helps control stress and emotional eating and losing weight. go to golo.com and see how golo can change your life. that's golo.com. ♪ ♪ snoelt ♪♪ ♪♪ caroline: from bloomberg's world headquarters in new york and from right here in london, i'm caroline hyde. joe: i'm joe weisenhall, romaine bostick is out this week. caroline: this is what we have in terms of the market, the s&p 500 rallying, it's big tech at play, is it as much for safety or the yields they come lower, joe. joe: the question is, "what'd you miss." for more -- caroline: breaking news, we've got what we're missing right now

is a recovery that is far from complete according to jay powell, getting some breaking news coming from the fed chairman. the fed support is going to continue, his remarks in a text of some testimony he is going to be given to the house committee, remember him and, of course, jeanette yellen, the predecessor at the fed going to give evidence, indications of activity and employment that have turned up, the labor market with conditions recently improved, joe, a recovery that is faster than expected and looks to be strengthened, millions of americans still hurting. it speaks to the fact that they are all about the labor market. joe: absolutely, more more, let's welcome in bloomberg knicks editor michael mckee. michael, it seems to me, the continued theme from powell, message discipline. this vision of not doing anything until something he accepts. michael: in his testimony in

previous years, the fed is releasing his testimony before the house financial services committee that he is going to give tomorrow, getting an early start on not moving the markets. he will appear with, of course, janet yellen. nothing much he has said before. the virus is in control, but a bit of an optimistic cast as you are youred it when caroline read the headlines. due in significant part to the unprecedented and fiscal and monetary policy actions i mentioned which he mention earlier in his testimony which provided essential support to households, businesses and communities. that is accompanied by a warning and a promise much more to be done, we welcome this progress, powell says, but will not lose sight of the millions of americans that are still hurting including lower wage workers in the service sector, african-americans, and other minority groups that have been hard hit. it talks how the fed rate cuts and lending programs helped as much as the fiscal side keeping

the economy going during the past year. they're using the full range of tools to help assure the recovery will be as robust as possible. stop me if you heard that before. as joe and i were talking about, not a lot to trade on, message discipline, staying in his lane, still, what is interesting is despite all of the fiscal, all of the talk about this being a fiscal policy moment, the fed is still dominating trading. the markets decided today, the bond market that we were going to, that they had perhaps overreacted to what the fed was doing, bond yields fell across the board as people got back into bonds, but most of the action at the longer end we don't have any signs of inflation yet, the richmond fed president said that happened the nasdaq gain 1 1/4 points, speaking of jay powell, he told a conference today, the feds are looking at digital currencies, i

know joe was all over that, in no hurry to create one. caroline: no fed coin imminently, i'm interested, mike, you talk about yields coming down, i wonder if that was a search for safety as well. we have not particularly covid great numbers coming out of of the u.s. with worried about germany's shutdown. it's also we have a big week for techs at play when you have such big auctions, two-year, five-year, seven yi, is that something the federal reserve will keep a close eye, do you think? joe: only to the extent we would have a bad auction. we have a seven-year on thursday. that is what got everyone's attention last month with basically the seven-year auction in history. so that will get? attention, but as long as the market is functioning, the fed is going to be ok with it. what we really want to feel out is the rest of the world ok with the u.s. issuing all of this debt. it seems techs and the japanese repatrioting profits rather than buying tressel treasuries was

the big issue with the sevens last time. we'll see if this happens this time as well. caroline: thank you, michael mckee all over what is happening, thank you, we await that testimony starting tomorrow. coming up, we continue our conversation around the federal reserve, the perspective next, this is bloomberg.

caroline: a few minutes ago, we received federal chair's jay powell prepared testimony to be delivered tomorrow to the house financial services committee.

powell stating that the economy is gaining some steam but far from the labor market, joe, trying to understand what the fed's real narrative is, it seems pretty evident, he is sticking to his rymn sheets, isn't he? joe: we have seen a pretty substantial back up in rates, you see pretty dramatic, especially since our early january, and yet given multiple opportunities we have yet to hear chairman powell say anything about wanting to push this down oar discourage the sell off in treasuries at all, perhaps surprising some people which is first appearance accelerating the move or not. but the question is, is the market testing the fed in some way. joining us now to discuss, neil dutta, macro research head of u.s. economics, neil, thank you so much for joining us, you put out a note this morning talking about myths regarding the

federal reserve. let's start off the bat, is the market testing the fed in some way here? neil: i don't think so. i mean, i think you mentioned the 10-year yield, the treasury market. that's largely a growth of expectations, why would the fed push back against 10-year yields, it would be akin against pushing against rising growth optimism. that seems foolish. what would people prefer, have the federal talk down the economy and then the fed knowing something about the outlook that no one else does pushing the yields lower, mission accomplished, i guess? i don't really quite understand it. i think the bigger story is that, yes, interest rates are up. if you look at broader physical conditions, joe, this is a point that powell made beautifully last week is that broad physical conditions remain accommodative, look at corporate credit, they're basically at the tights, there hasn't been much in the

