Show notes
Seth Carpenter, Morgan Stanley Chief Global Economist, and Mark Cabana, Bank of America Head of US Rates Strategy, break down the US Treasury's refunding announcement. Dom Konstam, Mizuho Securities Head of Macro Strategy, previews the Federal Reserve's rate decision. Win Thin, Brown Brothers Harriman & Co. Global Head of Currency Strategy, expects Japanese yields to continue to rise after the BOJ's decision. Jennifer Flitton, Invesco Head of US Government Affairs, discusses the latest in Washington on US aid to Israel.Get the Bloomberg Surveillance newsletter, delivered every weekday. Sign up now: https://www.bloomberg.com/account/newsletters/surveillance FULL TRANSCRIPT: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best an economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. Where this seth Carpenter at, the chief global economist at Morgan Stanley. Is this just about in our start? Are we all John Williams this morning and we're readjusting? I clared it with me last week at a Bloomberg event. At two point zero percent is not two point six percent? I mean, are we really talking, as Mike aludes tou there about a new inflation regime? I think you want to separate out a couple of things. One is the new inflation regime, and there if you're comparing it to where we were from the financial crisis through COVID to say, yes, right, the FED was consistently missing it's inflation target to the downside. I call it a quarter percentage point. We're above, clearly above target now and over the next several years they want to bring it down, but I'm not sure they want to go back to the old days of you know, being below two percent on a regular basis. So if they're going to be averaging a little higher during expansions, call it a tenth or two above. You know, you're talking about twenty five to fifty basis points high inflation, so that's got to be there. I don't think we're talking about the difference between two percent inflation and three percent of I want to tell you on radio on television where we're heading here, what half are we have. We have Dark Carpenter with this on the broader economics of this moment. Ira Jersey schedule to join us just exquisite here on fixed income dynamics, and then we do even better. Mark Cabana is going to darken the door. Who's just expert on your world about you know, the different tranches of the auctions. I want to dig into what the implications are of this announcement sas and to me, I'm looking at the idea that they're really going to force the front end to a lot of the heavy lifting here. Does that pose a greater risk than people realize. So my view is no, the way I would think about it. There was a speculation that back and forth a little bit earlier, did the Treasury just react to the market. And I think you want to remember that the folks there at Treasury, Josh Frost, the assistant secretary, the career staff in debt management, they have a structure now, they have a framework for how to think about what to issue, and they're looking at what is the market saying about where the market wants to pay up and where the market's demanding a discount, and at the margin, they'll lean a little bit more to where the market wants the paper and lean a little bit away from the place where the market's pulling back. And we've seen over the past several months a big sell off in the long end. It showed up, you know, in models speak and the term premium, and they're paying attention to that. It's not that one week to the next, or one month to the next, or even one quar to the next, is it sustained. What we are seeing is very much a strong move on the long end in that thirty year yield plunging back below five percent. As we were talking about do you think I think that this indicates that really what we're seeing in yields is entirely a supply driven story more than anything in terms of an economic read on strength and inflation in the US. So no, it's so hard depending on any single thing. When I talk to our clients here in New York, in London, around the world who are trading in treasuries, there are a whole set of different narratives, one of which has been supplied. People have been worrying about the deficit, which is exactly why Secretary Yellen came out and said it's not the deficit. People are worrying about stronger growth. Q three GDP data was very strong, There's no two ways about it, and so that contributed to it. Other people are worrying about is there going to be a pullback from risk by global investors. Other people are looking at the back of Japan. We just had that meeting right where they effectively de facto got rid of yield crop control. So it's not just one single thing, it's everything coming together. So what's your compass at a time where we're expecting the FED to come out today too in varying shades of we have no idea and we will see just along with you, what is your guiding loadstar. So we're trying to figure out, along with the Fed, sort of what's going on with the economy. The strong Q three data and notwithstanding there are some signs of the economy slowing down. The last jobs report super strong, but if you look at the trend over the past eighteen month, clear downward trend. If you look at the GDP data, consumption spending holding in, but a lot of the strength was in inventories. Capex was not