Global Bond Selloff, US Benchmark Slides, Paramount’s Debt

>> FROM NEW YORK CITY, FOR OUR VIEWERS WORLDWIDE, I'M EMILY GRAFFEO, IN FOR SCARLET FU. "BLOOMBERG REAL YIELD" STARTS RIGHT NOW. COMING UP, GLOBAL GOVERNMENT BONDS POSTED THEIR WAS QUARTER SINCE 2024 AS THE SELLOFF ROLLS ON. THE U.S. 10-YEAR YIELD HITTING THE HIGHEST LEVEL IN TWO DECADES. PARAMOUNT SEALING THE DEAL, FINANCING ITS TAKEOVER OF WARNER BROTHERS WITHIN A START DEBT PACKAGE. WE BEGIN WITH THE BIG ISSUE, ELEVATED YIELDS GRABBING ALL HEADLINES. >> YOU ARE GOING TO NEED TO SEE SOME DATA SLOWDOWN. >> INFLATION IS NOT GOING AWAY AND THE BOND MARKET IS REFLECTING THAT. >> WE HAVE SEEN THE RISE IN YIELDS IS THE STARTING TO SLOW THE ECONOMY. >> THE RESET IN YIELDS IS GOOD NEWS FOR INVESTORS. >> THE FRONT E OFFERSND-- END OFFERS A REALLY ATTRACTIVE OPPORTUNITY. >> I THINK IT WAS A VOLATILITY. >> IT DOES NOT FEEL LIKE THIS WAS THE PEAK AND VALLEY. >> ONE OF THE REASONS YOU CAN BACK OFF ON OCTOBER THE WHOLE CURVE HAS SHIFTED HIGHER. >> WE HAVE BACKED UP TO THE OCTOBER HIKE AS OF THIS MORNING. DECEMBER IS LOOKING LIKE A HIKE. >> THESE INCREASES TAKE TIME TO FLOW INTO THE REAL ECONOMY. >> RISKS ARE RISING, NOT FALLING. EMILY: WE ARE KEEPING IT SIMPLE. THE RISE IN LONG-TERM RATES AS THE U.S. 10-YEAR YELLED HITS THE HIGHEST POINT SINCE 2002. 30-YEAR LOOKS THE SAME. U.S. BENCHMARK, YOU CAN SEE THE MAGNITUDE OF THE MOVE. IT DOES NOT SEEM TO BE SLOWING ANYTIME SOON, AS THE FEARS ABOUT THE PHYSICAL PICTURE IN THE U.S. -- FISCAL PICTURE IN THE U.S., RISING INFLATION, AND CAN THE FED CONTAIN THAT INFLATION. TAKE A LOOK AT THE 30-YEAR YIELD. SEEING A LITTLE BIT OF A RELIEF RALLY ACROSS THE CURVE, PARTICULARLY IN THE FRONT END. THE STORY FOR THIS WEEK AND BASICALLY ALL THIS FALL IS THE LONGER-TERM YIELDS HITTING THE HIGHEST LEVELS IN MULTIPLE DECADES. EARLIER ON "BLOOMBERG SURVEILLANCE," NEEL KASHKARI SPOKE ABOUT HOW HIGHER RATES ARE AFFECTING THE REAL WORLD. >> I DON'T HEAR AS MUCH PUSHBACK ON INTEREST RATES. I HEAR FROM PEOPLE LOOKING TO BUY HOMES FOR SHOULD BUY SEVEN, 7.5% MORTGAGES. IN THE BUSINESS COMMUNITY, AND NOT HEARING AS MUCH ABOUT INTEREST RATES. I'M HEARING ABOUT INFLATION BROADLY. PEOPLE SAYING, MY GOSH, I CAN'T KEEP UP. SMALL BUSINESSMEN OVER THE WEEKEND, HE LOST HIS BUSINESS BECAUSE HE COULDN'T KEEP UP WITH INFLATION. HE CAME UP TO ME AND SAID, "WHEN ARE YOU GUYS GOING TO GET INFLATION BACK DOWN?" EMILY: MIKE MCKEE JOINS US FOR MORE WITH A CHART IN HAND. MIKE? MICHAEL: WHEN YOU TALK TO NEEL KASHKARI AND OTHER MEMBERS OF THE FED, THEY ARE CONCERNED ABOUT WHAT MIGHT HAPPEN TO THE ECONOMY IF INTEREST RATES KEEP RISING BECAUSE THEY WILL HAVE A HAND IN THAT. ONE OF THE BIGGEST ISSUES FOR THEM IS WHY OUR INTEREST RATES RISING. THERE IS CONCERN THAT INFLATION AND THE FED'S REACTION TO IT ARE PUSHING OPERATES. -- PUSHING UP RATES. BUT YOU DON'T SEE THAT WHEN YOU START DECOMPOSING WHAT IS GOING ON. MAYBE PEOPLE ARE BELIEVING IN THE IDEA OF THE FED ATTACKING INFLATION. THERE IS CREDIBILITY THERE. IT IS NOT SO MUCH THE FACT THAT INFLATION IS A WORRY FOR THAT OIL PRICES ARE PUSHING UP. IT IS REAL YIELDS THAT ARE MOVING. THE TRUCK I BROUGHT SHOWS US THAT THE MOVE IN THE 10-YEAR, PRETTY MUCH ACROSS THE CURVE, HAS TAKEN PLACE SINCE THE BEGINNING OF SEPTEMBER AND HAS BEEN PUSHED UP BY REAL YIELDS. YOU CAN SEE THE REAL YIELD JUMPING IN WHITE. WHAT THAT IS SELLING IS THERE IS A LOT MORE COMPETITION FOR CREDIT--WHAT THAT IS TELLING YOU IS THAT THERE IS A LOT MORE COMPETITION FOR CREDIT. PEOPLE ARE BORROWING EVEN WITH INTEREST RATES HIGH. THAT MAYBE GIVES THE FEDERAL LITTLE MORE LEEWAY TO RAISE RATES BECAUSE RATES ARE RISING FOR A REASON THAT DOESN'T HAVE TO DO WITH THE LOSS OF FED CREDIBILITY. IT HAS TO DO WITH THE FACT THAT THE ECONOMY HAS GOTTEN STRONGER AND PUSHING REAL RATES HIGHER. EMILY: WHAT DOES IT TELL US ABOUT DIRECTIONALLY WHERE ARE RATES GOING NEXT? IT DOESN'T SEEM LIKE THERE IS A LID ON THIS MOVE HIGHER. MICHAEL: WHICH IS WHAT NEEL KASHKARI SAID COME WE DON'T KNOW HOW HIGH RATES ARE GOING TO HAVE TO GO. HE SAID WHEN YOU LOOK AT WHAT IS HAPPENING IN BORROWING, PARTICULARLY IN THE AI SPACE, AND WHAT IS HAPPENING WITH THE ECONOMY, AT RATES THAT WE HAVE, IT MAY BE