Tom it is a mugshot of in yield and it is very technically elegant. Dean curnutt to start is strong in the 6 00. He will talk about that. A massive correlation in currency markets. Jonathan yields of, dollar stronger . Tom dollar stronger but it is the way the dollar is stronger. Maybe the japanese are fighting to keep the yen off of 1. 50. The answer is markets are moving. Tom can this equity markets jonathan can this equity market lived with it . Equities could work in a hybrid environment. The s p 500 returned 15 every year from 1985 to 2005. When will rates were 2. 5 , can we live with these rates . Lisa this is a key question. You are saying an increasing number of analysts come out and capitulate, whether it is Morgan Stanley or goldman sachs. Yesterday, tech stocks outperformed. Where is it going to hurt . It is counterintuitive. Jonathan manufacturing is getting better, not worse. Payrolls on friday. Tom the numbers are getting better. Lisa on one hand you could say you are seeing a resurgence in manufacturing but prices came in lower than expected. This is the hope, people are hoping we get the immaculate tom the immaculate implosion is going to be commercial real estate. They are short futures, not 30 year mortgages. Everybody is going to refinance. The 10 year real yield, i have lost perspective. 2. 33 is a mugshot. Jonathan from city citigroup, here is his stake his take if that move above 50 materializes and sustained, it would make a nearterm recession even more unlikely. That is the take. Lisa it feels as if more people are coming around to the holland horse view of things which is maybe why we are seeing the rise in yields, a sign of u. S. Strength, or Something Else. J. P. Morgan sank this morning that something doesnt feel right, it doesnt feel connected to fundamentals. It feels like people are testing when something will start to crack. If it doesnt, lets get going. Lets get more yields. Jonathan yields are rising for the wrong reasons. When you get upside on the economic data, you get highs, you can make that a good story. And you get yields on the back of treasury funding, i would argue that things are may be a little more difficult. Tom for go back to the view of a fiveyear slow down and china is going to do okay here. It is not going to do 5. 6 . Your point on the reasons we are moving come all we can do is observe the data. That is all the Central Banks can do, they are completely data dependent. Jonathan equities positive by 0. 1 percent, a small list on the equity market. Yields higher by a couple of basis points. 4. 70. Foreign exchange, 1. 04 on the euro. Tom something you have been on top of, a 40 year bond in germany, 3. 17 . Their 3. 17 is not our 3. 17 . Tell us they do not have the same bonded debt and banking problems we have. Jonathan i would argue 3 in germany is Something Like 5 or 6 in the u. S. Lisa considering we were negative. Tom this is how they do it in bridgewater, they just say yeah, it is equivalent to this. Jonathan why not . Lisa one thing i find disdain is with all of the fed speakers, there is a consensus they need to hold rates higher for longer and a consensus we dont understand what is going on. Atlanta fed president , the latest giving us this ambiguous motion of ambiguous mush of we are watching stuff and we are not sure where things are. This was stated that was discounted not too long ago and then the pandemic hit and this became the premier highlighting. We are expecting it to come in but remain strong. Total vehicle sales will be trickling out throughout the day. This will be manifest this will be fascinating. We are sing strikes, seeing loan rates going skyhigh, still they are expecting an increase in total vehicle sales. Surprising strength underpinning one of the goods in addition to services. Tom joining us, dean curnutt of macro advisors. Are yields rising for the wrong reasons . Dean i would say so. It is not higher for longer. The data is not exactly accelerating. It is not an increase in inflation breakevens. I think that is about indigestion. Treasury surprised the market with this new need for supply. Just a voracious appetite for deficit spending. I studied Financial Market history and episodes of volume, we are at the 25th anniversary of ltc, in 1998. The yankees won 125 games that year. Sosa and mcguire hit home runs. Tom steroids. Dean the u. S. Produced a government budget surplus. That is not going to happen ever again. Also steroids. So much of this is the fiscal side. People use the term fiscal dominance. We had the Central Banks running the show for a decade. It has flipped. I look at the back end of the yield curve as a function of markets have got to clear at a certain price and there is too much supply coming against qt. It is a precarious time. Jonathan is history and a guide when we start to say we can live with these levels, is history and a guide as to if we can live with this or not . Dean not really. Looking at history, i am remembering the bond market massacre from 1994. It was october 1993 the 10 year yield at 3 . A year that it was at 8 . Yearoveryear cpi was unchanged. You can see how these rates become more relative to the inflation facts on the ground. Debt to gdp was 40 back then. I am concerned about that side of things. Rates are a very selfcorrecting thing. Lisa, you talk about something is going to break, that is a risk lower thing. Either the economic medicine is going to work, and i argue it will, leading to lower growth and lower activity that brings down inflation or something breaks. Either one of these is going to lead to lower rates. Tom finally we have the dean curnutt question, we cannot go back up unless we get catharsis. Do we need catharsis to turn and move higher . Dean ultimately for the market, lets use the s p 500 as the base risk assets, for that to become investable, we have to feel like we see the economic medicine tickled. Tom give me a vics vix number on that. Dean when he five to 30. It doesnt have to be 25 to 30. It does not have to be 50. You can go back to the period when we saw the vix low. Lisa whatever Monetary Policy you end up getting is going to essentially be a selfcorrecting lower rates Going Forward. What happens if that doesnt happen . What if there is no financial accident and this is sustainable and we live with 4. 