very strong at all, and so we are seeing that slowing. And so what we think is the Feds look in the same data we are. They're driving by feel a little bit and they're not going to hike today. We don't think they're going to hike in December because inflation just keeps undershooting their own forecast for where they thought inflation was going to be this year. What does the job dynamic look like with an ellen Zetner's sub one percent Q four GDP, Well, I think there This is where we want to keep in mind that there's so many swings from one quarter the next to some of the spending data. Like I said, the inventory, the numbers, that was never going to be the primary driver. So she starts giving you gloom on the job economy. Not at all. I will say that we have a Morgan Stanley Ellen and I and the rest of the team have been consistent from the beginning of this hiking cycle to say, the Fed's gonna hike, They're going to bring down inflation, but we are not going into recession. It is not doing gloom. Well, she's expert on the American consumer. What is Zenner when she gets fired up? You know she does. When Zender gets fired up about the American consumer, what is she saying? Lots of things, but in particular, one of the key risks that maybe people are overlooking for why there should be a slowdown in the fourth quarter is student loans. Right, there is a moratorium on student loans that's been lifted. We're starting to see that payback starting to happen, and that has to crimp consumer disposable incomes. That matters durable goods. Right. Interest rates are high, credit card rates are high. People financing cars and other things, it's just costing more and so they'll pull back on the spending. It just extraorded her. Seth Carpenter, thank you so much, really really appreciate it. With Morgan's stay, he writes piercing notes for Bank of America. There's no other way to put it. Out of US rates strategy, He's aged in the last ten minutes. Mark Cabana joins us this morning. So I'm like refunding, so what, I don't care. Everybody's in a ladder. It comes out, and to me it was sort of I don't you know, I really don't care. Jenny Allen said, we're gonna do short paper. Yeah, we're gonna do long paper. But we're the United States. Our listeners are viewers who are not sophisticated. Do they need to fear the fiscal system of America? No, you shouldn't fear the fiscal system because the US economy is still going to be very robust. There will be buyers for treasury paper. It's just a matter of at what level will they step in, And we've had a relative lack of buying recently, but that's meant that yields have had to adjust, and as they've adjusted, that should incentivize more investors to think about owning bonds and we do think that rates are going to keep rising or they're going to stay elevated. Really, until you see one of two things. Number One, until you see the macro data slow, we don't think that you've really seen that yet. Or two until you see d risking, until you see investors who think, you know what rates are kind of high, really yields almost a two and a half percent at the tenure point. That's a decent own and maybe I should think about de risking in my portfolio. This is such a valuable conversation. Then I got to get to what we see on balance sheets right now, mark to market and the rest of it in bonds. But let's stay on this theme right now of our new higher yield regime. How far out are you in the longer? I mean, if take any given yield, any given spread, is there a cabana one year, is it a cabana three years? How do you see the regime of longer? Well, we just think that rates are going to have to stay higher for longer. Not to reiterate the Fed mantra, but we really believe it because we've seen an economy that's been so resilient in the face of relatively elevated interest rates. And as long as that happens, that just is going to mean that the f it doesn't have to cut for a while. Now, when I think about longer, I personally think about five years plus. Oh wow, okay, my attention, just because you know, most investors who really focus on liquidity and liquidity management, they think generally two years, three years. But when I think about intermediate to long end, I think about five years plus. Okay, And I'm going to invent this phrase right now. I haven't seen it anywhere else. I want to copyright on this if you use it. Is it normal for longer? Is that really what we're talking about, is we're back to a normal rate regime. Well, it's certainly we're back to a regime that looks a lot more similar to the pre financial crisis than the post financial crisis. You've got a five year window on that. So what maturity do you buy? I'm in cash, I'm really comfortable at Bank of America. What maturre do you buy given a five year normal for longer view? Well, it really depends upon what your overall investment horizon is and where your preferences are. We think that if you're focused at the front end, you probably we want to be neutral to slightly overweight your benchmark. And if you're a more long term investor, we think that you at best want to be neutral right now, and you want to stay neutral until you see those signs of feedback that tell you that higher interest rates are finally slowing the economy, not just one data point here or there, but in the tier one stuff