TELLING YOU THAT THE FED HAS NOT HAD ANY BREAK ON THE ECONOMY AT ALL. THEY NEED TO GO HIGHER THAN THAT. THERE IS GOING TO BE MORE DATA OUT IN THE COMING WEEKS THAT WILL BE MORE DEFINITIVE FOR THEM AND TERMS OF WHAT THEY'RE GOING TO DO IN A COVER. IT LOOKS LIKE THE RATE CYCLE IS JUST BEGINNING. EMILY: MIKE, WE HAVE A BIG ECONOMIC DATA REPORT TOMORROW. GIVE US A BRIEF HEADS-UP FOR WHAT YOU ARE PAYING ATTENTION TO. MICHAEL: THE FED LOOKS AT THE UNEMPLOYMENT RATE FIRST IF THEY WANT TO SEE IF THE ECONOMY IS FALLING APART, WHICH IF YOU LOOK AT JOBLESS CLAIMS TODAY, IT IS TELLING YOU IT IS NOT. THEY ARE STILL VERY, VERY LOW, AND HIRING IS HANGING IN THERE. THEY WANT TO KNOW IF THE DEMAND FOR LABOR IS PUSHING UP COSTS, AND THE RIGHT NOW THE FORECAST IS WE WILL NOT SEE A CHANGE IN AVERAGE HOURLY EARNINGS, 3.1% ON A YEAR-OVER-YEAR BASIS CAN WHICH IS JUST ABOUT EVEN WITH THE INFLATION RATE. IT MAY BE THAT WE END UP WITH ANOTHER EMPLOYMENT REPORT THAT GETS FILED AWAY, AND IMMEDIATELY THE FED IN THE MARKETS TURN THEIR ATTENTION TO CPI AND PPI IN THE FOLLOWING WEEKS. EMILY: WELL, YOU WILL BE THERE FOR THE PAYROLLS REPORT. I THINK WE WILL SEE YOU LATER ON THE SHOW, TO PUT FOR NOW, THANKS TO MIKE MCKEE. STEPHEN BLISS TELLS BLOOMBERG THAT THE KEY U.S. YIELD WOULD RISE TO 8% IN THE COMING YEARS. HE SAID, "WE HAVE BEEN HERE BEFORE, AND IT DOES NOT END UNTIL THE POLITICAL WILL IS THERE TO FAVOR CUTTING INFLATION REGARDLESS OF THE IMPACT ON ECONOMIC ACTIVITY. EVENTUALLY WE WILL SEE AN 8% 10-YEAR, THERE WILL BE PLENTY OF ZIGS AND ZAGS ALONG THE WAY." LET'S DIG INTO THIS WITH OUR ROUNDTABLE. GREAT TO SEE YOU BOTH. WE ARE GOING TO START RIGHT THERE. I WILL START WITH YOU -- 8%, ARE WE THERE? IS THAT HAPPENING? >> THE ARTICLE IS FED IS GOING TO BE HIKING RATES AND THEY ARE GOING UP IN THE FRONT END. IT IS NOT A SURPRISE TO US ECONOMIC PICTURE. IT IS NOT SHOCKING. 8% IS VERY FAR AWAY. YOU HAVE TO UNDERSTAND WE ARE IN THE MIDST OF A REGIME CHANGE, DIFFERENT REGIME AT THE FED, DIFFERENT REGIME AT THE TREASURY . WE HAVE AN AI BUILD OUT THE LIKES OF WHICH WE HAVE NEVER SEEN BEFORE. KEEP AN OPEN MIND. THERE IS NO HARD NUMBER. 6% IS INSIGHT. COULD WE GO HIGHER? YES, WE CAN. >> I THINK THAT IS HIGH. I THINK WE ARE CLOSE TO THE PEAK OF THE 10-YEAR. AT THIS POINT IT IS A MATTER OF OIL AND THE DIRECTION OF THE IRAN WAR. COM HAS SAID AFTER THE MIDTERMS HE IS LIKELY TO SEE SOME -- TRUMP HAS SAID THAT AFTER THE MIDTERMS HE IS LIKELY TO SEE SOME DIPLOMACY WITH IRAN. BETWEEN NOW AND THEN YOU WILL SEE RATES DRIFT HIGHER. ONCE YOU GET TO THAT POINT, YOU ARE LIKELY TO SEE RATES DOWN SLIGHTLY BELOW 5%. EMILY: DOES THAT DEPEND ON THE FED NEEDING TO CUT THREE MORE TIMES IN THE NEAR FUTURE? STEPHANIE: NO, WHEN YOU LOOK AT THE MOVE IN RATES WE HAVE SEEN SO FAR, WE FOUND THAT ABOUT HALF OF THE MOVES SINCE JULY HAS BEEN ENTERED. TWO DEBT HAS BEEN ATTRIBUTED -- HALF OF THE MOVES SINCE JULY HAVE BEEN ATTRIBUTED TO OIL. WE ARE TALKING BUT PERHAPS ONE TO TWO MORE HIKES AND THEN HE COULD STILL END UP WITH THE 10-YEAR BELOW 5%. EMILY: GUNEET, WHAT IS YOUR UNDERSTANDING OF WHAT IS DRIVING THE GREAT MOVE? THERE WAS A STORY ON THE BLOOMBERG TERMINAL THAT HAD 10 DIFFERENT REASONS ON WHAT COULD BE DRIVING MOVE. GUNEET: THE MAIN REASON RATES ARE HIGHER IS IT IS A CATCH UP TO WHERE THE GROWTH STORY HAS BEEN. IF INFLATION IS THE BIG ISSUE, YOU WOULD SEE MORE CURVE FLATTENING. IT HAS BEEN MORE LIKE A PARALLEL MOVE ACROSS THE CURVE. IT IS ACTUALLY FASCINATING, PEOPLE TALK ABOUT THE $40 TRILLION DEBT NUMBER. YOU TALK ABOUT INVESTORS AND CLIENTS, NOT MANY PEOPLE BRING UP THE FISCAL STORY. WHAT IS THE NEXT LEG IF RATES ARE TO GO HIGHER? ONE POTENTIAL CATALYST IS PEOPLE FOCUS ON THAT STORY GOING FORWARD AND THERE IS BIG REASONS FOR THAT. AS THE FED HIKES, THE INTEREST BURDEN FOR THE U.S. TREASURY GOES UP MEANINGFULLY, ESPECIALLY IN A WORLD WHERE THERE IS NOT ENOUGH BILL ISSUANCE LAST FEW YEARS. AS YOU GET WITH THE MIDTERMS, PEOPLE WILL START THINKING ABOUT WHAT THE POTENTIAL CONFIGURATION COULD LOOK LIKE NEXT TIME. COULD IT BE A DEMOCRAT VICTORY WITH NEGOTIATIONS WITH PRESIDENT TRUMP? IN 2019 WHEN WE HAD THAT ACCOMMODATION, WE HAD MORE PHYSICAL EXPANSION. -- FISCAL EXPANSION. FISCAL STORIES