Short-Term Debt Is Best Fixed-Income Bet: BlackRock’s Rosenberg

the fixed income markets? Here to tell us Jeffrey Rosenberg, chief fixed income strategist at black Rock, talking about their mid year investment outlook. Jeffrey, thank you so much for being with us. I want to start with a statistic that got my attention that the trading range of the tenure treasury yield is currently the narrowest that it's been in more than four decades. In other words, it's not moving.

We have a flat line. Does this indicate that we're about to break out with yields rising sharply or falling sharply in the next few months, You know, it's an interesting question. You're talking about the trend line of the ten year interest rates and if we've had a breakout, and if there's really a breakout to talk about. It's not the ten year interest rate, It's it's what's happening on the shorter end of the curve. And there, Uh,

you had had remarkably low volatility. How low you had zero volatility because it was zero interest rate policy, and so you had this anchoring of interest rates, and now you're significantly breaking out. You have the two year well above two and a half preyway. I'm sorry to break in, Jeffy, but what I'm trying to figure out is the ten year treasury out because as we are seeing more volatility and a breakout and doubling of two year treasury yields

in the past year, I'm just wondering. I mean, people are looking at that ten year benchmark is sort of an indicator of global growth and of sort of the view of the U. S economy right now and inflation, and it's going nowhere, and I'm just wondering, what's the

setting us up for. Well, so where we're kind of between me wanting to focus on the two year and you wanting to focus on the tenure, we're ending up talking about the yield curve, which I was hoping to avoid because that's the only thing people want to talk about. Let's talk about it because it's it's important. And so, yes, you and I thought you were going to split the difference and talk about the five year. We could do that.

We can certainly do that too, But there is a difference, and and and the flattening has got a lot of attention and and you know, one of the important points and Powell raised this in his testimony, and the set has been been talking about this for a while, and it's important for the listeners because you know, people get focused on the what's happening to the ten year and the ten years going lower and the two years going higher?

And is that a sign of imminent recession? And the level of the difference, which is part of your question, you know, it's highly influenced. It's much lower in today's environment because of the role of unconventional monetary policy that

is happening the world over. And so we want to just take that level of the difference in the curve and put a little asterix on it and say, yes, it's important, but we also have to recognize it's very different than what we've seen historically because of that unconventional monetary policy. Quantitative easing the world over, which the point of which was to flatten that relationship. So we want

to just sort of think about that. It decreases some of the concerns, doesn't eliminate them, but it it takes the temperature down a bit. Phim I hear what Jeffrey is trying to say, very very politely, that yes, yield curve matters, but perhaps not as much as it has in the past. Jeffrey, I want to ask you about liquidity and specifically the relationship between the rising value of the US dollar, the repatriation of corporate profits that have

been sitting overseas, and any constraints on dollar funding. Any thoughts. Yeah, so, um, Well, for first, the dollar strength is big deal. It's a big story. We've seen this before. It's an important development, and you're seeing part of that about growth differentials the US. We're gonna get second quarter GDP next week. In the first iteration, you see the tracking estimates somewhere up towards

five percent. That's not a sustainable level, but the U s economy is powering ahead and the rest of the world's economies are not doing so well. Part of that economic growth of confidence again he heard it from Powell that just re emphasizes the outlook that US interest rates are going to continue an upward drift. UH short interest rates, the Fed policy rates, and that interest rate differential to the rest of the world is another factor behind dollar strength.

One factor that is not behind dollar strength is repatriation. It's a very misunderstood notion that repatriating UH foreign corporate earnings results in dollar perch just is and the source of the misunderstanding is that most of the foreign held UH earnings are held in dollars. The notion of them being foreign is not the currency, but rather the legal entity, and so it doesn't really create a bid for for

for dollars. So that's a little bit misunderstood. The big fundamental drivers behind the dollar appreciation, there's really those two that growth in that intra st rate piece. So Jeffrey, look into the Chrystal ball for us, what do you think is going to be the best performing asset the fixed income world in the second half. You know, It's where I was kind of taking the conversation. We we really like the front end of the yield curve, so

