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Alphabet Looks to Raise About $15 Billion From US Bond Sale · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: Another big deal in the tech space, and I mean
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  Speaker 2: not in the MNA space, but in the bond issuance space.
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  Speaker 2: Alphabet looks to raise about fifteen billion dollars from a
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  Speaker 2: US bond sale. Just the latest big tech company hitting
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  Speaker 2: the bond market here, and why not? The market seems
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  Speaker 2: to be wide open. It's check in with a professional here,
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  Speaker 2: Rob Shiftman. He covers the bond markets for the big
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  Speaker 2: TMT companies. Here, Rob, you've told us in the past
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  Speaker 2: that these tech companies they raise money because they can,
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  Speaker 2: not necessarily because they need it. But now they kind
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  Speaker 2: of needed a little bit. Has that changed the narrative
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  Speaker 2: at all? Because they try to fund all this AI build.
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  Speaker 3: Out they don't really need it, Okay, but there's plenty
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  Speaker 3: of access at reasonably low cost obviously all along the
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  Speaker 3: curve with one hundred year deal on the market and
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  Speaker 3: in multiple currencies. So I think since demand for AI
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  Speaker 3: is so insatiable. I actually think you can still say
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  Speaker 3: that demand for these AI tech companies' bonds are insatiable
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  Speaker 3: as well.
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  Speaker 4: Okay, you mentioned one hundred year bond. I thought forty
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  Speaker 4: year bond for Oracle was kind of bananas, but one
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  Speaker 4: hundred year bond, I mean, we don't even know if
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  Speaker 4: this company is going to be around, and granted, they're
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  Speaker 4: going to refinance a lot of things, so you know,
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  Speaker 4: this isn't like in one hundred years people will necessarily
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  Speaker 4: be collecting on this.
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  Speaker 5: But how does that make sense?
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  Speaker 3: Yeah, well, listen, based on what might happen with AI,
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  Speaker 3: we don't know if any company is going to be
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  Speaker 3: around forty or one hundred years, so the world changes
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  Speaker 3: sort of quickly. But when you actually think about the
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  Speaker 3: duration of one hundred year bond, it's pretty much the
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  Speaker 3: same as a forty year bond or a thirty year bond,
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  Speaker 3: So it sounds sort of astronomical, but really the risk
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  Speaker 3: to the credit is pretty much the same, so I
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  Speaker 3: wouldn't really think that too much about that. The one
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  Speaker 3: thing to think about is, again we continue to talk
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  Speaker 3: about how much excess capacity these companies have, how much
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  Speaker 3: borrowing capacity they have. This morning, when S ANDP affirmed
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  Speaker 3: Alphabet's double A plus rating, they said they have one
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  Speaker 3: hundred and eighty billion of additional deck capacity before they
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  Speaker 3: get to S and p's rating trigger. So it's not
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  Speaker 3: just that they have a lot of capacity. That's how
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  Speaker 3: much capacity they have a double A plus What does
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  Speaker 3: that mean? What if they wanted to borrow a trillion dollars?
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  Speaker 3: Could they? So obviously that's not realistic. But there's just
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  Speaker 3: a lot of room here. And as these numbers get
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  Speaker 3: bigger and bigger, we also have to remember there's a
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  Speaker 3: flip side to this. Cash flow is also getting a
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  Speaker 3: lot bigger as well, So in the near term, though
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  Speaker 3: leverage is climbing a little bit. Again, there's a tremendous
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  Speaker 3: amount of capacity from both raiders and from bomb markets.
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  Speaker 3: I think all the skepticism here is really on the
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  Speaker 3: equity side. It's all about multiples. What the trading price
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  Speaker 3: for the equity is. What bond holders are telling you
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  Speaker 3: is we're trading at the right prices. We're actually near
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  Speaker 3: historical tights for the corporate bomb market. And you know
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  Speaker 3: these bonds don't offer tons and tons of yield. The
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  Speaker 3: bond holders are screaming, we are not worried.
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  Speaker 4: They're not worried, and that's why these bonds don't offer
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  Speaker 4: tons and tons of yield. Isn't there a risk of
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  Speaker 4: concentration risk where investors, I mean, there's a lot of
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  Speaker 4: debt coming to market, a lot of it coming from
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  Speaker 4: big tech, and everyone wants to because these companies are
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  Speaker 4: good for it.
