The October Consumer Confidence Index

have thought. Consumer confidence for October coming in at one point nine, so not a terrible reading, but not as good as economis are anticipating. On the September number was revised lower. Lynn Franco is Director of Economic Indicators at the Conference Board. Lynn, should we start getting concerned or is this still healthy reading? It's a healthy reading. What we're really seeing is that there's been sort of no

significant traction in consumer confidence. We had sort of a sharp rebound, um, you know, sort of post pandemic, but then we've sort of been moving a little bit sideways here. So Lynn, I mean, I guess it's not surprising that we're moving sideways, as you suggest, given where we are with the labor market and even some of the metrics for the virus on a global scale. Um, what are what are the consumers? What's their outlook? I guess for the near term, Well, what we're seeing right now is um.

You know, it's the labor market that grove both the improvement in the present Situation Index and also the decline and expectations. So while they're telling us that the job market has improved, you know, sort of from the lows of post pandemic levels, they really don't expect much of that momentum to continue through the end of the year and into next year. So it's kind of a glass half empty, half full, where you know, conditions have not improved,

but they necessarily haven't gotten much worse either. Yeah. I mean the three months moving average has gone to nine point two, all the way from one seven point re back in March. What's a useful comparison here, Lynn, So obviously March probably isn't the best comparison, even though it looks quite quite the difference. I think the key here is the trend, right, So we've seen your confidence to bounce up, they then bounce down and up and down.

So would really like to see it gain a little bit of traction in and upward direction, and that's going to be heavily dependent on what happens in the labor market. And while you know, unemployment claims have have come down, they still remain high. Unemployment is still high, and we expect to you know, softening in the labor market. So we could continue around these levels through the end of the year. And you know, one of the areas of the economy that just it surprises me a little bit

how strong it is is the housing market. How does that play into the consumer um given that it can be such a big part of the consumer's net worth. Well, I guess it's probably having a little bit of a positive impact. We did see a slight uptick in the percent of consumers which had the intern intended to purchase home over the next six months. That has to do

a lot with low interest rates. But the key is going to be the labor market and what happens there is really going to determine the direction that consumer competence procedures. Well in the state of you dive into all sorts of things like when consumers might be planning to buy a refrigerator or a major appliance when there's a vacation

intended and it's interesting to see that. Yeah, there's a reading of forty four point six for people intending to vacation within six months, but almost all of those are intending to vacation in the United States, and there's only a tiny number that's a seven point two number looking

to vacation in a foreign country. Absolutely, you know, we did have a pretty good rebound in terms of the vacation intention to this month, but it's well below fifty four nine that we saw, you know, back earlier this year. And again we've got a lot of travel restrictions. Um, you know, there's also pandemic concerns, so we're seeing that people are choosing to vacation locally and the means of

travel preferred is an auto. We did see a little bit of an uptick in terms of those willing to sort of you know, fly to destinations, but it's really sort of more about local vacation. Hey, Lynn, thanks so much for joining us. We appreciate this getting an update on the consumer. Lynn Franco, Senior Director of Economic Indicators and Surveys at the Conference board. Vannie, would you hop

on a plane to go on vacation. You know, I wouldn't bull Yeah, yeah, but then I'm not even doing outdoor dining yet, so not really typical down the middle. All right, you're taking a conservative we I'm coming into Q So I guess there's a few other things too. Yeah, you worry about Yeah, you listen to the airlines of an you know, they're just not seeing that pick up and demand. And I guess it's probably not surprising given that we're seeing a surgeon cases. So you know, consumer

travel leisure continues to be under pressure. Well, Vannie. When I started my career, it was at the Chase Manhattan Bank, and we made big corporate loans to big media companies, and the way we charged interest was libor plus some premium rate, uh, depending upon the credit worthiness of the borrower, so live or the limit. I think it's the London interbank offer rate effect. Can remember back all the way back to my Chase days. Um, that's kind of been

the basis of borrowing rates. But that's about the change. Let's get some color on that with Ira Jersey, chief US interest rate strategist for Bloomberg Intelligence. Ira tell us about libor and what maybe changing UH with that base rate. Yeah, so the base rate is UH basically scheduled to go away at the end of UM at least that's what the Financial Conduct Authority, which is the regulator of almost

everything financial in in England. UM. You know, LIBOR was much aligned during the Great UH financial Crisis back in two thousand seven to two thousand nine, and starting in two thousand thirteen, there was a real push by regulators to find replacement rates for live war globally and UM and a lot of countries have have different rates, and many of them found different rates that that they're comfortable using.

