i have the 10 year breakeven chart ready here for you. getting into how much of this is breakdown in the breakeven, the drop in commodities, you do think then that the market is actually what's here or what it will do with the balance sheet? certainly there is the commodity aspect to it, but the five year breakeven should not have as much of the recent drop of commodities and it. the fed is making a policy mistake here. the market is calling the fed's bluff here. getting the portfolio runoff hiking this year based on the inflation and growth are slowing down with no chance of fiscal stimulus. the fact that decline is telling you that inflation risk is declining, if you get the fed leadership change used for more hikes, we could have a lot more room to decline. with the fed that's continuing its hiking cycle. what about how you are positioning yourself along the curve? there's some disagreement here with many going against what you're saying regarding long-duration. i'm short duration here because i think the market is underpricing. the cu

breakevens versus the 10-year is one of the most interesting stories.it looks like they have gone ex-dividend this morning. it is trading down. let us flip it over to the upside because the market is just down, but not by very much. upside, we have a merger that seems to be taking place. think year -- bankia is a nationalized institution. this is the spanish government's way of time to get this home thinking nationalization story to work better. is pricing that positively. what is interesting is the mining stocks. anglo is trading higher. glencore is up quite nicely. what you have seen overnight is quite a strong bid being attached to the iron ore market and other various markets as well. the chinese premier has painted a positive picture for growth going forward. that has rippled into the commodities market and is rippling into the operating companies. at the see that clearly get go of trade this morning. manus was mentioning what was happening around the british gilt. theresa may came under fire over her plan to protect nationals in the u.k. michel ba

jonathan: the market is going somewhere else, breakevens rolling over, five years have been rolling overor quite a while. the 10-year treasury yield is lower than when they started hiking at the back end of 2015. i find those two things hard to reconcile. do you? >> to take today's movement in terms of the yield curve, and i had another chart we were going to allow as well on this. that may not be the chart. we have expectations on fiscal policy that were part of the yield curve steepening, part of the increase in rates that is unwinding as well. you have a inflation potential between how much of this is inflation and inflation expectations, clearly this happening in the same week. a lot of the trends to lower rates were proceeding that. that is unwinding some of the expectations for much bigger impact on fiscal policy. pricing that out of the market. the fed is not forecasting rates, medium forecasts at 2.1%. 10-year treasuries are just north of 2.1%. either someone is wrong or we are going to have a very flat yield curve. which is it? ed can influence the front of the curve directly. i

not at all when you look at breakevens. i have a chart here that looks at the u.s. equal weighted for duration. we are at a nice cushion. today in the lower right you see we are at 42 basis points. if we get an increase in interest rates, you are wiping out that total return potential. that is where i get very nervous about staying too late in credit. jonathan: you are all staying with us. bob michael, kathleen gaffney, michael collins. yields grinding lower by two basis points on the two-year. 2.81% is the latter curve no matter where you look at it in the treasury market. still ahead, the final spread. the ecb and u.k. heading to the polls. this is "bloomberg real yield." ♪ ♪ jonathan: this is "bloomberg real yield." it is time for the final spread. over the next week, right decisions from the ecb, australia, and india. the big event in the u k, the election. june 8 is busy. the u.k. election, the ecb, and director comey is testifying as well. join me as bob michele, kathleen gaffney, and michael collins. what are you looking for? michael: we are going to start ta

how breakevens are coming in a little bit, this is a five-year break even. the market is paying attention to the t-mobile cell phone you pay one price and get all the data you want. this recent weakness goes beyond weak cpi. what else does it reflect? >> when you look at the timing and breakeven inflation rates, it again after the march fomc meeting. the fed raised rates and tells us we will keep raising rates? the market is telling you this is not right time to raise rates. if the fed wants to continue to do this, we will bring down expectations. tom cole and for everybody tomorrow morning, you need to steal this chart. if you are on global wall street, it is a killer chart that scarlet just all from matt. daniel curtis constructed this beauty for us. people,ant to dazzle this is for morgan stanley and you can do that. >> we are giving full credit, we are not stealing. we will have more with matt. .ere at morgan stanley michael mckee over at the fed, the international economics and policy correspondent will be with us as well. >> she will join us here. kath

