>> the fed will be pushing on because the labor market is overheated and inflation is too high. >> the fed has to move ahead to control inflation. >> it is really now for the market to catch up to the fed. >> the fed needs to step in and take some of the steam out of labor markets. >> the longer-term risks of this consumer led recession or slow down, whatever it may be, are building. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. lisa: good morning. a pivotal week starts with a yield spike. this is "bloomberg surveillance"

on bloomberg radio and bloomberg television. jon ferro, tom would say, is on sabbatical. i will say it is vacation. kailey leinz is with us this morning. we've got the q1 earnings kicking off, the ecb meeting on thursday. how much is the scenes that are really 10-year gilts rising to the highest going back to 2019? tom: all we have done is set the table this morning. one is that in flirt -- is that important inflation report tomorrow. there is some data. all you have to do is look at the headline data, 8.4%. i guess that is a boom nominal gdp for a while, but then what? lisa: is it headed upward? how much upward? or is this the plateau, the peak? wednesday's earnings kickoff may be more important to markets given the forward look then even the cpi report. tom: there is a great division here. there's people looking at an average 5% earnings growth, people who underplayed it.

mike wilson's they very cautious note over the weekend -- mike wilson with a very cautious note over the weekend of morgan stanley. to me it comes down to the apparent animal spirit, which is that big inflation plus gdp. how much is the gdp? lisa: how much are we going to see good news is good news versus good news is bad news because it means a greater tightening, and frankly greater inflationary impulse we need to constrain? kailey: you would like companies to be able to retain margin and keep posting the kind of profits we have seen. at the same time, we know that pricing power companies are exhibiting have become problematic. we have heard speaker after speaker talking about that because his prices are getting passed on to the american sumer, exacerbating the inflation they are feeling. is it a good news, bad news type of scenario?

lisa: we have been talking about markets. let's go there, given the fact that yield is driving a lot of the action, frankly internationally. tom: yields are there, 2.75%. we catch up in the deterioration of equities just in the last few minutes. dow futures, -113. the vix out, 22.79. a 23 print would be a big deal. we are not there yet. the angst of the vix as well. in the currency space, it is simple. brazilian dollar -- resilient dollar, and i am watching yen. week yen is a bigger deal than you would normally think. one to 4,125. -- 124, 125. oil is part of the story, well

under $100 on brent, $98. west texas down, $93 $.49. on interest rates, on yield up and price down, shahid ladha joins us right now, b&b head of g10 rates -- bnp head of g10 rates. they are out there, and they have an appetite for bills, notes, and bonds. is it pension plans to the rescue? shah -- shahid: indeed, and we have aggregate surplus for the 100 largest corporate pension funds in the region of 105%, so they are fully funded, better than fully funded, and there's

no more large cost to hedging the volatility in the balance sheet of the defined benefit pension funds. in terms of her appetite and possibility to support u.s. fixed income, we have seen an average of about 10 billion and a quarter or 14 billion in a year. so far, what we have seen is about 6 billion this quarter, so it was a little bit underwhelming in terms of activity. that being said, we do expect pension demand if we get back to that kind of run rate of 10 billion a quarter and 40 billion this year, which is indeed, i think, should help cap the path of long and rates. their demand is really centered

on the 20 and 30 points. lisa: do you lock in 2.75% 10 year yield for the long-term right now because frankly, this will look good historically, according to many people. what is going on today given that that argument has been floating for a while? is this worries about qt? is this people unwinding hedges? shahid: in terms of the construct of the fed exit in the fiscal exit as well, all part of the great unwind we have talked about being this year's trade, this is part of it. higher rates and the broad flattening of the curve is part of it. what we have seen up until quite recently is things like the five year and 10 year rate have been somewhat low and depressed, consistent with the fed dot

based on the last fomc dots area so i think we are in a pretty rapid and ongoing repricing and ongoing repricing in fixed income that we would not wish to send -- wish to stand in front of because markets can move away from fair value, but i think ultimately during the course of this year and probably in a matter of months, we should find a level which may be closer to three, which should find strong support for fixed income demand. kailey: obviously the market has rushed to reprise how may times the federal reserve will be hiking this year. it has to price qt as well. what does balance sheet runoff equate to in terms of a basis point move? we've heard from federal reserve officials that it is the equivalent of a 20 basis point hike. shahid: i think when you put this together with a bunch of factors, what you also see is

