Bloomberg Surveillance TV: September 28th, 2026

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Jonathan Ferro (0:11)

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro, along with Lisa Abramowicz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9am Eastern.

Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App. We begin this app with stocks retreating as yields and crude climb. Bob Michele of JP Morgan Asset Management staying bullish on bonds, writing, we like the intermediate and long end with yields over 5%. The price action last week unusual, suggesting a blob of top in yields is forming. Bob joins us now for more. Bob, good morning.

Bob Michele (0:52)

Happy to be here.

Jonathan Ferro (0:53)

What's going wrong in your fixed income this morning?

Bob Michele (0:55)

Well, I think a couple of things synced up last week. One is we got midway through the week and it was clear there wasn't going to be a peace accord in the Middle East during UN week.

So suddenly you've got oil going higher. You've got everyone concerned about the second round effects of that. Will that get passed through to finish goods and services? And then you had some Fed speakers come in, notably New York Fed President Williams talking about more may need it to be done. And if you go back a week earlier, he was one we thought could be a dovish dissent. And I think those couple of things caught the market off guard. Probably there were a couple stops along the way. So we've had the backup.

Jonathan Ferro (1:37)

Is that enough to change your mind? And if not, why?

Bob Michele (1:40)

It's not.

One of the things that puzzled us is the move from 390 to over 4% to over 5% was pretty orderly. And we were always looking for a blow off top. We never got it, we hit our nominal and real yield levels, we did some buying. For us, the bigger problem was when we got down to 493, do we chase it? So 523 is a much happier place for us in the bond market. We can go back in, buy with some yield.

Lisa Abramowicz (2:09)

At this point, there's a question about whether we're gonna see yield curve flattening or yield curve steepening. We had seen pretty steady yield curve flattening. When people were expecting the Fed to do that much more. Now, as John was saying over the past couple of sessions, after that PMI print, you've seen an expanding in the yield curve. Do you expect that to continue?

Bob Michele (2:27)

I don't. It feels to us the entire yield curve is oversold. The demons have set in. Everyone has PTSD going back to 2022 Does the Fed have to do 200 basis points or more? I think once we get PCE this week, once we see the labor market, things will start to settle down again.

Lisa Abramowicz (2:49)

So you're backing up the truck?

Bob Michele (2:51)

Backing up the truck is your term, not mine. But if we see some stabilization here, we have our next buy level. We've got plenty of buying yet to do.

Jonathan Ferro (3:01)

We're starting to see some instability. Maybe that's not the right word, but starting to see some spread, widening in credit. Lisa went through the details. That's something we haven't seen for much of this year. Seen some jitters beneath the surface, particularly in CCCs, but now starting to migrate to the headline index level, spreads wider for the past few sessions. What do you think is happening with credit now? We've seen signs that maybe this Fed action might be biting elsewhere.

Bob Michele (3:23)

For sure. One of the things we've talked about is can the Fed actually do a total of six rate heists, go from three and five-eighths to five and an eighth, because if they can't, then bond yields of over 5% are pretty much a gift to you, which is where we think we are.

We have already seen that the rise in yields, the 110, 130 basis points backup in yields, is starting to slow the economy. We know that businesses are struggling more to finance themselves in the public markets. We know that if you're a corporate America floating rate borrower through the bank loan market.

So it does bite into discretionary income. And I think you're going to see some of that pass through the economy. All of that is telling us, sure, the economy looks okay. Corporate profitability looks fine. Earnings growth looks fantastic. But there are headwinds that have formed out there from higher yields, from more aggressive Thank you.