NOT PART OF THE SELLOFF BUT IT COULD BE IN THE COMING WEEKS. EMILY: STEPHANIE, DO YOU AGREE WITH THAT? DO YOU THINK THE FISCAL BACKDROP WILL BE A BIGGER PROBLEM? STRAIT IT'S BEEN A PROBLEM -- STEPHANIE: IT'S BEEN A PROBLEM SO FAR TO SOME EXTENT. TALKING TO OUR CLIENTS, THAT WAS TOWARD THE LOWER END OF THE RANKING IN TERMS OF THE REASONS. ECONOMIC GROWTH IN OIL HAS BEEN HIGHER AT THE CONCERN LIST. THAT SAID, I'M NOT SURE IT IS GOING TO DRIVE THAT MUCH MORE OF A SELLOFF IN RATES, ESPECIALLY WHEN YOU ARE THINKING ABOUT THE NEXT COUPLE OF YEARS WHERE THERE'S KNOCKING TO BE A LOT DONE FROM A FISCAL PERSPECTIVE. REALISTICALLY, CONGRESS IS GOING TO BE SOMEWHAT DEADLOCKED. MAYBE THERE IS A SMALL THING IN TERMS OF HEALTH CARE. I DON'T EXPECT THERE WILL BE A MAJOR SPENDING PACKAGE THAT WILL CAUSE A SUBSTANTIAL SELLOFF BASED ON WHERE WE ARE TODAY. EMILY: WHAT ABOUT GLOBALLY? YOU CASING 6% --U.K. SEEING 6%. IS THAT A U.K.-SPECIFIC STORY, OR IS THIS GLOBAL BOND YIELDS MOVING UP HOWEVER THE LONGER-TERM? STEPHANIE: IT IS CERTAINLY NOT JUST U.K. YOU ARE SEEING IT AND FRANCE. IT HAS BECOME A GLOBAL ISSUE. ISSUES ARE CONNECTED IN SOME WAY. THERE IS THE OIL STORY THAT LINKS EVERYBODY. TOO MUCH FISCAL SPENDING ACROSS THE BOARD, WHICH IS DRIVING YIELDS HIGHER. THERE ARE SIMILARITIES ACROSS THE GLOBAL BACKDROP AND THAT IS TAKING YIELDS UP TO SOME EXTENT, TOO. THAT DOESN'T MEAN THAT THIS COULD CONTINUE INDEFINITELY. AT SOME POINT YOU WILL SEE A CRACK IN GLOBAL ECONOMIES, PERHAPS MORE SO IN EUROPE THAN THE U.S., BECAUSE THEY ARE UNLESS STRONG FOOTING TO SOME EXTENT. BUT YEAH, THERE IS A LINKAGE HERE, BUT THAT DOESN'T MEAN IS IS GOING TO CONTINUE INDEFINITELY. EMILY: GUNEET, I WANT TO GO BACK TO TODAY'S TRADE AND GET YOUR THOUGHTS ON WHAT IS DRIVING THE MARKET RIGHT NOW. I DO LOOK AT THE TWO-YEAR, WE ARE DOWN 10 BASIS POINTS, 4.78 RIGHT NOW. HOW DO YOU INTERPRET THESE MOVES? GUNEET: THE FRONT END IS MUCH MORE THE FED POLICY IN THE NEAR-TERM. JOHN FROM THE NEW YORK FED CANNOT YESTERDAY TALKING ABOUT OCTOBER--CAME OUT TALKING ABOUT OCTOBER NOT AS OBVIOUS AS WE THOUGHT IT WAS. IT IS CORRECTION FOR THAT AND CORRECTION FROM THE MOMENTUM WAVE HAD INCESSANTLY. WE WON'T SEE STRAIGHT-LINE MOVE. BUT PARTICULARLY LONG-TERM YIELDS KEEP GOING UP. THE OTHER THING IS WHAT EXACTLY IS THE SENSITIVITY OF BOND YIELDS. NOT THE ENTIRE ECONOMY, BUT THE PARTS OF THE ECONOMY WHICH ARE GROWING, THE UPPER LEG OF THE K CONTINUES TO SPEND. THE HYPERSCALER BUILDOUT STORY SEEMS TO BE RELATIVELY RATE-INSENSITIVE. THE FED HAS ACKNOWLEDGED THAT. MY SENSE IS THE REASON WH THE RATES KEEP GOING UP IS YOU FIND A POINT WHERE THE ECONOMY LOOKS TO BE REACTING TO IT. WE DON'T SEE MANY SIGNS OF THAT. EMILY: STEPHANIE, I WANTED TO ASK YOU ABOUT THAT, TOO, BECAUSE THE ATLANTA INDEX IS LOOKING AT 3.7% GDP GROWTH IN THE THIRD QUARTER, VS. 5%. STILL PRETTY SOLID. IS THE TAKEAWAY THAT THE U.S. ECONOMY HAS JUST REMAIN RESILIENT IN THE FACE HIGHER RATES? STEPHANIE: WE GOT A LOT OF PUSHBACK ON OUR CALL THAT THE ECONOMY IS NOT BUILDING MOMENTUM, EVEN THOUGH IT IS MY FIRM, ESPECIALLY WITH GDP LOOKING FOR 5%. OUR EXPECTATION HERE IS THAT THE ECONOMY IS RUNNING VERY FIRM, RUNNING AT REAL GDP GROWTH IN THE MID- TWOS. WE ARE NOT TALKING ABOUT THREE, FOURK 5% GROWTH. I WOULDN'T NECESSARILY TAKE IT AS OUR GDP ESTIMATE FOR THE QUARTER. WE ARE LOOKING FOR SOMETHING LOWER THAN THAT. THE ECONOMY DOES NOT APPEAR TO BEGINNING MUCH MOMENTUM. IT SEEMS TO BE AN ECONOMY THAT IS QUITE FIRM, THE MARKET IS STEADY. BUT THERE DOESN'T APPEAR TO BE OVERHEATING FROM OUR PERSPECTIVE. AI CAPEX IS DRIVING A LOT OF THE GROWTH. CONSUMERS IS SOLID. WE CAN'T FORGET THAT RATES TEND TO IMPACT THE ECONOMY ON A LAG. WE REALLY STARTED TO SEE THE PAST MONTH IN RATES, GASOLINE PRICES HAVE DRIFTED HIGHER. THERE IS A GOOD CHANCE WE WILL SEE ECONOMIC MOMENTUM SLOWED DOWN AT LEAST MODERATELY IN THE NEXT QUARTER OR SO. EMILY: ARE WE GOING TO SEE IT TOMORROW? JOBSITE? --JOBS DAY? STEPHANIE: WE ARE LOOKING AT 70,000 ON PAYROLLS. IT WILL BE A NONEVENT WITH THE UNEMPLOYMENT RATE A LITTLE BIT HIGHER, NOT THAT BIG OF AN EVENT. IF YOU SEE THE UNEMPLOYMENT RATE SIGNIFICANT HIGHER, SURE, THE MARKET COULD REACT. LOWER, MAYBE LESS SO. FOR THE MARKET TO