pce 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. >> from new york city, i am vonnie quinn. real yield starts right now.

coming up, consumer sentiment tumbles while long-term explosion expectations jump to a 32-year high. wiping out the week's gains and sending treasuries rallying as investors and consumers brace for a further tariff launching next week. we begin with the big issue. inflation picking up as markets gear up for sweeping changes. >> there are some inflationary pressures in the system. >> the view that inflation was sticky and would continue being sticky. >> there is a real possibility that we slow down. >> a deadly combination. >> the uncertainty impact, i think that is probably weighing on growth now more than anything else. >> we have been calling it uncertainty paralysis. it's really hard to make a decision right now. >> uncertainty is the policy. >> this post the fed in a

difficult position. >> bond markets will react far earlier than the fed. >> if they cut without the trends they risk of the bond vigilantes taking over. >> definitely greater than 50% odds. >> there is a lot of uncertainty, even after april 2. vonnie: let's look at the inflation expectations. you can see the uncertainty and how it's impacting the market. the sentiment decreasing substantially. right back to where we were two years ago. when it comes to the actual inflation expectation portion, we are seeing five to 10 year expectations rising to 4.1%. the one year inflation expectation is 5%. that's quite serious. we have to bear in mind that these are survey-based and the fed had things to say about that, but let's look at how the uncertainty is impacting the bond market. the two-year is falling below 4%

at 3.93. look where we were a few days ago. and that is the beginning of the fed meeting. back to the middle of january we are 50 basis points lower, so it depends on what timeframe were talking about. inflation, consumers and policymakers are sharing concerns. listen to the atlanta fed president raphael bostic. >> i was at 2 and moved to 1 mainly because i think we will see inflation be very bumpy and not move dramatically in a clear way to the 2% target. that's being pushed back. i think that the appropriate path for policy will also have to be pushed back and getting us to the neutral level. vonnie: joining us is molly brooks and david come the lead portfolio manager at blackrock. this is a fairly serious and quick rise in inflation. this happened very quickly in the final days of last month. how seriously should we take it

given that the fed chair pretty much dismissed survey-based inflation expectations? molly: i think that the inflation expectation survey, while they are looking at market-based measures in addition to the inflation expectations, there's a chance that these survey-based measures can feed through consumer sentiment and into other data. it's about how it turns out and how we see it coming through the data in the future. the fed is definitely watching this. the market-based measures seem to be king for them, for them to remain on hold for the time being. vonnie: how long can the fed dismissed the survey-based expectations given that we are seeing a slowdown in personal spending? although it still increased, inflation adjusted? the markets are saying two years out inflation won't be where you want it. david: thank you for having me on the show. i think it's a great point.

if you look, the -- the u mich survey, in the market, with only seen that manifest at the front end of the inflation curve. i think that it's on the fed radar. i don't think that they can fully dismiss it. i think that it is clearly related to expectations. u-mich is a volatile survey, very bifurcated between democrats and republicans in terms of the response rates. i think there are reasons to discount some of that. to see what happens in consumer and corporate behavior. to see if those inflation expectations actually pan out, if people are frontloading consumption as a result of this changing behavior and patterns. vonnie: jim bullard from the st. louis fed was on with us today and he was talking about how the market expectations are showing

that the fed won't its job in two years. >> inflation expectations for the next two years have been rising. about 3.25 today, a cpi-based measure. if that is put over a pc inflation, that is what the market is thinking. that is too high for the committee. the committee is trying to get especially core pce inflation, which came in hot here, down to 2%. they have to be higher for longer. if it goes too much further, they will have to raise the policy rate. vonnie: you are nodding your head. this is essentially what you just said. there are not that many months left in the year. at what point do we see the federal reserve deciding, we are definitely not going to be lowering anytime soon and are actually thinking about a hike? david: i think that our view is

that hikes are pretty remote at this stage. last year, my view was that the fed was in a recalibration cycle. it was about bringing the policy rate down to make sure that the real interest rate didn't rise too much.we had a 9.5% inflation rate go down to 3.5%. so, they had to adjust policy. at this stage the fed is on hold through the middle of this year. i don't think that they can be completely dismiss it. our expectation is that you will see improvement in key services categories that have driven inflation. oer, rental inflation, motor vehicle has driven 80% of core inflation. we are seeing those categories moderate against the backdrop. you're going to probably have some firming with the auto tariff announcement, some firming in auto price inflation. you will see some goods inflation increased. i think it leaves the fed on

hold with inflation in the low 3's is our expectation. vonnie: we also have nonfarm payrolls next week. what are you looking for? if we see any more weakness than we have been seeing, does that suddenly send the market into growth scare mode? molly: we had somewhat of a weaker expectation for next week. in terms of the fed path, at some point they need to start looking at growth data. whether it is payrolls, consumer spending, we are seeing the savings rates tick up with consumers being more careful with their spending. all of this at some point will cause the fed to be cautious on their other mandate in terms of maximum employment and the economy. we see that shift more towards the second half of the year when that comes through the data. vonnie: i was reading earlier, talking about 2025 being a tale of two halves.

