i cannot understand the amount of nervousness around ecb. get u a scheduled speech, and the market moves on it because they are expecting something to be flagged. that is how nervous people are about the next move from the ecb. is it justified? >> yes, hypersensitivity is what we call it. for the ecb, the trouble is going to be to try to communicate a hawkish message without spooking the market. very small nugget of hawkish information caused bond yields to reprice very high in a very short period of time. bund yields especially are extraordinarily rich. if you look at the bund treasury spread, it was around 200 basis points earlier on. now we have come down to about 135. it is very much in line with the dollar. bunds are extraordinarily sensitive. jonathan: set us up for next thursday. there was some kind of debate about whether the market misjudged the speech he delivered at the ecb for. is that his job to clarify that message next week, and does that mean we could end up with a dovish ecb? >> he might try to clarify in a bit, but i don't

all the the ecb. but it will be interesting to get to that news conference and see if the president wants to clarify that message. happyl gross is probably because he had a warning letter that central banks must use caution. it could tip the economy into a recession. he also goes on to say a flatter -- now, we have a little bit of a warning. wehe says all the rules thought we knew may not apply anymore so it may be different. >> there's always a riskier. >> you never know. they will be joining us at 2:00 p.m.. again, bill gross sank central banks should be careful because a domestic and global economy are so over levered. whoooo. i enjoy the fresher things in life. fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me... ...you'll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... ...to find you the lowest price... ...on the hotel you want. go on, try something fresh. tripadvisor. the latest reviews. the lo

the degree of stimulus that the ecb provides.ou talk about complacency around the federal reserve, i cannot understand the amount of nervousness around the ecb. you get a scheduled speech and -- speech cash from president mario draghi at jackson hole and the market moves on it because they are expecting something flagged ahead of the september meeting. that is how nervous people are about the next move from the ecb. is a justified? >> hypersensitivity is what we call it. i think for the ecb, the trouble is going to be to try to communicate a hawkish message without spooking the market. we saw even a very small nugget of hawkish information caused the bond yields to be prized -- priced very high in a very short amount of time. and bond yields are extraordinarily rich, and they have been rich with the treasuries for a long time. if you look at the bund-treasuries spread, it was around 200 basis points early on. now we have come down to about 175 basis points right now, so the bund-treasuries very much in line with the dollar. and b

the ecb coming up next week, jim.about it and what you are expecting because not many expecting much, but mario draghi has had a lot to say. jim: i do not think we should expect very much. at the margin, i think he will continue to suggest, hint, whatever word we want to use, that they are beginning to "drain the punch bowl." they are not removing it, but the era of superlow interest rates and super high degrees of central bank stimulus is coming to an end. we are seeing the ending in the united states, canada, perhaps great britain. not so much in the ecb quite yet, but i think he is preparing the markets for an eventual move that reduces the degree of stimulus that the ecb provides. jonathan: you talk about complacency around the federal reserve. i cannot understand the amount of nervousness around the ecb. speech fromheduled president mario draghi at jackson hole and the market moves on it because they are expecting something flagged ahead of the september meeting. that is how nervous people are about the next move

the whole theory right now is that the ecb will have to be easier, the u.s.s well, global inflation. you can have diverging economies. when you look at the u.s., you are seeing strength. it's concerning because everybody thinks the fed will be there forever, and they are not. jonathan: you talked a little bit about the value opportunities across economies. this chart tells the story. walk me through it. >> this chart is showing the inflation differentials across our economy. while not overly significant, you are seeing a trend downward in terms of inflation. we see the united states moving down to 1.5%, 1.7% area. we see the eurozone at 1.1%. the bottom line if the differences are pretty significant. the u.s., where we think it is a transitory decline, we will start to see inflation push back europe, yout in have half the target and you were in a situation where you have a labor market that is very divergent. you have low inflation and unemployment in certain areas, and high unemployment and others. we expect that high unemployment to cause inflation to be lo

