francine: the treasury curve steepen's on expectations. policy is in a good spot. james bullard does not suggest tapering next. u.k. says the latest virus rate has peaked. we hear the bank of england's decision today. former ecb chief mario draghi is hauled out of retirement to lead italy in its time of need. we have not one but two prime ministers on the show, we will

have matteo renzi and mario monti later. on. at what point does the reflation trade continue, and at what point does it take a breather? if you look at deutsche bank, this is the biggest earning story today, so we won't spend -- we will spend a little but of time, once again surrounding the stimulus in the u.s. and the treasury curve steepen's to the level seen, i think the last time was february 2016. now let's get to the bloomberg first word news. here is leigh-ann gerrans. hi, leigh-ann. leigh-ann: good morning, francine. the u.k. has passed the peak of the latest wave of the pandemic. confections are still alarmingly high. records are on track to inoculate about 15 million in

the highest risk group by february 15 you the u.s. securities and exchange commission is honing social media for fraud and the value stocks of gamestop, amc, and others. bloomberg sources say regulators may be part of an asset to manipulate the market and drive up prices. treasury secretary janet yellen will meet with regulators later today to discuss the recent volatility. protests against myanmar's coup are growing. tightening grip on power, internet service providers to temporarily block access to block facebook. they are charged with violating law for possessing illegal walkie-talkies. global news, 24 hours a day, on air and on bloomberg @quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am leigh-ann gerrans. this is bloomberg. francine? francine: leigh-ann, thank you so much.

now, the bank of england officials meet today to discuss interest rates. the majority of economists expect no change. with the very latest on the market moves, yield curves, and the bank of england is our dani burger. what do you have? dani: francine, we have to keep in mind that today is a different scenario than when the market makers first were construct -- confronted with the boe meetings. the short-term picture definitely has turned more dark. we are expecting the boe to trim their forecast for the first quarter. it does not necessarily mean they will take action today. in fact, bloomberg economics assumes they will look on the brighter side of things and not take any action in terms of cutting rates or changing their bond buying programs, but still, they have to factor in this pmi picture of things weakening. but when it comes to negative rates, the market now does not see the doe moving in -- boe

moving in that direction anytime soon. all the bets are no because beyond 10 basis points, which is where we are now. thanks to look out for -- a cut to the first quarter and the study of negative rates, which we are not likely to see them move towards, francine. francine: thank you very much, dani burger, with the latest on these quite exciting market moves. now, italy's 69th government since -- they face the twin emergencies of the coronavirus pandemic and of course a devastating recession. my guest this morning is a key player at the heart of the recent italian political story could after serving as mayor of florence, he became president of the democratic party and prime minister the following year. between 19, he also set of the italian visa party that supports prime minister giuseppe conte a few he withdrew that support last month, bringing down italy's government. to talk about the current

situation, i am very pleased to say, is former prime minister and head of the italian legal party, matteo renzi. thank you very much. the economy could be in a better place. was this your plan all along? mr. renzi: good morning. for now, italy will open a new page, we can write a new page, because of course, we have a very great cast in our institution. unfortunately, it is a situation where it is normal to change every year the government, and that is absolutely crazy. we did not change the situation in the past. now it is clear, we had a great recession, a terrible recession. we have at the same time a crisis in the pandemic, and we have a crisis in school, and

education, because we are the education, we want the level of school open, so what is that? we need a change, i think it is time to give the country and very good hands. mario draghi is the best man to be prime minister. he will save europe. he will save italy. francine: what is the chance he will have a winning parliamentary majority? mr. renzi: absolutely -- i think right now, he will have no trouble, but i'm sure mario draghi will have a lot of confidence, and he will be able to write a recovery plan for the italian economy, the important decision of the economy, he will

be able to help europe in the campaign, because europe had a very great reaction, but unfortunately, and vaccinations, mario draghi not only is a good italian leader but would be a very important european leader, a world leader, and then i think from the next week, we will have a new government with an unbelievable man, the right man, the right place. francine: so what do you think the government will look like? is a technocrats? mr. renzi: i don't know. mario draghi will be a example of 1993, the former became prime minister, the italian economy

