美联储一致加息25基点，开启三年多来首次加息周期

SCARLET: FROM NEW YORK CITY FOR OUR VIEWERS WORLDWIDE, I AM SCARLET FU, AND THIS IS "REAL YIELD." COMING UP, THE FED UNANIMOUSLY DELIVERS A 25-BASIS POINT HIKE, MARKING THE FIRST RATE INCREASE IN MORE THAN THREE YEARS. THE CENTRAL BANK PASSING THE MARKET'S CREDIBILITY TEST, AS THE HIKE AND DOT PLOT SIGNAL POLICY MAKERS ARE COMMITTED TO BRINGING INFLATION DOWN TO THE 2% TARGET. U.S. CREDIT CONCERNS RAMP UP AS TRADERS ANTICIPATE HIGHER BORROWING COSTS, WITH RATINGS ON DRUNK JUMPING TO A 16-MONTH HIGH.

WE BEGIN WITH THE BIG ISSUE, HIGHER FOR LONGER MAKING A COMEBACK.

THIS IS THE BEGINNING OF A RATE HIKING CYCLE. THEY HAVE SIGNAL TWO ALREADY. THAT IS IMPORTANT. THEY DON'T WANT TO GET AHEAD OF THEMSELVES.

I THINK IT WAS IMPORTANT IT WAS UNANIMOUS DECISION. IT INDICATES ANOTHER RATE HIKE LATER THIS YEAR.

TRUCKING .23% IS ON OUR NUMBERS FOR THE MONTH OF AUGUST, IN LINE WITH WHAT WALLER SAID WAS AN AREA THEY COULD HOLD THE LINE. THE MARKET TOOK THEM THERE, THE MARKET WANTED THEM TO HIKE, AND THEY HAD TO DELIVER IT.

INFLATION IS NOT MOVING DOWN FAST ENOUGH FOR THE FED. THEY HAVE LOST SOME PATIENCE WITH THE PROGRESS THEY WERE SEEING, OR LACK OF PROGRESS. IT IS VERY CLEAR THEY FEEL THEY NEED TO ACT. SCARLET: THAT BRINGS US TO OUR CHART OF THE WEEK. TRADERS REPLACING THE ODDS OF FUTURE RATE INCREASES AS POLICYMAKERS SIGNAL THERE IS MORE TIGHTENING TO COME. THE IMPLIED PROBABILITY OF AN OCTOBER HIKE, AND THAT WOULD BE THE WHITE LINE HERE, IS PRETTY MUCH A COIN TOSS, ALMOST 51%, EVEN THOUGH THAT WOULD BE DAYS BEFORE THE MIDTERM ELECTIONS.

WHEN IT COMES TO A DECEMBER RATE HIKE, TRADERS SEE 73% ODDS, THE BLUE LINE AT THE TOP. LOOKING AHEAD TO 2027, JUST ABOVE ONE IN THREE ODDS FOR THE JANUARY HIKE, THE YELLOW LINE. AS FOR NEXT MARCH, WE ARE LOOKING AT ABOUT TWO IN THREE ODDS, YOUR PURPLE LINE RIGHT HERE.

INFLATION REMAINS ELEVATED. TODAY'S POLICY ACTION WILL SUPPORT A TIMELIER RETURN TO THE COMMITTEE'S 2% GOAL. I WOULD BE HARD-PRESSED TO DESCRIBE BROAD FINANCIAL CONDITIONS AS RESTRICTIVE. THIS VIEW WAS WIDELY SHARED BY THE COMMITTEE. SO WE REMOVED A DOSE OF ACCOMMODATION. THE DECISION WE MADE TODAY WAS A SOBER DECISION, SERIOUS DECISION, RESPONSIBLE DECISION. YOU HEARD FROM OTHER PEOPLE IN THE DOTS EFFECTIVELY, WHAT THEIR FORECASTS ARE.

I'M NOT GOING TO PREJUDGE ANY FUTURE DECISIONS WE MAKE. SCARLET: LET'S DIG INTO ALL OF THIS WITHOUT ROUNDTABLE. ED AL-HUSSAINY, PORTFOLIO MANAGER AT COLUMBIA THREADNEEDL E, AND REBECCA VENTER OF VANGUARD. LET ME START WITH YOU, REBECCA. WHAT IS YOUR CONFIDENCE THAT THE FED WILL STAY AHEAD OF INFLATION? TODAY'S MARKET REACTION SEEMS TO SUGGEST THERE WAS GROWING OPTIMISM THAT IS THE CASE. REBECCA: I THINK WE LOOK AT HOW THE MARKET RESPONDED TO YESTERDAY'S MEETING, ALL THE COMMENTARY THEREIN, AS GIVING SOME CONFIDENCE IN THE FED'S CREDIBILITY AND ITS OBJECTIVE TO TAME INFLATION.

