manus: this is bloomberg daybreak: europe, i met manus cranny in new york with francine lacqua in london. joe biden tries to temper comments calling for the removal of vladimir putin, saying the u.s. is into seeking regime change in moscow. ukrainian and russian negotiating teams are set to resume talks this week. china's virus resurgence raises

concern for japan's biggest crude importer. plus, the boj steps in to cap the rise. the gap in the five and the 30 adverts for the first time since 2006. francine, good morning. it is 1 a.m. in the morning here and we are starting with the intervention. this morning, your friend mr. kuroda came right in and goes for the jdb and comes in and buys aplenty, but it has not us waged the fx traders. francine: it is probably the steepest global bond rout we have seen in the modern era. governor kuroda try to step in to give support, i don't know how short-lived that will be. but he stepped in to cap that 10-year yield.

for the moment, they don't want to touch policy. i don't know how long that can last. manus: back in 1994, i actually remember when the bond market unfurled, and the biggest issue becomes you have written a lot of strategies around margin calls, and you have got to meet thousand i think that is the next issue. but they are talking about a softer hard landing, or as it has been said, a semi-hard landing. what is that in terms of growth and recession risk? the growth recession. larry loves a recession, and it's skating on ice according to diane swonk, the issue is how to temper inflation without

throwing the proverbial baby out with the bathwater? manus: francine: we could talk about the bond rout until the cows come home. but if we look at bitcoin, we don't 100% understand what purpose it feels, is it inflation protected. it's incredible to see the catalysts that we have seen. it has broken past $45,000, it could be a catalyst to further gains. the rally had erased its losses for the year. it's been a volatile. but now it seems we could see momentum. the coin has been stuck in a tight path as the fed and other federal banks are reducing stimulus and other measures. we continue to ask what does it try, is it an asset class different to everything else, or is it an inflation hedge? manus: mike no regrets says it will trade at 45-50 and then all

the way to 100. you have got oil down by 3% as of shanghai goes into a because i locked down, what does that -- because i lockdown, what does that due to demand? these pressures on the crude markets taking us lower. the biggest one-year move in to your paper in more than a decade. 35 basis points, and that momentum continues the explosion in the bond market. it could change the narrative for the fed. i would say that williams, the new york fed, talking about 50 basis points, your story, it inverts the yield curve for the first time since 2006. and the vfx bond traders are pushing the limits, -- they will not be moved, they want to be long the yankee, the greenback. francine: it is so much more

elegant. when it looks at, if you look at futures, and this is an interesting dynamic, because we have seen in the last week where features in the u.s. were actually down as we started trading in europe. and then we saw that reversal. the euro stoxx 600 gaining .2%, again, this will have everything to do with the bond rout. the biggest in modern history, manus. we need to look at the inverted yield curve. if the equities catch up with the idea that it's not going to end well for growth, then we could see further pressure especially on stocks that have huge margins that could become smaller if growth is heard significantly. manus: a lot to debate as we go through the markets this monday morning. let's get the first word from our correspondent in washington, and murray still whole on the ground -- and murray still on

the ground in poland. and this new lockdown, juliette saly is on the ground with the latest. francine: biden has yet to clarify his call for putin to be removed from power. it comes as european allies raise concern and critics one this is inflaming tensions. >> we will have a greater future rooted in democracy, hope and light. of decency and freedom of possibilities. for god sake, this man cannot remain in power. francine: for more, we are joined by our russian correspondent annmarie hordern. if you contextualize what he meant, is this policy? >> it was unscripted, and after you saw journalists scrambling to ask the white house was this scripted? did the president mean to say this, is he signaling a u.s.

policy averaging change? the u.s. -- the white house walked it back immediately after. we heard from the secretary of state, take a listen. >> as you have heard us say repeatedly, we do not have a strategy of regime change in russia or anywhere else. francine: and yesterday when the president was departing from a church, he was asked about this. he was asked are you looking for regime change in russia, and he said, no. but it was clear, he did say this man cannot remain in power. it just seems that is something reflective of the president personally, but not of u.s. policy. the president at one point called president putin a war criminal, and the u.s. said that was not exactly the policy. and days later that did change. so basically we will see how

