Commodity and Market Prices

Summary

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Podcast Summary: Bloomberg Surveillance – "Commodity and Market Prices"

Date: August 6, 2026
Hosts: Tom Keene, Alex, Carol Massar
Notable Guests: Suzuki Yamada (Bank of America), Ed Hirs (University of Houston), Suki Cooper (Standard Chartered), Julia Herman (New York Life Investment Management)

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Overview

This episode of Bloomberg Surveillance zeroes in on the interconnectedness of commodity markets, the arc of global currency intervention, energy refinery disruptions, precious and industrial metals dynamics, and the current bond market’s influence on Federal Reserve strategy. The hosts and their expert guests explore real-time market puzzles—ranging from the Yen's resilience, the “fiction” of the Brent oil benchmark, structural shifts in precious metals demand, to why U.S. Treasuries remain at the heart of global capital flows.

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Key Discussion Points & Insights

1. Japan's Yen Intervention and Market Dynamics

Guest: Suzuki Yamada (Bank of America)

• Themes:

  • The Japanese authorities’ resolve to defend a key yen level (155/USD).
  • The role and limits of unilateral vs. coordinated currency intervention.
  • How strong Japanese equities and balance of payments impact the currency.
  • Public pressure amid a weakening yen and global perceptions.

• Quotes & Memorable Moments:

  • “If [Japanese authorities] can't break [155] this time, I think the market will basically assume the authorities have run out of options." – Suzuki Yamada (01:56)
  • "Unilateral intervention obviously has a limit... As the US joins, [it] removes a hard limit on intervention." – Suzuki Yamada (03:48)
  • “Japanese equity has been the best performer in the market... Japanese bank stocks have outperformed US bank stocks.” – Suzuki Yamada (06:09)
  • "The weak yen hurts, but... maybe the pressure is not as strong as people think outside of Japan." – Suzuki Yamada (06:09)

• Timestamps:

  • [01:27] – Introduction to the topic and guest
  • [01:56] – Analysis of the yen and market intervention
  • [03:48] – U.S./Japan currency coordination
  • [06:09] – Impacts for Japanese businesses and the public

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2. Global Oil Markets & Refining Disruptions

Guest: Ed Hirs (University of Houston)

• Themes:

  • Global refined product shortages and the U.S.'s export-driven market.
  • The disconnect between geopolitical turmoil (Middle East, Russia) and oil prices.
  • The “fiction” of the Brent oil benchmark.
  • China’s declining oil imports, Venezuelan and UAE production, and U.S. SPR (Strategic Petroleum Reserve) drawdowns.
  • AI and private equity’s (Blackstone’s) foray into oil market data.

• Quotes & Memorable Moments:

  • “The refinery world is turned upside down. Once every 25 years, it's a good time to be a refiner.” – Ed Hirs (10:05)
  • “The Brent benchmark is a fiction... less than a thousand barrels a day. Why aren't we at $200 oil? China has cut its imports... Other nations have increased production.” – Ed Hirs (11:30)
  • "People scared of AI—they should be terrified because... this system is overseeing all of the data... any bad actor can just go right into it." – Ed Hirs (15:13)

• Timestamps:

  • [09:34] – Oil refining disruptions explained
  • [11:14] – Global supply and pricing paradox
  • [13:56] – Blackstone, AI, and oil asset data concerns

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3. Precious Metals: Gold, Silver, and Palladium Trends

Guest: Suki Cooper (Standard Chartered)

• Themes:

  • Gold’s resilience amid macro uncertainty but looking expensive long-term.
  • Silver’s dual role: barometer for uncertainty and its industrial demand, especially for solar and EVs.
  • Supply shortages in silver after five years of market deficits.
  • Platinum and palladium’s market microstructure and investment flows.
  • The gold-silver ratio and retail market perspectives.

