The economic problem, thats much more on the fiscal size. The focus needs to shift on to fiscal stimulus now. More coordinated policy response. And all of the above strategy its critically important do that. Dont bicker and argue whether doing payroll taxes or paid family leave. Do them all. This is what the market needs to see, fiscal policy makers panic. G to markets stop panicking when start panicking. It took until really the last butdays for that to happen, here we are now. What a week its been. Table, me around the greg, and from pasadena, westernia, mike of Asset Management. Michael, the Silver Lining at the end of a brutal week for you out there, i know. Finally do you start to see the and shouldr panic that be the moment when markets stop panicking . Real good thats a point. We knew fiscal policy was coming our way. Monetary policy was coming our way. The two working together in a cohesive fashion, i think, is reassuring to the markets. I think youre seeing a little of that today. I do worry that, you know, if youre looking for instant here, it doesnt feel like the volatility is really gonna be completely swept out of the market. I think thats gonna take some to at least virus show some evidence of containment globally. Reallydoubt, these are powerful tailwinds, both and monetary. Scal so, yeah, its an encouraging day for sure. Well see it going forward, what happens. Collin, just to turn to you, early than later, but betterthanlate than never. President will speak at 3 p. M. Looks like slowly were get the right place. We knew that the fed cant do a alone, so this is certainly positive that were going to get some sort of coordinated fiscal response. With michaelent that there can be volatility going forward. This is a good first step. That we can support local municipalities, the consumer, maybe businesses, just something. I dont know whats right, whats wrong in terms of the response, but it should boost confidence. Confidence in the recovery. Thats the crucial issue here. Publict address the health crisis. This virus needs to g fade. Littlewill give you a more confidence that after this fades, we can get out of this and recover. Consumer thats driven this recovery, we thought the consumer was going to power through in 2020. What could stop it . Obviously the coronavirus has done that. Youre absolutely right. Need too get through this. Were only on the left side of the bell curve in terms of transformation. Hopefully it will peak out in six to eight weeks and its think werehat i preparing for a strong recovery midsummer. Its very difficult to get your hands around what is going on with treasuries. Take me inside this market this week. Places youd expect there town death from liquidity, not much of this week. Whats been going on . Whats been going on in the is reallyarket spectacular. Off the run treasuries, trading 3 point bid spread. Thats been corrected with policy makers coming in yesterday to address that. Also i think whats really past ing, the previous two trading sessions, youve seen a little bit of a the risk parity trade at the long end, where in equity environment, treasuries werent rallying. Iny were actually weakening price. So a lot of odd things going on in the treasury market. We would argue, youre probably in an overheated, just in terms level. Lute but that obviously if theres dysfunction in the treasury onket, imagine whats going in some of these other spread markets. You know, its really just the trajectory of how we got here, how weve gone from a bull market to a bear market in less than a month. I think its really astounding. Theell be talking about credit market just a little bit later. Well hear many comparisons 2008. Back to were nowhere near the absolute levels but in terms of the pace brutallyve, its been quick. Treasuries, credit, take your pick. Its been really swift. Caught a lot of people offguard. The treasuryat market, were also getting the question, why even benchmark 80, 85, 90 basis points. Far, toojust came too fast. It was a really swift move, about 30 basis points. Was very fast. Maybe this is just bouncing back on optimism, maybe trying to point. Settling but its tough to really pinpoint one thing. I think its really difficult take treasuries and draw a line back to fundamentals when weve seen a liquid market through much of this week. Its difficult for me to give a fundamental narrative. Its a mistake to even try to do that. Weve seen 30 handles on the long bond this week. Back up fromoints where we started on monday morning. This is one where i dont want to step back. Theyre selling anything, that includes treasury bonds. I know theres many reasons behind some of these vicious moves we see in these treasury yields. Not think it is lets forget the fact that a lot of the broker Dealer Community are staff. On half theyre at home, in front of screens. Theyre just not going to get the kind of spot reaction that would in a normally functioning market. Is there a risk then that the next week could be even worse than the week weve just seen, not because of fundamental issues but because of the technicals . Theres going to be far more people working at home, away from their staff . You know, i would bet against it being more volatile than this week. If youre like us at western asset, the Emergency ResponseDisaster Recovery teams, theyve really worked with the technology. Time to, if people are working from home, if theyre working from another offsite, to get that technology right. Communication is going to be there. I really feel that way. You know, again, i think youve so much volatility in the market this week, its really hard to sort of speed the continuation of that. As i said earlier, i do think its going to continue to remain volatile. Also, i think prices have gotten to a point now where, you know, pricing in, in many