Income is back and Van Eck has you covered with VETF to bring income to your portfolio.
With Van Eck's Income Investing Yield Monitor at ThinkYield.com, you can easily track Van Eck's ETF yields,
monthly flows and performance of each income ETF category.
Explore Van Eck Income ETFs at ThinkYield.com.
Investing risk includes principal loss, past performance is no guarantee of future results.
Visit Van Eck.com to view a prospectus that includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully.
Van Eck ETFs are distributed by Van Eck Security Corporation, a wholly owned subsidiary of Van Eck Associates Corporation.
♪♪♪
Hello and welcome to What Goes Up, a weekly markets podcast.
My name is Mike Regan. I'm a senior editor at Bloomberg.
And I'm Voldana Heierk, a cross-acid reporter with Bloomberg.
And this week on the show, well, let's be frank for a minute.
For a long time, bonds seem to be pretty boring.
If your investment portfolio was a meal, bonds were sort of like the vegetable.
Yeah, you knew you needed them there on the plate, but they weren't very exciting.
Rather, stocks were the meat and potatoes and dessert.
Crypto, well, maybe that was the shot and beer you had afterwards.
But that's all obviously changed.
After last year's carnage, bonds of all stripes are sporting really attractive yields that look
especially enticing these days if and when that market focus shifts from worries about inflation
to worries about economic growth.
And exchange traded funds especially are reaping the windfalls with hundreds of billions of dollars
flowing into bond products in the last year.
You heard it, bonds are exciting again, and we're going to get into it with the head of
fixed income at the world's largest asset manager.
But, Vildana, first speaking of excited, I was very excited yesterday when I came into the office
and I noticed you had left a book for me on my desk, which I assume means I'm finally invited
to one of your book clubs.
And I'm very excited about that.
Oh my gosh, I didn't mean it to look that way, but I suppose it looks that way, like I am giving
you, I'm offering an invite.
Sweet, I've not invited to one of your many book clubs.
Okay, I suppose you and I have a book club going then because we have a special guest next week
and you and I have been tasked with reading his book before the podcast.
That's why I left it on your desk.
Oh, yeah.
Oh, that's not as exciting as one of your real books.
My real book clubs, which you're not invited to, I'm sorry.
I'm sorry.
I'm wondering about what exactly these books are you reading in these book clubs that I'm not
invited to?
They're fun books.
That's, yeah, no invite for you.
Tell us about the what goes up book club.
Who do we have next week?
We have Alan Blinder next week.
And he has a very thorough history of monetary and fiscal policy.
So we'll be talking to him next week.
That is riveting book club material right there.
But this week's guest is equally exciting.
Why don't you introduce him?
Yeah, I want to bring in Steve Lately.
He's the US head of fixed income ETFs at BlackRock.
Steve, welcome to the show.
Thanks for having me.
You're welcome to join any of my many, many book clubs that I belong to.
I was going to say the book for next week is sound riveting.
So I'll have to check that out.
You're well, come on into our book club then.
You're very welcome to be part of it.
Or the Chardonnay.
I'll bring the cheese.
Steve, maybe we can just start with, so your US head of fixed income ETFs at BlackRock.
So tell us about your role.
Yeah, so I've been with the firm since 2009.
And it's been quite a journey.
When I joined BlackRock, bond ETFs did exist.
We launched the first set of them in 2002.
And we recently celebrated the 20 year anniversary of those.
But it was still a relatively nascent business in terms of where it is today.
And so we decided to really make an effort at growing that business.
And in particular, I'm really trying to make the market aware
of just how much these products could, number one, help investors.
That's the important part.
But also we had a very strong conviction that these products were going to change the bond market itself.
And so I was one of the folks brought in to really start growing this team.
And over time we built out the bond ETF infrastructure quite a lot.
And so my role currently is to oversee that business more broadly in terms of
the products that we're designing, engaging with clients on their experiences,
how we can improve the products, working with broker dealers, index providers,
all of the folks who are very important to the ecosystem to make sure everything functions well.
Just to overall make sure investors are getting the outcomes that they're expecting.
You know, Steve, I was kind of joking at the beginning there talking about how bonds were
boring. Of course they are. They've always been very exciting.