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  Speaker 5: But won't they be too overloaded on big tech debt?
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  Speaker 6: Yeah?
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  Speaker 3: You know, we've heard this historically for the last few decades.
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  Speaker 3: You know, luckily, I've been around a long time and
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  Speaker 3: I've seen this happen before, where you know, the market
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  Speaker 3: people come back and say, we're full, we can't have
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  Speaker 3: another bond. We have too much exposure to either one
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  Speaker 3: individual name or to this sector. And you know what
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  Speaker 3: changes that spreads. You offer a bigger concession and people
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  Speaker 3: will come in. There's a price for everything. So if
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  Speaker 3: Alphabet a year ago or two years ago or five
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  Speaker 3: years ago might have printed a bond at treasuries plus
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  Speaker 3: you know, thirty year bond at treasuries plus fifty or sixty,
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  Speaker 3: So now they're going to print a bond at you know,
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  Speaker 3: let's say one hundred over. So there's just that right
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  Speaker 3: clearing level. We actually saw that with Oracle. You know,
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  Speaker 3: we talked last week how that's sort of the poster
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  Speaker 3: child for everything that people are worried about, and then
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  Speaker 3: they got one hundred and thirty billion dollars a demand
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  Speaker 3: because they boosted concessions higher. So I think, I don't
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  Speaker 3: think that's really an issue.
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  Speaker 2: They're not just issuing dollars, are they.
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  Speaker 3: No, They're doing Swiss francs as well as pounds. I
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  Speaker 3: also think there's other currencies they can go to. I mean,
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  Speaker 3: I've actually had a lot of people ask me this one.
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  Speaker 3: Why aren't they doing euros? There is a huge bid
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  Speaker 3: in the euro market for tech paper because all of
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  Speaker 3: these companies are effectively US denominated names issuing US dollar paper,
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  Speaker 3: So I think there's another market in euros. There's also
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  Speaker 3: I think it could be a huge yen a bid
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  Speaker 3: as well. Historically, we like we've seen, particularly in telecommon media,
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  Speaker 3: attracting a lot of Asian capitals, so I wouldn't be
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  Speaker 3: surprised if that might be the next market. The reality
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  Speaker 3: is some of these names they don't really need to
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  Speaker 3: worry about at this point. There's so much dollar demand,
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  Speaker 3: but it's interesting to see that. I think they can
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  Speaker 3: price they can price their bonds title levels because there's
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  Speaker 3: demand around the globe and multiple currencies.
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  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 4: We've got a lot of deal making news today. It
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  Speaker 4: is Monday, after all, so m and A is to
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  Speaker 4: be expected. But Eli Lilly has been especially busy today
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  Speaker 4: because it made an investment over the weekend. It also
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  Speaker 4: has made a purchase, an outright purchase as well, and
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  Speaker 4: this is of course as a company is holding on
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  Speaker 4: pretty well with its obesity drugs. Certainly in comparison, it
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  Speaker 4: feels like to Novo Nordisk. Sam Fizzeli is our director
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  Speaker 4: of Research for Global Industries and senior pharmaceuticals analysts, and
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  Speaker 4: he joins us now to talk a little bit more
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  Speaker 4: about what's happening with Eli Lilly. So Sam, our bi
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  Speaker 4: drug boss, thanks for joining us as always on this Monday,
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  Speaker 4: Eli Lilly buying a company called Orner Therapeutics for up
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  Speaker 4: to two point four billion dollars in cash, shortly after
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  Speaker 4: it has announced it's paying three hundred and fifty million
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  Speaker 4: dollars to in Event Biologics from China.
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  Speaker 5: Talk about what the common thread is.
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  Speaker 4: Between both of these acquisitions or these transactions.
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  Speaker 7: Yeah, sure, Scarlett. Common thread is I've got cash, that is,
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  Speaker 7: I'm producing at a very rapid rate, and I need
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  Speaker 7: to make sure that I've got a pipeline the day
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  Speaker 7: that people are going to stop worrying about my patent's expiring.
