. steve mnuchin says the jobless rate might climb to 20% without a stimulus. by a limit after yesterday's rally. agreed toeaders restrict most travel to the region. spain joins germany and france and announcing billions to support businesses. good morning, good afternoon, good evening, everyone, depending on where you are in the world. this is "bloomberg surveillance ," taylor and francine from london and new york. taylor and i had a wonderful hour with howard davies from rbs, and put together, i think we have a pretty good picture at some of the concerns out there when it comes to the markets. it is debt, debt, debt, and how a love these countries can afford what they are dishing out to support small and medium businesses. but businesses, taylor? taylor: the global bond markets

seem to think there is a little worry out there. out and say this could be less of a shock than we think, and as long as the ecb still buys and is on the balance sheet for longer, than the markets may not need to be as worried as perhaps we think they should be. spreads, andening now let's get straight to first word news in new york city. here is viviana hurtado. viviana: we begin with the trump administration, pushing a $1.2 trillion stimulus plan, this on account of the impact of coronavirus. could get payments of $1000 or more within two weeks. and months later, a second set of checks could be sent out. steven mnuchin warning republican senators if there is no stim of this package, the u.s. could face a 20% unappointed rate. -- stimulus package, the u.s. could face a 20% unemployment rate.

great britain is announcing $24 billion in loan grants and tax cuts to keep the coronavirus from wrecking that economy. biden has tighten his grip on the race for the democratic presidential nomination, yesterday sweeping all three primaries. we are talking arizona, florida, and illinois. the former vice president has more than half the 2000 delegates he needs for the nomination he also has a 284-delegate lead over bernie sanders. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, viviana hurtado. this is bloomberg. francine? taylor? taylor: this is what your -- francine: this is what you're markets are doing. we have some numbers out of european banks, how much banks the dollar funding

operation out of the ecb. we are getting figures out of -- the bank of england. we are talking about with howard davies, and he is saying this points to the fact that it seems to be supportive of liquidity. u.s. equity futures down, european equities also down. but as taylor was rightly saying, a lot of the focus is on what funds are doing. -- on what bonds are doing. bonds are having an ugly day, selling off, traders trying to figure out fiscal and monetary stimulus and that impact on the economy, and they are trying to way exactly how much that means of how these countries can fund it. if you are looking at global bonds, they are funding this debt day luge with concerns about the pandemic. taylor: massive dollar strength recently. despite the easing we are

seeing, if the fed is trying to weaken the dollar, easing at monetary policy. the problem is, dollar is still the reserve currency. we are seeing massive dollar strength now, the strongest going back to 2017 as banks continue to get their hands on king dollar. what that means for the equity market, we are still down about 3.7%, as we have been talking about all morning. the 5% of course is the limit down within the futures market, 7% in the cash market. crude is now down to $25 a barrel, very curious to see the impact of that on inflation dynamics, and the 30-year yield still getting a lift up in yields, but less so than we thought, only up eight basis points, and we are seeing strength in the yen relative to the dollar, a state haven -- as safe havens continue. top story of course come as you are saying, impacting all treasuries, but frankly bonds worldwide. the trump administration is

pushing for a stimulus of $1.2 trillion to counter the economic impact of the coronavirus, while bloomberg has also learned that americans can get a direct payment of $1000 or more within weeks. cirilli, ourkevin chief washington correspondent. i have a million questions about the election. first on the stimulus, we are talking about helicopter money, right? every american gets $1000 through the door. how would that be funded? then: i think administration will be drawing on help from the federal reserve as well as from other government entities in order to provide this immediate relief. speaking with sources yesterday, the partisanship on this issue is gone. republicans and democrats agreeing that all americans, particularly those who are relying upon small businesses, are going to need immediate liquidity and within the next week, week and a half. that is why treasury secretary

steven mnuchin yesterday at the white house, saying that the president has ordered him to make this happen "now." speaking with democrats on capitol hill via telephone, they are saying they agree with this. the timetable, according to senate majority leader mitch mcconnell, the tom -- the top republican in the senate, is that he is keeping lawmakers in the senate until they get to some kind of agreement. minute during the 90 press conference yesterday with the president, with treasury secretary steve mnuchin, they continue to say within a matter of weeks, i know you set out a preliminary timetable for this to be approved. how soon could we see those $1000 checks, or whatever that may be, in the hands of the american people? kevin: within the next two weeks. the on that, the president will be meeting with airline executives, continuing to have cross sector, cross industry firm up as they try to

