report for clues. a hawkish hold, watching upside inflation risks. bank of thailand is up next, under government pressure to ease. also ahead, president biden set to host japanese and philippine leaders in washington, sending a clear message to china. we will talk about that with the u.s. ambassador to japan, rahm emanuel. and speaking to markets, little conviction in the markets ahead of the u.s. cpi report. paring back expectations a fed rate cuts in 2024. cpi has come in hotter than anticipated for three straight months. the fed says it can remain patient. the msci asia pacific index up .3%. treasuries dropped overnight, 10-year yield easing from the highest levels this year.

china down, hsi and outperformer today above the 17,000 level. all sectors in the green. we are keeping watch on the kiwi , as the rbnz pushback on expectations for rate cuts despite lingering concerns about growth. markets pricing in nearly three rate cuts for the year. we're keeping an eye and the nikkei as well, under pressure. the governor avoiding sounding dovish on monetary policy. in traders on guard for possible currency intervention. investors are waiting the key u.s. inflation reading in the coming hours.

>> inflation will be sticky. it will be absolutely sticky. we're going to get stuck at around 2.5%-3%. i think that warrants over the long-term the fed rethinking its inflation target. haslinda: the cftc says firms that use borrowed money to amplify returns increase short returns in the futures market for the first time in two months. we saw record size trade in short-term interest rate futures which appear consistent. let's bring in garfield reynolds , what prompted that record futures that? >> traders are seeing the

potential for a serious shift. we've had this drawback from three rate cuts priced in which came after six rate cuts price for the year earlier on. now the question is to go to two or three, do end up with one? about the only thing that is certain is there is a lot of money to be made and to be loss on this. that record trade could've been somebody taking out a bet that the cpi is not going to come in strong enough to justify a reduction in the number of rate cut bids, or it could have been somebody who has a big short position on treasuries and they are using the fed futures block trade as a hedge in case you are

squeezed out of those bearish positions by a slightly modest cpi report. haslinda: interesting to note as well, saying we could potentially see a 50 basis point cut from the fed in june. >> that was a very interesting call. it is noticeable that to some extent they were using a political justification for it. the base case is the u.s. economy is worse off than it seems. but they're also saying the fed is going to be rushed into moving more rapidly so they are not carrying out major policy moves right at the time when the election is taking place. that is a very bold call. it is hard to see the cpi release justifying anything like that, especially seeing as we

have had previous cpi and jobs releases come in so strong, despite some sectors of weakness. the u.s. economy continues to show the level of resistance it makes it very hard to understand how you have got people betting on lots of rate cuts. rate cuts are coming, but we are going to be patient about it. there's a lot of moving parts out there. the fed is always has said it wants to achieve a soft landing but that is very narrow and difficult target to hit. there is a lot of nervousness about both sides of that equation. if the fed gets it wrong and there is a hard landing, then we get those big rate cuts, so if you have been shorting treasuries, you are in trouble.

if quite possibly inflation does stay little bit high but doesn't get out of control, you are in trouble if you have been betting on bond gains. also if you've been thinking the stock markets bull run is over, people are going to be saying, let's get out of bonds and into stocks. haslinda: several scenarios just highlighting how confused the markets are. thank is a much for that. jim, let's get your thoughts on it. we have the fed saying it can remain patient, yet it insists it will do three this year. what is going on? >> i think the markets have got themselves completely nervous that we could see an about turn from the fed this year. the fed needs to be quite clear that rate cuts will be coming

through. they may not be as optimistic about the degree of those rate cuts as the bull market was. it is now more like 2.5 rate cuts. i think the fed would be very nervous if on market start pricing in hikes or take away all the rate cuts from the market. so the fed has a very balanced game to play. i've been a bit more hawkish on the outlook for rates. i think they will go 2 or 3 cuts later this year as the economy starts to slow down. it is already back to the fed's target level or near that. so they will be ok about this.

they are still a long way above neutral levels of rates. cuts can be justified even in the face of what you describe rightly as a very strong u.s. economy, particularly with the jobs outlook. haslinda: the debate is for two or three, what is it, two or three? >> there are some weaknesses in the employment data, even though those headline job creation numbers are incredibly strong. keeping the number of people entering the workforce really high and creating this economy going into the election. we've had this high level of interest rates for a very long time now.

