♪ >> bound that's coming as we normalize -- there's a huge bounce that's coming as we normalize. >> the propensity to spend is very high. >> this is just a pause and what should be a broader dollar weakness. >> inflation is going to be a burst in the next 12 months, and then it is going to come back down again. >> fed policy inevitably is going to shift. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: an ecb rate decision 45 minutes away. good morning. "bloomberg surveillance "bloomberg surveillance this is, -- this is "bloomberg surveillance," live on bloomberg tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. we are flying on the nasdaq, up by 1.6%. up about 0.6% on the s&p 500. president lagarde a couple of hours away. tom: the ecb front and center, but i want to talk about what is

not happening this morning. yesterday we got a whole bunch of corporate announcements that were very worthy for the stock market to move higher. we don't have that today. can you imagine what this tape will do if we start to get constructive resets by america's big companies? jonathan: companies are confident for a reason, because we are talking about higher gdp growth this year. a 7% over at morgan stanley for 2021 gdp. tom: to me, it is the blunt instrument of economic growth that overwhelms that. i am really watching those dynamics. ian shepherdson last hour came in a little quieter, 5% or 6%. a lot of people are higher. jonathan: as this year grows older, the static gets a lot -- this data gets a lot more interesting. lisa: stocks are looking at the data that will be, basically protecting it out.

so when we get some sort inflation forecast below expectations now, the bond market reacts and gives it further boost to stocks that are looking to the future. jonathan: sub 1.50% on tens. equity futures on the nasdaq up about 1.6%. on the s&p, up 24 points, 0.6%. in the bond market, down to basis points to 1.4988%. with christine lagarde, the ecb president, just around the corner, euro-dollar $1.1960. lisa: the idea of easier monetary support from the ecb will actually be supportive of the euro. trying to wrap my head around that logic because it has been the opposite for so long. that 7:45 rate decision is what we are watching, but that 8:30 press conference. " unwarranted tightening," that

is the phrase people are looking for to see if the ecb will give whatever it takes in order to control the pace and even the direction of some of the yields that have been going up. at 8:30 a.m., we get u.s. initial jobless claims. this just shows the incredible ongoing pain. 720 5000 initial jobless claims. what i find interesting from a market perspective is that people have stopped caring unless there is a massive unexpected move either up or down in this data, despite the fact that we so have so much pain. people are looking to a future that is brighter. tom: can i get some auction talk? lisa: we are going to get to the auction talk. yesterday's 10 year auction was lackluster, but at least it wasn't terrible. that is a good thing. but 30 year will be more terrible considering this agreement we have in markets and politically. jonathan: a $10 billion bond and

loan offering, and the yield on the five-year tranche came in at about 5.5%. that is junk debt. that's rock-bottom. that's an airline. tom: very tranchey of you, jon. i bought the austrian in december. jonathan: look out for the issuance on the corporate side today as well. we are rising big was investment grade debt at the same time as the treasury comes in big with 30 year maturities. a lot to discuss. tom: i thought it was like i did us -- like adidas. jonathan: we are not doing that this morning. [laughter] peter oppenheimer, goldman sachs chief global equity strategist, wondering what he's walked into. can you invest in europe, given what is happening with this vaccine rollout? peter: absolutely, i think so. the vaccine rollout outside of

the u.k., in the rest of europe, has been disappointed. the recovery we are likely to see will come later then you are likely to see in the u.k. and the u.s.. but this is a recovery that, nonetheless, we think will be very strong. we are above consensus in our growth forecast globally, particularly in the u.s., but europe as well. we are looking at about 5% gdp growth this year, but the important thing about the stock market is to recognize that it is not really as levered into the european economy as people think. it has the highest beta to global world trade growth and global nominal gdp for all the major regions, but it is very operationally levered to the strong economic recovery you were talking about earlier. i think it stands to benefit from that. they're in mind that it also has a high waiting -- hi -- a high

weighting to the market. tom: what i think is so great here, and we have had the great joy of speaking to your colleagues, it is all founded on jan hatzius' gdp call. how are the three of you linking in the global and western world optimism of the economic team? peter: we all sit and work together, so we have a very coordinated view, and it does stem from that. we consistently have a view from this year and next year that growth will cover more than the consensus is expected. the consensus is picking up now. the vaccine program is accelerating rapidly. there's very high degree of household savings. and of course, when we are looking at the equity market, we are looking at the operational leverage to that growth.