• Quotes & Memorable Moments:

  • “If gold is our barometer for uncertainty, silver is our kicker... plus the industrial outlook.” – Suki Cooper (18:21)
  • "Five successive years of undersupplied market. That readily available silver stock is no longer there, and that's why we see these sharp moves." – Suki Cooper (19:27)
  • “The gold-silver ratio... tells us whether one is overvalued or undervalued. But there isn’t a fundamental basis for the long-term average.” – Suki Cooper (22:00)

• Timestamps:

  • [16:45] – Commodity market backdrop & gold’s performance
  • [18:09] – Silver’s industrial and retail demand
  • [19:22] – Structural silver shortages
  • [20:45] – Platinum, palladium, and market microstructure
  • [22:00] – Gold-silver ratio, retail pricing

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4. Bond Market & U.S. Federal Reserve Outlook

Guest: Julia Herman (New York Life Investment Management)

• Themes:

  • The Treasury yield curve as an indicator for market expectations around inflation and the Fed’s path.
  • The role of “term premium” in recent rate moves, including fiscal and inflation worries.
  • Whether the bond market is “doing the Fed’s job” by tightening conditions.
  • Rejection of the “Sell America” narrative, ongoing strength of U.S. asset flows.
  • Duration management and credit strategies for institutional investors.

• Quotes & Memorable Moments:

  • “What we've learned from the curve… investors are struggling with not if the Fed's going to contain inflation, but what their glide path forward is from here.” – Julia Herman (24:36)
  • “If the Fed cuts in the near term or… stays on hold is less important right now than if financial conditions are tightening naturally.” – Julia Herman (25:35)
  • “There is no alternative to the U.S… we think there’s a lot more robustness in the trade.” – Julia Herman (27:44)
  • “Around [4.7% on the 10-year Treasury] we would see those risks asymmetric for investors.” – Julia Herman (29:45)
  • “Short maturity credit… is a solve for the two key sources of volatility right now: rates fall and the shorter-term economic outlook.” – Julia Herman (30:20)

• Timestamps:

  • [24:06] – Treasury curve, inflation, and market expectations
  • [25:24] – Fed policy, natural tightening
  • [27:38] – U.S. asset flows, “Sell America” debate
  • [28:53] – Institutional bond allocation, duration, and credit risk

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Notable Quotes

• “The commitment [of U.S. coordination on FX] could be strong.” – Suzuki Yamada (04:57)
• “Brent benchmark is a fiction... less than 1000 barrels per day.” – Ed Hirs (11:30)
• “Five successive years of under supplied [silver] market... that's one reason we're seeing these sharp moves." – Suki Cooper (19:27)
• "Short maturity credit is a solve for the two key sources of volatility right now." – Julia Herman (30:20)

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Conclusion

This episode delivers a dense, insightful journey through global finance’s most urgent intersections:

• Central bank currency defense and intervention challenges (Japan, U.S.),
• The paradox of commodity supply and pricing amid global crises,
• Technological disruption in oil & gas data management,
• Profound supply-demand shifts in precious metals, and
• Navigating yield and credit risk as global rates and policy uncertainty persist.

Each segment blends expert perspective and practical market takeaway, making this a must-listen for investors, policymakers, and business leaders tracking the pulse of the world’s essential markets.

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Transcript

[Alex]

Salary bonus 401k stock options investment accounts At a certain wealth level, your financial life is anything but simple. If your wealth manager only sees one piece of the puzzle, who's connecting the rest? Creative Planning's integrated team looks at the whole picture. They coordinate your investments, tax strategy and estate plan to form a complete view of your financial life so everything fits together. Creative Planning where wealth works together. Learn [e-mail] BSP gain insight on the

[Bloomberg Announcer]

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[Carol Massar]

today's complex economy I'm Carol Massar.

[Tom Keene]

And I'm Tim Stenovec.

[Podcast Host]

Wrap up your workday with the Bloomberg businessweek Daily Podcast.

[Bloomberg Announcer]

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[Alex]

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[Alex]

on Apple, Spotify or anywhere you listen.