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  Speaker 7: So on long way off for these huge drugs. So
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  Speaker 7: the more assets that these guys have with their massive
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  Speaker 7: cash flow to invest in for R and D, the
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  Speaker 7: higher the probability that they'll be coming to that point
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  Speaker 7: where people start going, just like they're doing with Merk. Oh, gosh,
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  Speaker 7: your thirty five billion dollar drugs, about the kind up
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  Speaker 7: patent that's in Merks scenario, what are you going to
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  Speaker 7: be replacing it with? And of course Mark has been
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  Speaker 7: doing some moves there, Lily is doing these things. These
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  Speaker 7: are two very separate deals. They've done about seven deals
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  Speaker 7: with this Chinese company that you're referring to, Innovant and
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  Speaker 7: the deal they bought. And I love the name of
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  Speaker 7: this company, Orna. It's a circular RNA and I think,
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  Speaker 7: you know, I couldn't have imagined a better name for
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  Speaker 7: this company. It is another one of those ways of
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  Speaker 7: trying to use RNA to impact biology in the page
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  Speaker 7: in this person directly, like a vaccine, like cancer, or
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  Speaker 7: whatever way you want to go. It's a very different approach,
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  Speaker 7: but it's very interesting approach.
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  Speaker 2: Boy, the gloves are coming off, Sam and this obesity
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  Speaker 2: market here, Novo Nordisk suing Hymns and Hers for making
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  Speaker 2: knockoffs of its obesity products. This seems really cut and
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  Speaker 2: dry to me. How do you view this knockoff market
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  Speaker 2: here for some of these drugs.
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  Speaker 7: Well, you shouldn't have a knockoff market for these drugs.
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  Speaker 7: There's no rules in the patent world. You know, you
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  Speaker 7: invent something, you patented, you're supposed to have a while
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  Speaker 7: to make some profits of it before generic companies come.
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  Speaker 7: There's a very well set process for this, and of
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  Speaker 7: course the companies try and extend their patents a bit
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  Speaker 7: and keep stay on the market for a bit longer.
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  Speaker 7: But at the end of the day, generics come, and
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  Speaker 7: that's how the model works. The drugs get cheaper, good
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  Speaker 7: drugs get cheaper. Everybody gets access. So here having someone
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  Speaker 7: to go and say, okay, I'll go and buy and
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  Speaker 7: source the active agent from somewhere and put it in
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  Speaker 7: a syringe and sell it to people. That shouldn't be
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  Speaker 7: allowed during a period of lack of supply, especially if
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  Speaker 7: you have a very difficult to manufacture drug, which these
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  Speaker 7: have been. That's fine, perhaps, and the FDA allows that,
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  Speaker 7: But that ended nine months ago. Why hasn't this happened earlier?
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  Speaker 7: I don't know, And I tell you I love the
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  Speaker 7: take the Gloves off analogy. Are these guys heavy weights
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  Speaker 7: or we see here drugs or are there lightweights or featherweights.
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  Speaker 7: Let's see who's the heavyweights in this fite?
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  Speaker 2: Hymn's and hers. That stock is down twenty today a
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  Speaker 2: year to date, down about fifty.
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  Speaker 3: Fifty two close, So it's definitely feeling.
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  Speaker 5: It, definitely feeling it.
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  Speaker 4: Sam Novo and Hyms actually had a partnership, I believe
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  Speaker 4: last year, but they scrap that and their relationship has worsened.
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  Speaker 4: What did that partnership look like? And perhaps did that
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  Speaker 4: give Hims some room to feel like it could move
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  Speaker 4: forward on, you know, coming up with these knockoff versions.
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  Speaker 7: Yeah, wouldn't it be the easiest thing to do is
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  Speaker 7: just to go to to No, I don't think Actually,
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  Speaker 7: just want to ask you a question directly there, I
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  Speaker 7: don't think so. I don't think they could have back
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  Speaker 7: engineered the Novo noticed product, because the latest thing that
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  Speaker 7: finally brought this to a to this hiatus that we
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  Speaker 7: come to, to this pinnacle of fighting that we've come to,
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  Speaker 7: was the oral drug. But they couldn't have had access
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  Speaker 7: to the oral drug. It was only just got launched.