the ecb will have to be easier, u.s. will be as well.have global inflation as well, and divergent economies. the u.s., we are seeing strengthen american economies, best in american economies come and everyone thinks the fed will be there forever but they are not. jonathan: you talk a little bit about the relative value opportunities across major economies, and here is a chart that has the story. walk me through it. michael: this chart is showing the inflation differentials across our economies. while not overly significant, we are seeing a trend downward in terms of inflation on a global basis, and we know that is happening there. we see the united states moving area, we the 1.5%, 1.7 see canada at 1.4%, and the eurozone at 1.1%. we think the u.s. is a transitory decline, pushing back up to the 2% area due to the tightening of the labor market. you have the, target and you are in a situation where you have a labor market that is very divergent within europe. -- lowhave low inflation unemployment in certain areas and very high unemploymen

the ecb as such a long way away from that.y are still purchasing bonds. ,fter listening to mario draghi you get the feeling he is in no hurry to take that step. behind the fed. in fact, mario draghi said are from needing to question the idea of withdrawing stimulus, the euro area needs more monetary stimulus. said the last thing the european central bank wants to see is a tightening of financial conditions. he had a lot of reasons why he sounded like a ready dovish person on this ear it in fact, he is saying i am not ready to change the sense of where i am going, and that does not seem to be anywhere fast. >> unanimous in communicating no change to the forward guidance, unanimous inwere whenng no precise date for to discuss changes in the future. it has become a global story. the central bank feel they took unprecedented steps to cut rates dramatically in the financial bonds, start buying ending up with huge balance sheets, then they look at their inflation picture and it does not seem conducive with starting to take steps, at

the ecb is going to have to be easier, u.s. will be as well.have global inflation that is low and divergent economies. , looking at the u.s., we are seeing strength, we expect to see inflation resume, and everyone thinks the fed will be there forever but they are not. jonathan: you talk a little bit about the relative value opportunities across major economies, and here is a chart that has the story. walk me through it. mike this chart is showing the : inflation differentials across our economies. while not overly significant, we are seeing a trend downward in terms of inflation on a global basis, and we know that is happening there. we see the united states moving down to about the 1.5%, 1.7% area, we see canada at 1.4%, and the eurozone at 1.1%. the bottom line is those differences are pretty significant. we have the u.s. where we think it is a very transitory decline, and in the beginning quarter of next year, we see inflation pushing back up to the 2% area due to the tightening of the labor market. but in europe, you have the target, and yo

robert: the ecb has been running the wrong policy.he negative rates from absolute scored on that system, so it is time to wind down the qe and bring the rates back to zero will help them balance. in the u.s. they have been behaving as if the 2% inflation preemptivelyand tightening policy. we will get a lesson next year. we will get a new fed chief. they may be more of the same of what we have, or maybe somebody intent on hitting the job growth agenda -- donald trump growth agenda. i think the long rates is at or above fair value in the u.s. i think the spread have a ways to go. returns will be good. i think the risk is on the equity side, it is at the bottom of the capital structure and higher risk bonds if you get a hawkish view. jonathan: the federal reserve worried about risk and high risk tolerance, yet the focus of the market was on the risk-free assets. make sense of that for me. is it the risk with the risk-free asset or where it usually is? oksana: making the risk-free assets armor risky for that reason. we have talked about t

today it is the ecb and boj. yeah, we will focus on ecb a lot.st, let's get straight to the bloomberg first word news. reporter: it turns up the president trump had his second meeting with putin at last week's g-20. the white house says they had previously undisclosed conversation during a dinner of global leaders. the eurasia group says the meeting lasted one hour and the only other person present was putin's translator. mitch mcconnell's new plan to appearsobamacare to be dead. three republican senators have come out against a repeal without a replacement. they cannot afford to lose more than two republican votes. and greece's plan to return to the international bond market this week has been put on hold. that is partly due to a ci eiling set by the imf, meanign greece will have to it until thursday, when it will make a $4.6 billion debt payment. theresa may will try to build bridges the financial and trade organizations during the brexit talks. tomorrow she will launch a new business advisory group, which will focus on the u.k.'s withdrawal fr

julie: the ecb policy decision is out tomorrow.to euro area , the ecb staff is now examining stimulus plans to consider in december. while members have not yet held formal discussions on the end of bond purchases, investors are expecting hawkish guidance tomorrow. danny blanchflower is joining us with his perspective on the central bank. great to see you as always. great. julie: what do you think we will hear from the ecb? some of the recent communication has been a little bit more delicate given the market reaction. what do you think will happen this time? danny: i think they've got to be a little delicate and a little bit concerned about where the data are going. not least the inflation data. i was just looking at it ticked down from 1.9 in april to 1.4 in may and one point three in june. inflation headed below target, reasonable amounts of growth. let's get real, the european economy is -- an unemployment rate of over 9%. italy is at 11 -- 11% and france's in the 9%. rbc they have to because schists and there seems to be evidenc