REALLY REACT TO THE DATA, IT IS HIGH THIS TIME. I DON'T THINK ONE UNEMPLOYMENT REPORT IS GOING TO CHANGE THAT. EMILY: THANK YOU FOR YOUR TIME. STEPHANIE ROTH OF WOLFE RESEARCH AND GUNEET DHINGRA OF BNP PARIBAS. THE SURGEON U.S. YIELDS IS ERODING BOND GAINS-IN EMERGING-- SURGE IN U.S. YIELDS IS ERODING BOND GAINS IN EMERGING MARKETS. THIS IS "REAL YIELD" ON BLOOMBERG. EMILY: I'M EMILY GRAFFEO. THIS IS "BLOOMBERG REAL YIELD." LET'S STEP OUTSIDE THE U.S. FOR THE SEGMENT "GLOBAL RETURN." EMERGING-MARKET INVESTORS ARE DIALING BACK THIS COUPON BETS THAT THE SELLOFF STARTS TO DERAIL STELLAR RUN FOR DEBT IN THE DEVELOPING WORLD. JOINING US IS TARA HARIHARAN OF NWI MANAGEMENT. GOOD TO SEE YOU. LET'S START BROADLY. WE HAVE LONG-TERM RATES IN THE U.S. AND GLOBALLY RISING, LEVELS WE HAVE NOT SEEN IN MULTIPLE DECADES. HOW IS THAT AFFECTING THE EMERGING-MARKET SPACE? TARA: WE JOKE THAT EMERGING MARKETS BECOME ONCE-IN-A-LIFETIME INVESTING OPPORTUNITY EVERY FEW MONTHS, BUT THEN SOMETHING COMES OVER AND HAPPENS TO DERAIL THE PARTY. WE HAVE SEVERAL VECTORS OF CONTAGION THAT ARE CUTTING THE PICTURE FOR E.M. IN ADDITION TO THE HOSTEL RATE ENVIRONMENT WE ARE TALKING ABOUT RIGHT NOW, WE HAVE A STRONGER DOLLAR. I FIRMLY BELIEVE THAT THE DOLLAR HAS MORE STRENGTH TO GO. THERE IS CONCERN THAT THE EYN. -- YEN TRADE MAY UNWIND. EMERGING-MARKET TRADES WERE BEING FUNDED THROUGH A WEAK YEN. WE ARE SEEING ESPECIALLY IN THE BOND SPACE AND CREDIT SPACE THAT AI IS AFFECTING THE CROWDING OUT BECAUSE THERE IS SO MUCH COMPETITION FOR CAPITAL AND AI IS THE HYPE RIGHT NOW. THIS COMES ON TOP OF THE OIL SHOCK THROUGH THE IRAN WAR AND HORMUZ. WE HAVE A VICIOUS EL NIÑO COMING UP. ALL OF THESE ARE GOING ABOUT PRESSURE ON ENERGY AND FUEL AND FERTILIZER PRICES, WHICH ARE SIGNIFICANT VULNERABILITY POINTS FOR EMERGING MARKETS, NOT JUST THE POINT OF VIEW OF THE POPULACE, BUT THE POINT OF VIEW OF THE FISCAL DEFICITS. THE OVERLAY OF THIS IS THE POLITICAL IDIOSYNCRASIES WITHIN E.M. EMILY: WE HAVE THE BIG ELECTION IN BRAZIL. I'M CURIOUS HOW THAT IS GOING TO AFFECT THE MARKET AS WELL. THAT I WANT TO GO INTO OPPORTUNITIES YOU ARE FINDING. TARA: WATCHING THE BRAZIL DEVELOPMENT IS AN INTERESTING SIDESHOW BECAUSE THERE IS SO MUCH GOING ON THERE. WE ARE CONSTRUCTING ON RESULT ESPECIALLY FROM THE POINT OF VIEW OF THE CURRENCY BECAUSE WE DO BELIEVE -- AT LEAST WE ARE CAUTIOUSLY OPTIMISTIC THAT BOLSONARO WILL WIN THE ELECTION AND THERE WILL BE MORE FISCAL RECTITUDE BROUGHT TO BRAZIL AT THIS POINT. WE ARE NOT PLAYING THE RESILIENT RE--RESILIENT --BRAZILIAN REAL VERSUS U.S. DOLLAR. BASICALLY THEY HAVE A VERY HIGH DEFICITS, THEY'RE KIND OF CAUGHT BETWEEN RUSSIA AND EUROPE, THEY ARE STRUGGLING WITH HIGH ENERGY PRICES. THE CURRENCY HAS BEEN QUITE WEAK. THE TRADE HAS BEEN A GOOD WAY TO EXPRESS OUR POSITIVE BRAZIL VIEW. EMILY: WHAT ELSE OUTSIDE OF POLAND HAS BEEN THE MOST EXCITING TRADES FOR YOUR TEAM NOW? TARA: WE WERE VERY INTERESTED IN THE BLOOMBERG ARTICLE A COUPLE DAYS AGO POINTING OUT MANY INVESTORS ARE CONCERNED ABOUT DOLLAR DEBT IN E.M. THERE ARE A FEW POCKETS OF DOLLAR BONDS THAT ARE INTERESTING AND I WOULD ESPECIALLY POINT OUT NIGERIA AND COLOMBIA. NIGERIA IN PARTICULAR IS BENEFITING FROM THE CURRENT SITUATION BECAUSE IT IS A NET OIL PRODUCER AND THEY ARE EXPANDING NET OIL PRODUCTION AND THEY PROVIDE VERY HIGH CARRY AND IT IS A GOOD TRADE SO FAR. ALSO LONG COLOMBIA AT THIS POINT, PRIMARILY BECAUSE OF THE CHANGE OF GOVERNMENT. EARLIER WE HAD A VERY. -- A VERY FISCALLY PROFLIGATE GOVERNMENT. ANOTHER WAS A BIT MORE HOPE THAT FISCAL RECTITUDE WILL BE ACHIEVED. TOWARDS THE LONG END OF THE COLOMBIAN YIELD CURVE, THERE IS VALUE TO BE HAD. EMILY: WHAT IS MOST RISKY IN THIS ENVIRONMENT WHEN GLOBAL YIELDS ARE SEARCHING? -- SURGING? TARA: CAUGHT IN A NEXUS YIELDS AND HIGHER ENERGY AND AND INFLATION GOING UP BECAUSE OF EL NIÑO AND SUCH, INDIA AND THE GULF COUNTRIES AT THIS STAGE. INDIA CLEARLY THE CURRENT ACCOUNTS ARE STRUGGLING AND FINDING FEWER AND FEWER RESOURCES GIVEN THAT MANY OF THE OIL EXPORTERS ARE SANCTIONED. BUT WE ARE ALSO HAVING THE SITUATION WHERE THE RUPEE HAS BEEN WEAK DESPITE INTERVENTION BY THE AUTHORITIES. AND EVEN THOUGH THERE IS SOME INTEREST FOR INFLOWS INTO BONDS AND