upturn of the dollar, equity markets are quite buoyant, when you look at the aggregates of the financial markets, it's conducive to momentum. caroline: clearly still very good relatively speaking, therefore, we keep having this narrative, we love it across news, the market is pushing the fed, but does the fed look to the market to vindicate its performance or to see if its credibility is still running high? neil: to me, i mean, i would say that this is not unusual, right. this idea that the markets are kind of pricing in a tightening cycle that actually doesn't come to pass. that was a hallmark of the last cycle, the markets kept pricing in a more aggressive fed, it never arrived. it took years for the markets to ultimately align.

the way people should think about this disconnect between, let's say, the fed's guidance and the forward sort of euro dollar market, the said futures market, it's just an opportunity for the fed to ease later. i think for investors, it just creates nice little trading opportunities let's say in the belly of the curve on in. i don't think the fed is going to hike anytime soon. i think they have been very clear about that and at proof of the pudding is in the eating, right. as the data comes in and it's being shown that the fed is not actually getting off its seat and moving closer to the exit door, i think bond market investors will sort of come around to the idea and this is a point that i have been making. the fed's view of what constitutes max employment is a very expansive definition and it's something that a lot of people have no real experience with. this isn't just about the unemployment rate. this is about bringing those that historically have been at

the where margins of the labor market back into it. that to me is a much higher bar than people appreciate. joe: what about this idea, people liken this to the tantrum, in 2013, the taper tantrum, it has been dramatic, the backup, you don't think it's anything comparable to that? neil: i mean, take a look at the 10-year total return index, the drop in that so far has been about the same as what we saw in the taper tantrum, the only difference, it happened in four months. this is a little bit more drawn out. i don't see it. of course, back then, if you go to 2013, that wasn't just about the 10-year yield going up, it was about the two-year yield going up. look at what the two-year have been doing since 10s have been backing up, it's stuck at 15 basis points, which tells you what? the treasury market doesn't really, isn't really sniffing out a fed hike. by contrast in 2013, no, that was actually going on.

people thought the balance sheet adjustment was a sign that rate hikes were around the corner. eventually as is usually the case, the markets and the feds kind of figure each other out. this is different. people are talking also a lot about e.m., we have seen that happen a lot, right, so loose financial conditions are sort of easier or policy in the u.s. is driving lots of problems, it's sort of ridiculous. would people prefer the feds start hiking rates to loosen financial conditions in the emerging markets, it seems kind of nuts. so i would say even when you look at e.m., emfx is not weakping the way it did in 2013. in 2013, you saw a pretty substantial selloff in emerging currencies that you haven't seen so far this time around. caroline: we're going to be debating much more emerging markets coming out of turkey, for example. as we therefore do see this sort

of push and pull between the market and we look ahead to what is going to be not just evidence being given by jay powell but also the auctions, neil, how much do you anticipate, expect some sort of pushback up in yields or worried that we had around the seven-year auction that we had last week? neil: you know, i don't really focus too much on that. i mean, i think there is an insatiable appetite for fixed income, we live in an environment, europe is still quite sluggish, it doesn't seem to me that these auctions are going to be the big drivers of the rates market. i know people like to focus on that, i really think it comes down to growth and expectations. my sense is that economic activity is picking up and whatever weakness we see in rates in yields coming down will temporary in nature.

joe: neil, real quickly, going back to this question of financial conditions overall, is there any threat to real economic activity from rising rates directly? theoretically it should hurt housing or maybe autos, is there any issue there? neil: i don't think so, not yet so far. you could come up with a scenario where that could be the case, but this idea that the back up in interest rates is hurting housing activity, where is the evidence for that? look at home building stocks? we're not in a position where rates are hurting people's access to get credit. if anything, you can make the argument riskfree interest rates are going up, mortgage spreads, maybe lending, loan conditions, lending standards have eased a little bit. yeah, maybe 30-year mortgage rates have gone up, more people have access to credit. that's why the housing market is doing reasonably well despite the back up in rates. talk about tightening in

financial conditions because of rates if the areas post-impacted by that are still doing quite well. caroline: we'll see the ramifications. neil dutta, thanks for being us, now coming up, the lira, we're talking about turkey, the third president of the financial bank, we'll break it down next. this is bloomberg.

