bond. some of the addresses that you just mentioned as far as homeless service sites may go away depending on how the $20 million goes. depending on how far the $20 million goes, it may be gone by the time we get to some of these additional sites. correct? >> that's a possibility but i think based on our current budget, we feel there will be money left over after delivering 440 turk street to do additional service -- renovate additional sites. >> anticipating seismic upgrade requirements, correct? that got missed in -- >> sure, i understand. that will be looked at by the design team as we move toward the development of the project scopes for the other locations. >> one of the things we have to do, look at the scope of the bond and what were the voters promised when the bond measure was voted on and passed. that's scope. that's why i'm asking. on the community health centers, which is page six of this, we have got, as i understood it, castro mission and maxime hall, did you mention there wer

each bond issuance has its own bond to say these are the funds, so this bond identified the various number of projects and the allocated number amounts that are associated with these projects. these identified early, the actual bond -- >> it depends on the specific bond. i don't have the bond ordinance in front of us. i think this is a subject that comes up repeatedly in this committee and when we're drafting the ordinance before going to the voters, the degree to which there is tension between providing a high degree of specificity for the voters so they know the bargain they're getting, agreeing to allow you to raise our taxes and in return these are the projects we're going to get. against the idea that our sense of what we want to finance over the next five, 10, 15 years changes and can change radically. what we try to do -- there is no answer. there's no formula for that, is try to find a balance between those competing objectives. >> peg stephenson from the controllers office. what joe commented on is probably the rough answer to your question. i believe within this bond there's allo

bond. would the control's office help us draft -- i think what we would like to do is have a memo from this committee to the capital planning committee to share with them the problems that we are encountering as a result of the broad structuring of the bond. >> you're welcome to send a memo if you like. i'm listening to your conversation and clearly we need to do a better job talking to you about the problematic design of this bond and answering these questions. i can rely the conversation you've had here to the capital planning committee, to brian and his staff and i'm looking at your march calendar, i'm not sure which item he would be reporting under? so city capital plan presentation is going to move to march 26th. okay. so i can ask brian to address some of the questions specifically. i'm not trying to stop you from writing a memo but i could relay the conversation and work with him for his presentation to address it. >> timing wise, i wasn't aware they were presenting. if you would con

the question as a voter did this bond, this 2008 bond, did the outcome meet your expectations. something like that? >> that's close. that's close. it's also how has the out come changed. were voters kept informed of a change. let's take for example a fire station on the port which is on a pier. it's hard for the fire engines to get out of there. so there's always a question about is this where you really want to do more on the fire station or do you want it to be moved off of the pier and closer to some place it can move. >> i thought in the last one or two conversations we had -- there was no objection amongst the group that this would be a good idea, number one, the satisfaction survey would be -- it's less to address what larry, you talked about, whether there are changes. it is pretty much a snap shot judgment of -- a report by the citizen of the donor to say how do you like this park or whatever program we're talking about as a way to render a measurement of satisfaction and some ways accountability for the fact that they voted on something and the city delivered on what t

places versus a much more narrow bond and i think start ing with the park bonds makes sense. the sunset playground for example, we know the scope of the project was reduced because of circumstances that came up. it's a real success but that's an example of a bond with a much more narrow scope. to see what the impact there. if we have a bond in the future, whether it's community health center or something else, we can get the feedback. i think it seems like a worthwhile endeavor for the committee to support. >> can i just add -- i didn't mean to jump ahead by providing the products. we just wanted to show progress on the committee's desire to do this. this is a good practice that we try to follow as well. you have a lot of hard data, did we spend what we intended to spend, was it on time and opinion data. this is what we're trying to get with the biannual survey. we want to know what people think and spend time trying to understand if there's a difference why and how to address those things. we're excited about you doing the project. you may want to test a couple different sta

bonds. lisa: wow.achel, i am wondering how much do you look at the yield curve when making product decisions? how much do you look at that and say, this indicates a falling down. that should be bad for particularly high-yield credit. rachel: yeah, absolutely. interestingly, the investment -grade market is more correlated with treasuries. they tend to react more in line over short periods of time. inversely will correlate. if rates are going up, spreads can come down. we saw that very much happening over the big rate rise over the last four or five months when we saw intermediate treasuries -- i look at five-year treasuries. because high yield is a four year duration asset class. you saw them move up by 60 basis points. high yield spreads came down by almost 60 basis points. still a positive total return. so the pacing of any selloff is very, very important. a steady leaking, wider rate can absorb positive total return. i do think that spreads are pricing in a very benign outcome. and we expect to pick