jonathan: your story at blackrock, breakevens are rolling over, the 10 year treasury yield is lower thanhen they started hiking back at the back end of 2016. i find those two things hard to reconcile, do you? >> to take today's movement in terms of the yield curve, and i don't know, but i have chart we may pull up on this as well. we have an unwind going on us of expectations around fiscal policy that was part of the yield curve steepening and part of that tenure rates increasing. that's unwinding as well. you have a conflation potential between how much this is inflation and inflation expectations happening in the same week. there's a big focus on that. a lot of the trend towards lower rates were perceiving that. that was unwinding some of the expectations for a much bigger impact for fiscal policy uprising that out of the market. jonathan: something a lot of people find quite odd and myself included is that the fed is now forecasting rates medium forecast for the back end of 2018 at 1.4%. 10 year treasuries are just north of 2.1%. either someone is wrong or we're going to have a very f

no, no sitting at night at all when you look at breakevens.e a chart here that looks at the u.s. acting, equal rate of duration. if you look at the whites of 2008, we were at 160. it's a nice cushion. today, in the lower right, we are at 42 basis points. if we get an increase in interest rate, we are wiping out that total return potential. that's where i get nervous about staying to late in credit. jonathan: stay with us. let's get a market check on where bonds have been this week. yields grinding lower on two basis points. tents on 30, 2 .81%, it's a flatter curve no matter where you look at the treasury market. still ahead, the final spread, the ecb decision and it eat cake headed to the polls. this is bloomberg real yield. ♪ ♪ i'm jonathan ferro, this is bloomberg real yield. it's time for the final spread coming up over the next week, rate decisions from the european central bank, australia, and india. then the big event in the u k, the election. june 8, busy. i believe the former fbi director mr. comey testified on the same day as well. t

output, it is at $43 way past, even per barrel which according to wood mackenzie is currently the breakevenarrel. >> the big thing is that opec is banking on natural declines from oil wells all around the world happening as investment drops in oil. that, along with their cut, rebalancing the supply. they don't think he can produce very much oil. toy think the world these produce another five or 10 million barrels per day total. they think that all of shale can only do about half that. upy think reduction can go 2.5 million barrels to as much as 10 million barrels per day. that would bridge that gap. if that is true, then opec plans to cut oil, keep this applies down, it might be foiled by the u.s.. >> they may think that shale can pump that much oil. the market is squarely focused and.s. production inventory. let me show you a chart that spells it out, it is a little lighthearted. advise of what wti has done, you can see that every wednesday, when the inventory data comes out, oil seems to take a significantly -- wednesday is the oil markets these very time of the week. what are the chances

it is very difficult for a cable operator in many cases to breakeven on the cable side of the business, which is why broadband is so important, giving consumers more of the tour is that we can get them my cable through the broadband pipe. >> and the senior vice president of government public relations for media column corporation. they are being made out to be villains where the companies making all the cash up the internet are being wall audit -- being lauded for their wonderful innovation. i'm just saying, they make a ton of money off the internet. for them to go scott free with no regulations just to me that maybe that is not the right approach. maybe we should look at who is making all the money and why are they able to take so much of the system. it's because they're selling your information. >> all weekend, american history tv is joining our comcast cable partners to showcase the history of eugene, oregon. /citiestour.span.org we continue with the history of eugene, oregon. >> we are overlooking the -- the history of our 11 senator, wayne morris.

