investors should have it in their portfolios. i would exercise caution in picking where they want to be to take advantage of those tight -- the high-yield in spite of the tight spreads we do see. sonali: what do you think of the lessons to be had for investors as they enter into the type of risk appetite you are seeing? the event you would advise people to avoid pockets of distress.

i have been pointing out bankruptcies or restructurings to my team as often as i can. they are certainly there. what would you advise to avoid? ashley: -- winnie: we avoid anything that will have an outsized surprise hit from potential policy changes or shifting global macroeconomic trends. when we look at sectors like basics that are globally exposed and perform quite well, we are cautious there. when we look at retail valuations, especially in investment grade, they are objectively tight. while most issuers are higher quality, we have some concerns that can continued trends that are shifting and layering on tariff and immigration policy and a laundry list of worries are probably not going to be helpful for retail issuers. avoiding those sectors that are

front and center or potential impacts from economic and policy changes and trying to align with that higher quality carry where we see opportunity in some of the bigger u.s. banks makes sense to us. sonali: ashley, one thing is fascinating me lately is you look at the flows to retail products. etf's tied to high-yield and clo's, there's been a lot of interest and fluctuation. what does that tell you about the direction of travel? ashley: directionally, it tells me again that investors are yield hungry. we have seen the inflow into fixed income broadly. maybe some of the riskier asset classes like clo's and the growth of the space we have seen their. it is -- there. it tells me investors want yield. i would express a little caution

when chasing that yield given that spreads are at all-time tights. looking at the consumer and consumer sentiment you talked about previously on the show. growth in that space concerns me a bit more. so, constructive on credit. investors want yield. it's really important exercise caution on where you are choosing to invest. sonali: to harp on consumer caution, do you thing investors are underestimating the state of the consumer right now? there's been talk about the bifurcation of the u.s. consumer. people have shrugged it off in a lot of ways and a lot of sectors. cannot drift into more areas of consumer spending that could hit the bond market, particularly corporate? winnie: there has been a lot of confusion around the state of the consumer. we have had consumer confidence numbers that have been quite

negative for a persistent amount of time and then a little better and now trending lower again. even as consumer confidence was down and out in 2022, inflation was speaking, we did not see the strain consistent with recession-like spending or retrenchment to more cautious consumer behavior. more broadly, markets underappreciated the amount of liquidity injected into the balance sheet and the global financial markets. now we have had a few more years to run through that liquidity. i do think there is going to be some shifting behavior from consumers that perhaps people are not necessarily appreciating because we have been looking at that consumer resilience and durability that was so evident for the past for years. sonali: ashley, if you think about the drivers of the bond market, people of the yield. the problem with the yield levels right now is there is a

drift higher. the uncertainty around the 10-year. many investors think you can see a 5% this year. do you think there is a miscalculation on that ripple effect and corporate credit? -- into corporate credit? ashley: i think it's important to point out something you were alluding to, the type of pulls in the markets. for investment grade i think about the buyer base. who is the yield hungry investor? broadly speaking, it is tensions, endowments, etc. those of the investor based on the institutional side that can potentially look through tighter spreads. granted, they want a spread pick up where they can get it. they are investing to offset their liabilities over 20, 30 here -- 30-year periods. on the high-yield side, a little bit of a different buyer base. less institutional but some interesting supply and demand dynamics happening and that the

market. the growth of private credit in the past when he four months or so siphoned off some of the supply that normally comes to market there. the imbalance in the high-yield side is providing technical support as well. both markets, we have this interesting technical support backdrop despite tight spreads or maybe some murkiness on the surface. sonali: one can only hope this support sticks. ashley allen and winnie cisar, thank you for joining us this friday and this very complicated market. still ahead, the final spread. the week ahead. it features german elections, nvidia earnings and u.s. pce. this is "real yield" on bloomberg. ♪ i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari?

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sonali: this is bloomberg real yield. time for my final thought.

a look at pce data next friday and the estimates per month over month expected to rise. year-over-year forecasted to fall despite a hot inflation trend. that does it for us. same time, same place next week. this is bloomberg real yield and this is bloomberg. ♪

vonnie: let's get a check on the markets as we head towards lunchtime hour. lower after data suggested perhaps those inflation echo vacations are getting -- expectations are getting troublesome. the for luminary figures, we saw the one-your inflation excitations rise. -- one-year infant tatian expectations rise. another drop in the 10-year yield.