this plays out. manus: we crossed paths reporting everything over the weekend. many americans say the president is not handling this war very well. biden spoke from a nato country on the border of war. there was a moment of great unity at a certain juncture in this speech, what was that message on nato? >> it was a message he said to the people of poland, but also when he delivered personally to president duda when they had their bilateral meeting. it was wh he said thaten the united states considers the nato articles sacred, article five. he talked about the fact that president putin wanted a disunited nato, what he got was a stronger one. >> don't even think about moving

on one single inch of nato territory. we have a sacred obligation. [applause] a sacred obligation under article 52 defend each and every inch of native territory, with the full force of our collective power. now he has a stronger presence, a larger presence with over 100,000 american troops here along with all the other members of nato. >> while the president was in poland, he also met with u.s. forces who are based here in may nato country, very close to the ukrainian border. you should note that it is interesting that paul 75% of americans not having confidence in terms of the president's handling of the crisis. you ask americans how they feel about certain individuals or in editions -- institutions, zelenskyy tops that. just under that is nato.

so it does seem like americans like the idea of a stronger nato alliance. manus: these policy very in terms of how you phrase the question, when you ask, etc. annmarie hordern our washington correspondent on the ground in warsaw. china is grappling with that covid outbreak across the country, the worst since the pandemic began. to curb the spread in shanghai, a city of 25 million, they have lockdown in two phases four masked testing of residence. our reporter is fair, one of the latest development on the shutdown? >> the announcement came last night, and there were videos of people getting into fist fights. this latest lockdown is in two phases. starting from today, where the

firms are, and from wednesday through friday, april 5, it will be in a lot of residential and commercial. i think a lot of people are just stuck. we have had these lockdowns already in the last couple weeks. now it seems to be ramping up. so that is a concern for a lot of people. they are wondering what is the next phase? shanghai contributes 4% of gdp. so it is a big impact on chinese growth going forward. francine: allen wan with all the insights from shanghai. the global bond rout continues, forcing the boj to step in.

let's get more from juliette saly. good morning, how is it shaping up? juliette: it is worth noting, we are seeing significant downside moves in chinese equity markets. the boj with this intervention, it is the timing more than the actual move that is significant. it was late last week when we started seeing these big moves in the yield, the boj have stepped in today. you saw about 10 reached the upper limit. the boj assaying obits at these levels, but it is leading to concerns as well. bloomberg intelligent saying perhaps the boj isn't expecting a continued slide two levels. that is good in terms of exporters, but it is not good for the consumer in japan. we have seen this rock continue across asia.

you've got that yield at korea's 10-year at its highest since 2014. and the australian three year at its highest since december 2014. and the fives and the 30's, inverted for the first time since 2006. recession concerns are looming. when you look at the overall aggregate bond index, it is down by some 7% this year, excuse me, more than 1999 when the index fell by 5%. manus: they are explosive, and this will be the week of margin calls. juliette saly with the latest in singapore. today, president biden will announce his budget proposal for the 2023 fiscal year. chancellor sunak will appear.

they will discuss their annual budget weeks before the prime minister must call a federal election. we have the latest cpi figures, as well as the latest consumer confidence figures later in the week. manus: francine: wednesday we will have cpi from germany, and russian on appointment levels. then opec will meet to discuss production targets, and we will have the pmi data from an a. friday, yuan and chinese leaders host a virtual summit where russia's invasion is expected to dominate the agenda. and we will have the latest cpi data for the euro zone. coming up, human edge investment technology founder mads pedersen on the bond rout. that interview is next. this is bloomberg. ♪

manus: welcome back to daybreak arab, -- europe. the markets are kicking off in risk off mode. the steepest global bond rout in the modern era. treasuries are sliding across the curve. a portion is now inverted. the bank of japan has stepped in to quell the rise in yields. mads patterson is the chief investment officer and founder of human edge investment, joining us this morning. mads, this is going to be the call of your career. bank of america, no pressure, saying this is the third greatest bond market route bear market underway. when you see the price momentum, does that square up for you? mads: we have now reached levels which are pretty clearly above

where we dipped last time. in the short-term, it is a technical movement. in the long-term, it has to reconnect with the economy. we have moved all of our long-duration bonds the middle of last week and earlier than that as well. and we're seeing much better opportunities in high-yield. so that's what we're doing. but we don't think yields will continue that much lower from here. francine: where you see the signs that the current trend is bottoming out? mads: i don't see signs out of the trend as such, but when i compared to history, i can see that there is more leverage in the u.s. economy than ever. and now yields have spiked as manus mentioned several times, and we can see that this will break on the economy because we can see that corporate yields are high and attractive, and mortgage bonds are showing very

high yields which are going to slow down the housing market a bit. and we can see a fed that is now fighting to regain its credibility. so it is in that pattern that we see that this is about to be enough. we still think that high-yield bonds offer better value than government bonds. so long-duration is not for us. manus: you think 2.5 is the top of it. what kind of a landing are we going to get? there is a great debate now. you're going to have a growth recession from deutsche bank, a semi-hard landing from grant thornton, larry summers is the perennial bear with a recession in 24 months. what kind of lending are you going to achieve with six more hikes, and maybe a couple of 50's thrown in for good measure? mads: the key thing which happened is that that has actually started managing expectations and inflation. we are probably going to be at a

soft landing. it is coming from a high-altitude rate compared to the many flights we have had this week, we are coming to the landing strip with a high speed. the pilot has refocused and the crew, and that that is now refocusing on their actual mandate. that is the good news. the bad news is inflation is out of control, but the fed says inflation will come down, and therefore we will get a landing. the eu economy is strong at the moment and cannot continue at this rate. that's why it is going to be a soft landing. francine: how do you play divergence? i know the allure of chinese bonds is not effective as of last week, but are we going to see a repricing, do you expect a 50 basis points move, and how you play it? mads: i think we are going to

see a 50 basis point move, because the fed is behind the curve and the movements. now the market is pricing in that 50, we are going to get a 50. that is the most likely thing. we're probably going to get even 2 of them. what we have done is reestablished our equity weights and sold our bonds, most of it. they are following their minded -- mandate, and we are now always high-yield, and we have a 30% weight in short duration high-yield. this short duration high-yield is more than two and a half years duration which is

attractive at this moment. francine: something you mentioned before. mads patterson, chief investment officer and founder at human edge investment technology stays with us. shanghai is in lockdown is officials trying to bring the country's worst outbreak under control. we look at the implications for the global economy next. this is bloomberg. ♪

francine: welcome back to "bloomberg daybreak: europe", i'm francine lacqua in london. manus cranny in new york. china locking down. as the country struggles to contain its worst outbreak since the pandemic began, sparking fears for the global economy. still with us is the chief investment officer and founder at human edge investment technology.

i know manus has a couple of questions on the bank of japan. until china gets through this covid zero policy, what does it mean for the global economy? mads: it's going to be a little bit tougher. that is why we talk about the landings. i think this is a step in the right direction of easing constraints. it's not a fall lockdown, it is a short time. it is half of the city. so it ties in with the main statement we saw last month when they said the top priority of the chinese communist party is growth. and we need to consider economic growth. so it fits in with that emergency statement that we saw in the middle of the month. and i think it is a move toward a more balanced covid policy. manus: this shocking headline on

the oil market, this bank of japan line, he has come into this market twice. in the bond market still testing his metal. how important is it that the boj intervenes? mads: it matters for this statement, and it matters for the credibility of the central banks. i think it is much more important what happens to the u.s. 10 year, what happens to the chinese policy, and that china keeps a cool and calm conversation with europe about how to stabilize the situation so that china doesn't embarrass itself too much. francine: does the boj

conduct unlimited bond buying and is not -- does not support? mads: when a central bank does unlimited bond buying, it works. otherwise it is not unlimited. that would be a change in policy if it didn't work. and i think they can manage it. i also don't think the world is over if the japanese have to. it is important for their policy and credibility, but the world is a better place when interest rates are positive. when it moves in the right direction. manus: mads, thanks you are right, who to pick your fight with, the fed or the fx traders.

now listen, mads pedersen our guest from human edge. president biden hails be strengthening of nato. but insists he if you're a small business, there are lots of choices when it comes to your internet and technology needs. but when you choose comcast business internet, you choose the largest, fastest reliable network. you choose advanced security for total peace of mind. and you choose fiber solutions with speeds up to 10 gigs to the most small businesses. that's virtually everywhere we serve. the choice is clear: make your business future ready with the network from the most innovative company. comcast business. powering possibilities™.

francine: this is "bloomberg daybreak: europe." these are the stories that set your agenda. joe biden tries to temper comments calling for the removal of vladimir putin, saying the u.s. is not seeking regime change in moscow. ukrainian and russian negotiating teams are set to resume talks this week. china's worsening virus resurgence with questions about

demand. plus, though global bond rout continues, the boj set to cap yields for the first time since 2006. i know you're all over jgb moves. we think it is really symptomatically of what other central banks could be needing to do to fight this, it's the biggest bond rout in the modern era and at the moment no signs of when it bottoms out. manus: none. this will make it even more difficult for here in the united aides of america -- united states of america. as matt said, who is going to pick a fight with the central bank? it is unlimited, francine. unlimited bond buying. they are not going to reach that point to 5%, that is the sentiment at the moment, and the bank of japan will stand with the floodgates open. francine: it something a lot of

people are looking for, but who picks fights with central banks? we've seen in the past george soros and people like that. maybe you don't pick a fight with the fed, but maybe you do with the boj. you have or might it be of the margin calls all those years ago, let's see if people cannot cover themselves, we could be in for a lot of volatility in the next few days. manus: that is true and worth reflecting. it literally was the biggest margin call of my life. people could not, would not pay their margin call and i was left with no choice than to liquidate across other assets. anyway, i'm not going back to 1994, you were a lot younger than i was then. shanghai in a lockdown. there are two offers on the oil market and to your paper continues to explode higher as

your interview with williams from the new york fed i think cents -- sets a new benchmark to set a 50 basis point hike sooner rather than later. when the new york fed speaks, it speaks with absolute confidence. dollar-yen not bothered by the bank of japan at the moment in the fx market. francine: they don't seem to be, dalian at 123.11. -- dollar-yen at 123.11. sovereign bonds, u.s. equity futures falling today. it depends on how and where you look at. u.s. futures are down 3/10 of 8%. -- 3/10 of a percent. if you look at the key part of the treasury yield curve inverting, you're not seeing this in european stocks be you look at futures, and if you see the difference between stocks

and bonds, at some point you will have a readjustment. manus: bank of america saying it's the third greatest bond bareback or -- bear market of all time apparently on the way. let's talk about politics, the president trying to call her -- clarify his calls for president putin to be removed from power, saying he wasn't looking for regime change. this comes as european allies raise concerns and codex have warned that he was inflaming tensions -- and critics have warned that he was inflaming tensions with russia further. >> we will have a brighter future rooted in democracy and principal, with decency and dignity and freedom of possibilities. for god sakes, this man cannot remain in power. manus: let's get to and reordering -- annemarie. for many, the main take away from the speech was he went off script, he was very passionate,

but can you contextualize. you were in the room, can you contextualize this for us today? annmarie: he really had a speech that was building to this moment almost, he drew parallels to what happened in the cold war and he talked about democracy versus autocracy. earlier in the day he had called putin a butcher when he was meeting refugees. a reporter had asked. he made this comment. everyone in attendance at the royal castle, it was a very grand speech, especially room it was in in this castle courtyard, that since then we've had a series of lockbox -- walk backs from the white house. here is what the secretary of state had to say from jerusalem. >> we do not have a strategy of regime change in russia or

anywhere else for that matter. annmarie: adding to the walk back, the president himself said yesterday no if he was asking for regime change, but it was clear how he ended the speech is saying this man cannot remain in power, talking about vladimir putin. francine: energy was another focus. did the u.s. give europe the reassurances they need to re-accelerate their focus away from russian gas and oil? annmarie: it was definitely a focus of the entire trip and that started in russell's that friday morning. the president met with ursula vander line and they announced a plan that the u.s. can send more liquefied natural gas to europe. for weeks the u.s. has been trying to shore up supplies around the world, not just from united states but other producers, european officials talking to other producers as well. we know europe doesn't have the infrastructure yet to import all of this.

while the u.s. wants to send more lng, the fact is it europe still remains -- but the president in that same speech made a point to mention this. >> europe must and its dependence on -- end its dependence on russian fossil fuels, and we in the united states will help. annmarie: pretty clear how the u.s. feels, europe must end dependence on russian oil and gas, a 180 from when chancellor merkel was leading and they were talking more -- nord stream 2. that pipeline has been shelved. the u.s. is saying it needs to end when it comes to the influx of russian natural gas and crude oil to europe. francine: thank you. our correspondent in warsaw, poland. let's get to the first word news with juliette saly in singapore. juliette: the second black box

from the crashed china eastern jet has been found after days of searching. the flight data recorder was recovered among more than 33,000 pieces of wreckage, and officials said parts of the device are damaged. the mysterious nosedive of the boeing jet last monday killed all 132 people on board. the u.s. says the revival of nuclear deal with iran might not be imminent after recent requests from tehran, including that washington remove the islamic revolutionary guard corps from its list of terrorist corporate -- corporations. talks between key parties in vienna have dragged on for a year. a consortium has agreed to buy a 60% stake in national grid's gas unit. it is valued at more than $12.5 billion. national grid announced plans to sell the gas division last year.

it includes a seven kilometer pipeline network. after winning the oscar for best actor, will smith slept comedian chris rock live on television in an incident that will go down in the history of the academy award. rock had joked that smith's wife , who has alopecia, should be in the next g.i. jane movie. 'code' won best picture. 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. this is bloomberg. manus: thank you, juliette saly in singapore. coming up, chinese stocks and oil both the slide as virus woes

worsen. they are putting 25 million citizens into staggered lockdowns. more on the impact on markets. this is bloomberg. ♪

manus: it is "daybreak: europe." let's get back to the energy story. the u.s. and eu announcing a supply deal, efforts to help get europe to move energy policy away from russia. good day to you. a promise by americans to deliver 15 billion cubic feet, cubic centimeters in 2022 was committed.

europe needs a lot more than that. what caught our eye is the eu member states have a goal to ensure that by 2030, there will be a demand for 50 billion, so the americans get a short-term fix for europe, but a long-term mitt meant from europe -- commitment buy gas. >> i don't think it is necessarily to buy american gas. it is to buy the 15 billion cupid -- cubic centimeters. to but the numbers in perspective, last year europe got 40 through russian pipelines and also liquefied natural gas, and the americans say you get another 15 now and that sounds like not a big deal, but it is a big deal. in the short-term, american cannot ratchet exports up by so

much so what they will have to do is it will have to be gas that is contracted already to asia redirected for europe this year. that can only be done as part of a grand political bargain. long-term, you have to look at the german promise to wean off russian gas by 2024. that is a big deal too. francine: if you look at the short-term, medium-term and longer-term, longer-term there seem to be assurances on what the u.s. can do with renewables and natural gas. short-term, it is the summer, we will use less gas, we can manage with the release of stockpiles and what the u.s. is promising. what happens in winter 2022? stéphane: that is the bottleneck -- christof: that is the bottleneck. the inventory has to be

refilled. for that they need russian gas. it's not possible in any other way. from the russian perspective it is interesting because the russian gas that goes into europe comes from siberia. there is no pipeline from siberia onto asia, so what they cannot sell to europe gets stranded and they lose the revenue. on those grounds you could say it is not economically rational for russia to scale down and cut off europe for exports. they need the money. these days, you don't know how valuable russian energy is, so there is a small possibility that russia will retaliate and exit the relationship faster than the europeans intended. manus: we are trying to understand the risks, where this of all snacks. europe weaning itself off

russia. you say you, and obviously the likelihood of germany's announcement they would make do without russian gas, they still don't have nuclear -- and we talked about this 10 days ago at home in abu dhabi -- what is the prospect of germany saying they could do without russian gas? christof: look at it this way, 40% roughly of the european union gases from russia, and germany it is more than 50%. there is a history and this deal is almost as significant if germany said we need to spend 100 billion euros on our army and break budget promises. for decades, long before russia was an independent country come talking about the cold war soviet union, the gas was always reliably provided and everybody in germany counted on it. for decades, germany would in turn provide the pipelines.

it was a perfect stable arrangement in energy. the germans have said we are going to throw this away just like we're going to throw away the idea that we don't need an army because will be no more war in europe. think it was a shared understanding. russia will listen to germany may can this announcement, and i am german and they are slightly binary people, so this is likely to be executed. that will change energy markets for good. they will have to employ -- they can do it by having gas that is floating in it will be expensive for everyone. the bottleneck has to pass and it can be done, and by 2020 24 -- 2024, it will be a trickle. then there will be a significant change in energy. francine: i cannot comment on the binary, maybe manus can. would angela merkel have dealt

with this differently? christof: that's a good question. she backed out of nuclear power. talking about binary. one of the things germans are a pain to emphasize is we are leaving natural gas but we will not go back to nuclear. so now they are out of nuclear come out of coal, out of oil, and out of russian natural gas. angela merkel probably would not have acted as decisively. one of the surprising things, showing how deep this is, that all of these changes, the adjustment of the german army and the ancient energy partnership, happened under the leadership of a coalition of social democrats and greens were the leading parties. social are not known for liking to cut ties with russia. it is a sign of how deep this

war has affected everything. francine: thank you so much. manus: let's check in on some of these yields, they are exploding. there are some key things to keep an eye on. the two year, the short end of the curve, max peterson says he wants it exposed by another 10 basis points this morning. 239 is where we are. the three month 10 year spread is now the widest since 2017. this is the propulsion of the short end of the curve. there is your spread. the other ones have inverted, haven't they, on the five sevens and slightly longer and. francine: the latest bloomberg headline, a treasury three month 10 year spread it reaches the widest since 2017, as you said. china looking down the eastern half of shanghai for four days

of mass covid testing, as the country battles to bring its biggest outbreak since the pandemic began under control. we will talk about that and tesla locking down some of its factory over there. for more, we are joined by our reporters. allen, how are they reacting? allen: incredible frustration. last night i tried to buy some food, and i had friends sending me pictures of fistfights in the supermarket and hoarding. there's a lot of frustration. no protests, this is china of course. we've had targeted lockdowns the last few weeks. i have been locked down for a week already. basically i was allowed to go

outside my compound, go to the gate to pick up my food deliveries and that was pretty much it, now we are not even allowed to leave our apartments. so there is real frustration because a lot of people thought we were approaching a crossroads and it looks like this is ramping up because of so many new cases. the big question is what does it mean for the rest of the country? shanghai is 70% of the gdp, the second richest city in china. manus: it is worrying in terms of the impact, factories close down and etc. stephen, from a markets perspective what are we watching? stephen: from the oil side, we are watching closely the refinery rate, whether they are

buying crude and transforming it into gasoline, into diesel and fuel to be consumed, and right now we are seeing a run rates fall drastically. the so pot -- so-called teapot refiners have cut the rate by 50% of capacity. that is basically the lowest level since january or february of 2020 when the code pandemic dashed demand. it is not quite as low as 2020 but it is getting there. that's why you are seeing brent down as much as 3%. there is the fear of more lockdowns. shanghai is a huge city. if other cities do this and their other restrictions and people can't travel, it destroys demand for gasoline. china is a major importer, and suddenly this of bullish market where we are at $120 for brent, maybe it should not be this high and people are selling a little bit and getting worried.

manus: thank you very much. we go into an opec, albeit a virtual meeting, tonight. i wonder if it will be no news conference again. thank, guys. -- thank you very much, guys. coming up. you saw it, will smith s macks chris rock after he made a joke about will smith's wife at the oscars. more on that story and some of the owners -- the winners. this is bloomberg. ♪

manus: welcome back. big moves on the markets, australian and u.s. rates spiking higher, a propulsion in

the bond markets we haven't seen in a long time. the direct implication is the currency, the bank of japan. look at this, dollars swiss and the dollar ratcheting higher by 4/10 of 1%. a big night not just for markets and rates but the oscars. francine: "coda" won best picture, but the moment that might define the show was unscripted when actor will smith smacked chris rock moments before winning best actor. it was a shocking moment and that is all anyone is talking about. >> the producer said it would not be boring and it wasn't boring. chris rock was introducing the best documentary and made a joke about data pain -- jada pinkett, who has alopecia, hair loss will smith walked up and smacked him.

it was must-see tv. manus: very emotional moment. we will catch it on quick take a little later on. good to see you. bloomberg markets is next from london and singapore. ♪

anna: good morning. welcome to "bloomberg markets europe." the cash trade is less than an hour away. president biden walks back comments calling for vladimir putin's removal. ukraine and russia are set to resume talks this week. historic bond rout. a key