that supply of qe is actually falling this year, partly because it was so high last year despite strong fed qe, so really we've got to forces. we've got the fed and we've got the fiscal deficit which is falling a lot. so to some extent, i think the fed's numbers are sensible, but it is quite difficult to put a number on situation impact down the curve. the reason is because qe is an explicit purchase, but qt is an implicit sale. so it is really the treasury and not the fed that decides. tom: thank you so much, shahid l dadha with a constructive view. deterioration on the tape as well with futures -30.

javier blas links shanghai and covid directly to this move in oil. west texas, $93 handle. it is real simple. shanghai shut down, and other parts of china as well. lisa: this has been the big argument as to why you have seen such a move in oil, not necessarily the release from the petroleum reserve in the united states and other nations. you don't want to take oil prices down if you are able on growth -- a bull on growth because of growth concerns. it trades a lot of speculation. how do you gauge on a longer-term view? tom: i'm going to do a demand dynamic here. gold up $21. $1967 an ounce.

lisa: especially given the fact that bitcoin, and i know you love bitcoin, is falling to the lowest since march 22. i love when people say why. tom: because kailey is on the show to talk crypto. [laughter] lisa: there was a big conference in miami having to do is crypto assets. people were saying the reason why bitcoin is down is because the sugar rush is off and the parties are over, which i find kind of hilarious. tom: talk about our three hour effort, crypto with kailey leinz, how's that going? kailey: doing great. 1:00 p.m. tuesdays. we will be talking to sam backman freed tomorrow. it is going to be interesting. bitcoin is related to the broader theme we were seeing in the markets. usually it trades in tandem with other risky assets and increasingly with technology which is coming under pressure as we see real yield sitting at just -13 basis point. tom: what do i say?

she has so drunk the kool-aid. [laughter] lisa: well, a lot of people have. the reason i mentioned it is not just to get you. it was a really good side effect. but it was because there was this feeling of what is behaving right now. if it was commodities, that was the big inflation trade. now what is it? it is not the end, i will tell you that much. tom: that is a we -- that is a weak yen. even more, the inflation report. we will dive under the headline data tomorrow. on bloomberg radio, on bloomberg television, stay with us as we look to paris. c'est bloomberg. [laughter] ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. a government spokesman says the

iran deal's fate is resting on a decision by the u.s. on iran's latest proposal. one issue is the trump era designation of iran'-- of iran's islamic military force is a terrorist group. the runoff will be on april 24. three poles show micron leading le pen. lee crane president -- ukraine president volodymyr zelenskyy calls for even more large-scale action this week. he has been warning for days of a new russian offensive. he said he understands there will be much more russian rep. roy: -- russian weaponry then there is now. a twist in the saga of twitter and elon musk. twitter says the world's richest person has decided not to join

its board. that had stocked renewed speculation about the company's future. muska owns just over 9% of twitter stock. if he does not join the board, he would not be subject to an agreement to keep his stake at less than 14%. 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. i'm ritika gupta. this is bloomberg. ♪

>> i think it will take some time to get inflation down because there's other things going on in the economy that are adding to price pressures, including the commodity price increases and energy price increases that are happening as well. so i think inflation will remain above 2% this year and even next year, but the trajectory will be moving down. tom: the retta mr. with margaret brennan -- loretta mester with margaret brennan on "face the nation." the gentlelady from cleveland there, the mathematician away

from transitory, looking at the persistence of inflation. see that in the market this morning. these are markets on the move as we speak. 2.76% with real deterioration, a 23 vix moments ago. lisa: the idea that the 10 year yield is directly correlated to a further drop in stocks, and you are seeing a disproportionate increase in some of the volatility in tech stocks. i want to focus on crude. the volatility has just been shocking. you talk about the vix, but equity volatility has not been what has shocked a lot of people. oil swings around as though it were a crypto asset these days. speculation of shutdowns over in china are leading to fears of a lack of demand. tom: just to give you some scale, the 10 year inflation-adjusted yield, that residual has gone from -0.14% to -0.11% in about two commercial