THEY WERE COURTING NONRESIDENT INDIANS LIKE MYSELF TO BASICALLY BRING INFLOWS INTO THE COUNTRY, I WORRY THAT THE POSITIVE EFFECTS OF THOSE WILL BE SHORT-LIVED, BECAUSE THE CURRENCY EFFECTS WILL LATER HAVE TO BE OFFSET. IN THE GULF, IT IS A CLEAR ANSWER. THEY ARE NOT OUT OF THE WOODS YET. WE DON'T KNOW HOW LONG THIS IRAN STRIFE WILL CONTINUE, BUT ESPECIALLY WITH THE ADVENT OF THE HOUTHIS BECOMING AN IMPORTANT PART OF THIS CONFLICT, I THINK THERE IS CONCERN NOT JUST FOR THE GULF FISCAL SITUATION, BUT SECURITY THAT HELP TRIBUTE --THEY HAD HOPED TO BECOME A BASTION OF AI INVESTMENT. WHILE THEY MAY STILL HAVE THESE INCLINATIONS, THEY WILL HAVE TO PROVIDE HIGHER AND HIGHER YIELDS FOR PEOPLE TO BUY THEIR DEBT. EMILY: THANK YOU SO MUCH, TARA, FOR LAYING ALL THOSE TRADES OUT. THAT WAS TARA HARIHARAN OF NWI. STILL AHEAD, OUR CREDIT ROUNDTABLE. WE WILL SPEAK TO THE CEO OF R SELIUS. THIS IS "REAL YIELD" ON BLOOMBERG. WE LEARNED THAT A JUDGE IN THE PARAMOUNT CASE SIGNOFF ON A DEAL CLEARING THE WAY FOR THE ACQUISITION OF WARNER BROS. ANOTHER KEY PART OF MEDIA DEAL FINANCING. THIS IS "REAL YIELD" ON BLOOMBERG. EMILY: I AM EMILY GRAFFEO. THIS IS "BLOOMBERG REAL YIELD." TIME FOR "THE AUCTION BLOCK," WHERE WE HIGHLIGHT THE MAJOR CREDIT ISSUANCE. IT WAS ALL ABOUT FINDING THE SINK FOR PARAMOUNT--FINANCING FOR PARAMOUNT'S TAKEOVER OF WARNER BROS., A COMBINATION OF HIGH-GRADE JUNK-BONDS AND LOANS. TODAY IS THE FIRST DAY OF TRADING, AND THEY ARE ALREADY UNDER PRESSURE, SO MUCH SO THAT BLOOMBERG NEWS IS REPORTING THERE HAS BEEN A FLURRY OF ANGRY CALLS FROM MONEY MANAGERS TO WALL STREET BANKS THAT UNDERWROTE THE DEBT. LET'S LOOK AT THE INITIAL PARAMOUNT DEBT SALES. IT CAME AFTER MONTHS OF DELAYS DUE TO LOSSES. YIELDS A SWORD IN THAT TIME, AND SOME ANALYSTS ESTIMATE THE DELAYS COULD CAUSE PARAMOUNT AS MUCH AS $500 MILLION. SOME CAME WITH YIELDS HIGHER THAN 8%, INCLUDING A FOUR-YEAR NOTE THAT WAS NEAR 9%. PARAMOUNT FINANCING DROVE JUNK-BONDS SALES FOR SEPTEMBER, THE SECOND BUSIEST ON RECORD. SOFTBANK'S SALE PROPELLED ISSUANCE PAST $51 BILLION. ACHIEVED CREDIT STRATEGIST AT GOLDMAN SACHS IS WONDERING IF INVESTORS CAN STOMACH ALL THE SUPPLY. >> THERE HAS BEEN A WAVE OF ISSUANCE THROUGH THE HIGH-END MARKET, PRETTY CHUNKY. THERE IS MORE EXPECTED BY MARKET PARTICIPANTS. WHAT THAT IS IS THE MARKETS BRACING FOR THE SAME EPISODIC INDIGESTION IN THE INVESTMENT-GRADE MARKET EARLIER THIS SUMMER, SEEING THAT IN HIGH YIELD. EMILY: LET'S TAKE TO OUR CREDIT ROUNDTABLE. ANDY SEE LESS AND JOHN LLOYD OF JANUS HENDERSON. WE HAVE TO START WITH PARAMOUNT. JOHN, WHAT DO YOU MAKE OF HOW THE BONDS ARE TRADING? PIERCING A LITTLE BIT OF A SELLOFF. JOHN: FIRST OFF, THANKS ARE HAVING ME ON. IT WAS A LARGE INVESTMENT-GRADE MARKET, THE DEAL EVERYONE KNEW WAS COMING THIS YEAR. I THINK IT IS A BATTLE -- THERE IS A LOT OF SUPPLY IN THE INVESTMENT-GRADE MARKET, A LOT TO CHOOSE FROM BETWEEN AI DEBT AND PARAMOUNT COMING. FROM OUR VIEW AND JANUS HENDERSON, IT IS A FUNDAMENTALLY HARD STORY TO INVEST IN. IT IS A GENERALLY DECLINING BUSINESS. YOU ARE UNDERWRITING A LARGE AND NUMBER THAT IS HARD TO REALIZE. THE SPREADS HAD BECOME PRETTY CHEAP. WHETHER THE PROBLEM IS THE RATCHET--PART OF THE PROBLEM IS IS THE RATCHET IT UP QUITE A BIT AND THEY TRIED TO ENTICE INVESTORS TO COME INTO THE DEAL AND RATCHETED THAT INFLOWS OF YOU ARE SEEING UNDERPERFORMANCE TODAY. EMILY: ARE YOU BUYING PARAMOUNT? >> I THINK IT IS HARD NOT TO CONSIDER IT. THE ABSOLUTE YIELD BUBBLES ARE CREDIBLY ATTRACTIVE VS. WHAT WE HAVE SEEN. THE STORY YESTERDAY IN PARAMOUNT WAS THAT THE DEAL FELT WELL SUPPORTED. I DO THINK THAT THE PRICE ACTION WE ARE SEEING TODAY SPEAKS TO A LITTLE BIT OF SKITTISHNESS AROUND CREDIT. ON THE INVESTMENT-GRADE SIDE OF THE DEAL IT WAS HELD IN WELL UNTIL WE STARTED TO SEE SOME NEGATIVE PRICE ACTION IN THE HIGH-YIELD AND THE MARKET FEELS VERY REACTIVE AND THERE WAS A QUICK MOVE BY THE HOLDERS OF THE IG DEBT TO REPOSITION THEMSELVES WHEN THEY STARTED TO SEE THAT. EMILY: JOHN, DO YOU SEE IT AS PARAMOUNT SPECIFIC? CREDIT ALSO BE A SIGN OF WHAT IS TO COME IF YOU ARE ANOTHER COMPANY TRYING TO COME TO THIS MARKET IN A DEAL THIS LARGE? JOHN: I AGREE WITH HER, THE MARKET IS SKITTISH RIGHT NOW. WE HAVE SEEN