sonali: welcome to "bloomberg markets." traders brace for a wave of economic data that will help shape the outlook for interest rate spread we are seeing interest rates on the rise, back above 472. remarkable given the moves last week. the s&p 500 trying to break into the green flat on the day. the nasdaq 100 still seeing a bid up more than .3%.

bitcoin, up above $53,000. these are the highest levels in two years. mid-day movers on the equity side to talk through starting with bitcoin. it bought about 3000 bitcoin this month according to the latest filing with the securities and exchange commission. shares are sharply higher, about 13% on the day, after buying bitcoin which is now at the level it is today. we are watching intuitive machines plunging. officials say the lander likely landed on its side. the landing was touted as the first private sector company to reach the moon intact. the shares of the company behind the landing is down 25%. cathie wood's ark is shifting the ai strategy. the etf sold 23 hunter shares of nvidia last friday. it was part of the first stock

sale for that since 2021. the ftc has finally sued to block progress $24 billion acquisition of albertsons and cited lower wages for workers in higher prices for groceries. let's discuss with kailey leinz. we knew there was discomfort about the merger. what is the latest? kailey: the suit is not surprising. we had an idea it was coming. the ftc is arguing if the two largest supermarket chains were allowed to combine with 5000 stores, it would be damaging for customers in terms of higher prices and lower quality in the products and also damaging for workers because they would have less leverage over these combined chains and that could lead to lower salaries and pay for employees. it is interesting the ftc found the remedies these chains suggested they would offload more than 400 stores to another

operator is not adequate. they say that would not go far enough to replace the competition lost if they were allowed to combine. they noted in grocery deals in the past, the offloading has not always been successful in terms of remedy. that is what the regulator is arguing. unions have also come out against the deal arguing it would be bad for workers. lawmakers have as well. the companies say this is about us being able to better compete with amazon or walmart. and albertsons spokesperson said if the ftc is successful blocking the merger, it would be hurting customers and helping strengthen multichannel retailers. they say they are looking forward to making the arguments in court. the ftc filing is just the beginning of the legal battle to come. sonali: we are also watching the faa and its relationship to boeing, giving the company six months to respond. what do we know? kailey: this was an expert panel

that contributed to the report. they are saying at boeing, there is a disconnect between management and the rest of the employee base when it comes to safety. the communication needs to be improved. they gave boeing six months to review that further. they say this is contributive to a cultural issue at boeing when it comes to the role of safety management systems and other issues that affect safety including what they say was a lack of pilot input in design. they would like boeing to address this within the next half year and have given implementation dates to the faa. sonali: thank you for keeping an eye on the big stories. we are going to bring in a sofi head of investment strategy liz young. we have a lot of economic data ahead. you are looking at a market stalling. what is the next catalyst for the market? >> i think that is the question of the minute.

last week, we had a lot of euphoria even after trepidation pre-nvidia results and the possibility it would not be as exciting as it ended up being. this week, we are back to regularly scheduled programming of macro data. we have consumer confidence coming. we have pce. that will be the most highly anticipated number this week. the question of, what is our next catalyst to take it higher, i don't know that there will be one in the next few weeks. pce data, given what happened with cpi in the first month of the year, pca data may not be as exciting as we are hoping either. there is the possibility we see another read of sticky inflation. maybe not increasing inflation but sticky nonetheless. we have already pushed the first cut back a couple of months. i don't think there is anything that will come out in the macro data this week that will tell the market we need to go even higher from here, at least not

in a considerable way. sonali: there are parts of the market vulnerable to the higher for longer dynamic. which are you most worried about? >> if you think about interest rates using as an example the 10-year treasury, this level of yield generally results in a trailing p/e ratio lower than that. if you look at the meeting quartiles, we are above what history would suggest as normal. we are in the mid-20's now pete i think the median is probably in the 18 range. it does suggest we are slightly overvalued compared to history. we are not above all of the readings of history. but it is a point in the cycle and valuations where you want to be careful about how much you are paying for something and what you are paying for. generally, investors are paying

for the potential for higher earnings in the future. we typically talk about earnings over 12 months. depending on what you will pay today given where the 10 year treasury yield is, the hope is earnings would be much higher than they are at this point. if we are in a place where inflation remains sticky and the fed continues to push off cuts, i would expect even when the cutting cycle begins, you will see the short end of the curve come down. the other end may stay elevated. if the economy continues to show stable growth, i think these discount rates and levels of yield could be higher than investors are use to which will be difficult to stomach at certain valuation levels. sonali: speaking of valuations for the stock and bond market, how are you thinking about investing in treasuries at the longer end of the curve? we have a huge week of not just