other liquidity and other backstops before various agencies. so when you move this out, virtually every single lawmaker is introducing legislation on both sides of the aisle, trying to provide economic relief. 70% of americans do not have enough saved up in long-term savings and are living paycheck-to-paycheck, even a large portion of americans living paycheck-to-paycheck. so with so many americans working from home, they will incredibly quickly within the next week and a half. that is why there is an immediate sense of urgency as americans adjust to the impact of the global pandemic. joe biden impact popularity for joe biden versus donald trump? joe biden is continuing

his route, so to speak, in terms of the primaries, with significant wins in florida and illinois. the democratic national committee is urging states to extend access to early ballot voting. in talking to political strategists, i am going to be candid, they do not know what they are doing in terms of how to recalibrate for a strategy on either side of the aisle because there are so many unknown questions -- in terms of fundraising, door to door knocking, off the table in terms of mobilizing voters adding out the vote effort, with folks being urged to stay home. look, i think the politics of this for right now have largely been put on pause here they will continue to escalate. some democrats are saying the president was not as prepared as he should have been for this pandemic, and republicans are saying that it is the president's swift action that is protecting more americans. right now democrats and republicans, at least in

congress, are working together to provide economic relief. taylor: kevin cirilli, thank you for joining us. joining us to continue on the theme of fiscal stimulus is matthew liz eddie, the deutsche bank chief economist. thank you for joining us. $1.2 trillion, the markets wanted it, but they still do not seem satisfied. what is your take, or are we worried about how we will pay for it? matthew: thanks for having me. certainly you are seeing very rapid responses, first by the federal reserve bank over the past few weeks with the annual meeting rate cut, rolling out qed. -- rolling out qed. -- rolling out qe. the markets are waiting through that waiting through volatile

times, with the impact of the coronavirus on the economy, it's looks like it is going to be larger and larger. we actually published a report this money. we think we will see the largest quarterly decline in u.s. gdp on record in q2. and the similars package are growing in size. and for a good reason. you need to have a large fiscal stimulus package, as kevin noted, that needs to be rolled out quickly to help households and businesses. and the market will over time reach an equilibrium. but it does take time, given what we are seeing, given the dollar needs that people have in selling treasuries, and we also -- the market is digesting a lot of information in a short amount of time. taylor: matthew, walk me through that. you are seeing the largest courtly drop in gdp in the second quarter ever, or so than 2008. how does this quarter compared to 10, 12 years ago? the largest008,

quarterly decline we had was 8.4%. when you go back to the 1950's, 1958, we had a 10% decline. the difficult part with this is that we really have no historical parallel. we have nothing to anchor how we think about the economy, closing down large portions of the economy. people cannot go out and spend. the difference right now in 2008, significant ones, is that during that period, services by the consumer remained relatively resilient. that is almost 50% of gdp that remains resilient, helping to support the economy. that is the case over the coming weeks. even if you have the checks rolled out, people are not able to go out to movies, dinner, to bars and restaurants. we will not have that same ander from the consumer customer services spending in particular that will allow a bit more resilient recovery.

we think it is going to be temporary, but i think you are having a historically large distraction to the u.s. economy over the next few months. francine: will we see helicopter money? stepping in with almost everything they have with stimulus, offering money, and suddenly the markets are saying we cannot go too much into debt. what is the right way of looking at this? thehew: i think we will get fiscal response, and the $1.2 trillion package may not be the end of it. then i think we will get the corporate monetary policy response. what we have from the fed so far is they rolled out -- they debate whether or not there is qe. they have increased mortgage-backed security

purchases, and they are doing it upfront. combating market liquidity in these markets, but this could ute into a more traditional qe if you see interest rates rise, given maximum accommodations. there could be a pivot and the language for what purchases are being used for if market streams come down and liquidity returns to a more traditional type qe providing stimulus in the economy. matt, thank you so much. luzzetti ofhew deutsche bank. go -- have any questions, tweet us as well to give us some of your thoughts in what we are seeing in the markets. coming up on bloomberg daybreak: americas, it will be an interesting conversation with

jason furman, a former white house counsel of economic advisers. do not miss that interview, 8:00 a.m. in new york, 12:00 p.m. in london. this is bloomberg. ♪

taylor: i am taylor riggs in new york, francine lacqua and london. i do have a chart here, so let me bring this up for you guys because i want to bring this up. matthew luzzetti, deutsche bank chief economist, is still with us. is the bondr me market moves that we have seen.