breaks. the real yield spiking up. we are on zero watch this morning with that cpi print tomorrow. on oil, ellen wald, senior fellow at atlantic council and definitive on the saudis. with the oil issues, with demand in china, what do the saudis do? ellen: the saudis i think are in a somewhat difficult position at the moment with problems in terms of these lockdowns that potentially could cut into demand in china, especially with russian crude being available at such a discount for the chinese. they may really need to make their product more competitive. they do have long-term contracts for chinese refineries, particularly the refineries that they themselves, that aramco

has. but it is basically everything on the margins that they are used to selling to the chinese that they may need to make their products a little bit more competitive to compete with this oil, and you can see them offer a price cut. tom: let's go to wald 101. is oil one global price or not? ellen: it is never really one global price. you've got benchmarks, and then you've got the different blends that are sold based on those benchmarks. russian crude, the chinese can get this russian crude for as much as $30 off of the brand benchmark, and that is a really good deal for china, even if they are experiencing a drop in demand. they could use this opportunity to put more into storage, so i am not sure that we will necessarily see fewer imports

going into china if china think they can get a discount, but consumption in china could definitely go down, and that could hurt the independent refinery business, which does a lot of business making products and selling them around asia, and if there is no demand for these products from china and other areas, that could definitely hurt that sector in china. lisa: is they are a historical corollary for this period in terms of volatility, the fact that we are asking the question? is there a global price for oil, or is it basically a 20 adventure? -- a choose your own adventure? ellen: this is a very unprecedented period historically because there is so much speculation and all of these different prices going around in the market today. there were previous times we had big oil incidents.

we remember the 1970's oil shock, the iranian revolution. those were all massive issues in the oil market, except at that time, there was not this kind of financialization of the oil markets. you did not have traders trading oil every minute or algorithms acting in mere seconds. so it introduces more volatility and makes any move -- and makes it much more attenuated so we may see the effects of the chinese lockdowns, but the fact that there is so much money and trading and attention to the oil market just makes these swings even larger and more volatile. . kailey:kailey: you mentioned -- kailey: you mentioned the iranian revolution. it says today that the nuclear

deal is in the emergency room. it is not dead. what is your case on whether a deal can ultimately be reached and how that affects prices. ellen: this is an issue because several months ago, there was a lot of optimism that we would get an iran deal. i was speaking to people very much in tune, and they were very confident that a deal would get done before march. now looking at the situation, it is a different ballgame. i do think that the incredible rise in oil prices and the war in ukraine has given iran an advantage because they are still selling their oil and making much more money, so that reduces the pressure on them to come to the table and make concessions. so it has really created a situation in which iran is in the driver's seat. tom: ellen wald, thank you so

much. can't say enough about her one volume on saudi and the royalty. just a superb effort on saudi arabia. lisa, it will be a frenzy, a seven part amazon piece. they have 6.x% long-term debt. you've got to believe, who not going to buy this? lisa: exactly. at the same time, where are all of the company's going to try to login -- where are all the comedies that are going to try to bring in debt? you have to wonder whether they see something down the line, how much people are willing to pay, whether it is the price increases they are passing along , that they are saying this is the time. tom: i'm looking at a present piece out nine years, and the price was $105, and this 20 year

joining it at $89. as john templeton would say, bonds are on sale. lisa: well, bonds are on sale, but not in the right direction if you are the issuer. we will see. this is bloomberg. ♪

tom: bloomberg surveillance. good morning to you. futures -36. dow futures -152. vix over 23. nasdaq down as well. oil with a 4% move down. difficult covid news in china. lisa: it is this knee-jerk reaction on news. there are huge moves. ellen wald talking about the financial is asian of oil markets -- the financialization of oil markets. tom: our job on radio and tv is to give you the idea on corporate paper, amazon doubly