buried in the news is the ecb meeting. is a huge dealing cannot rise above the news flow. calline: when will the ecb it from the markets and underpin what we are seeing from asset classes? let's get to first word news. jeffr: an admission about sessions by president trump. he says he would not have appointed sessions if he knew sessions would work use himself from the russia investigation. recusal unfair to the present here john mccain has been diagnosed with brain cancer . his office says he and his family are reviewing treatment options. he is 80 years old. more than five years in a prison cap after being shot down during the vietnam war. its monetaryept stimulus unchanged. they have pushed back their timing for reaching 2% inflation pure they expect to hit it around april 2019, one year later than previously projected. toresa may is being urged assure businesses over her brexit strategy. she will have her first consultation with business -- businesses since taking office more than a year ago. global news, 24 hours a day

what is priced to the ecb? we have the story running this moaning talking about the fact he may wait until the autumn. we have the sequence of the meeting coming up tomorrow. we have jackson hole coming up as well and then we get into that autumn period. how is the market feeling about the sequencing, the timing of the communication shift from the ecb? people seem to be fairly comfortable with the idea that this is going to be a slow-motion decision by the ecb. it will be very gradual and mirror what the fed did under janet yellen. she has done everything and a steady pace, she has tried not to shock the market, a little bit at a time. america seems to be taking his cue from her. we are getting more information but it is being pushed in sue the future. we will get more tomorrow and a bit more at jackson hole and more in september. providing they continue with this slow and steady movement, they probably will not disrupt markets too much. ok. we are in for a quiet summer. that could be a slow and steady move int

the degree of stimulus that the ecb provides. you talk about complacency around the federal reserve, i cannot understand the amount of nervousness around the ecb. you get a scheduled speech and the market moves on it because they are expecting something flagged ahead of the september meeting. that is how nervous they are about the next move, is a justified? >> high sensitivity. i think for the ecb, the trouble is going to be to try to communicate a hawkish message without -- the market. we saw even a very small nugget of heart this -- hawkish information caused the bond yields to be prized high in a short amount of time. with the been rich treasuries for a long time. if you look at the spread, it was around 200 basis points early on. now we have come down to about 175 basis points right now, so that treasuries in line with the dollar. nds are sensitive to what comes out of the ecb. jonathan: set us up for next thursday. there was debate around whether the market misjudged the speech that mario draghi delivered. is it his job to c

ecb's potential advice -- twice as fast. what you see in the euro is probably on the trade weight because it is on a tear. what we monitor is the trade weighted and is up 3%, 4%, 5%. .1 ofuld maybe shave off the 2018 and 2019. they will have inflation ballparks, the same as in june. by then, growth will have been revised up. the ecb is in a difficult position, they have to announce that qe's extended but cannot know how to announce the realities. where less in a situation things are good in terms of growth, a bit disappointing for inflation but surely it is comical. nejra: nobody knows better how to cross a narrative. and aare echoes of 2012 couple of years, do you agree? guillaume menuet: the ecb is not going to make a policy make they made in 2011. at the time, true, they were increasing tensions in the market. and the euro area this time, there are tensions in some labor markets but it is not high enough. they will announce in september they are going to buy in 2018 with a view of ending the program. it is a very cautious

the ecb.at the voice we are hearing in those kinds of stories? we are waiting to hear mario draghi speak in jackson hall. he seemed to signal the ecb would talk about this question when they taper to october. too early for him to deliver the clarifying speech markets want to hear. david: that leaves the fed all alone in the corner. kathleen: starting to look that way, david. the fed made it clear, we want to normalize the balance sheet. yes, inflation has been low. we are doubtful, but want to forge ahead. note out today, no change from the fed. they will not see anything from the balance sheet. he says they have not done enough to prepare markets. --means usn global font u.s.l bond markets -- the and global bond markets. the jp morgan not looking for a big change. yvonne: great work this week in tokyo. let's talk about the australian pushingnd -- market, centcloser to the 80 u.s. mark. let's get the latest from paul allen in sydney. we are expected to hear the governor next week. what will be

