>> everything that has gone on in europe is even more inflationary than before. >> the central banks are in an impossible position. >> we are still looking for positive trajectory in the of us economy. >> as the fed looks to contain inflation, it is really important that they chops recovery continues -- the jobs recovery and then use -- the jobs recovery continues. 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. -- the jobs recovery continues.

>> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. information on the war in ukraine, right now all eyes on brussels. jonathan: a warning from the nato secretary-general speaking moments ago, saying georgia and bosnia may be at risk, stating that nato is not seeking a war with russia. tom: this goes to the baltic states. sometimes the headlines layout in a way that speaks volumes. there's the georgia-bosnia headline. remarkable. jonathan: let's work with georgia first and think about the black sea. they seem to be closing in on the desert in the southern part of ukraine, in the north of the black sea. georgia to the southeast of the black sea. what is russia trying to achieve

now if that is what nato secretary general yen stoltenberg thinks is at risk -- enroll yen's stoltenberg -- jens stoltenberg thinks is at risk? tom: a huge deal for the russians is bodies and injured come home. it is hugely emotional if he chooses to revisit georgia, and certainly to revisit bosnia. jonathan: a news conference happening with totenberg after some stunning pictures overnight . the good news is we are concerned around the fighting around the power plant, the fighting was contained, and has not affected essential equipment. no change in the radiation levels. tom: the panic subsides, but there is other new slow today.

let's get through the new slow today, and i would suggest brent crude wounded we -- brent crude moving higher. jonathan: in europe we are down by more than 3% on the dax. euro-dollar, a break of 110. euro weakness for a fifth straight session. crude breaking out, upon more than 3%. tom: our conversation of the day on this term sanctions. right now in ukraine, there's a teacher and a nurse leaving ukraine, and maybe they have an 18 month old with them. wally adeyemo came to california as an 18 month old with his parents. he has done better than good out of yale law, terrific in the democratic party with different public service positions, and the deputy treasury secretary joins us this morning. what will happen on sanctions

this weekend? wally: good morning. thanks for having me. if president putin continues to escalate his war on ukraine, we will continue to increase the sanctions we have put on russia. it is important to see what is happening in the russian economy today because inflation is likely north of 20%. russian markets have been shut down for days. just earlier, they announced they are going to shut them down for more -- for four days, the longest shut down they have had since 1998, when they defaulted on their debt. any investor or market participant i have talked to over the last week, they are trained to take their money out of russia, which means the russian economy is collapsing. tom: you have served both spheres of government and finance. from where you sit, can the biden administration unilaterally act, or must we wait for our allies? wally: the things the president has discovered as we are far more powerful working with our allies, and that is exact a what we have seen here, building

alliance that does not only include our european partners, but also our partners and allies in asia, which is cut off russia from access to the international financial system of the global economy. jonathan: your words moments ago, if russia increases the war in ukraine, we increased sanctions in russia. was last night and escalation? wally: i will leave that to the judgment as we look at what happened last night, but our goal is to make sure we continue to increase sanctions as they increase escalations. we are prepared to take additional sanctions to cut off not only the russian economy, but russian elites helping to support president putin, and we will continue to do that as long as president putin continues in ukraine. jonathan: you will leave it for another department to decide whether that was an escalation, and then you have to enforce what the white house decides. help us understand how the sausage is made. do you do the groundwork ahead of sanctions being announced, or do you have to do the groundwork after they have been announced?

can you help me understand what order it comes through? do you have to be prepared to act on something that might be announced down the road ? wally: the president ordered secretary yellen to start planning for the imposition of sanctions if russia were to invade. he gave one order, which is to make sure that anything we did had a maximum impact on russia and mitigated the impact on the united states and our allies. that is exactly what we have done, working closely with european allies on sanctions we could use if russia invaded. the number of things that we have planned for for the last few months to deploy if russia continues its invasion. jonathan: let's talk about what you have not deployed. have you got a plan for energy sanctions if you needed to deploy it. has that plan been made at treasury? wally: going back to what the president gave us as an order, maximize the pain on russia, but