rated, they could manage aaa if they put their mind to it. 40 year paper. 2062, 150 over treachery. even amazon -- over treachery. -- over treasury. lisa: if you take a look at the 100 year debt you own from austria, it is not doing so hot. the longer bonds have been on sale. they have been absolutely pummeled this year. are they raising money because they think yields will go higher , because yields are still low enough for them to see this as an opportunity, or because they need the money? tom: we will do this quickly. you could do this on the bloomberg. you can look up the piece of austria i bought for the great-great-grandchildren. down 50% in price because you

are out 100 years. neil dutta with economic forecast out 100 years, head of u.s. economic research at renaissance macro, and he has been a strident optimist through gloomy times. what does the gloom crew get wrong on this monday morning? neil: it is important to recognize the recession chatter is ubiquitous. i was reading an article in the economist. we are seeing a number of major sell-side research houses mark up their expectations or probabilities for recession. my view is the risk of recession is no higher right now than it normally is. i still think we are more or less in this inflationary boom economy. that is more or less persist for the next 12 months. when i look at what is going to drive through session right now,

we are talking about how homes are not being built and cars are not being built. what is stretched? durable goods consumption, but it is hard to see how that will drive a recession, project liana time consumers are still flush with cash and seeing a strong labor market outlook. lisa: we see a lot of calls for recession. is that really being priced in? i am seeing just as many reports saying related to cyclicals, lead into retail, how much have priced in pessimism? neil: if you look at most surveys of investor sentiment, it is not in a bullish zone. consumers, do you think stock prices will go up or down, more consumers are saying they will go down. i would not say there is optimism in the markets. i think sentiment around equities over the next year are pretty negative.

lisa: how would you position this. how aggressive should you get leading into risk? tom frame desk that you have been a bull. how much do you say you need to buy everything that is beaten up, you need to buy banks, where are you taking that optimism? neil: it a difficult situation. right now we are in a rising interest rate environment. that will have a negative impact on certain industries that constitute a large weighting in the equity market. we are seeing that. the way i am thinking about it is how much more room is there for the markets to price in a more aggressive fed for this year? i do not think there is much more the markets can do. we are basically pricing in neutral by year end.

it is hard to see the fed getting more hawkish than that. they have signal they want to get neutral. the markets are already there. perhaps that bring some reprieve in terms of the interest rate backdrop and maybe that provides catalyst for the cyclical areas of the market. looking beyond that, i think that would probably be a trade you would want to rent as opposed to own but i think the markets have not gotten their heads around just how far the fed is likely to go in this cycle. i do not think the terminal rate will be 2.75%. i think it will be higher than that. lisa: how high do you think it will go? neil: right now i will say higher. this is one of the classic questions when you say what you think the 10-year will do, i have no idea. to the extent the markets are pricing in cuts in 2023 and 2024 because procession rest, i think

those will get priced out. there is -- because of recession risk, i think those will be priced out. i do not see why the terminal rate cannot be 3.5% or 4%. we are in a strong nominal gdp environment. consumers are flush with tach -- with cash and have substantial room to absorb more normal levels of credit appetite. at the same time we've seen china and europe flipping to economic weaknesses this year. the u.s. economy is unlikely to go into a recession with china and europe probably week salary in those years. tom: i have to interrupt. this is so important. you have framed out of terminal rate of 3.5% to 4%. radio and tv listeners would suggest that throws america into

some form of stagflation, growth recession, or outright recession. are you saying it will not? neil: that may. i think the issue is where does the consensus think the terminal rate is? to be the consensus think the terminal rate is 2.5%. that is why some of these parts of the curve are already inverted. i think that is too low. i think the markets underestimate the extent to which the fed can go without breaking the economy. productivity slowly rising, the labor force participation rate is continuing to climb, that all means the fed can go wrong without breaking the economy -- can go longer without breaking the economy. kailey: cpi data tomorrow, doesn't have any real bearing on the decisions policymakers will make? neil: no. the die is cast. kailey: when does the data start

to matter again? neil: for me, i view these questions around the labor market. to me is about jobs, hours, and earnings. when you look at the products of those things, it is growing 8% or 9% at an annual rate so far this year. eventually, that should slow as participation rates climb, wages start to moderate. strong jobs growth at lower rates of unemployment. maybe that starts to cool off somewhat. that can take some pressure off of inflation. whatever does not going to quantity, the remaining will be inflation. to me is about the labor market. i do not think that will happen anytime soon because i think there's probably additional downside to the unemployment rate over the next several months. you'll be in situation where the fed will mark down there estimates for unemployment.

i think is primarily about the labor markets. kailey: the fit thinks 3.5 percent unemployment will stay the case through 2023 even if it moves aggressively. you buy that argument? neil: no. i think they would have to go much more aggressively to keep the unemployment rate at 3.5%. will probably be in the low threes by the end of the year. the fed can basically pencil and more rate hikes in future years to make sure the employer rate -- the unemployment rate stays at 3.5%, or they do not change the estimates for rates and dem employment rate continues to plunge. tom: neil dutta, thank you so much. really important comments as we try to frame out this odd thing called the terminal rate, which is what is the view out there

and the timeline out there? an important guest at the 9:00 hour. lisa: talking about fundamental research, what does that mean and a time of such great political uncertainty? dan suzuki will be coming up on "the open" as i try to step in for jonathan ferro, not on sabbatical, just on vacation. just putting that out there. it will be a fascinating moment given where yields are and how high the terminal rate will be. tom: you may get a pricing on amazon. this is a solid deal. there's nothing fancy about it. i'm not sure if anything is callable at all. amazon rounded up $100 billion. apple $200 billion. that is one of the great differentials. total debt, amazon now 7.2%.

apple heavily indebted. lisa: this goes back to why raise money now. if you think yields are going higher from here, it makes sense. if you're trying to price the market and you think yields will head back down, not a great time to sell debt. it goes to your whole austria 100 year piece. your grandchildren thank you. tom: i loaded the boat, that worked out. duration will kill you. that is what i said this weekend. [laughter] stay with us. this is bloomberg. ritika: keeping you up-to-date with news from around the world. in france, emmanuel macron's

team is painting marine le pen as an ally of vladimir putin. they will square off april 24 in a runoff election. marine le pen has been playing down her previous support for vladimir putin. polls show emmanuel macron with an eight point lead. bloomberg has learned the eu top diplomat is urging member states to send weapons to ukraine quickly. they told diplomats a decision is needed in days and not months. ukraine is preparing for russia to step up its military campaign. in pakistan lawmakers elected the opposition leader to be prime minister. they replace former cricket star imran con, who called his ouster a u.s.-backed regime change. china has approved the first batch of new videogame licenses since july. bloomberg has learned regulators have this tribute it a list of

approved titles. china's far-reaching tech crackdown spread to online gaming. the government introduced measures capping playtime for minors aimed at curbing addiction. amazon is a long way from launching its promised drone delivery service. bloomberg investigation revealed the program faces challenges, high turnover's, and safety concerns. the crash last year had regulators questioning the drones airworthiness. amazon says it has applied what it is learned from each flight towards safety going forward. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> when you have a highly transmissible virus and you have

fully backed on mitigation effort, you will see uptake. what we are hoping happens is you will not see a comparable increase in severity. tom: dr. fauci on abc. good to hear from him. still contentious, still debatable. we will get to that in a moment. first we are watching the amazon deal. i want to make clear to all i was looking at the prospectus on the break. that is what we do. we are so boring. i was leading the prospectus of the seven part bond deal on the break. kailey is looking at me like you are such a nerd. kailey: never. tom: jp morgan and morgan stanley and goldman sachs are the book runners. one of the phone calls will be to kriti gupta to see if she

wants to load the boat on amazon. right now she is looking at the inflation-adjusted yield. kriti: we have to talk about the real yield because you were just talking about the idea of amazon, are they coming to market because they're expecting borrowing costs to surge. you talk about where real yields are headed as well as nominal yields. last week you saw steep moves. the real yield is catching a lot of people's eyes. we are 11 to 12 birds -- 11 to 12 basis points away from a positive real yield. the implications are significant, not just for the stock market, does that mean stocks become less attractive, but it also has implications for financial conditions. those conditions have not tightened as much of the fed wants them to. if you see a positive real yield that is viewed as a risk off mood. does that spur a tighter financial conditions index?