7 rates . How much more volatility demand of seeing volatility do we end up seeing . Dean we were talking about losses on Balance Sheets to securities holdings. The increase in the 10 year was 40 basis points in q2, it is double that in q3. Those losses are going to be even more substantial. The potential for an accident is there. These higher rates ultimately are going to bite. It is interesting to listen to the fed speak. You have guys like Jerome Powell and williams who are more like i think we are close to done and folks like nestor and bowman who say i think there is one or two more but also we are going to get here and hold. I think even the holding is going to be a problem for the economy. Lisa who is feeling the pain from the increase we have been seeing . Dean we know the Housing Market is that a standstill. Your best asset is your 30 fixed mortgage. Cre is going to be the first disaster. It is already in motion and banks are a big funder of that. A lot of times that the fed talks about we are going to raise rates and decrease the demand for things. For supply of credit is going to go down as well. Folks are sitting on decisions they made that turns out were poor. That capital process is in the process of breaking down. There is the accident part and then the medicine of lower availability of credit. Jonathan if we neutralize that, the banks sitting on the long end, sitting on unrealized losses, 30year issues, treating like . 50 on the dollar, has the fed fed neutralized that since the spring . Dean they have this available for sale hold to maturity, this fictitious thing in a pile over here. Is there another svb in the offing . I never want to close the door on things like that. You always have got to be looking over your shoulder for some episode of risk you were not contemplating. Even if you dont get an accident, the supply of credit is going to go down because these folks are in situations. Lets use cre as the front and center one. That is ready supply of credit is damaged most quickly in 224. Jonathan sit in the front end and wait . Dean two year note, five percent, it is going to grow strong if the cycle gets upended. Jonathan this is awesome. Thank you so much. Cash is a beautiful thing. Tom cash is a beautiful thing. What is interesting about this is the motion or lack thereof out there. I have in the bloomberg total return index a 2 down in price gets us to new lows for bonds. What is that going to look like on peoples statements where people are what about fact 18. 5 month cd . Lisa yields will go down, there will be this financial accident. I know this feels like one step too far in game theory, but if people believe it is not sustainable, yields end up going down and if it is sustainable there is not enough strength. Tom i will go back to the hope and prayer of the three month annualized disinflation trend well under 3 . That is not in the market right now. Jonathan this conversation is going to continue, chris harvey in the next hour. Very shortly, terry haines on the latest in washington, d. C. A serious conversation in the bond market about fiscal issues being priced slowly. I am not sure that conversation is happening in washington, d. C. That conversation is up next. Live in new york, good morning. Tom a second straight jonathan a second straight session in the bond market. Just sort of short of 4. 70. Reached that earlier for a intraday cycle hi. 4. 6995. The dollar stronger against absolutely everything. We go against the euro. Weaker against the euro. Talking down 102. Tom yen really doesnt move. You wonder what the shenanigans are. I have a 1. 4989. I did not get to one point 50 and i think that is a lot to do with their system. It is a different toxic brew than monday but the tensions are there. Jonathan behind the session is tom what are you watching on the screen . Lisa i am watching bond yields. Tom she has not looked at the equity market since nixon was president. Lisa talking about how the tech stocks outperformed, i will say this, even kit juckes came out saying the fx market is in the peanut gallery watching the bond market waiting to break something. That we see that consistently and we have the past 10 weeks, 11 weeks. Tom the 10 year 2. 35 . Should we do politics . Terry haines joins us with a historical perspective. This is what you have to know in terms of the look the arguing. There is people who are the, can experience who arc the american experience. Lincoln and douglas debates in the 1850s. Drag it forward to 1910 where speaker of the house, a gentleman from illinois, was basically going to be thrown out. He survived. Terry haines on the new joe cannon, Kevin Mccarthy. What is the distinctive feature of the attempt against this speaker of the house . Terry one, washington small ball and one for the markets. The washington small ball is it shows that the house is pretty much ungovernable to begin with. Matt gaetz wants to talk about that people deserve to know how the house is governed. He is showing them perhaps inadvertently. What markets he is there is no u. S. Government attempted to deal with the debt or deficit with entitlements. That failure is bipartisan. Anyone who does not believe me needs to remember they went off on vacation seven weeks instead of dealing with this. This crisis is selfcreated. In a time when you are talking about the bond market and other realworld consequences, washington does not even understand how its on government is affecting the broader markets. Tom you look at the government failures out there, what do the next three to four days look like . Dont they have required is to do something . Terry they do come at the same time there are procedural things that happen first. Mccarthy may escape by the skin of his teeth. It has been a delegate coalition from day one. Regardless how it turns out, it will get more ungovernable with mccarthy there or mccarthy deposed. Whoever takes the job is going to have more onerous conditions put on him than mccarthy will. Is is very bad for anything fiscal and even for avoiding a shutdown in 