these are the five-year breakevens for the top line u.s. , bottom line eurozone. we are bouncing back a little bit, but inflationary pressures have diminished from those highs we saw earlier, this year. something to consider given the comments from draghi, carney and the ones we will get later from yellen. vonnie: seems to be going in one direction, that's for sure. a developing story, doesn't think -- dozens of companies in russia and ukraine have been hit by a ransom where computer -- ransomware virus. last month, euro poll said that 200,000 computers were infected in a global cyber attack. -- the u.s. coast guard is now confronting major delays in unloading and loading container ships at new york harbor as a result of the cyber attack. we are seeing cybersecurity stocks lower on the news. sometimes they rise, so it is interesting to see this reaction. we will continue to monitor this developing story. it is time to turn to health care and washington. the senate health care bill facing stiff opposition. at least 3 -- three republican senators have said they will

we managed to keep the business operationally breakeven. were not going to retire off of it.h men are husbands and fathers but watch them work and they still seem like it's too. >> things could get downright silly. >> the breeze, they don't make me look fat, do they quick >> they don't make your butt look bigger than they should. >> and while the temptation to engage in a battle is almost irresistible, >> hugs and high-fives only. if you're going to try and fight with giant cardboard robot arms, they have a few weaknesses. large gusts of wind>> playing is fun. even our own executive producer joined in and we think the kid size fit her perfectly. it's true. a giant cardboard robot will turn a lot of heads. >> it gets a lot of smiles and even though you can't buy legs jack, -- >> we don't know where this is going to go. we are structured in such a way that we just keep having fun and help others have fun.>> ktvu fox two news. >>> i would like to hang with those two guys. if you want to go outside this week and with the robot arms, keep the heat in mind. temperatures are topping

the breakeven cost they were considered less than $40. every time the price comes down, it makes fewer and fewer projects viable. if they do stabilize, we are likely to see production cutback. tranter we've got to leave it there. >> oil inventory numbers today. a lot more on fdma and. the republican victory in church a special election four gop control of the house. two strategies in politics who have skin in the game. the driver killed in a tesla self driving car accident may actually be to blame. u.s. stock index futures slightly down today. you are watching "fbn:am." we will be right back. ♪ ♪ here comes the fun with sea-doo ♪ sea-doo has the most affordable watercraft on the market starting at just $5,299 and up to $500 rebate visit sea-doo.com today ♪ whoa that's amazing... hey, i'm the internet! i know a bunch of people who would love that. the internet loves what you're doing... ...so build a better website in under an hour with... ...gocentral from godaddy. type in your idea. select from designs tailored just for you and publish y

i am looking at things like the five-year tips at breakeven.done everything was seen as inflationary since donald trump. this only crossed today and it took a negative and -- inflation trend we got this morning for inflation expectations and the longer term to get back to where they were seven months ago. awaywe are one minute so let's bring up the five-year break even. bring up the chart. normal, massive disinflation and a big recent rollover. >> it's been a recent rollover sense the great recession. -- us since the great recession. there was optimism the donald trump's policies would probably economy and that has fallen right back down. scarlet: as we look ahead to the decision, let's get you a quick data check. equities are not moving a whole lot, near record highs. in big move as been dollar-yen following the retail sales and inflation data misses we got this morning. there has been a lot of buying in treasuries of which means yields are coming down. and my crude 44 handle down 3.7% on the day. enormously important decision raisedas expecte

with the plans we have in the project, we can see a breakeven cost in 35 -- $35 or $38 a barrel.his year is a good year and an important year for bp. we have seven major projects in the commodity upstream. we got three of them already started and the other four on track. it's an important year for bp to get back within a financial framework. we have had our own special circumstances with fines and penalties in mexico and those are set now. erik: if the united states and the europeans were to relax sanctions on russia, would that create an opportunity for bp to do more business here and what you seize that opportunity? bob: we do business today well within the boundaries of the sanctions. we have a lot of work and new work and projects we have planned. for us it is not -- it is about maintaining a capital framework. we have a lot to do. that is probably the barrier rather than wanting to do -- erica: it is more a question of whether the funds would be available as opposed to whether you would have the opportunity to do it. bob: we work with ross net in russia, but it is the financ

