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00:00What surprised you most about the speech this morning? Yeah, a lot going on today. So I think with Powell, the expectations into Jackson Hole were dovish and he definitely delivered on that. I think in two ways we were surprised. One, he really suggested the Fed was open to a rate cut in September. And rather than just focusing on the unemployment data, he's also focused on payroll. So all eyes in the credit market, I think, will be to the September 5th payrolls data potentially. What was even more surprising is his comments on inflation. So, you know, before there was a question of is inflation with tariffs going to become entrenched? And Paul made some comments that, you know, potentially it would just be more transitory. So sort of going back to that 2021 transitory comment. So for us, we were constructive heading into the meeting and we're regaining some conviction around that view following following his comments. And David, let me ask you about the comments, too, and the particularly the reaction in the bond market. Where are you anticipating such a violent move? Yeah. I think the market was was very excited about getting maybe even a 50 basis point rate cut in September. I think that, you know, one of the things coming out of Powell's comments is he's very balanced. There is a dual mandate here, and it seems pretty clear there's a lot more data to assess. And so likely going to take it in a much more measured pace, which seems a lot more prudent. So the two year yield down ten basis points. Now we're at 368, the ten year at 425. Are we done for the year? Can we go home? You know, I don't think it you know, the volatility is, I think, going to be, you know, going to continue through this market. I don't think we definitely can't go home at this point. But I think there's a lot more data to come through. We're going to have to see inflation prints and whether tariffs really are starting to push prices higher for people. We're going to have to look at unemployment data and see where that trends. And so I think there's a lot more to digest before we kind of see where this ends. Yeah, Megan, there's a lot to worry about, even in what the Fed chair said, right? He said, look, changing labor market dynamics and they're very obvious and not just have we got soft numbers on one side, but we also have softer supply. So what will that mean? Is this labor market changing entirely? There are so many questions. Tariffs as well. And their impact on inflation. Will it be a one time shock or will we genuinely see inflation creeping in week after week to the end of the year, as the CEO of Walmart said earlier this week? What is the base case for you, at least in terms of the labor market and how it's changing? So our base case is that we see a gradual slowing in GDP growth, but that doesn't mean it's necessarily a negative for credit. So earnings so far has held up really well. So in second quarter earnings, which we just got, we had 5 to 10% EBIT gross margins, which I think is the key question. If we see margin compression, will that feed through to the labor market? So far, margins have held up very well. It's a place we're continuing to look. But I think the key drivers of credit, we still have this secular tailwind of elevated yields. So for us, we think heading into the rest of the year, you have elevated yields that will keep supply relatively lower than it otherwise would have been and and demand from yield buyers will continue to be there. So for us, that will be a key positive driver for credit markets.

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Robson and Rosenberg on Powell, Bond and Labor Market

BNP Paribas Head of US Credit Strategy Meghan Robson and Oaktree Head of Liquid Performing Credit David Rosenberg discusses Jerome Powell's comments at Jackson Hole, how the Fed's decision to cut rates affects the bond market and labour market. They speak with Vonnie Quinn on 'Real Yield.' (Source: Bloomberg)

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