THE HIGH-YIELD SPREADS SELL OFF. JUST FROM THE RATES, THERE IS A LOT OF SKITTISHNESS IN THE MARKET. I THINK THAT IS PART OF IT. I THINK PART OF IT, TOO, IS TAKING A FUNDAMENTAL VIEW ON PARAMOUNT. THE HIGH-YIELD PORTION DIDN'T FARE AS WELL. YOU SAW SELLING ON THE IG SIDE. EMILY: ANNIE, WHAT DO YOU THINK IT MEANS FOR ISSUANCE FOR THE REST OF THE YEAR? DO YOU THINK IT IS GROWTH SCARE OFF OTHER COMPANIES? ANNIE: I THINK IT IS IMPORTANT TO ISSUERS, SYNDICATE DESKS COME THEY TAKE A MOMENT AND ASSESS WHAT HAPPENED HERE. THE MARKET IS DEPENDENT ON THESE JUMBO TRANSACTIONS GOING WELL. THERE IS MORE TO COME. I AGREE THAT SOME OF THE ISSUES THAT WE SEE COMING RELATED TO THE AI CAPEX FROM THE HYPERSCALERS, THAT IS A DIFFERENT CREDIT FUNDAMENTAL STORY. NEVERTHELESS, I THINK THE ENTIRE IG MARKET LOOKS TO TRANSACTIONS LIKE THIS TO SEE HOW ARE WE FEELING. IT IS GOING TO TAKE A MINUTE TO DIGEST EXACTLY WHAT THIS MEANS AND WHAT IT MEANS GOING FORWARD. EMILY: DO YOU THINK THAT IF YOU ARE AN AI HYPERSCALER, YOU ARE LOOKING AT PARAMOUNT AND THINKING LET'S WAIT TILL NEXT YEAR? THERE WAS TALK ABOUT THE AI ISSUANCE AND ALL OF THESE FORECASTS. SPECIFICALLY FOR THAT SECTOR? ANNIE: I THINK SO. THEY'RE TRYING TO TIME THOSE TRANSACTIONS TO GET THE MARKET ENOUGH TIME TO DIGEST WHAT CAME BEFORE THEM. THIS IS A MOMENT WHERE THEY ARE GOING AFTER POSITIVE BUT FOR THE NEXT ATTRACTIVE WINDOW. AT THE SAME TIME THEY HAVE CUT FUNDING TO DO. IT IS HARD TO PREDICT WHEN THE RIGHT TIME IS GOING TO BE. WE NEED TO SEE HOW THIS CLEANS UP. IT IS ONLY THE FIRST DAY OF TRADING. IT IS OBVIOUSLY ONE OF THE HEAD ON A SWIVEL MARKETS WHERE THERE IS ALWAYS ANOTHER HEADLINE OR THING TO REACT TO. YOU WILL SEE WHERE THE WEEK ENDS UP ON IT AND CERTAINLY TAKE A BREATH, BUT LEARN FROM IT AND FIGURE OUT WHAT THE NEXT WINDOW IS. EMILY: I WANT TO. -- I WANT TO PIVOT TO THE INVESTMENT-GRADE MARKET BROADLY. MICHAEL GAETZ PREFERS GOVERNMENT BONDS TO CORPORATE CREDIT. I WANT TO GET YOUR REACTIONS. >> YOU KNOW, WHAT IS INTERESTING IS THE GOVERNMENT BOND YIELDS HIGH AS THEY ARE NOW, YOU CAN GET A NICE CARRY IN YOUR PORTFOLIO WITHOUT INVESTMENT-GRADE CREDIT RISK. AND THAT IS SOMETHING WE LIKE. WE PREFER THE CYCLICAL RISKS LIKE YOU GET WITH CREDIT THROUGH EQUITIES RATHER THAN IN FIXED INCOME. WE HAVE HAD OUR PORTFOLIO ON POSITIONS SHORT IN RATE DURATION AND HEAVIER IN GOVERNMENT EXPOSURES, HIGHER QUALITY, OVERALL CREDIT RISK. EMILY: WEIGH IN ON THAT. IG CREDIT LOST ALMOST 3% LAST MONTH. IS THIS A TIME TO BE IN IG CREDIT? ARE YOU MORE ON MICHAEL GATES'S SIDE? JOHN: MOST OF THAT WAS THE RATE MOVE. PRETTY RESILIENT MR. THE A PIT I WOULD AGREE WITH HIM TO BE UNDERWEIGHT INVESTMENT-GRADE. IT IS NOT THAT FUNDAMENTALS ARE BAD. THE BREAKEVEN ON SPREADS WAS INCREDIBLY TIGHT. 72 BASIS POINTS. SPREADS WIDENED 10 BASIS POINTS, YOU LOSE ALL THAT CARRY. THERE IS OTHER CREDIT MARKETS WITHIN FIXED INCOME WHERE YOU HAVE LOWER VOLATILITY AND BETTER BREAK-EVENS. EMILY: LIKE WHAT SPECIFICALLY? JOHN: THE SECURITIZED SIDE. YOU CAN HAVE 120 SPREAD IN A A AA-RATED SECURITY. THAT WASN'T EASY SW-- WAS AN EASY SWAP IN THE MULTISECTOR STRATEGY. EMILY: WHAT IS YOUR HIGHEST CREDIT INVESTING NOW? ANNIE: I COULDN'T AGREE MORE WITH WHAT JOHN HAD TO SAY. WHEN YOU HAVE A RATE MOVE LIKE THIS, YOU HAVE TO TAKE A STEP BACK AND SAY WHAT AM I THE PAID TO OWN. WE HAVE SEEN IN KINDLY ATTRACTIVE LEVELS. WE HAVE SEEN PAPER CLOSE TO 7% THIS WEEK, SOMETHING WE HAVE NOT SEEN A LONG TIME. THAT IS AN INTERESTING LIQUID HIGH-QUALITY ASSET ALL OF A SUDDEN. I THINK IT MAKES SENSE TO REASSESS. I ALSO THINK THAT CREDIT FUNDAMENTALS ARE REALLY STRONG, AND THAT THERE IS A CASE FOR OWNING SOME OF THESE REALLY HIGH QUALITY NAMES, ALMOST LIKE A RATE SURROGATE TYPE POSITION, JUST GIVEN THE STRENGTH AND THE FUNDAMENTALS OF THE BALANCE SHEET THERE. EMILY: CREDIT FUNDAMENTALS ARE STRONG. I HAVE TO ASK ABOUT CCC SPREADS HITTING 1000. THE REST OF THE MARKET IS PRETTY CALM, SO DOES THE REST OF THE MARKET CATCH UP TO WHAT WE ARE SEEING IN HIGH-YIELDS? IS THAT JUST A AAA PROBLEM-- CCC PROBLEM? JOHN: I THINK THAT IS A CCC PROBLEM AND ONE OF THE MAIN INFLUENCES IS HIGHER RATES. THOSE TRIPLE-C COMMITTEES ARE VERY RELIANT ON THE HIGH-YIELD MARKET. IF THE FUNDAMENTALS ARE NOT AS STRONG -- LET'S SAY THERE IS AI DISRUPTION OR SOME DISRUPTION IN THE BUSINESS -- IT IS HARD FOR THOSE COMPANIES TO SURVIVE LONGER TERM. THAT IS WHEN YOU SEE THE SPREADS MOVE. THE BIFURCATION WITHIN CCC'S IS EXTREME AS WELL. HIGH-QUALITY TRIPLE-C'S ARE TIGHT AND THEY WILL BE ABLE TO REFINANCE. BUT THE BUSINESS IS IN TROUBLE ARE SEEING HIGHER SPREADS. ANNIE: I AGREE WITH WHAT JOHN IS SAYING. YOU HAVE TO LOOK TO THE PLACES IN THE MARKET WERE COMMITTEES ARE MOST EXPOSED TO HIGHER FUNDING COSTS.