this is the move index which measures the volatility within the bond market, which are ghibli has been much more than with ash which arguably has been much more than we have seen -- arguably has been much more than we have seen. with the global rate moves we have seen this morning, a lift in yield -- what does that tell you about where we are? thatrstly, i have to say market liquidity is absolutely horrendous, so trying to get trades done in almost any reasonable size is moving the market quite a lot that is one of the reasons you have seen 30, 40 basis point moves intraday in a few minutes, so it is not based on fundamentals, it is not everyone going to save money all the time, it is the lack of risk-taking in this environment, where basically no one wants to warehouse any risk for any amount of time. take it with a grain of salt it i think some of these treasury moves. in general though, i think the fact that we were selling off is showing that people think the

fiscal response, not only in the u.s. but globally, is going to at least limit some of the damage. i don't think that it is over certainly. no one can really know the ending for the economy yet, but at the same time i think people think the coordinated action at some level is going to defer the worst case scenario that we still have in the back of our heads, that it might come to that. thisine: i am having conversation with -- fabrizio says the government's cannot do this too much because it could impact future generations. central banks have the firepower. look at what japan is doing. is that right? how much more can and will central banks do? ira: so, central banks can only do so much in an environment like this are the reason central-bank policies work, the

reason low interest rates work -- like this. the reason central bank policies work, the reason low interest rates work, want to make it easier for people to borrow money and for firms to finance themselves. they have done all they can, and it was never going to be enough because in an environment where people have a bunker mentality rate, social distancing and small businesses closing -- you do not have waiters and waitresses at restaurants even if the cooks are there because there is take out. it is not something that monetary policy can help. so you need a fiscal response. longer-term, what will that mean for markets? because you wind up having an trilliontrillion or $3 in debt over the next year or two. at the end of the day, someone has to pay the piper the question is, can we get growth ultimately. to bes really what has

the concern now. in a crisis, do not know -- do not worry about how much debt you have for the government. worry about whether people can pay their bills. ira, what about helicopter money? and central banks give money? cannot, because again, how did that money get into the system? if the federal reserve and other central banks buy up a lot of assets, they give that money to the banks, that if no one is borrowing from those banks, the money is not in the system. there is no helicopter. you have the money in the helicopter but you cannot get out the door because the door is stuck shut. you have to have other means to get that money to households, and that has to be through the governmental channel. that is the difference here. thinking about this in terms of 2007, 2008, is completely wrong. this is more like a wartime

footing, the way i look at it. people cannot spend because they literally do not have jobs because jobs were suddenly taken away from them, which is exactly what happened. so now you have to have a governmental response. the banks are completely ineffective. thes move on, let's go to government official response. taylor: ira jersery of bloomberg intelligence, thank you as always. and matthew luzzetti of deutsche bank will be sticking with us. coming up we will be speaking with nick murray russo, head of global bonds. all about the global bond rout. 3 p.m. london. this is bloomberg. ♪

viviana: you are watching bloomberg surveillance. we begin with softbank, capping down on the weworked bailout. the japanese conglomerate saying it could withdraw from the 3 billion-dollar deal. citing numerous government inquiries into the embattled co-working business. hsbc, taking a known quality to lead it through the rock economy. noel quinn was given the job on a full-time basis, running the british bank for seven months. mr. quinn has been at hsbc for 33 years. that is your bloomberg business taylor: flash. let's get a check on the markets.