45 days. Jonathan a conversation we had with commerce and french field, the privilege of acting recklessly for a long time. Washington, the government has had the privilege to act restlessly act recklessly. A question we asked french hill, do you think they understand in washington they are losing the privilege of acting recklessly with the nations that . The nations debt . Terry i dont think they understand that at all. The author of doonsbury said even in utopia there is myopia. The drama that goes on in the house or the senate is the be all and all of politics and they dont have a. Broader responsibility is rife. The lack of humility is rife. That is going to continue. That is playing into bigger market decisions. The gradual degradation of washington, d. C. Political credibility is something they dont even understand they need to Pay Attention to. Lisa we are looking at a potential 1 trillion of Interest Payments in 2025, maybe more given how yields are going up. When this congress address this and account for this in budget cramped and facing concerns about pushback without dealing with the big issues . Terry the last time they tried to start that process was with a balanced budget agreement 25 years ago and surpluses that were disrupted by 9 11 and the fallout from that. Where do they have to . Yesterday. When will they . As long as there is a divided congress, they are unlikely to. One of the things i always tell markets is i always tell you and tell markets is dont misunderstand that there are a lot of centrists in the senate and the house who want to address all of these things and do so in a responsible way. What we will see is the rise of those centrists once markets put pressure on them. Jonathan wonderful to get your perspective. Terry haines of pangaea policy. You have all of the bond supply, the deficit, the debt pilot, and then the dysfunction. Is this playing off of the dysfunction or just of the debt supply or just the debt supply . Lisa from what i have been reading, and i will trust the experts, they talk about the debt supply given it is increasing and the dysfunction goes to this idea that they are not going to get it under control. They are not going to reduce spending. Their is not going to be a policy prescription to move forward. If that is not. Buying until something breaks. Maybe they will start to lower rates. Is almost as if someone hopes something breaks in the market. Jonathan what is more importantly the context. This is happening in an expansion, not a downturn. That is why it is difficult to get the market to say, lets by the 10 year. But stay constant duration. Jobless claims down, it is difficult to get there. Tom dead on. As jamie dimon said, we have a technological edge. The people in america that benefit from technology are fine. There are a lot of other people. Jonathan perfect guests to doc about this, robert tipp from pgim income next. Equities up by 0. 15 on is be 500. A new intro cycle high. This is bloomberg. Good night hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Hi, im jason and ive lost 202 pounds on golo. So the first time i ever seen a golo advertisement, i said, yeah, whatever. Theres no way this works like this. And threw it to the side. A couple weeks later, i seen it again after getting not so pleasant news from my physician. I was 424 pounds, and my doctor was recommending weight loss surgery. To avoid the surgery, i had to make a change. So i decided to go with golo and its changed my life. When i first started golo and taking release, my cravings, they went away. And i was so surprised. You feel that your body is working and functioning the way it should be and you feel energized. Golo has improved my life in so many ways. Im able to stand and actually make dinner. Im able to clean my house. Im able to do just simple tasks that a lot of people call simple, but when youre extremely heavy theyre not so simple. Golo is real and when you take release and follow the plan, it works. Jonathan welcome to the program. Equities on the s p 500 positive. Yesterday virtually unchanged. Q4 going absolute and nowhere. The nasdaq is up. Camping down to payables on friday and earnings kicking off next week with j. P. Morgan next friday. Friday the 13th for j. P. Morgan numbers. Tom youre looking at the screen. What is important for surveillance is we dont talk about what we are going to do. All three of us look at different material. I am the least into it and i learn a lot when john and lisa bring out a certain point. I am sorry, there is no bid there. This is week sterling ready to breach to the lows. Jonathan remember postbrexit when breaching 120 was the most you could do . Tom you did 10 hours straight and i house and i was having breakfast in mayfair. Jonathan i am well aware. Lisa post breakfast. Jonathan you did turn out for the london open, we watched bank stocks plummeting. Which seems ridiculous now. Tom look at sterling giveaway. Jonathan i would you turn to the bond market. The 10 year right now, 4. 6953. The yields are up. A new cycle high. On a 30 year, 4. 8129. This is why the dollar dominated yesterday. A snapshot of things against the euro and the yen. The euro, can we make it into big 12 . Dollaryen, close to 1. 50 close to 150. Tom came out of berkeley, the first job he had come and we will get to the interview of the day, we have to do it on surveillance. I am psyched robert tipp is on. This is what you want in this type of market. Jonathan under surveillance this morning. You are not slowing us down. Republican matt gaetz starting a motion to remove Kevin Mccarthy from his position citing that he supported a bipartisan deal to avoid a shutdown as justification. The boat could come as soon as today with Kevin Mccarthy needing a simple majority to survive. What a mess in washington. Lisa all this screams is november 17 we will be doing the same dance. Probably good to get any clarity between now and then . Probably not. The issues we are dealing with the fiscal policy which are being expressed in the bond market probably are not going to be addressed. Jonathan let me wrap up the fed speak. The Cleveland Fred president fed president saying i suppose we may n