♪ >> very good morning. welcome to daybreak australia counting down to asia's major market open. >> jerome powell talkers message royals markets. the fed signals it may raise rates at a much faster pace. haidi: vladimir putin may be

narrowing his war objectives pursuing charity in east ukraine as president biden warns moscow is weighing a cyber attack against u.s. >> china faces its worst aviation disaster in more than a decade as investigators seek clu es on what a cost china eastern plane to plunge from the sky. a quick look on wall street with all about jay powell today, roller coaster ride for stocks. bonds getting crushed again after powell made it clear that he and his colleagues will do whatever it takes to bring inflation down, the most aggressive on rate hikes. it's interesting because stocks started tumbling after powell made his remarks. you can see the s&p futures have just turned positive marginally but the day started on a bed, on a good foot, got bad and got better. golden dragon index started the

day on a rather negative footing after the pboc declined to cut the loan rate. you saw tencent and baidu and alibaba in all negative territory. that index reduced its losses but still a loss of more than 4%, down 6.5 of 1% on the day. 10 year yield up to 2.30%, the highest since, the biggest gain i should say since march of 2020. the biggest move. and that was right when the pandemic was really taking hold. bond markets getting hit. the two year once again the star of the show. it is now closing at 2.11. it was up to 2.14. it is also the highest yield since 2019. jay powell again is the one who exacerbated that sense that was already there but the fed is going to hike and it may cause a recession.

let's look closer. he was picking to the national association for business economics. -- he was speaking to the national association for business economics. he said that the fed will do whatever it needs to bring down inflation and if we conclude to move more aggressively by raising the fed funds rate by more than 25 basis points at a meeting or meetings, we will do so." we'll move the funds rate above the neutral rate if we have to. the moderator pushed them further, asking him about the main policy meeting. let's listen to what she asked and listen to what jay powell said. >> what would prevent you from doing a 50 basis point move? >> what would prevent us? nothing. [laughter] >> pretty sustained answer there. the amount the fed also spoke

and he is in the middle of the pack, would not rule out 50 basis points. but talked a lot about uncertainty. uncertainty around the war, uncertainty about commodity prices. that is a factor hanging over the fed but clearly the balance has shifted towards move harder and faster if you need to. haidi: that energy price, crude raising one way or another. we have seen oil prices come down but a reminder this week this is not the end of it. we saw crude going higher for the 30 consecutive day. there are growing supply concerns. e.u. leaders mauling a fifth run of sanctions. and the kremlin has said that would impact the supply shortage on the continent in particular. but that is certainly still on the table and we are seeing that play out when it comes to futures in new york trading higher.

let's take a look at our asian markets. the price of oil and it is really watching the sovereign bond market as well after just the turmoil in treasuries. the australian 10-year yield climbed as much as 13 basis points in the tuesday morning session to 2.71%, after that selloff in treasuries in the monday session in the u.s. the three year jumping 14 basis points. these are both levels of yields we have not seen since back in 2018. and that was really after jay powell put in that 50 basis point fed rate move into play. when it comes to the equity session, pretty flat when it comes to trading in new zealand. the consumer confidence level falling to 92 from 91 in the fourth-quarter. really suggesting that new zealanders are growing more pessimistic about the economic environment. that is well and truly under that 100 level. watching became futures. a bit of catch-up to do after

japanese equity markets were closed for the holiday. kathleen: let's get more on our top stories now. starting with the market reaction to powell's hawkish comments and of course the latest from ukraine. the u.n. same the invasion has forced 10 men new people from their homes -- 10 million people from their homes. that's bring in our guests. let's start with wall street's reaction to jay powell. stocks seem to shrug it off but definitely not bonds. >> that's exactly it, kathleen. when you look at the stock market and this massive slide we saw as soon as powell started talking it was a clear, immediate reaction to what he was saying to some people said it was very clear that interest rate hikes are going to be extremely fast. there could be the 50% basis point hike in may. others are saying, nothing new here. we heard about this last week, we have been hearing about this for weeks. i think that reaction towards the end of the day, the last two hours of trading where we saw