globally, we are looking at at least 35% profit growth this year. in some regions like europe, well above that, above 40%. so it is really from this strong recovery that we are expecting. but bear in mind, it is not just the gross recovery. we are talking about an environment where policy rates are zero, real rates are negative, fiscal policy is expanding, commodity prices are going up, yield curves are steepening. that is a combination of factors we simply haven't seen at least over the last decade. it is positive for risk assets, and also areas that were left behind like cyclicals and value stocks, which have further to run, i think. lisa: this area you are talking about has an inherent tension being played out every day in markets. you have bonds pricing in the now and the bleakness of the now, and stocks pricing and stocks pricing in the optimism of the future. that tension is that if bond

markets start to price in the same optimism stocks are looking at, the stocks can't rally as much as they are currently, at least if you look at some of the productions with the nasdaq and some of the expectations with rate sensitivity. how do you reconcile this incredible and growing tension? peter: i think there's a couple of important points here. we've got through what we would describe as the hope phase of the cycle. it usually starts during be -- during the recession when profits are still falling. you get a big rise in equities led by a rise in valuations. we had that. we would expect equities to rise at a much lower rate and the actual growth comes through, and bond yield also adjusts a bit higher. bear in mind, equities can absorb quite higher bond yields, certainly in nominal terms. think about it.

we've got very high technology stocks, and some people are worrying about a bubble, but bear in mind, back in the 1990's, people were so optimistic about equities in the s&p, they were buying at a dividend yield of 1% when the risk-free rate for yield was out 6%. now we have a situation which is remarkably different, so we could see higher bond yields as long as it is reflected in higher growth, and equities can still do ok. jonathan: let's talk about that. rates are the epicenter of everything. in the united states, the s&p 500 banks up. if the rise we are seeing over the last month is inconsistent with the outlook, what is the bank sector in europe doing today? peter: i think, again, the bank sector is really at the epicenter of the value trade. it has been one of the worst performing sectors over the last

decade. it is the most geared to a steeper yield curve and raising interest rates, and of course to stronger growth. the banks have finally much stronger balance sheets. they are not issuing new equities. also, the ecb is becoming a bit more lenient about the prospects of paying dividends buying back shares. so we have to recognize that these companies are very levered and geared towards the shift upwards in bond yields and also in growth expectations. and they were extremely cheap, having underperformed for a very long time. so we have been overweighting the banks for the last few months, and i think they have further to go, consistent with the kind of growth outlook we have been discussing. jonathan: peter, great to catch up. good to see you.

peter oppenheimer, goldman sachs chief global equity strategist. the bank sector in europe up 18% this year so far. tom: that is a book value story. you wonder on a relative basis where all of the bankbook values are. where we haven't recovered is not the big banks in america, but the regional banks. i didn't get this in with mr. oppenheimer, but i just wonder what the c class officer spirit is going to be with a combination of stimulus and equity valuations. you've got to believe m&a will be front and center. jonathan: absolutely. the other story is a pure play on rates when you start to play with the regionals. that is why we have seen those stocks absolutely flying. lisa: it is a question of whether there is a recovery trade or praising in future growth, future lending expansion , future profitability. even in plays like commercial mortgages. jonathan: coming up, sebastien page, t. rowe price multi-asset