cases, a pretty severe economic consequence. Yes, they could go lower. Markets do overshoot. We always see that. At some point, i think theres a floor just based on pure, absolute valuation that provide some stability. Looking at the situation for the fed coming up next week, bank, heres one for you. We are looking for an immediate 100 basis point but one wonders if the fed has to Start Talking about qe as well. What are you looking for, 100 50, 25 . Ints, whats coming from these guys . Its all coming. Wed probably argue that you could expect 100. Almost think its irrelevant. Its the signaling from the fed in on this issue. The markets need to see that. A lot ofouve seen evidence of that now outside of fed. So i think thats really going to be what the markets are looking for, that, you know, a real genuine concern, significant, how how global this issue is, and all hands on deck, were all in to do everything we can from a policy standpoint. Put some of these issues together. On the right side, ive heard repeatedly there may be in treasuries, weve lost some of those risks that you may get a Treasury Holding in your portfolio. But if we drop 100 basis points, the rate cuts have been priced. You drop the whole curve. Not just the front end. If we drop 100, are you telling me that we can get some real steepening or do we pull the curve bei think its going to slower to respond. I think its at least a minimum of 75 basis points. Know that potentially 100 but i think there are going to be some people in the fed that going to resist that, resist using the literally last bullet theyve got. Going to go negative, at least in my mind. Once they do it, theyre done. Maybe a little bit of both. We think it pulls the whole yield lower, the whole curve short end maybe the is more than the long term. Weve heard this a lot over the years, abouto maybe the lack of diversification benefits that treasuries provide. We hear maybe from the stock bull saying theyre not going to provide that diversification benefit. If anything, the past few weeks are proving that thats not the case. We think they will continue to that benefit going forward. Right now, stocks roll over the place. Day but volatile on the week. The guys are on the table. Theng up on the program, auction block. Looking for opportunities amid the volatility. Conversation is up next. This is bloomberg real yield. [music] this is bloomberg real yield. Auction to head to the block and kick things off on the continent. Over in europe, where they grinded to a virtual halt until it finally snapped a week long after it released 10 issuers were said to pull their deals on wednesday alone. The highyield primary market zero deals this week, after they postponed the bond sale. Guess what . Volatility, sticking with credit. Stressing the importance of fiscal support. Clearly if theres a fiscal response that can open up credit come backh yield will and more critically, ig for the function of the economy. For the time being, those are pricing in what we think is pain, and theyre accurate. Collin and greg. Lets get to credit. What a move weve seen this week on high yield. I think its about 176 basis through thursday into friday. In four sessions, and if you how vicious q418 was, that was three months of a little more than 200 basis points. The speed of this, just walk us through how vicious this has been for you. Yeah. I mean, its really it really back, especially when you look at the one component of the highyield market, the remindsector, it really me of a lot of the severe price drops we saw in the fourth 2008. R of but down high yield market, since february 12, the rest of the market, you know, i would say is sort of in, something that we really havent seen since maybe 2011 withseptember of the downgrade, s p downgrade, the u. S. Government bonds. So really, just, you know, a very severe move. You know, there are some kind of Silver Lining positives. I think liquidity has been reasonable. It doesnt feel like theres a lot of forced unwinds of high credit in general. But to your point, i mean, this something that is truly very special and not in a good way. Way at all. Good we should also point out that, of course, the comparisons fall think aboute absolute levels. 12, 13 what, 10, 11, Percentage Points away from where we were back then. See this market, do you see the dislocations that you want to take advantage of, or price to get in there and put Something Back on the book . Definitely theres opportunity in credit right now. We dont think youre gonna have fundamentalnd of breakdown that you saw in 2008 know, just defaults materially. We think whats being priced in already we use these market default models. What they suggest to us about whats being priced in, in terms defaults are going and where theyre going to stay, is anything we f excess of anything we see, both from a top down perspective as a bottom up. We look to identify any credits that we think are perhaps vulnerable. Way. N the numbers that but in both cases, its really looking like what the market is is a lot more severe than ultimately whats likely to transpire. This has been the story this week. We woke up on monday, in fact sunday, with oil just ripping lower. Investors, get in the back seat. Funded by the bond investor for years. T 10 all of a sudden, its about near term risk. Ratings,rotect your meet your coupons in certain areas of this market . That seems to be the driving force. How do we balance some of those things at the moment . At some of theok dislocations an pick out some of the names. We dont really look at individual names. We dont suggest our clients at schwab do that. It can get a little worse before it gets better. This is why weve been negative yield, since the middle of last year. Clearly we didnt see the but we werecoming just concerned that the level of a