with a junk bond offering. t-mobile said it sold $2.5 billion of bonds to refinance debt.ireless carrier sold the notes in two parts following the collapse of talks with sprint in november. over in europe, spain drew record orders for its biggest syndicate offering since 2014. orders for the 10 year notes totaled more than $52 billion compared with more than $12 billion on the offer. and emerging-market bond sales at a record pace this year as issuers scrambled to lock in low yields. argentina to china, they have raised $65 billion in still billion in bond sales. still with me, subadra rajappa, rachel golder, and luke hickmore from aberdeen standards investment. you can hear that my voice is totally going away. welcome back and thank you for helping me out. so the big question to me is the biggest consensus trade of the moment is emerging markets. everybody seems to be piling in. my question is, where is the opportunity left? and luke, i want to start with you. do you see opportunity, and if so, where do you see it? luke: so i've been sitting in the emerging markets team t

ray: a 1% rise in bond yields will produce the largest bear market in bonds that we've seen since the0-1981 period. >> has that bear market started? are we in it? ray: i think we're in it. >> there will be a time the bank of japan and ecb begin tightening. that will be the time when bond yields increase. i don't see that now, unless i'm wrong on inflation. i don't believe the federal reserve will get the 10 year to 3.60%. >> i don't think the bear market is starting. since 1990 we had many, many predictions of a bear market in bonds, but it has not happened. lisa: joining me in new york is subadra rajappa, and rachel golder, and coming to us from london is luke hickmore. alright, so i want to start with you, subadra. the big question is, has the selloff in benchmarks just begun, for is this the extent of it and will people pile back in? subadra: that's a good question. i think that there is still more room for bonds the selloff from here. we have seen them pricing higher over the last few months. and i think that we could probably go a little higher. but ultimately it depends on where

are those being paid by bond funds? >> to the extent that the project program still has funds, we are allocating the city attorney fees toward the project. >> this is my observation, in the very unlikely case that this suit against the city prevails, i would think that the contract is really between the contractor and the city. they don't care who pays the fund. if we have depleted the bond funds i would assume it goes to general funds, i'm not a lawyer, but we're all at risk here. >> further on that, the claim that brought is against the general contractor, i would say a good part of the exposure is to web core and not the city. web core has named the city but it doesn't mean the city has that much responsibility inevitably. even if it's 5% of the value of the claim, they would name the city. a number like this, and given that they have already had some change orders that web cores that given via the city, the city has given via web core some change orders to kksns, this is a total cost claim, you guys have abandoned t

bond, i expect you to die. no, mr. bond, i expect you to die. $27 a share, out there buying up.alked to you about mr. bond, i expect you to die. that could be the euphemism. mr. bond emerges from the clouds, and the smoke on ruffles. what this chart is asking you, they are nervous, they are twitchy, they are even paranoid, bond traders that is. three markets telling you three stories. the bond market, equity market, and fx market. 255 is where we went on the yields. the bond market is bear. the curve steepened. this is incredibly important. the steepest move in over a year. huge amount of supply. this move in the bond market is going to work supply from the u.s., the u.k., and japan. year, he called the death of the bond market, and set a break of 3%. he believes the market can push higher to 2.6%. will starthaps what hurting the equity markets. three markets, three very different stories, higher yields. the fx is becoming a bit stronger. anna: we will see how long the equities keep pushing and fundamentally what it means for the u.s. economy, and the global economy. chief econo

bank holdings of bonds.t will be something that will prevent yields from rising meaningfully. lisa: i remember when people used to care about debt. when people used to worry this would be a problem. no one seems to care anymore, even though the amount of debt in the world is at $9.6 trillion. it has gone down a little. are you worried about this? are you buying negative yielding debt? luke: i am not. european debt is really expensive. it faces a lot more problems and probably closer to a bear market in u.s. treasuries. you will see -- you are starting to see capacity across and within europe. even italy is starting to see a lot of big improvements in the employment market. in thehe german bund 50's or 60's is the wrong level. that should be 90 or 100. that will take a lot more attention than a trickle upwards in the u.s. 10-year to the 3% level. lisa: there could be a potential violent unwind? luke: yes, very much so. mario draghi was telling you yesterday we will stop buying this stuff in september. if the