--COMPANIES ARE MOST EXPOSED TO HIGHER FUNDING COST, THE SAME AS COMPANIES MOST EXPOSED TO HIGH OIL PRICES. THAT IS WHAT IS GOING ON IN CCC'S. WE LOOK FOR POTENTIAL SIGNS OF TECHNICAL CONTAGION. IS THERE PRESSURE FROM SELLERS IN THAT PART OF THE MARKET? ONE OF THE THINGS WE ARE SEEING, TO TIE IT BACK TO PARAMOUNT, THE PRICE ACTION ON THE HIGH-YIELD PARAMOUNT GET CAUSING MORE FOR SELLING IN THE IG. THAT IS WHAT WE LOOK FOR IN TERMS OF HOW DOES THE CCC SPREAD LEVEL EFFECT WHAT WE ARE SEEING IN HIGH-QUALITY ASSETS. EMILY: IF RATES GO HIGHER -- WE WERE TALKING IN THE SHOW ABOUT 8% ON THE 10-YEAR. WOULD THAT BE THE TRIGGER FOR THAT? ANNIE: I MADE, THAT COULD BE ONE TRIGGER -- I MEAN, THAT COULD BE ONE TRIGGER AT OF IT. THERE IS A LOT OF THINGS, GET INVESTORS ON A DAILY BASIS. WE ARE STARTING TO GET SOME MIXED MESSAGES ABOUT WHAT THE FED PLAN IS FOR THE REST OF THE YEAR INTO NEXT YEAR, AND PEOPLE ARE TRYING TO SEE WHAT THEIR OPINION IS AND I WILL AFFECT HOW THEY POSITION THEMSELVES ---THAT WILL AFFECT HOW THEY POSITION THEMSELVES. EMILY: WE DIDN'T TALK ABOUT POSITIONING. I TALKED TO A LOT OF INVESTORS WHO SAY RIGHT NOW STAY ON THE SHORT END. WHY WOULD YOU GO ANYWHERE ELSE? JOHN: WE ARE CONSIDERING DURATION. WE HAVE BEEN UNDERWAY DURATION, BUT REAL YIELDS ARE GETTING VERY ATTRACTIVE. 3% REAL YIELDS. WE HAVE NOT SEEN THAT IN DECADES. TO ME, IT IS STARTING TO GET INTERESTING. FIXED INCOME IS A GREAT ASSET CLASS TO BE IN FOR THOSE REASONS. EMILY: WE LIKE THE REAL YIELDS PLUG, CONSIDERING THAT IS THE NAME OF THE SHOP [LAUGHTER] SHORT DURATION? ANNIE: HARD NOT TO OWN SHORT DURATION, AND THE LEVELS ARE CREDIBLY ATTRACTIVE. SOME OF THE LEVELS OUT THE CURVE ARE HARD TO STAY AWAY FROM. IT COULD BE TIME TO START OPPORTUNISTICALLY. EMILY: GREAT STUFF, THANK YOU BOTH. ANNIE SEELAUS OF R. SEELAUS AND JOHN LLOYD OF JANUS HENDERSON. PLEASE CHECK OUT THE "BLOOMBERG CREDIT EDGE" WEEKLY PODCAST WHEREVER YOU GET A PODCASTS. STILL AHEAD, WE TURN TO MUNIS, AS SURPRISED, YIELDS ARE SURGING THERE AS WELL. THIS IS "BLOOMBERG REAL YIELD." TIME FOR OUR MUNI MOMENT. THE BENCHMARK 30-YOUR MUNICIPAL YIELDS TO THE HIGHEST LEVEL SINCE 2011. HERE TO REPORT IS OUR SMASHUP IN NEW YORK AND TRUDY SINGH IN CHICAGO. PICK AS THE BACKDROP OF HOW THE MUNI MARKET IS REACTING TO THE HIGHER BOND YIELDS. >> WE ARE SEEING A LITTLE BIT OF RELIEF IN THE MARKET, YIELDS DOWN SEVEN BASIS POINTS AS OF 12:00 P.M. FOR THE PAST TWO WEEKS WE HAVE BEEN CONTENDING WITH HIGH-YIELD, THE MOST SINCE 2011 AT LEAST. THIS HAS CREATED AN INTERESTING DYNAMIC IN THE MARKET BECAUSE FROM THE INVESTOR PERSPECTIVE, PEOPLE I AM TALKING TO SAY THAT THE HIGHER YIELDS ARE CREATING A BUYING OPPORTUNITY FOR PEOPLE WAITING TO GET INTO THE MUNI MARKET, AN OPPORTUNITY FOR INVESTORS IN THE HARVEST. INVESTORS ARE SPOOKED BY THE SELLOFF, WHICH IS WHY WE SAW EARLIER THIS WEEK THE BIGGEST DAY OF TRADING IN THE MUNI MARKET FOR 30 YEARS. ON THE FLIP END, ISSUES ARE CONTENDING WITH A TOUGHER MARKET ENVIRONMENT. EMILY: TRUDY, WHAT ARE YOU SEEING FROM YOUR END? WE ARE SEEING DEALS GET DONE SPECIFICALLY IN CHICAGO. TRUDY: IN TERMS OF THE ISSUER STANDPOINT, STATE AND LOCAL GOVERNMENTS ARE BORROWING MONEY. THE LAST COUPLE OF DAYS WE HAVE BEEN TALKING TO A LOT OF PEOPLE WHO HAVE SEEN DEALS HAVE GOTTEN PULLED. WHAT DOES THAT MEAN? THEY ARE WAITING UNTIL THERE WAS MORE LUCRATIVE MARKET FOR THEM BECAUSE WHEN THE YIELDS ARE GOING UP, THAT MEANS THE STATE AND LOCAL BORROWING COSTS ARE GOING UP. WE SEE DEALS ON THE DAY-TO-DAY CAN MEANS THAT WATCHING DATED AGENCY WHEN THE DEALS COME TO MARKET. EMILY: TELL US ABOUT THE DEALS YOU HAVE BEEN WATCHING AND HOW THE ACTIVITY COMPARES WITH WHAT YOU WOULD TYPICALLY SEE IN A LOWER-RATE