Should investors look at that as an opportunity or just some kind of warning about what to come from the Fed?

Well, I think, you know, this is one of the main discussion points with clients right now is like, is this the opportunity in fixed income or is it going to get worse? And our answer is this is starting under the opportunity zone for strategic investors.

You know, we're priced for forfeit hikes.

We're priced for real funds rates of, you know, two and a half to three percent.

We're into that zone that historically this is value in fixed income.

And I think the other really important thing that fixed income is starting to offer is the ability to hedge some of these risk assets.

And I think we're seeing it in the market these days where higher yields are leading to some pressure on risk assets.

And yet people are so sensitive to the idea that, well, if I start to leg into fixed income now, what if yields move against me a little bit? And, you know, it seems like you have a cushion.

Firstly, my question to you is, did the Fed's unanimous 12 to 0 decision to hike rates surprise you at all? And then secondarily, what are your longer term takeaways from the meeting?

So I am surprised, you know, and I think we chatted earlier in the year and we thought this was going to be a year where it would be close, but the Fed would get through this year without a hike because of the inflation dynamic that we've talked about.

Was I surprised that we got a unanimous hike at this meeting? Not after the Jackson Hole speech.

So once Warsh gave that speech.

And basically, there was no dovishness in that speech.

And then we were followed by a good payrolls number and an inline inflation number.

I think the Fed sort of, whether they wanted to or not, they were going to have to hike at today's meeting.

Where are you seeing the opportunities in relative value at the moment? And how are you positioning on duration, curve exposure, credit risk across portfolios today? And what are some signals you're most closely watching as we head to year end?

Ashok, when you look at the messaging and reading between the lines, what do you anticipate from September and on through the end of the year?

Good morning.

I think September is most likely to be, be a hike at this point.

I think we're gonna have to see something like a 0.0 core CPI print to avoid a hike.

So I think, you know, the market's pricing 50/50.

I think we might increase those odds a little bit, but, you know, I think that's the short term.

I, I thought the most interesting part of his speech was actually the first section when he talked about AI.

Uh, a- do you think that the, the long end still ignores w- what's happening? I mean, if there's a hike, do you think the long end stays where it is and just shrugs that off?

What's your take?

So I think Mike hit, hit the nail on the head.

This is, first, this is a move about real yields.

Um, the market is very relaxed about Fed expectations at this point.

It's very relaxed actually about inflation and inflation expectations.

What the bond market is concerned about, you know, the amount of debt that we're being asked to finance, and that is, as I think he talked about, governments and AI, uh, financing.

I think the big problem, um, too, that's hitting the US market is we are dependent upon foreign capital.

Ashok, um, what about the, I, I guess the portfolio implications of whether you're seeing any value being generated by these moves in yields at any point along the curve or whether it's corporates, uh, or governments?

And when you consider that they've also tapped private credit and they're tapping euro dollars and they're tapping dollars here, right? Let's talk about how are we going to finance this? Is there enough capital in this world?

Yeah, I think there is enough capital in the world.

But maybe I'll just start with a few observations.

And I think just the point you made about the scale, one of the ways I like to articulate this is, Oracle has more corporate debt in our bond market indices now than Citibank, which is really remarkable, I think, when you think about industrial company compared to a leveraged banking institution.

These issuers, whether it's Microsoft, Google, Amazon, they've gone from irrelevant to the bond market to the biggest risk factors in two years.

And so I do think so on the question of where's the money coming from? Is there enough money out there? I think, first of all, the company, the hyperscalers have a lot of cash flow, right? Microsoft, Oracle, Meta, Amazon, they all have these underlying businesses that throw off a lot of cash flow that allows them to borrow.

So I think that's a that's a positive to find money.

Can you explain to me what's actually going on and also what this tells you about the market? Because this seems to me a little bit of like, okay, is this okay? Is this an indication of a bubble?

You think actually it's for a good reason, a positive reason, at least for equities.

Yeah, I think, you know, there's two reasons.

One is inflation and inflation expectations are going up.

That's certainly been the biggest driver of the move, um, until recently.

But the other component has been, you know, real yields, um, rising as well.

And this one is, is not, not necessarily that bad for equities.

We, you know, we think it's reflecting AI and potential growth and just a stronger intermediate or even long-term economy.

Is that straining the market at all? I mean, spreads look fine, but I wonder if you're concerned about that.