in the treasury market, we shape up as follows on the two-year.ou see the bid coming in on the back end of the tens and the 30's. just a marginal, mild as we get one a rally through the back end of this week. still ahead, the final spread and the week ahead featuring comments from the fed's jay powell. and we get the u.s. jobs report as well. this is "bloomberg real yield." ♪ jonathan: i am jonathan ferro. this is "bloomberg real yield." it is time now for the final spread. coming up over the next week, china's financial markets closed all week due to the holidays. plus, fed chair jay powell and u.k. prime minister theresa may -- u.k. prime minister minister theresa may speak. on friday, it is here already -- the jobs report just around the corner as we wrap up the end of september and the third quarter. still the three from -- still with me from jpmorgan asset management is diana amoa, scott thiel of blackrock, and colin robertson from northern trust as it management joining us out -- asset management joining us out of chicago. let's start in lon

battering the italian bond market. treasuries delivering a weeks of gains, leading yields negative for european buyers. heading into q4. investment grade set for the biggest annual loss since 2008. we begin first with the big issue, populists battering the italian bond market. >> we had these rolling existential crisis if the euro survives for years, and this is just one more stress point. >> public debt have something like 130%, which is a burden. it cannot be going even further. >> italy is a big economy in the european union. it should be a focus of concern. >> italy is still on a knife edge situation from an economic point of view. >> this has clearly been something that has been pressuring the markets for months it seems now. even if you get the budget problem out of the way now, it has not been resolved. we'll come back to this question in the next few months. >> there is something of a showdown that has still got to be followed through, vis-À-vis the italian government and the european union. >> this is happening right as

. ♪ coming up, italian proposing the italian bond market. treasurieselivering a week of gains leaving yields negative. investment into q4, set for the biggest annual loss since 2000 and. we begin -- since 2008. we begin with the italian bond market. >> rolling existential crisis about whether the euro survives. this is just one more stress point. a burden that can be going even further. >> of course, italy is a big economy in europe that should be cause of concern. >> this has clearly been something which has been pressuring the markets for months, it seems. even if you get the budget problem out of the way now, we come back to this question in the next few months. there is something of a showdown that's still got to be followed through. government italian and the european union. happening, and then likely zero in january. we are all wondering who is going to be supporting italian debt going forward. jonathan: joining me around the table is a fixed income portfolio manager. plus coming to us from chicago is the head of fixed income at northern trust as

the treasury delivering a weeks of gains. heading into q4. are set for the biggest annual loss since 2008. we began with a big issue. populist bettering the italian bond market. >> we had these rolling existential crisis if the euro survives for years, and this is just one more stress point. >> 30%, which is a burden. they cannot be going even further. >> italy is a big economy in the european union. that should be a focus of concern. >> italy is still on a knife edge situation for me. >> this has been pressuring the markets for months it seems now. even if you get the budget problem out of the way now, it has been resolved. they come back to this question in the next few months. >> there is something of a showdown that have to be followed through vis-a-vis the italian government and the european union. >> this is happening right is the ecb is dialing down qe. from $30 million to $15 billion and like the zero in january. we are wondering who is going to be supporting italian deck going forward. jonathan: joining me is diana , plusand scott th

than it does in on the run treasuries. e the picture has certainly deteriorated. whether that is a bad thing for the market, i'm not so sure. why should we be making a really liquid market, i don't know how does that help us? having said that, i think the point about the corporate market is a good one. innovation in the corporate market from a liquidity standpoint isn't the dealers or anything of that sort. it usually the eps. providing countercyclical liquidity that you would not normally gets. because of the aggregation of the risk, you can get second leaders to take the other side of all corporate investors looking to dump corporate bonds. corporate investors go one way. they are buying all of them were selling all of them. normally because of the allegations, people have a challenge. but availability has simply help. >> a final word on that, the shift to passive? >> first of all, and a lot of credit etfs are really passive. they can't buy every single bond on the market. the second thing is he is absolutely right. from

has the liquidity changed in the treasury market? dra: you really see any change in liquidities, still feels looks like a very liquid market. where things are fundamentally changed on the regulatory side, dealers like ourselves have to subject to leverage issue requirements that constrain our balance sheets. we are less willing to warehouse treasuries like we used to in the past. and that's leaving to a little bit of illiquidity in the jonathan: people point to that illiquidity in the markets. jonathan: people point to that sleepy day on october 2014 when treasuries have this huge move out of nowhere and a lot of people think about that moment and think about what could happen on a really, really bad day when money floods into treasuries. what does october 2014 mean to you, and can you really tie back to the regulatory regime can post crisis? mr. distenfeld: that is an important factor list of -- the buyer might be walmart bonds or the seller is verizon wireless. there's often that ten-year treasury bonds, there's a buyer and seller.