we need to do is make sure we do nothing to increase the price of energy immediately. we have created a general licensing the energy can be sold through pipelines, by boat immediately, but over the long term, we are degrading russia's energy production capabilities so they can pump less energy from the ground in order to cut off their source of revenue over time. jonathan:jonathan: i am trying to understand whether you had a plan to deploy if you need to announce energy sanctions. speaker pelosi says ban russian oil. i want to understand whether you have done the work at treasury to execute that plan. does that plan exist at treasury? wally: the plan that we have now is to do every thing we can to make sure the market remains well supplied. what we have plans to do is to degrade their ability to produce energy into the future because the thing we know is that if we do something immediately that increases the cost of energy, that will be a cost on the american people and it will be

money that goes into the pocket of president putin if the cost of energy increases around the world. so instead of creasing data of increasing costs now, we want to degrade their ability to produce oil over time. lisa: does that mean that the sanctions we have put out there so far are all of the sanctions we can put out at this time? what you are talking about will take time. even if there is escalation, there cannot be the sanctions on oil without having it conflict with this goal. wally: no, we have other sanctions options outside of the immediate sanctions on the energy industry. we have sanctions on the financial industry we can continue to deploy, sanctions on the defense industry we can continue to deploy. we have a number of options that will allow us to meet the president's objective of maximizing the cost on russia and reducing the cost on the united states and europe. our goal is to make sure the energy market remains well

supplied because that is important to the american people, but by making sure that energy prices stay low, it starves president putin of other resources he needs to fight the war in ukraine and destabilize the reason -- the region. lisa: how important is it then to get more production domestically, to encourage shale producers to create a buffer to give you more tools? wally: the most important thing is to make sure the market today as well supplied, and we are doing that in the united states. we are also doing that with our allies and partners -- jonathan: mr. secretary, forgive me, let's go back to the question. are you reaching up to domestic suppliers in america? devon energy's ceo said they were mystified that you have not asked them to increase domestic reduction. wally: as you know, the dumbest a supply of crude right now is at a peak and it will take time for more supply to come online. we are focused on make sure the energy markets are well supplied

today because we want to make sure costs are reduced for the american people today, and we are depriving president putin of the resources needed to fight the war today. over time we need to make sure that the energy market is well supplied and we are focused on that as well. jonathan: you said we are at the peak. we were at 11.6 million barrels a day at the start of 2020. what do you mean we are at the peak? wally: my point is that at the moment, we are producing a great deal of energy in this country get it will take time for additional energy to come online , but we want to make sure that as that energy comes online, we are well supplied today because we want to make sure that americans going to the pump today are paying the lowest possible cost. that is going to require not just us to take action in the united states, but also other producers to make sure the energy market as well supplied. tom: you are a great student of history on this. this is a sea change for the politics and the energy politics of the democratic party. does joe biden have to leave the

democrats -- have to leave the democrats to a new energy theory, a new energy velocity? -- energy philosophy? wally: i don't think it is. we have always been for a well supplied energy market. we know that is going to rely us -- to cause us to rely on fossil fuel's. ultimately, being reliant on fossil fuels that often come from places like russia is not in anyone's interest. it is not only good for our security, but good for our plans over time. jonathan: i am a little bit confused, as many people are right now. crude is at $111 on the bloomberg right now. we've got domestic oil suppliers , private companies essentially saying we just want to hear from the white house. we are surprised we have not heard from the white house. they have not heard from you. it does not make sense. you keep repeating the same thing over and over again, we need to make sure there's enough crude supply, yet you won't

reach out to domestic suppliers. we need to tighten the grip on russia. the fact of the matter is people are stepping back from russian crude anyway. as you know, and i'm going to repeat this for our audience, 3% of crude imports last year for the united states came from russia, just 3%, so people are already stepping back from russian crude. what is it you think will happen if the united states announces that they are no longer importing russian crude? and if you don't want to do that, are you suggesting that you want to mr. refiners to be buying rush asked want domestic refiners -- want domestic refiners to be buying russian crude still? is that the message you want to send to the american public today? wally: i know that you repeated that we have not reached out to domestic producers, but as you know well, domestic producers are making decisions based on what they see in the market, their ability to make money in the market. our goal is to make sure we have a well supplied market. the president has been very clear about what our goal is, to

make sure that with regards to sanctions, we have maximum impact on russia and we minimize the impact on the united states and our allies. that is why he has taken steps like working with our allies and partners to reduce the energy supplies we have in store, so we will continue to reduce costs for the american people. jonathan: mr. secretary, thank for your time today. the u.s. deputy treasury secretary. it is a tough time for governments worldwide to try to calculate what to do next as the situation in ukraine overnight, for many governments, escalates, and that war intensifies. crude, $111.25. it is called an energy carveout. this is bloomberg. ♪