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  Speaker 7: So reverse engineering something isn't something you do over three
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  Speaker 7: or four months. That was the case. I think they
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  Speaker 7: could have had a good relationship. Noble could have carried
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  Speaker 7: on used them as a platform, But then Novo created
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  Speaker 7: its own platform, Novo Care, just like Lily Direct, et cetera.
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  Speaker 7: So I don't know how much that lasted. That much
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  Speaker 7: revenue Novo got out of it, but it couldn't have
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  Speaker 7: been very much.
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  Speaker 2: Sam So having a drug here for obesity just a
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  Speaker 2: gold mine. You can just and just think about how
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  Speaker 2: big this marketplace could be. How about some type of
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  Speaker 2: medicine for I don't know, baldness, that a couple of
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  Speaker 2: my good who needs people in London may may be interested.
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  Speaker 7: In who needs a drive for ballness. We are higher
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  Speaker 7: up on the evolutionary treat my friend.
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  Speaker 2: I know, but that isn't isn't something like that in
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  Speaker 2: the offing as well?
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  Speaker 7: There is there is in fact a company is just
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  Speaker 7: IPO that's got some ideas there. I think there are
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  Speaker 7: drugs already alopecia drugs out there, but those are more
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  Speaker 7: for serious cases, not for someone like me that nobody
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  Speaker 7: cares anyone that I think that you'll ever be shocked
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  Speaker 7: if I turned up with a bit of a hair.
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  Speaker 7: So there are companies out there. This is something that
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  Speaker 7: folks who for whatever reason lose hair really early in
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  Speaker 7: their youth. I had a friend of mine who was
• 11:09
  Speaker 7: at the age of eighteen was going bold. So of
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  Speaker 7: course that's very tough for somebody at that age, and
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  Speaker 7: even you know forty year olds who don't want to
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  Speaker 7: end up losing that beautiful hair they have. It's too
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  Speaker 7: late for me, but those guys, Yes, there is a
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  Speaker 7: meaningful market there, not going to be as big as
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  Speaker 7: obesity do. I don't think stay with us.
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  Speaker 2: More from Bloomberg Intelligence coming up after.
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  Speaker 1: This, you're listening to the Bloomberg Intelligence podcast. Catch us
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• 11:47
  Speaker 2: It's Monday, which means we often get a lot of
• 11:49
  Speaker 2: MNA activity. We certainly did today in the energy space.
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  Speaker 2: Transocean remember them from the BP thing, Transortion to buy
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  Speaker 2: Vlarus in a stock deal value of five point eight
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  Speaker 2: billion dollars. Scott Levine joints as here he covers the
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  Speaker 2: energy space for Bloomberg Intelligence. Scott, Who's Transotion, Who's Valaris?
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  Speaker 2: And why are they getting together here?
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  Speaker 8: Yeah, so two of the bigger names and offshore drilling.
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  Speaker 8: Transocean has the largest backlog, Valaris has largest fleet. Valaris's
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  Speaker 8: name may not be that familiar to a lot of
• 12:22
  Speaker 8: folks here. It was actually a combination of a two
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  Speaker 8: companies called Ensco and row In a few years ago.
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  Speaker 8: But there are two of the biggest offshore drillers, and
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  Speaker 8: I think that this deal really has both offensive and
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  Speaker 8: defensive motivations. Offshore drilling is in a little bit of
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  Speaker 8: a recovery mode. Really kind of has been. Most of
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  Speaker 8: the drillers went bankrupt. Actually during the twenty twenty one downturn,
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  Speaker 8: Transotion was really one of the only companies that did
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  Speaker 8: not go bankrupt. Valaris did, and so Transition has kind
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  Speaker 8: of been saddled with all this debt as a result
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  Speaker 8: of not having their balance sheet wipe during a bankruptcy,
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  Speaker 8: and so that's been a limiting factor on their growth
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  Speaker 8: for quite some time. And this deal, which is an
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  Speaker 8: all stock deal, will accelerate their leveraging process and remove
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  Speaker 8: some of that burden from them and better enable them
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  Speaker 8: to capitalize on an upturn in offshore drilling. And the
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  Speaker 8: second the thing that's important to note here is that
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  Speaker 8: it brings a jack up fleet jet. So jackup fleet
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  Speaker 8: jackups are basically shallow water rigs okay, as opposed to
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  Speaker 8: the deep water drill ships or floaters, and Transotion had
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  Speaker 8: exclusively been a floater. Fleet jackups are more to the
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  Speaker 8: seabed and seabeds lower and shallow water, and Valaris is
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  Speaker 8: one of the biggest players there, and so this gives
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  Speaker 8: Transition exposure to the jack up or shallow water market,
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  Speaker 8: which has really undergone an interesting phase in that it
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  Speaker 8: was a bit of a downturn the last couple of years.
