mark: welcome to bloomberg audiences. i am mark crumpton with first would news. in norway, nato forces are gathered for joint drills, as the defense alliance, along with russia, china, and others competes for greater control -- control over the arctic. their suggestions it holds one quarter of oil resources. russian missiles and artillery have destroyed more than 152,000 residential buildings since the start of the invasion. in india, a panel of the country's supreme court will begin hearing detailed arguments next month in a landmark case

seeking marriage equality for the country's lgbtq community. this comes one day after the prime minister's announcement opposed legalizing same-sex marriage, deciding only by parliament. just a handful of places outside of the west, and only taiwan and asia, allow same-sex marriage. more severe weather in california. another powerful storm is sweeping into the state today, after an earlier system unleashed flooding on major roadways and dumped heavy rain and snow that breaks levees. some areas of the state could see several inches of rain and fierce winds that are likely to cause power outages. 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 am mark crumpton. this is bloomberg. ♪

>> welcome to bloomberg markets. kriti: let's stop right into the price action. on the surface, it doesn't look like it is happening in the equity market. don't worry, it absolutely has. the nasdaq outperforming just a little bit as well. the vix at 820. we were sustainably below 20. what happened? the bond market. we are at 4.08. you can see repricing, when it comes to what the fed is going to do in about 10 days time. the market is now expecting not even a right -- a rate hike at all, a pause altogether. that is really reflected in the 10-year yield as well. 3.49. what will tomorrow bring when we

get that cpi report? jon: we will be watching very closely. we are watching financial stocks within the s&p 500. they have been very challenged. we continue to look at dramatic declines for regional banks. first republic with its worst day ever. it is down now 65%. despite some attempts at reassuring the market over its capital position, you have schwab down 11%. they were down about double of that. they are trying to ease some concerns out there. but with limited success. of course, we are talking about the worries globally right now. you have credit suisse off about 5%. we have been watching a noble of global players trying to assess bond portfolios and banks around the world. we are looking at comerica shares off by about 28%. kriti: you are seeing that pain around the world. that uncertainty surrounding banks causing a re-think in the

market. is it an overreaction or a warning of something worse? >> this is typically the sort of price action you tend to see in the bond market. the bond market gets a little skittish on the potential turns in policy. especially given the fact that yields have risen so dramatically, and review has consistently been that the risk to yields are atypically skewed toward the downside. that is what you are seeing in the price action. jon: let's stay on that theme. thanks for being with us. how would you describe or characterize what you are seeing in the bond market right now? >> good to be here, jon. it is eerily reminiscent of what we saw a few years ago.

that is the interesting thing. the silicon valley bank, many would not have known about this name outside of the u.s. until last week. what we are seeing right now is a contagion that is manifesting in all kinds of signals that you would look for to identify system risk. this is happening in the u.s., in europe, so it is a global thing. it is remarkable, really. as you said a few moments ago, it is a complete turnaround in the rate discount. and forgive very good reason. jon: let's build on -- kriti: go for it. jon: sorry. let's build on those comments that crete he alluding to. what would you say the market is expecting with that fed decision? huw: --padhraic: over the past year, they have raised aggressively. they went from 0% to practically

5% in the space of a year. induration terms, that is massive. that is the starting point. and it brings us to a position where the fed already has conditions quite tight. there was also risk that something could break. the key thing is that when the fed was delivering those rate hikes, the system was in good shape. we said this a lot last year. don't worry about equity markets falling, don't worry about negative price action on bond markets. the key thing is, can the system take it? up until now, the system could take it. right now, it is a big question as to whether the system can take it. we are facing the cpi number tomorrow. i think the fed will be crossing their fingers for a number of 0.3% on the month or less. kriti: what does that then mean for the sensitivity of the bond market to go back to inflation? essentially the cpi data and jobs data that we were supposed to be pressing the market on, for how long will the bond

market need to respond to the idea of the fed needing to reassure the market economy? padhraic: i would say it is system first. it is financial stability first. this is why the bond market has changed. it is broken and there needs to be a degree of certainty that we don't have. it really eats into the vitality of the system. that is first and foremost. if we are sitting here next week or in two weeks time, when the fed meets, and we have circumstances like we have today, in terms of where the cross currency basis is, and the collapse of the valuation of regional banks, that is not an environment where the fed needs to hike rates. it can wait until the next meeting. that is the way they will play it. system first for now. kriti: also bring it to the next meeting. if you see hikes come back onto the table, what does that then mean for bond volatility?