after an international agreement. but you can think about mario draghi, he was a civil servant with a number of that she was the chief of the ecb. -- of, he was the chief of the ecb. i don't know if we have a minister from politics, technocrats, i don't know, but i am sure he will be able to have a great political leadership. so i don't care about the folks in the cabinet, because i am really, really confident about the roles of leadership and division, because this is the last chance for italy, yeah? 9 billion from europe. probably it is more than the marshall plan, it is more than

the marshall plan. francine: if mario draghi fails to form a government, what happens? mr. renzi: this is not a possibility. no one in italy thinks that there is a possibility of failure. also because, let me be very clear, my viva party, we opened the crisis months ago. really this situation in italy was very problematic, because, as we think, it was totally blocked in the vaccine, the economy, in the school, and education, in the jobs. now, the president of the republic, a very wise man, sergio mattarella, created a new government, so

there is no possibility and a failure for mario draghi, and i think mario draghi really will be able to give people two years, and in that period, i think we will have a lot of potential freedom but also for the eu. don't forget we will have an election in germany, election in france, very important, may 2022, and then an election in italy in 2023. francine: matteo renzi, if you see draghi staying on for two years, that is until 2020 three, we do not support him to become president of the republican 2022, when the current president will have to step down? mr. renzi: not right now. now the priority is the possibility to create a cabinet and the government.

2022 is correct, i will agree with you, there is a variant in moment with the election, the president of the republic, but i think, with respect to president mattarella, everyone, don't speak. i think for the people who follow your very good program, you're very good show, a lot of people think oh, it is very easy difficult to understand italian politics. yes, it is commanded is difficult for us, the politicians, -- yes, it is difficult for us, the politicians. francine: [laughs] mr. renzi: i think it is in very good hands, with mario draghi. for me, that is a message of hope. francine: all right, who do you see as finance minister?

mr. renzi: i don't know. i am so happy, because, for me, now it is time to relax and support all of mario draghi. so i do not know who will be the next minister of finance. i do not know who will be the next minister in every sector, but please come if you think about markets, financial markets, you know the financial community -- everyone yesterday opened a bottle of champagne -- not champagne, italian wine -- to give a very great message of confidence for the future after the decision of mario draghi, and mario draghi will appoint a great minister of finance, absolutely a great man, a great woman, i don't know who it i'm totally confident about the capacity of draghi. please, that is not a blind hope, it is a very clear message. draghi was the man during the

crisis of europe who saved europe. because in italy, a lot of people think in the past. europe is not a problem, and that is not true! europe is not our only possibility to abdicate from our crisis. so mario draghi, that is absolutely the simple, because he is the italian who saved europe, and he is the italian who saved our country. francine: matteo renzi, thank you so much. i can tell you with so much chatter on the markets with the fact that so many market for dispense heard mario draghi -- market participants heard mario draghi speaking english, and they heard him speaking italian for the first time. matteo renzi, head of the italy viva party, thank you very much. coming up, our interview with mario monti at 9:30 a.m., london

time. this is bloomberg. ♪ bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." i am francine lacqua here in london. let's get back to the markets, and the treasury curve, five years of expectations over the saudi government's decision to leave long-term debt unchanged. an expert when it comes to italian politics, we are delighted to be joined by francesco garzarelli, head of macro research at eisler capital. he is the cohead of macro

research at goldman sachs. thank you for joining us. when you look at what is going on in treasury, what does it tell you, first of all, about the reflation trade and how long it could last? francesco: it tells me, first of all, that the fed is being heard, and it is being effective. we saw, throughout last year, gradual normalization of inflation. that is a good thing. if you look at where inflation is priced now, it is about 2%, with the distribution of expectations pretty much where it was in 2018, which was a hot year for the economy. and i think now, it is the more challenging part of the reflation trade for us in the investment business, because you really have to think that the fed not only succeeds to keep inflation at 2% but actually overshoes in order to make up some of the lost round -- over