strategist. before we get there, there's an ecb rate decision. after that, there's a news conference with president christine lagarde, coming under a little bit of pressure over the last couple of weeks. futures higher by 0.6%. heard on bloomberg radio, seen on bloomberg tv, this is "bloomberg surveillance." ♪ ritika: with the first word news, i'm ritika gupta. within days, millions of americans will start receiving the $1400 payments included in the pandemic relief bill. the house has given final approval to the package, and president biden will sign it into law tomorrow. the $1.9 trillion legislation also extends supplement to unemployment benefits. plus, there are health insurance subsidies and child tax credits. another setback for astrazeneca's coronavirus vaccine. denmark has joined other

european countries into spending use of the shot over potentially dangerous side effects. meanwhile, the european commission warns that there could be further delays in the manufacture and distribution of the astra vaccine. lawmakers in china have taken a big step into limiting opposition in hong kong's political system. they approved an extensive overhaul of how they choose its leaders. amongst other things, there will be a committee to ensure that candidates for office in hong kong are "patriots." that will effectively end open elections. getting more details on that massive hack of security cameras. more than 100 employees at silicon valley's security startup could peers through the cameras of thousands of customers. they say access to the cameras was limited. 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'm ritika gupta. this is bloomberg. ♪

♪ >> this is one of the most passed in decades.

it will do more to help the middle class, poor people, and people struggling to get into the middle-class than any bill in a very long time. jonathan: a one point $9 trillion bill which the president will be signing tomorrow -- a 1.9 trillion dollar bill which the president will be signing tomorrow, and which republicans will be spending a lot of time trying to slap back down. good morning. alongside tom keene and lisa abramowicz, i'm jonathan ferro. we are counting you down to a rate decision at the ecb about 30 minutes away. yields come in on the 10 year by almost two basis points to 1.50%. we will get that rate decision at 7:45 eastern. 45 minutes after that, we get a news conference with president lagarde and a forecast from the ecb. tom: is it going to be a snooze fest? jonathan: i think the press conference will be interesting and i think the q&a will be as well. i wouldn't call this one a snooze fest. tom: i would also point out

pacific rim comes back in all of this churn. it has had a really difficult couple of days. right now, with the debris in washington, kevin cirilli, our chief washington correspondent. what does the signing ceremony look like? we've had so much gridlock, i can't remember the last signing ceremony. maybe the affordable care act. what will this look like when president biden starts giving out pens? kevin: well, the republicans had the tax bill. president biden is expected to deliver remarks this evening, and then of course, that signing ceremony on friday. president biden is going to say this is the crowning achievement of his first 100 days in office. tom: i still can't remember who to site, but i saw the senator from mississippi, a republican, showing positive spin on the

bill as well. how do the republicans play this? are they anti-$1.9 trillion? are they anti-the check in the mail? kevin: they are urging all states and mayors to return money to the federal government if it doesn't have anything to do with the covid-19 relief bill , but no governor or mayor in america would do that. tom: saying don't cash the check. kevin: pretty much. again, i think this point we have begun exploring that the republican governors are really the ones with the leverage in the party right now over the short and longer term, that is a fascinating thread to follow over the next year. lisa: i've got to say, don't cash those checks rings a little bit hollow. i can't imagine people won't say -- people will say i won't cash that money.

the governors are not only taking the front seat when it comes to the political landscape, but also the rollout of pandemic policy. how much is there concern over the self-serving aspect of governors trying to appease the populace by opening perhaps more quickly than they ought to rather than maintaining health instructions, but lose popularity in the short term? kevin: it is like my dad says, money talks, but i don't always have to listen. from a broader standpoint, as you go forward, when they are talking about infrastructure, president biden is going to say we've got to start with the projects that we need to address as opposed to the topline money number. so that i think is really the thread for infrastructure. when i talk to republicans, they are scratching their heads and wondering how are the democrats going to propose financing these projects. the political capital, as i've

noted, that president biden utilized, he used a lot of capital with senator joe manchin and not really any with the left flank of his party, so that is really going to explode that tension at some point. we just know when. lisa: on the health care side, how much is there a call to nationalize the process of reopening or not reopening, the rollout of the vaccine, based on this idea that it is difficult politically for governors to keep clamping down on some of the social interactions for health reasons given that it impedes their ability to get reelected? kevin: i think that where republicans have missed an opportunity is to suggest that reopening is bucking the science. i think that is shifting as more people get vaccinated because there is, as has been explored,

