>> welcome to "bloomberg markets ," and i am kriti gupta. today is a weird weird day, it is important to look at what the s&p 500 is doing. down, almost paring off the losses -- the risk off sentiment. headline payrolls coming in hot, wages coming in soft. the net that result is lower stocks on the day and lower yields on the day by a massive margin, 20 basis point move in

the 10 years. what else happens when you see that flight to safety again from around the world into the u.s. bond market? this is not just a fed story we are in dive into it. bloomberg dollar index down .5%. the good news for some commodity bulls is that the weakness in the dollar helping nymex crude futures, up in trading. jon: diving into the banking sector because there is so much uncertainty right now, you want to walk in to some of the carnage we have seen. the closely tracked regional bank etf, the kre is down 7%. when you look at some of the weaker performance and that index, first republic, pack west, and western alliance are off by 20 to 40%. sizable drops. people trying to figure out the

collapse of silicon valley bank. connections to other players in industry. obviously the other players trying to reassure the market right now, but still so much uncertainty as we watch this story unfold. kriti: something that is continuing to develop and much more news over the weekend as well. more on the inside of the collapse of the silicon valley bank and the role the fbi see will play going forward. -- fbi see -- fdci will play going forward. we have heard that the fdic is expected to take over monday. walk us through. the timeline of the next steps. . guest: a lot of the industry is waiting to see the next steps. i am in the lobby of the san francisco office, more of an office as opposed to a branch. there is a very slow trickle of customers coming in.

the office it seems like nobody is up there right now. there is a very slow trickle of customers coming in. there is a sign posted with the address of the palo alto branch, and we have colleagues out there looking to talk to customers. people are wondering what will happen to their funds. i have been speaking with investors, venture capitalist all day, that are working with companies to figure out what this might mean for them. there are concerns i've heard around making payrolls for some startups in this industry. they may have had cash sitting with svb for payroll. that could be over $250,000. i think right now there is a lot of shock and the tech industry. i have been texting and speaking on the phone with investors all morning as i was all day yesterday. this morning a message someone

and said, what happens now? i s a j venture capitalist with a long -- message to a venture capitalist with long history and industry. he says pandemonium. i do not want to make it sound alarmist but there are a lot of people asking what happens now. this year was looking tougher startups and a tougher funding environment. some need to raise money to get going. i pose this question everyone i talked to today. this seems like it is a very ominous sign in a year people thought would be tough and nobody -- it is a very ominous sign for the industry. jon: such sobering context. really insightful. maybe we should remind people about how things have been unfolding. the good times within the tech industry, just a couple of years ago helped to fuel the rise of silicon valley bank. it appears with all that capital coming in there were some

calculations made, i suppose on whether or not interest rates would make a big move. when ultimately that seem to go against their own police, the -- beliefs, it forced the issue we talked about this week. selling some securities at a loss to raise capital. the news about the stock sale. and a reaction within the bc community -- vc community, their concerns about maintaining capital. speaking to portfolio companies about getting out. can you walk us through some of the steps i got to this point you have been reporting on? guest: like you said, the past couple years money was flowing very easily and so -- in silicon valley. people raising very high valuations. companies will sometimes sound business models and sometimes not were easily able to raise boatloads of funds.

that started to grind to a halt last year. since yesterday, the last 24 hours in particular, it seems like venture capitalist and their portfolio companies have been in a mad -- to figure out, -- a mad dash to figure out over the course of yesterday should we have our companies move money out of silicon valley bank. should we have faith in silicon valley bank? it is a storied institution, they have specialized banking services for startups. it is there bread-and-butter. literally called silicon valley bank. it seemed that one point yesterday there was a bit of a herd mentality, a lot of people are moving money and people are talking about moving money. vcs are per -- are advising the import folios to move money. other people look around -- portfolios to move their money. other people are looking around to see if they should to.

everyone likes to talk about being a contrarian inditex industry. i think maybe -- in the tech industry. maybe this situation shows it is not that way. kriti: reporting from the lobby of an svb bank office. svb becoming the stock of the hour, early we spoke to former u.s. treasury secretary about what the collapse of svb would pose to -- a risk to the financial system as a whole. take a listen. >> if this is handled reasonably, and i have every reason to think it will be, i do not think this will be a source of systemic risk. ♪ [office sounds] ♪upbeat music♪ ♪♪

