Episode summary
Rising Equities and Bond Yields | Bloomberg Surveillance
Bloomberg Surveillance
· · 32 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Priya Misra, Sarah Hunt, Aditya Bhave, Katy Kaminski
Summary
The show centered on why higher bond yields and a still-firm equity market can coexist. A fixed-income guest argued that the 30-year Treasury auction looked fine, demand is still there at a price, and the market is adapting to a new normal of higher rates, with term premium rising and buyers becoming more price sensitive. The guest also said Treasury demand has shifted away from foreign central banks and the Fed toward asset managers, households, banks, and some foreign investors.
The conversation then turned to the Fed, Jackson Hole, and whether inflation is still too sticky for policymakers to ease. The guest framed the key issue as the Fed’s reaction function: whether officials need inflation to get all the way to 2% or simply keep decelerating. The guest also tied higher rates to broader macro forces like supply, productivity, and AI-related capital spending.
On equities, a market strategist said the rally is still being powered by earnings strength, consistency, and the AI story, even as valuations look rich in names like Walmart. The strategist said the biggest risk is not today’s level, but a break in the market’s linear earnings expectations. Later, an economist from Bank of America said the weak July retail sales report was largely a blip, driven in part by Amazon Prime Day shifting into June and by seasonal quirks, though the downward revisions to May and June were more concerning than the July print itself.
Key takeaways
- The fixed-income guest said the 30-year auction was fine and that demand is still there, but at a higher price for duration risk.
- The guest argued the Treasury buyer base has shifted from foreign central banks and the Fed to price-sensitive asset managers, households, and banks.
- The market strategist said equities are being supported by earnings growth and consistency, not just AI, but warned that a slowdown in the earnings trend would be the main risk.
- The economist from Bank of America said July retail sales were weak largely because Prime Day moved from July to June, making the month look worse than the underlying trend.
- The strategist said the market is effectively assigning a longer terminal value horizon to steady compounders, which helps explain rich valuations.
Notable quotes
“I like rates here. I mean as a fixed income there is income in fixed income”
“the auction was actually fine. We look at bit to cover. We look at end user demanded”
“we want to understand as data comes in, the Fed doesn't know the data and nor do us, but as the data comes in, how would the Fed react”
“the biggest risk for the market right now”
How the episode opens
Bloomberg Audio Studios podcasts radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. What a joy on a non like Fed day. Yeah.
Jobs day.
My conversation with Prima Misra of JP Morgan sort of like on a a quieter day where we can be calmer. I there's charts out there Prima Misra of like higher yields and it's worry. OMG 30-year bond where are you are you have angst here?
Like I read the auction and people showed up to buy our paper. Do you have angst or is it like okay to have rates here? I like rates here.
I mean as a fixed income there is income in fixed income. There is also the ability for capital appreciation. If the economy slows down fixed income is providing you that hedge.
Uh but since you bring up the auction you know the auction was actually fine. We look at bit to cover. We look at end user demanded.
Dealers have to take it all down. That would create a lot of angst because we have a ton of debt. The US government, global governments, corporates.
If there wasn't demand to meet this supply, I think then there would be angst. But right now the auctions were fine. Interest rates have risen.
But I think if you zoom out and you go back to the late '9s or the pre-leman time period, actually interest rates don't look particularly odd. I think they are pricing in all the supply that's coming in. They're pricing in potentially higher productivity through AI.
But there is still I would go back to we're seeing inflows into fixed income.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed and sticky inflation
- 30-year treasury auction
- equity melt up
- us economy rates and growth
- market open constructive equities and range-bound fixed income
Companies and tickers mentioned
- JPM
- BAC
- JPMorgan Wealth Management
- Alpine Saxon Woods
- Bank of America
- AlphaSimplex
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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