00:00Bob, the relationship between the front end and the long end, what's that relationship like going into this decision, this
00:05news conference?
00:05What influence does Fed policy have on what develops further out along the curve?
00:11Well, from our perspective, the market has gone an awful long way.
00:16The front end is pricing in approximately four rate hikes, and then the long end is pricing in a level
00:23of steepness to the front end
00:25that you would expect if you get 7,500 basis point of rate hikes.
00:29So it looked awfully bearish to us.
00:32I think we've reached a point of maximum pain.
00:35And to be honest, this morning in London, we were in buying.
00:38You were buying what denomination?
00:4130-year bonds?
00:4210-year bonds?
00:4320-year bonds that were left for dead earlier this week?
00:46The long end of the U.S., Japan, and Australia.
00:51Backing up the truck.
00:52It's just gone too far.
00:53Bob, not just the U.S. then, Japan and others too.
00:57It's just gone too far, John.
01:00The dominoes are starting to fall.
01:03The central banks, and it started with the ECB.
01:06It now goes to the Fed.
01:08And on Friday, we expect the Bank of Japan.
01:10That's the first thing you need are for the central banks to establish their credibility.
01:16I think Treasury Secretary Besant has done his best to stabilize the long end.
01:21He's got the firepower to do more if he wants to.
01:24The long end just got too cheap and too unanchored.
01:26It's starting to stabilize.
01:28This is the first ingredient.
01:29The second ingredient, of course, is you need some stabilization in the Middle East.
01:33With the midterms now weeks away and campaigning in earnest, that looks like that could be the next domino to
01:41fall.
01:42So the market reached our levels on nominal and real yields.
01:46That's simply too cheap for where we are today, and it's a good buying opportunity.
01:51Indeed.
Comments