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[Tom Keene]

Right now we want to turn our attention and we've decided decided we had to go to Japan. Suzuki Yamada drives the yen for bank of America with wonderful academics out of the Massachusetts Institute of Technology in Stanford and joins us right now. Suzuki, are you surprised that we don't have a stronger yen moving from 162 stronger to 158 and your key break point of 155?

[Suzuki Yamada]

Well, thanks for inviting me here. Well, I think the authorities are determined to break 155 this time around. I think right now they're probably waiting for events such as NFP prints tomorrow, but this time around I think the cost of failure is too high because they couldn't break 155. If they can't break this time, I think the market will basically assume the authorities have run out of options to defend the yen.

[Tom Keene]

The romance of this is George Soros and a guy named Druckenmiller a few years ago, where basically the market vigilantes tell the authorities what's going to happen. Is that an ancient idea or is the market telling the authorities in Japan and for that matter the Secretary of Treasury what to do?

[Suzuki Yamada]

Yeah, well I think the Taka each administration has potentially underestimated, you know, the market force, you know, up until now. But I do think, you know, the coordination with the US basically means Japan cannot, you know, indefinitely rely on intervention because, you know, you ask someone to join your project, you have to have a goal. And that goal cannot be just to buy time for yourself. Right. So I think this time around, this coordination appears to have been well prepared in advance. I think that implies the Japanese government is this time prepared to respond with a comprehensive package, including faster BOJ hikes.

[Alex]

Shashka, how important is it that the US worked in coordination with the bank of Japan in this particular case?

[Suzuki Yamada]

Well, I think it is quite important from two perspectives. One is that unilateral intervention obviously have a limit, which is the balance of FX reserves Japan hold. But as the US joins, ultimately the US can sell the US dollar, it issues. So I think it removes a hard limit on the intervention. And secondly, I think US coordination is key because without coordination on a broader community, I don't think that Japan can determine to respond with a comprehensive package because the current administration really historically believes in easy monetary policy and, you know, lose fiscal policy.

[Alex]

So we understand that the US Fed sold euros to buy yen as opposed to dollars. Does that suggest maybe their commitment isn't as great as it possibly could be?

[Suzuki Yamada]

Yeah, I mean, I think there are two aspects, right? I mean, first of all, they didn't sell US Dollar, their currency. So, you know, obviously that could imply somewhat soft commitment at the moment. But I think there's an alternative aspect. That is, because they sold Europe, there is a possibility that European policymakers may have been given a notice. So, you know, this coordination could be, you know, on a broader scale, let's say, in the G7 community. We have to see. But I think the commitment could be strong.

[Tom Keene]

I want to get this question in because I think culturally it's just so, so important. Our perception just gay is the large multinationals drive the bus this time around in this modern age, the domestic Japanese, the small business, the people politically and even financially, do they have more power now? Where they're harmed by weak yen, they're harmed by higher yields. Do they have more power than 20 or 40 years ago?

[Suzuki Yamada]

Well, that's a tough question, but I have to say that this time it's not all bad, you know, when it comes to what's happening in Japan. I mean, here's the fact about Japan, right? Since last spring, so that's when, you know, the yen started to weaken again. Japanese equity has been the best performer in the market, right? And we've seen the biggest balance of payment surplus in Japan among the developed nations, right? So I think economically or in the equity market, things are great. Japanese bank stocks have outperformed US bank stocks. So I think, you know, we're not in a recession, we're not in a debt crisis. The weekend hurts, but I think so I think from the public maybe the pressure is not as strong as people think outside of Japan. And obviously the question is why the yen has been so weak despite good things like strong equity and policy. Risk is one. But I think there is an alternative hypothesis which is that equity has been too strong, meaning, you know, outperformance of Japanese equities have basically led to excess yen selling from foreign investors.

