president vladimir putin insists that the crucial fuel be paid for in rubles. the largest economy relies on russia for more than half of its natural gas. the european union is trying to wean itself off russian gas and a response to the war in ukraine by cutting dependency by two thirds. china is using the national security law to undermine fundamental rights and a former

british colony. and that it would legitimize oppression. british judges have sat on the court since hong kong was returned to china in 1997. the u.s. trade chief says it's time. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg.

>> it is 1:00 p.m. in new york. welcome to bloomberg markets. u.s. stocks are lower so far in the session. oil is rebounding as is gold. corn is out, soy is in. new data is out on mortgage rates. they are now at the highest level since 2018. refinancing is down. our guest will stop by to talk about how the latest move in rates could reshape housing market. let's check in on the markets. the s&p 500 is holding despite the fact that we are stepping a

four-day win streak. it is a relatively weak date with only some of the energy, utilities, and health care names moving to the upside. apple is coming off of phenomenal 11 day run. it is been oscillating between gains and losses for a good portion of the day. four days of decline in the treasury space. some people are seeking out a little bit of safety. let's continue our discussion about the markets and elsewhere. our guest is a chief investment officer at state street global advisors. i want to start off with the

longer-term outlooks the folks have for this market which seem to be predicated on the longer-term outlook folks have for the u.s. economy and the global economy. how much confidence do you have right now in the growth story? >> as the market has climbed higher, we are much more focused on what being defensive really means in the portfolio. also, how macro economic conditions impact stock selection. those are definitely the two things we are focused on. it has become increasingly important on what it means to be defensive. romaine: let's talk about what that means. it seems like the playbook a couple of years ago was to gravitate to the apples and netflix is and apple bets of the world.

to the certain extent, they had the margin expansion to back it up. is that still the same playbook now? >> when you look at major market drawdowns in history, there are some things that are pretty reliable in terms of their ability to push the market drawdowns. others are consistently unreliable and some things are in the middle. the usual suspects the tend to be good for cushioning in a market drawdowns like chilis, health care, telecom, staples, they tend to provide the cushion when markets draw down. on the flipside, industrials, consumer discretionary and tech are reliably deep underperformers and that is something we have seen this year. where there is ambiguity relates to macroeconomic conditions. when it comes to being defensive, you don't want to

only focus on the things that are reliably defensive in nature, you need to consider what other macroeconomic risks are present in those segments and have balancing exposures. romaine: is it easier to diversify now than two with years ago? >> there are many more opportunities to find reasonably valued companies. some of the macro economic correlations the relationships between interest rates and some of the characteristics we like have been changing. value for example is not quite as tied to the cycle.

. -- romaine: when you see what is been communicated by jerome powell and other voting members of the fomc, do you have enough confidence that any additional policy mistakes, that what's being priced into the market might be avoided? >> i'm sorry, i didn't quite hear your question. romaine: i'm asking about that hard landing soft landing debate the folks are having when it comes to u.s. fed policy. >> indeed, we want to make sure that rather than trying to position ourselves for either being too hawkish or too dovish, that we contain those exposures. that means we need to model how interest rates, inflation, commodity prices, oil prices and so forth interact with other fundamental bottom-up characteristics in order to neutralize them.

at large, value stocks and low risk stocks tend to counteract each other when it comes to the macro exposure. we are very conscious of controlling that exposure in our portfolio so as to not be exposed one way or the other to the decisions. romaine: how much are you factoring in volatility? >> quite heavily. we are forecasting volatility in all levels. the impact of that measurement is more and more important. the component of volatility in the equity market coming from macro risk has only gone up for the last decade and over the last two years, it has been as high as we have seen in a long time. controlling the exposures is

very important. romaine: we always appreciate carrying up -- catching up with you. we're going to talk more about what has been happening in the commodity space particularly when it comes to fertilizer prices. they have been on the rise, which is causing some farmers to recalibrate the amount of each crop they put into the ground this season. we will explain coming up in just a bit. this is bloomberg. ♪

romaine: the persistence of inflation and criticism that the fed is behind the curve leaves some policymakers pivoting behind a plan for even more rate hikes. our next guest talks about the possibility of going 50 basis points at the next meeting. >> i'm open to it. we will make this decision will make it to the meeting in may. how does the economy look in terms of its ability to take rate increases and how high is inflation persisting? we will make our call and may. >> do you agree with economists