we're talking about shorter maturities. I'll bracket that one of the three year kind of maturities. You can leak out the curve a little bit, but as you do, duration starts to perhaps become a little bit of a drag. And if I add a bit of investment grade credit, where spreads of widen and we and we don't see a lot of credit risk in the next six months. To undermine that outlook, you're looking at three three and

a half kind of yields. That's on an annual basis um, so certainly six months returns will be lower than that, but that will probably be one of the best performing asset classes, and it's certainly one of the areas we we think is the most attractive in the fixed income universe. Jeff Rosenberg, thank you very much for being with us. Jeff Rosenberg is the chief fixed income strategist for a black Rock Investment Institute, giving us details about the black

Rocksen midyear investment outlook. Helsinki Summit trade negotiations Russians. Let's bring in Richard Kahn. He is managing partner of Eurasia Advisors, formally serving as an advisor to major Russian companies for initial public offerings, also sourcing financing for Russian real estate development of fluent Russian speaker, so he has a background and understanding exactly the relationship between the United States and Russia on a business level as well as politics. Richard,

thank you very much for coming into this studio. What can you tell us based on your experience about the Russian reaction to the Helsinki Summit. I think from the Russian perspective, they are truly thrilled. They witnessed the our goalie continually kicking the ball into his own goal. Um. And I think at some point they're probably concerned that people on the team are gonna wonder whose side he is on. But from their perspective, this has been a

a major propaganda victory for Putin himself. He cemented control in Russia and nobody there can possibly take him on. At this stage. He has a free hand to go after the opposition. But more importantly, they see the weakness of the US. They see that, you know, what Trump has done has put us at odds with our ally, as is shown, he's not going to stand up for our values. Um. All of that is is a huge win for Russia as they try to assert greater leadership

in the Middle East and in the world generally. So President Trump has said repeatedly it's good for the US to have a constructive relationship with Russia or the two biggest nuclear superpowers. We don't want war. Was anything achieved that was positive for the US in the summit? Well, first of all, I I fully agree with those goals personally, we and I've spent my life working to help resolve issues between Russia and the US and to bring the

countries closer together. But that's a long term process. It has to be based on reality and on a recognition of our different values. And that's what your age advisors is about as well. Uh. And every president I think you know, and certainly since the Cold War, has been trying to achieve that too. Uh. But I never heard anything articulated by this current president in terms of what his goals actually were in the summit, other than saying

he wanted to have low expectations. Um. I think his goals were achieved, which was to have a one on one communication with his co conspirator regarding what took place during the election, and to figure out how to handle things now in a manner that helps Trump protect himself give us some idea of the actual strength and weaknesses of the Russian economy. Look, the base aggression economy is

out of of an oil and gas state. It has other natural resources, but uh, the best way to think of it is that although it tries to expand into other areas, including high tech industries, it doesn't have the infrastructure legally and culturally to allow people to safely invest

and develop businesses. Uh. So it really is run more like a what I would call either a medieval empire or a mafia state, where certain assets are of the state are controlled by clicks and those who cooperate with them do well, and the rest are either eliminated in some fashion or they are basically, um invited to leave the country. You're allowed to leave a country. So, Richard, I want to go back to something you said that President Trump was meeting with his quote co conspirator, Uh,

with respect to what happened during the Russian election. Obviously this has not been proven yet. Uh. This is very much what Robert Muller is investigating. So we don't know that for a fact in any way. UM, But I do want to get to something, which is the broader political implication of this where you have a hardening of people who are anti the president, who are trying to say, look, this just shows that he's not fit for office. And then you have a supporters coming out and saying, look,

he's trying to create peace. Uh, you don't have anything on him yet. At some point this will come to a head. The sides are getting increasingly angry and agitated, and I'm trying to figure out, you know, what's the risk that we have some kind of dnue mall that is somewhat damaging on many levels here. Well, look, first, you know, I make that statement regarding co conspiracy because I think one we saw some of that playing out

in the summit itself. I also think there is plenty of evidence of that in emails and other communications that took place during the campaign, as well as in the indictments that we've seen. I think it's going to be extremely difficult for Trump and his supporters to contend that he was not at the very least of where and receiving support and conjunction with the campaign and cooperating with that.