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  Speaker 8: The biggest jack up driller is saudij Ramcoat, and a
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  Speaker 8: couple of years ago Saudia Ramco made significant cuts to
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  Speaker 8: their drilling program. They essentially Saudi Arabia abandoned plans to
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  Speaker 8: increase their oil production capacity to thirteen million barrels a day.
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  Speaker 8: And what we've seen since then is a lot of
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  Speaker 8: jack up rigs being laid off effectively in twenty twenty
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  Speaker 8: four and twenty twenty five. Indication suggests those rigs will
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  Speaker 8: return this year, so that market is bottomed and maybe
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  Speaker 8: on the cusp of an upswing. So this deal will
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  Speaker 8: give Transition the ability to participate in that recovery.
• 14:42
  Speaker 5: So in terms of.
• 14:43
  Speaker 4: Why now, when it comes to the timing of this deal,
• 14:45
  Speaker 4: the COEO transortion cited a multi year drilling up cycle.
• 14:50
  Speaker 5: Where are we in that cycle? Are we?
• 14:52
  Speaker 6: You know?
• 14:52
  Speaker 5: First inning? Are we?
• 14:54
  Speaker 8: It's kind of been an interesting up cycle. So we
• 14:57
  Speaker 8: saw an inflection in twenty two and twenty three, and
• 15:02
  Speaker 8: twenty four and twenty five, we've seen kind of a
• 15:04
  Speaker 8: plateau to a slight pullback. Now I do believe we're
• 15:08
  Speaker 8: in a recovery and have been and this has kind
• 15:10
  Speaker 8: of been more of a mid cycle pause associated rather
• 15:15
  Speaker 8: than a downturn and offshore drilling. So I do think
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  Speaker 8: the recovery is intact, but I think the cadence has
• 15:23
  Speaker 8: certainly slowed and in fact deteriorated, and offshore drillers, like
• 15:30
  Speaker 8: energy service companies, have been off to the races this year.
• 15:33
  Speaker 8: I think the oil price is held in better than expected.
• 15:37
  Speaker 8: Some of that is due to some of the tensions
• 15:40
  Speaker 8: in the Middle East, I Ran, et cetera, Venezuela as well.
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  Speaker 8: So the punchline really is that we're still in I
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  Speaker 8: think a mid cycle pause until maybe the second half
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  Speaker 8: of this year, and in terms of what inning we're in,
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  Speaker 8: I think we're probably like third fourth earn it, third
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  Speaker 8: fourth inning, but it's been in kind of an unconventional recovery.
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  Speaker 2: Will the regulators allow these two companies to get the other.
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  Speaker 8: Yeah, I think so, And it's a good question. These
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  Speaker 8: are the two of the largest players that are out there,
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  Speaker 8: and rig CEO expressed extreme confidence that that will be
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  Speaker 8: the case. It's a competitive market, there's a lot of
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  Speaker 8: fragmentation smaller players in the market, and it's generally the
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  Speaker 8: quality of certain assets that determine which guys win which contracts.
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  Speaker 8: A lot of it depends on which rigs are capable
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  Speaker 8: of drilling for which projects, and so no, I do
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  Speaker 8: think that this should get a relatively quick approval. Certainly
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  Speaker 8: they're talking second half of this year. That's a much
• 16:44
  Speaker 8: shorter timeline than the last major oil field services merger,
• 16:49
  Speaker 8: which was Schlumberge Champion X that took over a year
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  Speaker 8: two year and a half to approve and required significant divestures.
• 16:56
  Speaker 8: But offshore drilling is a different market.
• 17:01
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up there For.