But clearly in that decade of zero interest rate policy or near zero interest rate policy,
there's just been this massive sea change now with higher yields.
Every, I think, investor strategist we spoke to recently heading into 2023 was much more bullish
on bonds. That's kind of reversing a little bit now. I'm looking at some of the iShares's
big fixed income ETFs, TLT, LQD, the aggregate AGG, really off to a strong year like the stock market.
And now kind of back to maybe flatish on the year up a little. How do you see the rest of
the year shaping out? Clearly inflation and the Fed are the most important elements of how bonds
will do this year. There seems to be a rethink going on about how high the Fed will actually hike
and when an inflation will actually normalize back to that 2% area. How are you thinking
how the rest of the year will play out in fixed income?
Yeah, it's been a bumpy ride. Last year, as you know, was the worst bond market we've seen in
probably 40 years. It was incredibly challenging. I think to your point, investors have been long
into a bit of well rates are low for long and maybe low forever. That changed very, very
dramatically last year. I think investors were looking forward to this idea that, oh, 2023,
where it's higher yields, it's great. I'm going to allocate. I'm going to fix my 40, so to speak.
And then all of a sudden, we got the slew of very positive data. And that made everybody,
as you said, rethink. It does feel like people rethink this and maybe overthink it every week,
if not more frequently than that. I'm a little more sanguine on this. I think that there is a limit
to how high rates can go. So I think that the Fed is going to be watching the data closely.
We've maintained a view that consistently, that inflation was probably not going to
go down in a straight line. We've been saying that for quite a while. And I think that's just
what we're seeing now. There's going to be some bumps along the way. We do think that it's possible
that they may hike a little bit more than what was originally expected. And then they may hold rates
at that elevated level. If you just look at the futures market, I think the peak rate is
somewhere around. And it's probably, it's pumping around day over day, but it's somewhere closer to
a 5.5% terminal rate than it was before. But not quite there. So I think there's going to be,
you're going to see the market trying to find a level here. And I do believe that there's a limit
to this because whether people believe it or not, ultimately, these hikes will impact the economy.
They will take hold. There's debate about when that can happen. But it will happen. It's happened
every single time in the past. So they're cognizant of that. And they don't want to go too fast and
too far. Yeah, Steve, do you guys have an internal view in terms of what else to expect? It sounds
like maybe two more 25 basis point hikes that we can expect from the Fed. We have had this discussion
over the last couple of weeks of some Fed members arguing even during the last meeting that they
should go with 50 basis points that potentially the next, I think the March meeting could be 50
basis points. So do you have an internal view on what we can expect? I think we're still thinking
that they probably end up somewhere at 5.25, maybe one more. But it's really like if you look at the
market, that's pretty consistent. Unless we get a really outsized inflation surprise. Like I said,
we've been pretty consistent that it's not going to be linear. There are going to be some bumps along
the way. So I think this is, you would like to see it go down more consistently. But this isn't
really surprising us all that much. So like I said, I think the market's basically pricing in
around 5.25, between 5.25 and a half as a terminal point.
Steve, as I mentioned at the opening, the spent some eye popping flows into the fixed income ETF space
at BlackRock, I shares and really throughout the industry. Where are you seeing most of the flows
go into? What does it sort of mean to you when you look at where the flows are going? Is it
primarily the safety haven, that TLT, the Treasury's ETF, that sort of thing? Or is there interest
across the whole portfolio?
Well, it's interesting. If you would have told me last January that the largest category of inflows
would have been Treasuries, I would have probably disagreed given how hawkish everyone was and
the view that rates were going to accelerate quite a lot. But as it turns out, for us anyway, it was.
We took in over 100 billion in the US, 125 billion globally. Of that 100 billion, 65 billion was in
Treasuries, which was, again, I think most people would have been quite surprised. That was followed
by investment grade, multi-sector, municipal. So yes, to your point, it was all high quality.
