Is driving the market. The credit fundamentals are deteriorating. The central bank has effectively crowded in. You can get spreads. Jonathan always great to catch up with you. We have a ton of supply from the treasury. The 30year happened. What was your interpretation. There was supply fatigue. What was your take . In the end, supply does not drive markets. It can have shortterm impact as supply has to get digested by the marketplace. Over the long run, the fundamentals are what will drive evaluation. At the long end the long end of the curve was a little overbought. There had to be concession to be supply into the marketplace. Over time, it will be fundamentals and we will be in a low inflationary environment. The fed is on hold for years. As a result, there will be demand for long treasuries. Back in late 2017, when the administration cut taxes, the yield on a tenure was 250. On a 10 year was 250 what will matter for the long and is inflation dynamics. Inflation picked up in the last several months. What is kind that and how sustainable is that from your perspective . Mike back to my point about supply not determining pricing in markets, look at corporate. An enormous amount of supply and spreads are at post covid. The long end of the treasury market is going to be driven by supply and demand, longduration, pension fund manned. Inflation plays a major role. There are a lot of people talking about it. There has been food Price Inflation move up, but for the fed to do anything different really would take an extended period of time north of 2 inflation. Aen though you have seen shortterm site, there are fundamentals in the economy leading to inflation. I am ans tell you, economist by trade, but you dont make money my textbooks, but by real economic issues. Inflation is the thing we have all been waiting for. It is not likely to happen. Still have massive oversupply in the labor market. That has to be worked down. That is a global phenomenon. You have massive deflation caused by the internet and globalization. The idea you are going to see inflation at 2 or 2. 5 over the next few years is a low probability. Inflation expectations will be below 2 , which will cause a significant amount of demand for the long end of the curve. You have investors that need hedges, protections. When the few are longterm treasuries. Jonathan lets talk about credit or do the fundamentals matter in the credit market . Much iney dont matter the investmentgrade market right now. The bottom line is, the fed is buying they are protected. There is an enormous protection for these to come into the market. Times, we are at two three times, four times leverage, over the course of the year doesnt matter. The bottom line is the fed is there to protect companies. There will be enormous demand around the globe for yield. So there, no. Even though the fed is buying in the highyield market, fundamentals absolutely do matter. In the near term, we believe ande is a slowdown companies are suffering, but in the end, demand for yield will continue to be much more relevant than fundamental deterioration in the Corporate Credit architect. Jonathan lets talk about a concept you have been exploring. In the highquality parts of fixed income, crowding people out and pushing them to risk your parts. Is that a story you start to play yourself, think about the crowd drifting down in credit quality . Mike obviously, late in the cycle, you get very concerned about it. It is like the game of musical chairs. You are fine when there are 15 chairs and 14 players. When you are down to a couple chairs left, you get nervous. I think it is early in the process in terms of crowding out. Within the higher yield sectors, we think there is a lot of room to run. The area that is getting questionable is around the investment grade. You now recouped an enormous amount of the spread widening and curve, so a little more question there. I think this demand for yield that is going to be with us for the next couple of years as rates are zero here, negative in europe and pan. And japan. The u. S. Is still highyield, even though they have issued high yields a 2 handle, doesnt sound very highyielding, but better than negative yields in japan and europe. I am sure that is what you are alluding to. We have had several big tach Companies TechCompanies Issue demand with low yield. Can you walk me through why that is something someone would want to buy in this environment at this moment. Mike in general, longterm corporate debt is rarely purchased as a result of value and the potential for total return. Longterm corporate debt is purchased because there is a liability to match. So we work a lot with the benefit of pension lands that have longterm liability, so they are purchasing engine plans that have longterm liability, so they are plans that pension have longterm liability, so they are purchasing. I would expect that trend to continue. Companies are looking at longterm yields and seeing one handle, 2 for 30 or 40 years. I will do that all day. It makes all the sense in the world. There is a good match between structural demand and obviously a lot of incentive for companies to issue longterm debt. Jonathan give us some insight with the conversations you are having with clients about u. S. Credit. What do they sound like . Market is still very much looking like an attractive market for overseas investors. , a lot ofnvestors their issues are around hedging and hedging costs. You have a significant hedging cost in japan to be able to borrow dollars. You talk a lot about, do i want to hatchback to my currency are go ahead and say long stay long in the assets. With the decline in the u. S. Dollar, a lot of clients are hesitant to take on the credit risk and maintain the dollar exposure. They are susceptible to what we call the cross currency basis, to find in dollars. That