if you are worried about a steepening, or you are positioning for a steepening in the u.s. treasury market, you want the curve to steepen, you don't want it to flatten, but it did. anyone out there with steepeners in the u.s. will be confirmed at the curve did not steepen. jonathan: i was going to save it for later but i will go with it now. versusead on bunds treasuries is wide and gets a lot of attention on the two yada yada. something that does not get much curve is is the bund twice as distinct as the treasury curve. what is the story there? in a position where the ecb is downshifting their purchases, well telegraphed, everyone understands this. that is the first of normalization process. ant will perhaps be to increase in deposit rates and further increase in the refi rates that the ecb has. first the curve steepen's and then will eventually flatten. it is already flattening, that's what's interesting. jonathan: what is your view? priya: to the extent that the ecb will raise rates rather than reduce purchases. quickly,ctually taper they stop buying. if they stop reinve

if you are worried about a steepening, or you are positioned for a steepening in the u.s.asury market, you want the bund curve to steepen, you don't want it to flatten, but in fact, it flattened. anyone out there with steepeners in the u.s. will be concerned that the curve did not steepen. jonathan: ok. so you took us there. and i was going to save it for later but i will go with it now. the spread on bunds versus treasuries is really, really wide, and it gets a lot of attention on the two-year space. but something that does not get a lot of attention is that the bund curve is twice as steep as the treasury curve. what is the story there, matt? matthew: we are now in a position where the ecb is downshifting their purchases, it has been well telegraphed, everybody understands this. that is the first step in a normalization process that will eventually lead, perhaps, to an increase in the deposit rates, and a further increase in the refi rates that the ecb has. the curve steepens and then will first, eventually flatten. it is already flattening, that's the interesting point

kathy: a little bit of steepening would not be too surprising. only reason that they are , the long and has been stuck. i think we get longer-term yields to grind a bit higher and more supply that has to be absorbed by the market in 2018 and beyond. i wouldn't be surprised to see a moderate amount of steepening. jonathan: do you see any of that? krishna: absolutely, and we might see steepening, but i don't think it lasts. with inflation reappearing, the markets would anticipate a faster normalization and therefore a recession to get back to where we were. jonathan: some stellar data with the pmi in europe, but then the inflation data is not tracking what i'm seeing into the output numbers whether it soft sentiment surveys, or the hard gdp figures for labor market numbers. you would expect to see that and on the other side higher inflation numbers. you don't. why not? michael: that's one of the great mysteries. of the last few years. we think we will see higher inflation but nothing dramatic, just a small uptick going forward. that said, we do thi

i think we may see steepening, but that cannot last.f we see that inflation reappearing, the markets would anticipate a faster gradualation, less of a path, and therefore, a recession, which gets us back to where we were. jonathan: stellar data, the united states, the pmi's in europe, then the inflation data is not tracking what i am seeing in the output numbers. whether it is soft sentiment surveys, the hard gdp figures, the labor market numbers, you would expect to see that. on the other side, higher inflation numbers. you do not. why not? michael: that is one of the great mysteries over the past few years. we think we will see a little bit higher inflation, but not that much. just a small uptick going forward. but that said, we do think those inflation fears, and the supply issues that you mentioned. you know, in the past few years, supply has not mattered at all. we have gone to $4.5 trillion of mid-2008,anding in government debt outstanding in the middle of 2008, and we will hit $15 trillion by the middle of this year. but just bec

may see i think we steepening, but that cannot last.arkets would anticipate with a faster and gradual path. stellar data, the united states, the pmi's in datae, then the inflation is not tracking what i am seeing in the output numbers. whether it is the hard gdp figures, the labor market numbers, you would expect to see that. on the other side, higher inflation numbers. why don't you see that? michael: that is one of the great mysteries. we think we will see a little higher in inflation, but not that much. do think those inflation fears, and the supply issues that you mentioned. in the past he year's supply has not mattered at all. we have gone to for par 5 trillion dollars to debt outstanding inmate 08 of government outstanding to we will hit 15 trillion by the middle of this year. just because we have not seen a pressure does not mean you can go further and further forever. we will add $1 billion of additional debt every year for the foreseeable future. at some stage people will have to start to pay attention to that and we will have

