this is "bloomberg real yield." ♪ lisa: i'm lisa abramowicz in for jonathan ferro. : i'm lisa abramowicz in for jonathan ferro. this is "bloomberg real yield." time for the final spread, coming up over the next week, u.s. markets will be closed on monday due to labor day. during the week, we will hear from the boe's mark carney. bank of canada will make a rate decision. and we will get the u.s. jobs report and potentially another round of tariffs. still with me is priya misra, michael collins, and iain stealey. i want to end with what your highest conviction contrarian bets are heading into the year. priya, i want to start with you. priya: i will combine two things. i will say lower rates and higher vol. interest rate volatility is at all-time lows. i think most people expect interest rates to rise. and we do expect the fed to hike in september and december. if you buy the combination of an auction, and should make the trade work, as well as lower rates, i think the risk around em, risk around tariffs, all of that can potentially make rates drop as well as vol pickup

this is "bloomberg real yield." ♪ lisa: i'm lisa abramowicz in for jonathan ferro. : i'm lisa abramowicz in for jonathan ferro. this is "bloomberg real yield." i want to head to the auction block, where the u.s. treasury auctioned off more than $280 billion this week. we focus on the seven-year sale. the bid to cover was 2.65, marking the highest demand since january. the primary dealer take was roughly the years average. looking closer at the short end, the two-year sale of $36 billion had a yield of 2.65%. and a bid to cover of 2.89%. over in corporate, much, much quieter. u.s. junk bonds had no prices or launches to speak of. issuance so far this year is the lowest year to date total since 2010. still with me is priya misra, michael collins, and iain stealey. i want to turn to europe. the eyes are all on italy. iain, you are in europe, let's start with you. we are focusing on the fact that bonds have climbed to the highest since 2014, and the gap between bunds and italian yields has climbed to the highest since 2013. what is going on? what is the fear right now wi

lisa: from new york city for viewers worldwide, i'm lisa abramowicz in for jonathan ferro. with 30 minutes dedicated to fixed income. this is "bloomberg real yield." ♪ coming up, the selloff in emerging markets is roiling debt investors. how far will it go? plus, the flattening treasury yield curve is raising alarm bells. is the u.s. economy vulnerable? and italian bond investors run for cover ahead of what is potentially another month of political turmoil. we start with the big issue, pain in emerging markets. >> emerging markets has been hit quite hard. >> global liquidity is actually on the retreat. that will definitely leave traces in emerging markets. >> some of them are in good shape, some of them are not. they are all being tarred by the same brush. what that means is investors who are careful about looking for the nuggets are going to find some really good opportunities. >> we do see some selective value there. what has hurt the emerging markets has been the strong dollar and the fed tightening and higher u.s. interest rates that has caused capital to move out of em

this is bloomberg markets area diane lisa abramowicz. -- markets. i am lisa abramowicz.ady to impose tariffs on an additional $267 billion have chinese goods on short notice. on top of a proposed $200 billion already announced. the president told reporters on air force one, i hate to do this. according to u.s. government data on last year, those tariffs would more than cover the value of all goods the u.s. buys from china. the president is speaking at a campaign rally in north dakota. a trump campaign advisor who triggered the russia probe will find out whether he is going to prison for lying to the fbi. he will be sentenced in federal court in washington where robert bowlers team is pushing for -- robert mueller's team is pushing for six months. defense attorneys are asking for probation. he was the first to plead guilty in the mueller probe. that is according to the economy minister who spoke to bloomberg in berlin. >> i cannot tell you today the embargo or the [indiscernible] neighbor from economic point of view. it is behind us. we are doing excellent. from economic

lisa: from new york city for viewers worldwide, i'm lisa abramowicz in for jonathan ferro.ed to fixed income. this is "bloomberg real yield." coming up, the selloff in emerging markets is roiling debt investors. how far will it go? plus, the flattening treasury yield curve is raising alarm bells. is the u.s. economy vulnerable? and italian bond investors run for cover ahead of what is potentially another month of political turmoil. we start with the big issue, pain in emerging markets.