is not overly attractive. It is one of the reasons why we have seen a slowdown from foreign investors. In the u. S. , plenty of demand for credit. If you look at the investmentgrade index, with alltime highs in terms of ownership and with flows into products, it has been actively open. Jonathan we are waiting for this president ial News Conference to take lace. Place. Saturday, we were meant to have talks between the United States and china. That has been reportedly delayed due to reuters. Housing and then minutes. The ecb publishing the july meeting. On friday, home sales and u. S. Pmi. Lets get to a question on the administration. The 10 year yield is in the middle of the postcode range. The low is 50 basis points, the high 90. If you had to take a guess where we break out at the low end of the range or the top and, what would your answer be . Mike obviously, it is very linked to the vaccine situation. If you tell me when we had a vaccine, i could answer that question quickly. But if we are talking about six months to a year out for a vaccine, i would say break to the lower end and a higher probability of trading down to 25 to 30 basis points. Jonathan highyield spreads are below 500 basis points. Ort will we see first, 400 600 . Mike i would say we probably grind closer to 400 before we see 600. Jonathan the final question from me as we await president in washington, d. C. , deal or no deal before months and . Box 26 frompick Howie Mandels deal or no deal show . Jonathan no. No deal. Mikehan mikes well, swell, goldman sachs. You newark city, i will see monday. This was bloomberg real yield. This is bloomberg tv. Welcome to bloomberg markets. Im vonnie quinn. We will be speaking to ron , the Israeli Embassy ambassador. First lets get a stop of the hour. We have Abigail Doolittle joining us. Abigail the etf of the hour, gold and gld trading down in sympathy. After some of the froth comes out of the precious metal arc it, showing in terms of the holdings, which have declined for the fifth day. Down, after huge rally good this is the first down for gold going back to june. Gold had been up so much, 20 out of the june lows. This week, investors taking chips off of the table and taking money out of gold. It is also silver, sometimes called poor mans gold. Gold last year had a huge runup, its best year since 2010. It has been playing catchup. 130 , point, 150 , now far outpacing gold. His week, silver down about 7 investors wanting out of precious metals. Hedgealk about this as a against inflation. You could also see on liquidity. As far as miners, we have gold being outpaced by minors. Minors out 24 , but 28 , but minors are far more. That speaks to the degree of fraud in this market. You have Retail Investors going for where they think there will appreciation and then, inflation hedged in think about gold and russias metals, this has to you has to do with negative yields. Metals, this has to do with negative yields. And had four froth precious metals. Earlyweek for gold since march. Vonnie they have been quickly in and out. Where weology stocks have seen a grind higher and it is not going anywhere. Abigail this speaks to the froth mentality. Everybody thinks of gold and silver as haven assets, but if you go back to 2008, gold was down more than 30 at one point. It is not the haven that investors think it is. Silver and gold trade on liquidity with anticipation that willhe money printing get tighter inflation. Get in gold and silver to hedge against that. In 2011, a huge spike. As we tell got involved, it cap going. And then the fed did Something Interesting where they tried to move investors around in the bond complex, but it had the effect of moving investors into risk and out of precious metals. It could be down the road for sure, especially for folks playing this for the catchup to what they saw in technologies in the precious idols. Abigail, thank you for that precious metals. Vonnie abigail, thank you for that. We will speak with israels ambassador to the United States, ron dermer. This is bloomberg. Vonnie this is bloomberg markets. Low, but ineen august as you might expect. The turnaround for the nasdaq, down. 2 . , ups p 500 and the green 2 . A couple retailers are up. An idea that an activist might viacom and that story being put into the media. Viacom shares of 3. 4 right now. That is also given the s p a little extra lift looking at the chinese yuan, trending lower. The agreement by israel and the United Arab Emirates to begin, lysing has been hailed as a crucial step towards peace in the region. It is being denounced by palestinian officials as a betrayal, however. Us is israels ambassador to the United States, ron dermer. Thank you for joining. The secretarygeneral did welcome the announcement but did say he hopes it needs for palestinians for illegal for a legal understanding. Does this bring us any closer . Ambassador dermer we are always ready to talk to the palestinians. Palestinians, the have rejected almost every plan that has been put on the table. They recently rejected President Trumps plan, who put forward a plan six months ago. Opportunitycome the to reengage with the palestinians. I think with this agreement with the emirates to do is it will make an israelipalestinian peace more likely. For long time, people believed that the road to peace with any arab state goes through ramallah , through the palestinians. They basically put themselves in a position where they had veto power of the entire arab world with israel. Many arab countries would like to normalize with israel. The courageous decision of the emirates to move forward to make peace with israel and become the third country to make peace with israel, i think it sends a signal that the road to peace for palestinians go through ramallah, but peace goes through abu dhabi and i think elsewhere. That