In the US, the primary rate that a lot of instruments will UH will basically transfer to is called the secured Overnight Financing Rate or SOFA, which is basically UH calculated based on repurchase agreements which are loan secured by treasuries so UM. So that's why you know that there's hundreds of trillions of dollars of these loans outstanding. So this is quite a big deal, and I think it

hasn't gotten attention it really deserves by the broader market. Well, and let's just fill in the reasoning why this all happened. Lie war was one of the sort of the old guards of finance. It was hilarious. The way it was calculated daily was you just put out a bunch of asks to different banks and you've got a whole bunch back and the top three in the bottom three were mixed together and you've got some kind of the rate

and d and then you know this. Well, then it turned out that people were actually manipulating it a little

bit give us some background. Yeah, so so the way that that librars calculated it's basically a survey of the banks within the panel that are all London based banks and they then take a trim mean And what happened was during the crisis, um there there were um uh banks basically that that put in rates that weren't real that that it wasn't really where they could fund because they're supposed to be basically honest about what what they where they can fund in any given day, and that's

the rate they're supposed to submit and they didn't do that. And what what what regulators found and what even courts found because there were court cases based on this is as well as just regulatory finds that that were passed out in the tunes of hundreds of millions of dollars UM. They basically that they found that it was open to manipulation. So some banks wanted to pull out of these panels to limit their litigation risk um for being part of

the Liveboard panel. And as as part of them not pulling out UM, some of the regulators said, well, let's think about getting getting away from live board at some point in the future, and that date was tagged at the end of So so this whole transition process has really started in earnest in two thousand and seventeen, but it's really had to pick up steam because we're we're only you know, we're only fourteen months away from from basically library going away, which like I mentioned and like

like Paul had mentioned before, it's been ubiquitous for the last three generations, right, So, um, this is not an easy task and something that everyone has to pay more attention to. So if I'm holding a bond and it pays me live War plus two and a half percent come the end of what's going to happen? So so

that's a good question. So for most instruments, what will happen is live Board will become this secured overnight financing rate plus a spread and and we estimate, we actually put this out, uh, just a small wing, we estimate that that spread will be twenty three basis points at the end of So basically you're going to be paid twenty three basis points plus plus whatever SOFA is on

an ongoing basis UM. And so this is a problem for some banks because with a fixed spread or with using this you know, treasury based secured rate instead of a credit based rate like library was supposed to be UM, it changes a lot of the calculus in the way that UM, in a way that banks fund, and in a way that they're going to make loans going forward.

So if you have a loan, it will still be a floating rate, but it will be more interest rate based as opposed to the credit spread based, which which does have implications for the way that you hedge or the way that you you think about your loans going forward. Yeah, and just full disposure. Bloomberg had actually put in an idea for replacing the librar at the time as well. There was a sort of a request out there for public commentary, and I believe that Bloomberg had one POTENTI

chill replacement for a library. So so fur then, I mean, is it still going to be you know, London banks based or I mean if I'm if I'm paying a mortgage in Wisconsin and my credit is not particularly high, am I still going to be you know, basing my repayments on on what some bankers and London thank you so so no, so SOFA is based on an actual market.

So it's based on the the way that that banks and and hedge funds and um and broker dealers basically trade and and lend treasury securities to each other within the US. So it's it's a very very liquid market. There's over nine billion dollars of transactions every day. It's

one of the most liquid markets in the world. So um so so basically you're you're at the whim more of dealer balance sheets and bank balance sheets than you are worrying about, you know, whether or not you know, in London, there's enough dollars for Barclay's Bank to the fund themselves, which is what happened during the during the financial crisis. So so it's it's a it's a big shift and it's a change of mentality because um, you won't be paying more if banks find find it hard

to fund. Um, you'll be paying more if uh um, basically if there's too many treasuries out there for the amount that people can lend. I thank you so much, Ira Jersey of Bloomberg Intelligence. They're a chief interest rate strategists explaining everything to do with s O F or sofer. Time for Bloomberg Opinion. We're joined by John Author's Bloomberg

Opinion columnists covering all things on the markets. He joined us from our Bloomberg Interactive Broker studio out within a very interesting column just about a topic that you and I were talking about just recently. Vanni. It seems like, you know, the numbers are so bad as it relates to the pandemic. Here, some of the numbers, you know, as bad as we saw back in March and April. Yet the markets generally behaving much much better now than they were back in March, and able to get a

sense of why that might be. We welcome John John, thanks so much for joining us here. Let's talk about your recent column, Covics nineteen. What are you thinking about? I think we're getting to a point where the market has to accept that the risks of COVID to economic activity, and that's obviously what matters primarily to two markets is how much of an effect it has on stuff being bought and sold, have risen, have returned, and that does

