Managing Director, is a member of the Multi-Sector & Mortgage Investment Management Group within BlackRock Fundamental Fixed Income.

Good morning and welcome back into the financial exchange I -- shots out of filling in all week for Barry Armstrong. And we just had Joanna -- senior from Bloomberg News in affiliates and on what was going on in the markets this week. And also talking would unite our big text question of the day. How much are you planning on spending this year for the fourth of July study shows people are -- -- spending about 10% less this year. We wanna know you're doing it too so texting to 680680. -- let us know what your plans are for the fourth and if you're gonna be spending more or less than last year. And right now we have -- we have Martin Hagerty who is and I'm I'm hoping I can get this right again is the managing director. Of the multi sector and mortgage investment management group within black rock for fundamental fixed income. And Martin how are you doing today. I'm good thanks check how we did. I'm doing pretty -- BI -- a great fourth of July plant are are you planning on spending more or less this year than last you for the fourth of July. I will probably be spending about the same. I I have a heavily pregnant wife so we'll be not to do too much about it. So if you got -- got an extra person to feed those so you certainly going to be spending a little bit more than so let's talk a little bit about what's going on in the fixed income market will we keep seeing bonds being picked up by investors that are trying to flocked to safety so. What are the strongest sectors out there right now for investors. Well as you said we -- we deeply in pleasant to bomb them and of the biggest factors that we are seeing him president to -- is the high yield. And IG credit space where. You know given that the load level our rights thus far out of maturity spectrum as you -- -- -- investors seem to be looking for yield and -- -- appalled that you. They can get that's. And without much duration risk most of those close to put it becoming into the high yield spent where there is a lot of yield to be picked up without taking too much generation rescue. Now let's talk a little bit about that high yield sector because this is what's traditionally known as junk bonds so. In terms of the deep fault rate that we're seeing on those is it below or above historical norms that something folks should be concerned about. Well I think what happened at a lower rate environment over the last couple of years has actually helped a lot of these high yield issues to do a fair amount to balance sheet repair so. They know default rates being products and -- are somewhat but those historical levels and that is what is keeping me in those relatively healthy at this point in time. Okay and and looking at a different sector inside. Of the the bond market let's talk a little bit about tips now because tips have been -- really a pretty popular sector over the last couple years and in particular you know we've seen investors flocking into treasuries. But the yields on tips -- almost zero now so how or why are people still piling in the tips with yields so low. Well you know to the yield on perhaps depending on where you look on the kind of are actually actually negative you know we have five year real yield trading at. At at minus -- -- -- at levels through minus 1% and we have tenure real yield trading at. At around minus fifty basis points. What when you look at the yield on -- you're actually looking at at a real yields so basically what is -- your yield going to be off there inflation. And win the -- -- laid across into the volatile markets space you're not. You know one cannot look at an inaudible the only an opinion probably yields -- today around one point 65%. But if you think. All -- what inflation is going to do that crook -- that return over the next ten years the actually have to be looking at yield on a real basis. And out of the one great thing that tips market gives you perspective into. So that somebody buys a -- Kenyan today at 160 fall you know you've got to think about what inflation is gonna do to that returned. And that is the one reason why we are seeing people putting money into -- that's because at least you know what. You're downside is if you buy a 160 for a one to 65 opinion on now and inflation. If that doesn't come and a 2.2. Percent like the market is currently pricing and outcomes and win -- Three -- 4% you're actually going to be in experiencing and negative -- -- lost a normal terms on your investment. It's of the tips providing that protection from now lost directs. Yes and did date you know if -- helped maturity. You will be protected from from from our inflation. Okay and so looking then at the next couple years let's talk about inflation what are what are your expectations and look at what's the market expectations for inflation. Over the next couple of years. While market expectations for inflation over the next couple of -- are are somewhat somewhat that one and that that I -- I am in agreement with its. If you look at Department of Energy prices for the next furor to they're relatively well behaved so we actually have headline inflation. Put this here continued demand relative -- -- probably going down to sort of the one and a half percent leveled by Europe and but if you look on a global basis and that trying to look controlled -- a little bit further into the calculation also -- inflation what factors contribute. You know we think that despite the relatively. Soft growth in the economy inflation as additional core basis is going to remain a little bit more dobbins met one would normally expect with this growth rate because. -- -- 40% of the contribution to the core inflation calculation. Actually comes from the housing market and with that the rental market remaining relatively tight at house prices. Actually finding someone at the bottom would -- that -- rebounded in that house prices stay -- over the last couple of months I think you have that potential forum. House prices and the rental component could to continue to support a they're relatively. Just put a floor under the core inflation -- division and going forward. But. I think the bottom line is that headline is going to continue to be driven by energy prices. Over the -- In -- while he's on the net will drive headlines around. Yup and and we'll certainly keep and I have to that again that was. Martin -- Maarten thank you for coming on with us this morning -- a problem --