mario draghi walks a tightrope as the ecb president looks to shift away from easy money without royaling markets >>> ab bpob posts a weaker than expected second quarter. >>> deutsche telekom adds more than 1 million customers in the latest quarter >> we've been fortunate in the first quarter again following a good streak of acquisitions last year we extend with a disciplined approach our portfolio >>> we've seen a broader and higher open in europe with the stoxx 600 up over a third of a percent. taking its lead from more record closes in the u.s. overnight and a raft of earnings results are out today. on the whole broadly positive which has signaled the market opening higher you can see that reflected in the key movers in the markets today. let's look and see how the individual bourses are shaping up the xetra dax is in the lead, up 0.75 cac 40 up over a half percent. the ftse 100 up over 0.40% negative statements out of easyjet, yes, it managed to deliver higher unit revenue, but the issue is that there is overcapacity in the sector and it gave a bearish outlook for what's ahead let's l

removesro: if the ecb -- the ecb says it is ready to sizease qe in duration or if there is a need.mention of the sized so they can buy more every month. other sign that another sign the ecb is confident the inflation is there and the moment is approaching when they will release purchases. going to be an interesting day. team, plenty of coverage as we work our way through the morning into the afternoon. we're going to bring you the policy decision 12:45 u.k. time. for five minutes later with the mario draghi press conference. there are a number of ways to follow this. you can watch it here of course. you can watch it on tv go. tliv to the function. you've also got the life go function. we have got it covered from every angle possible. aberdeen asset management, what would surprise you? >> you'll have to work hard to be surprised by mario draghi. keeping that balance between not upsetting the market and making it clear there is a path to change here. it is how clear he wants to make it. i think he is god's dust is going to say -- he will get pushed in the press conference. he wi

i love how we jump from ecb to em.e first time we have actually done that. >> thank you very much. ben laidler will be sticking with us. coming up come mario draghi's news conference. all of that starting tomorrow. this is bloomberg. ♪ david: this is bloomberg. i'm david westin. morgan stanley was out with a earnings just over an hour ago. for a second straight quarter it be goldman sachs in fixed income trading. we have report cards from all five major u.s. banks. hawken hawken -- brennan is here. his morgan stanley the best of these five reports? >> it certainly appears that way. i would say the revenue trends quarter -- only one only one quarter. backr as my memory goes the first time we've seen a six-month strength where morgan stanley's revenue is higher than it rivaled in fact which i think is really something. david: they get lucky or smart? i six-monthy window. one quarter can always include volatility. pulling that off for six months is not something that can happen in my view. i think the idea that we have se

the fundamentals of the european economy and what is the resolve of the ecb?s the resolve of the ecb in terms of maintaining was financial conditions is very significant. the ecbet was viewing as being a bit more hawkish one month ago, and moving with the fed as far as moving accommodation, not likely to happen when you have inflation atning in your up -- europe half of the ecb target and weakness in the southern half of europe. i do not think it can last forever. jonathan: lisa, is this a message to the affects market or the bond market, or both? because he market, is saying let's not get your hopes up. let not yet -- we will not yields go up too high. we will keep them low. it makes me wonder how much it will allow inflation to pick up in the eurozone, which is supportive of the economy, and looking for a legitimate reason for the euro to get up, and also how much is the euro strength? simply, it is a dollar story. we have seen the dollar sank as prospects for the fiscal stimulus plan here has faded. >> i think it has been interesting to watch the euro stren

we are seeing possibly more hawkishness from the ecb.ange the mood and have asia turn hawkish? see a spikewere to in food prices for whatever reason or if energy prices, oil started accelerating. or wage increases in the developed markets. it would of course put pressure on the central banks to rein in or taper stimulus. but we are not there yet. india is backing loan sanctions. china is keeping rates at record lows. australia has been tightening because of the appreciation of the exchange rate. there are factors when we could see have the central banks in asia would have to change gears. it does not seem those ingredients are in place yet. yvonne: if there is any asian central bank you think could be joining in on this hawkish party, what would it be? jesper: it could be the people's bank of china. importantwe have an party leadership reshuffle coming up in october. if there is, from china, a more pronounced commitment to ease fiscal policy, it could indeed be the central bank of job -- china that is the first to hike. koll, thank you f