need now to be reflected in prices. Now. It's obviously very easy to get very much into big, polarized oppositional discussions on this. It's obvious that the medical community is getting much better at people keeping people alive when they catch this, and it's also obvious that we're all learning how to keep at least a certain level of activity

going on, even at points when we're worried about it. Um. So, you know, there's no question as far as I can see, of needing to go down to the kind of depths

we saw in March. But if you look at the economic activity data, you can see even in Germany, which is of the you know, the major Western economy is the one that's dealt with the virus best to date, you are seeing an unmistakable tick up in hospitalizations and you're seeing an unmistakable tick down in economic activity, which, unlike in the States, really had just about got back to normal for a few weeks at the end of the summer, and that's obviously likely to be repeated here

in the States. It doesn't matter exactly what governors say or mandate. If people are worried about the virus, that that much less likely to go out. It's not like we didn't know this was coming, though, John, I mean, we've known for a long time that we were likely to not get a vaccine this year, at least for for the clubs among us. Sorry, m well, there is that. I think the issue that arises there the administration calling for me. I think the issue that arises there is

um that. Uh there was and this wasn't ridiculous. There's a widespread belief within the market that the the the disease had reached what you could call a choke point or even herd immunity either. Once a certain number of the people who are the most connected, who of of necessity on the day to day lives, are the people who come into contact with the most other people once they've got it. The theory, and it's not that bad.

Theory was that it would be much harder for the disease to spread again, and so in places like where we are here in New York or other cities where they have been particularly severe outbreaks. The reasonable belief was that it just wasn't going to come back with anything like that amount of force. Now, you could still argue that in most places around the world, cases are picking up worst in areas where they've been least problematic before,

such as the Upper Midwest here in the States. But that's beginning to look ever more tenuous that yeah, there there are there is a steady drip of news about cases here in New York. There's a number of the European places that are having problems had already had quite severe outbreaks before. So I think there was a reasonable degree of hope, justified or not, that we really weren't going to get a sign significant recurrence in the places we've had it already. And we're now seeing the markets

beginning to retreat from that hope. And John, you know, I think just looking at Europe there seemed to be a little bit of ahead of us again here, and we're starting to see some shutdowns in France and Spain and other areas and the UK and the UK and it's only October, you know, I think it's would it be reasonable for people to say this could get materially

worse as we really get into December, January, February. Yes, it would be reasonable to to say that this is a time when people are more likely to stay in anyway, we have the psychological issue of Christmas coming up. In Britain.

The rule at the present is is no more than six people gathering together in more you know, in indoors, even if they're members of the family in the areas that are most affected, which basically for most extended families means no Christmas dinner, which is a very big families. By the way, well there is there there is that it might it might actually be bad for the marriage its industry, but bad for divorce lawyers. But yet there might be slightly at stress there. But but those are

those are significant issues. And also I nearly missed this interview because I was having my flu shot. We are now into flu season, uh, and the symptoms of the two are quite similar to each other, which gives reasons for concern. If you've just had COVID and then you

get flu, we don't know what that's going to be like, etcetera. Yeah, that there are I think there are good reasons to believe that this is not going to be as deadly per se as it was before, but it could easily be very disruptive if Biden wins the presidency, Do the markets price out a little bit of the COVID premium or the COVID discount in the sense that it's unlikely that Biden wouldn't implement some federal sort of orders if it came to that, Whereas at the moment we know

we're not getting those kinds of orders. I I doubt partly because he's not getting it. He's not getting in until January the earliest um, by which point, even if things are terrible, you would if things are at the very worst, then the precedent of Spanish flu in nine eighteen suggests that by then it would more or lesser blown itself out anyway, So I doubt I doubt it would have that big There are many other reasons why a Biden victory would affect the market. I don't see

it's having that big of an effect. And at this point, masks are so politicized. You could have a federal mask mandate, and I'm not sure how big an effect on people's behavior that would have a good point here, So I it just feels like, you know, you could make an argument for uh, you know, some real risk in the near term. On yes, I mean, there are plenty of other reasons for risk in the very near term as well, but people were hoping COVID wasn't one of them, and

they're giving up on that type. Hi, John, thanks so much for joining us, and congratulations on your flu shot. Always going to get that out of the way. John Authors, Bloomberg Markets Senior editor, giving us his thoughts on potential for near term volatile I'm looking at the vix here, which is something that Tom Pein loves to call out every morning. The vix is above thirty three. That's a

relatively high level, indicating some risky in the market. Well, our next guest has degrees in Russian, Eastern European, and Central Asian studies from Harvard University, so the natural place for her to end up is leading up Third Bridges coverage in therapeutics if you don't mind. Thanks to Jaylan Mamadama, who does lead up the healthcare analysis at Third Bridge,