the 10 year breakeven getting an eight-month low, the lowest since october.w that really ramp up and this point which was election day in the u.s. and in yellow is post-fomc and where we had the miss on the cpi data. today, theyields treasury yield is down around two basis points. we are seeing yields come down in the core in europe as well after the gilt yield moved higher yesterday following hawkish comments from the boe. how this is feeding into the dollar, this chart shows a tale of three currencies because if you look at the bloomberg dollar index it has underperformed the yen, dollar-yen in blue, and it has also underperformed the euro. there is a lot of questions about the euro as to whether we will see a rally like we did for the dollar in 2014. what has been fueling the dollar underperformance has been the lack of progress on u.s. stimulus, and prospects in europe and japan boosting those currencies. the euro the strongest performer against the greenback this year and it means that analysts have been changing their forecasts. strategists surveyed now

labels that those make too much sense as you go to 10 year or 30 year breakeven.it is probably down. francine: what is the one question you would want to ask prime minister may right now? is it if she stays, if we will negotiate a soft brexit? maximilian: to be honest, i think that the stands that we take in the u.k. between soft brexit and hard brexit is something in the next couple of months will not really be answered, particularly not from the continent of europe. theannot forget that elections in september in germany. inre will not be much leeway the next couple of months to negotiate. i don't think the leeway in the next couple of months is very great. one key point is the uncertainty. the other is how long this will take. it could be 10 years from now, we might still be talking about what shape future relations will take between the eu and the u.k. that kind of investing environment makes it difficult for long-term real fdi investors. francine: do we lose the clearing, and there seems to be a stronger place in the ecb saying that they want supervision over

>> i have a chart of my screen which is a discussion of the breakevens in the eurozone, as opposed to the bond -- bund has been trading. ucb decrease in inflation expectations has been an -- you see the decrease in inflation expectations has been an inch worth of move. that is interesting, particularly that we have had swings that are much larger in the last few weeks. jonathan: if you want the answer globalholds the key to rates and the cp curve, did you get that answer this week? says but i do not know if i got the answer. the first thing i look at come out where do i get yields? i think the u.s. is being dictated by what other central banks are doing. we have low inflation. at 1.4%,comes out yields are higher. why? as expected. >> as expected. certainly. where in a position here what is mattering more is what the ecb is doing and what the bank of england is doing, more so than what the u.s. data is telling us. the curve?hat is what is the plumber telling us right now? , i looking atberg shaving the curve, and certainly there have been historical 1994, orif you look at two thousand

up here, we have -- so, this is breakevens here, the white line. 2.9 percent.he u.k. 10-year. it has a real negative yield here. and that is pushing money away from the u.k. the u.k. does not need money being pushed away right now. you think it is incumbent upon the bank of england to think of a way to solve this? one of these lines are in the wrong place. -- is in the wrong place. can we fix this with a bank of england monetary policy? >> probably not. monetary policy can solve some of the bills but not all of them. many of the issues are political instability, people are unsure if they want to increase spending or not to predict or the continues to be a problem. wage growth is happening, undoubtedly. the economy is amazing -- is amazingly producing a number of jobs but they are located jobs. and the future remains cloudy in terms of what companies can and cannot do. our guest will stay with us. i want to quickly show viewers the tv function. you can use it not only to watch what we are doing on the video stream but also you can take the charts that guy a

michael: the movie lower is accommodation of what has been happening with oil and not even long-term breakevenon rates tend to be sensitive to moves in oil. also, the softer data we have had. we have had stabilization after that fall. expectationsad the on the impact it has on other assets. you have a situation where real yields and u.s. have been negative for a long time. this has been supportive to risky assets. because inflation expectations are lower, real yields are starting to move dramatically higher. you are having a pricing of liquidity conditions. this is concerning. it is heading higher, but had -- but it is for the right reasons. economic strength has been strong. really gilts are going up for the wrong reasons now. that is inflation expectations going lower because of less confidence in the economic outlook. the fed still conduct -- still determined to remain on that hiking pack. anna: will be fed make a mistake of the hike again this year? michael: we are expecting just one more this year. that is because we expect the focus to shift to balance sheets -- balance sheet reduction.