the ecb thinks the market misjudged it?you think they misjudged the words of the central bankers? >> i think the market, with respect to the ecb and the fed, has been consistently -- i would call it consistently calling their bluff, saying you will not be able to follow this path. it has at times been correct. but let's bring us back to, what does that mean for portfolios? what investment implications would this have? this can cause equity markets to go through a correction. what is going to be the force in your portfolio to diversify that effect if what's happening to your income is, yields are backing up? jonathan: if you think about what central banks forced everyone to do -- and i had this conversation throughout the week -- they forced everyone down the curve and down the capital structure, taking on more credit risk. if you reverse engineer that, with a load of central banks worried about risk, what happens to that development over the last five or six years? is that the reverse? is that the story you need to go up in

with the federal reserve tightening, the next step the ecb tightening.pretty unclear about the next step for the boe. the only front we have is over in asia, the bank of japan, for the most part right now. that said, whether a central bank is supporting or detracting from risk demand in a given market, it's defined by whether they are tightening faster or slower than what is priced in and what is priced in right now for most central bank action is a relatively gradual pace of tightening. if we do get tightening that is not priced in, that poses a modest problem for risk assets. i doubt it is a huge one. the issues with high yields are really about valuations and ties to the equity markets rather than bank policy. jonathan: everyone seems to be confused by bank of england policy. stick around with us. let's get you up to speed on the markets this week. what a week it has been. yields higher by a margin of three basis points, the big move further down the curve, 13 basis points higher. as we get back up to 2.82 on the 30 year treasury. still ahead on this

jonathan: who hikes first -- the bank of england or the ecb? of england my head by a hair. guy: bank of england by sheer accident. margaret: ecb. jonathan: where is the highest risk -- bunds or high-yield? guest: bunds. bunds. guy: bunds. margaret: high-yield. jonathan: we will wrap it up there. see you next friday. from new york, this is "bloomberg real yield." ♪ ♪ coming up on "bloomberg best," the stories that shaped the week in business around the world. another global cyber attack causes havoc. most u.s. banks ace the fed's stress test. the gop postpones a vote on health care reform. european markets try to stay in sync with central banks. >> the euro and markets have reacted very strongly to a speech by draghi. >> his comments now today in sintra suggest that august 3 is going to be quite a tricky meeting. scarlet: italy commits billions to save two banks. the country's finance minister explains the deal in an exclusive conversation. >> it is not a bailout. everything was done by the rules. scarlet: china preaches openness at the world ec

ecb spokesman declined to comment. the imf on they amount of debt the country can hold, according to officials familiar with the matter, the debt ceiling is included in the series of documents agreed on between greek authorities and the washington-based. the imf is expected to discuss the new credit line for greece tomorrow. venezuela has rejected president halt atrump's call to rerouting of the constitution that would consolidate the power of its socialist government. speaking during a lastly tell of meeting,ally televised the president said he was reviewing countries relations with america in response to the threat of sanctions. brexit negotiators have acknowledge frustration on both sides over the uk's divorce from the e.u. but there are signs of progress. second day of month the sootiations in brussels officials delve into the details of the main issues they want to make headway on. as well as the rise of european national u.k.. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more

it means they would do it without the ecb.overnment insists that they will not time this for pr reasons, they will going when the timing is right. that is their line. that said, we mentioned that the government of greece was in the market three years ago. since the start of the debt crisis in 2009, if they can sell five-year bonds at a yield of equaling the year of 2014, i am sure they would welcome that. marcus, thank you so much. we are looking ahead at the close of european equity trading. let's see with a are. down for the first time in five days. the stoxx 600, as you can see there, down more than 1%. the dax down more than 1.3%. not up by quite as much. 2/10 of a percent. -- 2/10 of 1%. this is bloomberg. ♪ whoooo. i enjoy the fresher things in life. fresh towels. fresh soaps. and of course, tripadvisor's freshest, lowest prices. so if you're anything like me... ...you'll want to check tripadvisor. we now instantly compare prices from over 200 booking sites... ...to find you the lowest price... ...on the hotel you want.