when you've got dr. fauci saying one thing one day and another thing another day, that leads to a lot of confusion and frustration. i talked to democrats in the city who are scratching their heads, and these are very liberal people saying open the schools. so i don't know if i necessarily agree with that framing because a lot of these states are looking at lower rates of diagnosis for covid-19, and they are beginning to think that it is time. jonathan: is the president trying to have it both ways on the vaccine stockpile? when the president says we put america first, but we also need to think about the rest of the world. kevin: i think for president biden as he moves forward, to be able to assist in the giant achievement of merck and johnson & johnson in their collaboration efforts and how they are working on the vaccine, i thing that is a really important point to make. tom: very quickly, on

infrastructure, doesn't the president and everyone else give the gentlelady from the bronx additional funding for the harlem river greenway? that's the way this works, right? kevin: i think that is an interesting point to make, especially given the drama with amazon in that particular district. it will be interesting to see how that plays. jonathan: you get the sense when kevin has got to run. lisa: wants to run. [laughter] jonathan: when he shortens down the responses. jonathan: kevin cirilli, chief washington correspondent. he's the host of "sound on" on bloomberg radio, weekdays at 5:00 p.m. eastern. tom: jon, you are on clubhouse, right? lisa: i am not on clubhouse. jonathan: i don't know what i'm doing on it. lisa: have you done anything on it? jonathan: no. annmarie hordern come our colleague and coanchor, invited

me. i will invite you. i am not sure if that is still the case. tom: joe weisenthal is on clubhouse. what are we missing? lisa: does anyone actually use it, or is it just to say i got invited to clubhouse? jonathan: they do live podcasts and stuff. lisa: have you listened to anything on there? jonathan: no. [laughter] i feel like other people might be able to listen to me. i just feel weirded out by the whole thing. maybe we should do a live "surveillance" podcast on clubhouse at some point. it should involve drinks, and may be a premier league football game on the weekend. that would be fun. tom: i could see a clubhouse with the tots. that would really work out. they have a game today. how do you pronounce it, dynamo? jonathan: the more important game is thursday, manchester and milan. coming up, mark cabana, bank of

america head of u.s. rates strategy. 1.50% on tens. your s&p 500, we are up 0.7%. from new york city, this is bloomberg. ♪

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♪ jonathan: from new york city, this is "bloomberg surveillance ." here's the price action this thursday morning. always looking at that spread between the performance on big tech and of small caps in america. nasdaq up by 1.76%. the russell doing ok. your you would on the 10 year, sub 1.50% earlier, 1.50% now. on the 30 year, that is where we get the supply a little later. on the sovereign side, you get a ton of corporate supply as well. they could -- there could be a corporate bond issue north of $20 billion. get to the euro. in about one hour from now, we

will hear from christine lagarde, the ecb president, on the outlook for europe. we will find out if she is unhappy with what is happening in the bond market. euro-dollar, $1.1963. we've gone from dollar strength to dollar weakness. it gives you a flavor of that on dollar lire, which right now is a stronger turkish lira. a 3% move on monday, and this lira is still stronger on the week, even with a move of 3% on monday. that has been the come back and fallout for the u.s. dollar. tom: i agree with the weaker part. it is idiosyncratic. i am looking at real as well, the brazilian real after the lula news. jonathan: we are not using that word, idiosyncratic. tom: it is very idiosyncratic. it's what it is. jonathan: you get a drink for that. tom: you are going to need a drink after this. talk about complexity. ira jersey is wonderful at this,

and so is mark cabana. we will get to that in the moment. we have romaine here to do the equities. jonathan: we do. i need a drink after that. tom: game step down --romaine: gamestop down. there's your update. this related to covid, denmark pulling the plug temporarily on that astrazeneca covid-19 vaccine. some concerns about led plots -- about blood clots. we already had austria pull the plug on this as well. not good for astrazeneca. london chairs down about 2.5%. if you are biotech, this is a positive story. -- vera biotech -- vir biotech, this is a positive story. they make those monoclonal antibodies.