[Tom Keene]

Suzuki, thank you so much. Suzuki Yamada with the bank of America Head of Japan affects rates. Stay with us. More from Bloomberg Surveillance Coming up after this

[Alex]

Salary Bonus 401k Stock Options Investment accounts At a certain wealth level, your financial life is anything but simple. If your wealth manager only sees one piece of the puzzle, who's connecting the rest? Creative Planning's integrated team looks at the whole picture. They coordinate your investments, tax strategy and estate plan to form a complete view of your financial life. So everything fits together. Creative Planning where wealth works together. Learn [e-mail] BSP have you ever wondered how Jessico took the Savannah Bananas from

[Suzuki Yamada]

we had a $6 million failure last year. We're gonna have bigger ones as we go to this. We've got shareholders, investors that reach out to us regularly and the answer is always no.

[Alex]

Or why L. Duncan would say this about a Netflix sports broadcast.

[Carol Massar]

Sometimes we're gonna take really big swings and we're gonna frickin whiff.

[Alex]

Then the deal is the show for you. It's a Bloomberg podcast hosted by me, Alex Rodriguez and me Jason Kelly. We talk to the biggest names in the world of sports and business, including NBA hall of famer Tracy McGrady on one of his biggest blunders.

[Podcast Host]

I think I've created something magical.

[Alex]

Well, I struck out and you'll even get some of my baseball hot takes. I've had owners tell me it doesn't matter. The game has to be fixed.

[Suzuki Yamada]

It's broken.

[Alex]

If we have to lock out the whole year, we will. New episodes air every Thursday. Don't miss out. Foreign.

[Bloomberg Announcer]

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tom Keene]

Joining us now, energy fellow at the University of Houston barely describes Ed Hur's just definitive global ability, folks, to have Paul Sankey with us and then at hers is what it's about. Down at the bottom of your note, I've been emphasizing this. The refinery world is turned upside down. Explain to mere mortals why the refinery world is in real issue like diesel at $160 a barrel equivalent and how we're going to extricate ourselves from that mess.

[Podcast Host]

I think I saw 175. So the reason is there's a shortage of refined products across the globe. And here in the US we've been exporting refined products now for about 10 years. We bring in more, we export what we don't use. In the US we've been doing wonderfully well to reduce our reliance upon refined products. I mean, we're seeing growth, not necessarily altogether in EVs but the hybrids which get double the mileage of a normal automobile. And so the refineries have the ability, the capacity to send product overseas. As the war kicked off, ExxonMobil chartered a couple of tankers to start sending gasoline and diesel to the Asian markets. It is a great time to be a refiner. Once every 25 years, it's a good time to be a refiner.

[Alex]

I'm actually surprised, or maybe put it this way, should I be surprised that oil prices, Brent, are not higher than the army? We've got this war in the Middle east, we've got Russia with sanctions, plus

[Tom Keene]

they're in a war.

[Alex]

Why isn't oil Brent like 150 bucks? I don't understand.

[Podcast Host]

You know, I, I look at WTI because of course that's what we have to, to buy. And Brent should be whatever the transport cost is from, from the Gulf of Mexico up to Brent Brent. The amount of Brent crude that's produced today is less than a thousand barrels a day.

[Alex]

Really?

[Podcast Host]

And so the Brent benchmark is a fiction. It's a fiction. It's, it's a fiction. It's in fact Brent includes a portion, WTI includes a portion of Riata, whatever the price is. Why aren't we there? At 106 million barrels a day pre war, with 10 million supposedly off the market, we should have seen a price of oil hit about $200 a barrel. Why we haven't? Well, China has cut its imports now by 5 million barrels a day. We've got increased production, or rather increased oil coming to market because the Venezuelan sanctions have been released. UAE has kicked up production significantly. We've been running down the spr at about 2 1/2 million barrels a day. So the net effect is about 2 million barrels a day off market. So that leads to a 50% price increase off the off of the pre war price of $56 a barrel, which is what it was in January before the market priced in the war.

[Alex]

As an energy person, do you just assume that the Middle east source of oil is going to be compromised for as long as we can see because the Strait of Hormuz arguably will never be open?