we will keep an eye on the ecb, meeting on thursday.n the agenda in terms of that central banking story. bloomberg first word news with juliette saly. juliette: thank you. donald trump is planning to shake up his legal team and is evaluating options for his communications. according to a person familiar with the president must thinking, the longtime attorney is likely to be eased into a less prominent role within trump's outside legal team as the fbi congressional investigation into his campaigns possible ties to russia -- mitch mcconnell has delayed plans to vote on a bill to overhaul the nation's health care system this week after senator john mccain said he would eat at home, recovering from surgery, leaving republicans short of the votes they need. citing york times medical experts to report mccain's condition could be more thought, and may delay his return to washington by a week or two. the brexit secretary has push for progress on resolving saudi issues. david davis's comments, as the second round of divorce talks begun in brusse

the ecb should is the technical need to terminate ecb qe lying in 28 -- buying in 2018 and draghi did very much focus on that inflation outlook. there was somebody saying it was about immigration, inflation, inflation. richard: for the ecb, they have a single mandate, all about inflation. in this inflation gets some sort of upward traction, they are going to want to carry on. they are going to have to do are because there constraints. until inflation picks up, and it has not so far in durable ways during the qe era, the ecb has a problem. they need to continue its policy but the technical impediments are there. nejra: do you think we'll have draw their -- do you think we will have draghi say anything more? richard: there has been anticipation. it could be that is the continuation of the incremental approach that they seem to be taking towards edging to some sort of announcement. you would think he would take that opportunity to say something, but after today, i think it is not as nailed on in terms of market expectations as it was before he spoke today. ,onnie: the bank of japan richa

that's according to ecb board member, benoit coeure. in an interview he warned that it would be unwise forthe ecb to let its guard down. he said the central bank will continue to adjust its policy as needed that last sentence is very important. he talked about removing stimulus flexibly and gradually. let's look at bond yields across the world this morning the ten yoo-year bund yield at 6 basis points a lot of people call it the bund tantrum. how long does this bond rout continue is this indefinite >> it really shows how nervous markets are about policy normalization and potential tapering from the ecb over the first half of next year and the reduction in the balance sheet and the fed actually selling its qe bonds effectively over an undefined s will go through phas of being nervous you may see periods where the economic numbers are not as good you will see rally in bonds. it's not a straight line we know investors are more convinced now that central banks are moving, shifting policies. that's because of the better economic performance

that seems that the ecb will take the next year, but we do not think the ecb will be any fester into hiking interest rates because of the low inflation rate. manus: ok, so to separate conversations. there is this issue that the ecb is running out of bunds to buy,. . overcompensating on france, italian, etc.. they are going to have to adjust qe, which is what steven major said yesterday. just because of supply and demand. old-fashioned issue at play. there is no alternative for the central bank. guest: totally agree. from that point of view, it's lucky that the economic data is coming out. but the same argument could apply to the bank of japan, they are still suggesting at tapering is far too soon. that's another debate, but we do think tapering will happen next year. adjustthis is slightly that the bank of japan just go for more stimulus there because it's doing us a problem. we are going to talk about the bank of japan area shortly. to0 p.m., we will be talking bill gross. what does he make of the bond market moves? daybreak, we are live where the g-20 kicks off today. matt miller i

the ecb looks like the pivotal event of the week. has happened with the dollar and the only thing that could turn that around is draghi coming out and saying, look, we are nowhere near the exit. we worry about the inflationary impulse and that growth is not as good as the market thinks it is. is that pretty much the only thing that could change it? >> i think so. but i also think that is the line draghi will toe. he is very concerned about his legacy. think draghi -- like yellen wants to steer the ecb and central-bank into smooth waters by trying to normalize, to the rhetoric, but do as little as possible, in terms of actual changes to the policy. guy: he is running out of finished bonds he can buy. he has got to change the policy. >> yeah, he is already reducing the amount. he can further reduce that amount. in terms of the steering in six to 12 months, he will be talking about the downside risks to inflation. in the past, when you look at the inflationary aspect on central banks, the eu has always said, we need to go through the su

mark: moore to come on what to expect from the ecb minutes tomorrow.ter, monte paschi givien lifeline from the tying government, why something's the restructuring plan is a turning point for the bank. this is bloomberg. ♪ vonnie: live from bloomberg world headquarters in new york, i'm vonnie quinn. mark: i am mark barton, 60 minutes away from the european close. let's carry on chatting and talk about what is happening today. let's talk about the ecb. mario draghi, did we misinterpret him in centra? >> he has one of the hardest jobs trying to communicate. markets. not upset the ecb is facing three difficult parameters. the first, inflation rates will remain low. thatecond grandmother is best parameter is that they did not -- parameter is they did not extend qe. the first quarter or half of afterwards, other countries ownership. they need to -- given the fundamentals are improving, they do not need to increase but they have to communicate in a way that the do not undo what they are trying to do -- we do not have that much space. to 118, the delta in term