late stage clinical trials showing about 85% effectiveness of their covid-19 treatment. amd, an interesting story here. there's a consortium of chipmakers that have agreed to work with chipmakers in the u.s. to alleviate the chip shortage. it is 10 companies on both sides of the world. you're seeing a lot of the chip stocks get a little bit of a bump here. flip up the board real quickly. oracle shares taking a huge leg down. they came out with earnings, flat growth. this is a company right now that has decelerating growth in an industry that has accelerated growth. that's loss of market share when you put that together. roadblocks -- road blocks -- roblox, great day yesterday. tom: we are not beating europe this week?

romaine: she's doing well. tom: i need the bumble update or i can't go on. [laughter] romaine: tom, two point 7 million paying subscribers on bumble. but they actually said they have a platonic app called bumble bff. according to the ceo there, she says friendship is the next big opportunity. i already sent you a friend request, and i have not gotten a response yet. tom: i'm doing a spac called hr violation. it is going to be great. [laughter] romaine bostick, think you so much. bumble, what did you call it? bumble platonic? romaine: bumble bff. tom: we are very bubble platonic. jonathan: you're going to move on from that? lisa: at least he's got bumble bff. jonathan: that's his excuse now. just a ready-made excuse.

tom: i think this is going to be in our tiktok. that's all there is to it. jonathan: i promise i'm using it for friends. well done, tom. tom: this is important for global wall street. mark cabana on the high ground, for years at the open markets trading desk, the medieval black box of the trading floor. mark, jon and lisa are way better at this than i am. i just want to go to this idea of operation twist. is the chairman of the federal reserve going to twist and shout? i just don't believe it. mark: not where we sit today. we had written about a week and a half ago or so that it can did -- that if conditions continue to worsen in the bond market, we would see the fed.

we have seen real rates fall. we've seen the 10 year decline about 10 basis points after the last week. it seems like the market is now finding its footing. if things don't get worse, there's no reason for the fed to do anything. that is what we anticipate at the meeting next week because the bond market has consolidated and found its own footing again. tom: i want you, with the heritage of bank of america, to calm the gloom crew down now. when you see articles that the short term paper market is going to come to an end, things are terrible, defends the liquidity of that market. defends the depth of the american short-term market. mark: the front-end of the curve is doing just fine right now. there are risks, though, that we see them continue to fall further or go negative. there will be real risks of this happening as soon as those stimulus checks get sent. we know that the yellen led

treasury department is going to do their best to get those out the door, and that is going to increase the overall amount of cash in the banking system and reserves in the banking system, and that could put additional downward pressure on the front end of the curve. if that happens, the fed will likely be forced to raise their interest rate on excess was irv, and maybe make some other adjustments to operating tools in order to prevent rates from trading negative. the fed has tools for that. they are well-equipped to do that. we do anticipate that will likely be necessary over coming weeks. the truth is we are not seeing enough downward pressure get to necessitate a response. but if we do see fed funds follow another couple of basis points, it is likely the fed will take that action. jonathan: i always go back to the same question, whether the conditions we are talking about now are set to persist through the year or fade as conditions grow older. what do you expect? mark: we anticipate we are going to see continued volatility,

higher real rates, and pockets of a liquidity like we saw in the rates market over the last couple of trading weeks. that is going to occur just because the market has reassess fundamentals. it has to reassess how strong will be economy be, how high will interest rates go. these are all questions that the market has grappled with. this week, we have seen a bit of a pause in that move higher in rates, but we think that trend continues and will likely continue to challenge the fed in their policy stance. the fed is going to have to sound more upbeat on the economy. they are going to market forecasts higher. they are going to see this new fiscal stimulus become law. they are going to have to start talking about more optimistically about the market. there risks will not be solely skewed to the downside any longer. in that context, the fed is going to start to set the stage for an eventual withdrawal of monetary policy accommodation. that is going to be tough for the bond market to digest, and likely allow weights to move higher.