countries move move toward peaceful relations with israel, the more likely we are likely to see forces who would like to be able to be empowered against rejection among the palestinians who reject any peace and any Movement Towards israel. Vonnie there was some confusion as to what it meant to suspend annexation. Forlong is the suspension westmark is it specific to a trip presidency in the United States . Dermer it means inherently that it is temporary and the u. S. Administration came to israel and said, we have a diplomatic breakthrough. We have achieved a diplomatic breakthrough. We have the emirates who are willing to normalize relations with israel. Vonnie did they agree to a temporary suspension of annexation . Ambassador dermer they agreed to what was put out. It says the word suspension. It means exactly what it does, a suspension. What happens is the United States came to us and said, we have this diplomatic breakthrough and we ask you, israel, to give us the time and space we need to take advantage of this historic opportunity. The Prime Minister of israel said yes. It has been a quartercentury since we had a piece breakthrough. There is a high possibility we will see more countries move over and in the weeks and months ahead. Rumors comingare in on this. The Palestinian Authority has withdrawn its ambassador to the United Arab Emirates good how concerned are you there may be more conflict as a result of this . Dermer the fact that halfave movement between of politics that they come together and fall apart, this has been went on for many years. Viewers should remember that hamas is a Terror Organization that openly calls for the destruction of israel. It is not surprising they would oppose it. The Palestinian Authority has come out against it, because they thought they could ensure that no air state would normalize with israel and no state that no arab state would normalize with israel. Thankfully, the crown prince of the uae was willing to take this courageous step and said i support the palestinians and want them to have a sovereign future and selfdetermination, but we believe it is important for us to come together with israel. I dont think they are doing it against the palestinians at all. They want to come to the table and get a compromise. Them, butey support you can support the palestinians. Vonnie we are out of time, but would love to speak to you soon regarding further development. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Where you can find games, news and highlights. All in one place, right on your tv. The xfinity sports zone. Use your voice to search every stat and score. Follow the teams you love. And, even get notifications with breaking news alerts and more. With the xfinity sports zone everybody wins. Now thats simple, easy, awesome. Say xfinity sports zone into your voice remote today. Mark this is bloombergs first word news. The agreement between israel and united arab amerens will change the paradigm in the region according to President Trumps advisor and soninlaw, jared kushner, who told Bloomberg Television the United States does not want to pressure the palestinian people. Asked about them rejoining the iran nuclear cord. Onrejoining the iran deal the old terms would be catastrophic for america, catastrophic for israel and the whole region. The vision of what iran wants to see [indiscernible] president Barack Obama SaysPresident Trump is trying to actively kneecap the Postal Service to hurt vote by mail and november. Speaking with his former advisor on a podcast, esther obama pointed to President Trumps recent remarks linking his opposition to 20 5 billion in emergency usps funding about mailin ballot and. The former has rarely spoken out about mr. Trumps actions in office but urged o. A. T. Voters elected official to take steps to protect the integrity of the election. The primeland, minister extended the lockdown of auckland for another 12 days. People will be urged to stay home and consumer facing businesses will be closed. New zealand had been covid19 free for more than 100 days and four new cases were detected this week. The prime is your says she will decide whether to delay september elections in the next couple of days. Mexicos richest man is putting his money behind the covid19 vaccine. Carlos slim says his foundation will pay for mexico and argentina to produce up to 250 astrazenecas of the candidate for latin america. Mexico has more than 500,000 cases of coronavirus, more than 54,000 people have died. Global news, 24 hours a day, on air and on bloombergquint take powered by more than 27 journalists and an 2700 journalists in over 120 countries. This is bloomberg. Live from toronto, this is bloomberg markets. York, i am in new vonnie quinn. Here are the top stories slow as saless rise at a slower pace than expected. Outlookat the industry with gerald storch. We will speak to residential and commercial Real Estate Developer about the state of the property market. Coming up later this hour, herve and hisw with jimmy li arrest in the future of the company. Greg its the last trading day of the week but its a friday in august and its light volume compared to the last 30 days. The s p 500 is not that far from an alltime high. It doesnt really fight like it has it doesnt really feel like it has the momentum to get there. You mentioned retail sales which grew for the month but it was a disappointment for the street. We have the dow up modestly as well and the nasdaq tech stocks have been problematic lately on a daytoday basis but take a look at the spider retail etf. Despite getting disappointment today on the retail front, its still up about half a percent so it seems to be shaking it off as well. As go the fortunes of the consumer economy in the states goes the goes the fortunes of a lot of the economy. Real estate is always interesting.