[Podcast Host]

Open, it's hard to say. I mean, you know, the Middle east has to sell that oil to somebody in order to make a living. In 1956 with the Suez crisis, Eisenhower was approached by the UK, by France, by Israel, to join in, in retaking the Suez Canal because it was the bottleneck for oil going to Europe. And Eisenhower said, why you can just send it around. He didn't want to get involved with that. He knew that no matter who owned the oil in the Middle east, the only way it had value was for it to be sold. And eventually they'll all come to some sort of agreement or there will be demand destruction as they fight it out amongst themselves and we got to run.

[Tom Keene]

But I got to get this in. When a professor comes in of his acclaim at her acclaim at uh, and he writes a separate paragraph. Hey, Tom. Stupid Blackstone. Enervis. Ask me. So private equity. Blackstone wants to take AI and bring it into the oil business. And you're apoplectic about it. Discuss.

[Podcast Host]

So Interbus is compiling data on every user or every royalty owner and actually every oil producer. They have data down to the granular level on wells, on, on property holdings. This is information that, for example, ExxonMobil, EOG, Chevron, ordinarily they fight hammer, tongue, tooth and nail not to let that out. But now Blackstone is putting itself in a position of grabbing all of this data across private companies. And of course, if you're a royalty owner, they know your bank account, they know your Social Security number, they know what your interest is in this well over here, the one in West Texas, the one in Colorado, the one in West Virginia.

[Tom Keene]

They must be apoplectic on landmines.

[Podcast Host]

Well, just imagine, just imagine Bloomberg having all of the private data here. And then now they've gone into a banking mode. They will make you a payday loan on your royalties for the next three or four months. And you know, in Houston, some of the wealthiest oil guys are actually the estate attorneys who've been making a market in the little fragments that they come with this for.

[Tom Keene]

People scared of AI they should be terrified because.

[Podcast Host]

Because what this system is doing is it's overseeing all of the data. It's filling and plugging numbers. You wind up as a user getting money taken out of your account. Interest numbers change. There can be different owner numbers. Wow. And plus, they use open servers across the globe. And so any bad actor can just go right into it.

[Tom Keene]

We got to go. But editors, you got to come back and continue this discussion because this touches folks on the fears that so many people have.

[Podcast Host]

AI they're acting like a bank and they're not regulated like a bank.

[Tom Keene]

That's the point. The regulation's not there. Professor Hurst, thank you so much. Always with the University of Houston. Stay with us. More from Bloomberg Surveillance coming up after this.

[Bloomberg Announcer]

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Tom Keene]

We made a commercial. Steve Lanzon made a special commercial about the Standard Charter Bank.

[Alex]

Yeah, okay.

[Tom Keene]

In Steve Englander's brilliance of foreign exchange, Suki Cooper has a privilege of sitting with him, Global head of commodities at Standard Charter bank with their whole Pacific Rim. How's the Pacific Rim doing with the war in the eastern Mediterranean is a general statement.

[Suki Cooper]

I think there's so much market focus there. But we have to remember that the geopolitics, while it's been setting the tempo for much of the commodities, some of the base that's been set is up by some of the structural drivers we've seen this morning in terms of copper surprise still being one potentially one of the most underappreciated risks there. But for the gold market, we still see that structural demand is still wanting to lean in and allocate once. There's a little bit more clarity on uncertainty there.

[Alex]

So we saw gold at $5,000 an ounce. You know, experts would tell me, boy, that's, that's really, really toppy here. But then we pulled back to 4,000, a big move down. What's the fundamental call on gold today? Is it feel attractive or not?

[Suki Cooper]

I'd say if we're looking on a longer term basis, it might look relatively expensive. But if you're looking at the macro risks right now, then it still looks underappreciated. So the base, we think has formed quite well, especially as we're in the middle of a seasonally weak period for consumption. And on top of that, we have a lot of macro headwinds that are being priced in, especially with the market swinging so sharply to expecting rate hikes in the US So we think that prices have held up very well at these sort of levels. And now I think if we're starting to see an unwinding of some of that positioning that was fearing that hawkish stance, we'll see gold starting to gain more traction.