we have higher markets across the board in aasia in europe the ecb will make a policy decision lateroday. the last time we heard from mario draghi, his comments thought as hawkish and sparked a rally in bond yields he might want to step those comments back give than it pushed the euro higher this morning in anticipation of the ecb european markets are up -- not across the board italy and spain just turning red. in washington news, the congressional budget office releasing new numbers on overhauling obamacare. according to the nonpartisan group, repealing the law would reduce the deficit by 4$470 billion. the number of uninsured would increase by 32 million, and premiums would double by 2026. the white house responding to the new numbers telling cnbc it continues to believe the cbo's methodology is flawed. >>> senator john mccain has been diagnosed with a brain tumor, that's according to his office sarah is live in washington with more details >> reporter: good morning. according to doctors at the mayo clinic where he's being treated. senator john mccain has been diagnosed with gleobl

ecb has been more unified.tohe ecb could the fact that the output gap in the euro is still more generous terms of there being fewer inflation pressures than the u.k., which is had to contend with a very weak currency over the course of the last year and all the consequences that brings for inflation. the work of recent statements from the bank of england has been to take the .dge off week sterling so it contributes less to inflation at the margins. manus: from the currency market to the bond market, there is a for.e that the data is to -- too poor. worse.a will get that will make it harder and perhaps it is mispriced. there is a risk for the u.s. and the u.k., probably more the u.k.. continues withk the desire to normalize and though youo so, even run into a patch of weak data. anna: michael, thank you very much for your time this morning. ecbill bring you all the latest decisions and the press conference later on. we will talk about corporate earnings, next. ♪ so we need tablets installed... with the menu app

now, the ecb and others are going to catch up and now we see the ecb will wait for draghi at jacksonoff a bit. hesitantlen was more on how committed she is in terms of current elation forecast going forward. has started going backwards. maybe we won't get as much in terms of said tightening. maybe we will get more in terms of the bank of canada and the .cb francine: it is sitting in europe. it is unlikely that market participants believe the ecb will act before the fed. it probably could not survive an interest rate hike. >> draghi mentioned maybe we will change the balance sheet and our purchases. that is going to be the extent of any moves in the ecb. it is that relative change to where the fed is not raising rates. maybe the ecb will do something in the next year or two. tom: i bring this up in the backdrop of what olivia has written about in the last number of days. here is the two-year yield and up.move three more said meetings -- three more fed meetings to come. do they have a theory or is the -- or, as the professor said, orthodoxy is under threat? >> we are not getting inflat

ecb?mmunication from the iraq: a great question.and the fed continue to do. like you said that this morning, the data is not terrible. so the question is -- as we talk about the cumulative movement -- even though we don't see data accelerating, the fact that we continue to have ok growth and improvements in crisis in europe -- in prices in europe, the fact bankwe have a hawkish data, it will be driving the markets. the fed may do the opposite and u.s. curve. francine: when you look at mario draghi and what he has been saying, wage growth has to do with the labor market. he said in europe, we are not creating quality jobs. but if the inflation stays at 1.7% over the next few years, it doesn't warrant a major policy shift. ira: probably not. but central banks around the world don't want their balance to be theet so big incremental price giver in the markets. so they will be thinking about purchasese reduce at of corporate bonds and sovereign bonds? in doing so, they will have an impact on market. even if they wind up having negative i

of england minutes, or ecb minutes. listening for the banks as they attempt coordination? simon: the fed minutes say they are keeping all of the options open. our expectation is another rate hike in september and then we will look to start unwinding the balance sheet in december. that is priced into the markets in terms of the fed funds futures. so i think, particularly as inflation starts to rolloff in the united states, the fed will keep those options open. when it comes to the ecb, our expectation is september that we will get tapering. with the program starting next year. so i think appropriately against the backdrop of the strong economic growth we are seeing and synchronized economic growth we're seeing in the united states and europe and etc.. francine: this goes back to what we saw with the minutes. from theaw a comment ecb board executive. this is the german 10 year yield. handle forseen a 0.5 quite some time. i think it has been more than 1.5 years. will it go higher? simon: i believe so. this level is not app