that is the one kind of unknown that could potentially steepen the curve some.ulie: kathleen, where are you for the end of next year? if you can bring out your crystal ball for a moment. do you guys have forecasts for where you think yields will be? kathleen: not a real and true forecast, but i think rates will be higher. i would not be surprised to see 3% on the 10-year easily. i think inflation expectations are really anchored firmly and that if there is any kind of change, the market could really react strongly to any signs of stronger inflation. julie: so, do you think wage growth finally perks up a little bit in 2018? is that where the drive will come from? kathleen: that would not surprise me at all. every day when i pick up the paper, there seems to be some shortage they are highlighting. snowplow drivers up in maine, they can't find enough of them. that is a little bit scary after having our first white christmas in a long time. we are also seeing shortages in the construction sector. truck drivers. there are shortages at one end and then at the other in

now we are slightly steepening the curve. towards a slightly steeper curve until get through the next round of numbers. that i think the expectation at the front into the curve will dominate and pull the curve flatter. david: that sounds sophisticated and right. hawkishness? we are talking about 2.1% inflation. >> your calling the old? exactly right. old?re calling me exactly right. now they go zero to six. the scalars are reduced to the high on the street. the magnitude is important. it is a global market. i think we could get a little steepening. 55-60 dancing around the basis points. our expectation is that goes south by the end of the year. i think you will be talking about a flat yield curve going into 2019. david: you think zero is possible? >> i think that is more likely than 100 basis points. >> every long business cycle we have had, and this is going to be the longest in america's history, you invert the curve. thefirst time, you steepen curve from the front in. they are one-off events. that triggers the dislocations

there was a very brief attempt at steepening before we see the narrowing once again. >> julie, thank you for that. financial markets beginning to price in a more aggressive federal reserve this year, that will put immediate pressure on new fed chairman germany owell, just confirmed by the committee this morning. powell will chair his first meeting in march. here to talk more about the direction and pace of tightening monetary policy is michael, head of global strategy. he is with us from his company's offices in new york. great to have you with us. this year's biggest challenge for mr. powell, will it be too little inflation or too much? >> thanks for having me back. the fed has missed us on its inflation target for many years now. underlying inflation as been around 1.5% on their core p. c. e. measure. yellen missed, and right now it looks like powell will miss for a bit as well. but we are seeing some upward macroor global perspective. a stronger domestic back drop and drop in the dollar as well. we could see a modest pick up in inflation. but we don't think we will g.e. back to th

it is when the curve start steepening is when you need to start worrying.t is after the curve inverts. we have another 50 basis points to go. this is a good time for global growth and equities. what we do next is interesting. we have to figure out if it is the ecb or the fed who surprises us. manufacturing sectors were going great guns in the u.s. and financial conditions are incredibly easier and is you the more the fed titans. tax cuts are coming through and we may get infrastructure coming through. why is that market pricing in three hikes and could they go more? inflation is pretty low and as we go into this year, let's look at the wage data and growth data. the market is pricing what the fed thinks they will do. the market prices too high and the fed prices three. this should push up treasury yields. the flattening yield curve is not too much to worry about. the reason why we have laid treasury yields, it is because of the [indiscernible] lower yields in japan, lower yields in europe. investors are looking toward the u.s. to get their yields. as a fed

a little steepening. a 10 year yields back on over 2.7% earlier in the day.ee days, not many places to hide. equity markets having their worst days since early september. 10 year yield up to 2.69%. there we see the multi-your perspective on rates. now we are at a multi-year high. we're still not where we were back in late 2013, 2014 but we are getting there. this is the selloff at the long end cutting more attention. take a look at german rates. check that out. we are no longer negative. it is unbelievable for the first time basically since early 2016, it looks like we are back to zero for the german five-year yield. the euro negative rates finishing. -- the year of negative rates vanishing. julia: we will get excited about that. the greenbank strengthening again, most of the majors here. ok. we're starting off with dollar and canada. talks again today after at nafta. we been talking back and forth about what was actually achieved here, seemingly optimism from the u.s. side. not quite sure about what. the discussions will continue in mexico and the latest rou