the $500 million geo bond was the first of a number of local measures that recommended both that bond and a subsequent one in 2024, incorporated into the city's capital plan. a few other recommended revenue measures that are currently being rereviewed by the transportation 2045 task force, the report for which should be out i believe this month. this is a picture by expenditure category of the overall bond as well as the, what was approved in the first issuance, after a supplemental appropriation you approved last year, and that you can see what is in the second issuance in terms of what we are proposing and what the balance would be. so the first issuance thanks in part to the supplemental that you approved is largely expended. i'll show you a chart later that shows where we are more specifically, but fully expended in early calendar 2019, but we have a number of projects that are ready and waiting for these funds that would come from the second issuance which is why we are bringing them before you now. just a little bit of a timeline in terms of the bond approval, you can see it too

overall, the 2012 geo bond, $195 million. and it was split between ourselves at rec park and our friends at the port of san francisco. this is our third and final issuance. however, the port still has a subsequent sale of 3.1 million that will take place in the future. and this is our issuance summary, broken out by appropriated projects. proposing to allocate 35 million to complete the neighborhood parks projects in the third issuance, and remaining allocation, toward the citywide parks and programs. i believe the previous presentation mentioned leverage funding. we do the same thing with our bond program. we have been able to leverage at this date, $30.8 million. these revenue sources include development impact fee revenue, philanthropic gifts, state grants and other city funding like the department capital baseline and other allocations. so, this is a status update of our neighborhood park program. we currently have six sites open to the public, two are in construction, and seven are in either planning or design. for cityw

a, b, and c, affordable housing bonds and infrastructure bond in transbay. the issuance of the bonds was intended to fund infrastructure in transbay and affordable housing in the shipyard and in mission bay, and so you can see the expenditure of this proceed is reflected here. as you can see, there's no change in our reserve funding. we don't have any dollars on reserve, so we have no expenditure from the sources. from other, our expenditure is going down $38 million and that's primarily due to the fact that the $20 million in cash proceeds budgeted in this current year, so that's a major drop towards next year, and then you can see in rttpf, nonadmin, sorry, difference, spending $42 million less, and that's being driven by three things. the first is that in the three bond issuances we had earlier in the year, we were really projecting a much higher level of debt service than actually resulted. that means that the market responded really well to our bonds and we are paying much less interest than we had actually anticipated. so, that's a major savings to the

this is how bond markets look at the moment and government bond yields are down.rally in yield over the past 18 months. there is a chart that talks about the 18-month period, is it a clue to something bigger. the buzz is about four rate hikes. what does that mean for the terminal rates? you are seeing a surge in the shorter-term rates. bones are down by 16 -- bunds are down by 16 pips. -- we will ecb is start to change in march. willeconomists say qe end. that will be set at the june meeting and the deposit rate will be lifted from -25 in the second quarter of 2019 from a record low of .4%. inspectingrkets are re-inflation pulse in the u.s., the end of qe in europe and the goal in line with bund. juliette saly has your first word news. germany's social democratic party is looking for ways to sweeten another government with angela merkel. delegates are to start former coalition talks with the block. leaders expect a tight vote, while young party activists lead a campaign to shun compromises and go into opposition. britain must pay into the european union budget and

we plan to spend all bond funds by the end of 2020. say program schedule overview of the neighborhood parks program. the green bars on this schedule are when construction is going to commence. and we have quite a few projects ready to break ground this year, like rossi, garfield, george christopher, margaret hayward, and willie woo woo wong. complete by 2019 and all the citywide programs los angeles completed by the end of 2020. with the passage of proposition b in 2016, city charter was revised. annual capital plan, and bond funding is a critical component to the successful completion of our goals. so, what these bond funds will do is make progress on a few of our deferred maintenance goals. we have a plan to complete the renovation of all our rec park swimming pools. we will complete renovation of all but five rec centers. and with the funding from the let's play sf initiative, make significant progress renovating -- and it is an unfavorable bidding environment. bids coming back 20 to 40% above engineers' estimate, we are looking at

it is equities versus bonds.seems that bonds are breaking and equities will win, but the reality is we have to be a little more careful. we have a lot of supply the next few days. all around the world, we have a lot of government supply. do, is what bond traders run it down to the auction, get the bids as low as they can, they have their shorts, and backup they go. i would like to see the close on friday, if it is a new weekly low i will start agreeing with jeff and bill. mark: let's talk china. marcus: yes. let's make it up. bear, some guynd said something to me about china, they always are saying this. a lot of policy is going on, on trade. classic -- trump is classic, let's put it on china so they will buy more trade. do you think china will talk down there biggest holding globally? no way. whether they buy more treasuries depends on the fx. they moved their fx policy recently, but i would not read too much into that what happens with the u.s. treasury's. a report from the brookings institute was that the fed