but as that occurs, you will likely see markets elevate liquidity. lisa: to talk about those pockets of liquidity, and this is where tom keene interrupts you because he's got renewed interest suddenly in bond auctions, how much do you expect bond auctions to repeat what we saw in that disastrous seven year sale a couple of weeks ago? mark: in the near term, and for the 30 year auction today, we think it is going to go fine. the 10 year option yesterday tailed a little bit, but by and large, it was a standard treasury auction. the risks are later in the year. as the economy improves, as the fed starts to sound more optimistic, it starts to set the stage for a taper and signal they want to move in that direction. there's a real risk you will see additional indigestion in the market of these bond auctions, just because the supply is so large and the fed's footprint in the market is so big. once you have one of the biggest

market participants aiming to withdraw from the market, other market participants are not going to necessarily want to enthusiastically step in and take their place, at least not without materially higher interest rates. there's probably going to be some indigestion and pockets of illiquidity along the way. we think this sets the stage for a continued volatile bond market, especially in the first half of this year and into the summer as the bond market tries to signal they will be withdrawing accommodation. what that means for other asset classes is there will likely be cross asset turbulence as well. we know that the bond market is ill-equipped, and real rates -- is illiquid, and real rates are rising rapidly. jonathan: it is always a clinic, and we appreciate your time. mark cabana, bank of america head of u.s. rates strategy. a big bias potentially coming out of the market, and that big buyer is a price insensitive buyer.

that is the big issue to try and process this. tom: really want to say to all of our audience on radio and tv, these people come on and try to speak and list. the acuity -- and try to speak english. the acuity of mark cabana's note, it is almost in greek. jonathan: he does a good job of breaking it down. [laughter] and he's well aligned with the rest of the team over at bank of america because of the indigestion they are looking for in the treasury market. they are expecting it to bleed over into investment-grade credit. if we start to get spreads wider there, that is where they think the fed has to step back in with a bigger presence. lisa: and there are big and put haitians across the board. the idea of higher borrowing costs making it harder for companies to finance, and for the government, how much does this put a damper on their ability to keep borrowing to juice economic prospects if rates continue to rise? jonathan: coming up on the program, and ecb rates decision coming up.

going into that, up 26 on the s&p. we advanced 0.7%. the bond market comes into basis points. i can't believe it was you who said let's get this show back on the road. [laughter] jn, and day out. -- day in and day out. the ecb up next. full coverage on tv and radio. lisa: hr violation. [laughter] jonathan: this is bloomberg. ritika: with the first word news, i'm ritika gupta. president biden is preparing a nationwide victory lap to promote that $1.9 trillion coronavirus relief plan. he will hold a ceremony tomorrow to sign the measure into law. then there will be a series of appearances across the nation to ensure voters know that he and fellow democrats are getting the credit. the bill provides $1400 direct payments to millions of americans, and there's also

billions in aid to state and local government. the u.k. is trying to defend the city of london's global preeminence in finance following brexit. the government is planning a wide-ranging review of markets. the economic secondary to the treasury tells bloomberg that overhauling rules on fintech and ipo's isn't enough. the government will also ask business for proposals to reform capital markets. the emergence of coronavirus vaccines could bring more students back to u.s. college campuses. enrollment fell by 4.5% for the spring term, and that included a 16% decline in international students and a 9.5% drop at community colleges. the jeep brand has missed out on one of the most lucrative segments of the suv business. jeep is debuting three more vehicles this year.