steepening weakness across treasuries.eek for the bond markets and italy leading the selloff. this is a look at the markets. david: let's get the first word headlines from mark crumpton. >> president trump is wasting little time setting his 2018 legislative agenda after arriving back at the white house following his vacation. reportedly sending top aides capitol hill tomorrow to meet with house speaker paul ryan. he is hoping to keep his congressional momentum going after scoring his first major win with the tax overhaul. al franken is spending his last day as a u.s. senator. he formally submitted his resignation letter to the governor of minnesota today. smith,lacement, tina will be sworn in tomorrow. franken was forced to resign after several women came forward and said he groped them. the u.s. general commanding the fight against islamic state warns the terrorist group is still a danger. lostys islamic state has 90% of the land it had once controlled in syria and iraq. he wrote online that the group could still continue

we've seen a big move in the 12 year basically stayed flat at ten-year highs a steepening of the curvewhat did it mean for the dollar. and it's moving higher as well we did see a 30 of a percent decline for the dollar index the dollar index, the fifth negative week in a row for the dollar it starts weak again today down about 0.24% and this week, we do have a ucb meeting and a bank of japan meeting as well. >>> well, let's get to washington where the shut down has entered its third day. ka kayla tausche joins us >> the senate failing to reach a deal they had originally expected to reach a vote at 1:00 a.m. this morning. now federal workers are waking up to a shutdown today a day that many of them were expecting them to go into work they were expecting them to have a vote at noon here's the new proposal that senate leaders were talking about. it would fund the government until february 8th but it would extend the built for children's health insurance which ran out friday it's beginning to fix the bill for children of undocumented immigrants and a host of other issues before that next de

with the weaker dollar front and a tough dayee on equities and a little curve steepening.little down from the $70 level on brent. .2457.nger euro, 11 the yen, not really part of the story. i put the dollar-renminbi in the re, a stronger chinese currency. within, struggling here what the chart clowns call a narrowing penant. right now we give you full state of the union coverage. we want to go into the policy and maybe what the view forward is on budgetary items. yes, there were politics involved as well. kevin's really designated survivor for bloomberg. -- kevin cirilli is the designated survivor for bloomberg. we don't really care if mike mckee is the designated survivor . he can go or i can go. mike mckee, what did you hear on infrastructure? mike: if there were $1 trillion, but there is not. it would not even make a dent in the infrastructure problems. the one thing you can say about this speech is it had all most forward-looking items for the economy. tom: i like that idea, kevin cirilli, of hope. what was the hope you heard last night? kevin: well, i think it was a di

we've seen not quite a steepening but an eradication of the flattening we saw last year. that mean for equity market valuations? >> i think for equity markets the key thing is base rates. so less important what happens to the ten-year, because i struggle to see an environment where the ten-year yield rising to somewhere, even if it gets to 3.25%, i don't think that will cause problems for equity markets. the concern would be once you start to get base rates at the upper bound of the fed funds near 3%. i don't think we'll get there this year. that should still be an attractive opportunity for equity investors once you look to 2019, let's say interest rates in the u.s. get to 2.5% by the end of this year, that's a more difficult question for 2019 >> what was your start of the year forecast for returns on u.s. equities? i think one reason we saw that intraday selloff was discussions about the fact that so many wall street targets for things like the s&p 500 were close to being met just a couple weeks into the start of the year. >> yeah. we think that u.s. equities can still

shery: could there be opportunities in 2018 to short a steepening curve here and there?solutely, time of deepening pressure which will take people out of that positions put on right now. vonnie: what is your advice for investors? some who are over allocated to bonds? >> moving down the curve a little bit makes sense, there is some value created in treasuries versus ois spreads. get out of agency paper. rise, the fed to move rates higher, short-term rates will prevent -- provide an opportunity to buy more money market instruments. shery: could they delayed the to later in the year, which would confuse everybody? >> an interesting year because we are changing fed leadership when everyone thinks the fed is on cruise control, the bond market has been skeptical of the fed for the last three years and with the skepticism the fed has delivered three hikes. they pushed back one. vonnie: comeback, we have a lot --themes to talk about here come back, we have a lot of things to talk about but favored traits in 2018? >> tips makes a lot of sense. commodity prices giving an early rea