that say you will not be able to get inflation under control until you bring the rate above neutral? >> i think two things are going to happen. some of these pressures whether it be geopolitical or pandemic will presumably fade in time. the second thing is our rate increases and how it's impacting loan markets will have an impact on expectations and demand and inflation. we will see how those go. as get closer to neutral, we will make that call. romaine: an exclusive conversation with richmond fed president. let's take a look at bloomberg business flash. the world's largest aircraft leasing firm is taking billions in insurance claims over jets

and engines stuck inside russia. they have not been recovered since the invasion and the company is seeking $3.5 billion. there is likely to be a battle with insurers. bloomberg has learned that volkswagen joined banks for an ipo. it is expected to be one of europe's biggest listing this year. ubs is going to buy back stock over the next two years. it's part of a plan to boost shareholder returns. many european banks are increasing buybacks and their -- that's your business flash update. let's talk about fertilizer.

the global fertilizer market has seen a surge in prices due to the war in ukraine. farmers are forced to take a new approach when it comes to what they are putting into the ground. let's bring in our reporter to talk about this. you can plant corn, you can plant soy. why would you choose soy over corn? >> it all comes down to money. nitrogen, which corn takes tons of nitrogen to plant, soy takes nothing. you don't have to put knoche -- nitrogen on soybeans. the fact that nitrogen fertilizer is up so much, it was already up last year amid gas shortages then the war in ukraine amped it up even more. the fertilizer costs farmers are facing has caused some of them

to pull back on corn and plant more soybeans. romaine: nitrogen, phosphates, testing, potash, a lot of the things that farmers rely on to fertilize their fields. they are thinking about something less fertilizer intensive. when we look at this, does this turn into be a one-off where farmers switch for one season then go back to corn in a year or two or is this going to be a longer-term shift? >> on the one hand, yes probably a one-off. american farmers love to plant corn. here in chicago in the big corn states of illinois, iowa, indiana, they like their corn. on the other hand, we are in the

middle of a big increase in renewable diesel production. soybean oil is used for that. that will require a lot more soybeans if the biofuel production on paper is coming to fruition. that's -- that has boosted the price of soybeans. long-term, people are talking about a shift more toward soybeans. whether or not that would surpass corn, that remains to be seen. romaine: we are going to get another crop report out of the u.s. government tomorrow. what do we expect to see in that report? is it too soon to see these changes? >> that report is a perspective planting survey of farmers. the expectation is you will see

corn will outnumber soybean acres by a little bit. you will see a pullback of a few million acres of corn and an increase in soybeans. that's the expectation. if tomorrow, the usda says there's going to be more soybeans and corn, that will only be the third time in history that has happened. the other big surprise could be there's more corn planted than expected, but that's not what is forecast right now. romaine: a lot to keep an eye on. still ahead, we will talk about this massive surge in mortgage rates. it is already having an effect on the housing markets. refinancing is down. there's a lot of speculation about whether this will affect investment. we will discuss the major

factors affecting the market coming up. this is bloomberg. ♪

romaine: home prices are accelerating, but that's not stopping demand. all of the talk has been over the last few weeks about the rise in the federal funds rate, how that affects mortgage rates and the housing market. have you seen so far any changes in not just homebuyer behavior but investor behavior? >> vanke you for having me. the market is still incredibly

strong. i wish i could say it was just interest rates, because you have to believe -- you have to realize there are many factors. stock market volatility. the markets don't like uncertainty. you have this wealth effect on consumers for buying the homes. we have commodity price increases and global supply chain issues. there are very few homes out there. the last time we had rates in this zip code was in 1819 and we had one million more homes on the market. at this point, we're still seeing very robust demand. in a post-covid world, that means there will be some level of working from home. there is demand for more space and more houses. that is houses for rent as well as for sale. we haven't seen it letting up. romaine: with regard to your business specifically, does it make your job harder or give you

an advantage as we move into a higher rate environment? >> it's a mixed bag. right now, we are seeing margaret -- margins that are than we have ever seen because we have been able to drive pricing up well beyond cost. we are worried we are in a dangerous part of the cycle where we could start to see the point where housing prices don't accelerate that much and we are still seeing rising costs in our projects. on top of that, supply issues. we're having lots of issues getting windows, cabinetry, appliances, ducting material. we are seeing delays from 20 days to 90 days of delivery. we are still seeing margins much better than our underwriting, the market is very strong. you haven't seen a pushback. romaine: do you anticipate cost