i feel like in the last three or four trading days, a lot of traders have gotten burnt. padhraic: i think one of the things here -- in fairness, even before we had the silicon valley bank debacle over the past few days, if you look at the curve, it is incredibly inverted. it hasn't been inverted like this since the craziness of the 1970's. the bond market was anticipating something might break. it hadn't broken, but now it has broken. consequently, going forward, it looks like the fed is going to be dealing with a big rise in rates so far. we have to remember as well that this set of circumstances is going to tighten conditions arguably even more forcefully than a rate hike from the fed. the fed has to do less going forward, and the bond market will price them accordingly. jon: thanks for your time.

appreciate it. padhraic garvey, at ing financial, joining us with what's happening in the fixed income world earlier today. president biden addressing the crisis surrounding the banks, saying the overall banking system remains sound and calling for additional regulation. pres. biden: americans can rest assured that our banking system is safe. your deposits are safe. we will also assure you we will not stop at this, we will do whatever is needed. i'm going to ask congress and the banking regulators to strengthen rules for banks, to make it less likely this kind of bank failure will happen again. and to protect american jobs and small businesses. jon: joining us now to discuss the actions taken by the fbi see and whether that banking system needs additional regulation is huw van steenis, former senior advisor to the boe. as well as padhraic garvey,

--alexandra barrage, currently a partner at the doc. we'll start with you. these actions are meant to at least bring some calm and stability and what you are hearing and seeing so far. you think that is achieving the fdic's old so far? alexandra: thanks. i think the government had to do what it did yesterday. it had no feasible options over the weekend. the primary concern was protecting the markets and protecting depositors, including those uninsured depositors. but we also have to realize they had no good choices. so, there are going to be significant repercussions and a lot of policymakers looking back at reforms, inc. supervision, concentration in bank deposits, and thinking really hard about where we may have fallen short and what reforms are needed. kriti: hop on in here. you wrote a column today talking

about the duration risk and how a lot of banks perhaps were not prepared for it. where do you go now in an environment where it is almost inevitable that the fed has to hike again? huw: thanks for having me on. i think it is a couple of things. first, i think the tightening of credit conditions on the back of the second and third largest failures of u.s. banks is putting up rates by 1%. i think it is a huge tightening and we should not underestimate that. what i did in my piece is went back and reread the minutes after continental illinois failed in 1984. after that failure, they said, "we have run out of room for tightening." i think powell and others are students of this. i think second is on regulation. i think it is deeply unfortunate that the 16th largest bank was not covered by stress tests. if you look at europe and japan,

pretty much any other they were market, these rules are for all banks, not just the biggest ones. that is one area for reevaluation. jon: alexander, how do you see this impacting federal regulation going forward? alexandra: first, i would say that a bank the size of silicon valley bank was subject to certain stress testing. they were not tested as much as the banks above $700 million. i think we will have to look closely at the banks relying on uninsured deposits as a fund -- as a form of funding. we are going to have to look at the extent to which they have non-diverse funding and i think regulators are going to be especially attuned to banks that grow as quickly as svb did within a relatively short period of time. jon: huw, hop back in here.

kriti: to the point alexander was just making, inc.'s having to pay up for that funding, explain this to us. huw: they will have to turn out funding at more senior debt. they will have to pay up for that. i think that is really going to hit the net interest income. there is always a flight to policy. larger banks will not be as impacted and will be benefiting, but that squeeze means the earnings we are currently seeing be rated significantly. i think that is what you will see partly in the price action today. i think if they're going to pay up more for funding, they are going to be more thoughtful about how they extend credit, and the cost and availability of lending is going to get much tighter. i think that is also what the

fed needs to focus on in the coming weeks and months. jon: we alluded earlier in our previous conversation too, as we get ready for that next fed decision, depending on the state of affairs in a weeks time, that could even more influence what we hear from the central bank. this idea of systemic risk, we have obviously already seen some very skeptical investors placing near-term bets on the health of some of these banks. can you give us a sense on how smoothly you think all of this can go? huw: it's a very difficult situation to make a strong call here. i think as you said, the history of financial crises is that central banks really get it right in the first move. just look last year in november, when the bank was having issues with prime minister. they had two or three tweaks of the funding scheme. i will not rule out that the fund -- that the fed will have

to -- i think that ptfe is extraordinarily generous and thoughtful to deal with the rate risk, which is in the system. i would not rule out that the fed may have to add another tweak going forward. i think if this is successful, that will allow them the room to raise rates. but i think we really have to wait and see if this facility is successful first. kriti: stick with us. i want to hear more about these words from earlier. one of the cosponsors of the dodd frank act. earlier today, he said we got hit, although we were in good shape. given what the fed and the fdic announced today, if that were announced on friday, we wouldn't have had any problem at all. we begin to lose deposits on friday as a reaction of what happened in silicon valley. and it wasn't just silicon valley. it was a punishment for anyone involved with crypto. some really strong comments.