in labor more clearly an inflation. You want to stay neutral until you see those signs, or until you believe that there's a clearer and more definitive negative feedback from risk assets, which I don't think that we have really seen sufficiently yet. I love to bust Brian moynihan's chops because he, like no other CEO, quotes his research staff and I'll go blah blah blah about Bonzi and his own Cabana says, So let's get the report from Cabana that you would give to Brian moynihan right now. I got balance sheets, nationwide, mark to market I get, and I got everything else with massive bond losses, priced down, yield up. Should our listeners and viewers be afraid of this non marked market garbage on balance sheets. Well, I think you're talking about bank balance sheets, and we do appreciate that. Brian reads our research. He's a staunch supporter, and we really do appreciate that. We think that what banks are doing right now is that they are really prizing liquidity. They really want to hold as much liquidity as possible. They're choosing to hold cash, they're keeping reserves with the FED, and they're not buying bonds, they're not buying treasuries or mortgages, and they're prizing liquidity because they know that they need to meet their outflow needs. They know that their securities book is not particularly liquid because it's so low in value. You don't want to sell and realize the loss. We saw what happened with some of the regional band. So what do you do? This is the key thing. So what do you do if you're a bank? What do you do if your bank? If you've got all this out there and you don't want to sell, just like you said, but things can happen, things can change. How do you process that reality? If you're a bank, what you're doing right now as you're holding that is the game. That's why the Fed shrunk their balance sheet through QT by a trillion dollars, and you've seen bank cash holdings not move down very much at all. They are bidding up on the liability side of the balance sheet. They're issuing CDs, time deposits, etc. To take in more money because they're seeing retail outflows. And then they're holding cash and they're going to continue to do that until they see signs that the economy is turning, until they know that their loan growth is really slowed down and maybe negative on a year over year six month average or whatnot. And they're gonna wait until the economy slows more meaningfully to extend out the curve and buy those bonds. Right now, banks are not buying duration. They've been shrinking their treasury and agency holdings, and they're going to wait to add duration until they see definitive signs that the economy is turned. And so again, what banks are doing right now, it's holding out liquidity because that is the most valuable thing that they seem to believe that what does holding out liquidity mean for mere mortals that can't hold out liquidity? Small business? Torsten Slocke at Apollo talks about ten percent small business loans as well. I saw a thirty one percent charge card the other day. It wasn't Bank of America, of course, thirty one percent charge card interest rate the other day. What does the public do given price down, yield up banks saying I'm scared stiff, I got a whole cash. Look, it's a tough time to be a borrower. I think we know that, right. It's tough time to move, it's a tough time to buy a home, it's a tough time to be a business if you need a loan. And that's exactly what monetary policy is trying to do, right, It's trying to slow down activity by reducing demand for loans and borrowing. And so if you're a small business and you do need a loan, well you need to think about, Okay, what other liquidity sources do I have? Can I draw on any other type of liquidity? And then you've got to ask yourself do I really need to expand? Do I need to make that next investment? And you got to make sure that you can clear a much higher hurdle rate in order to justify those costs. That's how monetary policy works. It should slow down activity through the lending channel, and to some extent we're seeing that, but it hasn't happened, I think to the extent of the FED, like Mark Commander, thank you so much. With the Bank of America joining us now to begin strong on this day of a Federal Reserve meeting is Dominic Constem. He's head of macro strategy at Mosile Americas. For years literally iconic Credit Suite were thrilled that doctor Constem could join us today. Dominica, I give you the phrase super restrictive. Is Jerome Powell's FED combined with market action a super restrictive FED. Well, yeah, in the context of the sustainability of the US consumer, and if you like the overhang of debts refinancing in the corporate sector really beginning in twenty twenty five, you know, clearing the front end is super restrictive, and it's going to have to get first quite aggressively. As some stage that the issue is a timing, and you know that timing has been pushed out because the consumer who's got great balance sheet, has decided that even as they spent all their fiscal excess that they were given after COVID, they're deciding to leverage up even with interest rates as high as they are, but they can do that because of the balance sheet, So that kind of delays the impact of this super restrictiveness, which is kind of a bit of a conungrum for the Fed. So that's