♪♪ ♪♪ caroline: though techs stocks and bonds tumbling, more concern that the country is in a fresh bout. joe, we have been here before. in fact, we have been here through other times previously, it's the third central bank chief gone in the last two years and the volatility just sneaks back. joe: yeah, it seems like if

you're going to cycle through central bank chiefs over and over again, you will have currency volatility. we saw that in a very big way today. this is the dollar against the lira surging 7.7%, that's because the dollar is rising against the lira, absolutely getting clobbered after the dismissal of the central bank chief who had briefly tightened policy, so joining us with more insight, capitol knicks senior emerging commitment, thank you so much for joining us. it really feels like sort of deja vu, every once in a while, you hear about a central turkish bank official getting fired, the lira plunging as it did today. what does it do long term for the turkish economy, financial markets to continue to have this sort of ongoing source of uncertainty out there? >> yeah, i mean the news today

was incredible, to be honest, under the previous economy, there was signs that turkey was turning a corner and this policy shift that we have seen since november was the real deal. he couldn't give it up for too long and abruptly fired him. so now another central bank governor, someone who is more aligned to what the president wants. at some point in the near future things will go down again, turkey's inflation's problem is much worse. that means continued weakness going forward. caroline: you saw serious effects, spanish banks took a massive hit, those exposed to

turkish loans in particular, the fine line between the two. talk to us about the turkish banking sector and how much of a key concern it is for you? jason: it's a key area for rebuilding turkey's economy. there are some concerns about the effects of the lira in terms of bank's balance sheets. they aren't as big as they were say back in last summer, but the concern that has been there throughout the past few years is the fact that banks have very large external debts and they have to be repaid, 12.5% gdp. and to put that into context, banks, their liquid assets at the central bank which they use to repay these debts during peers of stress, these assets are very, very low. and once more, the central bank,

it can't step in either if banks do get into trouble. so i think the banking sector really needs to keep a close eye on it in the coming days and weeks. joe: in terms of the future of central bank going forward and what are we likely to see in terms of policy, on rates policy and you mention the domestic policy to insure holding of lira? jason: yes, that's a good question, in terms of bringing rates, he has been an advocate opponent, so that's the desire and given the poor balance of payment position, it's going to be very difficult, in terms of

trying to get people -- inevitably there is capital controls in place, maybe not in the immediate future, but that's the road that turkey is heading down in the long run. caroline: can you talk to us a little bit more about the global ramifications of this, european banks dragged lower, day two to digest this, who else gets hurt? jason: good question, i think this is really contained to turkey. this is an idiosyncratic thing going on, i think we have seen periods so far in 2018 where there were some hits to other currencies, a period of risk of sentiment. we have seen today, the moves, there haven't been any, the demand in the lira was 1%, it

very quickly snapped back. i think investors are taking this as purely a turkey story. joe: what do you watch for, though, in terms of identifying vulnerability? right now it's purely a turkey story, but from a fundamentals standpoint and again we do seem to be in this pretty broad upswing in markets and despite the rates, e.m. is doing fine. what are the radar signs you see of when perhaps e.m.s get into trouble? jason: i think the external position in particular, if you look at it it's very large, large extent of debts, turkey is in a league of its own. we have a similar thing to overcome and i think that you mentioned any specific links to

turkey, we would be looking for the spanish banking sector, but beyond that, i think most of the vulnerabilities in e.m.s at the moment are quite domestic driven, and what's happening with the public finances, the public finances there and i think it's very difficult to draw specifically on things beyond what we have seen inside the u.s. treasury market and the implications there. caroline: thank you, jason, we're going to look at the ripple effects continue on this latest move from the turkish central bank. breaking news, music to many's years based in america at the moment, joe. a travel group, airlines for america and others asking the biden administration for a plan to lift international travel limits, in particular they want a plan to be developed by may 1.

now, music to my ears as i'm in the u.k. to get back to the u.s. joe: we miss you, will we finally be reunited one day? caroline: some word from the u.s. bureaucrats with visa let-ups. an interesting take, juarez coming from the c.d.c., numbers starting to tick up in the united states. how does it feel from a gut -- joe: we're in a weird moment. it feels like some people are willing to say the light at the end of the tunnel is here, we start to talk about the pandemic in the past tense and the numbers are generally going good, they are still very high. we're in this weird moment where people feel like it's over, but not quite, headlines like this kind of speak to that confusion. caroline: exactly, at least there was the optimism that astrazeneca's vaccine might be another one added to the u.s. market, over here in the u.k., the tussle of actually getting the vaccine to the united kingdom from the e.u. and vice

versa, just hammering things. joe: new york was hopping this weekend, by the way, it was great. caroline: just to rub that salt in the wound a little bit more. i was allowed to sit on a park bench with somebody else. that's it for "what'd you miss." joe: "bloomberg technology" is next. this is bloomberg. xt. this is bloomberg.

♪♪ ♪♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, apple to $3 trillion by 2030, so says citiedy, any apple car would send conversation skyrocketing, that plus a clue, deep within the home minuty, a secret sensor, what is it for? plus president biden