stocks come back a little bit is reflective of the investors saying, ok, he is speaking, he is pointing to high inflation numbers, strong economic growth but overhear there is not so much going on in terms of something new. that being said, like you said earlier, it is a lot of volatility. anything that powell says the market is going to be watching. the market is going to be reacting to extremely quickly. so it is something investors are obviously paying very very close attention to at this point. haidi: jodi, investors are watching the situation on the ground in ukraine. what is the latest? jodi: looks like there is somewhat of a shift in strategy by vladimir putin. rather than hitting, trying to hit kyiv and try to hit several cities, he seems to have shifted towards the east and to the port city of mariupol, where there

has been bombardment by land, sea and air it looks like they have shifted strategy to try to focus on this one area. again a port city, so to kind of deal with that as a transportation area. the, we saw ukrainian president zelenskyy has called it a war crime of shocking proportions. this all comes as we're going to see a nato summit which president biden will attend on thursday on ukraine and the invasion, and then-president biden will go to poland to meet with the polish president there. you saw the statistic earlier here. the -- that 10 million people have left their homes. more than 3 million had ended up in neighboring countries like poland and we are starting to see the effects of that refugee crisis that will continue to get worse. we also heard today from president biden how -- a very

stern warning saying that he thinks that russia may start engaging in malicious cyber attacks. he says they are weighing that and urged private companies to be very cautious that there could be serious cyberattacks in the coming days. haidi: jodi schneider with the latest on ukraine. and our america stocks coverage. let's get you over to vonnie quinn with the first word headlines. vonnie: thank you and good morning. the european union is back to reinforcing the u.s.'s warning to china that would face serious consequences for helping russia with sanctions really for military support. sources say brussels and washington have been coordinating ahead of the e.u.-china summit with the aim of encouraging beijing to take a responsible stance on the war. communication with china is excited to be on the agenda when president biden meets e.u. leaders in brussels thursday.

china has played stronger monetary policy support for the economy while cautioning against slowing the market with liquidity. the country's cabinet called for the adoption of monetary tools to keep credit expansion at a stable pace. they also promised to maintain policies that can support the economy while pledging to avoids measures that can hurt market sentiment. japan is warning of potential electricity shortage on tuesday and has issue its first ever power supply alert for tokyo. that is power plant outages from an earthquake and colder weather struck the grid. they are urging customers to conserve power this week and the capital is using -- electricity from other regional electors he. india will protect -- the government will not also allow tax price and interest after cost for mining cryptocurrencies. the clever kitchen parliaments

-- -- the clarification in parliament are a further setback. global news 24 hours a day on air and on bloomberg quicktake powered by 2700 journalists and analysts in 120 countries. this is bloomberg. kathleen. kathleen: thanks. partial wreckage of up trying to eastern 737 passenger jet that crashed in southern china have been found. as investigators begin the arduous task of figuring out how the plane with 132 people on board crashed. our chief north asia correspondent stephen engle is in seattle. this is where many of boeing's claims on mates. the world has a lot of tragedy right now and i think a lot of people woke up to see the headlines in the u.s. around the world and wonder how in the world does this happen? what do we know about the crash? stephen: there are two elements, many but of course the crash itself and then there is

the potential impact on boeing which was trying to regain its footing in mainland china, get recertified with the 737 max, actually flying shanghai airlines 737 max to shanghai south of shanghai just last week on that recertification process. in fact, you know, this was not a -- a max. mu5735 was flying in the south-central china province to southern china across from the border from hong kong. it was about two thirds of the way through its flight when it suddenly, went into a sudden des cent. what data tracking shows a sudden vertical dissent. that was a slight recovery at 9000 feet before plummeting at a speed of 31,000 feet per minute.