the price for longer, not higher for longer, but just longer. What is the cost did your own power of a longer strategy at these levels? Well, I think what's happened in the last couple of months really has been that the Fed has decided that, you know, because effectively they are super restrictive, they didn't want to keep on pushing up short rates, you know, don't not quickly go to six percent. So they've emphasized this idea that they're just going to hold at a high level for that much longer. But ironically that directly feeds into a sell off in the back end, the idea that what we call term premium, this risk premium that's short rates you end up being higher than the equivalent tenor of a longer dated treasury. That's term premium that gets priced into the market, which is why you've had this enormous sort of bare steepening going on with the tens going up to close to five percent thirties, nifiing the corter, et cetera. And in a way that that's not a bad thing if you want to slow the economy, but because that will undermine and is undermining risk assets, and it will help to tighten financial conditions overall. So that's the impact of what the Fed is doing. There is a risk though, that they run because you get people concerned about the as you mentioned earlier, the refinancing of the Treasury. You know, when they decide to issue longer dated debts that now it is coming in at much higher interest rates, and you start worrying about a vicious circle where if you can't reduce a debt so through spending cuts, well you've got another problem because your interest service costs are going up at the same time. And that's kind of get people worried about this idea that Treasury isn't going to be able to sustainably fund itself down the road, particularly when you get those sort of you know, bigger issues coming up, the structural issues coming up that will mean higher deficits. There's always been a sort of uncomfortable tension, especially now between the Treasury Department and the Federal Reserve, especially because the Treasury Department is helmed by the one and only Janet Yellen who used to head the FED. How much is a treasure you're going to try to game out the market and kind of give a helping hand to the Fed by not concentrating some of those debt sales in the longer end, sell tea bills and hold a pad and wait for things to normalize. Well, I mean, it's obviously a great question and issue. I mean, strictly speaking, I don't think Treasury really should gain things too much. You know, they're not really traders as such, and if they were, then you know, maybe God help us. I mean, the idea I think is is, you know, you do have rollover risk, so you know, no one really knows how quickly long term rates might might reverse, even if we go into some slowing you know, where is this sort of mutual rate It might you know, might be higher and maybe ten years trading around you know, five percent is the sort of new norm. So I think it wouldn't be appropriate for the Treasury to really try and game the markets or a near term and sort of second guests that short term rates are going to come crashing down and they'll be able to refinance themselves down the road by extending maturity later. So I think they'll they'll probably extend the duration. I think the estimates are kind of you know, you know, seem about right, this sort of one hundred and fourteen billion and putting it in coupons. And because of the announcement we had earlier in the week, they can cut bill supply bits. So that's our expectation and no gaining of it. Basically, a lot of people expect this to be a boring meeting, sibad or Jappa calling it a placeholder, Steven Linder saying, how many ways can you say we'll see? I mean, this is basically going to be a holding kind of pattern. And yet we see a dissonance growing where the market sees and escalating's chance of excelling, reaccelerating inflation. At the same time that the Feds kind of seeming to subtly agree with Janet Yella and saying that yields are going to go back down. Do you think they're going to bridge that gap today? Well, they could do. I mean they've always got the option to. I mean that there are a couple of interesting things going on. I mean, obviously this sell off in the long end is very interesting, and I think they can definitely address that in the conference call and basically say that's doing some of the work for them and be a bit more optimistic. They can also be actually, even though inflation has been a bit sticky on the very latest prints, they could be a bit more optimistic on that. We've done some background analysis on that, and the reason why inflation has been a bit stick is it's really been on the demand side, less on the supply side type thing. And I think that's encouraging because that's something a little bit more understandable and sort of indicative that, you know, the underlying trend lower is still in place for inflation, and obviously the global inflation picture has been looking a bit better, so I think they can basically, you know, I don't think it'll be an uninteresting meeting or press conference. It's just really a question of how far power wants to go down the road and try and sort of reassure markets. One interesting thing I always think is that you know, to what extent to the FED really anticipate or