>> from new york city, bloomberg real yield starts right now.

coming up, fresh inflation data shows sticky price pressures. wall street address to higher for longer. we begin with the big issue. a cut delay from the fed. >> the fed focuses on pce. >> pce. >> pce data was not as bad as expected. >> i don't see why the fed would be rushing to cutting rates. >> a case for fed. easing is pretty small >> the market needs to see a couple of good prints on the data. >> we need to see a swift and compelling and convincing several prints of weaker inflation data. >> i'm convinced inflation is not returning to 2% in any kind of stable, reliable way. >> inflation is going to prove more sticky. >> this is no longer something you can explain is the beginning of the year pop. >> there will be more elevated

debt than we thought. >> we are seeing elevated signs the u.s. economy is slowing. >> inflation has come down pretty meaningfully. >> we have already landed from that very high level of growth and inflation. >> we still think we could be cutting rates modestly this year. >> now, let's look closer at that pce data we got. this is the fed's preferred gauge of inflation. the yellow line is the highest it has been in a year. core pce over the past three months at a 4.4% annual rate is actually higher than any time from november 1992 march 2021. according to harvard economist jason furman. the six-month line has been coming down, the blue line. you see this mountainous range of inflation has been sticky. of course, still above that level of 2%. let's take a look at the treasury yields. the two-year in particular has

been bumping back up against that 5% level after a steep drawdown in yields earlier this year. we have not seen the level we have seen. we have met resistance and have not gotten there this week and there are questions among some in the market on whether we can even move a little higher than that. this week we heard from the cantor fitzgerald ceo who gave his take on when the fed would cut. >> i think right before the election, not that the fed is involved in elections, but september? i'm thinking september and it is not really to move the economy, it is to show off a little bit, help a little bit, the guy who was employing it today. maybe he will give you your job again if he gets elected. it can't hurt. i think september, one cut, just showing off. sonali: joining us now is -- i'm

going to make both of you play the rate cut game with me. if you think about how early the fed could start to cut, what would be your earliest estimate? >> i would say september would be the earliest. june is off the table. sonali: how about you, noah? do you think that is possible given with what we know about the data so far? >> september is possible, but not likely. we think november is more likely or maybe later. sonali: let's start to talk through the data because we have had the gdp data, the pce data. this is the most critical data heading into the fed meeting next wednesday which is also followed by more data in payrolls. how do you read all through the signals that we have had so far? >> yes, again yesterday, it was incredible to see a weaker gd the brent and the market really overlook that focusing on

inflation. i think you could have deciphered from yesterday's inflation print that we were going to come in higher than the market expected, but still trending at higher levels for the month of march in year-over-year. one take away from the inflation print and i think what we need to step back from is that i do think the inflation print, while it is still sticky, hasn't exceeded expectations and hasn't significantly surprised to the upside. it is not where we need to be, but i have to think the market is looking at it, but some of that surprise factor and the volatility that ensues with it is kind of coming down a little bit. but i thinks this makes the fed meeting a little bit more clear in some regards. june rate cut definitely off the table. i think the fed will have to shift their language to be more hawkish. i think kind of supporting the

fact that they need to see more data before they follow through with cuts. we just kind of took our turns of predicting when that might happen. with at least maybe one half being this year. they want to make sure there was that language and door open. that is going to be the tricky part for the fed. sonali: are there other risks ahead that pushes your timeline out further? >> the inflation data has been clearly problematic this year. we have had a series of numbers, they haven't gotten any closer to their first cut. the most recent dot plot pointed to three. the data hasn't supported that.

six months later, we think the fed is still in the same place. that means they are still six months out from being able to hike. that brings elections into the picture. we would argue the fed is not inherently a big risk-taking institution. instead, we think what they really want to do is focus on their independence and 25 basis points here or there isn't going to move the needle and likely puts them behind the election rather than getting out in front of it and risking that independence. sonali: if you think about where the two-year is standing, where the 10 year is as well, how do you think about buying these levels, especially when you look further out on the curve? >> yes, you made this point earlier that we are looking at year to date highs. we are not quite back at those october levels, but in our view,

this starts to be an interesting entry point, but also a compelling one. in talking with our investors, on one hand it has been frustrating to have this continued roller coaster ride and volatility of rates year-over-year and even into 2024. i think the pivot that we saw at the end of last year, many of us agreed that was well overdone. but just how much that has unwound and how quickly has taken investors by surprise. we flipped the narrative to say, you are underweight fixed income to really look at this as a compelling entry point. cash has outperformed, ultrashort has outperformed, but the yield that investors can now login and the cushion that provides is very attractive in our view. sonali: how much do you buy these levels and what kind of conviction.