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  Speaker 2: The Trump administration is considering a potential antitrust probe into
• 17:26
  Speaker 2: US homebuilders. Presumably this kind of goes to the issue
• 17:29
  Speaker 2: of affordability or like thereof in the housing market. The
• 17:33
  Speaker 2: question is how impactful is it for this industry and
• 17:37
  Speaker 2: for the companies the homebuilders in this industry to get
• 17:39
  Speaker 2: some answers there returned to Drew Redding and covers all
• 17:42
  Speaker 2: the homebuilders for Bloomberg Intelligence. He also is a sconce
• 17:45
  Speaker 2: down in Princeton, New Jersey at our campus down there,
• 17:48
  Speaker 2: Drew talk to us about this potential lawsuit by the
• 17:51
  Speaker 2: Trump administration. How serious is the industry taking this?
• 17:56
  Speaker 6: Right? So, according to the report, there's actually no indication
• 17:59
  Speaker 6: that any formal investigation has started. I guess what's that
• 18:04
  Speaker 6: play here is that it was hinted at that one
• 18:07
  Speaker 6: of the industry trade groups, the leading builders of America.
• 18:11
  Speaker 6: Builders within that, including some of the large public builders
• 18:14
  Speaker 6: that were highlighted like Ador, Horton and Lenar, we're sharing
• 18:17
  Speaker 6: information that could be used to restrict home prices or inventory.
• 18:22
  Speaker 7: Uh.
• 18:23
  Speaker 6: You know, we've seen this this tactic from the administration
• 18:25
  Speaker 6: in the past, where the leaks some information to the
• 18:27
  Speaker 6: public kind of has to put out a feeler for
• 18:30
  Speaker 6: you know, what the how what the industry's response will be.
• 18:34
  Speaker 6: You know, But to this point, it doesn't appear that
• 18:38
  Speaker 6: there there's actually any concrete evidence of wrongdoing. It's interesting
• 18:42
  Speaker 6: because the home builders have been in the crosshairs of
• 18:45
  Speaker 6: the administration since the end of last year. You know,
• 18:48
  Speaker 6: there's been rhetoric saying that if the builders don't put
• 18:52
  Speaker 6: their lots into production and start building houses, that the
• 18:54
  Speaker 6: gcs could pull liquidity. There's been dialogue suggesting that the
• 18:59
  Speaker 6: public home builders shouldn't be buying back their stocks, they
• 19:02
  Speaker 6: should be putting that into production, and that's actually become
• 19:04
  Speaker 6: a big part of their business model. There's also been
• 19:07
  Speaker 6: talk about them, you know, not being able to utilize
• 19:10
  Speaker 6: their forward purchase commitments, which is how they've gotten buyers
• 19:14
  Speaker 6: monthly payment solo by buying down mortgage rates. So, you know,
• 19:17
  Speaker 6: I think this certainly heightens the rhetoric, and I think
• 19:21
  Speaker 6: it's something that's going to continue as we go through
• 19:23
  Speaker 6: the year.
• 19:24
  Speaker 4: Okay, So even as they've been as there's been tension
• 19:26
  Speaker 4: between the White House and the home building industry, there's
• 19:29
  Speaker 4: also some talk of them working together. Right, there's all
• 19:32
  Speaker 4: this discussion about Trump homes, builders working on a plan
• 19:36
  Speaker 4: for massive program to develop these so called Trump homes
• 19:40
  Speaker 4: that would at least address the supply shortage.
• 19:43
  Speaker 6: Yeah, that's a great point, Scarlett, And it's interesting because
• 19:47
  Speaker 6: you know, the tone of this relationship between policymakers and
• 19:51
  Speaker 6: the homebuilders seems to change by the day. I just
• 19:54
  Speaker 6: mentioned that they've been in the administration's crosshairs. But at
• 19:57
  Speaker 6: the same time, we've heard from the administration and from
• 19:59
  Speaker 6: the large PubL with builders during their earnings calls that
• 20:02
  Speaker 6: they have been working collaborative, collaboratively to find a solution
• 20:06
  Speaker 6: to thousand affordabilities problem, whether that's through you know, demand
• 20:09
  Speaker 6: side stimulus or finding ways to bring new supply to market.