understand that their actions at the September meeting was going to lead to this sort of you know, near one hundred base on itseel off in the long end. I mean, it's been quite dramatic, And did they really expect that way? Yes, this is a question dominic and why this is outside your remit. But we've known each other for years, So I'm going to go from the macro of constant to commercial banking. Bernanky taught us at Princeton that financial structure and strength matters. I'm looking at the technical construct of the American banking system and I don't like what I see. Should the FED fold in what's happening to the banks right now? Should they today pay attention in their meetings to the weakness that we see in commercial banking equity prices? Absolutely? And I think the thing that so many people miss is they think that banks are kind of less important now than they were before because of alternative banking, you know, fintech, private equity, you know, other forms of leverage if you like, in the system that they people think seem to think, you know, credit is created elsewhere. Credit is that there's something called outside money, which is a central bank, and they start the credit creation process there's in something called inside money, which is the banking system, and they continue the credit creation process. And to be honest, that pretty much is where how credit is created. Money it can only be created by the FED and the banks to the bank multiplier. It cannot be created by private equity. They have to get their leverage from somewhere. And so I think you always have to go to the banking system, and you always have to focus on if the banks are kind of doing their job, even if the leverage overrule in the system is getting higher and higher, and the relatives of the banks, they're the ultimate ones who if they pull the plug, let alone the FED putting the plug, then the whole kind of system can start to implode. So I do think it's very important what's happening in the banks, and I think it's a big concern that obviously lending is slowing down. There is obviously regulation and there's some credit some cattle restrictions taking place, but that's all part of the cycle. And as long as the FED is there to pick up the pieces at the end of it, we're fine. But those pieces will need to be picked up. You sound like Alan Meltzer, the late Great Alan Meltzer, lender of letters. Who are dom I got thirty seconds? Are you concerned the massive shift from deposits to money market funds? Is that going to destabilize the system. Well, it's been a challenge, but to be fair, that TGA build up that the Treasury has done has actually come at the expense a lot of the money market funds and the repo there. So I think, you know, the Fed has actually managed this process relatively well with the help of the Treasury rebuilding TJA with all that bill issuance, so you know, you know, it's it's a relatively orderly process, but it's obviously something that you've got to keep watching. You don't want excess reserves to get too low in the banking system. Is that to Constant? Thank you so much, Dominic Constant with the Missouri Are they just a terrific brief Therey joining US doctor Wynn Thinn, global head of Currency Strategy around brothers Harriman win Thin. You were at the altar of Robert Mundel at Columbia who invented our international currency dynamics. Is there a theory to what Japan is doing? Are they making up original theory? Well, first of all, thanks, thanks, as always a pleasure to appear here with you guys. To me, it's an experiment, it's an ongoing experiment. You know, Japan has been fighting deflation for decades and they've thrown everything at the wall to see what sticks. The latest iteration was negative rates and he locor control and by hooker, by crooked, it's it's finally getting out of deflation. It's obviously the positive makers are very nervous there getting you know, starting these poses is the easy part. Getting out of them is always the hard part. We saw the FED struggle with getting out of q back after a great financial crisis. So what we've been seeing unfold over the last year is just a really haphazard so again throwing stuff at the wall to see what works. It's been again more out of fear and concern than anything else. They don't want to upset the opera card that the recovery is, by many measures, you know, quite modest and vulnerable, and so that's what we're seeing. I do think that that Japan will exit accommodations fully in early times, and by that I mean a ray hike. Why should our why should our viewers and listeners care in the Western world, it just seems to be removed and over there. For example, comparing the yuan the ren menbi in China to Japanese. Yeah, and even with we you want versus a dollar, it's studying how weak the Japanese yen is versus ren memby. Why do I care in America? Well, I think, as you guys pointed out just earlier in the segment, Japanese investors have been have been basically leaving Japan and chasing yield and returns elsewhere. And that's because of the zero rate interest policy and heal com control. Domestic eiels aren't attractive enough. So we've seen massive capital outflows of Japan over the last years, if not decades. If we get that infection point where things change and actually rates are allowed to go back to