[Alex]

Silver I see down 14% this year. I was, I mean, I don't know anything about the commodity space, but I always feel like gold and silver kind of trade in tandem, but not really here. What's the feeling on gold here? I mean, I'm sorry, silver's. Pardon me.

[Suki Cooper]

If gold is our barometer for uncertainty, silver is our kicker on uncertainty, plus the outlook for the industrial picture.

[Alex]

Okay.

[Suki Cooper]

And the silver market on the one hand did incredibly well when we saw so much retail demand at the start of the year. But now we're starting to see some of these risks lurking in the background and substitution risk, especially for the solar industry. So on the one hand you've got that demand boost that's growing, but the substitution risk on the solar side could be quite sharp.

[Tom Keene]

Okay, let's, let's go. I happened to be in a small store on 57th Street, Tiffany and the elevator randomly got me off at the silver floor.

[Alex]

Oh boy.

[Tom Keene]

It was just packed. Packed. Is silver a big part of jewelry or is it really driven by solar panels?

[Suki Cooper]

It's a, it's a significant part, but it's not the main part of jewelry consumption. It's at the moment we're seeing much more. Even though we're seeing the solar demand starting to shrink, it's still much larger

[Tom Keene]

than the industrial silver.

[Suki Cooper]

Industrial use are much larger. It's more than half of the consumption that we see.

[Tom Keene]

Is there like a shortage of silver? Like mines versus gold?

[Suki Cooper]

This is a really fascinating development because if you go back five years, I would have been sat here saying silver's very well supplied. There's plenty of above ground stock. But we've had five successive years of under supplied market. So that readily available stock is no longer there. And that's one of the reasons we're seeing these sharp moves.

[Tom Keene]

Paul, I'm ignorant on this. I feel like right now I got to go read everything Suki's written, plus three books on silver. You know, I just, I'm just not up to speed.

[Alex]

I know.

[Tom Keene]

Why am I so dumb on silver? Why do we not look at silver like we look at gold or oil?

[Suki Cooper]

Silver is fascinating in that it's used in so many different facets like from water purification to wood preservation. And we don't realize how many parts of Our lives it touches and then you've got the EV demand aspect too. But I think it's tends to be looked at more so as a precious metal rather than its industrial components.

[Alex]

I mean all I know Tom about commodities is glcl, GLCO on the Bloomberg terminal, the global commodity prices. And I click on the metals and it gives me the base metals. They're all up double digits this year. Ferrous metals down. I don't know, it's iron ore and all that stuff. But then I go to precious metals and the precious metals are down kind of 15% across the board here really. Platinum palladium, talk to me about those because what's driving the story there, the

[Suki Cooper]

picture for the PGMs approach, platinum palladium has become much more micro in comparison to macro. So last year maybe you could have said that platinum was riding on the coattails of gold. But this year we've seen some of the supply concerns maybe take a back seat. Much more focus on the demand side and whether we might see auto demand being scaled back or whether there might be some challenges around the recycling side. But we still see that the platinum market's undersupplied for this year, tilting to a surplus. But having said that, the investment demand has turned a lot weaker. There's still that structural story that's supportive for platinum.

[Tom Keene]

Two things I'm going to get this in. So to summarize your long gold here

[Suki Cooper]

we still see upside risk. From here we have 4650 as our Q4 average.

[Tom Keene]

Okay, this is a listener emails in. It's part of Ask Radio.

[Alex]

That's how it works.

[Tom Keene]

This is Mrs. Keene somewhere like a number of streets up. Can you ask Suki is the ratio of the $29,000 Elsa Peretti small bone cuff in yellow gold $29,000 versus $2,100 for the same silver cuff. Is that a proper ratio to look at gold to silver? For a mere mortal out there, the

[Suki Cooper]

gold silver ratio is one that people like to look at over the longer term and it tells us whether one is overvalued or undervalued. But there isn't a fundamental basis that drives what that long term average should be. So we're starting to see that ratio normalizing at current levels. At Tiffany, at the retail level, there's many, many other dynamics that are at play. The manufacturer in cost really.