and supply chain issues any soon that that would moderate significantly may be back down to the levels we had prior to the pandemic? >> we are in a generally inflationary environment. i'm not sure they will go backwards that way, but they moderated -- the largest input of forces is lumber in a house and that has gone down dramatically. we are back down to around $1000 per 1000 court feet. that was up at $1300. but it was $300 or $400 a year ago. i think that will moderate, but the war hasn't helped things. you'll prices going through the roof. that stretches the consumer. you pointed out investors, there's a lot of investors in this market today as well. we will start to see it go back at some point, but i don't see it anytime soon. we are underwriting 10% plus

cost increases. we think it will be at least that. we're are still seeing price appreciation. romaine: what about geography? is there a notable difference in the investment opportunities between urban and suburban communities? >> absolutely we have been a big believer in the sunbelt in the growth markets. we are big players in phoenix and denver. a lot and florida, the texas, the carolinas. when i was on a little while ago, i said don't count out new york. we have seen tremendous rent increases. we are just back to the pre-pandemic levels. i think there has been a flight back into the urban market a little bit. people are looking toward lower-cost markets. if you track u-haul traffic,

it's a couple thousand dollars to take a u-haul from l.a. to phoenix. it's $300 to go backwards, because no one is going that direction. romaine: coming up, we will talk about russian bonds. a big story. this is bloomberg. ♪ ♪

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mark: russia says it is

regrouping its forces in ukraine in a push to complete the takeover of the eastern dundas region. it is the latest sign that moscow is not slowing activity despite a pledge to cut operations. yesterday, russia claimed it was cutting operations and what it called an effort to build confidence amid talks aimed at a cease fire. the number of ukrainians that have fled the country has surged past 4 million. that's 10% of the prewar population. the united nations says or than half have fled to poland with the government preventing men 18-60 from leaving. the majority of the refugees have been women and children. a new push is being mounted to send rebate checks to gasoline

motorists and eliminate tax breaks cherished by the oil industry. the movement is growing momentum in congress. bruce willis is stepping from his career after being diagnosed with aphasia which leads to the loss of ability to understand or express speech. that's according to his family who posted a statement on social media. the 67-year-old is best known for the diehard franchise and the tv series moonlighting. his family says it's a challenging time. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700

journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. >> welcome to bloomberg markets. romaine: u.s. stocks are lower right now. oil rebounding. traders uncertain about the uncertain situation between russia and ukraine. plus we discussed an interesting story in businessweek. distressed investing in russia and gets into the moral dilemmas involved.

>> looking forward to that conversation. let's get a check of what has been happening in the markets. the headlines from the kremlin today painting a different picture on where those talks are between ukraine and russia. we have seen the higher price of oil but not a lot of other sectors. we are still set up for a negative quarter. that is a story in the stock market. it is also worth highlighting in the corporate bond market. we take a look at the beaten-down asset category in 2022. if you look, this is the u.s. investment grade bond performance, we are set for our worst quarter over that stretch of time.

when you add up market deterioration whether were talking about higher grade or riskier product in the market, upwards of $1 trillion in lost market value. not sure that that's a bargain opportunity, but the flipside is going to be we are just getting ready for earnings season. what are companies going to say about the health of their balance sheet? what are we going to hear about what's happening in europe as well? >> a similar story when it comes to treasuries. here in the u.s. as well as government debt around the world . it's interesting to see how this shakes out. >> let's get more perspective on all of this. our guest is joining us. great to have you with us. a busy time of the market to say the least. on the subject of risk versus

opportunity, how are you viewing what's going on? >> it has been a challenging time because every day, i feel like the narrative is switched. we have three major themes. we have what's going on with the war, the pandemic, then the massive change to the inflationary picture. we're trying to be disciplined and being long-term thinkers. looking at what we think is a tectonic shift in the major themes going on across the globe. take that into consideration. be very disciplined about doing bottom-up bond picking work and only getting invested where we