the treasury holds equity issue for the program. will noton, taxpayers only owns shares and should be paid back with a reasonable will also receive warrants for common shares in participating institutions. we expect all participating banks to continue and to strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure. foreclosure has not only hurt the families who lose their bank homes that your neighborhoods, communities, and our economy as a whole. many banks have suffered significant losses during this. of market turmoil, many others have plenty of capital to get through the. you are not in position to wednesday -- to lend as widely as possible. our goal is to see an array of healthy institutions so preferred shares to treasury and raise climate capital so they can make more loans to businesses and consumers across the nation. at a time when events make the most daring investors are risk needs of our economy require that financial institutions not take this new toital to coordinate -- but t

the senatebama: confirmed timothy geithner as our next secretary of the treasury. nk: it was difficult in many ways for me to leave but i took real comfort from the fact that tim geithner, who had worked with me on putting some any of these programs together with even -- would be many treasury secretary, and ben bernanke was still the federal reserve. reformthat we needed to fannie mae and freddie mac. behind,eft a blueprint a plan for how to perform the regulatory system but that would take a lot of work. i recognized the actions we have taken had prevented a far worse disaster, but the markets were still fragile. >> asian markets tumbled. the stock market has been falling day after day. hank: looking at it today one of the things i'm proudest of is that we got congress to do some pretty extraordinary things, twice. first with fannie and freddie, and then with the tarp before the system collapsed. 171.3 to the motion is adopted. hank: the obama administration managed them well, adapted than the market conditions and they worked. when we look at our flagship bank in

why the treasury tough talk is falling short. consumers may bear most of the cost of president trump's tariffs. carol: this is bloomberg businessweek. ♪ carol: welcome back. jason: join us every day for bloomberg businessweek from 2 p.m. wall street time. carol: you can also find us online and our mobile app. jason: sanctions have become the economic weapon of choice from iran to russia. carol: a crucial element is missing with three quarters gone, actual enforcement. >> the u.s. has put in place several new sanctions in the last two point five months, but the actual enforcement of the decline -- of the sanctions is on the decline. when the companies that have been violating sanctions, there has been less enforcement. with almost three quarters gone, only one case has been done this year. they often do dozens and sometimes hundreds of cases in a year. carol: this has to do with this ofac office, part of the treasury department i have never heard of, the office of foreign asset control. why are you reporting this? christian: it's

when that happens, money will flow back to the treasury as these assets are sold. we expect that much, if not all of the tax dollars we invest will be paid back. >> on september 29, 2008, the house of representatives failed to pass the trouble asset relief program, prompting the stock market crash of one and 700 points. the final passage came on october 3 after the senate sent the bill to the house for a second vote. it is then senator and presidential candidate barack obama from the senate floor speaking on october 1. senator obama the fact that we : are even here voting on a plan to rescue our economy from greed and irresponsibility of wall street, and some in washington, is in outrage. it is an outrage to every american who works hard, pays their taxes and is doing the best every day to make a better life for themselves and their families. and understandably people are frustrated and angry. wall street's mistakes have put their tax dollars at risk and they should be. i am frustrated and angry as well. but while there is plenty of blame to go around, and many in w

but she hasn't provided that money yet and the treasury has it at the same time it's got a 4 billion right it's depressing, let's drop down a fraction there, we have a picture here, i say fantastic picture in the sense of the photography dare, of elon musk smoking marijuana, we should say this is legal where it was happening in california by illegal here, but it's whatever your view, it's controversial because he is controversial. in a live podcast peculiar thing to do, i mean, controversial. in a live podcast peculiarthing to do, i mean, i must admiti peculiarthing to do, i mean, i must admit i didn't really know who whatever his name is, i didn't know who he was, electric cars, all very sort of sounds very futuristic, but his company seems to be in trouble and this kind of take does not really help him and i would not think it would impresses investors. because the shares a test have been moving about a little. they been moving about a little. they been moving in one direction it seems, they fell 10% yesterday, story ends by saying, if i were an investor think i would be first baff