-- the bloomberg business flash. taylor: thank you. the market down 7% after a rebound yesterday. take a look at crude, down. looks like we could see a risk off sentiment, meaning 30 year bond yields unchanged at 1.70. yet strength means it is all about safe havens. coming up, we are going to get a check here from scott minor. last time we spoke to him, he tod look for spreads, out 750 basis points in the high-yield market. we will get an update on that call, scott minor from guggenheim partners, cio. this is bloomberg. ♪

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history -- i would like all of us to join forces. >> we are ready to do whatever we have to. >> you can be sure, the public can be assured of that. >> sentiment before year end was needed. virus ant against the outside force beyond our control that is wreaking havoc around the globe. mr. speaker, we are up for this fight. francine: those were some of the leaders, policymakers, and government officials trying to do with the coronavirus fallout, really trying to avoid the health care crisis becoming a financial crisis. still with us, matt luzzetti, burger bank chief u.s. economist, and christopher wailing, wailing globe or advices -- the markets are uncertain about what they need to look at they look at fiscal, central banks, they rise a little bit, and then they are

down significantly. what would it take to put a floor on these big equity moves and bond moves? ofyou have a whole class companies and countries and other entities that have effectively been downgraded, francine, and the rating agencies will take months to get caught up with reality, so investors have big question that makes markets dysfunctional. that is why the high-yield spreads have risen so high. these are all bad indicators because they indicate that the economy is essentially stopped and that we are not financing in the private sector, so the government has to step in and they have. but in order to calm everyone down and get valuations to stabilize, you need to start answering some questions about how the crisis is going to impact the specific companies and industries and everything else. i think it is fairly obvious

what we have to do. it is just going to take time to get clarity. francine: is that right, matt luzzetti? is it clear what we need to see? what are the markets looking for? are they testing central banks? are they testing governments worldwide? matthew: i think the markets are responding to an immense flow of information. thery rapid rollout of stimulus. in terms of what you need to see, i think, one, you need to have the central-bank action take place, which the fed has taken place and other central banks are doing as well. two, we need to get to clarity on the fiscal stimulation -- the fiscal symbian -- the fiscal situation. seeing how the data reacts to that. three, how the virus evolves.

will economic activity rebound by the second half of the year? we don't know, there is a lot of uncertainty about that. until we get clarity about that, i think you are in this volatile world. chris, i made this chart just for you. spread, alibor-ois measure of the health of the banking system. funding for us has picked up a little, but we are nowhere near the spreads that we saw when we in 2008. how is the health of the banking sector this time around? chris: banks are relatively able fine,s point the earnings capital is too high. serve as an important foundation for building recovery. this is the demand-side crisis

rather than a liquidity crisis. so what we are worried about is people seeing revenues falling, and the banks are going to step in and provide credit, and the government is going to be behind that to banks -- to backstop the banks. small business, i imagine a love small businesses are going to be able to get loans from banks that in turn are going to be covered by the u.s. government. so it is that sort of role, i think you will see the banks play. at this point they are fine. they really are in better shape now than they have been in many years. matthew, full dover into this world of economics. talking about how low inflation and low oil prices are, potentially could be a boost to the consumer. the problem is that in the last nine days, oil prices have plunged even further. what does that mean for your inflation expectations and any potential benefit to the

consumer? the fed and other central banks are firefighting right now. longer-term, i think what we have seen is that when we have big shocks to oil like this, we had one in 1987, we had another 2014, 2015. we are seeing it now again. when that happens, inflation expectations ratchet down to lower levels, and they never recover. these are longer-term expectations. even consumer inflation expectations. that is a worry for central banks if we look a year, two years down the road. rates at record low levels, it does not give ammunition to respond to recessions or correcting. so i think that is the big concern from a central-bank perspective. if we look forward 6, 12 months down the road, which is we are just attracting this long-term

inflation regime. the lookhank you for at the banking regime. francine? get these ares the key developments. first cases have been topping 193,000 worldwide. deaths exceeding 7800. the trump administration is considering a stimulus plan that could reach 1.2 trillion dollars. european leaders agreed to restrict most travel into the continent in an unprecedented move. joining us now is the chief executive officer -- they are involved in testing, producing some of the kits. he is a great voice to have to understand how we can test and get on top of a number of cases. thank you so much for joining us today.