shoots in order to make up some of the lost round, and that is a big economic question. francine: where do you see that playing out? it is playing out in treasury markets, in bonds around the world, and actually also equities. is there a danger that we are getting ahead of ourselves? where does inflation actually come from? is it the stimulus? we still do not know what happens in the u.s. or could we be importing it from china? francesco: it is a bit of everything, to be honest with you, francine. the market has summed up all of these things, the policy, a bit of inflation, which originates from bottlenecks, it is all in the price, and i think the price now is fair from what we know. i think, if you look at how the market response to that response to inflation, i think the markets want to understand what

happens to fiscal policy, and there we draw an important distinction. fiscal policy fills a hole in incomes left by the covid shock. so we transfer resources from the future into the present in order to make people, you know, in order to bridge people's finances. now, some in the market say there is pent-up demand, that once we reopen the economy, that will, you know, translate into bigger spending and not put pressure on prices, but it is just that -- it will fizzle out eventually. and i think, on the fiscal stance, there is the distinction, rather than filling holes, we need to see governments building ramps for the next phase of spending, and that means, you know, infrastructure, spending, entitlements, and whatnot, and that, i think, is ultimately very inflationary, considering

especially this combination with monetary policy. so i am bullish there. francine: what does it mean for european bonds and actually specifically the situation in italy, given what we are seeing in terms of politics? francesco: i think, look, in europe, i said the distribution of expectations in the west is normalized. in europe, we are far from that. let me give you an example. if you take the probability of market discounts of inflation being below 1% over the next five years, it is all 10% in the u.s. in europe, that same probability of inflation staying below 1% over the next five years is about 50% to 60%, so the market is a great skew on the tail of inflation outcome distribution, and that is a good opportunity for us investors. i mean, if we get fiscal policy and monetary policy combined, there should be a little bit

more inflation. so it is a bit like a trade that we had in the u.s. last year played out and next -- had in the u.s. last year, played out in europe this year and next. you have matteo renzi on. technocrats have always been brought into tight and fiscal policy, and that was a good trade for creditors of italy. francine: yep. mr. renzi: it was a btp trade. btp trades are just fine. their yields are paltry, like everywhere in the world, and mr. draghi has been brought into direct a fiscal expansion. this is the opposite from what we have seen from previous technocrats. he has been called into have a

greater chance of italy absorbing that fiscal stimulus, and it is bizarre the politicians don't do it themselves and have to call in a, you know, an expert. probably everybody wants to jump on that bandwagon, and you need some discipline. but in terms of structural finances, i think it is not that great, because i do nothing draghi, in order to win majority, will have enough time to really do something material, but he will be offering, obviously, plenty of credibility, and, again, play into the reflation trade. so italy to me -- continue, francine. francine: finish your thought, and that i want to talk about gamestop and bank of england. but your thoughts on italy, you like equities? francesco: it is more of an equity trait them a reflation trade, rather than a classic trade we would be used to, where

spreads triton, you know, -- t ighten, you know, we have all of that, it is really getting accounting wages up and getting industry started again. that is more, to me, an equity trade, an italy inc. trade than it is a btp trade. it is a completely different playbook from what we have seen in the past. francine: i want to talk about gamestop. it has been a wild ride in the market in the last 10 days. is there something that has made you uneasy? are we going to see regulation? how do you see this playing out in the wider world on the longer horizon? francesco: well, there is a lot in there, francine. you mentioned systemic risk. i, frankly, at this point, do not see them. trying to think hard with the group at eisler capital about whether this could, you know,

commanded more sustained relevance. i don't think it does. but it does highlight something. it dovetails with a lot of conversations happening in markets, which is around market structure and liquidity risk. i mean, here we see a lot of leverage offered to retailers, retail investors. we are seeing, you know, and a lot of group of investors influencing or gathering in a gregarious way toward one stock or one asset, and that creates even more volatility. when volatility happens, high-frequency traders tend to pull out, and that begets more problems ultimately, it creates essentially prices that are not there. you look at a price, you think you can exit at that price, but actually the market is somewhere else, and that is the liquidity