market based levels, I think the fear of at least in Japan and others, is that that wave of capital will come back from crashing back. And already seen announcements some of the Japanese life insurers that they planned the second half of this fiscal year to underweight foreign investments, foreign bonds and overweight jgb's in anticipation of normalization. So there's also the capital flow stories that I think, you know, coming in a time when we don't know what the Fed's doing, we don't know what's going on in Europe with the Middle East. It's just another sort of added uncertainty that Marcus had that jests and I think that's what I think investors in general are worried about. It's almost deliberate ambiguity. Is deliberate ambiguity by the Bank of Japan going to actually create some sort of soft gradual increase in yields and some sort of controlled departure from yaled curve control. Yeah, yeah, at least I think that's what we're seeing. In fact, in my opinion, Yeald curve control is dead. It's deader than Elvis right now, as far as I can tell, they've they've introduced this ambiguity where it's now one percent is now reference point. Who knows what that means. So the market will will prod and tested the Bank of Japan not just on heels but also on the dollary in and it's gonna be a cat and mouse game. But really, for all intents and purposes, jgbills are going up. They have been going up. They will continue go up. We'll go above that one percent sort of reference point within days, and you know the upside I think natural sort of target for the markets. Where we go from there well dependent what's going on in other global market, especially US treasuries. But again, this is normal. This is you know, we've been it's very what I would say, an abnormal period. And it's been going on for decades in Japan of zero rates, negative rates, year clear control and it's abnormal. And I think that they're trying to exit that, but are obviously very very scared of the ramification at least some moments ago, the d X y unraveling. Right now one oh six point ninety one, we're really buttressed up here against the one oh seven on DXY and is clearly yet led by en dynamics. And this goes like the banking stocks. I'm sorry, you just have to look at the Bloomberg screen and it's screaming a certain level of tension out there this morning without being you know, a toxic brew of gloom. I mean, it's just the markets are speaking before this FED meeting, and it's not all the managed message of the elites. When to that point. How disruptive is the fact that the dollar has continued to strengthen and not weaken as so many people thought this year. Well and for the for the US, it's good because the stronger currency helps to limit important inflation. What we were seeing particularly stress is with emerging markets, especially in Asia, that's being double whemmed by the yen, n by the dollar. But basically we've seen many many emerging market center banks intervene to help support their own currency. We've seen surprise rate hikes, we saw that from Indonesia last month, and we've also seen countries that are cutting weights slow. They're easy because the currencies are coming under pressure. So it's to me it's really a toxic root for emerging markets. That is a height height money conditions in the US, slowing global growth slow in China, and easing cycles in emerging markets, and that's all to be a very toxic row for emerging market currency. You should have seen Tom King's face when you said toxic brew. His ears perked up and he was fully into Robert Mondel used to say, Robert Mandel would be in a lecture and he say, look, you know the Mundell triangulation and in partically ununified currency. It's one big time. This is a difficult time because people have been throwing around people have it thrown around where it's like toxic brew for quite a while. And yet we have been in a sort of uneasy equilibrium all year that's really been tapped off by a US dynamism. You go, what do you mean? I don't think it's been an an easy equilibrium. I think the markets are talking here. You know, I'm going back and forth, Doug cass here on the banks, you can rationalize us all you want. Yen one Fifty's why we're talking to win thin so win way in on that. Are things breaking down in a more material way that'll lead to more traumatic moves in effects. Well, I think was the main driver that's really taking anyone by surprise. This is the continued strength of the US economy and by that extension the US dollar, the FED and all that. I'm of the opinion that the Fed will probably get us into a recession next year. But I don't look for anything quote unquote break by break, we mean like a financial crisis, banking crisis some sort. We had to scare back in March with SVB but we found that was, you know, to me, an idiosyncratic situation with SVB and signature. So to me, you know, all the stress tests suggest that that the global financials remains fairly resilient. Now look, that's like we all know that. That doesn't mean you know, a whole lot when when when push comes to show. But I do think that we are sorting this post gred financial crisis uh so situation where yes, the institutions and and overseers and regulators are all sort of on the same page and and hopefully uh willing and able to head off a crisis. Now, well