WE WOULD ALSO LOOK AT WHAT THE MARKET HAS PRICED IN SO FAR THIS YEAR. TAKE THE BLOOMBERG U.S. AGGREGATE, FOR EXAMPLE. IT HAS RISEN, THE YIELD TO COME HUNDRED BASIS POINTS THIS YEAR. AS THE MARKET TENDS TO DO, IT TENDS TO PRICE IN THE PAIN OF TIGHTENING POLICY AHEAD OF TIME. WE FEEL PRETTY CONFIDENT THAT WE ARE ON A BIT OF A PATH OF RECALIBRATION OF POLICY THAT CAN HELP TO TAME, YOU KNOW, THE INFLATION PICTURE WE ARE LOOKING AT TODAY.

SCARLET: ED, WHAT DID YOU THINK OF WARSH'S FRAMING OF THE HIKE, TYING INTO THE ECONOMY STRENGTHENING MORE THAN ANY CONCERN ABOUT THE AI BOOM OR LONG BOND YIELDS? ED: I THINK IT WAS THE RIGHT WAY TO POSITION IT. THE BIG CHANGE IN THE STORY THIS YEAR IN THE U.S. HAS BEEN IMPROVEMENT IN THE LABOR MARKET. WE HAVE BEEN WAITING FOR THAT IMPROVEMENT TO PLAY ITS WAY THROUGH THE ECONOMY AND WE GOT TO A POINT WHERE THE UPSIDE RISK THAT POSES TO INFLATION WAS IMPOSSIBLE TO IGNORE, AND SO WE ARE STARTING TO SEE THAT MOVE.

I THINK THAT IS EXACTLY THE RIGHT FRAMING. IT PUTS DISTANCE BETWEEN WHAT THE FED IS DOING AND THE ENERGY STORY, WHICH IS DEFINITELY NOT THE CASE IN EUROPE. SCARLET: A BIG QUESTION MARK IS HOW THE PRESIDENT WOULD REACT TO EVERYTHING, AND HE SEEMS TO BE THINKING THAT THIS IS KEVIN WARSH BEING PRESSURED BY THE COMMITTEE, BY HIS FELLOW FOMC MEMBERS, RATHER THAN HIM MAKING ANY KIND OF DECISION ON THIS. INTEREST RATES IN THE U.S.

SHOULD BE 1% OR LESS," HE SAYS. "WE ARE CARRYING ON MOST EVERY COUNTRY IN THE WORLD. LOWER THE INTEREST RATES FOR THE USA, AND FAST." QUITE A CONSISTENT TONE WE GET FROM THE PRESIDENT. BECAUSE THAT FACTOR INTO HOW YOU THINK OF THE FED'S PATH GOING FORWARD, THE PRESIDENT JAWBONING FROM THE SIDELINES? REBECCA: THE FED HAS A DIFFICULT JOB, WE CAN ALWAYS SAY THAT AND IT IS TRUE. THE FED HAS BEEN CLEAR THE LAST COUPLE BIDDINGS THAT IT HAS OBSERVED THAT THE LABOR MARKET'S IN A GOOD POSITION, IT IS STABLE, SO THE FOCUS REALLY IS ON INFLATION.

AS WARSH SAID, YESTERDAY, WE HAVE NOT SEEN TRENDS IN INFLATION THAT GIVES CONFIDENCE IT WILL COME DOWN ON ITS OWN WITHOUT SOME COOLING FROM POLICY. I THINK THAT IS GOING TO BE THE FED'S FOCUS, AND DAVE MADE IT VERY CLEAR THAT--THEY HAVE MADE IT VERY CLEAR THEY ARE COMMITTED TO THE OBJECTIVE. SCARLET: IN TERMS OF OPPORTUNITIES ACROSS THE CURVE, EVERYONE TALKS ABOUT HOW THIS TIME AROUND FOR THIS RATE HIKING CYCLE, WE HAVE HIGHER STARTING YIELDS THAN LAST TIME AROUND.