gap that we saw time and again over 2020. so there's a bunch of stuff in there. i think there is a role for regulators. the optimistic view is they know this, they have been looking at it for a while. the pessimistic view is, at least directly outside the purview of the fact, the fed can get to the problem of the central banks via a firm brokerage or, you know, via the banks who offer leverage to the platforms. i think there is a discussion to be had about clearinghouses and their capitalizations. the pessimistic view is that regulation in history has come in once there was a smoking gun, when there was a problem, and, you know, the politics and regulatory momentum coincided. francine: i'm sorry, i'm doing,

like come around the world in seven minutes, but in 30 seconds, what happens to yuki acids if the bank of england goes negative? -- u.k. assets if the bank of england goes negative? francesco: well, the u.k., a bit like the u.s., until they brought this up, could have priced negative rates, and i think it will include negative, and i think today we will find that out. it will steepen the yield curve, and i think it just offers them more leeway on the currency and the number dimension, so i think it will be a change for them, so well done there. francine: thank you so much, francesco garzarelli, head of global macro markets research at eisler capital. eisler- [announcer] imagine coh■ñhaving fuller, thicker,

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francine: economics, finance, politics. this is "bloomberg surveillance." i'm francine lacqua, here in london.

let's get to the bloomberg business flash and world news. here is leigh-ann gerrans. leigh-ann: good morning. oxford university is starting a trial combining the covid-19 vaccines from astrazeneca and pfizer. it would let researchers see if the two jabs of vaccines are better or worse than a dose of the same product. in the u.s., president joe biden says he will not retreat from his promised $1400 stimulus checks full-time in the past two rounds of aid, people earning up to $75,000 could get the full payment. democrats are weighing lowering the cap to $50,000. the first major tennis tournament of the year has been hit again by the pandemic. hundreds of players, coaches, and staff are in isolation after a hotel worker tested positive.

-- has gone 28 days without infection, but everyone is staying at the hotel as a potential contact and now has to go into quarantine. the australian open was due to start on monday. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries, i'm leigh-ann gerrans. this is bloomberg. francine? francine: deutsche bank has posted its first annual net profit since 2014 with a bumper year for debt trading. bloomberg's daniel schaefer spoke with the cfo. >> year on year growth in fixed income was 28% -- sorry, 21% in fixed income, 28% in investment banking in the first quarter. -- fourth quarter. that carried over into 2021,

which is encouraging to us. >> what was the growth rate? >> >> i don't want to speak to growth rate. >> and the outlook for the full year when it comes to fixed income trading? >> as we shared with our investors in december, we expect normalization of the market environment in 2021, the very high levels of 2020 were not going to be sustainable. so in moderation of volatility very likely -- very likely a moderation of financing activity. on the other hand we are seeing strength and a lot of areas. i expect m&a to pick up this year. it has been a very vibrant equity underwriting here so far. we expect in pockets activity to continue. there is also arguably a rotation back to credit and leveraged finance that may take place this year, which are the sectors that are relatively the

weaker performers in 2020. >> the equities trading market has also seen a great year in 2020. do you sometimes regret that you move out of it, or most of it, just before the boom? >> we really don't. we make the right strategic choices. it allows us to focus on the businesses where we truly had leadership positions, and there are certainly times in the past 12 months where we felt that had our risk management focus been distracted across a rod array of products, or that we might have lost focus where it needed to be, we have been very pleased with how we have been able to manage all risks through this period of time, both on the credit and market risk side and also the operational risk. it is not something we regret. we think we have made the right strategic choices. >> he also managed in 2020 to achieve the first net profit since 2014, actually.

what does this say about your turnaround plan, and also what is the profit outlook for 2021? >> we're talking about a pivot to sustainable profitability. to see the fruits of restructuring that we announced in july of 2019, i think we have now demonstrated that the execution discipline over the last six quarters, but also the success in terms of the franchise improvement. initially stabilization, now improvement and growth. i think that speaks well for the momentum going into 2021. we fully intend to sustain the level of operability and improve on it as we work to our 2022 goal of our 8% are te. >> you have said that you eventually want to return capital to shareholders. when do you think you will be able to resume dividend payments? could it be in a year's time for 2021? >> we fully intend to begin