alix: lisa abramowicz and michael mckee, thank you. general mills earnings reaffirming fiscal 2019 oh, earnings beating gross margins, 33.6%, a solid earnings number. net sales for first quarter came in late that they reaffirmed fiscal 2019 forecasts. if you are looking, look at what they say on the call, but that area seems to be doing well. dollar general will create new jobs. mr. trump will like that. david: i general mills, they are light on the top line and need to return more profits. it does not show up in the gross margins. we will have to look carefully. for theat do they see full-year forecast and why they are optimistic? digging into this over the next couple of hours, we have all the charts in the gtv . you can save the charts and check them out. coming up, it could've been worse. markets unfazed by the trade tensions between u.s. and china. we will talk with mark mccormick the head of strategy. this is bloomberg. ♪ >> this is "bloomberg daybreak.". i'm kailey leinz with your "bloomberg business flash." visa and masterc

lisa: i'm lisa abramowicz. welcome to bloomberg markets.ine: we are live in new york over the next hour. here are the top stories we are covering on the bloomberg. flirting with the beds. -- a seventh straight day in the red. russia's currency hits its lowest level in two years as sanction speculations escalates. and trade talks. nafta negotiations resume for another day as president trump says that could be a resolution today. we are live in washington the u.s. markets close in two hours. abigail doolittle, it seems to be tech and semiconductors. the dow. look at basically unchanged. the nasdaq down more than 1%. also really weighing on the s&p 500. we see the dow flipping between very small gains and losses. nasdaq, downnd the the nasdaq on pace for its worst day since march. selling some out of those high flyers on the year and on the week these are some of the big losers. twitter ceo jack dorsey testifying before congress yesterday admitting that perhaps some things do need to be fixed. investors worried there could be the possibility o

lisa abramowicz has more on the demand. lisa: thank you.een as treasury yields rise, at what point will investors who have been pushed into riskier assets for yields come back to the u.s. government bond market, seeking safety and yields now that you can actually get something for your money? the answer is it does seem like that is happening with pensions, if you take a look at federal reserve data showing what purchases pensions are making. you can see they have increased their spending on u.s. treasuries and decreased their relative spending on corporate bonds, but what you are looking at now is the gap, the difference between the purchase of treasuries and corporate. this has widened out actually to the highest levels since 2001. this suggests they are actually even rotating back into treasuries, out of riskier assets, including corporate debt in order to take advantage of the yield. just revise, data, and through the end of june. but it is interesting to me to see that we are getting some rotation back to treasuries, you are getting yie

. ♪ lisa: from new york city for viewers worldwide, i'm lisa abramowicz in for jonathan ferro.ed to fixed income. this is "bloomberg real yield." ♪ coming up, the selloff in emerging markets is roiling debt investors. how far will it go? plus, the flattening treasury yield curve is raising alarm bells. is the u.s. economy vulnerable? and italian bond investors run for cover ahead of what is potentially another month of political turmoil. we start with the big issue, pain in emerging markets. >> emerging markets has b

lisa abramowicz has more. lisa: looking at audubon's -- at auto bonds.t says u.s. bonds of speculative grade auto companies have underperformed the broader high-yield bond index by six percentage points, a difference between bean -- gains and losses. the pain looks like it will continue. you can see the vast underperformance. the white line is high-yield automate of bonds. the orange line is the broader index. two main drivers, slowing auto sales, of course. a lot of these committees are auto parts suppliers. they're facing issues with respect to the tariffs and the fact that cost of metals and some electronics have been rising on the heels of these tensions. the other issue here is the fact that maturities are mounting. the total folly of a global automotive industry total volume of global automotive debt is $160 billion through 2020. they're going to have to pay this back at a time when credit worthiness has been deteriorating. it raises the question of whether they will be able to pay it back and at what cost, especially at a time of mounting trade co