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>> the correct statement, that the banking system is sound as a whole does not mean that every bank is strong. we are seeing the correct statement. the bank, sensitive to both interest rate risk and credit risk, then you have a more difficult outlook. kriti: this is "bloomberg markets." i am kriti group alongside of jon. it is time for the stock of the hour, you heard a home and speaking about svb. -- mohammed speaking about svb. joining us now for a roundtable discussion not only on the collapse but the company itself is david. he has a neutral rating of the dock, a $200 -- stock, the $200 price target before the chaos. he is also on the sidelines with a market perform.

lovely to have you both on. chris, when start with you. is this a canary in the coal mine type of story? >> absolutely not. we have been writing since october that silicon valley is an outlier. you can see that already the third quarter results, remember the third quarter rates started rising. for the rest of the industry there are assets yields going up 23 basis points more than the deposit cost. for silicon valley it was the other way around. in the fourth quarter the rest of the industry again benefited, meaning the earning assets repriced more quickly than the deposit cost. the rest of the industry earning as it's went up by nine basis points. fore silicon valley, earning assets were adjusted six if you basis points less than the

deposit cost. you had it for silicon valley it is an outlier. on the right-hand side of the balance sheet it had mainly commercial deposits that adjust really quickly. there is always a corporate treasurer or cfo on the other side of the deposit trying to get the best rate or the money. -- for the money. when he did not have his retail deposits as much. on the otherside of the balance sheet, 44% earning assets were mortgage-backed securities, held to maturity, bought at the peak of the market in 2021. they were fixed rate and do not just and will be there for 10 years until maturity. that is how they got in a bind. they have a combination of short duration rate sensitive assets, and long-duration non-rate sensitive -- excuse me it is the

other way around. long-duration accents, and short rate liability floating rate. jon: david, i want to bring you into the conversation as well. what you make of the fact that people are trying to figure out not just what kriti was asking about silicon valley bank versus other banks. just the connection to the tech industry and the start of community. silicon valley bank catered to, we had a reporter on the scene speaking to some of the startups who are actually worried about making payroll. given what has unfolded. what is your reaction to that? david: there is a lot of pressure on the industry right now. that is what essentially has led to the difficulties at silicon valley bank. you have vc investment activity drying up, with no new rounds of funding coming into replenish

the coffers and that is what led to the demise of silicon valley bank. there is a lot of issues to go through here. i would say it is very much a niche oriented business, that we saw fail with silicon valley and the very much focus on the vc backed community. the other bank that we cover is silvergate. both of these companies are very niche oriented and ended up seeing trouble, as chris mentioned. the securitys portfolio. sitting on significant unrealized losses. as deposits went out, crypto in the case of silvergate and vc backed companies in the case of svb, they ended up on a crunch on the capital side. they had to realize those losses that were unrealized up until the final moments. it is a really just in current of events that occurred. the vc backed community has been

under pressure for some time and that is partly what occurred over the past couple days with silicon valley bank. they indicated that the cash burn at these companies would continue for the next several quarters. kriti: you mentioned the niche of it, for a lack of a better term but let's bring in the macro. one of the major concerns for the svb collapse is a lack of digestion when it comes to the restricting and tightening hawkish stance the federal reserve has taken. two what extent is that true? david: it absolutely is what triggered the losses. they were taking duration risk on the securities portfolio. they had duration of 3.5 years, the other north of five years. over the past year we have all seen what the fed has done with interest rates, given that level of duration it leads to significant losses. when you talk about the case of svb they had a security spokes

of -- book of $125 billion. when you take that kind of risk and interest rates go against you end up in a capital whole. that is what ended up leading to the attempted capital raise that ended up not coming to fruition. jon: chris, you alluded to this and i will reference the comments we heard from larry summers coming into the segment. he does not see systemic risk right now, can you walk us through, this is a business you have covered for decades. when this situation unfolds and the regulators get involved, how did things unfold from here typically? guest: for silicon valley itself or the industry? jon: yeah, based on what you know when we have these collapses. guest: typically, they would take over, when ftse takes over a company they take it over --

fdic takes over a company they take it over. they make a decision if they will honor all of the deposits. they tend to do in a big bank. sometimes it only honor the deposits of $250 million or less. they went liquidate the assets of the company. that is typically what they will do in the case of silicon valley their assets are primarily agency mortgage-backed securities. that would be very easy collateral to date. most of the loan portfolio is what's called subscription lines. again very liquid securities, lots of other -- very liquid loans are lots of other banks would probably like to make. i actually think liquidating this company should be, compared to most, relatively easy. it is not like there are masses of nonperforming loans on the balance sheet.