over the last week there has been a shakeup in the local bond market -- the global bond market.most investors being nonbelievers in a bear market. >> this will be a jacket. period. >> it is not much about china selling treasuries, much more about inflation in the u.s. the risk that keeps most participants awake at night. >> for the treasury market, it is more important, what the actions are coming out of europe and japan. >> you have the fed unwinding the balance sheet, the ecb slowing purchases. the boj this week, making changes, if we extrapolate, slower purchases. up theed to take a thumb scale and it is poised to stop manipulating the most important price in the world, the ten-year treasury. that is a meaningful change. >> $14 trillion worth of bonds bought by central banks in the past five years. that appears to be close to an end. >> the bond market is not dead, it is dealing in a bearish trend that a lot of people have not seen before. they have to learn how to do it. >> we have put in a structural yield, to say that we are in a bond bear market is premature. mark: let's

-- 110 million towards interest on the bonds. annual impact, 7.97 per $100,000 of assessed property value. so for typical, well, maybe not typical, properties assessed at $600,000, that would be about $47.29 impact on property taxes. the city charter imposed debt limit on general obligation bonds is 3% of the total assessed value of the property in the city. the city's outstanding general obligation bonds equal approximately .88%, if the board of supervisors were to approve the issuance, and the debt ratio increased by .1%, in the limit. additional, the ten-year capital plan, places a policy constraint to ensure property tax rates which fund the city's bond program would not be increased above 2006 levels of 12.01 cents, and proposed sale of these bonds is still consistent with the policy, and we are expecting to price and close the sale of these bonds in february. we have also submitted forms of the financing documents, including the notice of sale, notice of intention to sell, preliminary official statement for the board's appr

that will tie into the change in bond yields.hink investors will go for dividend yielding tech companies and that will become less attractive as rates rise. guy: what does that mean for microsoft? mark: i think microsoft straddles this directly. it has got great growth initiative. umbent some incom businesses. i think it sits between the two. i still quite like it as an hatestment, amonst t incumbent group. guy: why don't you like apple? mark: it is a tricky one because it is cheap and if i was a pension fund manager i would be more seriously considering it. but as a growth technology company, it's far from growth. expectations of growth over the next couple years are in the low single digit topline. if the x is less successful than expected, that seems to be what out, growth could be lower than that. guy: it feels in many ways a bit like microsoft a few years ago, not generating topline growth, off a lot cash and it depends on what kind of investor you are as to your attitude on whether or not you own it. mark: it does and it de

rising bond yields are not at catastrophe. rising bond yields drives the banks. be just a precursor to a little bit of a fade in the qe move that might not necessarily equal disaster. ric: that's true. this is one of possibly the core questions that investors will have to answer in the next year or two. as you rightly say, usually the early stages of monetary tightening, which are associated with a bond yields inching up often, or great news for equities because essentially, , not are still very low really pulling back the economy at all and economy is rising. the traditional goldilocks scenario. is it different this time? that's a question. the reason it maybe different is pushed policies have bond yields down to such low valuations mayty be to some extent the payment almost very low yields. that may be the case, although i don't see that as being a catastrophe. be 10% worth of bay andon -- a relation, profits continue to grow at a good pace in the overall result for stock markets could be a bit of a pullback rather than a real catastrophe, as you say. anna: tha

. >> it could be a bond bear market. think it is more of a teddy bear market than a grizzly bear market. >> we don't need to worry about the 10-year getting too expensive. we've seen 3% in the past few years. our work suggests the sort of positive effect on the financial sector of the 10-year moving higher right now overwhelms the potential negative effect of the valuation compression as rates rise. >> we have been talking about this rate rotation for years. people are going to go out of bonds into equities. bond returns, we are only three weeks into the year but they are not very good. maybe you start to see as rates move higher and returned sir to -- move higher and returned to start to deepen in the bond market, people moving equities and supporting the equity market. >> at some point, when the bond yields get up to 285, perhaps it will get to 3% in the 10-year, i don't think so but perhaps, the equity market is going to pick up and take notice. i think it will be to the benefit of the bond market. >> with higher rate