♪ chair powell: i would be recommending and supporting a one quarter of 1% increase at

our march meeting. if we see inflation behaving in ways not consistent with that, we are prepared to raise by more than that amount in a meeting or meetings. jonathan: chairman powell on the path ahead. it is payrolls friday. the number about 12 minutes away. futures down 0.9% on the s&p, the nasdaq down 0.8%. yields lower by five basis points, 1.78 70% on tens. crude, $111. tom: you mentioned it to the deputy secretary, and it is still a shock to hear that. that is where we are. all of these numbers on the bloomberg are a shock. jonathan: the effort to try and insulate the energy market, with these unintended consequences of all of this, you are at a point now where you got to try to answer the question, haven't you? if you don't want to stop buying russian crude, are you saying

you want refiners here in america to be buying russian crude? tom: i'm going to go british on you and go obe, overcome by events. that is what we will see in the coming days. this just oldenburg -- mr. stoltenberg with important headlines out of nato. we will attempt now to move to the labor economy in this historic week, this war. it is good to try to begin a jobs report study with randall kroszner, professor of economics at chicago's booth school and former fed governor, and he is out doing what randall kroszner does. he joins us today from saudi arabia. let me stay on jobs here for a moment. we are job forming. we are fully employed, and yet there is so much political pressure on people like you who are saying we are not fully employed.

the fed needs more labor and social mandate. are we fully employed? randall: unemployment rate is around 4%, close to our 50 year lows. that seems like a pretty full employment notion. there's some technical definitions of exactly what for limp lehman to his, but i think by most people standards -- what employment is, but i think by most people's standards it is pretty strong. tom: fold in inflation and wages , which chairman powell must consider in a number of days. randall: this is the trickiest part because obviously, as you have been talking about, commodity prices have just been exploding. we are going up significantly before what is happened in the ukraine. now there are even more

challenges and potential for chip shortages and other supply chain disruptions. so we are going to see price rises continuing for quite some time and probably quite significantly. so the fed has to worry about that because people are asking to get paid more, reasonably enough. everything is costing a lot more. if that gets baked in and they just expect to get high wage increases, that is really difficult for the fed to peel back, and that is why i think it is very important that despite all of the uncertainties, they are extremely likely to move at the next meeting. lisa: the harvard professor jason furman just put out on twitter, "my production, 150 million -- "my prediction, 100 a few million -- 150 million." it really highlights how no one really knows. how is the fed making a prediction and looking forward to some sort of projection? do they even try?

randall: i hope he said 150,000. [laughter] lisa: no he said 150 million, basically a throwing a big number out there. randall: it is not about the particulars of the number. sometimes the print is low, and that is not because the jobs market is weak. people are not accepting the jobs that firms are making offers to, and that gets back to tom's point of the strength of the labor market. i think it is not about the number itself. the fed is going to be looking at what is happening to wage inflation. i think they are looking at the number of hours worked and they are going to be looking at the population and labor force participation ratios. headline number is not the key thing. they know the labor market is really tight. lisa: do you think the bigger risk is the fed moving too quickly or the fed moving too slowly? randall: too hot or too cold?

the fed needs to be moving. time will tell whether they waited too long to act, so i think the deliberate approach that jay powell is taking is quite reasonable. they are going to move despite the uncertainties, and i think that is important to signal that they are concerned about inflation, that despite all of the uncertainties around ukraine, that they are moving. tom: critically in vietnam, but chesney argan and johnson -- chesney martin and johnson, is liquidity at work? randall: i don't think at this point it is at risk. certainly if the fed does not act well to rein in inflation or acts to bring the economy into sharp recession, that is going to raise questions in politicians' minds about whether the fed is making the right