the biggest problem was with agency securities. jon: really helpful context. i'm sorry, go ahead? guest: every other failure we have seen is the bank made too many bad loans. we have not seen this kind of thing. the only president really is roughly in 1980 when paul volcker raised short-term rates to 14%. then you had all kinds of thrifts fail for this reason. jon: helpful context, chris, thank you for your time of oppenheimer, and david, joining us web bush. we will take a break, the other big stories is on the jobs front. market reacting to the latest deployment picture of the united states. we have jobs number in canada, earlier today we spoke with u.s. labor secretary marty washer talked about silicon valley bank, as well as labor data. >> a lot of concerned if in areas.

hopefully we can can can you to move forward, secretary yellen is up at capitol hill testifying, there is lots of concerns about what the future of the stock market is. i know that, when it comes to jobs we have a good jobs report. good signs all around. ♪

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kriti: this is "bloomberg markets," i am kriti gupta alongside jon. outside the svb collapse, jobs top of mind for the investors. know better to ask about it then bloomberg news economics and policy correspondent matthew and the chief u.s. economist at deutsche bank. matthew let's start with you specifically. the jobs number 311,000, the estimate 255,000 get the wages -- walk us through it.

guest: as you mentioned we added 311,000 jobs on the back of five under thousand jobs in january, wages are only up 0.2% on the month, 3.6% annualized the past three months, the unemployment rate take a little higher, labor force participation take tire. -- ticked a little higher. it in would indicate -- it would indicate a between five basis point rather than shifting -- 25 basis point rather than shifting to 50 basis points. >> the market makes its assumptions and then the data points in this country, the bank of canada not making a move on interest rates for the first time in nine meetings. then you have a harder than expected jobs report. some people wonder if they are behind the curve on behind -- fighting the inflation story. the message from this central

banks along with the data are the two things you have to watch. >> timing is everything and the governor did not have the good timing that jay powell has in not having his meeting, right before the payroll report. in canada it raises questions because they are hiring stronger and the wage is stronger than anticipated. about if they have to come back in the markets and start doing more. do they have to do 25 or 50, how much wage or inflation pressure is there? in the unites states, as matthew says it takes a little bit of that edge off. you still have the cpr report still coming out. that will weigh on the fed on if there is a lot of inflation trouble. we have a narrative in this country at least that there is a good story, a soft landing story, in this report. only one report. you have people coming back into the labor force.

you wonder all the workers have gone, they are coming back into labor force and filling jobs that had not been filled. leisure and hospitality the biggest gainers. areas of the economy that recovered first like manufacturing are the ones that are not adding jobs or are flat right now. that leaves us with lower paying jobs and keeps the wage pressures down. you can make the case for the fed that this is good news. he could let things go. jon: does our storyline change yet again depending on what we see in the inflation reports next week? guest: it absolutely could, over the past year we have been surprised a number of times over inflation. inflation the driving force for monetary policy and this administration at this time. if you get an upside surprise on inflation this week it could put more pressure on the fed to move 50 basis points. we are expecting a 0.4% per

quarter cpi, we heard from jay powell this week, is not just the latest data. it is certainly strong for january with inflation, consumer, and in plum, is the upwards revisions for the q -- it is the upward revisions in the q4 data, it will be a determining factor of what the fed does that the next fomc meeting. if we get a print that is in line at think they will likely go by 25 basis points in march. kriti: giving us perspective during a crucial time, we appreciate it as always. let's take a quick check of the markets. s&p 500 selling accelerated near session lows. 10 points away from where we ended last year, almost erasing the year to date gains where we are at. we will keep an eye on it. the bond market catching up, 25 basis points moves in the

10-year yield. at the front end of the curve seeing a move as well. more markets coverage ahead, stick with us. this is bloomberg. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service

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>> we are kicking you off to the close, two hours left in the trading day, i am kailey leinz next to sonali basak, today is a massive bank day, the collapse of svb taken the market by storm and sapping risk asset -- appetite. they are as, the bank index heading to the worst week since march 2020. a massive bid into the bond market withi