do you worry that things could selloff a little further even at the short and from here? >> what we see as investors are largely already too levered up in the front end. the narrative has taken the markets by storm. people are comfortable in the front end because there is yield for the first time in a long time, but people have to take a step back and look at what has happened in history. what we have seen when we have done our analysis is it is a very good time to start diversifying your exposure across the curve. we would agree you do want to take some of that concentration at the front end and move that through the maturity spectrum. i think if people look at what has happened over the past six months, they would be pretty surprised. it has been a difficult market for fixed income year to date. the bloomberg index has outperformed the bloomberg treasury build index.

this is a time to take advantage of attractive yields across the curve in a concept that we talk about as riding the curve. sonali: given the concerns around volatility, how do you prepare for next week? you think about the fact that we have the jobs report after the fed meeting and you just think about those three days alone of potential conflicting information. what do you do to prepare? >> yes, look, it is tough. we have seen this so far this year. there is a lot of noise and you can't give into that noise. you look at a more longer-term objective. as we have just discussed the entry point is what we are telling our clients to focus on. there could be more volatility and again the market has become very sensitive to not only every word and language from the fed,

but every economic data point onward. while there could be more volatility, while there could be a little bit more upside from a yield perspective, we make the argument that the amount of yield you are able to lock in provides you an incredible amount of push to wear your break becomes incredibly high to where rates would have to substantially grow from here, which we think we are closer to the top range of that. don't focus on the noise. you were going to hear a lot of it. you have to focus on the longer-term narrative from an allocation perspective. sonali: what do you prepare for for next week? what are you watching most closely and what has the biggest room for surprise? >> what we saw a really going back to the end of last year, we saw the big fed have it in december. and trying to set the market up for rate cuts this year. again, the data has not supported that, so that puts the

fed in a position where once again they have to pivot. unfortunately, when you pivot after pivoting, and basketball, that is a violation, that is a traveling violation. i think that sets the market up for some volatility here. i think there will be opportunities in the fixed income markets to attract returns as the fed has to shift their narrative and expectations for the second half of this year. the way they we -- that we really set things up as talk about diversifying. you want to be a little bit higher in quality, but diversify across sectors and even diversifier crossed interest rate structures. the growth is very strong, inflation has been high, but different dynamics outside of the u.s. and western europe offer example where we still think the ecb is on track to start cutting and would likely

be cutting sooner than the fed. we think you can diversify globally as well. sonali: i was spending the whole last minute thinking about the equivalent nfl reference and i think it would be a falcons moment for the fed. [laughter] we talk about the option block next. high-grade u.s. sales have the slowest issuance this year. we will talk about why up next. this is real yield on bloomberg. ♪

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sonali: i'm sonali basak and this is bloomberg real yield and

it is time for the auction block where we highlight the debt sales for the week. we start with europe's primary market. well beyond expectations and one notable deal was a new 30 year bond from greece. orders for the sale tops 33 billion euros, just below the record high every at the united states sold more than 180 billion worth of treasuries this week. yields and demand were mixed, but the appeal of higher yields for shorter-term notes seems to hold up. in u.s. investment grade, it was the slowest week of the year. only 11.5 billion priced, calling for up to $25 billion. names included citigroup, amex, and gx so. sales are doing well amid higher rates. >> when you think about some of

the deals that have gotten done this year, i think investment grade has done incredibly well. we have seen a huge amount of deal flow. i think so far even with rates staying elevated, we are getting deals done and good execution. i think so far, concerns on the primary market side are not there. sonali: let's bring in our credit roundtable. when you think about just the impact of higher for longer yields, how do you think this is going to start to feed into the market? >> it has been a solid year in terms of issuance so far. we are running at a pace will be in estimates. we are at $650 billion so far. tight spreads have been the name

of the game in investment-grade and high-yield and demand is pushing them tighter. for obvious reasons with inflation so stubborn, we still see a reluctance for people to go further on the curve. sonali: what's interesting is how far you see the corporate market starting to slow down and the sovereign market heat up. how do you see the demand floating in and what do you talk to investors about when it comes to the biggest risks on the table? >> sure, so on the supply side for sovereigns, we know that most of the world is grappling with large deficits. the u.s. case in point. i would say the bright spot is that fiscal deficits are lower than where they used to be in the past few years. em sovereigns are finding new financing channels. if you look at the volumes this year, they have issued $93 billion. this is exceeding the pace we have seen in the past few years. and there is demand out there