pce but issuance. >> right. i don't think issuance will necessarily come down anytime soon. a lot of times the question is, will people stop buying u.s. treasuries? we know we have a deficit we have been running for a while. we continue to issue more to cover obligations. it also seems we have the fear of a government shutdown once or twice a year. i do not think the question is, will people continue buying treasuries? yes, there will continue to be buyers. it is more about the rate, the yield those treasuries will get picked up at. back to the previous topic we were on, if there are less incremental buyers of treasuries, i would expect those options to generate higher and higher yields -- options to generate higher and higher yields. we continue to have a high peg rate for yields. that is a risk on the longer end of the curve. as we approach the beginning of a cutting cycle, i see a decent

amount of opportunity on the short end, 12 months or less. as investors near the cutting level, we should see the short end of the curve come down to reflect it. we just continue to push it further into the future so the short end is stuck at the higher yield level. at some point, the curve will re-steepen and it will go away. sonali: we have to leave it there. thank you for your time. i'm joined by marc lipschultz to talk about real estate and more. stick with us. this is bloomberg. ♪ ♪ (upbeat music) ♪ an ever-changing landscape comes with challenges.

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sonali: this is "bloomberg markets" and i am sonali basak. time for stock of the hour. blue owl hit an all-time high friday. it is one of the largest players in the private credit market. it helped fuel the rally with strong earnings that highlighted asset growth and a dividend increase. blue owl last year formed a partnership with the abu dhabi wealth fund. the moves highlight the growth of the $1.7 trillion private credit market which has more than doubled in size over the past five years. joining us now is marc lipschultz. let's start with the middle east. this is such a highly watched story, the amount of money coming in from the middle east, from abu dhabi in particular. you also announced a recent partnership with a different abu dhabi-based fund. how do you describe the need for capital from across the world? >> thank you again for having me

today. the need for private solutions remains strong for one really important reason, which is it works as a matter of investment results for the people participating. whether those are institutions or our partnership, these are large strategic partnerships to build out asset opportunities together but also for wealth and individual investors. at the end of the day, it is a solution that delivers results. i think that is why we are seeing continued inerest.it is , private credit in particular, where domesticinstitutions has , sooner, and the interest is picking up in places like the middle east and asia. sonali: underweight relative? >> underweight relative. that is part of the market getting to the place where the

risk return were compelling enough that they get enthused in those markets as well. we have seen that in the middle east, asia, and elsewhere. sonali: we have talked a lot about your inclinations to open offices abroad. >> we are opening an office in abu dhabi reflective of the conversation we are having about the importance of the marketplace and market opportunity. we already have 10 offices as a firm. it is important to be on the ground and spend time with investors and companies we will invest in. where we invest as a firm is heavily u.s. centric. that has worked well. we are sitting here today with exposure in terms of our real estate business, credit business, heavily centered around the u.s. the u.s. economy and markets are strong. we like that as a matter of deployment. sonali: a lot of your rivals have been expanding in private

net worth, high net worth individuals. how much opportunity is there? there is a big question about the structures and other high network channels having higher fees than the traditional institution would have the leverage to negotiate. do you see high net worth also getting fee cuts? >> i started in alternatives in 1995. it was not called alternatives. at that time, the average institution had a single-digit percentage of assets and what would later be called alts. now it is 25% probably. individuals are in the single-digit percentage today. the reason it has gone from five to 25 is it works. individuals now have the opportunity with providers structuring products a right way to deliver results to them to participate in the benefits of

these otherwise historic products they did not have access to. with wealth, from the day we started the farm, we have been committed to building an institution, a structure, a set of products, the dna to serve individuals as true peers to institutions. we do a credit product. they participate in the same loans. this is delivering the institutional opportunity. that is quite particular to blue owl. it is also particular to an investment you make over eight years. we have been spending years and tens of millions of dollars to build the infrastructure to support that audience. as for fees, at the end of the day, the net result is a very strong one for institutions, and individuals. i would not characterize it as a case that institutional fees are lower. i think it varies quite a bit by product. both are getting a good and fair result. sonali: we talk about compression. another big question is compression of returns potentially.