REGIME. >> WE HAVE BEEN DEALING WITH HIGH CALENDAR VOLUME IN THE MUNI WORLD, LOTS OF SUPPLY IN THE MARKET. A LOT OF ISSUERS ARE COMING TO MARKET THIS WEEKEND COMING ACROSS THE STUFF GOOD ENVIRONMENT. WE REPORTED ON DEALS OUT OF LOS ANGELES, $1.8 BILLION CONVENTION CENTER DEAL. WE REPORTED ON A TOLL ROAD IN TEXAS, SOME STUFF IN NEW JERSEY. ALL OF THESE DEALS WERE PUT ON PAUSE BECAUSE THESE ISSUERS ARE WAITING FOR BETTER MARKET CONDITIONS. LIKE SHRUTI SAID, WE ARE WATCHING THESE DAY-TO-DAY. WE SAW A DEAL PUT ON PAUSE INTERNATIONAL COME BACK TO THE MARKET. --PUT ON PAUSE IN NASHVILLE COME BACK TO THE MARKET. EMILY: WHEN YOU TALK TO PORTFOLIO M MANAGERS, WHAT IS THE GENERAL CONSENSUS? DO THEY EXPECT THESE RATES ARE GOING TO CONTINUE TO MOVE HIGHER? IF SO, WHY GET IN NOW VS. WAITING FOR WHEN YOU GET A JUICIER RETURN? ASHNA: PEOPLE WE TALK TO SAY THIS IS THE CHEAPEST MUNI SELLOFF IN A LONG TIME. INVESTORS SAY THIS IS A GREAT TIME TO GET IN, A BUYING OPPORTUNITY FOR INVESTORS WHO MAY BE WAITING. AT THE SAME TIME, SOME PEOPLE WE TALKED TO SAID THIS -- THE MUNI MARKET MIGHT'VE SOLD OFF A LITTLE TOO MUCH AND WE ARE SEEING YIELDS COME DOWN AND CORRECTION IN THE MARKET. WE WILL BE TALKING TO INVESTORS AND PORTFOLIO MANAGERS ON WHAT IS GOING TO HAPPEN IN THE COMING DAYS. EMILY: SHRUTI, I HAVE TO ASK YOU ABOUT THIS PARKING METER OPERATION SALE. IT IS SO WONDERFUL TO SEE THE DIFFERENT KINDS OF FINANCINGS THAT WE SEE IN THE MUNI BOND MARKET. GIVE US A BREAKDOWN OF WHAT YOUR REPORTING TELLS US. SHRUTI: EARLIER IN CHICAGO THIS WEEK THERE WAS ABOUT THAT WAS HIGHLY WATCHED AND FAIRLY CONTROVERSIAL IN CHICAGO. THIS DECISION IS ROOTED IN A LEASE THAT MAYOR DALEY ORIGINATED IN 2008 WHEN THE CITY OF CHICAGO WAS FACING DIRE FINANCIAL SITUATIONS. THEY LEASED ABOUT 36,000 PARKING METERS IN CHICAGO FOR 75 YEARS. THE CITY COUNCIL DOES NOT NECESSARILY HAVE A SAY IN THE CONTRACT NEGOTIATIONS ONCE THE LEASE WAS SOLD. SOMETHING CAME UP THIS PAST YEAR WHERE THE LEASE WAS GOING TO BE TRANSFERRED FROM MORGAN STANLEY-LED CONSORTIUM TO ANOTHER INVESTOR GROUP. THE CITY COUNCIL SAW THIS AS AN OPENING TO MAKE, AS MANY OF THEM HAVE SAID, LEMONADE OUT OF LEMONS. THEY DID RECEIVE SOME FINANCIAL INCENTIVES FOR THEIR APPROVAL. THIS BOAT WAS EARLIER THIS WEEK AND IT PASSED 46-3 AFTER MONTHS OF NEGOTIATIONS AND DELAYS. THE CITY COUNCIL HAS NEGOTIATED WITH THE CITY IS GOING TO GET A $75 MILLION UP FRONT PAYMENT AND CUTS GOING INTO THE FUTURE IF ANOTHER DEAL HAPPENS WHERE THE ASSET IS SOLD AND PROFIT SHARING IN THE FUTURE. THIS MORNING IS INTENDED TO GO TOWARDS THE VERY UNDERFUNDED PENSIONS IN THE CITY OF CHICAGO. EMILY: OUR THANKS TO ASHNA SHAH AND SHRUTI SINGH. MARKETS ARE BRACING FOR THE SEPTEMBER JOBS REPORT TOMORROW. OUR OWN MICHAEL MCKEE TELLS US WHAT TO EXPECT IN HIS FINAL THOUGHT. THIS IS "BLOOMBERG REAL YIELD." EMILY: I AM EMILY GRAFFEO. THIS IS "BLOOMBERG REAL YIELD." FOR OUR FINAL THOUGHT, LET'S BRING BACK MICHAEL MCKEE. AHEAD OF THE JOBS REPORT, GIVE US THE LOWDOWN. WHY IS THIS JOBS REPORT SO IMPORTANT? MICHAEL: WELL, IT ISN'T REALLY IN THE GRAND SCHEME OF THINGS BECAUSE THE FED IS FOCUSED ON INFLATION. AT LEAST IF WE GET THE NUMBERS WE ARE EXPECTING TOMORROW, 4.1% UNEMPLOYMENT RATE, UNCHANGED, 85,000 JOBS CREATED, RIGHT IN LINE WITH WHAT IS HAPPENING, AND NO REAL INCREASE IN THE AVERAGE HOURLY EARNINGS NUMBERS. THAT WOULD TELL THE FED OF THE ECONOMY IS IN REASONABLY GOOD SHAPE AND THERE IS AN INFLATION PROBLEM FOR -- FROM THE LABOR MARKET, SO THEY GIVE THEIR ATTENTION TO THE OCTOBER CPI REPORT. EMILY: THERE IS ALMOST A BID FROM ABS AFTER ONE, BECAUSE MAYBE IT WOULD CONVINCE THE FED WE DO NOT NEED AS MANY RATE HIKES. MICHAEL: IT DEPENDS ON THE WAY YOU LOOK AT IT. IT DOES NOT APPEAR THAT INTEREST RATES ARE HOLDING BACK ANYBODY IN THE MARKETS. THE STOCK MARKETS HAVE BEEN GOING UP, BONDS ARE GOING DOWN. YIELDS ARE GOING UP IN THE CREDIT MARKETS ARE STILL FUNCTIONING AND EVERYONE IS BORROWING INSANE AMOUNT OF MONEY. IT LOOKS LIKE THE ECONOMY CAN LIVE WITH THIS. IT IS A QUESTION OF EVERYBODY WANTS TO GET RID OF INFLATION. THEY ARE SAYING, FED, DO WHAT YOU NEED TO DO. EMILY: BRIGHT AND EARLY YOU WILL BE THERE. M AND I'M SURE YOU-- MICHAEL: AND I'M SURE YOU WILL BE