Wide, but the main event is fixed income. Treasury yields at new highs. Lisa the highest levels going back to 2009. Around the globe you are seeing this push upward in yields. Is it because of inflation, because there are not going to be as many buyers for this debt . For is this the wholesale figure out as people capture this yield for a longerterm . Jonathan what a pain. The fx market right now, this might hurt. Lets have a look at the offshore human, taking a move lower. China told state banks to escalate human intervention this week. What is that about . Lisa beside father the lowest level in 15 years. That is as you look at Economic Data coming out that was weaker than expected. The intervention has been settled or growing has been subtle but growing. We heard that the peg was unusually below where it was supposed to be trading in the free market. At what point can china control the narrative through market manipulation . Jonathan lets see if that exit difference. We have been reporting, house prices are much lower according to private data providers and property agents and china is leading us to believe. Statistics say new home prices are down two point 4 from the high in august 2021 2. 4 from the high in august 2021. Lisa this is not new. No one trusted the chinese official data but there is Something Different about the tone of this distrust. Not only is it trying to cast a good paul over everything in china, this is more. This is trying to craft a new narrative with data that is not reflected the reality people are feeling on the ground. I wonder domestically whether people are buying it, whether this is a message resonated with anyone who can see the actuality. Jonathan how many people come on this program say they are underway and not touching it . It is an economic giant, is a Financial Markets minnow. What are the benefits of a contagion from the stress we are starting to see over there . Lisa the Housing Market is not not a minnow. In all of these details i was reading overnight was this private wealth manager. You are starting to see protests percolate of people saying we want our money back. We dont understand. The fact that there are protests visible to the western world is notable in a country that tries to discourage public unrest. Jonathan we are seeing the gdp downgrades. The goal is something about 5 . The view on the southside side, Morgan Stanley is down to a 4. 7 . They think china will miss their targets. Theyre looking for 4. 2 . It is next to downgraded as well. Lisa this isnt just about a gdp figure, this is about Going Forward, china is not going to be the engine of growth for this world and it is unclear what the ramifications are and how much this economy can decelerate before you start to feel a ripple effect. Jonathan china is determined to the bond market to bring wall street back from the beach. Lets get to the price action. Equities on the s p 500. There is a lift here, he lived for yields. Lets call it 4. 30. New highs for the cycle, new highs for this year. Lisa people are wondering how long can it continue given so many people have said lets buy. Retail cell yields in focus, walmart is coming out. Tapestry about 15 minutes before walmart. This is the irony of the moment. We are talking about china dragging everyone down, this feeling of inflation and people moving away from sovereign debt and u. S. Consumers keep spending. 8 30, we see jobless claims come out. When do we see the jobless rate tick up . It has been steady around 3. 5 . Do we need to see a tick up . The economics and dexcoms out. It has remained so high relative to history. The data is coming in above expectations more reliably than it has in a long time. What does that mean about how much people are feeling negative about the economy and how that is not reflected in the data . Jonathan compare that to europe. It is ridiculous. We have a lot of earnings, walmart later. The target cfo came out yesterday and he said Something Like student loan repayments would strain already strained consumer budgets going into your end year end. The white house has instituted this onramp of 12 months. Is that going to kick in . Lisa everyone looks at it as the bogeyman that is going to come out and hunt for spending. If you look at studies come half of all obligors say they dont have the means to pay it, they plan to default. Straight up not pay. They have 12 months to not be penalized. Will this matter . It is a good question at a time where people are saying it is on the prefers fresh the peripheries on the peripheries. Jonathan when are we going to burn out fee pandemic savings . The San Francisco fed, have they made the call yet . It is this quarter. Lisa how many people are going to strut this off going to shrug this off and say you said this before . We will see. Jonathan that is the question mark. Equities are up, yields are higher. Joining us is linda from federated hermes. Is it a Financial Market minnow we dont need to worry about . Linda it is the secondlargest economy in the world and the fact that it is the secondlargest economy has implications for economies around the world, putting aside their stock market. Interestingly, a lot of people thought we should run over to china earlier this year when they opened up after china after covid and enough people invested over there overweight about that. It reminds us that the u. S. Is a safe haven. We have our august correction. This remains the best place to define reasonably safe to invest. Jonathan we dont know how much longer they will be done at the beach. You mentioned doubling down on the u. S. , is that the way you see it . These events dont lead you to pull back on risk and exposure in the u. S. Equity market . You think more people look to the market as a haven . Linda yes. If you look at the growth of economies, much of the world now is moving in contractions are poor in contractions on and the u. S. Is booming. When you talk about Student Loan Debt and concerns, we calculate that as 0. 