U.S., Tonga, Leanne Laura discussed on Bloomberg Daybreak Europe


With the world's news morning Leanne Laura good morning and thank you The scale of damage caused by a massive underwater volcanic eruption in Tonga remains unclear with both Australia New Zealand sending surveillance aircraft to assess this situation The eruption on Saturday was so powerful was heard as far away as Alaska and triggered a tsunami that flooded coastlines from Japan to the United States Information on casualties in Tonga is still uncertain Now large door events can go ahead in Scotland again after a limit on the number of attendees was lifted It means sports stadiums can welcome back spectators but at least 50% of people will have to be asked to show a COVID path to get in from today booster vaccines are also required to make a pass valid and British tennis number one Cameron nori has crashed out of the Australian open in the very first round The number 12 seed was comfortably beaten by American rising star Sebastian corda and that was in straight sets and Rafa Nadal is through to round two Global news 24 hours a day on air and on Bloomberg quick take powered by more than 2700 journalists and analysts in both 120 countries and Leanne guerins This is Bloomberg And surely Leon will wait a few more in Australia but thank you so much for the update including all of the sports news too Global bond markets under pressure this morning after treasury sold off on Friday That's really the big market theme this morning U.S. ten year yields closed at the highest since before the pandemic last week that is 8 basis points one spot 7 8% on Friday Bloomberg consensus and the market now pricing in more than four fed rate hikes in 2022 Joining us now is put your camera who's seen a European rate strategist at Toronto dominion bank Put your welcome back to the program thanks for being with us Seems like markets woke up quite late day on Friday to the hawkish fed turn Yes markets are sharp for MLK day Today but global yields are very much under pressure How much higher do they go do you think Good morning Thank you so much for having me Definitely the care message could be one in 2020 We have given that we would see substantial tightening of centrist path policy across both And it's not only in fed We are basically pricing for basis points in hike by eukaryotic when they have told us they will not be hiking rates I think the global coordination will be so strong that we would see parish move to continue Engage for fed if we are true that we do get free to poorly type plus QT We do expect tenure treasures to hit the highs of 2.5 basis points by the end of 2022 Two 50 by the end of 2022 That is an interesting call on the U.S. ten year What would two 50 on the U.S. tenure by the end of 22 do for U.S. equities So that's today tricky one because what we have seen is when the treasury do hit the 2% 11 you do see financial conditions that are tightening And if that's the case it would be hard to see stocks to rally that So I think right now stocks can still have a good run just given the fact that there is a lot of liquidity impact on the less as compared to what we had expected We could see a strong in the beginning of the year But I think the more we see tightening in the second half of the year note that it won't be just fed but it will be the other Central Bank to That's where we could see stocks getting impacted And that also is the reason why we are not looking for 50 basis points hikes but from because I think they do need to keep they are aware of the fact that they don't want the financial condition to tighten too quickly Yeah This perhaps the suggestion from Bill ackman and others of a kind of shock and awe idea that you get 50 basis point rise from the fed in March Well in that case where does that leave in your view European rates And we've seen European rates following the U.S. but the ECB tried to hold off on the idea of tightening How fast a run up how fast do we get to zero for Germany yields Yes I think with ECB no matter what ECP space we have such as we said we have such a strong rate that it's hard to keep a urinary anchored if we do see fed hiking So we are looking for points to touch close to 0% by the end of this quarter And we are looking for positive to return in the U.S. space with both ending social 30 basis points by the end of the year Indeed we could see point outperforming treasuries but they can not be the baddest from treasury How are you thinking about peripheral bonds then We've seen a little bit of muted demand softer demand for Italian bonds in a more in a most recent auction Is there a concern we may get a blow out of spreads when it comes to the peripheral nations or is the ECB on hand to cap those yield still So the thing is that right now you can sort of concern regarding politics with it adding presidential elections on the retail as well as strategy addiction So yes that has been adding suspense and then class we did have a lot of issuance coming from ETB when it comes to syndication So I think that's where we did see a vigor auction But that has been markets are getting a bit nervous So you could see some widening and press But I still don't think there's a fundamental change in how these spreads just given the fact that from a credit perspective the periphery are doing really well The impact has been updated by so many of the agencies just because the economic outlook better So that's why we are not looking for a big collapse or association to have big widening moving best But yes some winding on packages have ending in March While on the idea of political uncertainty the prime minister in the UK is under pressure to resign How does that affect markets guilt Sterling the FTSE spreads right now Is it just a very short term issue Or is there a bigger concern Yes I think yes we are a lot of party lockdowns happening So I think markets right now are not reacting much to the fact that so far there doesn't seem much evidence that Boris Johnson would have to resign but clearly we are not watching very closely to get the acquired number of letters of no confidence in the prime minister that could actually lead to a vote But I think right now even the conservatives didn't get much time to figure this out And I think so far it doesn't seem that bodice is being the case But again this week is very important and especially given the fact that we do get the official inquiry reports to as well So I put you from the geopolitics of the UK or at least the domestic policies of the UK to the importance of the U.S. dollar Are we looking now at a sustained period of U.S. dollar weakness I think generally we could see a bit of choppy markets because we did see big reaction at the end of the year So I think where we are not what we are looking at is more of a dream training and some consolidation in over after the big position that would take it Okay interesting Also we expecting big bank earnings more than this week Goldman Sachs included and some of the big banks expected to hit the corporate bond market after they report their quarterly results So are you expecting a big sort of dump in terms of more short dated bonds I think what we have seen over the.

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