I do think that was a reflection of investors saying, these yields are attractive. I can't call
the top. I'm not going to try to call the top. That's pretty tough to get right. So I'm going to
start allocating. But I'm a little bit worried about where we're going here in terms of,
do we tip into a recession? What do we ultimately end up doing as far as a land
and go? So I'm going to buy high quality. The part that helped that out the most, if you think about
it, the front end of the yield curve, you have two-year notes that are now about 4.5%. And so
they didn't have to go down in credit to get yield. They were seeing yields they haven't seen
in many, many years. That trend persisted this year. We're seeing high quality flows this year as well.
To the flows into the HYG, the high yield ETF, I'm guessing they track closer with risk
sentiment in the stock market. Are you not seeing them there? That they're more of a
risk-on type of product? Yeah, I agree with that. Particularly, HYG has become very entrenched in
the high yield ecosystem. And so it does tend to react very quickly to sentiment. So when you
have risk on, you'll see equities rally, you'll probably see flows into HYG. When you have risk
off, as you said, you'll probably see the opposite. And it does happen to react quickly in a large size.
I want to ask you more about your predictions for what you see for the bond ETF space
down the line. But first, you mentioned the two-year note, it's above 4.5%. I'm wondering what
you think the bond market is telling us right now, given the rise in yields that we've seen in recent
days? Yeah, I think it was this adjustment. The market had started to get to a place where,
okay, the end is in sight, all is going according to plan. And we can even start thinking about a
Fed pivot. It depends on what speaker, what day. But I think the last speech by Powell sort of
calmed the market down. And I think got them to a place where it's like, okay, I can see the light
at the end of the tunnel. This recent slew of data really upended that a bit where you saw
strong employment numbers really, really outsized. The manufacturing indicators, PMI, etc. were strong.
Inflation did not come down as much as people had expected or hoped. And so what you're seeing,
the market is just sort of pricing in combination of maybe an additional hike or higher for longer,
if you will. And so I think it was just that adjustment. We've seen this. So remember,
I think last year, the peak was somewhere closer to 4.5%. And so we've been on this journey before.
We may test at some point above 4% again. But like I said, I don't think that we're going to see
yields jump sharply higher. You may see them grind a little bit higher. But I think we're going to
be more or less in a range. It might be a volatile one as people continue to price out what the Fed
made you. Income is back. And Van Eck has you covered with VETFs to bring income to your portfolio.
Find the yield duration and credit exposure you're looking for from Van Eck's range of
income-focused ETFs, which includes municipal bonds, corporate bonds, international bonds,
equity income, floating rate instruments, and multi-asset income. With Van Eck's income investing
yield monitor at ThinkYield.com, you can easily track Van Eck's ETF yields, as well as the monthly
flows and performance of each income ETF category. Take advantage of the back-to-income play.
Explore Van Eck's income ETFs at ThinkYield.com and find the right ETF for you.
Investing risk includes principal loss. Past performance is no guarantee of future results.
Visit Van Eck.com to view a perspective that includes investment objectives, risks, fees,
expenses, and other information that you should read and consider carefully. Van Eck ETFs are
distributed by Van Eck Securities Corporation, a wholly-owned subsidiary of Van Eck Associates
Corporation. Steve, you mentioned earlier that notion of bonds being that 40%
of the portfolio in a traditional 60-40 portfolio. Last year was just one of those bad years where
that stock and bond correlation reversed. Typically, when you see stocks go up, you would expect
bonds to fall, yields to go up as a result. Last year, obviously, we saw stocks and bonds
fall together and eliminate that hedging aspect of a bond in a 60-40 portfolio.
What do you think we need to happen to see happen to get that correlation back to what everyone expects
it to be? Is it a narrative shift? Is it a sentiment shift? Or is it really about the data
and inflation normalizing? Do we really have to wait for 2% inflation to see that old trusted
correlation reemerge? It's a combination of some of the things you mentioned. As long as the Fed
is being very hawkish, I think that that perpetuates what you just said. Yields go up,
you have risk off, you have equity selloffs, high yield selloffs, or what have you. I think
when the market comes to believe that, okay, we're reaching a leveling off place here. I do think
we may be starting to see that with yields bumping up closer to 4%. Like I said, I'm of the view that
we will bounce around in this range anyway. But I think investors will start seeing that
traditional behavior. As an example, when you don't have a hawkish speech in the market,
you do tend to see the traditional correlation where affect what is are selling off yields,
you'll see yields trend lower. I think it was really about getting to that level. I think we're
almost there. At these levels, there's a lot of diversification value in yields right now.