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'm ritika gouda. -- i'm ritika gupta. this is bloomberg. ♪ ♪ >> it is spent out over a couple of years, so some of the focus on the overheating doesn't recognize the spend out pattern. then there is slack. there is still way more slack in this labor market. and then of course, savings. that, too, puts downward pressure on price pressures. jonathan: that argument as to why this one point $9 trillion plan in d.c. will not be as inflationary as some people -- this $1.9 trillion plan in d.c. will not be as an pushing area some people fear. alongside tom keene and lisa

abramowicz, i'm jonathan ferro. we are counting you down to an ecb rate decision due in about 20 seconds, sometimes a little bit late. the euro just a little bit stronger. if you are looking at 10 year yields in italy, we come in two basis points to about 6.55%, in-line with what we have seen in treasuries. this is what we've got to do as we await this decision. we will do rates, then the forward guidance, and a little bit later, we will get forecasts from president lagarde. here's the decision, 0% on the refi, unchanged. the lending facility, unchanged. the depot rate, unchanged. widely expected. nobody expected any changes. the guidance coming out of the ecb so far, let's get to it. pepp will run at least through the end of march 2022. that is the pandemic emergency purchase program. full flexibility around buying bonds will run until at least

2022. they confirm the size of the pandemic purchase program, and will run until shortly before interest rates rise. "pepp can be recalibrated if required." those are some of the headlines. tom: i wish we had a camera on somebody's shoulder here so they could look at my screen, color-coded with the bloomberg headlines. my overwhelming thought is a non-sophisticate is the headlines we are seeing here are so un-american, so not the federal reserve system. it is another world and frankfurt. jonathan: yields come in a little more in italy to 0.64%. we are down around three basis points. the ecb saying pepp purchases over the next quarter significantly faster. that is an ecb that is just leaning into some of the volatility in the high yields we have seen, the higher peripheral spreads we have seen. tom: how does it dovetail into what we are going to hear in the press conference?

jonathan: i think it backs up the words of president lagarde if she comes out strong with what we have seen on yields in italy and germany. this idea that they can come in more quickly with the pepp program, full flexibility of bond purchases. it has been difficult to reconcile what would have seen -- what we have seen in the bond market with what they have said, so that is some verbal intervention with real policy to back it up. here's our plan. this is how big it is. it has full flux ability. this is what we are planning to do. that gives a little bit of emulation -- of ammunition going into this press conference. tom: significantly faster really is what this is all about. lisa: a significantly faster pace of bond purchases. you do wonder whether people are interpreting this as the ecb will buy more italian bonds, more spanish bonds, take aggressive action there due to their discretion at the expense of perhaps buying more german

debt, but you do see yields on the margin rising in germany, which i find -- actually, they are coming down a little bit on the long end now -- but i find that interesting, the idea that this will disproportionally benefit italy. tom: i'm going to go to hamlet and say there is something rotten in denmark, and it was that headline some two hours ago on astra. we welcome all of you on radio and television worldwide. with berenberg, their senior economist, i have to know the jawboning you will listen to at this press conference today. jon has made it clear to me this is not a snooze fest. this is a press conference of import. what will you listen for? kallum: expect the ecb basically to reaffirm this commitment to buy bonds a little faster in the near term. we have heard what sounded like a fairly well judged intervention.

the market has welcomed big policy intervention around the world. we have rising inflation excitations. growth is expected to be very strong over the next couple of years. but europe is still under lockdown, and rising interest rates at this moment is not with the economy needs. so the ecb has essentially bought a little bit of time to keep interest rates low, and that will come later this year once the economy is opened. jonathan: i just wonder how divided the governing council is on this plan. the key letter in the aquitaine -- in the acronym pepp is e, emergency. for some, they may not consider conditions emergency conditions. how do you see that progressing in the year ahead? kallum: a year ago, that was a real emergency. we were facing a major

financial crisis and we had an unprecedented policy response, but we are not yet out of the woods. the underlying risks are still significant. i think what we will probably see over the course of this year is some evidence that might make people worry about inflation risks. one of the factors probably pushing inflation above the 2% target for the ecb during the middle of this year. the ecb will have to remind everyone that there are more powerful factors that will unwind. we don't think we will get core inflation anywhere close to 2% over the next two years. think we get close to 1.5% by 2022. lisa: let's talk about the japanification of the eurozone, the idea that the ecb will own a substantial portion of overall debt from the government in that region.