2 of the gdp. People say the economy is in bad shape, i say hogwash. This economy is strong. Retail sales are at record highs today. I dont know how much longer we are going to call this revenge but we have a tight labor market. This is a great place to invest. There are certainly pockets of value out there here in the u. S. As we rake our as we make our way through a more interesting time in our market. Lisa this sounds great and when people look at the bond market and say maybe not, especially given the multiples. How do you understand the bond move going back to 2008 . Linda we are definitely in the camp that says what is going on with this bond yields with these bond yields . Why open today around 4. 3 on the 10 year. It really does not make sense if you think it has to do with an inflationary problem. I wonder if it has to do with the fact that markets are starting to realize that you get efficient below 3 is going to be much more tough then you might think, particularly with the job market as tight as what it is. Yields be going up and you may be losing money, but they probably should be at the high end. I would like to put a shout out to the cheapest areas of this u. S. Market which sees earnings growing this year 10 . That is the highquality dividend trade. If you were to worry about stocks, you can worry about growth stocks. Those are the ones that get hit when Interest Rates go up. They are fully valued. The utility sector, the real estate sector, these are unexpected these are inexpensive sectors. They dont seem timely and therefore there are very good value. Lisa i want to build on what you are saying. The fund has the bond market is saying the fed has more work to do fueled by the growth mimics a positive on the equity market. At what point does this undermine the thesis if the fed has to create real pain and he waits have to be more instructive to this Economic Growth more destructive to this Economic Growth in a way that will hamper earnings . Linda the fomc minutes came out yesterday, they dont want to make the mistake of over tightening so they may take a break. We think theyre done raising Interest Rates for this cycle and they want to watch and see. They have been lucky with inflation coming down as much as it has. I think it is going to be sometime. It might even still be a year from now when we wonder do they have to get to 2 before they call victory . We can live okay in a 3 inflation world but they insist so much that we at federated hermes are taking their word for it and that is still hanging on. Certainly not this year. Jonathan you dont see them tolerating a high renovation number. Pimco thanks for start tolerating something on cpi. Does that resonate with you . Linda they keep insisting they want to back down to 2 . Even if it is 3 , we were between 2 and 3 for 40 years. They can get it down and around that. Is the core cpi they cannot get down around enough. That goes to services and goes back to the very extremely strong consumer. The word is resilient. I think that is a great word for what is going on with this country and this consumer. Jonathan the ingredient does not sound like the equity market. Why is that . Linda it would be along the equity market if you said inflation is coming down, we can live with this. The consumer has the wherewithal. I have to laugh when they talk about this excess savings gone in a quarter. Excess savings over between 19, which we were doing just fine. The consumer is strong. On employment is reasonably good. Inflation is slowly coming down. 2 is not a magic number. If it continues to come down and corporations can see they can push through price increases and earnings look good and consumers are seeing income come up. I saw statistics that say if you look at the price changes come all the prices we have to endure this year versus last year with real disposable income, we have a percent more this year than last year because real income is higher. Jonathan i have got to run. We could do this forever. Linda duessel of federated hermes. Well bond market yields, 4. 30 on a 10 year. Coming, choi of Fs Investments troy of Fs Investments. Booking. Com, booking. Yeah i need it cool at night. You trying to ice me out of the bed . Booking. Com, booking. Yeah baby, only on game nights. You know you are retired right . Am i . Ya save 50 on the sleep Number Limited Edition smart bed. Plus, free Home Delivery when you add a base. Shop now only at sleep number. I made a set of different decisions and i would agree china resents a headwind. We are better prepared to deal with that because of faulty choices made here in america that are allowing our economy to grow and create jobs. Jonathan that was the u. S. Deputy treasury secretary catching up with the team here on bloomberg tv and radio. A bitter breaking news, allow me to share some of that. According to people from the within matter, chinese authorities have told stateowned banks to step up intervention in the currency market this week in a push to prevent a surge in volatility in the human in the u. N. This currency pair is negative, a stronger chinese currency. Lisa it comes after the official government came out saying they wanted to ban something more shares of stocks then the manipulation of the message percolating into the markets more and more as they try to grapple with an economy that is overwhelming. Jonathan is a sufficient . Is a misplaced comfort here in u. S. Markets . . Linda was talking about the comfort is another reason to double down and u. S. Exceptionalism is backed up by data we have seen so far. I remember when we had a cold or flu in china and there were big problems abroad. Lisa even if it is not marketbased, the interconnectedness of the economists everyone agrees is greater than many people would like and more the people would realize. At what point does it have to factor into expectations when people are banking on american exceptionalism . Jonathan we probably should not use sniff, cold, and flew as an example of chinese markets. I am talking with the issues in 2015 