You need to have a calming down of all the hawkish speeches and all that stuff. But I think we're
getting there. The thing that Mike was referencing, I think, because I wrote it down, I like what you
said a lot of people are thinking, I'm going to fix the 40 part of the 6040. I think you guys are
saying that advisor 6040 portfolios are under allocated to fixed income by 9%. Now is a once
in a many year opportunity to rebalance portfolios. Maybe you can tell us more about that.
Yeah, it's been interesting. If you think about the last decade, we've had quantitative easing,
we've had yields. If you look at where the 10-year bottomed out, it was 50 basis points,
which is remarkable. The two-year bottomed out somewhere in the teens, 12 or 15 basis points.
A lot of investors decided to stay out of the market or they had to take on a lot of
additional risks to get that yield. Whether that was overweighting high yield in that
traditional part of the portfolio, where maybe they would have preferred higher quality assets,
but they had to have the income. Or things like alternatives and private credit, private equity,
asset classes of those nature. Now, investors are looking at this market, the public fixed
income markets and realizing that they can, quote-unquote, fix their 40 by derisking it to varying
degrees. You don't have to be the majority in high yield to get a certain yield target. You can
allocate to the front end of the treasury curve and get yields that you were seeing at some point
in the high yield market. It really is an opportunity to get back to what that 40 was supposed to do,
which is diversify your risk assets. Then you think about it simple, okay,
I have the S&P 500. What do I want to hold against it? A very simple world would be,
I'll hold long data treasuries against it. For the reason you said, which was, I know that if
the equity market sells off, probably long treasuries will rally. But investors are being a lot
more intentional than that. They are looking at building out that 40 in a much more deliberate
way. Yes, allocating building blocks to treasuries, investment grade, having some bit of high yield.
I think what we're advocating is to get away from this whole active passive paradigm,
which we think is really just an archaic construct. We think really it's both. We're
encouraging investors to use bond ETFs for that core diversification purpose. Why is that well?
Because you know what they're going to do. You could see what the holdings are,
they're transparent. You know what the strategy is because they're following an index.
Use that predictability as the diversifying part of your portfolio. Whether that's treasuries,
investment grade, some combination of both. Then you can use an active manager to get that extra
kick in your 40 as well. It's not active versus passive. It's both.
Obviously, each investor will have to decide what that mix looks like. But we do believe
that both can play a role in that 40 and get you to a much more robust place than you were before.
I've never heard somebody argue that before. That it should be both.
It should be both. Yeah, absolutely. It's a great time to do it. Like you said,
it's the first time in 10 years, a dozen years that you've been able to get these yields and
de-risk at the same time, which is pretty remarkable. Steve, it's interesting when I think, and correct
me if I'm wrong in how I'm thinking about this. But when I think of the audience or the user base
for say equity ETFs, I think of maybe a lot of self-directed retail investors, average Joe's
sort of futzing around with their retirement or just their personal trading account.
Your big equity ETFs are pretty easy to understand for that audience. You buy the Russell 2000
buy all the small cap stocks, buy Chinese large caps, buy whatever it is. And again,
I could be wrong about this, but I don't see that cohort of investors really knowing what they're
doing as well with fixed income ETFs. And my impression is that the user base is different,
that it's more of a professional user base, even active bond fund managers. A lot of times we'll park
some inflows into ETFs until they can pick out the bonds they want. Talk to us about that sort of
difference. Am I right in that that it's kind of a different user base between the different asset
classes and ETFs? Well, actually, Mike, I think it's a pretty diversified investor base. It's pretty
broad. And so we actually do see direct flows into fixed income ETFs. Now they do tend to be
the ones that people know about like AGG. Those folks will know that, okay, that's the bond market.
I'm just going to buy that. I'm not an expert. I don't want to try to get too smart about it or
get too granular. I'll just buy the bond market. So you'll tend to see that with the direct
investors. You're right that a lot of the, if you will, power users tend to be these institutional
investors, active managers, insurance companies, pensions, et cetera. But then there is a very large
part of the wealth client base, the advisor base, that uses bond ETFs through things like models.