the ecb has had it.this is significant because it encourages like central banks that have no compulsion to hold negative assets to return to the market. tom: this is well said. are we there yet? my opinion is we're not even close to there yet. how much price damage do we need in microsoft stock held by the swiss national bank before we go this is not a good idea? we are not there yet. kamal: i think the direction of travel to the ecb has signaled it is going to be a slow pace. we are looking at a 2018 story rather than a 2017 story. guy: quick question on this number chart. -- bloomberg chart. a fundingen become currency? does the euro go up? if it accelerates to the upside, how big is a problem -- how big of a problem is that? kamal: this is consistent to what we saw last week. the bank of japan came in to market forcefully. be thek the yen will funding currency of choice. we are thrilled you are with us to get us started this monday. kamal sharma of bank of america merrill lynch. we will look at the re

was it the no side of the ecb? whatever it was, it has been moving around the world with great speed. jeffrey good luck says the recent selloff is assigned there is more pain to come for treasury bulls. let's get a view from singapore. mark joins us. does this have legs? is that it? where does it take us? i think this has legs, but i disagree that the treasuries are the focus. i think treasuries are the worst way to play this bonds selloff. europe is where we are seeing the real move. it is because the ecb will need to taper. they're running out of bonds to buy. we are on earlier and highlighted a chart showing european yields seem too low in the context that the economies of the u.s. and eurozone are beginning to converge in terms of gdp growth and inflation. european yields need to go higher. i should caution, we have had a big move in a short space of time. short-term, things looking stretch. overall, i don't see why you would fight these moves. matt: what about in the u.s.? we saw the 30 year yield rise to almo

the change delta is from the ecb. guy: we'll talk about the ecb in little more detail later on.aghi. let's focus on sterling. we are at 1.30. are you comfortable with that? the politics point me in a lot of different directions. am i comfortable with 1.30 on the cable rate? >> i would not say you are too uncomfortable. let me just go through a number of steps. valuation models have been thrown out of the window because we don't know the extent of the structural damage because of the brexit referendum to the u.k. economy. the other thing is that cable is up 6% this year. rallyells me the cable that we have seen this year reflects massively the weak do llar factor. i think you need to be looking at eurosterling. the divergence we are having on the economic and political front -- i think the risk is we go to 90, and there is an equal risk we go higher than that. >> that is absolutely right. when you look at it, it comes down to the difference in economic fundamentals. the eurozone is outgoing the u.k. at the moment, and currency will reflect that. guy: you have the spread narrowing

the ecb introduced qe, the selloff would be the trade if the ecb must too fast.en that we expect a slow exit we will still be long that the fact that it is not selling off as much, the market expects an exit they do not expect a mistake. long: if you want to be the euro and long the euro against the dollar, where's the stuffing off point? whenever the euro approaches 115 you hear some comments from the ecb sources, they try to talk the euro down. this is what happened last week. that is why we are -- we have seen the euro-dollar so it is safer to be short the euro on these levels. stays thanos vamvakidis with the daybreak team. bloomberg 10 tv .you do get it has video streaming, everything, the charts, the functions, everything you see on the screen, you can click on it. you can ask the guest of question. at the bottom of the screen you have an editor on watch. responds to demands for reform. the u.s. and kuwait result -- step up efforts to resolve the crisis. this is bloomberg. ♪ manus: welcome back. it has gone 6:48 a.m. in london. if you are in boston, tun

the ecb four in portugal.s the economy continues to recover, the policy stance will become more cooperative and the it --l bank can accompany not in order to tighten it, but to make it broadly unchanged. jonathan: there with the words of president draghi. big moves in the bond market. treasury, yields, buns plunging. did the market misjudged the speech? it kind of did. guest: it interesting because what the draghi said was 100% correct. they are not looking to tighten, they are looking to remove excess accommodation to keep accommodations at levels that are consistent with where financial conditions need to be. i did not deal his talk as overly hawkish. i think it's a reinforcement of what he has been saying, but it came at a time when the marks were surprised. people were expecting a dovish comment. the data has been decent globally, but nobody was expecting it to come out so strongly put right mario draghi and it caught people by surprise. guest: i would have to argue that this is not necessarily about the s