paying dividends in respect to this year, 2021, obviously subject to profitability and regulatory approvals, but it has been part of our planning throughout to redo -- to resume dividend payments this year. francine: that was bloomberg's daniel schaefer speaking with the deutsche bank cfo. mario draghi has agreed to form italy's next administration. the former ecb president faces a deep recession and an unprecedented buildup of government debt. it is a situation with mirrors -- which mirrors the situation by the prime minister. in 2000 -- i am very pleased to be joined by mario monti, president of -- university, an italian senator. he served as a member of the european commission, in charge

of internal markets, in 1995, and was italy's prime minister from 2011 to 2013. thank you for joining us. what would be the number one piece of advice to mario draghi today? mario: simply to be himself. i think it is more important to be advised to the italian political parties, which i did come in an article in -- an article this morning. unlike the impression of the political part this may have -- or i say each of them. it will be convenient, it will be a wise move to take part in the majority because not only is there a sense of responsibility toward the country at a difficult time, but because this government, unlike the one i had

to chair 10 years ago, is not there to ask sacrifices of italians. it is there to orderly set up a plan to use 200-plus billions of euros, prepare for italy by the european union in the context of the recovery and the resilience facility. so both from the point of view of a sense of responsibility towards the country and future generations, but also from the self-interest perspective, it is a big political mistake for parties not to be constructive and to join this majority. francine: given what you have just said, do you think mario draghi has an easier task than you did at the time, and how

important is it, the composition of the government? does it need to be technocrat and politicians, or is one better than the other for his survival? mario: well, i don't attach a lot of importance to this station, but i can tell you what i tried to do when i became prime minister, and that was to compose a government made up of various politicians from, in my case, mainly from the rise of silvio berlusconi and for sonny. i had in mind to ask the parties to become minister of my government. it is indicative that they

gently, politely declined, so i had nevertheless a very strong theme, but without professional politicians. why did they decline? because they knew that in that situation, with the spread around 600 points in germany, we were necessarily to do, to practice restrictive policies, and the creek structure reforms, which we did, and the country did not go bankrupt. so even in my case, it was meant to be government with politicians. they refused. francine: your popularity, mario monti, certainly in italy, maybe not outside, waned because of the measures you had to take. does mario draghi need to worry

about his popularity going forward? mario: well, he is in a better situation in the sense that, as i just said, he would not have to take the drastic measures that the government like mine, for example, had to take, and those are the measures that erode popularity. i am sure a personality like mario draghi with such an immense reputation globally, i am sure is not calculating in terms of popularity. if i had done the same thing, in terms of popularity, i would not have affected the government in those conditions. but i think it is personalities like us outside of politics, to

build -- and then try to put it at the service of the country even if it is eventually eroded. francine: what do you think mario draghi's biggest difficulty will be? dealing with the economy, he is very expert on -- i don't know whether there is someone you would see as a good finance minister, but the other questions of course are the rollout of the vaccine, which is a different skill that requires a different skill set. mario: yes, that was difficult, that was a difficulty certainly that in my time was not there. so clearly he is not an expert in pandemics. but i believe there are aspects of the organizing the response to the pandemic, where the previous country -- conte\

government has -- obviously draghi will not be able to contribute to it, with his skills, but he has a strong personality, capable of attracting balance, disciplining the collective work, which of course will have to include somebody more in tune with those specific requirements. francine: who does he need as finance minister? or actually is it irrelevant because mario draghi is, you know, the finance person? mario: well, i think he will not have much time to devote to management of the finance portfolio, and he may not even have the need, which i had,

which led my government under president napolitano to decide that for many months, seven or eight months, i was prime minister and minister of finance. and as the minister did a lot of the job. the effort was to transfuse immediately be presumed credibility of the prime minister, the certain credibility in the case of prime minister draghi, into the financial discussion tables, into the marketplace. but i think that it is not that strong that the government will be really challenged. francine: thank you so much for joining us this morning, mario monti, the former italian.

