RUSH TRANSCRIPT This is ░░░░░░░░ close scarlet welcome back ░░░░░░░░ the close I m ░░░░░░░░ Fu Romaine I m ░░░░░░░░ Bostick It looks like ░░░░░░░░ would get an extension ░░░░░░░░ the rally a rally ░░░░░░░░ showed a lot of ░░░░░░░░ at the last couple ░░░░░░░░ sessions Today we did ░░░░░░░░ higher but only modestly ░░░░░░░░ the the S P ░░░░░░░░ up to 8 of ░░░░░░░░ As you see on ░░░░░░░░ screen behind me that ░░░░░░░░ not hold It faded ░░░░░░░░ the close Modest drop ░░░░░░░░ the day That was ░░░░░░░░ of what we saw ░░░░░░░░ the other major indices ░░░░░░░░ you go down on ░░░░░░░░ sector basis it was ░░░░░░░░ tale of two cities ░░░░░░░░ did see a lot ░░░░░░░░ strength in the financial ░░░░░░░░ as we got more ░░░░░░░░ out of the big ░░░░░░░░ can CitiGroup as well ░░░░░░░░ Bank of America They ░░░░░░░░ not shook about tariffs ░░░░░░░░ shook right now about ░░░░░░░░ potential of a recession ░░░░░░░░ an eye on the ░░░░░░░░ We got united reporting ░░░░░░░░ little while ago As ░░░░░░░░ were talking about scarlet ░░░░░░░░ very wide range of ░░░░░░░░ outcomes going forward here ░░░░░░░░ they are saying they ░░░░░░░░ navigate through any potential ░░░░░░░░ risk Scarlet it depends ░░░░░░░░ what happens but they ░░░░░░░░ give two different scenarios ░░░░░░░░ case there was a ░░░░░░░░ I want to start ░░░░░░░░ netflix one of the ░░░░░░░░ advances in the S ░░░░░░░░ 500 as well as ░░░░░░░░ NASDAQ 100 after The ░░░░░░░░ Street Journal reported that ░░░░░░░░ student join games to ░░░░░░░░ revenue and reach 1 ░░░░░░░░ by 2030 Ambitious through ░░░░░░░░ turmoil and stating that ░░░░░░░░ pretty clearly Boeing a ░░░░░░░░ recliner off 2 4 ░░░░░░░░ the day on signs ░░░░░░░░ aviation has become a ░░░░░░░░ football Bloomberg learning that ░░░░░░░░ has ordered its airlines ░░░░░░░░ to take further jet ░░░░░░░░ from going as part ░░░░░░░░ a larger effort to ░░░░░░░░ purchases of equipment and ░░░░░░░░ from U S raised ░░░░░░░░ Romaine we are keeping ░░░░░░░░ eye on what is ░░░░░░░░ on in the broader ░░░░░░░░ particularly when it comes ░░░░░░░░ volatility Vix hovering around ░░░░░░░░ down significantly from last ░░░░░░░░ s intraday high of ░░░░░░░░ move indexes also lower ░░░░░░░░ of course elevated from ░░░░░░░░ it was a few ░░░░░░░░ ago Nancy Davis is ░░░░░░░░ founder and portfolio manager ░░░░░░░░ quadratic capital management and ░░░░░░░░ says there is still ░░░░░░░░ lot of uncertainty in ░░░░░░░░ Volatility will remain elevated ░░░░░░░░ markets try to determine ░░░░░░░░ path forward Pleased to ░░░░░░░░ that Nancy is right ░░░░░░░░ in studio Great to ░░░░░░░░ you in person Nancy ░░░░░░░░ to see you Romaine ░░░░░░░░ don t think anyone ░░░░░░░░ volatility to go away ░░░░░░░░ soon but is it ░░░░░░░░ to be onerous Are ░░░░░░░░ going to see the ░░░░░░░░ of spikes we saw ░░░░░░░░ last week and a ░░░░░░░░ Is that going to ░░░░░░░░ the norm in the ░░░░░░░░ future Nancy everybody s ░░░░░░░░ at the vix People ░░░░░░░░ focused on equity The ░░░░░░░░ I want to stand ░░░░░░░░ and make people aware ░░░░░░░░ is your bond portfolio ░░░░░░░░ what you should be ░░░░░░░░ about because bonds have27 ░░░░░░░░ the bloomberg bonds have ░░░░░░░░ of the bloomberg ag ░░░░░░░░ mortgages Mortgages are inherently ░░░░░░░░ volatility It is not ░░░░░░░░ vol it is interest ░░░░░░░░ vol It is so ░░░░░░░░ for investors to realize ░░░░░░░░ even if they are ░░░░░░░░ nothing just with the ░░░░░░░░ vanilla bond portfolio they ░░░░░░░░ only short volatility Romaine ░░░░░░░░ am curious come in ░░░░░░░░ environment I understand your ░░░░░░░░ about short vol with ░░░░░░░░ to mortgage debt but ░░░░░░░░ interest rates where they ░░░░░░░░ and the Fed saying ░░░░░░░░ they are not planning ░░░░░░░░ lower them anytime soon ░░░░░░░░ that on offer some ░░░░░░░░ of protection from being ░░░░░░░░ mortgage backed securities Nancy ░░░░░░░░ s really tricky because ░░░░░░░░ have the spread component ░░░░░░░░ well They have been ░░░░░░░░ along with credit The ░░░░░░░░ I want to keep ░░░░░░░░ mind is people look ░░░░░░░░ our etfs sometimes can ░░░░░░░░ has a big name ░░░░░░░░ volatility in the name ░░░░░░░░ think oh it