the treasury started working on a study looking at the limitations. missing thes just magnitude of the event. >> this is you, hank paulson on the debate. i was never able to convince the american people that what we did was in for wall street, but was for them. i want to ask all three of you about this. this, to me is the central issue. if you look at where we are today and describe it as a success economically, there are still many in this country who don't believe it. the question is from a policy perspective both the policy itself, and in the communication of the policy, was there another way to do it? hank: i will start because you are looking at me. [laughter] i thinkbegin by saying one of the issues was that we to wherey relative some other countries have stepped in to deal with these things. bankspped in before the had collapsed. fix theome things to , which are very hard to explain because they are objectionable things. in the u.s., there is a fundamental sense of fairness havethe american people better if you take risk and you succeed, that i

the u.s. treasuryt, despite this tariff talk, is not enforcing the rules or collecting money. it has come way down to a fraction of what it was under the obama administration. >> i'm picking about sanctions. they are promising them but whether they carry them out. a lot of m&a activity. we saw that auction for sky tv, comcast paying a big price. >> $39 billion which is a lot more than analysts were expecting that deal to be. this is a big bet on brian roberts, the ceo of comcast who outfoxed box and disney. disney had acquired fox to get sky. this drove up the price and minutes of eba that bob iger and company lost out on sky. this is putting comcast in an interesting position. loading the company up with debt at a time where people look at cable companies and say, aren't people cutting cords? >> there's only one thing i love more than deals, media moguls. >> all coming together. >> joel, thank you so much. comcast cannot the big winner and a bidding war with disney over british broadcaster sky. they w

with the buns and treasuries, and everything to do with the boj.s you see the boj today, a little bit of movement on the steepening of the curve. it is still relatively happy days, but the amounts coming out of japan going into europe because of the steepness of the curve is a big factor in that treasury-bund spread. as the boj policy evolves, as the economic fundamentals warrants, you may see some pressure on that spread come off. krishna: i think if european -- i think european rates are a product of a bunch of things. part of it is european growth outlook. we have a slightly different take then noelle. we think european growth probably does not re-accelerate. if anything, it's sort of tapers off. i think the driver of that is the slowdown in emerging market growth. beening market growth has one of the biggest drivers of the revival of european growth. that story stabilizes our faith and i think you have an impact on european growth. i think the european fundamentals, far more than flows out of japan that drive it. let me make another point -- je

at the new york fed and the treasury. tim would say i don't like peacocks, people have to be members of the team. that was important. >> i want to say this important thing, in our system of government, in the executive branch we were at the top four levels of government every time there was a change in the administration. the system depends on the quality of people that occupied the civil service. the treasury, the talent at the fdic, and the experience at the fed and new york fed. i think one of the great advantages we had and of course we admire each other and we were lucky in our partnership before the two presidents we worked for. the huge advantage we had is that we had a team of people of exceptional integrity, smart, creative people who are overwhelmingly focused on trying to figure out what was the best of the bad choices. finding the most effective thing. that is something you have to nurture, you have to create the incentives to make it attractive for people to spend a meaningful part of their lives in these inst

let's begin with the quiet climb higher in treasury yields. deal expected to continue? elle: you nailed it. is a quiet climb higher. think it is due to a couple of reasons. the drivers are exactly clear. tariffs nots that being as bad as people expected, maybe marginally. the trade war is not over by any means, but part of it is we have seen the idiosyncratic risk come off the table. turkey and russia are both hiking to alleviate concerns. imfntina, the deal with the looks like it will be better than expected. it is not any one driver. is multiple. krishna: cap the end of the day it's about the u.s. economy doing much better than what everyone was expecting. that is the primary driver. noelle's point about other issues are important, but the primary driver is the u.s. economy. the question is, can this be sustained for a long period of time? the fed consensus is building up quite nicely. our position is they still have room to tighten. i think they tightened a couple of times this year. if they keep on this path and 2019, the environment becomes far more challenging. i d