what do we know about testing? i know some of the key components needed to make sure that enough people, the people that need to be tested, already done so is missing. how do you see this evolving in the coming weeks? >> good morning and thanks for having me. back, at theep beginning of the year, the crisis when we started to pathogens were emerging out of china, and we -- this is when we understood it was another strain of coronavirus. i would like to highlight at this point, there are other strains of coronavirus. it is a known virus, a known pathogen, but when you start to identify a cluster of infection, the first answer normally comes from central laboratories. it is exactly what is happening

in that crisis. example, in, for the u.s., the cdc in china, also in europe, there is normally a may ocular -- a molecular solution that emerges faster to identify the virus. the strain of the virus. once you get access to the strain of the new pathogen, health care companies can start looking at a new test. so the first answer is always -- if from central banks you go to the u.s., the cdc started little by little to make these available in labs in the u.s. but then as the contamination rose and spreads out over the world, you need to go beyond that. you need to be able to have more

easierand if possible, tests to use. francine: mr. bernard, can you quantify when we will get to that place? alsoe moment we are reading reactions. rry: we are now in that in pursuit -- that situation where you have a very good testsoration between the in the central labs in the cdc, that have separate tremendously over the last seven weeks to come to the markets. in the case of -- what we need is to try to think about a very

quick test. compared to the cdc test, which four to six hours. extremely easy to use. see in our case -- it one, half thele size of your iphone. that goes into a very small reader. you load the cartridge once you have inserted a swab into the cartridge, and you get your results in two hours. it is very quick, easy to use. , diagnostices companies in the past, are coming as well with solutions. of different magnitude. medium-sized, hospitals, emergency rooms. you have a complete scent of test set of answers -- a complete set of answers. are these tests

different from other coronavirus tests we have seen? like a stars, a mers? matt: we decided to detect specifically two genes recommended by the cdc in the had testshina, and we already cleared in many countries, available in europe and the u.s. single swab, you can identify and a lot of different pathogens, more than 20, like flu, and like all the coronavirus. if you follow the recommendation of the cdc, especially in the time of flu season in winter, with allergy season, it is extremely important to be able to specifically detect that

coronavirus against other pathogens. taylor: thank you so much, that was thierry bernard. thank you for joining us. the qiagen ceo. you can watch all of our interviews on tv . click on our charts and interact with us directly. just go here to tv . this is bloomberg. ♪

francine: this is "bloomberg surveillance," from london and new york. francine and taylor. markets have an fluctuate in quite a lot, so we need to catch our breath and figure out what comes next.

u.s. equity futures down, european stocks also down. yesterday they were up, but there seems to be a lot more anxiousness from traders and market participants, that they are trying to figure out the fiscal and monetary stimulus and how that will counter the effect of coronavirus. some are looking at oil dropping to a 17-year low. japanese shares were unchained -- were unchanged after rising 4% a couple hours before. the recessiont would look like, let's get straight to annmarie hordern. good morning. annmarie: good morning, francine. all the alarm on a global morgan stanley, goldman sachs, jeffrey gundlach -- saying the growth is going to fall .9%, that is their base case that there will be a recession. goldman sachs earth weakening one point 5%. -- hey gundlach puts the

says we are completely unprepared for it, the longest -- it is clear a global recession is here. the question is how long will it last and how deep will it run. taylor: annmarie hordern, thank you for joining us. i want to bring in matthew luzzetti from deutsche bank. he is still with us. fourth quarter -- first quarter gdp falling the most ever. how much pent-up demand will there be in h2? matt: i think before these recent developments, we were constructive on the economy, on the consumer. if you look at the aggregate consumer balance sheet, it is the best on record, although there were a lot of differences -- i think what you are seeing

is, we will have significant fiscal stimulus, the packages being considered are significant. you have a monetary policy that is setting up the financial crisis using levels and that will continue. in the second half of the year, you should have the benefit of the phase one trade deal, boeing production may get back online. there is a lot of reason to think that second-half growth picks up and picks up meaningfully, as long as the spread of the virus subsides and we can back away from some of these containment measures. i think that is a big uncertainty. but we expect significant pickup and second-half growth, which helps limit contraction to 1%. taylor: i am trying to fold in my love of bonds and credit spreads in your world of u.s. economics. look at this chart i amt showing inside my terminal. widening out to -- widening yield spreads, doubling. at what point do credit spreads