• 20:14
  Speaker 7: You know.
• 20:14
  Speaker 6: So it is interesting to hear that, you know, just
• 20:16
  Speaker 6: the day after you mentioned that the builders brought the
• 20:19
  Speaker 6: concept of Trump Homes, which would essentially be a rent
• 20:22
  Speaker 6: to own program that we're hearing, you know, this from
• 20:25
  Speaker 6: the administration.
• 20:27
  Speaker 2: Interest rates, mortgage rates. What's the industry saying about mortgage
• 20:30
  Speaker 2: rates and where they may go throughout the course of
• 20:32
  Speaker 2: this year.
• 20:34
  Speaker 6: Yeah, we've actually made pretty good progress on mortgage rates.
• 20:36
  Speaker 6: Were down about one hundred basis points from last year.
• 20:41
  Speaker 6: You know. The administration's directive for the GCS to purchase
• 20:44
  Speaker 6: a hundred billion worth of mbs has certainly helped. I
• 20:48
  Speaker 6: think the consensus is that a lot of the juice
• 20:50
  Speaker 6: from the policy end has been squeezed.
• 20:52
  Speaker 7: If you look at.
• 20:53
  Speaker 6: Spreads between thirty year mortgages and ten year treasury rates,
• 20:57
  Speaker 6: we're approaching more normalized levels. You know, there may be
• 21:00
  Speaker 6: is a little bit more room you can make up there,
• 21:03
  Speaker 6: but I think the bulk of the move has already happened.
• 21:07
  Speaker 7: I think, you know, in.
• 21:08
  Speaker 6: Order to get lower mortgage rates, you probably have to
• 21:10
  Speaker 6: see lower tenure treasure yields, which are going to respond
• 21:13
  Speaker 6: to you know, fiscal policy and things of that nature.
• 21:18
  Speaker 6: You know, affordability has improved a little bit from last year,
• 21:20
  Speaker 6: but we still haven't seen that significant demand response. I
• 21:24
  Speaker 6: think that a lot of builders have been hoping for.
• 21:26
  Speaker 6: And you know, the reason for that, and we've highlighted
• 21:28
  Speaker 6: this several times, is that there's just more concern out
• 21:30
  Speaker 6: there in the market as to the direction of the economy,
• 21:34
  Speaker 6: what's going to happen with the labor market. So it's
• 21:35
  Speaker 6: taken a lot of urgency out of home shoppers. And
• 21:39
  Speaker 6: you know, the other thing to point out is I
• 21:41
  Speaker 6: think that there's a lot of people sitting out there
• 21:43
  Speaker 6: on the sidelines. We're saying, you know, I think in
• 21:45
  Speaker 6: the next six to twelve months, mortgage rates and or
• 21:48
  Speaker 6: home prices are going to come down. So I think
• 21:50
  Speaker 6: there might be a better time to get into the
• 21:52
  Speaker 6: market very quickly.
• 21:54
  Speaker 5: Drew.
• 21:54
  Speaker 4: We also know that we have some home builders reporting
• 21:58
  Speaker 4: results in the weeks to come. Toll Brothers, which of
• 22:01
  Speaker 4: course is big in luxury housing, is reporting on February seventeenth.
• 22:05
  Speaker 5: What's the tone going to be like?
• 22:08
  Speaker 6: Yeah, So, by and large, I think the move up
• 22:10
  Speaker 6: and the luxury segments of the market have done better
• 22:12
  Speaker 6: on a relative basis, And you know, it makes total sense.
• 22:16
  Speaker 6: You have the lower end to whose buyers are more
• 22:20
  Speaker 6: sensitive to fluctuations and mortgage rates, so pricing has held
• 22:24
  Speaker 6: up better at the higher end. I think we're going
• 22:25
  Speaker 6: to continue to hear that. What's important to remember is though,
• 22:28
  Speaker 6: just because you're at the high end, you're somewhat insulated
• 22:31
  Speaker 6: from what's happened in the market, but you're not immune
• 22:33
  Speaker 6: because the housing is an ecosystem. In order to get
• 22:35
  Speaker 6: more volumes at higher price points, you need to see
• 22:38
  Speaker 6: demand funnel up from the low end.
• 22:41
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