we see pockets of stress. You know, we've had frontier markets blowing up, emerging markets or Canade remain in the stress look UK, uh Europe or into recession. But you know, nothing again, nothing sort of broken. This is sort of a normal thing. I used. I'll leave this, you know with the final thought is that, let's say, normal sort of situation terms of down town going too faster in the US, that's hiking, We're gonna slow, we maybe go into recession, but then the whole cycle starts over. It's not something to worry about. I've got to leave it there. Doctor, Thank you so much, he says Brown Brothers Harriman. There's been an issue in the US side of things, first of all how deeply the US troops will get involved, but also how much aid can actually get passed to go towards supporting both Israel and Ukraine, which no one is talking about. Jennifer Flytt and covering all of this fantastic guests to really analyze it for US head of US Government Affairs at INVESCO, Jennifer, what do you make of this split that we've seen with the House proposing a separate bill to fund Israel that yesterday President Biden said, Vito right, he issued a veto threat. That's correct. Yesterday. We're going to see what the House can do. I think it's still an open question if they have the support because they have paired the Israeli funding with an offset that directly sort of impacts that Inflation Reduction Act and of the irs, and so they will lose the vast majority of Democrats. Could they gain a couple while they lose a few of their own Republicans? I think that's the question, and we'll see that play out on Thursday. What does it tell you about the nature of funding agreements. If funding Israel comes at the expense of cutting the agency served with collecting taxes, well, first, I would say this is an opening salvo for the House because they will have to negotiate no matter what with the Senate. Schumer has the majority leader in the Senate, has already stated that this is dead on arrival, so there is an expectation that there will be further negotiation. But when it comes to offsets, this is a reflection of what is happening in America right now with regard to our own domestic debt our, own deficits that we're running right now. And that's what Republicans and their districts really feel a need to answer to. Jennifer. I believe it is November first. Count it down sixteen days to November seventeenth. It's been left in the debris. We've forgotten about November seventeenth. Give us a brief of the importance of November seventeenth inside the Beltleigh, it is coming upon us very quickly. That is an excellent point and it is not lost on most members. Also, most members that want to get Ukraine funding through the House, Republican and Democratic members and the Continuing Resolution, which is that stop gap that runs out on November seventeenth that has to be extended. The Ukraine funding may have to ride on that continuing resolution. However, they work it out and we'll see that over the next week. They're currently drafting another continuing resolution in the House. Jennifer, there's real dissonance and a headline Stiffe been reading and I am trying to square them. I'd love your help. Basically, on one side, you see the fight that's escalating in Congress, it's escalating with the White House over how to get financing to back these efforts. And then on the other hand, we're talking about US troops potentially being in Gaza indefinitely after the war to keep some sort of peace. What is the appetite in the United States to have a protracted role in some of these conflicts that seem pretty intractable right now? That's right. I think there are a number of steps though that we have to get to first, right because US troops are in the region, of course, they are in Iraq there in Yemen. This was discussed a little bit at the hearing yesterday with Secretary of Blincoln and Secretary of defense Austin. They have been attacked over the last week two weeks. They have had to retaliate in those attacks, and the expectation is to deter further escalation. That I think is the immediate issue before we get to the longer term issues in Gaza. Israel is able to contain that area. There's also a really short term kind of issue with respect to President Biden's approval rating in some of the swing states. And there was a poll that recently came out that more than fifty percent of Muslim Americans used to support President Biden and now a fewer than twenty percent currently do. How significantly is this going to color the entire debate next year? That's an excellent point. I think the tension there within the Democrat Democratic Party and seeing some of those polls, but even seeing the streets right, I mean, we've seen the protrust across America, not just among Arab and Muslim Americans, but also with young people, young progressives on college campuses, and they do see that as a threat. So how they're going to diplomatically work within their own party and their own voters. I think we're starting to see that play out. Jennifer Thank you so much. Jennifer flintne with this with Invesco there on Washington and the war in the Eastern Mediterranean. Subscribe to the Bloomberg Surveillance Podcast on Apple, Spotify, and anywhere else you get your podcasts. 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