the first half he thinks will be liquidity and growth-driven skier rally, but the second half will have problems with rising rights on coupon raises. does he have it right or is it backwards? molly: we think that the fed will be nervous enough about growth because of the size of the growth measure the second half of the year. in terms of the long end, we are definitely concerned about deficits. some of the fiscal policies, in terms of cutting these deficits. we don't really see that happening in the near term. we do agree in terms of seeing that increase some type of supply. vonnie: how much time are you spending at the moment given that we have imminent problems next week alone to get through, but there are also tail risks of the sos red flag moments with the potential for the fed chair to be cast aside, even though he only has one year left in his tenure.

the potential for deficits to be blown out, etc. how much time are you spending on the armageddon scenarios right now? david: great question. i think that next week is tough. i'm not willing to make any adjustments -- any judgments until we see what's announced. the deficit i would agree with what was described as one of the bigger risks in the fixed income markets. its white term premium is a big theme in our portfolios. -- why term premium is a big theme in our portfolios. if you look at the deficit path, there's a lot of discussion around trying to hit a 3% deficit from the administration on this. i think that that's an admiral target and would be a good spot to get to. i think that the issue is, getting there is difficult. if you look at non-defense discretionary spending excluding interest it is around $1 trillion. if you want to get to a 3% deficit you have to increase taxes by $1 trillion or cut spending by $1 trillion.

it will be difficult to cut that category to zero. i think that there needs to be a greater focus on how to get there. i think that our basic case around the deficit is that you will see somewhere between a 5% and 6% deficit. the supply-demand imbalance, i think that there's a lot of money waiting on the sidelines to get into fixed income and support the market, but that is price-sensitive demand from the household. that is all going to contribute. vonnie: briefly, both of you, coming to the end of the quarter, how was the quarter for you? where do we end the year on the 10 year? molly: yeah, this quarter is definitely very volatile. we saw a shift from the question of, is the economy reacts to are we going into a recession? -- is the economy reacts seller to are we going into a recession -- re-accelerating to are we going into a recession very quickly. david: i say 4.5 on the 10 year

is a fair level with the 50 basis point band around that. i think that you're going to see continued pressure and termites on the back of the deficit. vonnie: we will give you a reprieve given that we have one more session in the quarter. that is molly brooks of td securities and david of blackrock. next, the auction block. even with all of this market volatility u.s. high-grade issuance has the highest level for volume for a first quarter ever. this is real yield on bloomberg. ♪

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vonnie: this is bloomberg real

yield. it is time for the auction block, where even the record first quarter of high-yield and high-grade issuance, companies were looking to raise capital stood down the last two days as markets were hit by tariff uncertainty. before that stoppage, we saw deals from dell, t-mobile. marge volume has also already topped expectations -- march volume has already topped expectations. bausch health shifted the mix of its debt offering to put even more into bonds and loans. it is inundated ultimately receiving nearly $18 billion worth of offers for bonds. yields, 10%. finishing the treasuries, we saw auctions for the 2, 5, seven year. the seven year saw the highest primary dealer award since august. when it comes to credit, oaktree

's daniel says that its holding of amid the market volatility. >> it continues to be so uncertain with the tariffs. what we found is that markets are resilient. credit right now is resilient. it's doing well. for those companies that are issuing deals are oversubscribed. you have a bit of a supply demand imbalance given how many investors are looking at credit as more of a foundational element in their portfolios. vonnie: joining us now is maureen o'connor, the wells fargo global head of high-grade syndicate, and the head of consumer abs and cmts at bearing. maureen, what have the dynamics been like in high-grade? obviously it seems like you would rush the high-grade insets such a volatile environment, but are we seeing hesitation? maureen: that it is a risk asset like anything else.

the headwinds that our market experienced particularly early to mid march definitely impacted our market. we saw about a 20 basis point correction at the index level from the tights that we were sitting at mid february to mid march. we have settled back in. today is another softer day. i think our market tends to be better insulated than other asset classes when it comes to broader market choppiness. why? i think that the lead up was telling. there is a lot of cash still on the sidelines ready to get put to work. in our market, a lot is directed towards the primary calendar which kept our market open and operational from a new issue standpoint. volatility has been remarkably low but we are not immune. there is defensive posturing and how credits are trading relative to each other, little bit of spread decompression. favoring higher rated single a's and double a's over b's but i think that our market is wholly

operational and functional at this point. we've been able to weather the storm pretty well. vonnie: yulia, are you seeing similar dynamic sent what do you anticipate in the coming weeks given the amount of volatility that we are anticipating? yulia: i will say that i will echo a lot of what marine has messaged. in abs we've experienced about 25 to 30 basis points whitening over the past -- widening over the past few weeks. the massive over prescription levels that we've seen our reaching sometimes 10 to 15 times, have largely faded away. we are close to one time on average for more recent transactions. with that credit markets, the abs market as part of that, appear well behaved versus the equity markets. yields are still high so it attracts young buyers. as we were looking at the spreads more locally, we are not alarmed by the recent widening.