what proportion could that be by the end of this year? kallum: i don't like this description, japanification of europe. if the euro zone, if europe would have enjoyed gdp per capita gains as strong as japan over the last decade, i doubt very much we would have the political problems we have had. the ecb will rapidly expand its balance sheet as is necessary to lift installation expectations, but the real lift comes from productivity, and we have to look at fiscal policy makers. all the bank can do is grease the wheels to allow commerce to improve with a bit of boost in fiscal support. i think it is other policymakers we should be thinking about if we are really worried about this so-called japanification risk. lisa: i've got to say, i've never heard that before. usually it is a slur almost in economic policy.

kallum seemed to say that was too generous for the euro zone based on what we are seeing with perspective growth. jonathan: euro-dollar, $1.1949, coming in a couple of tenths of 1% of session highs. the bid is in and the bond market right now. italian yields down to 0.62%. tom: just quickly come the swiss 20 year, which is somewhat away from europe, that does the same thing with a more negative yield right now. jonathan: it is a clear response to market conditions. i think what is really important here is this is the message from the entire governing council this morning. i wonder how much division within the governing council there still might be about plans to lean into the financial conditions we have seen tighten just a little bit, undo tightening in the words of some ecb officials -- undue tightening in the words of some

ecb officials. kallum: i think they will want to make sure that the front of this recovery is a strong run. i think one of the issues in europe at the moment is a worry that some of the inflationary pressures from the other side of the atlantic which are spilling over into the european markets. just to repeat an earlier point, interest rates show that growth expectations are improving. but there is inconsistency if those rates rise before you get the growth in inflation. then it could be an impediment to growth. so i expect pretty strong consensus to act against this moder -- this moderate tightening. jonathan: so rates, guidance, and then forecast. the plan around the asset purchase program looks a little something like this, affirming the size of the pendant purchase

program at $1.85 trillion -- the pandemic purchase program at $1.85 trillion. it is the plan to purchase more quickly over the next quarter, to deploy that bond buying at a faster pace. what you see in the market right now is an italian 10 year down about six basis points. the whole bond market over in europe nicely bid as well. tom: within all of that fancy talk is the word pandemic, and madame lagarde is going to have to address headlines out of denmark and the eu today. to me, the overarching theme particularly against the united states is the ecb has to deal with a continent that just simply can't get the pendant trend in the right direction -- the pandemic trend in the right direction. jonathan: totally agree. just compare and contrast what you will here at 8:30 eastern to what you will hear in the news conference with chair powell on march 17, when you hear them talk about the forecast. chairman powell is going to have a radically different outlook

for u.s. growth, and those revisions are going to be significant more positive than what i imagine we will see in about 35 minutes. tom: with the criticism of christine lagarde, frankly, she may be very adept on the political side to address frustration over the pandemic, as you mentioned earlier -- mentioned germany earlier. jonathan: it was a bit of a faux pas when she said it wasn't the role to close spreads, and it turned out that it was. but they got their act together in the end, particularly with the purchase program we are talking about this morning. on the politics, there is something about this outlook that is totally out of her hands, and it is the vaccination rollout. i think the news out of denmark this morning is absolutely critical to that. i said earlier, it is not my place to even comment on the analysis coming out of denmark, but i think we can all agree that it is pretty clear that it is pretty clear that undermines the vaccine rollout even more so across europe. tom: absolutely.

to me, it is the headline of the morning mind frankly, the headline of the good happening in america. jonathan: coming up, sebastien page, t. rowe price lt asset strategist. your bond market, 1.48 present. see that spillover from europe into the u.s.?

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>> i'm pretty convinced the u.s. is going to see a gigantic rebound. >> there's a huge bounce that's coming as we normalize. >> there's very high degrees of household savings, which support a strong rebound when it comes through. >> fed policy inevitably at some point is going to shift. >> the market knows that if financial conditions really start to tighten, the fed can do a lot more. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. a simulcast,