But look, of course we're gonna wait for the Muller indictments to come down and We'll see how all those play out and what all the details are. But I've certainly seen enough and have lived a life involved with Russia to know what this is about at this stage. And I see the conduct of our president and giving up critical US positions and also undermining our country and our alliances, all all serving as I see, at the interests only of Russia in this um So where does

this play out look? There will always be people who will pay attention only to the tweets from this president and will take his side. UH. The Russians are also very effective at building additional support, whether it's through the n r A, religious organizations are the groups to support

this president. I am very concerned that at the end of the day, regardless of what happens, he is going to take things right to the line in terms of undermining our institutions, as long as he doesn't cross over it to the point where he's obviously acting in a traitor of his fashion. That's what happened at the summit, where he was pushing and pushing, trying to appease and UH and please the Russians and protect himself by doing that.

But he got the backlash and realized that, Boy, I've gone over the line now and my base is starting to see who I really am, what I'm really about. So I think it the end of the day, Uh, we will probably find ourselves in a position where we have strong indictments coming down and we're at that point going to face I think some real issues about the strength of our of our institutions in dealing with the President, who I do not think, Uh, we'll hold back and

doing anything you possibly can to maintain power. Do you have any comments on the idea that their Germans are held captive by the new pipeline, the North Stream to pipeline that would bring natural gas to Germany from Russia that the President alluded to. I do have a view on that. In my experience, Andrew Merkel and her team have integrity and ethics, and I think that they understand that although they have to have dealings with Russia, that that does not mean that they need to give up

their ethical framework in terms of how they deal with Russia. Uh. Having said that, I understand and that UH, certainly the creating alternatives to the pipeline, you know, it might be a good idea in terms of diminishing Russia's influence. But that's just a again more of a business type of issue. I'm not worried about that German leadership becoming like like our current leadership. Richard thirty seconds. Russia's horde of US treasuries plummeted in two months, ended in the end of May. Uh.

Do you know why I wouldn't. I wouldn't say that. I know why. I have my suspicions why I think that there is concerned that there's going to be a greater round of sanctions against Russia. I think that, Uh, there's a point at which Putin and Trump and those around Trump are are overplaying their hand and they have to expect to backlash. And we saw some of that

backlash after the summit. Richard Khn. We could go on four hours, Richard con managing partner of eur Asia Advisors, joining us on the fallout from the Russia U S summit by President Trump and President of Vladimir Putin in focus today very much the Chinese un It's been falling dramatically. Today's fall is accelerating against the dollar now at the lowest, the weakest versus the green back in about a year.

Joining US now is win Thin Global Head of Emerging Markets ffx UH and when we're so glad that you could join us. This is really an important story for today. How concerned should investors be about this decline? And frame it for us? Is this a is this a tool in the trade war? Is this? Uh? Something more significant about a slowdown in the Chinese economy and easing to respond to it? Well, first all, thanks for having It's always a pleasure. Um. There's lots of lots of of

factors rolling the markets right now. But I'm gonna try and be the sort of voice of reason and say, look, there a lot of things to worry about, but Chinese evaluations is simply just not one of the major things we should be worried about. Um. Why is that? Well? Look, um, if the longest time over the year's last several years, not decades, the US UH I m F also the Western powers of press China to give a greater market role to the exchange rate and lo and behold that's

what we're seeing. If you look at the UM You're wonderful w c RS page. If you look over the last twelve months, UM, the Chinese want is actually one of the better uh, performing EM currencies. So if you look at year to date, it's smacked in the middle

of the impact, down four percent year to date. My view and as and as this for a long time, is that that the recent weakness and you want to simply reflecting a broad based dollar rally, EM sell off, it's it's really trading with the rest of EM and I think that's the sort of what we should be saying. It's it's more market based, uh more UM being driven

by by global factors. Could you speak a little bit about the shadow banking system that exists in China and the efforts on the part of the Chinese government to try to spur economic growth, specifically among small and medium sized businesses. Yeah, you know, listen, this is you know, we have seen this kind of going back and forth for the last several years. So you know, look, we know I mentioned the factors going on. China's particulous juggling

a lot of balls. Uh. They're trying to deal with the slowdown and economy as well as sort of stresses in the financial sector, and they've been trying to de leverage the last several quarters. The time that we always see is when they try and deleverage loan. Behold the constats weekend, they get nervous and they start pushing UH loan growth up again. So it's sort of like two steps forward, one step back my bottom lines. I think that you know, it's it's a sort of black box.