coming up, it has been a pretty wild ride in the markets. a selloff at the start of the week. why some $16 billion in market value from u.s. retailer gamestop, but what do these dramatic moves mean for the commission free trading model. we will speak with the founder of free-trade coming up shortly, and this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." i'm francine lacqua, here in london. no fee stocks trade can exact a high price, not only for the retail traders sitting on losses, speculation on stocks,

or for robinhood, which faces scrutiny for the gamestop buying that spun out of control. what is the future of trading after the wild ride we have seen in the past 10 days? for more, i am delighted to be joined this money by viktor nebehaj. from free-trade limited. thank you for joining us today. first of all, given what we have seen, which was wild in the markets, and the last 10 days, could you replicate that in europe, or are there different rules on what retail investors can buy? viktor: well, you can certainly -- basically what happens, users of the online discussion board reddit banded together and bought stocks that are sometimes called made stocks in the media.

they can certainly happen in europe as well. there are a high number of brokerage, commission brokerages at this point. there are over 500,000 registered users, and the financial sector is connected globally. francine: how much more trading interest would we have in the last 10 days? is there a direct correlation with gamestop, what we see on free-trade? >> that -- definitely we have seen demand, and for context we have been pouring rapidly this last year. we have 40,000 registered users, to be seen really high demand. these customers stay around, and

they invest in other stocks as well. so looking at gamestop, that it is fundamentally good, we believe in the fundamental rise of investors to make an educated decision in investing, and we don't see that as a mindless move. we see more modest movement honestly. and we think the movement is fundamentally good because when you look at the stock market for a long enough timeline, that is a really good thing to bring with your balance. francine: how much bigger do you expect this to be? if you look at some of the things -- is the market going to double in size, triple in size? and what are some of the pitfalls that you worry about?

viktor: with the multiplying size, what we see this year is over 50% of our customers have reinvested before. we basically are -- we are in the markets already and we don't see why this market will not multiply and investing could become part of the conversation. something that you do just as normally as you get a mortgage to get on -- we see the market of investing to increase, and there are pitfalls. we certainly saw that the plumbing of the financial markets is not necessarily going to lead to safer, rapid, increasing customers. that is something to look into. we are a company that does our best to keep us challenging, but

we manage to survive. francine: do you worry that people will take undue risks because looking at gamestop they think they can make money so quickly that this can be replicated, but because it has been done once, it will be more difficult to replicate? viktor: definitely. as a retail brokerage, that is something that has to be on your mind all the time. the best approach we as a platform can take is educating our customers. so half of our team is basically advancing to prices, sending off messages about the potential for the increased risk. it is very important that people understand the gains are not

natural, not guaranteed. the best way to look at investing is assisting a long period of time. that is what we educate our customers about. francine: victor, thank you so much for joining us. viktor nebehaj, cfo and founder of free-trade. attention now turns to the bank of england for today's great decision. we will look at it next. this is bloomberg. ♪

francine: let's look at what is moving the equity markets. here is dani burger. a lot going on. dani: a lot going on. a lot of individual companies, one of them is bayer, moving up on the stoxx 600 today. they submitted a proposal to u.s. judges to settle the rest of the roundup lawsuits, that the weedkiller causes cancer, for $2 billion. they have reached an agreement with the plaintiffs' lawyers. a prior agreement last year was

rejected for a quarter billion, but still optimism that that will get done. no lever declining today. they did upgrade, go back to the prior growth target. however, rising costs, that is why that share is rising today. also commerzbank, rising costs due to restructuring to make them profitable, and also the cost issue of the pandemic. and they wiped out 2.9 billion euros in 2019. francine: dani burger with all of the big moves in the market. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we will of course look at the yield curve and we will look at a little bit of italian politics, and of course deutsche bank. this is bloomberg. ♪

francine: the treasury curve steepens on stimulus expectations. loretta mester says policy is in a good spot. james bullard doesn't suggest tapering yet. u.k. officials say the latest virus wave has peaked. attention turns now to the bank of england's decision today. and former ecb chief mario draghi is hauled out of retirement to lead italy in its times of need. former prime minister matteo renzi tells us expect mario draghi's government to be in place next week. good morning and welcome to "bloomberg surveillance." i'm francine lacqua in london, tom keene in new york. we were looking at pictures of mario draghi speaking in italian yesterday. the amount of messages i got from market purchase friends is that i have heard him in hundreds of press conferences and never have i heard him speak italian. tom: there is. what