that happened in about five seconds. so, something absolute catastrophic happened. now aviation experts we have spoken to are baffled by this. the situation is extremely different than what happened in indonesia and in ethiopia with the max where we had this mcat software where the flight stabilization software was in focus. those two crashes happened in the early parts of the crash, of the flight, and caused the buckling sensation where the pilot tried to control the aircraft. this is completely separate kind of incident. this happened two thirds of the way through the flight, it was right about the area over a remote area that the flight would begin its descent. something catastrophic happened. the investigation has begun. u.s. officials have appointed a senior crash investigator to spearhead the u.s. approach to it but of course, the aviation regulators and china will be

watching and conducting this investigation. xi jinping, the president of china, without talking very quickly, in a quick, public statement saying he was shocked by the crash and urging the investigation to go quite quickly. as far as boeing, i mentioned this is a blow to his credibility. we don't know the cause of it. we do not know if it is a manufacturing issue, pilot issue, it is too early to speculate on that, but again, this is an airline that has been, an airplane maker that has been scratching at clawing back from the disaster of the max and was trying to get recertified in china. we'll have to wait to pass judgment on anybody, and know the cause but it is a blow to boeing and the stock was down as much as 6% today. haidi: we are waiting for answers. china eastern in this particular aircraft had very robust safety directors.

stephen engle with the latest on the top story. still ahead, president biden says russia is mulling a cyber attack against the u.s. we consider will be next for the two country in ukraine. next, volatility could be easing despite the ongoing war between russia and ukraine. this is bloomberg. ♪

>> the expectation going into this year is that we would see basically inflation peaking the first quarter and leveling out and see a lot of progress in the second half. that story has already fallen apart to the extent it continues to fall apart, my colleagues and i may well reach the conclusion that we will need to move more quickly and if so we will do so. what i've said is that if we think it is appropriate to raise 50 basis points, at any meeting or meetings, we will do so. kathleen: fed chair jerome powell speaking at the annual meeting of the national association of business economics i n washington. let's discuss the market implications, what the market did today and bring in erin gibbs from main street asset management. i'm a fed watcher. jay powell had opened the door

to 50 basis point rate but today he waved a flag and said, " if you do not get it we will do whatever it takes and they are definitely not off the table and not just one, it could be more." markets seem to shrug it off. did they shrug it off, really? >> well, i think it was interesting how the bond reactors versus, the short-term interest rates as well as equities. equity markets shrugged it off. i think more because they like certainty. if powell is reinforcing that they will -- they made mistakes, that they were, saying that their stories were incorrect, just admitting that and saying that we are ready to do everything it takes is definitely reassuring for the equity investors, not so reassuring on the economic growth and what companies are able to do within the u.s.

so, you know, investors have really been pummeled this year. if you do not feel exhausted as an investor, just to kind to give you a feel of what we have gone through, whenever the vix is over 30, we saw that the extreme period, or extreme volatility, and historically over the past three years, the markets were only in this extreme period for 10% of the time. year-to-date, the markets have been in this extreme period almost one third of the year, for the past 2.5 months. if you do not feel exhausted by volatility, great for you, but we really have gone through such a period of dealing with multiple stories, multiple headlines that create that uncertainty in the markets and powell is doing his at absolute

best to remove the interest rate and monetary policy concerns. kathleen: some have a different concern that he means it and the fed's going to move so much that they will tip over the economy and in fact you have to cause a slowdown in order to bring down inflation. larry summers arguing that on bloomberg television for months now. in that kind of environment, i would guess for some, depending on what you are investing in, it is kind of hard to be unequivocally bullish. erin: certainly, i think, we're talking about potentially creating stagflation. we are not too much really talking about any type of recession but a slowdown. yes. it's difficult to be bullish if companies are going to be facing this high inflation for a longer period of time. but, on the other side, markets are very bored -- if we know we have to get through this period, six to nine months, we still