The financial system is understressed. We've had just had a huge I think the fault UM one of the Chinese issuers. I think you guys carry that story overnight. Right Well, they're they're like twenty they've been twenty corporate bond the faults so far in the No. I mean interestingly, I think we want to see that cost EM. You know, it's not just China, you know, EM and Channel took advantage of low barring cost globally. They issued debt like there's no tomorrow and now sort of the it's time

to pay the piper. So, Um, do I think there's gonna be a systemic problem. No. I think that the system is in stresses, But I don't see something sort of huge sort of uh leave a moment for for the China or for for the global economy. Um, when I understand what you're saying with respect to China being sort of lumped in with the rest of emerging markets, and that its currency is actually one of the better

performers against developed marker competitors, or basically appears. But what I'm struggling with is China is the world's second biggest economy. It can't really be lumped in with much lesser economies based on how significant it is for the world economy. And meanwhile, you have the trade war or at least the threat of an escalating trade or with the US,

and China is uh easing policies. It's sort of backtracking on some of the tightening that had done based on what you were talking about and pain was talking about. I guess what I'm trying to understand is because as you were saying, China such a black box. Could this be that China's economy is slowing much more than official data are letting on and they feel the need to reverse policy now to counter that, Well, you know, we go back to the age old debate. But how reliable

are there Chinese data? And something I've always looked at as more qualitative assessment. Look, we know, maybe it's not really growing tacks and um, but we can't sort of use benchmarks as well it's it's a little bit slower than was a year ago, you know, and so comparedive of uh matters now you know to me, um, and you're right that because it's such a large economy, it does take a special place in that sense. It makes me believe that they will not do anything that's going

to upset or the royal markets. You know, we saw that back in the talks fifteen they devalued and uh, not only the domestic investors flee and we had to you know, had cap ouphas out of China, but you know, the developed markets emerge, other emerging marketstop markets really felt the pain. And I think China doesn't want to go down that path again. You know, they've seen that it's

a very dangerous path to go through again. They're already, um, you know, dealing with all sorts of different stresses in the economy. I think some sort of currency crisis is sort of the last thing they want to deal with right now. So again, I don't see the human lines out of line, out of you know, sort of out of line with the moves of the rest of the world. Um. I think they will continue to manage the currency. Remember,

it's not a floating currency. It's managed currency, but they'll manage it within these parameters and that will they'll prevent any sort of mass hysterical move of some sort. And in global markets, can you do Turkey and twenty seconds or less? H yes, I would stay stay away. Um. You know we had Urdwan when he was VICTI, but he put his soun in law in charge of the treasury. In finance industry, E clipped the central bank independence. So it's going down to pastoral, which I think is bad.

Next week we're very tunneling. Central bank meets inflation jumped up in June. They need to hike at least a hundred fifty basis points. Let's see if they do it and they don't, I think we go back up. We take dollar you want to dollar era above five? He did it. Win Thin, Global Head of Emerging Markets FX speaking to us about the Chinese yuan and the Turkish lira. He's with Brown Brothers Harriman the Future of healthcare and

healthcare costs. Joining us now is Susan Duvore, the chief executive of Premier Inc. They are based in Charlotte, North Carolina. Susan joins us here in our eleven three, Oh studios. Thank you very much for being here. Before we begin in this sort of general content next of what's happening

with healthcare and healthcare pricing. Could you just offer an example of some of the work that you're doing, and I'm thinking most recently maybe of the Physician Enterprise Collaborative and how Premiere works with healthcare providers, because I think it's more than thirty eight hundred hospitals around the country. Yeah, so Premiere works with plus and a hundred fifty other providers like doctors, nursing home, surgery centers, this kind of thing.