the bond market has been living in a bit of this police -- disbelief. it is not yet fed through into credit shocks, or a slowdown in the housing market. eventually you do run out of the road. i say three this year, perhaps even more. haslinda: do you ceo's trending higher pretty much -- do you see yields trending higher? >> i think it is the right thing to do. there is a lot of value in government bonds, if you expect

inflation to head back toward 2.0, as it appears to be doing. but it is going in the right direction, generally. if you're getting paid a 10 year bond deal, that is a historically great return. the entry points now look attractive. perhaps more than the inflation outlook is the supply outlook. that is the thing that has kept bond markets on the back foot as much as anything. it is worry about the long-term debt to gdp outlook. who is going to turn up and keep buying these bonds? i think most of us believe the inflation outlook is trending in the right direction.

i think the market will be more relaxed about it. haslinda: when you look at correlation between stocks and bonds, they were correlated when they diverged and now they are back to being car dated. >> it is one of those difficult things for investors because so many people have a blend of stocks and bonds in their balanced portfolio. when correlations go toward one, it makes life really tricky for investors to get some risk out of their portfolios. the thing that is going on is that bad news becomes good news and good news becomes bad news. when we get week data, it makes people think bond markets can

come down in yield and that gives them support for long-term equity iu asians. so individual company earnings starting to deteriorate in a big will. >> to be honest, we are not seeing either of those things in any big way at the moment. equity markets are extremely buoyant. i don't see the correlations changing dramatically in the short term until we start seeing some of those accidents in global markets. i think everyone has been expect ing, and we saw a few instances last year with the regional banks and in the united states with credit suisse.

with some of the bonds around the world as well. but really we haven't seen the big risk off episodes are the significant rise in overall defaults incorporate bond markets that we would need. haslinda: your credit strategy in asia, how does it look? >> i think it is one of the bright spots in the corporate bond world. we are trading with a lot more opportunities in asia, both in local currency markets and in dollar bonds. our credit team in singapore and elsewhere are really quite positive. we are not seeing the levels of stress outside the china property. even those areas that acted badly are offering badness --

bad properties. haslinda: great insights, jim. still to come, we speak to stride ventures about the outlook for india's venture debt landscape. then of founding partner will join us later in our. plus defense issues expected to top the agenda during president biden's meeting with the japanese prime minister. we have a preview, next. keep it here with us. this is bloomberg. ♪

♪♪ ♪♪ live up to it. the all-new gx. ♪♪

haslinda: welcome back. the japanese prime minister is set for one-on-one talks with president bynum as he continues

his landmark visit to the u.s. put this in context for us. what can we expect from the meeting? >> for the formal summit with biden -- they have actually already met. they were having dinner together in a restaurant a few hours ago. but at the formal summit, we are expecting for the main results to be around this stepping up of the defense alliance and security arrangements between the two countries as they both share these concerns about the increasing threat from china. so what we are expecting is how they can work more closely with the japanese military, setting up what is called a defense counsel were both countries will look into divisions procurement and how it can be done more

efficiently and perhaps cooperate in that area. and also have japanese shipyard workers work on u.s. naval vessels which will be a new step in bringing the two militaries closer together and increasing the deterrence value of the alliance. haslinda: it seems like he is getting some traction there. >> he's had one great victory already, the microsoft investment in japan is great news for him on this visit. i think japan is a little concerned about being left behind in things like ai so it wants the u.s. contribution on that front. the elephant in the room on this occasion is the whole deal on nippon steel and u.s. steel.