have very good earnings support, even in the face of high inflation. we haven't really seen those earnings -- come down. so, i think the strength in the u.s. economy is still there -- it's really more about valuation -- and the buye staying on the sidelinesrs -- buyers staying on the sidelines. haidi: where are you finding value at the moment when it comes to mid and small caps? given how much valuations have come down? erin: right. so, one of the anomalies we are seeing right now is that mid cap and small caps are actually trading at a 25% discount to large caps. and that is really unusual. certainly, we expect valuation compression in the face of high inflation, because it is harder for smaller growth

companies -- typically it means it just means their premium become smaller. they normally trade at a higher forward p.e. than lower. so, because we are seeing this massive, you know, discount, you know, over more than 30% compared to historical norms, even during periods of inflation, it really looks like it is holding up much better year to date. and so, if there's any dips in that market, i think it is just at a safer point as we continue to face some uphill battles within the equity markets over the next couple months. haidi: erin gibbs. you can get a roundup of the stories you need to know to get your day going in today's edition of daybreak. terminal subscribers can get that. and you can customize the settings so you just get the news on the assets that matter to you. this is bloomberg. ♪

haidi: a quick check of the latest business flash highlights. -- has banned facebook and instagram calling their activities extremist. the ruling was made after prosecutor argued that their policies were directed against russia. a lawyer says the court did not have authority to rule the case because it is a foreign registered company without domestic presence. -- says it's ready to make a change needed to become a global leader. the company is already at top maker of -- and is seen its share price more than doubled since the ceo took over in 2019. he telels bloomberg he is committed to diversifying while focusing on core units. >> it is a very self promoted

company about specially we have to become the global medical technology company. we need to enhance more speed. we need to attend more product portfolio to really compete with the global market. with the global competitors. haidi: we will have more from our interview with the olympus ceo on japan ahead. revenue hitting $10.8 billion which is a boost for the company which is seeing supply issues. revenue from greater china dropped 5% but still was a beat on expectations. nike share price is down 22% this year and on track for its biggest quarterly drop since 2008. coming up next, president biden warning that russia is weighing a cyber attack against the u.s. as its military struggles in

ukraine. we will speak with a consultant next. this is bloomberg. ♪

haidi: we are getting an alert when it comes to the consumer confidence weekly reading for australasia, it is really not a good picture when it comes to expectations from australia consumers. what we're seeing is the lowest level since september 2020 when it comes to this consumer confidence reading. and the reading coming in really at levels we haven't seen since that point, 94.8 was a prior

reading we saw. and we are getting a reading of 91.2 at this point. it does seem like that sentiment recovery, when it comes to the fate of omicron and the multiple lockdowns the australia economy has gone through on account of covid-19, we are still seeing that recovery play out. but the march 20th seeing the survey falling from 94.8 to 9 1.2 the lowest since september 2020 and inflation expectations playing a big part of that, rising to 6% as we start to see petrol prices continuing to surge as well as concerns over financial concerns and a decline in current economic conditions and future economic conditions as well. let's get you the latest first word headlines with vonnie quinn. vonnie: thank you. federal reserve chair jay powell says the central bank is prepared to raise rates by 50

basis point if necessary. speaking at the national association for business economics on monday, powell adopted a more aggressive tone towards inflation that a few days earlier saying curbing prices is their top priority for 2022 and a at they are prepared to move aggressively if warranted by incoming data. >> the excitation going into this year is that we would see basically see inflation peaking in the fourth quarter and then leveling out and see a lot of progress in the second half. that story has already fallen apart to a stent at continues to fall apart, my colleagues and i may well restate conclusion -- well reach the conclusion we need to move more quickly and if so we will do so. vonnie: china eastern says it is grounding all of its boeing 787 jets, following monday's crash that killed all the people on board. it is china's first commercial aircraft disaster in a decade.t the jet plunged 26,000 feet in 90 seconds. experts say it is highly unusual. the ntsb has appointed a senior