take the fed issue and the bank of japan's issue, they are all facing this dilemma. , andis the breakeveninning to rollover. there was a phrase he used , tie those strands together for me. they are all facing the same issue, a falling over in the perception of where inflation goes in five years. not worry about this too much because we're in a situation at the moment globally -- gung ho on it,ll why not be a little bit concerned about it? bob: we are now in a situation where growth is accelerating in europe, japan, and i think the week growth data in the states over recent months probably will reverse and we will see somewhat better growth data in the states. we are seeing strong data yet again today out of china, and at acceleration in india. the global economy numbers are being improved. at the same time, inflation is subdued. that is a good environment for global equity markets in an environment where bond deals actually stay low. bond deals are not a threat to local -- global equity markets at the moment. we will have more on the ecb at 7:30 on bloomberg markets. lots more to come on

e gilts the right breakevens are appear end up bank -- and gilts here. this was a vote on austerity, not brexit. hisill keep one wing of party happy by saying this and spend money as a result of that. that is probably going to mean more issuance. how, with this negative yield story in the u.k., is that dealt with? neil: i would argue we have not had any austerity on dirt phillip haven't we have been using our credit card. when international investors decide they are not prepared to support her link or the gilt markets, which they have done quite considerably over the last few years. i would argue at about 127, 128 with political difficulty. .ising rates in the u.s. maybe the u.k. is not quite the attractive place that i would like it to be. we would probably argue that gilts have to go higher. they are going to be wrong. the good news -- neil: i was just going to say, if sterlingin asia, fell another 10% or 15%, there is wall-to-wall buying for u.k. assets. matt: is the good news from these election results perhaps that you are going to see a much softer

breakevens are up here. they are rolling over.y rollover even more if what you are saying is going to come to bear. what about the bottom line? this is 10-year gilts. we have traded around this one person area for a while now. any sense that there is a directional change coming up? john: not really. when i would say, on a relative basis, we think things are going to go on shifting. we think yields in the eurozone in particular, but in the u.s., rise somewhat from their low levels. in the u.k. come on this negative outlook, and the probability that safe haven demand stays strong, and the sort of medium-term growth expectations remain impacted by concerns about what lies beyond the next couple of years as well as over the brexit process itself, it is hard for us to build up a sort of fundamentally bearish view on gilts. even in light of this hawkish swing on the mpc, the second half last year that we have been expecting -- you are not seeing any sign in these gilt yield of what is effectively a more optimistic outlook, which would d

breakevens are relatively high in saudi compared to the top.ome up compared to the budget deficit, more reserves and saudi does. uae has the most. this thing here is that what we have to look out for is the split between the domestic economy and foreign policy. there seems to be a convergence there that does not seem to fit together at the moment. definitely, the inclusion of saudi aramco, eventually, when they do the ipo, this could lead to saudi being about 4%, five percent of the msci e.m. index, which is huge, even bigger than china. this is what we have to look out for. guy: should i expect the argentinian market to fall today, equities? it was not included in msci. it was just too early. andrew: it is too early, i think. this is what msci is saying through the reforms started one to 1.5 years ago. we could see a negative reaction in equities, no question about that. there has been hope, very much built up on hope. she will do a new political party, so we will have plenty of shows going on there, so the october midterm elections. i think e

the five dollar call for january in the money, so the breakeven is only $.50 higher. six and 10 for more than 30 years. you have to remember, it has only been a couple years since we were at 20. there's a lot of potential there. i think there is a lot of potential for a low risk/high reward play for a long time in the future. me ask you something. this is a common strategy of yours when you look pretty far out. when you do that, do you hold the option of until expiration, or do you play with it in the meantime, cash out of it in the meantime? until -- i'md it looking to have enough time to be right. i will hold it until i'm in a comfortable position, whether that is 50% or 100%. to that level, it doubles. i have more time than i need and that is the strategy behind it. i don't know when that's going to happen, but i am taking that component out of the equation and using it as a strategy so i have time enough to be right. julie: all right, cooking with gas -- is it that i am using that expression? thank you so much. scarlet in julia? julia: thank you very much. forget