and 2016. Was a 2015 we had the currency difficulties . Lisa yeah, and we are still going through some of those levels. This is the problem we are facing. Looking at these markets, is it a free market and an accurate reflection of where we are . No. It is unclear what the ramifications will be. Jonathan lets get the conversation started on china. We can do that with susan thornton. We have given the chinese policymaker the benefit of a doubt that they can resolve these issues in an orderly way. Is there any reason to believe it is different this time . Susan there are a couple of things going on. They are running into structural problems. We have seen them try to reform and they have run into difficulty with that. You see the lack of confidence and faltering trust in the economic officials and the chinese leadership after the covid lockdowns and the unwinding of covid in china. I think we are looking at a loss of confidence on the part of both chinese participants in the chinese economy and foreign participants. Jonathan the state council promised annual income of target through targeted and forceful macroeconomic adjustments. What does that actually mean . Susan they have been struggling to find policy responses that are going to bring about what they need. They need households to start spending and this has been a problem in the chinese economy going way back. They have the highest level of savings in china and they cannot seem to unlock that from households. What we have seen as they have tried to lower Interest Rates, they have tried to push out stimulants pushup stimulus but they are loath to pushup stimulus because push out stimulus. They are limited. They need to try to get some confidence back to the private sector which is sitting on the sidelines looking to see what is going to happen. Lisa part of this is international because there was International Investment from u. S. And european companies. We have seen u. S. Companies pull back a bit or significantly. How much do chinese authorities want to see International Businesses come back versus embrace the isolation and domestic focus that seems to be more front and center . Susan i think you see them trying to do everything they can to encourage foreign businesses and Foreign Direct Investment to come back into china. It has been a tough five years for four businesses trying to work in china for foreign businesses trying to work in china. Not just covid, but the regulations that have come out, chilling rules and laws that have been passed, especially on crossborder data flows. It has been hard for companies trying to deal with the data they depend on back and forth across the border. There has been a whole slew of problems that has kept people wondering what they should do about their China Business and how they should be looking at this market. Susan with all of your your stash lisa with all of your years as a diplomat, i wonder if the difficulties china is facing makes it more or less difficult for the u. S. To negotiate. Does the u. S. Have more leverage or less leverage as a result . Susan what i have seen since the chinese have started to face up to the fact that the economy is not going to bounce back after covid, there has been a big change and mindset about the need to maintain connectedness with the rest of the world economy. I think there was a question about that at one point. There may still be a division inside the chinese leadership. Certainly the technocrat Economic Experts understand that the chinese economy needs to maintain those connections. Jonathan the president of the u. S. Referred to the chinese economy as a taking timebomb. He referred to some government officials as bad folks. He said when bad things start to happen, bad folks do bad things. What do you reckon he meant by that . Susan it is hard for me to get inside the head of leaders when they say thanks, xi jinping were joe biden. Were joe biden. Or joe biden. My sense is he is thinking that the chinese economy is not as impregnable as we were thinking. There may be risks here. The chinese economy is important to the stability and psychology and predictability of the Chinese State and chinese leadership. I think what he meant is 50 chinese economy is not going to be doing well, the whole Chinese Government is going to be getting more desperate. We may see things we might not otherwise see. He is worried about some kind of incident or accident that might cause some conflict or crisis we would not normally see if the chinese were more confident. Jonathan i have a feeling we will be talking more soon. Susan thornton of Yell University law school. There is a hope this can be dealt with for obvious reasons given what the president said. Lisa and given the fact that the market is not necessarily independent from the rest of the world given it is the second biggest economy. I keep going back to the fact that we saw two dozen protesters outside the offices of this private wealth manager. This is unusual. This shows it is not going over well with the locals who are watching these problems. Jonathan not totally unheard of but it doesnt speak to the social unrest, together with the youth unemployment figure. I dont want to labor that pointed too much, but it is important. There are some concerns around that issue. That is why some people think we are not getting access to that data point. Lisa how do you game out chinese buyers of luxury goods internationally . How do you game out buyers of chinese properties . How do you game out of the market implications at a time and there is a lot of opacity. Have these have been Major Players around the world that have been infected by impacted by policies . Jonathan it is not in the treasury market right now, there is no rally. The haven you might expect is not developing. We will talk more about the bond market with yields and new hires for 2023. We will do that with dominic konstam. This is bloomberg. Hi, im jason. Ive lost 228 pounds on golo. 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