you think the yield curve is steepening, i like that for the financials, but at some point, do interest rates not go high enough a lot of -- is precisely because of rising interest rates >> well, it's interesting that -- >> well, you have a year of contradictions on the other hand, you have the dollar weakening, which is not something you would expect when rates are rising, so it will be interesting to see how this plays out. all things being equal, a weakening dollar is good for the industrials. >> chris, that's a good observation on kirk's part, but chris, it's the yield on the ten-year that ultimately provides competition. >> ultimately sticking with the market makes sense until you see the fundamentals break down. i'm seeing earnings growth continuing, seeing the economy continuing to grow i'm not worried at this point in time. stimplgts toby, it's always great to speak with you. >> nice to talk with you a big story. >> brent saunders was interviewed earlier and asked who should be named ceo of the new venture. he mentioned you have you been in talks with any of these companies. >>

that steepening or the acceleration has happened in the past and it is actually not bearish.hen you say it happened in the past, when are you talking about, specifically? tom: since 1928 it has happened nine times. one of them was 1929. and 46. those are the bad outcomes. 2004, 12,017ed in is another example. -- 2017 is another example. it's neither good nor bad. more than often is not a sign of the top. you have got some colorful acronyms to describe your strategy, but once again you are just looking at a different barbell than last year. tom: last year we recommended know,the cyclical, you computers, resources, american banks, phone carriers. but that outperformed by 550 basis points. it delivered 25% total return. this year we think industrials need to be in people's portfolios. it's a really good inflation play. i think that inflation is a bigger theme. it's very prevalent and apparent. we can even see it in the costs that are being reported. sensitive, inflation but industrials are a great play. because of commodities? the dollar? wage increases? tom: all of the above. t

. -- steepen. mr.: on inflation, we made no progress in the last two inflationrd our target, at least based on smooth inflation,res of less food and energy, 1.5 year-over-year, that is a low number. it is the same as it was in 2015. 5% inoyment went below the fall of 2015, so even two , we really have not made any progress at all. i do not think we will get any kind of phillips curve of fact that people so emphasize. long ago, youhat have the natural rate of unemployment, so you have the 5.5%. we are now at 4.1%. we have a jobs report coming out this morning. we have not really seen any inflation out of that. i think the commodified are story about the phillips curve is either nonexistent, or whatever it is, the pile there is really small comparatively. michael: janet yellen and jay maybe weth of said need to look at our model of inflation dynamics. do you think something has changed -- will be fed change the way it looks at making policy? mr. bullard: if you look at the graphite used yesterday about t

. >> i don't think the curve will steepen. i don't think that's the play at all. what you're seeing right now will be a continual -- >> it doesn't stop the s&p in its tracks if tomorrow morning you woke up at 3. >> yes i think it goes to 3% and it's the velocity of the move. >> and then you get a flattening in growth and equity valuation because you have a real competition for where dollars get allocated every day institutionally and individual management 3% ten-year, okay, i'll throw a dab will do you and have 5% waitinging >> is the global demand that's been there for years >> so far it hasn't showed up. >> stock valuations are braced for this, all right. you've got to remember that the fed is expected to raise three times, so maybe -- they say four, some say two. >> that's 150 bips built in. >> but it's the doj. >> let me just finish and you can take it back that will take it to 2, 2.25% on their range, right, so a 3% ten-year, talking 100 basis points of yield curve steepening which isn't steep. it isn't florida i'm going to dare to say it's a goldilocks shape

we are seeing a steepening of the yield curve for japan.for japanese indices, but we have topics going on 2018 at best. samsung, are with profit miss that could fire up intervention. yuanne continuing -- the continuing to falter. in taiwan, we are seeing the taiex snap and a date rally even after taiwan reported record export growth in december. we are seeing record shares in china, but the large cap gauges up one third of a percent. in hong kong, the hang seng being -- consumer staples. , -- china eastern is resuming gains. policy tailwinds for china's big three airlines. falling. the worst on the asian regional benchmark today. rishaad: a mixed bag from samsung today. let's have a look at the first word headlines. let's join paul allen for that. paul: samsung electronics has reported lower than rejected fourth-quarter profits as it loses moment of and faces a strong you on -- yuan. the 5% surge in the korean currency came as prices of benchmarked memory chips leveled off after a year of gains. the atlanta fed president has added his voice