decisions aced on the structure they have, but at this point it is not any more of a threat than it always is because politicians always have some sort of gripe with the fed. jonathan: they always will. randall kroszner -- randy kros zner of the university of chicago booth school. let's get to mike mckee for a quick look ahead. michael: basically, wall street is taking the view that this is an nfp day, not following payrolls, because there's a lot going on in the rest of the world. this will be a very quickly dismissed reports because we already know what the fed is going to be doing next week. they are going to raise rates 25 basis points whether or not this number changes significantly. 421,000 is the forecast, with a 3.9% unemployment rate. that tells you the labor market is still healthy if we get anything like that and not something for the fed to be worried about jonathan: looking

forward to your coverage in about five minutes. not following payrolls. an important headline moment to go from jens stoltenberg. i don't want it to pass because there are calls to do the following, and he is pushing back. nato will not move into ukraine airspace. in a minute, the significance of that line this morning. tom: it is very important, and it redefines geography and landmass. that is something i think we will focus on through the weekend, as what do mr. putin and his troops actually do. we'll stay munch how -- wolfgang munchau joining earlier this morning put out a blistering note on your questioning to mr. adeyemo, "ban russian energy imports now." it is a ruthless note. jonathan: that was the call from speaker pelosi yesterday as well. dan it -- ban it.

the white house so far not looking to do so. on the nasdaq we are down 0.8%. treasuries rally in, down five basis points on tens. crude through $111. 423,000, the payrolls report moments away. ♪

jonathan: the payroll support in america, seconds away, with futures down .8% on the s&p. yelled -- yields lower to 179, and crude, $111. with your payrolls report is mike mckee. mike: it seems like significantly higher than the 421,000 that had been anticipated. the unemployment rate falls more than forecast, down to 3.8%. but just back were in december before the update to the household survey. that pushed it up to 4%. we have a very tight labor market. it is pretty clear. average hourly letter -- average hourly earnings were flat on the

month. and on the year are up by 5.1%, which is a very unusual thing. we are going to have to look and that, because there were 21 states that raise the minimum wage, and also in january is when we get raises. well, some of us. at this point we should have seen an increase. that would have been the expectation. the markets that we would get a .5% jump in average hourly earnings. i suppose that is good news for the fed and that it is telling us we are not seen a wage price spiral at this point. labor force participation rate does it take up to 62.3%. that is also good news for the fed. they have been wondering where everybody is and if, indeed, omicron has been keeping everybody home. they are starting to get them back into the labor force and looking for jobs. right now it looks like people who got jobs for the most part were in the leisure and

hospitality space. i will get you some numbers on that in a moment. lisa: jonathan: i knew you were not going to let that go, jon. futures, they rebound a bit. on the nasdaq we are down .5%. yields look like this. we are down six basis points. tom, let's play again. i know we can't really play it, but if you could strip out what is happening in europe right now, would tuesday at 150 -- would tuesday -- twos be at 150? tom: i think the methods of 770,000 with the revisions. very constructive report. mike mckee, with your work on g7, you were in prague, your work in russia, moscow. why am i looking at your job support and watching ruble and euro on the screen? mike: i suspect the folks at the

fed are watching those headlines as well. leisure and hospitality was one of the big gainers. 179,000 jobs created in the overall category. you look at food services and drink in places, 123,000, almost 124,000. so, people are coming back to work in those areas. there was some concern that people would not want to be waiters and waitresses and bartenders again because of the contact with people, but it does look like they are starting to draw them back in. a lot of the minimum wage increases may have helped in that area. government, we saw a big decline last month in government hiring, but it looks like we are back up again overall. 24,000 in the education spaces. 15,000 in local government education. those jobs starting to come back a little bit. lisa: some people might say more people are coming into the labor force, that is good.

it is going to decelerate the wage gains. is that good? is this potentially a problem at a time when wages have liked behind consumer price inflation? mike: you know, i would not characterize it as good or bad. went to a very long period where wage growth was in the 2% range. if we get above 3% that is above average what economists would be looking for over a longer period. if we are looking at 6% then there is a concern about inflation out there. if it moderates a little bit, good news. if it moderates a whole lot, it stops going up like it did last month, then that is something that is going to be more disappointing. the whole way you put together what you are looking at people are making these days has been so distorted by the pandemic and the government aid and which jobs were coming back that it is going to be a while before we get a real handle on whether workers are better off in the long run. tom: big week next week. mike mckee, thank you.