period where they should maybe cause and breakeven rates are falling, showing inflation rates are showing-- slowing. if it's right and it's slowing inflation, then it's all to the good for treasury bonds. matt: tech stocks are some of the biggest gainers. we had an amazing story going into the weekend with amazon depending on how you see that. is the tech wreck over? is the viktor troicki drop we saw, the big scare, done? guest: here in asia today, technology was the best performing part of the stock market. gainers,couple of the samsung electronics. wasby the way, some of that related to the idea that grant prices are rising. at the nasdaq index, certainly down from the high and nobody would want that to happen, but if you look at the long-term chart, it's close to what is happening. it's looking like the tech wreck is turning out to not be so bad. mliv was goodman there, blog reporter. at mlivfollow insights . know to only way i start my day. the first thing i fit on the bloomberg terminal. you can watch the program using tv . check it out here, as well as the video stream of wh

and talk a lot about the efficiency gains we are seeing in the shale industry bringing down the breakeven prices here. but how critical is the type of research that current funding provides? catherine: i guess it depends on who you talk to. it is very important for small, independent shale producers who really drove shell production. they have their one million dollar r&d budgets, so people are asking how they can can be when we have no r&d budgets of our own? the department of energy is saying we will help you with these studies that you need to do to get your efficiency down, get more oil out, do it more safely with less water. and for some companies like petroleum, the are seeing an immediate improvement to their production that is affecting their bottom line. so this is very important. scarlet: and we need to remind everyone when we talk about this, these proposed budget cuts have not been done yet. do you think there is any had a push back in congress or there will be to save some of the funding for this office? haverine: i think we already seen tremendous pushback from congress. in

the breakevens are breaking down at the two-year level, the white line. is the five-year break even. 10 year yield you can see is the yellow line. it is also heading lower. you can see how the fed is flirting with the thing it wants to avoid. that is what a lot of people are saying, hike rates to avoid inflation, maybe you will cause the next inflation. he does say in his piece that one of the legitimate concerns the fed has is keeping inflation bubbles --uel asset excuse me, keeping interest rates low, because people reach for yields and take risks they shouldn't take. that is one reason for the fed to be concerned. yvonne: we have got three central-bank meetings in asia the next several hours. we just had the rbnz several hours ago. what is expected out of thailand and the philippines? kathleen: let's recap the rbnz a little bit. they did hold their rates at a record low. they did not protest against the strong currency as some thought. graham wheeler is the head of the rbnz, also signaling they are not going to raise rates for a considerable period. he

i'm showing the breakevens, that -- the twos, fives, tens. they are all pointing down. direct contradiction to what janet yellen sees happening the economy, happening with prices. what do you see? david: in the bond market, we spread trades,e particularly for u.s. citizens. the u.s. tax bond was trading above the taxable treasury yield at the long end, is still is. it is one thing for the fed to say, we are going to forecast inflation, it will get to 2%, and we will act now. that is ok, it is forecast-driven rather than data-driven. those forecasts are not realized often and they have been extended and extended. we expect that to happen again. we do not see inflation pressures. kathleen: what is the risk? they are going to start reducing the balance sheet gradually. they are getting an important process in play. what if inflation does not rise, what is the risk to the economy for investors? if the fed goes too far -- right now it has not gone's -- done so. it has not done any shrinkage at all. then, you can tighten conditions. you reported earlier how financial conditio