we were somewhat expecting it and somewhat positioned for it. when we started the year, we were actually anticipating a little bit of a bout of volatility. we were at extremely tight levels across the board in credit. so, we were building dry powder, staying disciplined, but potentially anticipating to deploy some of that cash that we had built up opportunistically into bouts of spread widening which we experienced over the course of march. vonnie: is that indiscriminately or are there industries you prefer? yulia: absolutely, where we see the best risk-reward is the abs space. while we are very cautious about consumer, we feel that abs at this point provides a great blend of downside protection and complexity premium. it also provides diversification for investors that don't want to

pile into equity or traditional corporate credit. at the same time it gives investors access to uncorrelated income streams or less correlated drivers which is more important at this point in the cycle. i like abs because it provides those structural protections. i like that bankruptcy remoteness is our friend and it is becoming more important in 2025.abs is providing the benefit of natural deleveraging, because we have a lot of advertising structures in consumer segments that de-risk you over time. the last thing is for investors who don't need a ton of liquidity, like private credit and private asset backed finance, is an extension of that. in public credit we navigate and in private credit we negotiate. vonnie: i love that. when you see the survey-based

inflation expectations rising quickly our u.s. england as the fed chair about -- rising quickly, are you as sanguine as the fed chair? maureen: the worst thing that could happen is stagflation. i think that the over arcing concern is still around growth. perhaps, some near-term pressure on inflation, but right now it is just the survey data showing that and i think that the fed is right to stick to the hard data. vonnie: what makes you say concerns are around growth right now? we are also seeing a tiny bit of softness, but still healthy enough data. maureen: it is the concerns around a prolonged trade war dragging on growth. we are already seeing it impact consumer sentiment. these things have a way of snowballing and building on themselves. so, you obviously saw a pretty meaningful recalibration in the way that equity markets reacted

to the first round of tariff headlines. markets have perhaps a little callous around the headlines recently, but next week is a pretty meaningful risk event for our market. time will tell as to if we see the meaningful drive on growth that will convince the fed to continue cutting rates as aggressively as the market would like. vonnie: in your universe, how do you figure out where the marginal basis points are going to come from? we are seeing such rotation, daily rotation in the stock market that feels like today the insurers are up, utilities. it has been chip stocks. obviously seeing massive selloffs, too. where do you like in terms of robustness in corporate america? maureen: the natural strategy is to go up in quality and liquidity. that is the behavior that we've seen across corporate credit broadly. even though there are more tariff-exposed sectors and underperformance, by and large

it has been the large-cap, highly rated companies that have fared better. when we moved wider there was decompression and tighter there was decompression. the single a and aa categories are doing the best. it is the lesser liquid triple b names having a tough time participating in the improvements we seen in the market over the past few weeks. that is where you see the core of the behavior shift for now. delineation sector by sector like underperformance in autos, obvious more impacted names. overall we are reasonably positive on credit. yulia brought up a good point about how we open the year at cycle tights and spreads. we needed a bit of a correction before we could get back to what matters, credit selection. vonnie: i can't wait for our next update. still ahead, the final spread.

the week ahead. president trump's liberation day tariffs. the march payroll report. remarks from fed chair jay powell. this is real yield on bloomberg. ♪ areful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪ we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

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no more mindless swivel chairing between platforms. or swivel chairing between apps. no more swivel chairing! i don't feel so good. what does he do here again? mostly that kind of stuff. will you push me back? no. vonnie: it is time now for the final spread, the week ahead. coming up on monday, we have china pmi's and inflation data from italy and germany. tuesday, u.s. vehicle sales, ism manufacturing. then we get jobs data. wednesday is the big event, president trump's tariffs go into effect. on thursday we have the auto tariffs going into effect plus more jobs data. jobless claims and ism services. the march jobless report and remarks from jay powell. let's look ahead at estimates for the nonfarm payrolls report.

the median estimate in our survey calls for 130 5000 jobs created in march. -- 135,000 jobs created in march. same time, same place next week. this was bloomberg real yield. ♪

>> welcome to bloomberg markets. u.s. stocks selling off after the university of michigan survey data showed consumers were more pessimistic especially about inflation as anxiety builds ahead of next week's scheduled tariffs. right now the s&p 500 is down for a third straight day with big tech leading the way lower. the vix is elevated above 21. we are seeing yields down as investors flow into treasuries. treasuries are gaining across the curve. the 10 yr