Michele. This is one of the most difficult things to accept, that this market does not have to reflect what is going on in this economy. Can you speak to that . Bob i can speak to that because im in the bond market and it is reflecting perfectly what is going on. We just printed 33 gdp. There is a giant hole that we think will take 10 years to fill the output gap that has been created. The fed is telling us for a long period of time they will keep rates at zero because they have to bring the cost of funding down across the system so that any kind of recovery takes hold. Slowly, Bond Investors are recognizing that, and that has emboldened them to move further up the curve both in terms of duration and lower in credit quality. Jonathan we have had conversations about market distortions. The equity market, Big Tech Companies dominating the benchmarks in the u. S. What is the cleanest trade in fixed income to play an economy that would take 10 years to fully recover . Bob there are two clean trades. best with the fed. The kinds of things they are supporting, go ahead and buy them. You will get a notional return on them but at least it will be something that is positive. The second is to roll up your sleeves and dig through credit. The interesting thing to us is this is where there is a divergence from historic valuation metrics. We are seeing default rates go up credit rates come in. Jonathan what is the appropriate valuation method . We have spreads at 500 basis absolute borrowing costs for investmentgrade near record lows. What is the appropriate response, approach to this asset class now . Bob with the ongoing policy responses we are seeing, throw away the text books and the historic metrics, and find those companies that will pay you back. Book that yield now because it is only going to go lower. Those industries and companies, sectors of the market that look like they are headed to restructuring, get out of the way of those, let them head to restructuring, and then look to pick them up on the backend. Jonathan do you expect the same pain in europe . Once the ecb stepped into credit, the data was irrelevant, and spreads cap grinding tighter. Do you see the same thing happening in america . Bob i think so. This is less about buying bonds and more about an affordable funding rate for a recovery across corporate america. I do expect that. Jonathan walk me through how you would play the rest of the curve. Many think we can get a steeper curve. Are you looking for the steamroll to go out over the long end . Bob i think it is nonsense the curve is going steeper here. While i dont think this Central Reserve will take policy rates negative, to me that is irrelevant. It is possible that five and 10year treasuries go negative as more and more money comes in from overseas, both europe and japan, where yields are negative there. Think 10your nominal yields can turn negative in the market . Bob without question. We saw that in europe where the ecb held policy rates stable for a while. I dont know that will happen over the next month, but over the next few quarters, there will be a move, the fed will stick to zero, the money will come pouring in domestically and finance internationally to bring rates down to zero and probably negative. Is that foreign inflow enough to take it into negative territory . How much would you expect the Federal Reserve to respond . Fed you still have the theyre buying. They say they will buy 40 billion in agency mortgages, 80 billion in treasuries. Even as they start to fade from the market, theres enough money overseas trapped in negative markets that would come into the u. S. Market. The fed will look at that, it would make them uncomfortable, and they may dial down the level of her juices, but that may just be the reality of the economy we are in. Jonathan let me get the final spread. Next week, a ton of fed speak with jim bullard, Loretta Mester speaking throughout the week. Pmi in the u. S. And china. U. S. Factory orders and durable goods as well. Finally, another round of initial jobless claims and the u. S. Payroll report. Lets finish with a rapidfire round and get three quit questions. On the payrolls next week, negative or positive print for the month of july . Im going to be the outlier and say negative. I dont like what is going on with weekly cames data. Jonathan what is the first to break 1 , the 10year yield going higher or the 30 year yield coming lower . Question . At a trick 30 years going lower. Jonathan final question for you, on high yield, with everything that you have said, is a negative print possible on the payrolls report, a 30youre going some 1 , what do we see in spreads . 400 or 600 . Bob 400. To catch upntastic with you, bob michele. From new york, that does it for us. Was bloomberg real yield. This is bloomberg tv. It is 1 00 p. M. In new york, 6 00 p. M. In london, and 1 00 a. M. In hong kong. Welcome to Bloomberg Markets. We are digging into how the pandemic is affecting all walks of life from big oil to teachers and schools to even how we work out. Ill be speaking with Raymond James analyst paddle mulch and up. You will also hear from Stacy Davis Gates Chicago Teachers Union about the particular challenges in that city to reopening schools. And we will be discussing the work out at home trend with the ceo of tempo. Lets get a quick check of the markets. New jerseys transmission rate for coronavirus has jumped to 1. 