the trump trade in terms of reflation and small caps, breakevens and in terms of the dollar, has alreadygiven back. the part of the market that may suffer if this begins to go further is sectors like financials and i.t. because the surface -- the sectors that have recently benefited from the trumpflation. most markets have given back to the gains. small caps are where they were. broaderthink this has a read through into emerging markets and even within the u.s., a lot of this is in the price. francine: yesterday we spoke to bill gross and he warned the u.s. market risks are at the highest since the global financial crisis. bess told investors to cautious about the high cost of treasuries. bill: treasuries are the most attractive of the developed market, in comparison to the tenure bund, 25 basis points. 190 basis points and relative to year, 205 basis points. more attractive on a yield basis, but still, i would suggest they are overvalued pricewise and under yielding and investors should be cautious of how much they want to own relative to cash. francine: alberto, this is how you measure

decelerated.s we should be realized a lower breakeven of jobs as we continue in this business cycle,eleration. we are now averaging something between -- tohink the fed is determined continue the normalization process, however they could be forced to go slower if the economic data becomes weaker. >> paul, how do you understand it? what michelle said, last year we were around the 18190 mark. -- i think the market is going to keep watching. a year ago we saw an anomaly in that data so is this a may or june think? we don't know yet. -- 135 was enough to bake a june, but it took september and suddenly you have stocks rallying again. tenure probably justified. fedmarket has caught the the last two years and the fed is winning. they told you they will give you three hikes this year. they are about to have to done. september is probably going to be a day there and that just puts december on the table. get the two out of the and wethe first half were really sent off in the market and then get him back on as a possibility for hike. i think the commitments are starting to shrink the balance she

>> the breakeven is interesting. i have seen research suggesting it is higher than last year.ting thing is how this will play into king salman 's plans to wean the country off oil. on the one hand, higher prices can helped that project along by garnering support and by giving the government more funds to enact additional stimulus measures. today we saw the government saying it was going to roll back some of the cuts on government official's salaries and bonuses. but on the other hand, lower oil prices can spur some of these efforts to diversify the economy and that has been the pitch a lot of saudi rulers have been giving the population. francine: tracy alloway, thank you. at saudihen you look arabia, this must be one of your main concerns, the ratings for this country, because it has so much going on. >> the announcement itself is not such a major surprise. the timing is always unknown. this is happening behind closed doors. the formally deputy crown prince, he has been accumulating increasing influence in power for some time. so, we were going down that road. i think that wa

breakeven rates have dropped to the lowest level since november 9.raise rates after tomorrow's fomc meeting. the dollar has been flirting with the pound's territory. .et's welcome randall kroszner he has chaired the committee on the supervision of banking institutions and is not a professor of economics at the chicago school of business. it is great to speak with you on a day like today. overall the markets and equities are doing one thing and then we have inflation going up, right? but it is the bad sort of inflation in the u.k. >> in the u.k., yes. the bank of england has a much bigger challenge than the fed does right now. it is a tough combination for the central bank to deal with. in the u.s., we have had continued growth, not gangbusters growth. it looks like it will be stronger in the second quarter, averaging about 2%, both wage inflation and headline inflation are below where the fed would like them to be and going down a little bit. but the fed is on track for the rate rise tomorrow, and then we will see for the rest of the year. francine:

francine: this is the difference -- i know you look at breakevens a lot.ds are rolling over more dramatically in the u.s. what does this tell us? >> the trend is that inflation is still dormant. both the ecb and the fed are struggling to reach the 2% inflation target, suggesting more caution continues on the unwind. that's a reason for the fed to want to raise interest rates, but i am still convinced by the argument that you need to raise rates today so you have room to cut them tomorrow. tom: a really interesting market right now. it will become more interesting tonight in london, 6:00 p.m. and we see that at 1:00 p.m. new york time. chair yellen with an important speech. it will become more interesting bloomberg will have full coverage of that in the new york afternoon. stay with us. this is bloomberg, and that is washington. ♪ reporter: this is "bloomberg surveillance." i'm taylor riggs. google will receive a record fine today. google has more than $90 billion in cash, so the money is not the issue. there is concerned the eu will force google to change