dan laid down the law at the new york fed and the treasury. he said i don't like peacocks, they've got to be members of the team so that was important. >> i want to say that it's an important thing which is in our system of government where in the executive branch we were placed at the top four levels of government. the system depends a lot on the quality of people that occupy the civil service of the treasury, the talent that the fdic and the talentand experience at the new york fed . i think one of the great advantages we have i think and of course we admire each other and we are very lucky in our partnership and in support of the two presidents we worked for, i would say the huge advantage we had is that we had a team of people with exceptional integrity, smart people who were just overwhelmingly focused on trying to figure out what was the best of the bad choices? and that's something you have to sustain and preserve and nurture and create incentives to make it attractive for people to spend the means of their lives in these institutions. w

marshall billingsley, assistant secretary of the treasury today. saying --singh previously served as the deputy assistant secretary and as deputy chief counsel to the committee on foreign relations. marshall billingsley has been serving since june 2017 and prior to his current role, mr. billingsley was the managing financial advisory services. he has held multiple positions within the department of defense and state and we appreciate both of them being with us. without objection, the full statement is going to be made part of the record. if you would, please summarize your remarks. we will begin with you. >> thank you. chairman rice and members of the committee, thank you for the opportunity to speak with you today regarding the administration's sanctions policy. as the head of the bureau of economic is this affairs of the state department, i will address from a foreign policy perspective, how the trump administration is employing sanctions as a critical component of our national security. the state department works closely with our allies and partn

the key staffer -- the godfather of telf, steve, stated the treasury into the geithner treasury and was there to get it launched. evaluation of the telf finds it reduced spreads, reduced interest rates on securitized assets but didn't reduce interest rates on any particular issue within the universe it was covered. so it sounds pretty good. helped relieve strains in asset-backed securitization without favoring one or the other. now, the program did favor some markets over others because tractor loans were in and some other loans were out. that's precisely the fed allocating credit. as i look at the -- you know, the policy response, it's a murph how concerned chairman bernanke and his colleagues were about the economy that they took these steps. obviously they are not -- they're not in the business, they don't want to be choosing tractor loans over other loans and yet they felt the economy as in such bad shape that that was necessary. the tarp, of course, is the best known in the policy responses. there's an evaluation from 2010 paper that looks at the events of columbus day when the tar

." ♪ jonathan: coming up, a slow-mo selloff in the global bond market driving treasury yields towards018 highs. risk appetite returning, driving investors back towards emerging markets, fueling a big bid into corporate loans. funding this year's biggest leveraged buyout. we begin with the big issue, the quiet climb through 3%. >> our take is it's about time that the 10-year started pricing what the strong u.s. economy is doing. >> we've been expecting 10-year yields to remain around a range of 3%. they were a little bit lower for a couple months and now they are back up just above. we think the levels will attract investors. >> look at the difference between the 10-year in the u.s. and in germany. it is 254 basis points today. there is a limit to how much you can stretch that without breaking something in the system. it can go wider. it's just that what happens when it does go wider? ok? you will get dollar appreciation, more emerging-market pain. so it absolutely can go wider. >> vol in the rate market is due to go up, as the fed policy is is beginning to just bite just a little, not

chair ofn, who is the the federal reserve's. secretary of is treasury in the bush administration and tim who is president of the federal reserve bank of new york and then secretary of the treasury and the obama administration. they will be interviewed by times andthe new york cnbc. he will be soliciting questions from the audience following his conversation. also, just a reminder. we are on the record and we are wise. -- live. i would like to welcome to the andrew, the professor of finance and management at the yale school of management and the director of their financial stability program. [laughter] -- [applause] good morning, you are here to see what is the main event. project toulti-year catalog, explain and analyze the actions that were taken during the financial crisis by the official sector in the united states. --se actions were taken by as leaders, these three individuals here. i think what we can argue, discuss, and we will, whether or not any of the specific things that they did were good or bad. the is not in dispute is extraordinary partner

in addition to all the other stuff treasury does. their job including fiscal policy. -- the enforcement cases are done by a particular unit. by a certain point they need the attention of the counsel's office and ofac and the director and more senior leadership. there is some sentiment that there is not enough capacity right now to be getting these cases. >> staying with politics. let's talk about trump's trade war. the president arguing foreign producers will swallow the cost of tariffs to preserve u.s. market share. opponents are arguing that american consumers will pay the price. we asked, who is right. >> the answer hinges on who has power in the market. >> some of the tariffs just started this past week. it will be a while before we feel the effect. the u.s. did the smart thing. if you're going to do a tariff, try to put it on those things for which you might be able to push it off on the supplier. bank had a fascinating chart that said, in the first round, very few of the products were ones -- on china, very few of the first 50 b