see growth areas. this changes going to create growth areas. romaine: let's talk about the potential growth areas. i'm curious how you segment off different slices of the fixed income market in a way that protects yourself from what is basically a persistently rising rate environment. >> it's as simple as taking each market separately. let's look at the high-yield market. it is had next to zero issuances this year. i think it's fascinating from the low end rates, the high-yield market spread has only widened about 20 basis points. yes, we are up to percentage

points in yield and it's easier to invest at 6% and for -- than 4%. but we have not seen a widening of that market given the risks that are -- that we are now facing. that's where i want to be a little more conservative. continuing to look for upgrades. starting to think about what those themes are that we need to get us to the next place. a lot of people are talking about the issues with the shortage of labor. we need productivity. to get productivity, we need investment in technology. cybersecurity. >> no doubt. since you mentioned labor, as we get ready to digest another dobbs port -- jobs report, the issue of higher wages doesn't

fall into the camp of transitory pricing. >> clearly, labor is the piece of the puzzle that isn't transitory. we can also point a little bit toward rent which is another area you were just talking about in the housing market. in the labor market, it's very similar to what we saw everywhere else. we saw a major supply shock. we lost a lot of labor. we lost it to immigration. we lost to the pandemic, to mental health issues, to opioids , to probably the biggest piece which was retirement. we had a big supply shock and

what can correct that? there's only one thing and that is time. getting more people into the workforce or increases in wages. i think we will continue to see the increases in wages to pull people back into the labor force. romaine: thank you for helping us kick off the program. coming up, a lot to talk about including rh formerly known as restoration hardware. anonymous warning by the ceo about the company's outlook. we will discuss that in just a bit in our stock of the hour. this is bloomberg. ♪

romaine: breaking news on apple. apple is developing its own payment processing technology and infrastructure for future financial projects. this will reduce its reliance on outside partners. this would be a big deal as we know with apple pay and apple wallet. they rely on other companies. affirm and a few other companies are moving lower as apple is trying to go it alone and maybe separate itself from its dependence on these fintech companies. that's get word directly from the man who reported the story. this seems like a big deal. is this apple saying we can do all of this in-house? >> that's exactly right.

it's codenamed breakout as in breaking out of the financial infrastructure. they are trying to go it alone in some respects. they are not becoming a full bank. you won't see apple checking or savings anytime soon. we will see that they are moving to their own payment processing platform. today they use a card via goldman sachs to do that. that's the underlying technology that when you make the transaction, that goes to the bank for processing. they handle disputes, ledgers, monitoring payments, fraud, credit analysis, credit checks, credit limits. apple wants to bring all of that in-house for a slew of financial products. we don't believe that the apple card were apple cash card or apple pay are going to drop. apple is going to move to this new generation in-house

infrastructure for future products. here working on several new fintech related services which is by now pay later service. it's going toave a high installment rate. high amounts, hi linda, but also a low amount program similar to affirm that apple is trying to do in-house and they could announce that this year or next. they're also working on iphone or another hardware program to generate more revenue. >> helpful context. along with navigating the existing partnerships which we will have to watch as they make this bigger push in terms of their resources, what they spend internally, what they go out and buy, is this going to influence what we see from apple over the next year? >> they are spending hundreds of millions if not more to bring

more services in-house. that's in terms of engineering, internal engineering work on these programs. it's cross-country -- cross company effort. they are also buying companies. last week, they bought the company called credit kudos in the u.k.. some thought that that was indicative of apple's plan to bring services to the u.k.. they are doing that for underlying credit check technology they want to bring in house. they're not going to try to reinvent credit checks globally. what they will do is try to work with the credit bureaus directly to make the lending decisions. right now, they have intermediaries doing the work with the credit bureaus. romaine: a great scoop. apple developing its own payment processing technology. we should keep an eye on these fintech affirms. affirm, green., paypal all

lower. we have other breaking news from joe biden is speaking right now about the covid crisis. saying that he plans to get additional funding out of congress. he also talked about the need to ensure better booster shot access. also a few other issues with regard to health care including supporting the passage of an insulin pricing cap bill. you can see the president speaking on your screen. if you want to hear full comments, you can do so on the bloomberg terminal. in the meantime, we will be back in a moment. this is bloomberg. ♪

romaine: welcome back. we want to go back down to the white house.

president biden speaking about the covid crisis. he just got another booster shot . he talked a lot about the idea of making them more widely available. he said he is also going to seek funding from congress to help fight the covid crisis. >> that is a key storyline and one that has had less attention because we've been talking about the invasion of ukraine. there is a fascinating development when we are talking about the investing landscape. many were looking for bargains in russian bonds. now, and hedge fund managers are wondering whether buying russian debt is worth it. joining us to talk about it is erik schatzker. he wrote the story for the cover of this week's business week. whenever you do reporting on what high-profile investors are doing behind the scenes, it is challenging.

this one i would imagine even more so given the sensitivity of these investments. what was this process like? >> challenging is an understatement. nobody wants to admit to buying russian debt. because there is a moral overhang unlike any i have ever seen. distressed debt investors, those of the hedge fund managers, they often find themselves in tricky situations deciding whether to participate in venezuelan debt, sudanese debt, ecuadorian debt. there are lots of crises to focus on. as we know, we haven't seen anything like this in the western world since world war ii and the sheer graphic horror of the imagery on television brings home to so many people this ethical issue that anyone thinking about russia has to overcome if you're going to produce a paid in an investor --

as an investor. most people are stepping away. they are staying russia is nothing i want to touch, but there is a group of investors who feel comfortable taking this kind of risk. romaine: your story quotes a lot of those investors, people who make their living going into areas where it can be difficult to get paid. i'm curious beyond the moral question, there also has to be a question of whether the investment can pay off. when you mentioned at other countries, they became pariahs, but there was some sort of idea you were going to be repaid. is that the case with russia? >> you can think about it like a traditional credit investor which is am i going to be paid back? so far, russia is giving every indication both the government and russian corporate to the degree that they can that they do want to continue honoring their debt obligations which

would mean anybody who buys a bond at $.50 and get pace back at a has doubled his money or her money. the other way to look at it is if the bonds are yielding enough and some of them at one point were yielding north of 60%, then the coupons even if a russian company ends up defaulting, you're earning coupons for long enough that it doesn't matter if you don't get paid back because you bought at so little in the way of cents on the dollar and earned such a fat coupon that you did get paid. those are two different ways of thinking about it. that is the distressed calculus goes into these types of valuations. >> as much as there are some investors who swiftly moved away maybe because of their marching orders, whether there pension funds etc., focus on whether or not russia would be able to make the debt payment that they made is a reminder that much of the

investing base is turning away. everybody is curious to know about the global ramifications of what happens in the worst case scenarios for the global economy and markets. >> there is an important distinction to be made between what happens with russia as a sovereign borrower and with some of these corporate borrowers. if russia stops paying, and investors have very little recourse. if russian companies stop paying, particularly if they have issued foreign debt under the jurisdiction like u.k. law or u.s. law, there is recourse. you can go to court, make an insolvency case, and often you will be rewarded by taking control of some of the assets that might be located in friendly countries. we could look at a case like this russian company that has a chain of retail gas stations here.

if it defaults, it has assets in bulgaria, spain, italy, the netherlands, united states. those in theory are all fair game in a western court. romaine: some of the best reporting that we do here ends up in businessweek and erik schatzker is gracing the cover this week. check out that story. you can find it on the bloomberg terminal or at your newsstand. >> it is russian related headlines we have been watching in the markets today. the commentary from the kremlin earlier today pushing back on the dialogue that seemed to be breathing in the markets yesterday that there was progress made in the ukraine russian talks. today is a different story. you have to wonder, the fact that the s&p bounced more than

10% off of the recent lows if people are reevaluating. romaine: we talk about that rebalancing, we talked to a lot of investors that people want to see proof of the de-escalation before they have comfort with regard to waiting back the riskier assets. the bid into u.s. treasuries gives you some idea of where people's heads or at at least for now. >> this is bloomberg. ♪

mark: president biden says the united states will give $500

million more in a do ukraine. the president spoke for more than an hour with president zelenskyy. they discussed efforts to deliver assistance. resident zelenskyy also updated president biden on the status of the ukraine russia talks aimed at reaching an agreement for a cease-fire. boris johnson says the u.k. is right to double down on military aid to ukraine. he also warned against easing sanctions on russia prematurely. >> we need to ratchet up the economic pressure on vladimir putin and it is inconceivable that any sanctions could be taken off because there is a cease-fire. that would be absolutely unthinkable. mark:or