Leader's Emons on Fed Causing Volatility in Bond Markets(Audio)

Smith Incorporated. Now let's head over to the Bloomberg First Word Breaking news desk for today's afternoon call. Here he is Bill Maloney. Afternoon Charlie. Stocks are rising today, but are off their best levels. Dalla is currently hired by forty five points. SAPs Game nine and AzaC rises fifty one. The small cap six hundred is up seven points, and the US ten yield at one point eight four per cent. Seven out of tennis B sectors are higher, led by

gains in technology, healthcare and consumer discretionary. Consumer staples, Utilities and telecom declined down. Transports rise eighty points and as a biotechs Game fifty and the vix is lower by four and a half percent down Leaders to the upside include American Express, Intel and IBM McDonald's, Nike and Exxon Mobile.

Led to the downside. Campbell, Soup, foot Locker, and Deer all fell after their results, while Apply Materials jumped as much as four that's in most since two thousands two after its earnings live in the first Breaking news desk on Bill Maloney, Charlie, all right, thank you very much, Bill Maloney, and it is an update on Wall streets. Bill mentioned to hear live breaking news over your Bloombird time squawk squ a w K on your terminal. I'm

Charlie Pelton. That's a Bloombird business flash. This is taking stock with pim Box and Kathleen Hayes on Bloombird Radio as better reserve from its e MC minutes, two big high profile speakers. This week's signals that it is looking to see if it is going to be able to raise that key rate again in June or even July.

And of course today we've got a meeting of finance chiefs G seven finance chiefs warning about risks from sharp swings in the yen, at least Japan is as the U S is making clear currency markets aren't so bad, they look pretty calm. What does this all mean for the bond market, global bonds, spreads and more. Got just the fellow to answer that question today, and that's Ben Emmons.

He's managing director and portfolio manager at Leader Capital of fixed income mutual fund management firm, and Ben joins us from Los Angeles. So Ben, let's start with let's do this in chronological order. The f MC minutes, Bill Dudley speaking, who's the FED Vice chair? Uh, what is the what does this mean if if that's going to raise rates as soon as June or July, the markets repricing, what does it mean for bonds, particularly corporate bonds? Right afternoon? Kathleena,

thanks for having me. Um, Well, it wouldn't be necessarily good news because, um, what we've seen of the last period is that inflation, sorry interesting expectations really low, and it had also very low volatility period and I was very very favorable for for broad markets. And now these minutes have come out and they signal pretty strongly that

June is very much a possibility. I would almost say they have given the market some sort of four guidance there that if they hiked then it would cause some volatility. Most of all because these guidance that they've given on us on Wednesday is going to be determined by the data that now comes out between Wednesday until June fifteen, and that's inflation data, retails, sales, in jobs numbers. So any of the data that comes up better than expected

or differently than expect, it will cause volatility. So I think we're going to enter a period here in where markets are not gonna trade really well on the back of this this looming rate hag by the better federal reserve.

So I would think of it that way. Um whereby corporate bonds, in particular high quality corporate bonds may not trade so well either given the correlation with stock markets overall, also because there's been a fair amount of these bonds issues and the rispringiums on those bonds are quite tight at this point. Bet, And what if you could comment on the relationship between inexpensive money and the use of that money for things that perhaps are never going to

be paid back. For example, I look at credit card balances in the United States and they are on track to hit a trillion dollars this year and that rhymes with what happened in July of two thousand eight. Are you concerned about it? I'm concerned about the degree bim that. Um, these credit card balances are are to short term credit, right, so people have built this up to try to spend are spending more money. So that's reflective of a higher

consumer spending. But that you would get if we go through another stage, whether he come is going to slow down significantly, and that may be upon us because the signals in the markets that are indicating we may have we may have towards that scenario the US economy that then you're getting, you know, the faults on those on those credit cards where people can't pay it and the linquacies rise quickly, which was kind of what happening two

thousand eight. So that is somewhat alarming, but it's different perhaps and at that time where a lot of this is also related to just accesses in the housing market, which we don't really have today. But we don't have that subprime issue as we had at that time. UM, but it is it is something to watch outs here. I mean, since thing your pointed out, because credit expansion has happened. That was very much with the fellow Reserve wanted. You know, they have more of the happening. Consumer spending

would pick up as a result. But if it gets too excessive, then as that miske if he comes slows down that consumers will fall behind their pains. Then then is it a mistake for the Fed to consider a rate hike in June? It could strengthen the doll or that might weaken the year the you know, the Japanese mn't like that. But is there a risk of the

destabilizing economy that's got some accesses in it now? Right, because we've already had this because before the hike took place in December, the dollar has strength of those by pulatively and that did very much has slowed down the US economy and has now had or hash and had an impact on the on the energy sector, and that has been spreading out a little bit. And it's been noted I've I've seen it in five minutes before and there was even this minister where they noted that the

job losses were appearing in in the energy sector. That may be spreading. So, so yes, if you were to hike again, and you would invertly strengthen the dollar too much, then then that would that would continue that you wrote the economy for that matter, whether it goes to trade or the energy sector, and that could impact a certain sector. Yes,

it is a delicate timing. It feels to me the fact wants to do this because it sees signs of inflation for the picking up in it and it is a full employment in their in their view pretty much, and so they feel they can do this, but markets continue to signal the opposite view of that. I think more about, yeah, you can hike, but then you know, long administrate our falling really because you know you could damn sheet going. Thank you very much for spending time

with us. Ben Emmons is managing director and portfolio manager of Leader Capital. Joining us from Los Angeles. You're listening to Taking Stockheim pim Fox my co host Kathleen Hayes, and this is Bloomberg Radio coming up, Taking Stock of Luxury, brought to you by your Try State BMW centers. Visit them online at try State BMW dot com at BMW. They make only one thing, the ultimate driving machine.