an inflation report into an important federal reserve meeting. he spoke to the deputy secretary of treasury about sanctions. he is -- he assisted president obama and biden with financial service. he has also had a tour of duty at blackrock. it is good not to go to blackrock to speak to someone away from sanctions, maybe, about what yields tells us. jonathan: just a brilliant lineup today. jeffrey rosenberg joins us now. jeff, have you ever seen a number as big as 678,000 met with a collective shrug in the markets? jeffrey: well, it is a reminder, jonathan, that the market focus is really not on payrolls. but if we do just look at some of the implications of the payroll report, clearly a very strong report across the board. mike mckee, if you are looking, check out the workweek. that may have been behind that disappointing month over month

ag. i can't see it here. this is a difficult period for markets, because as we heard earlier this week the fed is focused on inflation, and its need to get on with normalization and raise rates while the market is focused on the implications of the russian invasion. in that implication is a negative supply shock. you know, negative two growth, positive to inflation. it puts the fed in a difficult position, it puts investors in a difficult position in that we cannot look to interest rates falling from fed policy easing in the face of any growth slowdown because of the inflationary aspect. it is a very tricky environment. obviously market reaction is about russia-ukraine. tom: we say good morning to larry fink oh, who is hanging on every road -- every. i don't want you to give away the secrets, does blackrock have

any sense in full faith and credit and the credit markets of all of this war that you can mark to market this friday? jeffrey: what we are seeing in the credit markets -- and this is kind of even proceeding some of the acceleration around the geopolitical uncertainties is we are well off the tightest levels of spreads. partly a lot of that was just repricing to a higher interest rate environment. i think now you have a difficult time this entangling the price signals because of liquidity -- there is a liquidity risk premium built into the market. and i think that most of the price response so far is that, but we have to recognize that the negative supply shock and the stagflationary impact of that is really a tricky environment for credit. but the growth side is ultimately a bit more on the negative side.

you have seen some wider spreads across credit markets, and i think that is a message that makes sense in terms of pricing in some higher probabilities around some more negative scenarios for how this all plays out. that higher risk premium, not yet really talking about default risk premium, but risk premium around the potential to change some of the probabilities around economic outcomes. lisa: jeff, a lot of people we spoke to this week said they did rethink or they are rethinking actively their allocations in response to the developments. with the russian invasion. have you done the same? jeffrey: yeah. no, there is certainly kind of the initial playbook of, you know, geopolitical risk is very hard for markets to sustainably reflect in prices. i think that initial hopeful response in terms of this could be a buying opportunity has really been replaced,

particularly after the weekend sanctions, with a much harder reality that this could be going on for a much longer period, with a much more persistent impact to energy prices and water commodity prices. that is the negative supply shock that you are seeing now rollout in terms of forecast revisions. forecast revisions so far are modest, but they are significant in terms of reduction in growth, increase in inflation, a longer period of inflation, then the challenge that puts the global central banks in terms of, how do they manage the crosscurrents between growth and inflation? a lot more focus in the u.s. on inflation. for the ecb we are going to see perhaps a different response, given the central impact this has and a much larger impact on the european growth outlook. we are really upending a lot of assumptions, but clearly here the shock to commodities, the negative supply shock, prolonging the inflationary environment is going to make

this more durable in terms of market impact and economic impact as a geopolitical shock. jonathan: are you watching this movie in euro-dollar? just about holding onto 1.09. tom: i cannot convey enough, the cross correlations. this is not flagging us. it is sort of a rolling wave tape to tape of stress, euro swiss not showing the euro-dollar. nevertheless, ruble at 1.17. jonathan: credit down almost 10%. stockton down by 7%. deutsche bank down by a little bit more than 7%. jeff can you frame how much of a part -- a problem we are facing in european markets and whether you will go near it? jeffrey: the problem is certainly centered there. you have significant commodity shocks, significant rose shock.