>> that is consistent whether the treasury department or the or the whiteent house. we will not tolerate and actively prevent anyone from attempting to interfere in our election. the president signed an executive order just yesterday for penalties to take proactive measures. >> i know that. i know that. >> but it is consistent. >> okay. obviously you don't see any diversions. it seems it is a lot harder for us to focus on when the president of the united states that both countries are responsible and the message from the president should be entirely consistent with the policy you try to carry out and too often unfortunately it is not like this is reflected in the executive order signed yesterday. >> the revolutionary guard corps the arm of iran to designate as a foreign terrorist organization i introduced a bill to do that and also to sanction them. where is the administration on this issue? >> congressman we remain very concerned i don't have an answer to that question i can get back to you. >> as an organization the shell companies are already under treasury sancti

bank of america ben bernanke he was the head of the federal reserve bank and hank paulson was the treasury secretary and they let lehman collapse and then came to the rescue of all their friends well they wrote an op ed about basically concern trolling that there could be another financial crisis and first pointing out how much they as you know federal reserve bank chairmen and people involved in that helped rescue the system back then they said although we and other financial regulators did not foresee the crisis because report foresaw the crisis i might add we moved aggressively to stop acting in its traditional role as lender of last resort the federal reserve provided massive quantities of short term loans to financial institutions facing runs while cutting interest rates nearly to zero the treasury department stopped iran on money market funds by providing a backstop for investors the treasury also managed to take over the mortgage giants fannie mae and freddie mac. and worked with the fed to try to prevent the collapse of large systemically important financial firms the federal depos

i want to head to the auction block, where the u.s. treasurytioned 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 with italy? iain: i think there's a couple of things going on. you have this general risk off sentiment that is starting with emerging markets

that year yield curve in the treasury markets. ahead on this program, the final spread and the week ahead. central bank decisions from the ecb and bank of england. this is bloomberg real yield. ♪ ♪ jonathan: i'm jonathan ferro, this is bloomberg real yield. time for the final spread. coming up over the next week, japangs of leaders from and china. the fed base book coming out wednesday and we get ecb and bank of japan. guests.th me are my to the ecb, i want to get the view from london. what are you looking for from draghi for the next 12 months? given the forward guidance, we think they have given themselves very little wiggle room. there's not as much excitement around the ecb as there used to be. is telegraphed on its way out. we see to what extent they take italy on their periphery in changing the tone of the statements. we had a pretty soft start to the year. making the end of summer more likely than later down the year. >> i would agree. i think it is mostly about the balance sheet decisions going forward, and forward guidance

please know the treasury department is -- we are all over this matter. you did -- you asked a key question regarding, quote, automatic sanctions. automatic sanctions, mandatory sanctions, are really not the way to go in our view simply -- it's not because we don't want to designate these individuals, i think we've proven with our track record that we will not hesitate to go after these people. but we have to be able to synchronize the way we go after them together with the department of state but also together with our own financial diplomacy efforts. a lot of what we do are things you never really hear about or see as we are out preparing the battlefield for the imposition of the sanctions to ensure that we have maximum effect with partner nations. so i appreciate the chance to comment on that. >> thank you, congresswoman. i just wanted to make a quick statement on the elections, because you mentioned the deter act. as you know, the president has signed an executive order. we very much share congress' concerns and i think the intent behind the executive

there is no business from the treasury market today. view on whether you think the trend that can begin or a trend that can last? >> i think the trend has begun. you see the lows of a wage growth in 2015. if you look at the trend in average hourly earnings or employment cost indexes, we have been trending steadily higher. we are nowhere near the highest of 2008 or 2007 which had the average earnings closer to 4%. but the trend is a steady pick up in wage growth. >> thank you for having me back. i think it's interesting, we felt for quite some time the phillips curve is not dead. we think it is flat. it is pretty clear if you do any statistics. as we get low and unemployment rates and keep creating jobs, it is no surprise that wages are starting to pick up. we think that will continue to do so. the risk is, no one has any confidence about how this will translate to broader market inflation. the relationship between inflation and wages has also flattened quite a bit. it is not clear that companies will be able to pass through higher wages