one of the messages he wants to send in a more subtle way without raising it directly with biden is to say investments between our two countries is very normal and healthy and beneficial for both sides so there is no need to fear it. haslinda: thank you for that update, isabel reynolds in tokyo. we spoke to u.s. to japan rahm emanuel from the white house lawn. he told us why he has high expectations for the prime minister's visit. >> this comes at a historic moment for both countries as they change dramatically there deterrent posture and position. japan's changed in the last two years, five separate policies that have basically been on the books for 70 years. normalizing the level of the

relationship with korea to a new more solid, strategic level. the u.s. also has made some fundamental changes, going from a hub and spoke system to a lattice strategic type of architecture. i see the state visit, the fourth from a head of state in the region out of five the president has done as putting a period at the end of one era described as alliance protection and beginning to write the first chapter of a new era of alliance projection with japan. also a key strategic partner in a global set of issues. the second thing, a kind of book in, naval air exercises together in a new multi lash no -- multinational effort and a first

trilateral. that reflects and symbolizes the change in the u.s. approach and symbolizes the role japan will play is a constant in our relationships in the area. it also symbolizes china's whole strategy to isolate the philippines. isolate australia with her economic coercion, isolate japan by not accepting their fish to be exported. our strategy is to flip that script and make the isolated party china. they are the ones who are isolated as relates to the philippines. and when it comes to use economic coercion to course australia to change their posture, and they become the isolated party which is why they threw in the towel on that effort. that is how this state visit, it has been nine years since the last japanese prime minister has had a visit, but it comes at a critical juncture where the

relationship will pivot into a new kind of posture and a new position. >> you mention the first trilateral summit with the philippines. how far do you expect japan to involve itself when it comes to these confrontations in the south china sea where these encounters tend to be more aggressive than what we see in the east china sea? >> the whole goal is not to have a conflict. an understanding this is not china versus the philippines. this is china trying to coerce the philippines into changing their policy which the international court of 20 ruled was in favor, and china needs to understand that the philippines have some very important friends in the neighborhood in this situation. haslinda: that was u.s. ambassador rahm emanuel. plenty more had. keep it here with us. this is bloomberg.

haslinda: here are some top corporate stories we are following. intel will roll out a new version of its ai chip in a bid to compete with nvidia. the ceo said the chip will cost less than invidious current processors. an event on tuesday, meadows top leaders say they haven't seen it happen yet, last week met announced plans to label all ai generated content on facebook and its other properties. experts fear it could spread misinformation online.

pushing back expectation for rate cut despite lingering concerns about inflation still above its target. in terms of the kiwi dollar, up .3%. that policy stands remaining necessary. the market pricing in nearly three rate cuts by your in. keeping an eye on today. it is up 20% since the lows we saw at the end of january. china is in the opposite direction, down by .4%. lingering concerns about the economy. in terms of gmm, lack of conviction as we head to the cpi

print out of the u.s. investors now reconsidering what has been effective in terms of the number of rate cuts for the year. plenty more ahead. keep it here with us. this is bloomberg. ♪

haslinda: china market just heading to lunch. under pressure as we speak. the cpi index down about .4%. no conviction in the market. some optimism and it comes to data but not enough to reverse the sentiment. csi 300 under pressure.

in terms of the chinese you want, unchanged. the pboc continues to support the currency under pressure from the lackluster economy. shanghai composite currently down .3%. we are keeping an eye on japan as it comes back from that lunch break. the nikkei to 25 under pressure, down .3%. the governor avoided sounding clearly dovish when discussing monetary easing. the yen front and center, traders on guard against the potential currency intervention. the nikkei to 25 down .2% and the topics also in negative territory. the bank of japan said to be considering raising its

inflation forecast at a policy meeting later this month after surprisingly strong results of annual wage negotiations. meanwhile the governor has weighed in on the impact of a week in. -- weak yen. >> exchange rates may have an impact that cannot be ignored on economic and price trends periods in such a situation, there's a possibility of considering a monetary policy response. this is the general statement. haslinda: let's bring in paul jackson. how would high inflation inflect the view on the outlook for policy? >> if you got higher inflation that seems clearly linked to demand, i think that paves the way for the bank of japan to be able to raise interest rates

further. a move toward normalizing policy more. the question is, is the pace at which that will take place, i don't think anyone at this stage is expecting the bank of japan to do back-to-back rate hikes, having waited this long to do his first rate increase since 2007. these forecasts will be among the main points of interest at the april meeting. if the boj is forecasting inflation to be around the 2% mark in fiscal 26, which us what we are hearing from people familiar with the matter, that suggests that they are on track to keep moving forward with policy normalization. haslinda: we know he said they