and the dependencies that we know terms of the russian energy supplies is centered, obviously, much more in europe than the rest of the world. this is, not only the growth impact, but the stock impact he described in terms of financial linkages of the banking sector. all being reflected in this repricing here of russian sovereign and credit risk premium. the second part of the question, i think it is a very difficult environment to assess the primary and secondary spillover effects until a more cautious stance is one that we are taking when we look at some of the impacts in our portfolios. jonathan: jeff, looking forward to catch up with rick later. anastasia amoroso, we will hear from the white house as well. tom: why is he never on with us? jonathan: you speak to jeff, catch up with rick. do you want to swap them?

tom: yeah, we could do a switch then. jeffrey: we can work it out. jonathan: he is very sensitive this morning, jeff. i apologize for that. tom, there's a difference between long into the week and short into the week and being hands-off on the weekend. i think people are worried about being wrong and this market going completely in the other direction. tom: the vix is midway. we are at 33.33. johnny, are you leaving us right now? jonathan: i'm going. but i will give it a minute. [laughter] tom: while, 1.09. this is not a joke. this is something. jonathan: just a final were between you and i, on thursday bpi, then literally cpr comes out, lagarde is going to walk into the room in friend for, germany and deliver a news conference. tom: 1.0903, we are there any

moment. jeffrey rosenberg, think you for joining us. jon ferro, thank you for joining us, as always. lisa: me too? tom: thank you. jonathan: it is an honor, tom. tom: michael mckee with us as we try to find humor in this trying time. i'm going to open it, mike. jobs report, i'm sure you have some wisdom. how odd to see a plunge in euro. second derivatives moving as well. do central banks get on the phone and talk to each other? mike: they do. tom: currency moves like this? mike: they are always talking to each other, is what they would tell you. if the europeans were going to intervene in currency markets they were called the fed. because the fed would probably have to help them in the sense of, -- tom: to affect the transaction? mike: to affect the transaction.

whether they would join in, the last time the europeans intervened they did it on their own. they do talk about it. this is clearly a reaction to the jobs report, and i said not focused on payrolls, but i was wrong, because the currency traders are. they are looking at the strength of the u.s. economy and comparing it to what forecasts are now for the european economy. he see only people marking down russia and how bad the economy is going to be there, and the spillover effect that is going to have on europe that people are saying, you know, dollars going to be the place to be. tom: mike mckee, thank you so much. dow futures, -282. we welcome you on the oddest of job days. this is the point where you get on your pencil and paper and start taking notes. ira jersey here. are you macron interest-rate

strategist and truly expert in the short-term space? he wrote an incredibly important note the day before, maybe two days before saying the short-term paper markets do not show a fear of liquidity. they show something else. what do they describe right now? ira: it is all about credit spread raw -- spread widening, which is different than that liquidity pc mentioned. if liquidity was really the problem and you had banks that were on the week of default, all lehman, you would see signs of stress and other markets, and we are not seeing that. but credit spreads in european banks are widening, and with good reason. they have exposure to russia. that might have lower profitability. central banks are going to be reducing some of their liquidity. no, my colleague in europe noted that if has been a lot of volatility there is -- there is still going to be monetary

policy tightening. monetary policy and tightening it means bank spreads going to be lower. some monetary policy goes tighter. that canary in the coal mine some people think has widening out a lot is actually following things like credit default swaps, which have been widening over the last month. so it is not a jump to default risk here. lisa: taking a step back, perhaps this is not a credit default issue, but taking a step back people have been looking at the gyrations in treasury yields. intraday it has been a while. this is the benchmark stalwart asset of the entire world used as haven status. we have seen that throughout the altercation we see in europe. does that raise concerns about basic liquidity in basic treasuries? ira: as the treasury market has gotten bigger and the federal reserve is not buying anymore assets -- i mean, they are buying over the next week, but it is three or four more

operations and they are done -- you have seen liquidity pullback. that is a function of a couple of things. the treasury market is much larger than it used to be. plus you have all these bank regulations don't incentivize primary dealers who are part of larger banking institutions to take a lot of risk. so they are not going to be, you know, the -- how should i say this? they are not going to be the intermediaries they had been in the past because they cannot just massively increase their balance sheet to take on a lot of risk. we have been talking about this for a decade. i think it was on with you in 2014 when these rules were being implemented and we talked about, look, this is going to be bad for liquidity for treasuries, and it is proven to be correct. you are going to have these period's work but i swear liquidity gets dried up and you see these large swings in order to facilitate people who want to buy and sell treasuries. lisa: this is important, because