investigator to work with china along with representatives from boeing. russia is refocusing his military campaign in ukraine on east, mainly on the port city of mariupol. bombardment continued on monday after a russian ultimatum for the city's surrender expired. the strikes intensity is being seen as a sign that president vladimir putin is trimming his ambitions after failing to force a rapid regime change in kyiv. global news 24 hours a day on air and on bloomberg quicktake powered by 2700 journalists and analysts in 120 countries. this is bloomberg. haidi? haidi: staying with the fall of russia's war in ukraine, -- pushing up prices of aluminum and piling pressure on the russian producer rusol. what have we seen as the impact on rusal? >> aluminum was already in short supply before the invasion of

ukraine by russia. rusal has been having some difficulties with logistics that has impacted is productive. and an aluminum ban on top of it. aluminum is not officially sanctioned, so the australian government made this unilaterally to stop supplying materials to russia. it still has a 20% stake in the queensland aluminum limited with rio tinto. it says it is in the process of ending its relationship with rusal and intends to comply with australian government directives but as you say the price of aluminum soaring. it has pulled back from $3800 a ton, which we saw earlier this month -- this month, but the price rising again overnight. kathleen: also putting pressure on india to take a stronger position against russia over the war in ukraine. >> scott morrison does not call

out india by name, but this is what he did say. the cooperation of like wide liberal democracy is key to an open and inclusive and prosperous indo pacific. he made those remarks at the start of a virtual summit with the indian prime minister modi. so, in different medical language, it is pretty clear what he was getting at there. similar commons were made by the japanese prime minister in recent days as well, that needing work operations between democracies when it comes to censoring russia. so far they have abstained in the u.n. it gets a lot of weapons from russia and it echoes the stance of what it had during the cold war era. but more and more, india's allies are trying to gently n udge them towards. choosing aside haidi: president biden said that

russia could conduct a cyber attack and urged private businesses to enhance their defenses. victor, great to have you with us. give us some context about how cyber attacks form part of the arsenal, if you will, for russia, and as we near the one month point of this war, what do we expect next from moscow? >> sure. well, russia has an extremely -- good cyber capability. they have been behind a great range of attacks into u.s. systems, solar and wind for example, which copper mice thousands in america. and there is potential for them to harm us, with cyber attacks large private companies both to try and return some punishment for what moscow feels it's been subjected to, and of course, is a one to other companies to not

go down the same path. now, in terms of what the future holds, it is very much likely to, they do appear to have failed in their initial attempt. what that probably means is that you will see a pause while they rest and regroup. they are likely to try a different strategy now, which is probably what we have been seeing in mariupol, blasting await civilian targets and trying to force kyiv to the negotiating table that way. so, i don't think we will see a large-scale conventional attack in the way we have seen in the past, but we'll see a move towards life scale seige type warfare which is going to be terrible for civilianthe. -- for the population more than he had has been. haidi: does that give them a greater chance of success, does that give president putin an offramp to get out of this at some point? >> look, it might. it really ultimately, vladimir

will decide himself, of course he was the one who decided to go ahead he will decide what conditions the victory are. but it's hard to see whether or not he will back down from his objective he has painted himself into the corner with. there is been the claim that ukrainians are working on nuclear weapons, that they are nazis, committed genocide. it would be surprising if he was really to back down too quickly. and you have to remember, while they have not had that much success in the attack, it is a big change for ukraine to push them out of the country. in one way, putin can simply dig his heels in and start blasting away at various cities and places and see over time if that does not place pressure on zelenskyy to bring him to an accommodation more in putin's favor. kathleen: the war in kosovo started in february 20 8, 19 88, same time of year as this. it went on for you before nato

decided they could not stand the bloodshed, the ethnic cleansing. is there any chance we will see a replay of this? many people who follow this history and the current situation raise this question constantly. >> yes. look, and i have to say it is very unlikely. and it would be quite unwise. kosovo was one thing. one way or another, russia is still a great power, still a nuclear armed nation, and an escalation where you have nato potentially directly shooting at russian forces and vice versa would be a terrible thing. you have to remember in tech's, all across the cold war all the way up till now nato and the ussr and russia and delicately avoided engaging each other directly because they wanted to avoid an escalation. even though the ussr supported