would consider it if inflation remains below 2%. are we there yet? >> there are lots of different ways to slice and dice these figures. we've had inflation at 2% or more for almost two years now. so what exactly are they waiting for? i think it is the measures of underlying inflation and also the idea that they really want to avoid moving too soon when it is all about import cost and the impact of the weekend. they want to see this inflation being driven by consumer spending that is fueled by higher wages. we are still yet to see clearer evidence of this taking place. i think that is what they will be waiting for. haslinda: so put this in context

for us. how to its forecasts compare with the private sector? >> generally speaking, we do sometimes see the private sector getting in a different spot to the bank of japan. one of the things that has moved the dial in the past couple of weeks is the decision by the government to phase out its energy subsidies. it has led to firms raising their forecast for where they expect inflation to be. some as high as 3% for this year as a result of that subsidy impact being phased out.

it shaved a percentage point off inflation. haslinda: paul jackson, thank you. the bot has been -- most analysts expect the boj to keep its benchmark steady for the third straight game. they have been pushing for a rate cut and there is reason for that. we are seeing inflation easing for consecutive months. >> yes. he has made a lot of big promises to boost thailand's economy, to lift growth over the

next four years. that is a tall order given that taiwan has grown an average of below 2% for the last decades. so he has used up most of his physical firepower. one of the key strategies he set out to achieve in the short-term , he has been exerting relentless pressure to cut rates from 2.5% which he says is way too high for an economy that he thinks is in a crisis, with sluggish growth and week demand. haslinda: credit to the bot for resisting that pressure. >> it has been resisting so far because it doesn't think the country is in a crisis. committee members would be looking out for clear signs from

high-frequency data at the sluggish growth trend is here to stay and that domestic and internal headwinds are not going to retreat any time. that said, even if the mpc doesn't cut rates today, all eyes will be on thailand's release of the data for the first quarter of this year. that is going to come up in may. it could strengthen the calls for rate cuts or it could become a big point of consideration when it meets in june for the next rate decision. >> you have to wonder what the implications might be. >> that would be the clearest signs yet of the bot asserting

its independence. stability contracts but there's not much the government can do to sway the rate battle because of the weight is structured. it includes three dot nominees and four external members. so it is very hard to dictate his way through this. that said, there's a very high chance that we will continue to make calls for rate cuts and the boe continuing to resist and wait until conditions warrant a certain move. haslinda: coming up, a deep dive into india's venture debt markets.

keep it here with us. this is bloomberg.

haslinda: welcome back to bloomberg "markets: asia." you're watching india focus. india starts trading in just under five minutes. futures point to a higher open.

some individual investors in india are exploring a new and growing segment of the nation's credit market in pursuit of higher returns. our asia credit reporter joins us now. why? >> the nascent credit market of india is primarily because of the higher yields these kind of products are offering. it's a market where the debt is backed by the cash flow of bonds which have been issued by the nation's highest companies. when you compare it with the fixed deposit of similar maturity from the nation's largest lender, it is offering 7%. clearly the yield is the major

driver of my these individuals are excluding the exotic corporate debt. the other reason is also because it is believed that these smaller companies of india are going to gain the most out of the economic growth they're promising. this buying of these kind of debt products gives initial investors exposure to the smaller, midsize firms. haslinda: we are talking about something exotic. it sounds like there are risks involved. >> over here, although the risk is a little disbursed given the fact that an individual is not investing in one single high-yield, corporate bond, still, what could be even

riskier is that if the small severs of the country who do not fully understand the credit risk involved, we should also not forget that india has had its own share of credit crises. justin 2018 when it top-notch rated financier collapsed. haslinda: our asia credit reporter, thank you so much for joining us. some breaking headlines, fitch revising its outlook on china to negative, affirming its a+ rating. the country contends with more uncertain economic prospects.