that is something we will keep our eye on. tom: thank you so much. we will fit is this our strong with joshua sharfstein, vice dean of health at johns hopkins. bloomberg is a benefactor to his johns hopkins university. is the china omicron our omicron? is it the same one we had? dr. sharfstein: i think it basically is. it is extremely transmissible, and for people on vaccinated -- for people on vaccinated -- for people unvaccinated it can be quite deadly so it is a serious situation in china. tom: we got over it quickly here, i would suggest. do you have the same optimism? dr. sharfstein: they are taking

historic measures to keep it down. they are not in a position to get over that quickly. they are in a position to eliminate it entirely. in our position it went through so quickly because it burned through the population very fast. we suffered from that. we had the highest hospitalizations we had through the whole pandemic. on the other site if that we have a lot of immunity, and that is probably helping us with the ba.2 variant. kailey: how threatening does that mean future variance -- future variants in china, how big of a threat is that to the u.s. or other countries that have a high level of you -- of immunization. dr. sharfstein: it depends on the nature of the variant. we are worried about a variant that could escape our immune system response.

the thing that drives variant production is the number of infections. there are not many infections right now. the challenge for china is to figure out how to best protect their population and the way they find acceptable. they are doing things we would not find acceptable. for us, we are focused on reducing the enormous number of infections that can still be happening in parts of the world, helping to get vaccination out to the countries that do not have it yet. kailey: as there are still high infection rates, when can it move into the endemic phase? that still feels pandemic-esque to me. dr. sharfstein: i do not think we are in a much better place in the world until we have seen high vaccination rates in as many countries that we can get to.

right now it looks like the vaccine supplies not so much the limiting factor but fundamental issues of acceptance. you have to invest money to explain the value of vaccine and to be able to get into their local jurisdiction. all of that is extremely important. i hope congress wrecked nice is that and adds the money back to the discussions of a new pandemic funding bill. tom: thank you so much for joining us with johns hopkins. we will have to do this longer next time. we have to pay attention to this deal. i do not know the size of the deal. i've seen $12 billion floated. i want to focus on the scope and scale. with these larger companies, amazon is no different. on long-term debt, they have 116 gazillion, and 16 gazillion short-term debt. it does not move the needle to me. kailey: we are talking about

amazon's debt level. you also have to consider their cash level. the same case could be made for apple. these are companies that do not need to borrow. they are tapping capital markets because they can. maybe they think the cost to borrow will be higher in the future. we've seen apple cap the debt markets time and again. tom: one thing that has changed from jeff bezos's maybe they are talking about a little bit more share buyback. it is not our job to speculate. these are some of the things you can do when you bring in that kind of money. i do not know. should i selloff the austria paper and load the boat on the 40 year amazon? kailey: [laughter] i don't know if you should take investment advice from me. when we are talking about the relative value of any asset, that is the conversation that started to change. the 10 year real yield 13 basis

points away from positive territory. we have heard for so long, there is no alternative, what happens when an alternative starts to emerge? tom: i would emphasize this is not a normal monday. the cpi report tomorrow. for more, the residual of the nominal yield, take away the inflation you get the 10 year yield on the edge of a positive real yield on the edge of a positive. a lot of other stories. the bloomberg down 5%, brent crude 9852. all of it goes back to weak dollar again -- weak dollar yen. this is a huge deal. kailey: and the strongest to dollar since july 2020 speaks to the divergence we are seeing in monetary policy. a boj going nowhere and a fed that is going quickly. tom: stay with us.

a lot of interesting analysis and watching ukraine. annmarie hordern at the white house this morning. 12:00, lara rhame. stay with us. this is bloomberg. ♪

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lisa: from the new york city for our viewers worldwide i am lisa abramowicz in for jonathan ferro. we are looking at deteriorating

tape as yields in the united states climbed to the highest we have seen since 2018. "the countdown to the open" starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. lisa: we begin with the big issue. bond yields surging. >> of fast climb in yields. >> demand for bonds is evaporating quickly. >> you had a huge selloff in the bond market. >> bond markets have been punching the notes a few times. >> this job of orchestrating a soft landing. >> the ever elusive soft landing. >>