the move against the u.s., they never went one on one, even though america supported the move argentine against the -- the muhazadin against the ussr. kathleen: others who study military strategy, as i'm sure you do, and diplomatic strategies say it's wrong to completely rule anything out. when nato says they will draw a -- a red line, is a green light for putin. >> instead what you're seeing is data is doing its best and particular president biden, of

course, to thread that fine needle in between stopping putin and not escalating or engaging in a way that might be out of control. you have to remember that russia three weeks ago or so announced attack that everybody, the russians thought would be successful. instead, nato support, nato's weapons and nato's sanctions have really helped grind that will help. now putin finds himself in a pretty terrible position. i think what you are going to continue to see is more weapon support, more stations over time, perhaps of the energy sector and ultimately keeping that war constrained in ukraine but making it intolerable for putin. it might well lasth another year, but i think he'll ultimately hand up having to withdraw. haidi: the sages have not had the effect so far. e.u. a mulling a fifth round of sanchez p rates some people are calling for energy sanctions would that make a difference? >> it depends what you mean by

the impact. the sanctions are never going to stop the war there. russia is an enormous economy. has a lot of resilience but it is h and you are seeing affect in -- effects in financial markets and in the aerospace sector. over time, these things will accumulate and keep opposing -- imposing pain. and that will take a long time. in terms of the energy sector, that will be a target now that europe is exiting winter. your 60% drop in requirements for russian gas, as the weather warms up and now you will start to see the energy sector for europe it, become a target for centuries. that will take time to really change the kremlin's calculus. haidi: victor, always great to have your insights. victor abramowicz. crossing the bloomberg from the boeing coe, a statement saying that he is deeply

saddened by news of the chinese accident that boeing is in contact with the various regulators. their full support has been offered when it comes to technical experts. and the company will do every thing to support customer, the customer as well as the ongoing probe. this is a measures to boeing employees. of course, the investigation into monday's crash of the boeing 737 800 ng plane, flown by china eastern, is underway, focusing on what made the aircraft suddenly drop from the sky. 132 people on board, parts of the records have been found. it did go down in the mountainous area as you can see near the city of-- we do know that all of the boeing 737 jets in china eastern will be grounded beginning on tuesday and that coordinate investigations with the regulators across with boeing and now within china is underway

at the moment and rescue efforts have been urged by president xi jinping following that crush. kathleen: coming up china is promising stronger monetary policies after banks cap lending rates unchanged. but will be enough to soothe this market? this is bloomberg. ♪

kathleen: china's cabinet is pledging stronger monetary support for the economy while cautioning against flooding the market with liquidity. that statement reported by the state broadcaster last night came after chinese banks left the loan primer and change. we have more. more verbal intervention from the authorities. what came out of the state council meeting that the markets need to digest? >> i think after what we --- we heard last week, traders were anxious that we would see some sort of policy action after and with that lpr, it was expected they would not do anything because last week they did not do anything then. then again, i think some were still hoping that we could seen some sort of action on monday. we didn't get that. and therefore we are hearing

these similar promises from the state council meeting last night that was chaired by now the premier. a similar sort of rhetoric here, hearing from state media telling people to stay optimistic about the local stock market due to the policy support. but, from what we heard from this meeting last night, they are calling for the adoption of monetary tools to sustain credit expansion at a steady pace. as you mentioned, they do not want to flood the market with liquidity. that is what you hear, the caveat there. but, that again, markets, you talk about the reaction, it was a bit of a disappoint even the -- even in the u.s. the nasdaq golden dragon felt 4%. a-shares erased gains as much as 2% and ended the day lower. it was more -- the financials, the banks, property developers that were really weighing down on overall sentiment. there were still news of evergrande suspending trading. unable to publish audited