35. Not great news. Selling off on the s p 500, down. 6 . Crude oil making it above the 40 mark but it was below that for most of the day following results from some of the majors. The 10year yield at 55 basis points. The energy index for a second point 2 ,ow down two the worst performing index in the s p 500. Lets stay on that with more insight and what is next for big oil. Pavel molchanov is the Equity Analyst from Raymond James. Talk to us about exxon. I know you have a lot of thoughts about chevron, but weon, for the negative views were expecting, it was not as bad as it could have been. Picture is, the big that this was a her in this trough quarter for every oil company on the planet. Was at 30 a wti barrel at one point in april. Of course, demand collapsed in the lockdowns in april and may. The degree to which any betteres q2 results were or worse than expected, you are right, chevron was relatively worse. But those are minor details. The fact of the matter is, this was a trough for the entire industry. Q3 will certainly be much better. We have seen Oil Prices Get back to 40 plus. The response from every one of these companies is the same, which is cut everything they can. Capital spending, operating costs, headcount, corporate expenses. It is not pleasant but these austerity measures will help bring the oil market back into balance. That is the silver lining. Vonnie where will those reductions come from, will it be more shutins, the dividend . Pavel we have seen earlier this cut, shall cut its shell its major, the only major to do so this cycle. S dividend, the only major to do so this cycle. Do i expect others to follow suit . Probably not. If we are still talking 40 a barrel one year from now, all bets are off. In the meantime, everything these companies are doing is designed not to have to cut the dividend. The cuts will be from shrinking reserves, shrinking writing off assets, as we saw a number of these companies do this quarter, and less spending on all the assets that remain. Vonnie you have brought up a point i wanted to address. The highyield market is off limits to most of these guys, perhaps not the majors, but smaller players, and they are having to write off assets. What happens at the other end of this . Do they all get gobbled up by the majors, what happens to those assets that have been overburdened because of financing needs . Just in the last 100 days in north america, we have seen Something Like 30 oil and Gas Companies filing for chapter 11, public and private. M anumber of corporate deals is much smaller than that, we can count on one hand. For example, chevron buying noble energy. Most of these bankruptcies are not going to lead to buyouts, simply to banks taking a haircut on the debt, shareholders getting wiped out, and then perhaps the companies can come back to life in a shrunken down form with a cleaner balance sheet. There will be some m a. Right now, all of the big oils are cutting everything they can, too. Part, they are not in the mood to be gobbling up more assets, when the fact of the matter is, the existing asset base is being underinvested as it is. The first are your day need to be recovery in capital investment, organically, and only then doesnt make sense to look at potential does it make sense to look at potential m a and acquisition opportunities. Vonnie you say that while this year may look flat production wise, we could be looking at an increase in 21, 12 in fact. Will that be possible for chevron to do, is that thanks to the noble acquisition . Pavel that is absolutely because of the noble acquisition. Way, flat production, given the meltdown we have had this year, is actually quite good. The vast majority of multinationals will have a production decline of some unknown in this current year because of curtailment. So chevron is actually doing pretty well on that. But the growth in 21, that growth you mentioned, almost all of that comes from the noble acquisition. That was a oneoff. Corporatet seen much buyouts at all in the past six months, for obvious reasons. The accretion on that deal to chevron by our numbers is 5 on cash flow per share. It is not huge but not a huge deal to begin with, a 13 billion acquisition for a company with an enterprise value of more than 150 billion. Not a needle mover, not Something Like oxy buying anadarko last year, which was transformative. I dont know if chevron needed to do the deal, but it is accretive. Vonnie and a Good Discount built in. I want to ask you about the other companies. You include a company in brazil. Im curious what you think the trajectory is for that company that is so bogged down in coronavirus, and petrobras sticking with its target this year, even though it seems impossible. Pavel we have a sell rating on petrobras. That is very much in the context of brazils absolute catastrophe with the virus. Brazil is only the second country major second country in the world where more than half of the population is confirmed infected. That is particularly problematic in the coastal states. That happens to be where petrobras is based. More to the point, its offshore production platforms that are right off the coast of these are byhardhit states geographic proximity exposed to this high level of covid outbreak risk. By the way, petrobras already had two offshore platforms that had to shut down temporarily in april because of sudden outbreaks. At the time, brazil had 50,000 infected. Million, second only behind the u. S. , of course. You have that risk from an operational standpoint, to one of the Largest Oil Producers in the world, and on top of that is withacro crisis in brazil the pandemic, the currency, economic collapse in some of these hardhit states. Petrobras has a lot of exposure from a macro perspective to the brazilian economy, as you said, is pretty brutal right now. Vonnie thank you for joining us. Pavel molchanov at Raymond James. Expedia down 6 after a slump in bookings. We will discuss that next. This is bloomberg. We are looking across the entire company for efficiencies. We announced earlier in the year a goal of 500 million in savings, which did not even go to our variable costs. Ofare already at a