and most of this paper is coming from ig issuers who are benefiting from this increased crossover demand. it is the girl will -- global bond funds. that has a spillover effect into em ig as well. there are higher volumes, but there is also higher demand in the sovereign space as well. sonali: double down on that for a minute. how do you view those two important lovers, ig? how much of people looking for the safest quality at this point? >> in u.s. ig, so notwithstanding the outflows we have seen the past two weeks, there has been $19 billion of inflows and that might be puzzling because valuations are so tight. but actually, u.s. ig is seen as an asset class of good risk reward even the receding recession risks we were so worried about last year. now u.s. ig is seen as an extension of money markets.

the ratio is quite good. therefore, you don't need to take that much risk to get rewarded. how that feeds into my second point is the spillover into emi g. global bond funds getting inflows means there is incremental demand and primary markets and we see that in a meaningful way. sonali: how do you view this dynamic when it comes to the corporate market as well? do you think that only the safe will survive or people are reaching for yields despite any potential risks ahead? >> if you are looking at the high-yield market recently, the single portion has been outperforming. last year was triple sees driving the boat when it comes to performance. we are seeing less of that this year. it is not because we see a major increase in defaults. moody's recently took down their estimates for where we will be 12 months from now.

they had been forecasting 3.5% 12 months from now. it is now well below the long-term averages. i would tell you from equality perspective that things are looking ok and there are not a lot of headlining defaults out there. there are a particular number of european credits with euro bonds outstanding that are under some stress right now and may recapitalize. the news seems to be pretty good. sonali: what would cause things to start turning? spreads have been pretty tight when you think about riskier bond markets. what would start to cause you to really think about taking some chips off the table and advising people to stay away, how much does the data need to turn? >> the thing we had been watching early and late last year was the news we were seeing out of the banking system because we were seeing that

tightening of economic conditions and turns and spreads. we haven't seen high-yield spreads move along with that, which we usually do. recently we have seen that banking lending activity seems to be easing up a little bit and the tightness that was out there six or nine months ago was not at the same level. if that were to reverse and commercial banks were getting tighter on terms, that might cause us to believe that spreads will tighten. but we think we are operating at a pretty tight band. we always think about spread, we always think about relative value. but i think at the end of the day, really one of the things driving the market right now for both investment-grade and high-yield is the actual high-yield itself. there are a lot of investors out there that don't think about relative term spread. they think in absolute terms. with the yields north of 8%,

that is a meaningful income number for people that in particular think about nominal terms, but absolute terms. even with inflation headwinds still out there. sonali: 30 seconds for each of you, favorite trade and why. >> egypt. i'm an em expert. i have been bullish em high-yield for some time now. that remains intact. the message has been reinforced. increased funding channels, recommitment to sustainability, egypt is benefiting from that. and they now have the bandwidth to work on structural reforms. sonali: favorite part of the market and why? >> i'm going to echo some of her comments. we like em airlines and print to alert. they have been later to the game in terms of their turnaround and we think there is a lot of market still there and we think spreads will tighten.

sonali: no reward without a little risk. we thank you both so much for your time. still ahead, the final spread, the week ahead we had the rate decision and april payrolls. a lot of data ahead. this is real yield on bloomberg. ♪

sonali: this is bloomberg real yield and it is time for the final spread. u.s. consumer confidence data and the fed rate decision. thursday, durable goods and another round of jobless claims and friday, payrolls. markets do expect a softening from the prior print of 250 k in additions. plus an unemployment rate that retains its level. this is what we are watching. an inflationary story in the

wages we are seeing, plus new minimum wages in california. interesting to see how all of that cuts through the tape. from new york, that doesn't from us. same time, same place next week. this is bloomberg real yield and this is bloomberg. ♪ thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

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sonali: welcome to ""bloomberg markets.",i'm sonali basak. the s&p 500 having the best week of the year. traders reading a sigh of relief from the latest inflation data. the s&p 500 is notching a gain. moving higher. really up, snapping weeks of declines. one of the worst weeks we have seen in a while. the nasdaq 100 up one .6%. the