widen out enough where you can start to see cracks, concerns about the underlying high-yield companies within u.s. economics? and at what point does that become a recovery and a buying opportunity? matt: what we have been doing is updating a measure that the fed uses, corporate bond risk premium, and this is tripping out from high-yield rest or's debt high-yield measures, and an expected default rate. high-end -- hi-yield measures and an expected default rate. if you look at that recently, given what we have seen with spreads, it has reached the highest level since the financial crisis. and the implied probability over the next months from that is roughly 85%. i think we are at the levels, certainly with credit spreads, but also in equities. with volatility, where the

economic impact of the financial market moves is real, and is moving to a significant drag on the economy in the near term. once we get past a lot of the uncertainty, you get the rebound in the economy in the second half of the year, but in the near term, it is a drag. what kind oft, unemployment levels will we see in the u.s., and how quickly can people be laid off? how quickly will they have to be laid off because of the economic consequences? matt: as i noted at the beginning, it is hard to know. a additional is difficulty in thinking about the unemployment rate in the u.s. both because we will be seeing significant smaller and medium-sized business loans which may allow people to maintain payrolls. in addition, the way we define

-- people actively searching for jobs. there is a will question if people can be actively searching for jobs if employers are shuttered and they cannot go outside their house. so they may be defined differently. measure of unemployment increasing substantially. we have seen news reports out of connecticut and texas already this week, seeing increases in jobless claims. the bestocus on real-time recession indicator -- it is another question exactly what -- given all the difficulties. it will certainly rise and probably will rise by a percentage point or certainly even more, but it is going to be hard to know. it may not be the best indicator of what is happening with the labor market. matthew, thank you so much. coming up on balance of power, an interview you do not want to miss.

former u.s. treasury secretary larry summers speaks to us. he will have a thing or two to say about stimulus. that interview coming up, 11:30 a.m. in new york, 3:30 p.m. in london. this is bloomberg. ♪

taylor: i am taylor riggs in new york with francine lacqua and london. the chart of the week for me, all about funding stress picking up. we are using the libor-ois spread, picking up with the health of the virus spread. nobody person to discuss this than our guest, who has been covering the banking sector, banks this time around in way better position in terms of liquidity and leverage ratios than 2008. >> what is happening here, is the people are worried about -- we talked about corporate debt a lot, hedge fund funding, where private debt has been in all of this the system is clogged, even after multiple emergency actions taken by the fed in the last couple of weeks. some people could argue these actions started in september,

when the federal reserve repurchased operations. it shows you something underpinning the market has been quite clogged, no matter how much everybody says it is doing all right. or was doing all right. know if any of the banks went through stress tests? if they need to continue to fund a lot of corporate's without ever getting loans back for three months, six months, nine months, is there a concern about capital, something else? >> they are not concerned about bank capital, but regulators trying to loosen a lot of the standards, the banks are more willing to lend. -- there is a general understanding among my sources that they will not be profitable on all of these loans that they are extending, but they are ramping up the velocity at such a degree or being prepared to, at least. the commercial credit facility,

it is a backstop to what they want to have companies go too that it- the hope is will prop up the system more, loans will be handed out at a faster rate than what we are seeing in this kind of down period in the market. but there will be expected losses. as far as stress testing goes, leverage ratios may come down. thank you so much. that is it for "bloomberg surveillance." this is what the markets are doing. a lot of focus on bonds. yields jumping more than 60 basis points. this is bloomberg. ♪ when you move homes, you move more than just yourself.

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like a wartime government and do whatever it takes to support our economy. alix: the u.k. lays out a $424 billion package. the u.s. targets $1.2 trillion. banks keep liquidity flowing. theal bond yields surge as build for fiscal stimulus might come from issuance. no visibility. fedex scraps guidance as the virus trims business in the west , while global car companies shut down operations. welcome to "bloomberg daybreak" on this wednesday, march 18. i'm alix steel. it is an unbelievable move we have seen in the bond market. i can't emphasize this enough. the 10 year yield is up by four points. the fact that we are over 1%, when last week we were down to 50 basis points.