So models are these recipes for here's how you build a portfolio. More and more firms are going
that direction where instead of saying, hey, buy this set of equity ETFs and then,
oh, for your bonds, just go out and build some ladder using municipal bonds that you like,
they're advocating more for here's what your portfolio should look like. On the equity side,
here's the recipe for that. It's these ETFs on the fixed income side. You can use a combination
of these ETFs. And the model portfolios are a really fast growing business and more and more
investors. And for that matter, advisors like it as well, because it allows them to free up
their time to focus on things like, you know, tax planning, things like that. So we're starting
to see that a lot. So that I think is the main, you know, growth area, but we're seeing a ton of
growth in the institutional side as well to your point. And the last thing I would say about it is
your traditional bond pickers, some people really love that, right? It's interesting and fun for
them to do it. But even they've come to realize that if I am a bond ladder person, I can go ahead and
do that for my client. But to get some diversification around that, I can buy something like, you know,
our I bonds, which is it is a ladder, but you have within a given run, you can have several
hundred bonds. So even even the folks who really enjoyed laddering as an example are starting to
use ETFs alongside of that for liquidity and diversification. So we talked a little bit about
where you see the flows going, where you said the majority is actually going towards
treasuries. Is that also what you would recommend, how people should be positioning right now?
Well, I think the investors have to have a view. So for investors who are pretty unsure about,
you know, whether we're going to have a recession or when that might happen, you know, you can get
great yield, right, in these higher quality exposures, whether it's whether it's the front of the
treasury curve or investment grade or what have you, you don't have to invest in something like
high yield. However, we do still have investors who are allocating a certain portion. Again,
think about the model portfolios, the recipe, if you will. There's going to be an element in that,
and investors can make up their minds. If they think that the, you know, the chance of a recession,
for example, is overstated, then high yield might look attractive right now. You know, so if you
look at where default rates are implied, it's somewhere in the 6% range, which isn't super high.
I mean, a lot of times during more some of these bigger sell-offs, this approach double digits,
but, you know, traditionally, the realized experience of default has been around, you know,
sort of the high three low 4% range. So for investors who have a view that, well,
I either think a recession isn't coming for a while or I think it could be a lot more shallow
than what people are worried about. Something like high yield could also look attractive.
But we're seeing people vote with, in terms of flows, we're seeing still the majority this
year going to the higher quality segments. You know, you mentioned that how high rates are at that
front end of the treasury curve. I mean, every time I look at it, my eyes, you know, I take my
glasses off and wipe them off and double check that I'm really seeing a three month T-bill yield
at 4.8, 4.9%, whatever it's... But maybe you also need new glasses.
I might need new glasses too. I don't know. But I can't help but wonder if, you know,
we're back into the realm of extraordinary measures, you know, to get around the debt ceiling.
Is that impacting the short end yet, concerns about the debt ceiling and a potential default?
And if not, will it, you know, how do you see that whole issue playing out this year
and what it means for fixed income?
Well, we've seen this movie before, right, where it has happened, where we were actually
downgraded and everything. But I don't... It's not... There's a little bit of it that's in there. If you
look at, you know, for example, credit default swaps, I haven't looked at the levels lately,
but there was sort of some of that risk being, you know, slightly priced. I think as time goes on,
that concern could come forward much more, you know, as we had, you know, towards the summer,
which is kind of a critical time. So I would say it's not dramatically impacting the front end yet.
Could it? Sure. Could start creating a lot of concern as we start moving towards the summer.
And then I promised I would ask you about your long, long, long term views. And I think you guys
are predicting that bond ETF assets will go from about 1.8 trillion right now to 5 trillion by 2030.
And I wanted to ask you to speak about that too.
You know, this is something that we believe is going to happen. And I think there are a number of
drivers behind that. And it before last year, we also had that conviction. So I think we
originally came out with a 5 trillion, even before some of the astonishing flows that we saw last
year. And there are a number of trends driving that. You know, I've mentioned a few of them already.