this is the world's haven asset, right? this is the world's deepest asset class. if you have problems with respect to pricing, if you have massive gyrations, considering this is such a big part of so many portfolios, what is the consequence? could this be a real problem for market stability? ira: that is the fear, i think, but keep in mind that you also are coming out of some unprecedented periods, right? we were in an environment where for two years the primary dealer community and the dealer community as a whole had a backup buyer. at the worst-case they could sell the bonds to the fed. now we are in this process of adjusting to a world where dealers have to be the liquidity provider. that will take a couple of months for us to adjust. you know, of course that is happening in the middle of another crisis in eastern europe, which would have created more volatility anyway.

on top of that we have, you know, an environment in terms of growth and inflation that we have not seen for 40-odd years. so all of that is contributing to this massive uncertainty. now, it is interesting you say, hey, we have been really volatile. we have sin -- just open and arrange -- a 20-basis point range. lisa: doesn't make sense for 10 year treasury yields to be below 1.8% if we are going to get a cpi print of 7.9% next week? if we are going to get inflation that only seems to be accelerating? ira: people don't like when i say this, but we are pricing for stagflation. when you look at what has gone on with inflation expectations and the tips market versus where real yields are, real yields is what you have seen the volatility. if you want to talk about a less

liquid treasury asset, look at tips. they are now at, looking at it on my terminal, -93 basis points. that is a 50-point rally in the last couple of weeks. that is insane, and that is pricing for slow growth, fast inflation. that is stagflation, by definition. tom: if we see the 10 year real yield reached below -1.00, stunning, as you say, what does that signal to the fed? if the real rate collapses and shows permanent entrenched inflation? ira: i think it is not dissimilar to what you have seen in today's jobs report. i'm going to look a little bit beyond, because it is just one print, if you have wages that are not going and you have real wages slowing significantly, that means you may not be fulfilling in the near future one of your mandates, right?

that is full employment. you also want to keep prices low. i think they are going to be walking a tight rope, and i think the federal reserve has to hike this year in order to make sure that inflation expectations, you know, hopefully come down or stay anchored. they will hike, but i think they are going to wind up hiking much slower than the market was thinking. we have always been in the four to five hike camp, and i think that is probably what they do this year, but i think that means they can hike even further going out. that is why you see, maybe, some steepening in the yield curve with short-term yields going down a little bit. longer-term yields staying where they are, maybe going higher. tom: right, jerzy. thank you very much. truly world-class, particularly in the short-term space. mike, one observation, what have you got? mike: talk about unemployment rising or falling for good or bad reasons, this time it is definitely good reasons. the labor force rose by 400,000

people. more people looking for employment rose by 548,000. unemployment fell by 243,000. lisa: lisa, we have to do a data check. let's be quick here. euro below 1.10. lisa: yeah, 1.089, the biggest move since march 2020 as people are looking at the nato conference. the general secretary saying the responsibility is to prevent a full-fledged european war, but that is the discussion. how much are we looking at a complete version -- fight divergence between the u.s. and europe? tom: the old-school dxy index, mostly 54% euro, is going to reach up to 99 here. the bloomberg dollar index, maybe not showing quite the move. right now on the equity markets, gina martin adams joins us, equity strategist.

my interview of the week on american wages was targeted $24 an hour is what they need in selective geographies. however wages for the corporations and what it -- what will it do to their margins? gina: we are starting to see wages creep up, him particular in this consumer sector. this is where we see the predominance of margin pressures emerging. the consumer staples up a's in particular. as well as the consumer discretionary companies. a little bit peripherally in industrials as well. the transportation industry has been an some degree of margin distress. but it is the consumer companies are dominantly. that is consistent with history. this is where we tend to see wage pressure most. they tend to have the most hourly workers the hourly workers very sensitive to food and energy inflation. the results of that is that they tend to see the pressures they