junk bonds with the largest inflows in over a year.e begin with a shakeup in the global bond market. >> this will be a jagged period, the first quarter. >> not so much about china selling treasuries but more about inflation showing up in the u.s., the risk that keeps most market participants awake at night. >> i think for the treasury market, it is far more important what the actions are coming out of europe and japan. >> you have not only the fed unwinding its balance sheet, we have the ecb slowing purchases, what we have seen from the boj, they are making changes, which we extrapolate, slow purchases as well. is poised to take its foam of the scale, and poised to stop manipulating the 10-year treasury. >> $14 trillion worth of bonds bought by central banks in the past 4-5 years. that appears to be close to an end. >> the bond market is not dead, it is just dealing in a bearish trend that a lot of people in the market have not seen before. they have to learn how to do it. >> we have put in a structure, secular low in yields, 130, 140

if look at the bond market.omere the bluebay would be that perhaps you are a little bit too in your rereading of the u.s. treasury market. you're going to get for great -- break heights. it is martin luther king day. they are flat at the moment. they are saying is four rate hikes from the federal reserve. it will not be a similar taper tantrum, but perhaps a drift higher. you will see central bank come in and buy the bonds at 2.6, 2.7. .at's up we are shy of the .6% yield in germany. draghi's message going on hold? a move in is pricing rate in december of this year. two hikes going into june of next year. these markets are beginning to rerate, reprice, and reconsider interest-rate risks for 2018. those are your markets. let's get to juliette saly. she has everything else going on in your first word news. juliette. juliette: carillion has said it will take steps to enter liquidation. the company said its board has concluded it had no choice but to take steps with immediate effect. that decision came after talks w

it 0% is a bond bear market, sign me up.-on't think that treasuries it is hard to draw a downtrend line for the past 25 years. jonathan: but you know we will do it. just going to drive a 20 five-year line for treasuries. matthew: you should do the same for the jgb market. you'll discover unless you expect bonior's ago into -10% territory, eventually, those downtrend lines will be broken. let's think about it from a total return perspective. it zero is the worst we can expect, then given where equities are, it is not that bad of a buy. it is a great edge in zero is the worst-case scenario. say 3% or higher as a bear market. i think we are far from it. 2.65 is already priced into the forward market. if you think 10 basis points above what they are pricing in, that is not a bear market i would argue. michael: it doesn't feel like a bear market. you go back to year, we were at or near the levels, great opportunity to buy duration. proved to be a head fake. that related to fundamentals. i still see fundamental suggesting rates ar

they were zero coupon bonds but not toible on maturity, cash, but to 6% bonds.he marketplace slowly rose to sixes as maturity came closer. when a holder of revolutionary war debt redeemed iou's, most of which promised 6% interest, they voluntarily received a combination of sixes, deferreds, and threes that yielded about 4% total. a few of the holders thought that was a bad deal. they held off. but most preferred the more or less certain 4% over the possibility of one day receiving 6%. hamilton's bonds were fully funded and backed by taxes. while the wartime iou's were not. in addition, a liquid market in for hamilton's bonds formed immediately. holders could sell their bonds to other investors at fair market prices quickly and at minimal brokerage expense. holders of revolutionary war iou's might not be able to find a buyer at all. or they might've been offered a lowball price. a holder of a three, by -- a holder of a three, by contrast, could see the going rate published in the local newspaper. and contract with a broker to sell it in a day or two for a .5% com

those are bond funds. the court has to make a decision how the money has to be spent and they're expecting a decision in the late spring to put the call for the money out in the summer and the way they legislated is san francisco may be able to compete to get our own pot of money. it will probably be in the $80 million to $90 million range under the general offices. and general approval and it's exciting. it's pretty great. i didn't mention there's a project we'll be planning for and some changes with our local tax credit and prioritizing housing for the homeless through a special needs program they have. also again, the state's done work to consolidate their housing programs through the tax credit community and bond committee and lending arm and granting arm. that's been great to watch. some challenges. one is cost. it costs a lot to build in san francisco. we're very proud of the results of our work and it costs real money. in this case we have land so it's not a challenge on treasure island but generall

also close on bond spreads.ave our credit reporter to tell us about the bonds and why they are issuing now. tencent does not exactly need the money, does it? alibaba's, following $7 billion deal you would not expect that. today they came out with a five-year floating note and five-year fixed as well as well as 10-year and 20 year fixed notes. they said tencent does not need the money, but they are in that cash position. it is a good opportunity for them to go to the u.s., do a roadshow. ther brand awareness in u.s. is not as strong as alibaba right now. as you said, their bonds are trading well. but recently tencent was widening as alibaba is in that -- anticipating this to come. they offer 30 basis points over alibaba's bonds, which means eventually tencent may spread wider. which may be fair because tencent is rated one notch lower than alibaba. david: that sounds fair. talk to us. they have not priced yet. we think they will price at about that spread. what are investors saying about this? >> interesting thin