You know, one would be, you know, this growing institutional adoption. So we talked about how,
you know, before an active fixed income manager, as an example, would probably not touch one of
these products because they viewed it as well. That's a passive product. I'm an active manager. I'm a
bond picker, et cetera. We have moved past that, in our view, where you have active managers
using these products just as tools for active management, which is pretty remarkable. And so
nine of the 10 largest active bond managers do use I shares fixed income ETFs. And they use
them for active management tools. So that's a pretty interesting trend. And again, we're seeing
insurance companies, pensions, all of these larger institutional clients really embrace the products.
COVID accelerated that because liquidity issues you're experiencing in the underlying market.
Last year was a further accelerant on that trend. Another long-term trend that we see
that's been talked about a lot is just this idea of the bond market finally modernizing.
Some people laugh out loud when you use the term modernize and bond market in the same sentence,
because it's still not what we would call that modern compared to, for example, the equity markets.
But we do think that the presence of fixed income ETFs and their infrastructure has really kicked
the bond market into high gear in terms of modernizing. So a lot of the things that you see today,
in terms of activity, call it portfolio trades, which are large bond basket trades that are priced
and traded simultaneously, that's not possible without bond ETFs because they're the hedge for that.
And the plumbing around that, so the creation redemption mechanism is what brings that to life.
It allows dealers to move large blocks of bonds to and from the exchange into the over-the-counter
market. And so that's a very powerful innovation. I think the other part of that is just pricing.
Pricing is something that everyone sort of took for granted for many years. It was something that
index pricing services did. Not a lot of thought was given to a but because of this acceleration
of these large block trades of bonds in conjunction with ETFs, it's become not only important,
but necessary to be able to price large numbers of bonds and price them quickly.
So now you have things like algorithmic pricing in credit, which is pretty astonishing. I think
further developments will be all to all trading. You're seeing the market structure itself
change. And we think all of these things were really catalyzed by bond ETFs and just the desire
by investors to use these products, but also not only directly, but to use them as tools for
some of the other things. We just talked about the way advisors and direct investors are using
bond ETFs to build portfolios. We think that's only going to accelerate. This idea of using
transparent building blocks for your 40. That's going to continue. And then lastly,
just we'll continue to see innovation in the number of offerings, the number and type of bond ETF
offerings over time. So those are kind of the four long-term drivers. Like I said, we were
already growing pretty rapidly, double digit growth every single year. I think COVID accelerated
that and then the yield spike of last year further accelerated. So we're pretty confident in that
$5 trillion prediction. We're almost approaching $2 trillion today. And honestly, if it wouldn't have
been for this yield shock, which caused the values of fixed income assets to go down,
we probably would have already crossed $2 trillion. Does getting to that $5 trillion
imply a shrinkage in AUM in traditional bond mutual funds? That's up for debate. We think there
will probably be a role for different types of wrappers depending on what investors like.
There's certainly, you've seen a migration by certain types of investors from mutual funds to ETFs.
You've seen a lot of equities, the same thing starting to happen in the bond market, which
explains why you're seeing more and more traditional active managers offering ETFs because they know
that a certain segment of the investor base wants it. So I think our view is we want to give clients
the exposure that they want in the wrapper that works for them. Some people don't really view the
ETF as something that they need because, well, I'm not going to trade every day. I'm not going to
look at it every day. It's not that big of a concern. But we talked about these model investors.
They very much want ETFs as part of that. So I think over time, there will be some sort of an
equilibrium, but I think we're still in the midst of a migration. What I do think will happen
is that you will see more and more investors using bond ETFs instead of just going out and
buying bonds. So as an example, if I'm an active manager, instead of going out, I want to start
a new strategy. Instead of going out and buying hundreds or more bonds to implement that strategy,
I may start with a series of bond ETFs, and then I can put my higher conviction bets into individual
bonds or other positions. So recognizing that there's always a core of a portfolio,
that can easily be accomplished through a low-cost bond ETF. And then you can add value around that.
♪♪♪
Income is back and Van Eck has you covered with VETFs to bring income to your portfolio. Find the
yield, duration, and credit exposure you're looking for from Van Eck's range of income-focused ETFs,
which includes municipal bonds, corporate bonds, international bonds, equity income,
floating-rate instruments, and multi-asset income. With Van Eck's income-investing yield
monitor at ThinkYield.com, you can easily track Van Eck's ETF yields as well as the monthly flows
and performance of each income ETF category. Take advantage of the back-to-income play,
explore Van Eck's income ETFs at ThinkYield.com and find the right ETF for you.