advising the outlook on china to negative, and now turning to india's venture. some analysis and investment insight with the managing partner at strike ventures. good to have you with us. give us a sense of what you are seeing in the sector right now. >> thank you so much for having me on bloomberg. the landscape has evolved a lot in the last five years. the total deployments crossed 1.2 billion dollars which was 15% of take over the calendar year 2022. it has been accommodation of multiple factors. one is the education of this asset class. it was not a very well-known asset class. it has been in existence in the

u.s. for three decades. over the last five years it has become -- and what should you add not to overlap itself as well. they have realized if they don't at some bit of debt they are unnecessarily diluting themselves. due to a couple of doctors why the asset class -- founders are using it for use cases like financing, capital expenditure, etc.. haslinda: so where did you see the most demand last year and what are you expecting for the coming year? >> they are correlated asset

classes. 79% of the deals, they consumed basic wrote -- happening in the early stage. in terms of the amount, the quantum of cost for later stage deals. and it comes to sectors, financial services or fintech is the primary sector which absorbed 55% of the major debt requirement in india last year. for acquisition financing, new areas of business. financial services was the number one sector which has a working capital requirement.

these two sectors were the most, and we felt cleantech's across the value chain, whether it is a battery recycling plant or a battery manufacturer, all of that. haslinda: as you said, there has been a lot of interest. can you quantify that for us? are we likely to see the same kind of growth in the years to come? >> this year was close to $1.3 billion. we feel this can continue only if the venture capital ecosystem picks up.

20% is what we have seen even in the u.s.. the system has to come back. the sentiments have been muted. if the ecosystem does not pick up at the same space, we will have to reduce. haslinda: is there a correlation between a fallen equity and a rise in venture debt? >> it is, definitely. a lot of work had already been done with respect to people understanding the asset class. if you use debt for the right reasons always, but given that venture capital was expensive.

the valuation multiples were at a completely different level. the valuation multiples, equity is evidently more expensive. people have understood the better use cases. it notes people to think of quantitative sources of financing in a tough funding environment. haslinda: i'm just wondering whether there are is stemming -- systemic reasons for it as well. >> as i said, multiple reasons. education has been imparted to a lot of vcs and founders. they understood equity is more expensive than debt. the third thing i would say, the internet has been driven largely by a catholic push.

if you look at u.s. major debt, there was a dip which coincided in the -- despite venture capital going down. it was insulated from what is happening globally. a more liquid asset class in that sense. because of those reasons, it has held its base in india. otherwise i think it will be more sluggish over the last year. >> there are lots of reasons for the uptick.

>> one good thing that has happened is, people have just gone into the mindset of sustainability and economics. so it is generally a positive that they have blocked me from the ecosystem. as long as that is happening, we feel that india has a lot of very high quality startups that continue to grow despite the environment. haslinda: having said that, what sectors may come under stress then? >> obviously, the most obvious ones or fintech, which took a deep dive in 2022 and following in 2023. they have been the most impacted post-covid.

once the markets open, offline was back into play. the company's were not able to -- even b2b companies have to make sure the cash they have is up to the mark. they have not been able to amass a lot of capital. haslinda: thank you so much for joining us today. muted gains across the board as we await that crucial cpi data out of the u.s. we are also keep an eye on the rupee. in terms of the other

benchmarks, the nifty index up .2%, some say you want to keep an eye out on lenders that are out of favor at this point in time, but they may extend their rebound. there is now renewed optimism for the return of more than 14%. plenty more had. keep it here with us. this is bloomberg. ♪

haslinda: headlines to tell you about, in china, tesla in talks with reliance for india's -- tesla may be scouting for local partner to set up its operation in india. highly play sources say the u.s. ev major is in talks with reliance industries for possible joint venture to build that manufacturing facility in the country. reliance currently trading up by 1.2% amid that headline. talk some say are in the initial stages and have been ongoing for over month, according to some people familiar with the matter. discussion saying the movement should not be construed as the reliance entry into the automobile space. also keeping an eye on markets

on the back of that cpi print out of the u.s. which is crucial , and also some headlines earlier, fitch revising its outlook on china to negative, affirming the outlook reflecting increasing risks to china's public finance outlook. that is it from bloomberg's "markets: asia." keep it here with us. this is bloomberg. ♪

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