coming up, the great yield curve steepening of 2008 has come and gone in like 24 hours. we will assess that next. and taking a look at bank of america as we go to break, up 3/10 of a percent, goldman is also up. solid quarter for bank of america despite the $3 billion charge related to taxes. we will break it down more. this is bloomberg. ♪ alix: time for our first take, where we discuss top three stories. getting the read on bank of america, goldman sachs is up in 15 minutes. the flattening curve takes the reins, 530 is a decade low, the euro is weak or for a second day and the ecb warns the fundamentals are not there to support it stronger euro. david: joining us is days at a better -- executive editor tracy alloway. michael, good to have you here. and the discussion of thanks. we -- banks. we are looking at the earnings. bank of america does not rely on this as much as jpmorgan, but they come in really well across the board. better than expected. mike: i think the explanation for fixed is a fairly easy to discern. if you look at this chart that brought,-- that i volat

it's very interesting that the curve is steepening.art of that has to do with the auction dynamics. in general if china and some other reserve managers were to reduce their purchases of treasuries it should really be a curve flattening or not a curve steepen her. as opposed to what ultimately would happen if china were to take this step. alix: great distinction. flat or curved. richard jones and ira jersey of bloomberg, thank you for joining us. david? the presence as everybody should put country above party. is that going to give us an immigration deal? move, foreign reserve managers places like china and foreign officialwe will talk abt right here on bloomberg. ♪ david: bipartisanship was back in fashion at the white house yesterday. the same day that one of the president's most partisan supporters, stephen bannon, left breitbart news. to explain what this means we welcome horizon investments chief global strategist greg valliere and josh green. also the author of devil's bargain, the definitive book about steve bannon. welcome, gent

and nice steepening today, up at 53 basis points, the biggest selling happening.three-year auction later today. watch the demand of the yields move bid and crude, 61.92 despite the fact that opec says they do not want oil over $60 a barrel. what is the potential for correction? david: you named it, dysfunction cabinet. it has been a chaotic year for theresa may as she attempts to reshuffle her cabinet. but some with different ideas on what should be done. joining us is emma ross thomas. what is going on and how does it affect brexit? emma: a couple of ministers wanted to move, in one case they ended up keeping the same job, in the other case she ended up quitting. this is justine greening, she could become a thorn in the side of may's parliament. narrativething is the coming out with a reshuffle is one of weakness, that theresa may has not been able to take authority on the cabinet, to be a vote to balance the divided cabinet. there will be big concessions that will probably have to be made to get the deal that britain wants. hard decisions even to get the transit

in the question that also needs to be asked is what does steepening gain by talking so freely and openly to the author of this book fire and fear he. it will be coming out next week because in the book he equates what don junior did in meeting with the russian lawyer. it's from what she says even if you thought that this was not treasonous or unpatriotic and i happen to think it's all of that. he believes don junior did take it. when he was fired he not only lost his job he's only in it for himself. those are the questions that sarah sanders was ask about. that is a ridiculous accusation and one that i'm pretty sure we had addressed many times from here before and that's in reference to comments made refer you back to the once he made previously on 60 minutes where he called the collusion with russia about this president a total farce. i think i would look back at that if anybody has been inconsistent. it's been him. it certainly hasn't been the president or this administration. there is great many questions this was front and center but you have the meeting on capitol hill. the north ko

if it's any indication of next year we break out of this as you get a steepening of the yield curve.see volatility come back. for now very tight spread. i love that you are drawing attention to it. you've got a bit of a task on your hands. .eat that > mark: let's talk about debt. chinese financial markets were in somewhat of a celebratory mood today. there's poverty. there's pollution. and of course there is debt. gdp.'s debt to mark:. bloomberg economics. forecast by 2022 china will have total debt at about 327% of gdp. last year it was 250%. the rapid growth, the high level of china's debt may have already placed them in the danger zone for a financial crisis. so says bloomberg economics. things are looking good on the growth front. look at the data today. it's debt we have to keep an eye on. vonnie: great chart. i will say the first winner of 2018 is taylor riggs. no real reason. still ahead, we will be speaking to mike wilson of morgan stanley. stay tuned. this is bloomberg. ♪ vonnie: it's noon in new york. i'm vonnie quinn. shery: i'm shery ahn. welcome to bloomberg markets. von

the treasury curve steepening the most in three weeks. bond manager is a weighing in. jessica mark says the s&p will end it year with a negative return. the founder says investors are pricing in no recession which is why he sees the benchmark falling after a decent run in 2018. he also says commodities may be one of the best investments of this year. and china's transport ministry says no major oil spills happened attentive after colliding with a cargo ship. they believe there is a still hope of finding survivors because the engine room is not directly affected by the fire. the body of one crew member has been found, but 31 remain missing. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. lyons.lee this is bloomberg. let's take a look at the market open ropelike. a mixed session when it comes to equities, but south korea get we did see the talks fall during the day yesterday, but there has been one story, which is next income. a bond rout continuing. when it comes to equity space we fair