results due their auditor residing. so, there is a lot of factors at play here. of course that china eastern crash certainly has been a worr y, a new worry. as for the next policy action, i think people are still betting on these rrr cuts they could be coming as soon first or second quarter, according to what we heard from economist as well. and, hopefully this is a pause before the easing cycle kicks off again. haidi: developers in the meantime unable to publish results. it seems there is quite a bit of chaos and uncertainty in the sector. yvonne: yeah. this is going to be interesting to we will see how markets react. two of the biggest property developers in china. interesting, they both came out with similar statements as well. it seems like this was more operational, covid-related, they

said that because of some of their employees and certain management have been put in quarantine during this latest wave of covid, it did impact their audit process, though there was some delay in terms of getting some confirmations from third parties as well. they do expect to delay in publishing the results for 2021 for both of them. but, then again, we heard from sunac out with the profit warning before the statement came out, talking about how year profit could decrease by 85%. they are expected a 50% drop from a year ago. they continue to cite challenges they saw the second half of last year in the property sector, which of course, we telegraphed a bit here, but they mentioned it was primarily due to the loss, an investment loss of disposal of stocks for sunac china, and a decrease in sales revenue. some property developers and had a tough time trying to revive those home sales.

and a decline in gross profit margins and expected credit losses as well. haidi: bloomberg markets co-anchor yvonne man. betting directly on china's economic rebound maybe too risky according to jp morgan. direct investments are better including options like commodities, mining and global cyclicals with exposure to chinese economy. jp morgan warning that direct investments are risk to the continuing regulatory uncertainty. kathleen: companies have cut forecast across the board to factor in the slower macro recover and the recent covid resurgence. morgan stanley forecast double digit growth and key data for several industries such as online shopping, gaming and food delivery. so, now we are going to take a lot more, coming up.

plenty more head on daybreak. this is bloomberg. ♪

haidi: ahead of ukraine's biggest oil and gas company says that sanctions against russia should be expanded to prevent putin from accessing oil money. in an exclusive interview the

ceo call frustrations on moscow to be stopped up -- stepped up. >> it's the very sensitive one and they have been discussed at the highest political level among -- ukraine. currently the decision is that as soon as technically possible we will continue sanctioning russian guest. >> can you speak about the capacity of those flows. the flows from russia from ukraine have increased the conflict began. speak about the capacity in how russia is getting paid here. >> yes. we have enough capacity. in fact, russia is using currently only about one third of the available capacity in terms of gas to ukraine. even before the war for different reasons, and currently they are just using the --

capacity. we also understand that as soon as gas continues to flow through ukraine, it is not just a matter payments that russia's make and we are getting this money but it is more about it needs some -- in terms of protection of our -- our interest russia. they will not bomb the infrastructure that they are using to sell their guest -- their gas in europe. >> so, the russians are paying you for that transit. how is that financial arrangement working? is it being paid in rubles, paid in dollars? how does the money get transferred? i'm just asking because i am curious, given the financial situation we see and russia, the sanctions being applied, how does it work in terms of the payments to you? >> no, we are talking about hard

currency, u.s. dollars. unfortunately, the financial sanctions against russia -- contain some very important exemptions from things -- from certain banks. so, that is why major russian companies can still use various accounts of the west to get money. for the export of oil and gas. and, by the way, that is the reason why we are saying it should change. even if europe cannot get rid of its dependence on russian gas and oil overnight, we should not allow putin's regime to get money for the exports of oil and gas. and that is why extra accounts should be used. they should be able to get this money only on this -- account, and until they withdraw their troops from ukraine they cannot get access to this money. haidi: that was the naftogaz

ceo. that is it for daybreak australia. kathleen: we're going to be taking a look at what is going on in the markets after a big jump in treasury bond yields. over -- over into aussie bonds. this is bloomberg. ♪

♪ haidi: i am haidi stroud-watts in sydney. i am kathleen hays in new york. asian stocks set for a steady open as aussie and qe bonds come under pressure. ukraine says any peace deal with russia