Investing risk includes principal loss. Past performance is no guarantee of future results.
Visit VanEck.com to view a perspective that includes investment objectives, risks, fees,
expenses, and other information that you should read and consider carefully. Van Eck ETFs are
distributed by Van Eck Securities Corporation, a wholly-owned subsidiary of Van Eck Associates
Corporation. Steve, I'm going to put you on the spot with one final question here before we get
to the crazy things. I'm looking at the 10-year treasury yield now, 3.93 about.
If we're to fast-forward to the end of 2023, and I throw out a number, say, 3.5 in the 10-year,
you're taking the over or the under on that. And show your math. Tell me why.
I'm going to take the over on that, but just slightly. If you were to free-phrase that differently,
where do you think, well, and I would have said probably $3.50. So I think you'll see these bumps
along the way where you just keep testing yield higher because I think people are still very
nervous about the Fed inflation. But that's all going to reconcile, hopefully, by December.
We'll have to call you next year and check on your prediction.
That'll be interesting. Let's hope that I'm not off by an entire handle or something.
But I agree. I don't think we'll see a collapse in yields to anything like what we were used to.
To your point, it is hard to see them continue this March higher throughout the rest of the year.
So I think I'm with you. I'll take slightly higher, too. What do you think, Phil Donah?
Is this the time where I admit I hate the bond market? I hate it.
Why do you hate the bond market? Oh, my gosh, because it's so counterintuitive. You have to flip
everything in your head before you can even think about what's going on.
You like the nice, simple, easy to understand markets like crypto better?
Yes, exactly. I was going to say, how do you reconcile that? That's even more tough.
In my mind, it's much more straightforward. I love the crypto market.
All right. Well, Steve, it's great to hear your insights here, but we can't quite let you go
just yet. We've got attrition here on this podcast.
Vodana, tell them what it is. We are going to play the craziest things you saw in the market
this week. I'll go first. For once, I'll go first. I was hoping to go first, actually.
All right. Well, you go first. Well, because I have an update for something that you,
I don't know, maybe it was like five or six episodes ago. I think you made me guess
on an iPhone, like an original 2007 iPhone, how much it was going to go for.
And the final auction took place. I don't know if you saw this.
Oh, I had missed it. $30,000.
No, it's way more. It sold for $63,000.
Wow. Yeah, it's like a vintage. I have pictures. Can we call it vintage? Yes, it's in its box with
the plastic wrap and everything. Yeah, $63,000.
If that's vintage, I'm a full-on antique at this point. Well, I may have one of those.
I may have one of those in my garage somewhere. Now, I need to even start here.
Well, you have a $63,000 investment. Take it out, Steve.
Put it up for auction. But I have another crazy thing. Okay, my weirdest thing is Starbucks
has this new drink. Did you see this? No, no, no. I can't believe it because my kids
have me make me driving the Starbucks at least twice a week. Well, you're going to be driving them to get
coffee with olive oil. They're literally just putting olive oil into the coffee and it's,
I don't know how to pronounce it. It's called Oliato. Oliato latte with milk and olive oil.
Is that a thing? Is that an old Italian thing to do? I have no idea. There's a picture and it's
how they make the coffee look so beautiful. All the milk is dripping down. And then
there's just olive oil next to all the coffees. So, yeah, it looks like it's literally just olive oil
and coffee. I can't wait to try it. Anyway, that's my weirdest thing. I don't know, Steve. That's a
tough one at the top. What's the craziest thing you've seen in markets? I don't know how that's a
market. I guess Starbucks is a public company. But publicly traded company. Well, all right, fine,
fine. Yeah, I can't compete with that. I would say the craziest thing I've seen
and it wasn't this weak thing, but I just had this realization when we were talking about cash
in the front end of the curve, you can buy a treasury floater, which has almost no duration
for like, I think it's somewhere between 460 and 464-70 somewhere around there. It's amazing
that you can get income off of something that has almost no duration and it's a treasury.
