PIMCO：美债收益率未反映基本面，市场或已处公允价值区间

Talk about the bond market first and grateful to have with us here a man who needs no introduction. One Tom Keene, of course, the, of course, the co anchor of Bloomberg Surveillance, Bloomberg Money, as well. Tony Krizanhze joins us as well, portfolio manager at PIMCO. Tony, let me start with you. I just wanna wanna get your perspective here. It's been a couple of days since we had the surprise intervention by the treasury secretary announcing these changes to the bond buyback program.

How are you processing it? How are you thinking about it? What does it signal about mister Bessent's approach here to stewarding the The US economy? Well, it's a stabilizer. It's probably the best way to think about it. And when we think as investors about what to do, we have to really start with the the principle of how to invest and what the fair value is. How do you determine where a ten year note should be, where thirty year bond should be?

What does a bond investor actually think? You know, there's a lot of there are a lot of headlines, but we have to still do the math. Think of the movie The Martian. Remember? He said, just get get to work and do the math. There's really three components of a bond yield that an investor thinks about each and every day. We're focusing a lot on, of course, on this technical operation, but the most important variable in that, and I'll go through each each one really quickly, is the inflation component.

It's the least variable when we think about what we should be compensated against as investors in a long term security because you are in it for a while, ten year, thirty year period. A two and a half is rough is is pretty reasonable if you think the Federal Reserve is serious about inflation. We're using something like the low twos in our systems, even though the Fed has a 2% inflation target. Now I said just a second ago that the the most, predictable component of the compensation a bond investor demands when buying a bond.

That may seem, difficult to imagine these days because inflation's been moving around, But it has been more stable in the old Greenspan, the former Fed chair, and Volker, also the former Fed chair, who conquered inflation in the seventies. Their old way of determining whether or not the inflation story was in the right place was to think about whether prices were stable, whether they had achieved price stability. There was no number.

The Fed established a number under chair Bernanke in 2012, the 2% inflation target that Kevin Walsh is focused on now. They had a way of thinking about it, and they both said it, Greenspan and Vulcan, the same way. They said price stability occurs when price changes cease to influence household and business decision making. Now could we say that about the past few years? Probably because the economy has been pretty good.

Look at the stock market. It's been roaring. So that part of it looks pretty good, and I'll go through those others two in thirty seconds. We have the neutral rate. How do you know whether you're at neutral? We'd say that's about one point over the inflation rate. How do you know that that's a neutral rate? Maybe it's two points. Well, the economy has slowed over time with the Fed's current three and a half ish policy rate, which suggests that that number is probably right.

So about one point you want for the the neutral rate the the real neutral rate, the two two and a half ish for inflation compensation. But the tricky one, the one you're talking about, and everyone has this week, is the uncertainty element, the term premium, the extra yield you get for the uncertainties about many, many things, it's a catchall. And we'd say that should be around 1% now. So that adds up to something like fours, and so we're kind of in the fair value zone.

Well, there's Tony knowing his audience, by the way, know you're a chief Martian fan of The Martian. I just Listen. Wouldn't I I follow that. However, there are fewer things I hate more than doing the math, and I'm now adding talking bonds to that list. Okay. Alright, Tom. Help me understand what Bessent said because the treasury secretary said in an interview with CNBC, we believe that yields don't reflect the underlying fundamentals.

How can that be? David says I should be astonished by that. I've been doing this for a hundred and twenty four years. Yeah. He's rounding down. He's rounding down. Than Krizanzi. I have never seen a pile on like this weekend in the zeitgeist on the treasury secretary of The United States Of America. Just as one example, Lars Christensen out of Copenhagen with Danske Bank, hugely respected even by people that disagree with his economics, was vicious in a lengthy, lengthy message this morning about the treasury secretary, and there's others as well.

I've never about the action he took about his messaging The arrogance. It's about the arrogance of it. In in in chairman Walsh's defense, he's gotta now completely adjust the body language at Jackson Hole to remove himself from what is perceived by the street, by economists, by finance people is the arrogance that we saw this week. I'm not saying it was arrogance. I'm saying that's clearly the opinion, David, that we see now.

We had Chris Nancy on the show yesterday, Tom, and he said he'd love to be a fly in the wall at the weekly breakfast that the treasury secretary and the Fed chair have. As I say, we're gonna talk about Jackson a little later in the show in more more detail, but talk a bit about that. I mean, we we see a treasury secretary now, Tom, engaged in yield management, which customarily, historically, traditionally has been the providence of the the Federal Reserve chairman.

Well, the the they're two different things, but the basic idea is the Fed is independent, and we still have that independence. I think the check here at Jackson Hole and the check here right now is which staggered a Monday morning or, frankly, Monday morning in Tokyo when they opened in Japan. The check is is the markets will corral the treasury secretary. They don't have to corral the Fed. The Fed is an independent body and still proven is an independent body.

I would suggest the great unspoken here now and also to get to next Friday and beyond. The great unspoken here, the governors and the presidents of the Fed have a voice. It'll be fascinating to see the body language in the next meeting, the meeting after that, even the the post election meeting. It'll be fascinating to see how the presidents and the governors respond to Bessent and Walsh. Tony, one of the other things I dislike intensely is that I am now the person at dinner parties who talks about things like bonds and the Fed and makes me the sympathy.

Lucky you. Right? It makes me very uncomfortable. However, I was out last night. I was asked by somebody, and they said, oh, well, you know, I don't care about this bond stuff. I'm not invested in bonds, but we're all kind of invested in bonds. Right? Because they are this paragon of stability for so long. And and looking what happened at this last week, does it make you look at The US bond market any differently? This is not a place you're supposed to see frequent surprises.

Frankly, it shouldn't be interesting enough for us to be leading this out of this. The dinner parties? Well, you know, I'm not saying my dinner parties are barn burner, but you can all attend for yourselves and let me know. It's important right now. Investors have an opportunity, and they should be thinking about this. I like to call it the the double to join what I call the double lock club. Americans are very astute when mortgage rates decline to lock in low mortgage rates for a thirty year period.

They could be just as astute now if they believe that there's value in the bond market in locking in higher interest rates because on the interest that they receive. Because today these days in high quality bonds and in portfolios, what I mean is a double a type portfolio, you cou