you look at all of the capital flooding into the industry. you have to wonder whether you will get the same returns in the next five or 10 years as you have more recently. >> supply and demand. it is true supply of private credit has increased but so has the demand. the demand has increased partly because we have this large structural amount of private equity capital, a wide range of different numbers, but i have seen numbers as high as $2.5 trillion in dry powder around the world in private equity that will be deployed that will utilize credit. when i think about dry powder in institutional and private equity and in the hands of private lenders, direct lenders in particular, it is not that different from where it was a few years ago. sonali: keep going, please. >> i was going to add one other thought. let's keep in mind there is all this legacy debt issued in the public markets much of which has an opportunity to come to the private markets and benefit from what we offer. private credit has grown because

we deliver predictable, private, partner like solutions. there are many people before that did not have the option and now do. sonali: when we spoke a couple of months ago, the leverage finance markets where looking for the opportunity to reopen greater scale. they are certainly opening again. how is that compressing spreads when looking at the opportunity from bribing -- private credit? >> markets are opening. that is good news. we need vibrant capital markets. private capital is not the singular solution nor is liquid capital the singular solution. together, they create a more active market. we will gladly take the enhanced opportunity deal flow that comes with having a more enabled marketplace. as for spreads, spreads will move up and down as different dynamics, markets open and close, perceived risk in the

marketplace. but at the end of the day, private credit and the way we run our business is all about picking the best and delivering attractive spread and incremental return. there will be some peaks and valleys. but all of those have allowed us and we have been involved with wide open markets in 2021 and enclosed market. our products work in both. sonali: there is a lot of conversation about big banks entering the private credit space. do you see blue owl partnering with a bank? >> happy to partner with banks. happy to partner with any institution. we have built a business around creativity and being that type of partner, partner to the borrower or someone else that has a role to play in the value chain. we are delighted to partner with banks. they have a certain set of corporate relationships that are powerful. they do a lot for those

companies that we do not do. they do things like foreign-exchange and cash management. we are a very much natural and steadier home for the liability for the loan. we buy and hold loans. we have long-term capital for long-term needs. over the last few weeks, it reared its head again. when you take short capital deposits and use them for long-term things like loans, some days that tends not to be a great not. private capital has proven the last couple of years it is a stabilizing influence. it is not one or the other. i see a very positive world for both. sonali: you will have to come back. a lot of people have their eyes on that. marc lipschultz, thank you for your time. next, why goldman sachs and morgan stanley are holding on to risky parts of the clo market.

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sonali: this is "bloomberg markets." i am sonali basak. it is time for the wall street beat where we look at what is buzzing on wall street and in the world of banking and finance. today we are looking at goldman and morgan stanley's new willingness to hold onto risky parts of the clo market. let's talk about what is going on. why are they willing to take on this kind of risk, particularly goldman and morgan stanley? >> is all about market share for both. it is a lucrative business. the more you are willing to differentiate yourself to say i have lots of leverage you can repackage into bonds or i have aaa bonds the bank is willing to hold. now the evolution has been to say we will backstop clo equity

which is the riskiest and most difficult part of clo to get done. sonali: talk about how hard it is to sell this part of the equity. >> last year, 40% of clo managers did not do any deals. mostly because they could not get together the equity portion. this year, the markets are ripping. it is much more improved. but there are times when caelum managers spent over a year not being able to do deals. the bank says we can help you, that can make a material difference. sonali: are many banks doing it or is it limited to these two? >> it is an emerging trend. it is goldman and morgan stanley, deutsche bank, jefferies. they are sort of the trendsetters right now. we will see if some other banks get into the business if they start losing market share. it is a small amount. even these banks are doing it

for like $10 million a pop and only for selective clients. sonali: what could go wrong? >> with under-rating, anything you under-rating -- with under-rating, there is risk. you are promising to sell the debt. if the market turns against you. it is not too difficult because the market is ripping. if we have another shift in market sentiment, it can be difficult again and you could be taking a loss. it is not a painfully big loss like leveraged loan underwrites where you had billions in losses but clo equity is not the kind of natural capital for a bank to hold. you will have stiff capital charges and may be an unpleasant call with regulators. sonali: lisa lee, thank you for your time and joining us for one of the most read stories of the day. we are watching the two-year yield at the highest levels of the year so far. we are going to watch that all

week as we have critical pce data towards the end of the week. the s&p even further on the declines. stick with us. that does it for "bloomberg markets." this is bloomberg. ♪

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>> from the world of politics to the world of business. this is "balance of power."