if anything i would probably suggest the aussie has more potential to steepen.the same time it depends on flows. both markets could have new 2029 issuance over the next months. nothing has been announced but there is speculation in the market that could come. clearly how well both of those bond issuance is go and demand from potential banks like china and others in asia will determine that spread to a great deal as well. if anything, i think most of the investor basis have to look at both of them as being decent bonds to hold against obviously treasuries. david: laura, the less time we spoke in november i asked you to stick your neck out to us and give us a call. i will not hold you being wrong against you because you're not in equities person. be a good sport. asx 200. where does this go? some: well, we are seeing kinds of profit taking but i think clearly miss plenty of money still to be put to work in the equity markets. if anything i think 62. 50 is likely. right now i think most people are still struggling where to put their money. while that theme continue

the blue line is the euro stoxx index which has risen through its 2015 hi as the yield curve steepen's as evidenced by the white line, which is the german 10-year 2-year yield spread, which is widening today. lack of comments about the euro positive slant on the euro zone economy. let's get to the euro. the headline was what he did not say. he mentioned volatility but did not talk about the euro level. consequently, it went through 1.25, highest level since the end of 2014. he also said the ecb does not target exchange rates. it's important for growth, inflation. highest since the end of 2014. the analyst median forecast for the end of this year, 1.23. we are above that now. commerzbank is the most bearish 1.12..1 expects more cause to stay at present levels until well past the end of net bond purchase. made upbeat about the strength of recovery. see's very few chances at all or rate increases this year. i want to so you the german 10-year, another fascinating chart in the wake of the ecb news conference. above 60 basis points. we have risen by four basis points today, breaking through

when you add those things together, and you end up with significant upward pressure and a steepeninghe curve as the year goes on. in the u.s. 10-year goes to 3.5 percent, what does the german ten-year do for 59 basis points today? how high can it go in 2018? do think that we will probably get a spread of summer around 250 basis points by year and between 10 year treasuries and 10 year bonds and that applies a yield that will get around 1% by year's end. julie: bob, we will hold you on. ,ext, we'll talk asia and china and its interest in u.s. treasuries with a topic of conversation. this is bloomberg. ♪ ♪ julie: live from your, i'm julie hyman. mark: and from the city of london, i'm mark barton. time for a bloomberg business flash, the business stories in news right now. oillopment involving texas closing energy focus. trading isn't as intriguing to me as it once was and he also says he is recovering from a series of strokes and a major paul. stroke.s -- according to people familiar with the matter, that could happen as soon as this month. nton is dealingbo with debt. according to peo

are up half a dozen base points twos are up four, fives are up five, 30s are up eight the curve steepening we go back to march to find a higher zone. not the highest yield but we are now in a zone above 2.44. the market seems to have pretty good volume. we need to pay attention to this upside move. five basis points, highest yield, should they close here, in april of 2011 finally, you would think with the curve steepening, the stock market up and rates up, the dollar index would be up wrong. dollar index not only is not up, it lost its 92 handle, as you see on the september 1st start to the dollar index. tyler, back to you >> rick, thank you very much seems like everybody is trying to cash in now that california has legalized recreational marijuana. we will have a live report on the business push coming up and talk to a person who used to run a latin american real estate etf. he's changed it now to focus on edwe (siren wailing) (barry murrey) when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden

shery: will this be a steepener? michael: right.here is more supplant the front, the impact is larger on the maturities. vonnie: where will we see demand? michael: again, i think we will have to cheapen up more to get those out the door. strong pension demand in the last few months. that has helped this curve flattening to we think that will add in the next few months -- ebb in the next few months. the company that turns a profit in 2000 17 has to pay 35% tax. your profit in 2018, 20 1% tax. one way you can ship -- shift aocess -- profits, is make pension contribution in 2017 that is larger than normal. then make a smaller than normal in 2018. you will not make overall contributions in 2017. but that is what has helped the curve flattened. fed has had this intense flattening to we think that will fade. at the same time, you get an editing of the pension demand. shery: will it be a nonevent tomorrow with the fed? to do anythingly significant with the change of leadership. it is more of a goodbye session. shery: we are seeing inflatio