[Alex]

Well I think that, I mean to me when you look at diamonds and now you get the lab grow diamonds, that puts that market in total.

[Tom Keene]

See Suki's like, she's got the charter look on. She's not layering this morning. No, what you do is you layer and you mix your gold and your silver. I learned this y and you do that. I mean, thank you so much. I folks, my ignorance of silver is just stunning. I mean, I just have to read up on it. Is there like a sil, a Silver council, like a Gold council?

[Suki Cooper]

There's a Silver Institute. Lots of great institute. There is.

[Tom Keene]

So I should go to their website to get.

[Suki Cooper]

Absolutely, yes. There's lots of great data.

[Tom Keene]

Please don't be a stranger. I'm smarter. Suki Cooper, thank you so much. Global head of commodities and silver at the Standard Charter Bank. Stay with us. More from Bloomberg Surveillance coming up after this.

[Big Take Narrator]

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[Suzuki Yamada]

My fellow Americans, this is Liberation Day,

[Big Take Narrator]

Stories that move markets Chair Powell over

[Alex]

opened the door to this first interest

[Big Take Narrator]

rate cut, impact politics, change businesses.

[Carol Massar]

This is a really stunning development for

[Big Take Narrator]

the AI world and how you think about your bottom line. Listen to the big take from Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.

[Bloomberg Announcer]

You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube at New York Live.

[Tom Keene]

She's at Sweet Greens three days a week. Julia Herman joins us. Do you go to Sweet?

[Carol Massar]

I have to agree with the prices.

[Tom Keene]

You throw that in the New York life we're doing.

[Alex]

That's what we roll.

[Tom Keene]

You have a brilliant note. I what do you expect out of Notre Dame? It's like wicked conventional. I really respect that right now. What do you learn from the treasury curve? The vanilla difference between twos and tens, or dare I say in a worse kind of way, three months and 30 years.

[Carol Massar]

Well, really what we've learned from the curve in the last few weeks is that investors are struggling with not if the Fed's going to contain inflation, but what their glide path forward is from here. And we can learn that because we can dissect what's happening in the 10 year and the 30 year.

[Tom Keene]

We know that inflation expectations are still spread tens, thirties.

[Carol Massar]

Well, we're looking at spreads across the entirety of the curve. But if we just take the individual tenors themselves, we can break this down into inflation expectations versus real yield. It's real yield that has driven the rate move in the last few weeks and this is almost all attributable to term premium. And we know that fiscal questions have been the huge contributing driver to that term premium increase lately. But what happened of course last week is now we have these increased contributions of questions of how the Fed is planning to contain inflation.

[Alex]

But the Fed's not really telling us too much these days here. Is that frustrating for you and for the market? It seems like some certain folks in the market are saying, I don't like this new regime, this new sheriff in town.

[Carol Massar]

Well, you know, it's not necessarily frustrating because candidly a lot of the curve has done a good job of tightening financial conditions. And even without a ton of guidance, or specifically a rate move of course by the Fed now, given of course that the geopolitical situation is so tenuous right now, so uncertain. And we also know that the Fed's tools are not well suited to cope with a supply side inflation shock like the one we're dealing with. Candidly, you know, if the Fed cuts in the near term or, excuse me, hikes in the near term or stays on hold is less important right now than if financial conditions are tightening naturally

[Tom Keene]

across the curve, you have no rate rise. Right? Sorry, you have on a Fed call, you have no rate rise.

[Bloomberg Announcer]

Right.

[Carol Massar]

We have the Fed through year.

[Tom Keene]

Why? Why?