sounds ░░░░░░░░ N o no treasuries ░░░░░░░░ long options It is ░░░░░░░░ that scary because you ░░░░░░░░ short options inside your ░░░░░░░░ portfolio Scarlet when you ░░░░░░░░ at shorter measures the ░░░░░░░░ index now I 30 ░░░░░░░░ it did dip below ░░░░░░░░ level yesterday and the ░░░░░░░░ index is off its ░░░░░░░░ but not as much ░░░░░░░░ the vix what does ░░░░░░░░ tell you about how ░░░░░░░░ are positioned for volatility ░░░░░░░░ forward Anti the think ░░░░░░░░ the thing to keep ░░░░░░░░ mind with both of ░░░░░░░░ indices as they are ░░░░░░░░ market The move index ░░░░░░░░ 30 day swaptions The ░░░░░░░░ interest rate volatility and ░░░░░░░░ hedge etf is a ░░░░░░░░ type of interest rate ░░░░░░░░ and it is trading ░░░░░░░░ basis points a day ░░░░░░░░ is very different There ░░░░░░░░ a lot of different ░░░░░░░░ of options markets and ░░░░░░░░ depends on the tenor ░░░░░░░░ dated options and rates ░░░░░░░░ cheaper volatility than short ░░░░░░░░ options If you are ░░░░░░░░ volatility in interest rates ░░░░░░░░ control of the volatility ░░░░░░░░ even if nothing happens ░░░░░░░░ how do you think ░░░░░░░░ Powell s comments tomorrow ░░░░░░░░ going to change that ░░░░░░░░ Nancy he almost seemed ░░░░░░░░ on Friday the last ░░░░░░░░ we heard him talk ░░░░░░░░ He seemed kind of ░░░░░░░░ not my problem immigration ░░░░░░░░ my problem tariffs not ░░░░░░░░ problem fiscal policy not ░░░░░░░░ problem I m really ░░░░░░░░ to see if his ░░░░░░░░ is a little different ░░░░░░░░ is not what he ░░░░░░░░ because he says the ░░░░░░░░ thing data dependent wait ░░░░░░░░ see I don t ░░░░░░░░ that to change but ░░░░░░░░ will be interesting if ░░░░░░░░ tone is more sensitive ░░░░░░░░ what is going on ░░░░░░░░ glasses that people are ░░░░░░░░ in their day to ░░░░░░░░ lives especially in the ░░░░░░░░ market Romaine with regards ░░░░░░░░ the bond market to ░░░░░░░░ too in terms of ░░░░░░░░ we ve seen a ░░░░░░░░ of activity on the ░░░░░░░░ end of the curve ░░░░░░░░ people trying to game ░░░░░░░░ if the Fed does ░░░░░░░░ who knows what is ░░░░░░░░ Jay Powell s head ░░░░░░░░ is the resented if ░░░░░░░░ are guarding for interest ░░░░░░░░ but is there a ░░░░░░░░ that if you re ░░░░░░░░ for interest rate volatility ░░░░░░░░ of it is we ░░░░░░░░ not know which direction ░░░░░░░░ Fed might go if ░░░░░░░░ are in a situation ░░░░░░░░ they feel inflation is ░░░░░░░░ of control and they ░░░░░░░░ to adjust rates to ░░░░░░░░ or it is an ░░░░░░░░ recession and the need ░░░░░░░░ adjust rates to the ░░░░░░░░ is that the issue ░░░░░░░░ Nancy we had such ░░░░░░░░ head fake last year ░░░░░░░░ the rates market because ░░░░░░░░ into 2024 the market ░░░░░░░░ priced in six cuts ░░░░░░░░ those didn t materialize ░░░░░░░░ s like the topic ░░░░░░░░ jour But I think ░░░░░░░░ term structure is what ░░░░░░░░ need to be focused ░░░░░░░░ now The yield curve ░░░░░░░░ treasuries is about 50 ░░░░░░░░ points if you pull ░░░░░░░░ your bloomberg terminal but ░░░░░░░░ swaps market is trading ░░░░░░░░ For a swap curve ░░░░░░░░ is trading around half ░░░░░░░░ price of the treasury ░░░░░░░░ now 25 basis points ░░░░░░░░ is the spot curve ░░░░░░░░ now That is pretty ░░░░░░░░ Romaine is that healthy ░░░░░░░░ at the term premium ░░░░░░░░ the 10 year blown ░░░░░░░░ to the worst since ░░░░░░░░ basically a decade here ░░░░░░░░ Bessent tells us that ░░░░░░░░ week nothing was going ░░░░░░░░ break behind the scenes ░░░░░░░░ m not sure I ░░░░░░░░ that Nancy it s ░░░░░░░░ little hard when people ░░░░░░░░ nothing is going to ░░░░░░░░ the Fed only controls ░░░░░░░░ overnight rate but the ░░░░░░░░ premium of interest rates ░░░░░░░░ set by the rest ░░░░░░░░ the world It is ░░░░░░░░ companies sovereigns the rest ░░░░░░░░ the world wants to ░░░░░░░░ money We are seeing ░░░░░░░░ blowout between treasuries and ░░░░░░░░ I think there is ░░░░░░░░ sign that there is ░░░░░░░░ leverage and funding problem ░░░░░░░░ we know that the ░░░░░░░░ has made That if ░░░░░░░░ does become a bigger ░░░░░░░░ according to Susan Collins ░░░░░░░░ Fed would be willing ░░░░░░░░ step in Thank you ░░░░░░░░ much for joining us ░░░░░░░░ Davis is founder and