WHAT DOES THAT MEAN FOR A SUSTAINED REBOUND IN BONDS AND FOR LONG-TERM ALLOCATIONS? ED: IT STARTS TO BUILD CONFIDENCE AROUND THE LONGER PART OF THE CURVE STARTING TO STABILIZE. THE MORE YOU CAN TAKE INFLATION OUT BY TIGHTENING POLICY IN THE FRONT ENDC, THE MORE LIKELY YOU ARE TO SEE THE 10- AND 30-YEAR YIELDS FIND A CEILING. WE ARE IN THE BEGINNING OF THE PROCESS. THE BIG OUTSTANDING QUESTION IS HOW HIGH WILL THEY GO.

ABOUT 100 BASIS POINTS IN THE PRICE, IS THAT GOING TO BE ENOUGH? NO ONE QUITE KNOWS THAT AND THEY WILL HAVE TO FEEL THEIR WAY THROUGH THE ECONOMY THE NEXT SIX MONTHS TO ANSWER THE QUESTION FOR SOME REBECCA: I WOULD ADD ONE THING, TOO, WE TALK ABOUT THIS WITH CLIENTS A LOT, WHAT IS THE BREAK-EVEN YIELD RIGHT THAT WOULD PUT YOUR RETURN IN THE FUTURE IN A NEGATIVE SPOT, OR BELOW POSITIVE. WE HAVE SEEN THE AG PRICE 100 BASIS POINTS HIT WE HAVE TO SEE THAT HAPPEN ALMOST ALL OVER AGAIN FOR THE CURRENT 5.3% YIELD FOR YOUR 12-MONTH RETURN TO BE NEGATIVE, OR TO BE FLAT, REALLY.

THE QUESTION IS SO MUCH BIGGER FOR INVESTORS TODAY. WE DON'T NECESSARILY EXPECT RATES TO RISE FROM HERE. WE THINK A LOT HAS BEEN PRICED IN. EVEN IF THEY WERE TO MOVE UP A BIT, INVESTORS HAVE A LOT OF CUSHION AND THEY CAN FEEL MORE CONFIDENT OWNING THE FIXED INCOME ALLOCATION TODAY. SCARLET: THEY HAVE A LOT OF CUSHION, BUT I WONDER IF HIGHER BOND ALLOCATIONS WOULD ADD MORE VOLATILITY TO PORTFOLIOS, RATHER THAN ACTING AS THE DEFENSIVE BUFFER THEY ARE SUPPOSED TO ACT AS.

WHAT DO YOU THINK, ED? ED: REALLY INTERESTING QUESTION. IF YOU WANT THE PURE YIELD, YOU CAN GET IT ON THE FRONT END OF THE CURVE. THE CURVE HAS FLATTENED A LOT, SO THE FRONT-END YIELDS HAVE COME UP. THE QUESTION FOR INVESTORS IS WHY WOULD YOU WANT TO TAKE DURATION STEPPING OUT? WHAT PURPOSE DOES IT PLAY IN A PORTFOLIO? I THINK THE ANSWER IS IT IS A DRAWDOWN IN EQUITY RISK AND CREDIT RISK. THAT IS WHAT YOU NEED PROTECTING FOR.

IF YOU WANT PROTECTION, STEP OUT ONTO THE CURVE. IF YOU ARE BEING CONSERVATIVE, STAY ON THE FRONT END. THAT IS THE KNIFE FIGHT HAPPENING AT THE MOMENT. REBECCA: I WOULD TEND TO AGREE. WE THINK THAT INTERMEDIATE DURATION AND FIXED INCOME, IT WORKS WELL FOR LONG-TERM INVESTORS BECAUSE YOU ARE GETTING PAIDD -- THE CURVE TODAY, 100 BASIS POINTS FOR MONEY MARKET YIELDS TO THE 10-YEAR, AND THEN YOU HAVE GOT THAT PROTECTION IN YOUR PORTFOLIO.

THAT IS A GREAT SPOT FOR MANY INVESTORS. SCARLET: THANK YOU TO BOTH OF YOU. ED AL-HUSSAINY OF COLUMBIA THREADNEEDLE AND REBECCA VENTER OF VANGUARD. STILL AHEAD, OUR CREDIT ROUNDTABLE. SINJIN BORWON IS IN TOWN, AND MICHAEL BEST WILL BE JOINING US. THIS IS "REAL YIELD" ON BLOOMBERG. SCARLET: COMING UP NEXT ON "BLOOMBERG REAL YIELD," THE AUCTION BLOCK. EUROSEAS ITS BIGGEST JUNK DEBT ISSUANCE