run rate 400 million in savings, and we expect to do meaningfully better than our goal. Ofhave also taken costs out the variable side, on the call center side using technologies on the processing side, and even on the advertising side where we not a returnill be to business but much more efficient in our marketing. There is a lot of opportunity for us to take additional cost out. I will say that whole notion of deferred bookings has settled down. It was particularly acute in the back half of march and april when nobody was booking travel and everybody was canceling. That has considerably changed in the past few months. Even in july with cases returning, we are seeing it is not growing at the same rate as in june, but it is a fine place for us to sustain ourselves. We are not particularly concerned about that. Much of that deferred booking has burned away anyway. We feel good about where the business is. Obviously it is greatly reduced. You pointed out the quarter was terrible. Of course it was. Not a surprise to anybody. What is important is how we are going about it now and what we will look like when the business returns. We are spending our time on that, making sure we are efficient when we come back. The company is our stock of the hour. Here is kailey leinz. We heard peter talking about when the business comes back, but there may be a long way to go until we get there. When you look at the secondquarter numbers the company reported, bookings were down 90 from 2019 levels. Revenue plunging 82 . 33 largerit loss, than analysts were anticipating. Granted, they may be moving toward the light, things improving sequentially each month, but even in june, demand was down 70 . One analyst said things have gotten less ugly but the environment remains challenging. That is the sentiment echoed across the sell side. The street is giving the company some credit in regard to those cost cuts. Here atown analysts Bloomberg Intelligence say that they make it may weaken them from a competitive standpoint. They are focused on this competitive Advertising Channels like google, and that means they could lose bookings to rivals that have stronger digital platforms. Vonnie if they are traveling, where are americans going . Kailey pretty much anywhere they can get to by car. About 85 of people surveyed are planning to a road trip. They see a car as safer as a plane. Safety appears to be the primary factor in trouble at this point. 72 said they are basically trying to avoid crowds, and that is more important than anything else. That is an issue for expedias business. That is why we have seen the Airline Sector be hit so hard. Maybe its better for rental cars and hotels. Traveling, they just want to do it in their own cars. Vonnie thank you, kailey leinz. Chicago schools are preparing to reopen. We will hear with the teachers think about the citys plan with the Vice President of the Chicago Teachers Union. Stacy davis gates will join us in a few moments. This is bloomberg. Mark im Mark Crumpton with bloomberg first word news. The u. S. Government top Infectious Disease expert dr. Says he isci cautiously optimistic a Coronavirus Vaccine will be available by next year. Fauci a pironkova today at a hearing that was held by a House Committee calling for a National Plan to contain the virus. Market another milestone this week with total markinges from covid19 150,000. It is official, the euro area economy plunged into an unprecedented slump in the Second Quarter due to coronavirus lockdowns, and it may take years to fully recover. The area saw a 12. 1 contraction. Spain took the biggest hit, shrinking 18. 5 . France and italy also dropped by double digits. The u. S. Government want to seize but profits from john bolton without a trial. The Trump Administration asked a federal judge to rule in its favor. He argues bolton violated nondisclosure agreements when he released his book without completing a prepublication review. Bolton argues he fulfilled his responsibilities. Tropical storm nate lisa lees saias could strike the u. S. By saturday. The National Hurricane center has posted a watch along floridas east coast. Meteorologists think that it will skirt the east coast but the strongest winds will stay offshore until the hurricane probably comes ashore near wilmington, North Carolina next week. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Amanda live from toronto, Bloomberg Markets. Im amanda lang in toronto. Vonnie im vonnie quinn in new york. We are joined by our bloomberg and Bnn Bloomberg audiences. Here are the top stories we are following from around the world. Chicago schools prepare to reopen. We will speak with the Vice President of the Chicago Teachers Union on the hybrid learning model said to be in place for reopening this fall. Investors gaining access to the clo market. Tempos 250 million valuation. The athome Fitness Company raised new capital. We will talk with the ceo about their plans for the future. President donald trump planning to sign an order to direct bytedance to divest its ownership of tiktok, of course, popular in some circles. Been reviewing potential National Security risks due to the companys control of the app, and the order could be announced today. This is something that had been chinasr the head of bytedance. President trump no ordering bytedance to get rid of tiktok over potential National Security concerns. Amanda we will watch to see some reaction in the markets. Watching reaction in the markets, coming off of the lows of the session. Is the strength across the broad markets, thanks to the earnings from some of the biggest tech names, which were mostly out of the park. We did see them give up some ground. The nasdaq back in positive territory. All subgroups of the s p 500 are negative except for Consumer Discretionary