the curve steepened. this is incredibly important. the steepest move in over a year.e amount of supply. this move in the bond market is going to work supply from the u.s., the u.k., and japan. year, he called the death of the bond market, and set a break of 3%. he believes the market can push higher to 2.6%. will starthaps what hurting the equity markets. three markets, three very different stories, higher yields. the fx is becoming a bit stronger. anna: we will see how long the equities keep pushing and fundamentally what it means for the u.s. economy, and the global economy. chief economist will join us later on the program. a.m. in london. on the u.k. up retail story. we have had contrasting story reports. next hour we will speak to the cfo, kevin o'byrne. more about that in the next hour. let's go to the bloomberg first word update. with juliette saly. juliette: in the u.s., the children of undocumented immigrants facing deportation from the country have won a court order temporarily blocking the trump administration's position of ending the dream program in march

up to about -- yesterday we got up to 2.66 today 2.62 the trend of late has been a rising and steepeningield curve. asian trade for you, strong across the board we did have a bank of japan meeting which, as expected, kept things in line as they were. the statement also very, very similar to last month. the nikkei rallied 1.3%. the yen not doing too much off the back of the season a strong session across all of asia we talk about the rally that's continued at the start of this year the likes of hong kong up sharply. already strong out-performers last year. hong kong up 3.2%, adding 1.6% so asia has taken off this year. european trade, more mixed year to date. positive today, but not resoundingly for most of europe other than germany, up 0.8%. dollar board for you, we saw the dollar slip down 0.2% yesterday. it is stronger today, but not significantly against the euro and the pound. but against the yen it is weaker the pound overnight did cross the all important 1.40 level, but it pulled back the dollar has been weak it's been strong against the euro, but less so because the euro itself ha

our economists do expect we'll see steepening in the back half if that does not materialize, you couldther pockets benefit more but my personal view is that we will see a little bit of rotation out of the growth names, into some of the value sectors like finltancials. a lot of people are highlighting banks positively into this year. that's a consensus view. what i would say is probably there are more obvious candidates like wealth management firms i cover steve iffel, raymond jas maybe not big games, but they are helped from rates and tax reform i think there's upside there, but people should target the smaller names. >> one name people are targeting for 2018 is goldman sachs. it was the biggest underperformer of the big six last year. you still don't like it. what's your avoid case on that >> i have a couple of concerns one, as we think about who are going to be the big winners this year, it's the policy pen fi beneficiaries. goldman does not benefit address much from tax reform they will take a fairly large eta hit. that's been well telegraphed to the market that means will you have

equities so much as bonds significant move higher in yields especially in the long end we've seen a steepeningf the curve in the last couple of days we did not quite hit 2.6% on the ten-year yesterday we reached 2.597 the rise in yields has since abated since the peaks of yesterday. 2.54 we stand at today significantly higher than friday's close >> look at the trading action from around the world. starting in asia a mixed picture in asia. mainland china did see equities turn in higher at the end of the session. the nikkei was down 0.3%, as was the cob p kospi was down a half percent. the shanghai logged some slight gains. bitcoin slipping more than 11% thursday after south korea said it was preparing a bill to ban all cryptocurrency trading that's a big mover overseas because of the biggest market in seoul if you look at what was moving in those markets, chipmakers were down along with automakers and manufacturers look at what was going on in europe marginally mixed to start out trade. you can see here we are ever so slightly higher for most of the major european indices so the german dax is a

there was a moment's last it week when we had the inflection point of where we steepened.y question to you is this. as the flattening bench -- is the flattening binge going to continue? >> it does, but it will not invert. the problem is when you get the yield curve inverting. there is still plenty of steepness. anna: you do not see much chance of a recession? you felt that it was a 5% probability and now you think it is 0%. why are you that confident? >> when you look across the globe, you have every economy growing. months, look back 12 there was a list of countries with problems. when you look at those today, even emerging markets look very healthy. anna: we're not looking at an overheating story? the fed is going to have to respond somehow. what are your expectations of if we run too hot? to run causes companies too hot is central banks being behind the curve. manus: are we going to see a much more constricted central-bank policy this year? >> we could. manus: we will certainly touch on that next. atis the cio of fixed income jpmorgan. expectations for the central bank'