So think about what you had to do three years ago to get that kind of yield.
You either had to take on a lot of duration or a lot of credit risk. Now you can do that with
treasury floaters. That's pretty amazing. That is a good one. When you were talking
about how low yields got there for a while, I was flashing back to the whole notion of negative
yielding treasuries, which the front end did, I guess, go negative for a while there. But remember,
it was this big debate if and when the 10-year yield actually go negative,
life comes at you fast. When you think about how that was the craziest things we were talking
about a few years ago. It's quite a difference. All right, I'm going to give you mine.
Do you watch the WNBA at all? No. Women's National Basketball Association?
Just football. Well, you might not be very good at this one then.
I keep an eye on women's basketball. The dirty secret in the Regan family growing up,
there were six of us, five boys, one girl. We all fancied ourselves as hoop stars. But
my sister was really the best. She was the only one who played college ball. So I've always had a
soft spot for women's basketball. Diamond Miller at University of Maryland, where my daughter goes
now is Google her highlight reel. She's something special. There is a very famous recent WNBA player.
And I'm probably going to say her name wrong, but I believe it's Sabrina in Nescue. Sabrina in Nescue.
And her rookie card just sold, her rookie card for the WNBA just sold at auction,
highest ever price for a WNBA trading card. I'll give you a few details here. One of just five
copies in existence. It's graded as a perfect gem mint 10. Whatever that means. I guess that's
like a triple A bonds Steve, I guess, by third party greater PSA. So I'll take their word on it.
So it's time to play the prices precise. As you now know,
fill down a highest ever auction sale for a WNBA trading card.
According to CBS Sports, where I got this story from, what do you think it was?
I have negative knowledge about any of these topics, literally negative.
But there's only five that I'm so it's very unique. This is an exceptional player,
her rookie card. So that's why I chose it. I think it's a challenging one.
Okay, I'm going to go with $45,000.
$45,000. I like your confidence in that answer.
It's feeling very not confident in that, but that's my guess.
All right, Steve, prices precise rules are the standard rules.
Of that game show of a similar name.
Yeah, yeah, that shall not be named. But if you go over, you lose. So keep that in mind.
Oh, so can I do the, can I do the prices right thing and just go over by a penny?
Absolutely.
I'll be a little more bold. I'll say, I'll do six figures. I'll say a hundred grand.
Yeah, it's a tough one. I don't know what I would have guessed to be honest.
$10,800. Yeah, from Pwcc marketplace.
I win. I won.
I won.
I won.
Yeah.
Right.
I don't know. You both went over. So I think.
Yeah, but I went over by less.
I won. I think I'm the real winner here.
Well, what would you have guessed?
I probably would have gone closer to Steve, I think. You know, you kind of hype it up.
You know, it depends how you hype it up. You know, you think highest ever price, but
at the end of the day, you were still talking about 11 grand for a piece of cardboard.
Right.
It's pretty amazing.
So I have negative knowledge around cart collecting as well.
So.
But yeah, who would have thought? 63,000 for a quote unquote vintage iPhone and 11,000 for a piece of paper.
Yeah. Yeah. I wonder if you can still use the iPhone, you know?
I think so.
I'm looking at a picture of it.
I'm going to keep it in the box.
Yeah, because I guess in 10 years you'll sell it for double.
Yeah.
All right, Steve, go check that garage.
I'm definitely going to check the garage.
Anyway, great to catch up with you, Steve. I hope we can have you back again.
Somebody, maybe we'll have you back on the end of the year and see how that year end.
Yeah.
That could be fun.
I know. Thanks for having me.
Thank you, Steve.
All right, take care.
What goes up will be back next week.
Until then, you can find us on the Bloomberg terminal, website, and app.
Or wherever you get your podcast.
We'd love it if you took the time to rate and review the show so more listeners can find us.
And you can find us on Twitter.
Follow me at Vildana Hirek.
Mike Regan is at Reganonymous.
You can also follow Bloomberg podcasts at podcasts.
What goes up is produced by Stacey Wong and our head of podcasts is Sage Baumann.
Thanks for listening and we'll see you next week.
Bye.
Bye.
Bye.