for joining us. Jollen, you know, I was being a little facetious earlier, but it is wonderful to have all of that in the background, because we're dealing with a global pandemic right here, and we're dealing with global companies trying to come up with therapeutics, with vaccines and with cures. And I'm curious as to you know, where you think the first of the the better vaccines. Let's say we'll

come out of perfect Thank you so much. Funny and justin starting up with earnings from Lily Merchanciser this morning, he's really key that you're looking at the second half in Q three is to see who's done a better job in terms of weathering the storm. And this comes down to the vaccine conversation. Um. The media has really portrayed us to who's going to come to the market first and our experts. Do you really think fisor biontic and what that maderna will be making up the first

generation of vaccines. Now, having said that, we do think that the most important mechanism to look after is them to be the durability for longevity of the efficacy in a mass population, as well as the safety pertaining to the durability mechanism. And what I mean by that is that there's a window of time where the patient isn't client uh to get more infected due to declining antibodies. Now as we were pertain to the RNA vaccine, So

both fives are in Maderna. They have historically shown poured your ability and T cell responses, but there are um not too many safety concerns, and looking at the ste Way guideline not being a strict but efficiency and the meeting two months follow up, we essentially see these first coming to market, capturing maybe about fifty percent share, and then leveling off until we see more durable options come out out of the novavaxes, the j and Jason and

the Marks and especially also both on the preventative vaccines and on the prophylactic sides like with the oral antivio agents that both fives are working on. So, Jaylen, is it the expectation within the health care community that um, there will be one kind of go to vaccine or will there be kind of a cocktail or uh approach where maybe some people will get one or more of this vaccine and others will get one or more of

that vaccine. What's the expectation currently? Yeah, So definitely, although I don't like to talk about this in terms of winners, there will be three four candidates out there, right, and just from the standpoint of of getting the vaccine administrat a mass scale, we are going to need a few

of those players now. In terms of considerations on administration, the elderly are the average population and the We saw a recent JAMA article noting that you know, living your technology platforms like the R and AS, there are safety reservations as to the adoption uh in in those you know, older populations. For us, when you look at Mark although much later entrance in the in the game um they're using their established DSc vector platform that has shown amazing

efvocacy of the bowl of vaccine. Right, it's also going to be potentially in single dose and oral formulation, which is super convenient and again no reservations when it comes to administration for the elderly, You're absolutely right, they're different age categories that are probably going to adapt to this differently.

Having said that, um Nova vacs also has a combined potentially combining to the COVID nineteen vaccine with their flu vaccine, so from an administration standpoint, that's going to be much more convenient and those are the players that we're going to be seeing, you know, three or four of those gaining adoption at mass scales, but definitely not not one player that would not be sufficient in terms of UM, in terms of uh mascale adoption, which is really the

case with really any other therapeutic indications, Jayleen, At some point we should have several vaccines, I mean hopefully, right, that would be the idea. Do they all stay in existence then or or do some end up with better

marks than others. Yeah, that's a really good question. I mean with the RNAs, for example, we do see these phasing out and then the URNA platforms being used in different affections to be duringn oncology indications, right because on fibers partnering with BioNTech um, that's really they're investing in the in the in the platform with COVID nineteen as

a starting point. But likely it is going to be faced out when these more durable mechanisms comes to the floor out of you know j J and NOLO vax and MARK and the two areas to really track are both the antibody responses UM as well as the T cell responses. As we are still trying to understand better the passagenesses of of of COVID nineteen UM. Now, the prophylactics options are also going to be interesting to track. UM the merk oral anti viral combination with bridge back

bio UM. We're looking out for the safety data out of that. But before we get a vaccine and mass scale, these types of prophylactic options, especially in oral formulation, will will really we're expecting to see why viceprea adoption, especially in skilled nursing facilities. Hey, Jalan, just about the thirty seconds left? UM, how confident is the industry that they can actually produce and distribute this at scale? Yeah, So we were looking at the first hundred million doses by year,

and our experts don't think that that is viable. I mean we're seeing visor bions and keep pushing the timeline out further and further. UM, we're probably going to see the first hundred million doses sometime you know, mid next year. And what I mean by that is not just ready

to go, but ready to go and administer to the population. UM. In terms of viability, looks the urns are easiest to man a factor right the but then that becomes a little bit more complicated with the two dozing regiments, so anything that single dose will probably catch up to the two dozen regimen vaccines. Hey, Jalen, thanks so much for joining us. We really appreciate your insight getting us updated here on some of the therapeutics and vaccines and the timelines.

Jalen Momadoba, global sector lead for healthcare at Third Bridge, joining us to lend her insights into what is the topic of the moment and that is exact see Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn. And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio