00:00So, Abir there talking us through the Middle East events, that's pushing oil prices higher.
00:04We're back to worrying about inflation. I'm not sure it ever left our consciousness,
00:08but oil prices heading, well, back towards $100, it would seem.
00:12What are you watching in terms of that inflationary dynamic?
00:15Yeah, I think in the very short term, yield should be higher again.
00:17So we're seeing yields higher across, you know, everywhere today.
00:20And I think, you know, if you take the US curve as kind of the benchmark,
00:23which is maybe debatable because they've got a different policy from the French Bank,
00:27you know, the three basis points are higher across the curve.
00:30I think in the short term, we can go higher again.
00:31I think everything in the very short term is quite inflationary.
00:34I think you've got strong data. The ISM was really strong on Monday.
00:36We had the JOLTS data, and the JOLTS data is very backward looking,
00:39but still it's showing that the jobs market is holding up.
00:42You know, we've got this idea that the markets are very strong,
00:46and that at the moment, the AI impulse is inflationary,
00:50even if it's ultimately the production boom is going to be deflationary, which is still in debate.
00:54And now you've got the Iran conflict firing up.
00:56So everything in the short term suggests to me that yields should be going higher.
00:58Now, I do accept that the beta for the yield move to inflation is lower
01:02because there's a bit of a stiflationary kind of whiff around this impulse at the moment.
01:07So people are worried about if it is the Iran conflict that's driving it,
01:10isn't that quite bad for the long end?
01:11So I realize it's a bit more nuanced, but I still think the short term dynamic today is yields higher.
01:14And obviously, that's more problematic for things like gold, Bitcoin, other speculative assets like that.
01:18What stops the U.S. turning it to getting to 5%?
01:22I mean, I think it probably will go there, but just not quickly.
01:25I think what...
01:26Why not quickly?
01:27I'll tell you why, because it stops in...
01:29Because there are enough market participants who have an interest in accumulating, you know,
01:36coupon assets or fixed income assets that basically when they think that there's a...
01:41A yield higher.
01:42A reason to pause.
01:43Yeah, exactly.
01:43They kind of choose an amount to pile in.
01:45And they tend to work in kind of tandem.
01:47So if you get to a certain level and they're like, okay, it's time to, like, buy a load of
01:50fixed income.
01:51And then that's where you get these pause and these fixed income moves.
01:53It's why everything...
01:54You know, we've seen this the last couple of years.
01:55We've seen a very steady trend in a bond bear market.
01:58And we're still in that bond bear market.
01:59We're still going to see much higher yields over the long term.
02:01But I think one of the lessons of the last few years is that it doesn't happen in a straight
02:05line.
02:05It happens quite violently.
02:06And then we get these dip buyers come in and bonds, and they buy it, and we pause for another
02:10few months.
02:10And then we get the next catalyst, whether that's inflation or fiscal side.
02:13So I do think that ultimately we're getting there.
02:15I just don't think it's a rush there.
02:17Do you think the moves into...
02:19I mean, gilts have been relatively well bid in recent weeks here in the U.K.
02:23There has been moves in.
02:24Maybe that's a kind of a repricing around some of the political risk.
02:27Maybe the markets have got over their skis in terms of how far the BOE might go in terms of
02:31their expectations.
02:32Are the gilt markets looking slightly distinct at this point?
02:36I think in the U.K. there's probably a stronger growth fear than other places.
02:41You know, it's how much can the Bank of England actually get away with hiking?
02:44If they...
02:45You know, I think our colleague Van Ram, as they literally just put something out in MLive only about 10,
02:4815 minutes ago,
02:49just kind of going like, hey, you know, the Bank of England by Taylor Reel can only do 35 basis
02:52points.
02:53So why don't you get the hike in as soon as possible?
02:55And that might stop them to do more later.
02:56But there's more of the kind of the growth concerns there.
02:59I think the U.K. is kind of weird that it's lost a little bit of its international sheen,
03:04but it still has a very strong domestic sector of long-term, you know, real asset managers, pension funds,
03:10who need to, again, buy those dips at certain income reasons.
03:13So it's a kind of slightly weird denouement that it gets more extreme panics,
03:16but it has a strong domestic bias to buy those dips.
03:18Mark, thank you very much indeed.
03:20Bloomberg Markets Live executive editor, of course, Mark Cudmore.
03:22And a note for Terminal users.
03:24Anna, Guy, and I will be joining the Markets Live team for an event, Money & Macro,
03:29tomorrow, 5 p.m., here in London.
03:32Terminal users can catch that using the function Live Go on the Terminal.
03:36Terminal users can catch that using the function Live Go on the Terminal.
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