00:00I'll start with you because it feels like this week was a big reminder that geopolitical risk
00:04is still real and it reasserted itself back in these markets. And I wonder how you're thinking
00:10about energy. As we were just discussing with Mike, it's not the entire story when it comes
00:15to inflation expectations, but again, it certainly doesn't help. Yeah, definitely
00:21higher energy prices, higher oil prices has led to higher inflation expectations.
00:26And it's almost restarted this route in global bond yields, if you will, with, you know,
00:33gilt yields, bond yields, as well as JGB yields rising in tandem. So geopolitics is definitely
00:39a very important factor in the price action, the bonds over the last week. And, you know,
00:46add to that concerns about debt and deficits. I mean, that's something that's, again, back
00:50in the forefront. You discussed, you know, the issuance coming from some of the hyperscalers.
00:56So the in aggregate, you're looking at a lot of bond supply that the market has to absorb.
01:01And that's also pushing bond yields higher. Yeah. And Savadra, I mean, just to finish that thought,
01:07I think that's a really interesting dynamic. The fact that, you know, you have bonds dealing
01:11with all these different fundamental issues right now. And then at the same time, you have
01:15the technicals, which is in the form of massive corporate supply. And I wonder if that's, you know,
01:21sort of crowding out some of these Treasury investments.
01:25We had Treasury issuance as well this week. So, yes, in aggregate, you're starting to see some
01:31level of concession that's built into the Treasury market. And that's what investors are demanding to
01:37take down the supply. The supply in general has been well absorbed. But you're getting a lot of,
01:42you know, supply coming from on the corporate sector. You're starting to see concerns about
01:47maybe a bit of a pushback in global bond yields. And that all kind of adds to the pressure that
01:55you're seeing in the bond complex. So it's a variety of factors that I think are pushing bond yields
02:00higher. Inflation expectations, as I mentioned earlier, is also pushing bond yields higher. Real yields
02:06are moving higher. The yield curve is starting to steepen out a bit. So this sort of
02:11move that we've seen in the last week is more of a bear steepener. And that is something that is
02:17a
02:17little bit of a change in the dynamic that we've seen, given the fact that in recent weeks, we've
02:22seen the curve somewhat flattened. And you're seeing some of that flattening, unwinding.
02:27Yeah, absolutely. And Vanir, I want to bring you into the conversation here, you know, and just to start
02:33on the inflationary backdrop here, you think about some of the supply shocks coming through in the energy
02:39market. I mean, does the Fed have the tools to actually address what could potentially be going
02:45on when it comes to price pressures? Or, you know, do they sort of lose their potency when you think
02:50about some of the factors we're dealing with right now? Yeah, I think that's the big question. And to me,
02:56it is the question that should be on everybody's mind. I think over the last few years, maybe a few
03:01decade, maybe a decade, the Fed has pretty much lost control of the economy. I think they're doing a lot
03:09of
03:09things. They're obviously, you know, moving short rates, used to do forward guidance. That's now gone the way of the
03:16task force. So a lot of changes that happen, I think they largely do not have the tools and the
03:22fact that their
03:23credibility and the fact that their record of forecasting inflation and controlling has been quite dismal over the last five
03:29years, tells you that the market actually does not pay attention. So I come from a trading type of background.
03:34And I can tell you that, of course, in the short run, when they do something or say something, we
03:40all pay
03:40attention. Like, you know, a couple of weeks ago, when Mr. Warsh, you know, talked about inflation and everybody was
03:47expecting him to talk about, you know, in a more dovish way. But largely speaking, the market ignores it. And
03:53I think
03:53they actually do not have the tools, they are pretty much cornered at this point of time.
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