i'm lisa abramowicz. joe: i'm joe weisenthal. >> 30 miss from the close of trading, red across the major averages. s&p 500 falling to its lowest level in two weeks. >> the question is what you minutes -- would you miss? president trump ready to impose tariffs on an additional billion dollars worth of chinese goods. two senior executives announcing exits from the company after elon musk smoked marijuana on a comedian podcast. a labor market surprise. wages climbed by the most since the end of the recession as hiring also jumped. president trump amped up his trade war rhetoric threatening tariffs on 267 billion dollars worth of chinese goods. he spoke with reporters earlier today. >> we have added another 200 million. $267d that is another billion ready to go on short notice if i want. the occasion. joining us from chicago the big question right now for a lot of people is have markets already priced in another $200 billion in tariffs, let alone another 267 billion? >> they have not. first of all we have to

we are joined by romaine bostick and lisa abramowicz. this chart caught our attention yesterday it is the 10-year yield versus the bloomberg dollar spot index going in opposite directions. i don't know that i am going to add the potential reasons it fell flat, but the recent this is concerning -- reason this is concerning his wife are foreign investors hedging against the dollar? that is the key question underlying some of these moves. perhaps we're not seeing the same kind of international investment we should be seeing in treasuries to keep the yield stabilized. romaine: i have a theory. a lot of this centers around the head and the fact that we destined the fed -- around the fed and the fact that we are in this tightening cycle. you are trying to reallocate, and if you are not already deep into treasuries, why would you move into the u.s. at this time? why not wait until the end of the year? lisa: yields are still higher. isn't that the whole point? tightening, we are tightening. david: boj made a little change, buying long bonds. ita

david: many thanks to lisa abramowicz.he senate passed a stopgap spending bill this week to avoid a government shutdown. speak with republican senator david perdue of georgia, who voted against it. that is next on bloomberg. ♪ david: seems like only yesterday president trump was in the white house complaining about having the omnibus spending bill with everything and it including the kitchen sink. congress is up against a september 30 deadline and yet again going forward with a continuing resolution rather than a real budget. we welcome someone trying to change that, senator are due perdueorgia, -- senator from georgia. explain what the problem is. second how did we get from march to this point? : we stayeddue in august to get confirmations down and to fund the government, and here we are, two days ago, we voted to pass this down, pass the september 30 deadline. i think it is ridiculous. we got 90% in the senate funded, and now we're kicking it down the road. one reason i voted no is it is totally irresponsible. this is a

let's go to lisa abramowicz. you can see it in italy's spread today. the italy spread is blowing out today. you have to wonder about how much that has to do with the european central bank eating prepared to curtail monthly bond purchases and stop them completely in the near future. this is an existential question credit over the european marker right now. if you look at high bonds, they have underperformed u.s. jumped -- u.s. jumped at your today -- --. junk debt your today junk debt year to date. most since 2012, you are seeing high-yield bond spreads in europe exceed those in the u.s., which is a reversal of what we have seen through the peak of when the ecb was going buyingnd market and corporate bonds, which raises the concern, what happens when the ecb stops dramatically distorting this market? bigave had some investment firms is the opportunity in european credit because it yields more relative to that in the u.s.. others are saying no thanks, look at what is happening in italy. his is a liquidity issue, but an interesting thing to keep an eye on.

let's get out to lisa abramowicz with more.ow you diversions between the u.s. high-yield bond market, where spreads, the extra yield fewer earn, -- extra yield you the european high-yield has been selling off. the divergence between the gasped out to the widest since 2012. in other words, if you are an investor and own a european high-yield bond, you are earning the greatest extra to on them since 2012. this is really compelling to me for a number of reasons. number one, if credit is a indicator, it is the death of diversions and equities that we have been seeing between the u.s. and the rest of the world, that could potentially continue. it also suggests that will pressureis u.s. yields. the ecb has been pulling back from its stimulus, which could be the reason for the selloff in riskier european debt, and it'll force investors to seek some potential advantage in urine hoping -- moving over to european high-yield, which could lead to a universal shirking of that gap. caroline: lisa, we thank you for your reporting. for a bloom