the more important one is the steepening at the short front end of the curve., i wonder if this is where i will get my performance. everybody who sits in the chair you are sitting in, which says europe is on a tear at the moment, and my alpha comes from european? yes, european banks are going to be the source of outperformance in europe. moves insitive regulation last year. that frees up and reduces uncertainty. daddies could start to work in the market. are seeing in europe is strong. weekw some stories last that there were trouble in the italian banks. matt: i have a chart right now , and i know it has only been a handful of trading days in 2018, u.s. banks in white. the euro stocks bank index in blue. in 2018 so far, european banks have outperformed. i wonder what we will see from the ecb this year. do you expect that to change the bank picture at all? yes, i think the ecb is in focus. what we have seen on the inflation front in europe, the inflation data has not moved materially. nothing to write home about. we have seen data which they start to raise rates

we haven't seen a touch of curve have seen a- we touch of curve steepening.d talked about that reversal rate. what is interesting is that the correlation between the yen and the 10 year yields in the u.s. has fallen to its lowest since august 2016. you can see dollar-yen there. finally i am taking a look at oil extending its again, going about $62 a barrel. run --s news about i iran play into this as well. let's talk about one of the corporate stories that is on our radar. altice is splitting off its u.s. unit. bloomberg's reporter joins us from paris. good morning to you. tell us more about the intent here. it will create value for a company that has been struggling because of the european operations. altice usa'st it shares, they have lost 30%. they want to give assurances to the u.s. shareholder that he can create value with the u.s. business. he is this a billionaire who has been building an empire just over the past few years. a spending spree in europe and the u.s. in europe he brought -- he bought a mobile company for 13 billion euros in cash. that bus

as a credit investor, are you seeing some of the repercussions from the carillion failure steepen todit markets? is there nervousness around the construction sector now? >> i think it reinforces weakness in sectors, in construction, things like home care, social care in the uk are under a huge amount of pressure. one of the sectors in the high yield sector in the uk, things like loans, so you're seeing stress emerge in all of those. in that sense, carillion is like the canary in the coal mine. >> david riley, thank you very much >>> an extraordinary set of pictures this morning. vladimir putin has immersed himself in an ice code lake last night to observe the orthodox christian feast of epiphany. put whon is rin who is running election in march never shies away from a good photo-op. >> i wonder if i can unsee that image. there it goes again. if you have thoughts on putin or anything else that we've discussed, feel free to e-mail the show the address is streetsignseurope@cnbc.com i'm sure willem wants to hear your views as well you can tweet him directly >>> one final thing to go befo

they could even steepen the decline.e fresh oil they are seeing to the other thing is will opec hold its line? so far, it is being disciplined in sticking to cuts. but we will hear more and more voices that opec should ease its policy stance. tom: thank you, will kennedy. for brent.l -- i to write hyper detailed commodity analysis. the soft is what we do not talk enough about. things like coffee. thomas theotokos -- themos fio takis with us. bring up the chart of coffee and the slowdown -- is the analysis in trading of soft the same as it was 10 or 20 years ago? four are they going through it a change in commodities? >> to some extent, it has. broadly, it is still supply and demand. agricultural is supply-side trayvon -- driven. it is supply that drives it, because what is the weather in brazil, in vietnam? in your coffee analysis, i get the usual names -- there is the new kid on the block. vietnam. is there a new come last -- complexity that makes it harder for commodity traders to get on trend? sets coffee apart from t

to steepen, if you that would help this and your call on banks.t steepen the yield curve, but also the absolute number of yields. you would expect the yield curve to flatten, but nonetheless the nonetheless, when the yield curve is moving up, banks are able to generate more revenue. perhaps more importantly, the being in good shape, you will see a bunch of financial activities. boosted with more trade volume and economic activity. david: finally, what would lead you to rethink your bullish goal? back to her inflation discussion, the central bank needs to give a much more aggressive start. that's one problem. the other is a loss of momentum in global growth. i think at the moment, the upside to inflation is larger compared to a downside on global growth in the next 12 months. hui, thank you so much. if you are one of our subscribers, you can check out all of the interviews, including , using your interactive tv function. join the conversation. send instant messages to our team for our guests during our live shows. check it out on your bloomberg. ♪