whatanding, in were looking another right now is kind of the 201516 situation. Whats different this time around, though, is that it doesnt look like its just in energy play, with a little bit of slower china growth. This is a slower Global Growth issue. Seeing a lot of issues with airlines, hotels, tourist companies. Weve seen some big moves for the airlines and for the triple b players. The way a lot of people stands to think about this is, ok, downgradesome real lists out there but prices those two things against each other. The fear that some of these big vs. Thet downgraded price move weve already seen. I think the price move has been nondiscriminate until now. I think were going to do a lot more separation between these that are going to be very hurt by covid19 and those survive. Going to think about pharmaceuticals and nondurables. As long as the economy doesnt tank, i think there are real values there if you know where pick. Still real value if you know where to pick . Definitely real value if you know where to pick. I think we have to remind ourselves that these issues, concerning,y coronavirus, the price war with crude oil, these are transitory issues. We will ultimately get through these. Corporations, as well as the consumer, are in much better shape than they you go backow, when to 2008. So can they endure . Water . Y tread and wait for the economy to stabilize . Question youre gonna see numbers drop off in terms of cash flowin terms of generation. But i do think the flip side is Balance Sheets are in a pretty place. Financial flexibility is there. Cases to capital in many is still open. Albeit at a higher price. Yeah, take advantage of these prices right now. And its like you said earlier, its about, can you get reliable, consistent coupon and a lot of comfort that youre gonna get paid back at maturity or before . We feel really good about that. And just valuations have changed dramatically. But were relative value investors. Time where its scary but you dip your toe in and you put some cash to work here. Basics. Ng back to guys, sticking with us. Coming up, still ahead, the ahead,pread, the week featuring a rate detention and chair powell delivering a news conference. This is bloomberg real yield. Im jonathan farrow. Yield. Bloomberg real coming up over the next week, kicking things off with a Leaders Summit over video conference. Then china and the u. S. Reporting retail sales, plus the fed Rate Decision and powell conference on wednesday. Turn. Ts the bojs lets start with you, mike. Looking ahead to next week, what from chair to say powell and the fed that they havent done already . Real cohesive message prepared to know, do anything it takes. Dry. Rs not maybe we dont go to negative rates. We wouldnt expect that. But theres a lot of other tools tool kit. And i think expressing a those tools,o use highlighting what some of those qe or other, is think thats going to be real important for the market to know that the fed is not out of ammunition and theyre prepared to use it a all and weve got a long way to go. So tough for the policy maker, because every time the fed steps back in, the has moved against him and has reinforced the argument that it cant do a lot here. Communicate, i know, but at a critical juncture too many balls have been dropped. Lagarde, she said, thats it, i can do no more. Isfar as this week concerned, i think its about the press conference. Hes got to follow through for be tough,ts gonna because with the injection of liquidity yesterday, he cant reassure them more on that. In the buying of securities, that really is quantitative easing. Gonna talk about what he can do but i think the market is skeptical. Its a qe now. Can we call it qe now . Leaning muchre towards qe now. Previously, not so much, but ais one i think is smelling lot like qe. Would you go with that as well, mike . Call thisly you can qe . Is that what this is now . Yeah. Qe, whether we call it or qe. Call it qe or not, its coupons, what does that mean take . Ust the final i hate to say this week all it was about off the runs and on the runs. Really not quite sure what qe is going to do, if it can down from 50 to 80. Whats ailing the market is not low interest rates. Its really about risk taking. Thats a different story. Rapid fire round. A massive week, three quick questions. The biggest risk right now for what is it . Credit or Liquidity Risk . Now, credits right risks or Liquidity Risks . Mike . Liquidity risk. Mike . Credit risk. Collin . Risk. Dit second question. A call for the brave. Have we seen the low for the yield . A 10year have we seen the lows on the 10year yield . Talking intraday, 30 day, i would say weve seen the low. 32 basis points, i think weve seen the low. Agree. Well see. Third and final. The fed, next week. 50 or 25. Pick a number. How much are they going to cut this coming week . They wont at all. 75. 50. 100. In for a penny, in for a pound. What a week. You. Stic to catch up with thank you. Does it fork, that us. Well see you next friday at 1 p. M. , new york time. Yield. Bloomberg real this is bloomberg tv. Good morning oh no, here comes the neighbor probably to brag about how amazing his Xfinity Customer Service is. Im mike, im so busy. Good thing xfinity has twohour appointment windows. They have night and weekend appointments too. Hes here. Bill . Karolyn . Nope no, just a couple of rocks. Download the my account app to manage your appointments making todays Xfinity Customer Service simple, easy, awesome. Ill pass. [music] from edinburgh to the city of london and to the top of an Asset Management giant, today 300of sees more than billion dollars of assets for 2. 5 million clients, with investments that span the globe. In scotland. Egan she got her degree in electrical from the university of edinburgh. Circuits. Richards went on outside of paris