Think about us as a national network of providers, the people delivering healthcare to patients um and we are in infrastructure to help them lower their costs, improve their quality, improve their safety, improve their outcomes. And so in the pharma world, for example, we aggregate their buying of drugs, We create competitive friction between suppliers, and the inflation in the cost of drugs that we help them negotiate is

half what the industry inflation is. So that's an example of how Premiere works and what we're trying to do with these health care systems. We do similar things where we help them improve their safety, you know, lowering infection rates in hospitals, lowering mortality in hospitals. And so it's two sides of an equation, which is a cost reduction

side and a quality improvement side. So uh, we had some guests on a few weeks ago who are talking about the Indian UH system healthcare system and how the U S could learn something from the hub, hub and spokesmodel that they have where they have hubs that really specialize in specific services and that are experts and then the spokes that kind of provide provide the other services.

Have you ever recommended to any of your clients you guys, this whole center should probably be shrunk immensely or are cut uh and really rely more on these people for services. What's your thought on that? Yeah, when you think about the evolution of the health care system, Premiere has systems of all kinds around the country. A lot of them are integrated delivery systems. They are hub and spoke, but we may have more of them in a market than

we long term need. And so the real question is how do we take the services and optimize the volume and optimize the cost performance and optimize the quality outcomes. But yeah, we have we have a lot of markets that have moved into that integrated delivery system model. Several large pharmaceutical companies such as Novartis and Viser have said that they are going to freeze drug prices. This seems to be in response to the tweets and the comments

by President Donald Trump. Do you think that that's an effective way to manage healthcare pricing? You know, I actually think that the Drug Blueprint and Scott Gottlieb and the things that he's trying to push forward with the administration are things that are pointed in the right direction. Speed up the approval of generics, get rid of some of the loopholes for extending the life of a branded drug company. I don't think anybody just saying we're going to freeze

prices for a period of time. I mean, the truth is you've got to have market forces and competition every day, all the time UM to actually have a sustainable, UM, you know, managing factor for drug pricing. Do you think that Medicare should play a more active role in negotiating with pharmaceutical We think at Premier that Medicare should continue

to implement these value based payment programs. So you take the delivery system, you have them own the risk of the total cost of the patient, and then you create you allow for market forces and competition to have the health care system try to lower the cost of the care that they're delivering to patients. We think the government directly intervening in the decisions about which drugs at what price patients will have access to will be will be

very problematic. Okay, But if the government is the one that's ultimately paying the bill, shouldn't the payer be allowed to negotiate prices, particularly when they are such a big force in the market. You know, the last time I was on the show, which was about a month ago, I talked about employers getting directly involved with providers and

consumers in the cost of healthcare. So, if you think about Medicare, Medicare is a payer, they are the implement or of and they are in a sense the employer too because these are Medicare, these are Medicare patients. So yes, we think that they should be directly involved, but we think the way that they ought to do it is to go directly to the provider delivery system because that's where the decisions are being made, and that's where you

want the decisions to be made. So create models that that take that provider system and help them manage the cost of the care. You know, a month ago I said, I thought employers were getting a lot more active. Since then, we've got JP Morgan, Amazon in Berkshire who've hired now they're CEO. You've got a coalition of employers who are now attacking some of the high cost procedures. Amazon bought

pill Pack. Amazon bought pill Pack. Amazon is reportedly talking to ex Health and so these are all initiatives that say, maybe there's an insurance company in the middle of this that that actually isn't lowering the cost of healthcare and isn't delivering the best clinical outcomes. I think the same is true for the medicare world, and maybe it'll be disintromedd it disintermediated. Unfortunately we have to leave there. Susan Divore, thank you so much. We love having you on. It's

an important perspective. This is an important industry to keep tracking, especially given all of the pressure to try to make it more efficient to deliver healthcare in the US. Susan Divore, chief executive Officer of Premier Inc. Normally based in Charlotte, North Carolina, but joining us here in our eleven three oh studios in New York. Thanks for listening to the

Bloomberg an L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio