>> this is bloomberg daybreak: europe, i'm dani burger in london. strategic divisions may lead to a split over talks with putin. germany's finance ministers has demands for ruble payments are black male. the boj forges ahead with bond buying.

president biden avails a $5.8 trillion budget plan prioritizing defense spending and deficit reduction and hiking taxes on the megarich. 2-year yield's surpassing 2.4%, curbs continue to flatten or invert even further. the two's vs. the ten's. 5's vs. 30's inverted yesterday, the first time since 2006. there is a lot of debate over how much of a recessionary indicator this is. but it points to expectations that near-term rates will be higher than further out. that means down the road that means easing will have to come in sooner. one thing that seems certain though is uncertainty. bank of america says bond market volatility will continue given a wide range of near-term

outcomes. what you're looking at is a measure of one year rate volatility versus that of 10 years. that has now surpassed the covid peek at the front of the chart, and is now mirroring the highest in almost a decade. these markets are not trading to uncertain, a little bit of calm coming. u.s. futures up nearly .1%. nasdaq futures are slightly weaker this morning after that rally that took a lot of gains back for the year. your again, those losses are stemming at least for today at 123.33 after big losses. brent crude is easing after concerns over the china lockdown, at $110 a barrel.

let's get your top stories today, juliette saly joins us with the latest market moves. maria tadeo is looking at the nail response -- made a response to a potential peace deal. -- nato response to a potential peace deal. and enda curran joins us to discuss the $5.8 trillion budget. there is unprecedented boj intervention for a second day to cap the rise in yields. for more, we are joined by juliette saly. the boj acting again, but some of those losses in the yen stemming today. >> let's have a look at this chart that is showing you what we have seen with the 10 year. as you pointed that boj intervention. they say about $2 billion has been snapped up in terms of interest to these bonds and has unveiled -- failed to put icap

on the yields. but really just showing you that they are going to continue to intervene in this market because we know they want that level below 2.5%. they are continuing within easing of monetary policy and you would think they are starting to get more nervous with yields continuing to ratchet higher. let's have a look at the yen impact, you saw that jawboning from governor kuroda which gave strength to the yen. yesterday you saw dollar strength once again. but today you are seeing the yen rise again up by about .4%. despite that, it has been a positive session on the nikkei. and more broadly across the region. we are watching upside from the tech players in hong kong such as meituan and alibaba. the other big reason we are looking at bonds in the region is ahead of the australian federal budget, a lot of sweeteners expected.

this is the government facing an election and doing badly in the polls. you have the yield ahead of that on the australian 10-year at 2.9. dani: bloomberg's juliette saly on the latest moves in asia. to ukraine where differences are emerging among nato allies over whether they should talk with putin. they also appear divided over what weapons to send to ukraine. we are joined by maria tadeo who is in berlin today. tell us more over what is dividing nato. >> this is something we have known for weeks. there is a big debate over should we send defensive weapons. and the other big issue is after thursday when nato members agreed they would apply maximum pressure on vladimir putin

through sanctions and not become belligerent. there is debate on what do we do after. we know that this war will have to end with a peace deal, and that means diplomatic means. the question is do you engage with putin now, or do you wait until later? and this has been exacerbated by remarks from biden in poland where he said for god's sake this man cannot remain in power. for many, this is not the time for diplomacy yet. for other leaders like micron, they believe you need this communications channel that is consistent and continues to be there no matter how ugly the situation gets. if you go back to the words of emmanuel macron where he said i will not use this type of language when it comes to describing putin, i will not call him a butcher. you still have to be on the phone with them, and it would be unrealistic do that in public

and engage with them behind the scenes. when it comes of the town, that is where there are big differences of opinion. dani: you brought up some of the most consequential interviews. yesterday you spoke to the german finance minister over ruble payments for gas. >> this was a broad conversation we had. i was surprised by how direct he was to every question. we talked about defense and energy, and that took me to the question on the ruble's, and are they going to pay rubles for gas which is what putin is asking for. he told me know. -- no.he also described it as blackmail. >> we can't accept any kind of blackmailing. the treaties are based on dollar and euro, and so we will fulfill

the treaties and pay in euro and dollar. we suggest the private sector companies to stick to these currencies. putin has to decide to accept or not to accept. in any case, we are prepared and we will find solutions. it is our long-term objective to be less dependent on russian imports. >> that was christian lindner who spoke to myself in berlin yesterday at a panel. he also said this is our guidance. we are not going to pay in rubles. the g7 is not going to pay in rubles. he also mentioned that i suggest private companies stick to our guidance. you do not pay rubles for

contracts that are stated in dollars, a warning to countries not to play along with this demand. dani: great reporting as always, thanks to our european correspondent maria tadeo. ukraine's minister says his government and among goal -- minimum goal for talks with russian negotiators starting in turkey will be an improvement to the humanitarian situation and he is striving for a ceasefire. for more, we are joined by piotr in warsaw. >> hi, dani. they are meeting for the fourth round of talks happening in istanbul. the previous round brought no progress, and we have seen that although the russian invasion has made little progress. and that probably brings mr. putin and his people to the

negotiating table now. what mr. lavrov said was at minimum what we are expecting is that the humanitarian situation will improve. that is a big issue. we have seen a lot of shelling of the eastern part of ukraine. the city of mariupol has become a symbol of how bad the humanitarian situation is. countries like poland accepted more than 2 million ukrainian refugees since the crisis started. opening humanitarian corridors and improving the humanitarian situation is key. what he also said is that maximum, what we want to achieve is a ceasefire. overnight we heard report from the financial times where they said russia is apparently ready to drop one of their goals which is 'de-nazification'whatever that means which was a stated

goal of their invasion. they are also willing to talk about the cease-fire, and also they are willing to allow ukraine to join the eu. the question obviously is the guarantee is for security. russia is still against ukraine joining nato. that is a no go. and the question is what happens to the land that was captured during the invasion? apparently the talks will have to continue further on. dani: at the same time, we're hearing reports that russian billionaire roman abramovich suffered symptoms of poisoning during talks earlier this month, what do we know so far? >> it's a bit of a mysterious story. we heard about this yesterday. apparently he was in kyiv on 3 a

pril, and he met with ukraine negotiators, and once those ended and he retired to his hotel, he suffered skin peeling, loss of eyesight, headaches and so that's what we heard. there were issues on in the past. russia was accused of attempts to poison people including for example, former ukrainian president gano cove which -- yanukovich. we don't know the details. this is just reports from the wall street journal. what we have heard from that ukrainian negotiator was don't believe the yellow press, so they are trying to play that down. dani: that is our reporter in

warsaw joining us. some breaking lines coming from japan. japan's vice minister of international affairs is talking about speaking with his u.s. counterpart. part of the discussion was a long discussion on fx as a major issue. they discussed this within the context of the macroeconomy. they also spoke about russia as well, saying they are cooperating on the russian response. but the sudden moves in foreign exchange are not desirable. and excessive moves can have a vet impact on the economy. we have seen the yen weakened significantly versus the dollar over the divergence between japan yields and that of the u.s. so far, there has been no intervention to stem some of those declines. but again, we have the ministry

of finance flagging this is a potential issue. president biden's federal budget proposal to congress seeks $5.8 trillion for the 2023 fiscal year. nearly all of the major agencies would receive increases. for more, we are joined by enda curran. who will be impacted by these new tax proposals if they are passed? >> there will be a billionaire's tax, a capital gains tax and a corporate revenues tax. the idea is to raise $2.5 trillion to offset this budget. it increases funding for police and veterans and the like. a big question is whether these measures will get through congress without a major rewrite

and without being overtaken by the economy itself. we have officials telling us that inflation forecasts are well ahead of data. that will have an impact on their assumptions. so we will probably get a new budget forecast sometime in the summer. it is something of a fiscal wishlist. but policy will determine how far those proposals actually go. dani: enda, thank you very much. coming up, as japan's finance ministers signals growing concerns over the yen's recent slide. we will look at the boj's bond intervention later this hour. this is bloomberg. ♪

dani: welcome back to bloomberg

daybreak: europe, i'm dani burger in london. that fed chair is trusting the wrong yield curve to justify rate hikes according to citigroup. it says the central bank is relying on the steep slope of the short-term treasury curve, but ignoring that foreign rights are deeply inverted signaling recession risk. joining us as the chief investment officer at quintet private bank. this debate over which part of the yield curve we should care about, the fed says the short-term part, citi says you are looking at it wrong. what are you seeing as we see various parts of the yield curve inverted? bill: it is an interesting dynamic. yield curves have flattened the last couple of weeks. there are a couple of dynamics which is that the fed is trying to move interest rates in a

super liquid environment, but also trying to moderate inflation expectations. but the economies are not as resilient as the fed's haw kishness on the forward part of the curve is suggesting. so actually the markets are saying you are going to tip the economy into recession if you move this quickly. for the fed, the markets have been a better predictor for the yield curve forecasting recession than the fed has. dani: what do you make of the fed saying if you look at the three-month end 18 month yield curve, still moving higher and steepening, this is what i was alluding to earlier, and you

just did as well with the foreign yield curve which is deeply inverted. does the fed have less runway than it believes it does? bill: the fed has to remain hawkish now because the headline inflation is going to remain high a little bit longer. the second half inflation numbers are going to come down significantly. what the fed is trying to do is anchor expectations to make sure the supply shock isn't going to disrupt consumer behavior. they are going to remain hawkish the next six month, and will probably move interest rates in the next few meetings. but the fed will start moderating their behavior in the backend of the second quarter. we will find that we will not go into recession. the fed will moderate their hawkishness and the yield curve will start re-steepening

probably at the end of next quarter. dani: the argument is the bond market is moderate then -- smarter than the equity market, but if we are not going into recession, does that mean it make sense to have an equity market that has yet to reflect the bond market's belief of a recession? bill: the bond markets believing and a signaling if you look at the forward rate. the inflation expectation rates are still relatively low. it is still only about 230 in terms of yield. given that context, risk assets will still be supportive.

we still need to look at the growth element. growth is going to moderate but still be consistent. we're not going into recession. if you believe that thesis, then you need to be in the esg markets and some part of the credit markets as well. dani: at what point does the bull market get dented by the american consumer who is hit by inflation and less willing to spend? we haven't seen that yet, but surveys have shown the most pessimistic american consumer since 2011? at what point does that start to hit corporate margins? bill: there is a lot of consumer anxiety with covid and now the conflict, so there is anxiety out there but we know that labor

is tight. and we do know that savings are the highest they have been for decades. it is still a very supportive environment. corporate america has got some of the strongest balance sheets and will be the most resilient to earnings headwinds as we go through the next few quarters. dani: bill, great to catch up. bill street, chief investment officer at quintet private bank. germany's finance minister tells us german companies must resist demands forecast payments in rubles. more on that later this hour. ♪

dani: welcome back to bloomberg daybreak: europe.

i'm dani burger in london. let's get to the first word news with juliette saly in singapore. juliet: russian billionaire roman abramovich is said to have suspected --suffered a suspected poisoning. they experienced loss of eyesight and headaches. they received treatment in assemble and have now recovered. it is unclear who was behind the attacker what type of poison might have been used. bloomberg understands london's police are set to issue fines to officials who broke lockdown rules. the first batch of fines are expected to be levied today with some people facing more than one penalty. prime minister boris johnson is unlikely to be touched. there will be a $450 billion

share buyback, the era which analysts called bizarre will require the firm to repurchase defective securities at the initial price. 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. dani: juliette saly in singapore. the front end of the yield curve continues to push higher, now up eight basis points. you are looking at a 2-year yield that is above 2.4%. that also means your 2's, 10's is just around six basis points. already i'm the belly of the curve we have seen some yields flip to invert. the fed has said it is the front end of the curve that matters to them. but citi says if you look at

forward rates, that is deeply negative. we will continue this debate. as japan's finance minister signals growing concerns over the currency slide. all of that dani: this is "bloomg

daybreak: europe." and dani burger in london. strategic divisions, nato is split over talks with president putin. germany's finance has demands for ruble payments are blackmailed. unprecedented intervention, the boj forges ahead with unlimited bond buying to keep yields capped. traders brace for more volatility. president biden unveils a $5.8

trillion budget plan prioritizing defense spending, deficit reduction, and hiking taxes on the megarich. it is yet again a morning where the drama is in the bond market. oil prices are easing. the two year yield is higher by eight basis points, punching through the 2.4% level, currently under 2.11% -- 2.41%. the gains we saw in the yen last time around, it took almost four years to see the same equivalent . this has ramifications globally. the volatility that we are seeing, bank of america, it is the perfect near storm of uncertainty when it comes to policy. can the fed follow through and get a soft landing? you are looking at a measure of uncertainty in rates at the

highest since 2013. let's go back to the story in japan and the yen's plunge paused this morning. for more, we are joined by daniel who has a great column on the yen and japan. does it have kuroda's name written all over it? >> it does. at its core, this is about the bank of japan's continued absolute categorical insistence they will not raise rates. we are used to central bankers tipping themselves a tiny bit of wiggle room. in his remarks this year, kuroda has done none of that, and very categorical. as people talk about the federal reserve being more hawkish, and they see the bank of japan

flatlining, that is a sell for the yen. dani: the boj says there is no way they will move from ultracheap money. do we take the boj literally? >> i think we should take them seriously but not necessarily literally. the reason i say that, we have another six weeks before the next boj policy meeting. a lot can happen in six weeks. i am not predicting an intro meeting move, but kuroda through his history, when he succeeded at the finance ministry, he was a guy who believes in the value of surprises. in 2016 he was interviewed by bloomberg tv in davos. there would be no negative interest rates -- what it do the next week? interest rates went negative.

let's watch what they do as much as what they say. for now they are drawing the line but it does not mean it is set in stone. dani: great stuff as always. i highly recommend you check out his peace. -- his piece. joining us now is jordan rochester, strategist for g10 foreign exchange, nomura international. we heard from one of the finance ministers of international affairs saying they talk at length with the u.s., the fx and weaker yen is a problem but so far we have seen no intervention from japan's government. are they going to get to a point where they have to step in to stem the decline of the yen? jordan: i do not think they will. if they try to strengthen the yen, they will have to sell dollars to do so again fundamental factors that are weakening the yen. the first is oil prices are skyrocketing. energy prices in general.

japan is the world's largest lng importer, now competing with countries from europe wanting that same lng supply. the cost of imports have gone through the roof, and that is weighing in on the trade. the second is the u.s. yield chart. if you plot dollar-yen against the u.s. yield, it tells you everything you need to know. the rise in u.s. yields is weakening the yen. unless the bank of japan is willing to raise rates, which is unlikely, if they were to do that, the yen can strengthen back. the third is the risk on with s&p pushing higher again. those three factors are making it difficult for any yen intervention to be a credible threat to the market. dani: to give you the flip side, technically the yen is oversold basically on every measure, but as you are describing fundamentally, it does have the

feeling of weakening that could come further. how much weaker could the yen get? could we be looking at 1.50 dollar-yen? jordan: dollar-yen was 1.18 and expected to go to 1.20. then yesterday we write about how it will get to 1.25. it gets there in one day. the pace of the move is faster than anyone can predict. if you are talking 1.50, which we do not expect, how could we get to 1.50? the fed does more than two 50 base hikes. we expect 50 in may, 50 in june. that is not fully priced in. what if they step up to 75? those scenarios could push the dollar yen to 1.50. and if oil prices went to 1.50,

that could weaken the yen further. it is underlying a big trend change for oil prices in the u.s. rates that could lead to those sort of moves. dani: i love this game of catch up with the yen, it shows how fast and unexpected these moves have been. what about for portfolio managers who have yen calls and serves as a backup of the worst case scenario should things go awry? are we currently seeing a systematic re-think of that type of insurance in a portfolio? jordan: absolutely. look back to 2020-21 long yen positions were held as that risk off hedge i asset managers sat across the table for many investors. when we talk about the yen, the conversation comes to -- i know u's it as a hedge. -- i no longer use it as a

hedge. those factors have made the yen less appealing to institutional investors for using it is a risk off hedge. they are looking elsewhere to hedge out risk to the portfolio. the beginning of 2021 was the end of the long yen position held by real money investors when the georgia senate results turned blue and the democrats surprisingly wanted joe biden got that thin majority in the senate, we saw a massive selloff of yen long positions real money, and that was the end of that. dani: what have you heard managers say that has taken the place of yen? jordan: fixed income is no longer a hedge as well they are doing a variety of measures. long fixed contracts is more appealing to folks rather than looking at proxies in fx. dani: picking up pennies in

front of a steamroller. if you look at the yen closest to its weakest versus the chinese currency since the summer of 2015, that brings memories of a yuan devaluation. is there a scenario where the weaker yen versus the renminbi could lead us down that path again? what is china's response likely to be? jordan: i do not think a risk of a devaluation like that is on the table. the trade surplus china has amassed, one of the biggest outflows of money from china, and now china cannot go on holiday -- that tourism deficit is no longer there. the trade surplus from the exports of china's produce has made the trade balance into a surplus. it makes it difficult to see a

selloff. we have had a growth slowdown in china. you could say that is growth lower, therefore sell the currency. that does not apply in the case of china. it is best to keep the factories working in the lockdowns. that leads to that story continuing. dani: i have to ask you about the euro. we have seen a weaker swiss franc and gold fall as well. the euro over the last two days has been resilient. money markets are betting that the ecb to some degree will have to follow the fed with tightening policy. is there any reason at this point to bet on a strengthening euro? jordan: it is a mystery. the u.s. rates move has been bigger than the european rates move. if you look at the charts, the euro-dollar should be lower.

the trade surplus of the euro area is no more. the oil and gasoline prices have gone through the roof, and european exports to china have slowed down. the trades in deficit with rates moving against the euro, and a european issue with the conflict in russia and ukraine. why is that euro-dollar not lower, it is a bit of a mystery. the pricing from the ecb, nearly 50 basis points this year. i think we get one in december. i think the ecb will look at the collapse in consumer confidence. that really does point to lower consumption in the euro area ahead. the ecb will be on the dovish side, the fed much less so. for the time being, euro is toward 1.08. when the ecb does get hawkish -- dani: i think we might have lost your sound, but we are out of

time. thank you for mystery solving with us. that was jordan rochester, strategist for g10 foreign exchange, nomura international. let's get over to the first word news. juliette saly is back with us in singapore. juliette: russian billionaire said to have suffered a poisoning after meeting in kyiv. according to sources, they experienced peeling skin, red eyes, loss of eyesight and headaches. he received treatment istanbul. it is unclear who was behind the attacker what poison might have been used. london's metropolitan police will issue to 25 u.k. government officials close to the prime minister who broke lockdown rules the first batch of fines, which will be levied today with some people facing more than one penalty. according to the source, the fines are not likely to include one for boris johnson.

u.k. authorities amid a growing campaign over the firing of 800 workers, the enforcement action follows the detention of another tied to crew training and documentation. transports rick perry called on the debt by company's executive to resign. credit suisse has stopped a business in russia and is cutting exposure, according to an internal memo. credit suisse said it had russian exposure of overnight heard million dollars as of the end of last year. -- $900 million as of the end of last year. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. dani: coming up, no blackmail -- germany's finance minister tells

us german companies must resist commands for gas payments in rubles. more on that, next. this is bloomberg. ♪

>> the presidency of the g7 in germany sent a clear message to vladimir putin saying we will not pay your gas in rubles. it is blackmail? >> it is blackmail. it is in dollar and euro. we fulfilled the treaties, but we will not change them to reduce the burden on putin. he wants to circumvent the sanctions, but we will not allow this. all options are on the table.

he can decide what he wants, but we will be fulfilling the treaties as they are, and there will be no change. otherwise we would finance his war chest again, and we will not. >> what if he says, good luck? >> then we will be finding a solution. >> you will not play into the blackmail? >> no. >> that is a different germany from before. the audience remembers the nord stream 2, what i get from you is a different germany. >> if i told you a bit of hawkishness is invented in germany. >> do you think the russians get it? they are dealing with different people? >> i think so. look at the numbers. they have to realize it is a

unified european union g7. some time ago, the idea of nato and the debates we had on nato -- that has changed completely. putin will not win in ukraine. what he has achieved is that we in the liberal democracies of the world, western democracies, we are standing together, and this will last. dani: the german finance minister christian lindner, speaking to maria tadeo. a really fantastic interview. answering your questions, saying we will not give into the blackmail. you had a wide-ranging conversation which unfortunately we cannot play all of. what else did he tell you?

maria: i was expecting my 15 minutes in full, but i get that we are constrained by time. to give you a run through of what he said -- i was frankly surprised by the tone. he was very direct, and he told me this is blackmail, we will not accept it. i said this sounds like a different germany. many remember the big deals between german and russian companies, angela merkel going to moscow to sign off on nord stream 2. this germany says we will not agree to the ruble payment, it is blackmail, we will not accept it. but the key question what if vladimir putin decides not to send any gas, and he will cut the flows and use that as a geopolitical weapon -- and he told me, we will find another solution. it is not clear what the solution is.

these are huge numbers in terms of the relationship between russia and germany when it comes to the gas pipelines. it was striking to see he was not conciliatory in any way, and he was clear that germany as a precedent as the rotating g7 will not agree to this. if they pay in rubles, they will allow him to pay for this terrible war in ukraine. and they would be in breach of contract, so they will not do it. dani: other sea change from germany is the school spending, is germany changing its tune from its traditionally conservative approach? maria: i would say yes and no. he said when it comes to defense spending, the country had a major wake-up call. spending on your own military and defense capabilities is spending on freedom. that is the price you pay to

have a democracy that operates in freedom. when it comes to fiscal spending, i put it to him clearly, will we see a major stimulus package to revive the economy after the war, and he told me no. we will not see another huge stimulus package. we should not get the central bank involved. he said we need to well spend the money from the pandemic. there was a huge plan. he said the focus should be to use that money well, and not put more money around this because it is difficult to check what is going on. dani: thank you for that excellent interview, maria tadeo. coming up, barclays is about to take a $450 million hit on a bazaar bond that will delay a share buyback. more on that story, next. this is bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe." i'm dani burger in london. park leases expected to take a $400 hit million after issuing $15 billion of more structured notes in exchange traded notes than registered for sale. we are joined by tom metcalf. this is basic for banks, usually they apply for a blanket allowance to issue more shares and structured notes. how did this happen? tom: it does seem like a clerical error, and it is a simple thing they need to do. they have a registration that they should go over. they did, massively, 15 billion. it will be costly for them. it raises questions, if this

happen, what else could? dani: what impact could have on barclays results? tom: they said we will take that hit and we have hedged muscle it should not go above that. it will be on the financial side. citigroup has said this could impact the q1 results elsewhere, and you have seen the buyback delay. they are trying to work through this. they will not start the buyback until the second quarter. dani: we also had jeffrey's earnings release yesterday. anything stand up to you? tom: they beat estimates, shares were up after trading. the thing for me was how tough it was, the equities, ipo's are all down as expected 30-45%. it will not be a fun comparative to the strong start to 2021. dani: thank you so much, tom

metcalf, keeping us up-to-date on barclays and jeffrey's results. as we close out the hour, we look at the two year yield, some of the moves have eased a bit. it was up six basis points. we are seeing market moves easing this morning. some of the bounce back in the yen. losses and oil has eased a bit. here is where you are on the two year yield. the moves over the past few months to push 2.4%. the last time we saw this level of moves, it took six months. that gives you an idea of how steep this is. bill street does not expect a recession despite what they yield curve is telling us. currently it is sitting around 6.9 basis points. bill street says the right

message is being sent that we will not see a recession. equity futures pushing higher this morning. amazon erasing losses for the year. up next is "numbered markets: europe." anna and mark will walk you through that. this is bloomberg. ♪ at xfinity, we live and work

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anna: good morning. welcome to "bloomberg markets: europe." i am anna edwards and mark cudmore joins us. cash trade is less than an hour away. ukraine holds talks with russian negotiators in turkey today. the goal for kyiv's immediate improvement in the humanitarian situation.