00:00Well, let's get some more perspective on the fixed income markets now.
00:04Joining us from Hong Kong is Greg Peters, co-CIO for public and private fixed income at Pigeon.
00:10Greg, thanks so much for joining us today.
00:12And I do want to kick off with that data that we saw out of the U.S., the ADP November payrolls slipping.
00:19Pretty much seems to be the consensus that that's nailed on a Fed rate cut for next week.
00:25But what kind of commentary do you expect to hear now around further easing?
00:31Yeah, so I do think, you know, we will have a hawkish cut, you know, coming up.
00:37But I'm not sure there's a lot of information coming out of that meeting, right?
00:41I think the markets are focused on what happens next.
00:44And what happens next is the new Fed share, the new composition, and quite candidly, the meddling of the administration in Fed affairs.
00:53So I'm not sure there's a lot you can read into next week's meeting.
00:58But the labor market has been softening.
01:00It's been stagnating for quite some time.
01:03You saw that in Spage yesterday.
01:06So, you know, on one hand, you have a weakening labor market.
01:09On the other, you have stubborn inflation.
01:13And our read is that inflation is going to actually be much more stubborn going into 2026.
01:19And that really complicates matters for the Fed and complicates matters for, you know, financial markets writ large.
01:29Well, in terms of 2025, we've got U.S. Treasuries heading for the best year that they've seen in five years.
01:37But with the picture a little bit more interesting for 2026, how do you see this trend evolving?
01:42Yeah, so if you decompose what has done well on the Treasury side, it's not the back end of the curve.
01:50So what has been happening is that even though Fed cuts have come through, it's pulled the front end lower and the belly lower.
01:58But the back end is actually trading higher today than it was this time last year.
02:03And so why is that occurring?
02:04Because investors are worried about this inflation component.
02:08They're worried about Fed independence slash credibility.
02:12And so risk premium, term premium is being built into the curve, not only in the U.S., but across all sovereign bond markets.
02:20So it depends where you are.
02:22The bond market in the back end is still quite fragile.
02:26Greg, I just want to get your views on Fed independence as well.
02:29We've had a report in the Financial Times today about bond investors warning the Treasury about the risk of Kevin Hassett.
02:36Should he be the next Fed chair of pursuing easing for political reasons?
02:41I'm wondering if you'd add your voice to that warning.
02:44But also when push comes to shove, is the bond market going to make sure the Fed stays independent?
02:51Well, I sure hope so.
02:53So, I mean, the market has reacted since since the betting markets have raised the probability last week.
02:59The bond market has performed quite poorly.
03:01So the bond market is telling you that there are some concerns there.
03:05But on one hand, you have the Fed independence question, you know, with Hassett as, you know, basically tied to the administration.
03:13But on the other, does he have the credibility within the committee to drive consensus?
03:20And so we don't know that answer.
03:22I don't think he has that credibility.
03:23I think that's what the bond market is telling you.
03:25But it's important to remember that it's a full committee and you have to have the confidence of the committee to drive consensus.
03:35And I don't know if he has it.
03:37But one point on that, though, I think there's a lot more to come on the Fed side.
03:41I think the Fed chair is just one aspect.
03:44I look for, you know, some other structural changes on the come from the Fed that actually whittles the independence even more than just having a different Fed chair.
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