[Carol Massar]

Because the Fed has two mandates and if you look at the labor side of the Fed's mandate, obviously we'll get the jobs report tomorrow. But candidly, the jobs market is in something as close to an equilibrium as a team of economists could really hope for. We have wage, wage growth decelerating to a really nice sustainable 3 1/2 ish percent. Yes, hiring has been relatively stable, but been reaccelerating in a huge way. This is not to us a labor market that can tolerate a sustained hiking cycle. Of course we also know it's not a labor market that has needed a lot of cuts for support.

[Alex]

It looks like the bond markets may be doing the job for the Fed. I mean we've got rates that are higher here 10 year with a464 handle. Maybe the market's already spoken.

[Carol Massar]

Yeah, I think it has in many ways and it's contributed to volatility on the equity side of things because there is a mismatch between highly narrow, volatile cyclical market leadership and by this I specifically mean the chip leadership within tech. And that's less compatible with a more tight rates environment. Not necessarily because these companies need a lot of interest rate support in order to continue their capex cycle, but simply because the Status of the economic cycle is a little bit more tenuous from here on out with a, with a tighter rates environment.

[Alex]

Global Market Strategist, that's your title. How do you think about the US versus rest of the world these days?

[Carol Massar]

Well, I've been hearing more whispers and thoughts about this Sell America trade and it's something that we really push back on. If you look at actual treasury flows, we have seen consistent inflows from private foreign investors. And the only place where we've seen foreign investor conviction start to rattle has been in industrial specific treasury flows from official investors of foreign governments and foreign central banks. But this is a trend that started in 2013 and has not been accelerating. So rather than a Sell America trade, we think that there's actually a lot more robustness in the trade, that there is no alternative to the US Julia

[Tom Keene]

Herman with this New York Life Investment Management. You know I look at this Julia in the long term in the financial media is. What do you think Paul? Six months?

[Alex]

Yeah.

[Tom Keene]

Up as the World Series.

[Alex]

Yeah.

[Tom Keene]

You have just is one statistic, 347 billion something in New York Life matched up against insurance and annuity liabilities. What do you say to the managers of a huge multibillion dollar portfolio at New York Life where their short term is 10 years?

[Carol Massar]

Well, you know, we think about this on the strategy perspective of the asset management side, which is where our team sits deficits from the perspective of how do changes in the rate environment impact our holistic allocation considerations. So for example, with the recent move in the long end of the curve that for us really influences our duration view for the shorter term, which is that up until this point this year we have been trying to stick toward the shorter side of neutral on duration. Yeah. At 4647 on the 10 year, that's a place where we would see more value.

[Tom Keene]

Okay, well explain. I think our audience doesn't know this. I mean duration for, for New York Life or any other insurance company is a lot longer term, isn't it? Do you. Are you going to buy 40 year Google paper today?

[Carol Massar]

Well, so I can only speak from the asset management side of the business. Right.

[Tom Keene]

Okay.

[Carol Massar]

So from the asset management side we would see a little bit more value at the 4 7. You know, what we have historically seen a little bit more of though is that you know, systemically there's an institutional bid around 5 for the 10 year. And so, you know, being able to creep into duration from here is not to say that we can't see a little bit more upward pressure on long rates again that term premium. These questions are on both fiscal and Fed related risks are significant, but around 47 we would see those risks asymmetric for investors.

[Alex]

Credit risk Is it worth taking credit risk here or you just clip the coupon that the U.S. government's given you?

[Carol Massar]

It's a really good opportunity right now for not just short duration but short maturity credit right now in our view, and that allows investors to think about that buy and hold opportunity which yes, which as a total return perspective is going to lean you more toward the yield perspective. Keeping everything short maturity specifically in our view, is a solve for the two key sources of volatility right now. Rates fall, of course, but also questions about the shorter term economic outlook given that the impact of higher gasoline prices stemming from Iran and has already contributed to consumers trading down, for example. That's data out of the Beige book in the last few weeks and we can bolster portfolios against some of that near term economic outlook volatility by keeping things shorter maturity.

[Tom Keene]

Julie, thank you so much. Julia Herman with us Director of Global Market Strategy for the it's like Ohio State, the New York Life Investment Management

[Bloomberg Announcer]

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