are also struggling to find laborers. we are seeing that play out in margins at large. it is not yet a broad s&p 500 issue. i will stress that, because a lot of the s&p 500 pays salary, right? to the wage cost is not necessarily as significant. labor is not as big an input for many of these companies. but it is a very big issue for the consumer companies, and we are seeing downward revisions as a result. lisa: we are looking at payrolls, but also beyond that what is going on in europe. right now we are seeing a new high for the day so far. wti, crude, right now we are looking at the highest level since may 2011. looking at the prospect of, have american companies and stock traders accurately priced $120 a barrel oil means? gina: i think we are pretty close. i have been watching oil prices carefully as well, but i think we need to keep this in perspective. from 2011 to 2014 oil prices

ranged between 80 and $110. above 100 $10 is increasingly problematic, that it is not terrible for margins overall. we have to get well above 125 dollars in today's state of revenue growth to really see margin deterioration. i think we will have to get closer to five dollars at the pump before we see a consumer reaction as well. remember, 10 years ago now we saw four dollars at the pump. have to see a bigger shock than that, when the economy was significantly smaller. at that period of time we saw four dollars impact spending, not enough to throw the economy into recession. i think you have to see five dollars at the pump before you see the consumer materially react. the difference might be food. we focus so much on what is happening in the energy complex, but what is happening in food prices could be much more profound and create an impact on the consumer that maybe we are not expecting.

you are seeing consumer companies got us to a significant margin compression, much less earnings growth as a result of food price pressures. certainly the cost of wheat, the cost of corn, all of these prices feed into food prices. i'm a little bit concerned that the consumer ultimately reacts to that or so than the last cycle, because we really didn't see this. lisa: that is exactly where i wanted to go. we are seeing limit up and chicago every day for several days now on wheat futures. how much would this affect specific sectors of companies versus, frankly, everyone? because that affects entire economic trajectory. gina: it absolutely affects the consumer sectors. it is great for industrials, frankly, if you can continue to see high commodity prices. you tend to see greater machinery spending, greater capex in the industrial space. it is not good for the consumer space. it is the typical's player -- typical players.

the consumer sector is one of the more dangerous sectors of the s&p 500. this is an area where investors tend to go when they are fleeing risk. this is a low-data section of the s&p. people think, consumers will not give up on food. the truth is they do substitute to cheaper products, and the results of that, through the consumer company, is margin pressure. the same time they have higher wage cost. it is more about the consumer. i don't think we are getting to the point where the consumer does not by iphones as a result of food prices. we may get there. we are not likely to see this filter through to the rest of the sectors just yet, that i do think we want to be on guard for. tom: gina martin adams, thank you so much. i said this a week ago, and it is another week of war, to our team from poland on the border, and in ukraine and over to new york, you so much for your work here. lisa, let's sum this up. i know you were focused on

agriculture. the movements here and the litmus paper of the global system in foreign exchange are just extraordinary. lisa: it is an extraordinary moment that has changed a lot of people's perceptions of where we are and where you're going. i do want to bring you another headline from jens stoltenberg of nato, saying the entire alliance is increasing their presence in eastern europe. how much does this lead to an escalation? was the big question after overnight. did see that attack on a nuclear facility, nuclear power plant. it did not lead to any kind of outages or issues with respect to nuclear waste. it was not the worst case scenario, however it is raising questions about what comes next in this escalation we are seeing more broadly. tom: in the 4:00 p.m. afternoon of ukraine, i believe that is the time zone, we are right a -- we await a friday in ukraine. it has been a dearth of geography today, of key of down

by the like see, and focused -- pretty much, but to some great extent from odessa over to the west. we will be covering that out of our european news bureaus as we go throughout the day. it is an american success in america with the jobs report, 770,000. that is something we have not talked about this week. good news on the pandemic. please stay with us through the day. this is bloomberg. good morning. ♪ jonathan: what a very strange morning. the countdown to the open starts right now.

>> everything you need to get set for the start of u.s. trading. this is bloomberg "the open," with jonathan ferro. jonathan: live from new york city we began with the big issue. geopolitics and the economy. the data and america is looking good. the situation in ukraine, anything but. yields down seven basis points, crude at 100 $10, and euro-dollar very briefly with a 1.08 handle. anne-marie, it felt like for many people an escalation overnight. anne-marie: we should make the point, jonathan, that this is the first time ever you have a country being invaded that has a vast amount of nuclear capabilities in terms of that