their exposure to crypto, from the perspective of the fbi see, how do you regulate banks that are starting to get more involved with new technologies, like cryptocurrencies? alexandra: i think it's extremely challenging for the fbi see to do that. we know that the agency has recently put out a statement for all banks who seek to engage directly with crypto currencies -- crypto companies. on the one hand, it is not prohibited on the other hand, there are high hurdles for banks to do that in a risk managed and focused way. i think really, the crypto businesses currently are facing some headwinds, given what we have heard from banking regulators. i also think as a broader comment, we have already learned over the past week that too big to fail banks need more considerations. these to be the most globally

interconnected banks in our system. we are now looking at over a $200 billion bank and a bank just over $1 billion. that was a sickly too big and too concentrated to be allowed to fail because of the sheer numbers of uninsured deposits at those institutions. i think bank regulators are going to be very finely attuned to those. kriti: certainly something we will be watching. i think they had only 10% of deposits that were actually insured. huw van steenis and padhraic garvey --alexandra barrage, we think you both for your time and insights. time now for stock of the hour. yes, things are happening outside of the bank and crypto world. we are looking at pfizer, purchasing cancer drug maker segan. they spoke earlier with bloomberg's david westin about the benefits of the major

acquisition. >> it is giving us the ability to repeat once more what we did with biontech with vaccines. now, we can do it against cancer. cancer, as you know, it is one of the biggest concerns of humanity. one in three people are getting cancer or will get it in their lifetime aired many more will be affected because cancer affects all. it affects the father, mother, son, daughter, spouse. it is a unique technology. this technology can become one of the biggest answers to many tumors that right now we have no solutions. >> it was reported that pfizer took a look at the company earlier and decided not to do a deal. is it more important now than it was a year or so ago? >> i will not comment about

whether or not we were part of the discussions. but we are looking -- we have been looking at them for a long time now. it is not new to us. we have been working in connection with multiple other companies. we were impressed with the new data they presented. we are thinking that right now is the right time to engage with them. we will have a happy ending. >> it is obviously going to be very valuable to pfizer for the reasons you described. why is see jen -- seagen more valuable with pfizer than otherwise? >> that's an excellent question. this is exactly what i wanted to say. one plus one is not two. it is three or more. they have a unique technology,

but pfizer has a scale that they do not. from day one, our commercial capabilities will triple those altogether that they have. we are having a global network of commercial capability that they currently don't. they are mainly in the u.s. we have a very quick way of concluding clinical trials. you have seen how we are able to finalize clinical trials in record time. you see we are among the top of industry. we have a global network that they don't have. their portfolio will move faster than it would move alone. we have the ability to be very good in small molecules. the abc's are a very complicated structure. it is like a missile that has targeted cancer. it depends on what you put into this missile.

we are very good in small molecules. we believe the best payloads can be carried in. there are some any opportunities to provide this. jon: that was pfizer's chairman and ceo. coming up, more on the fallout from the collapse of svb and signature, and how it affects the venture capital community. this is bloomberg. ♪ ♪ if your business kept on employees through the pandemic, getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application. go to getrefunds.com to learn more.

what does it mean to be ever better? its your customers getting what they ordered when they expect it. discover how ryder ecommerce makes your customer's experience ever better. >> i don't think there could be anyone who has touched the venture capital industry in the last 40 years who does not have some exposure to one or another of these junior type things, like svb and signature, and a whole host of others. it has become part of the fabric of the venture community.

jon: this is bloomberg markets. that was ellen patrick of speaking about the svb collapse. it is throwing markets into turmoil now. let's bring in ed ludlow with more of what we are learning on the topic of depositors getting access to capital. what do we know right now? ed: there was a massive collective sigh of relief from both founders and vcs. i heard wires are going through. people i spoke to did have difficulty logging into the online banking service with silicon valley bank. a number of people got error messages. but once they were able to get through to the portal, they could see the balance of their accounts. they could also make wires in and out of silicon valley bank. and as my colleagues in the field are reporting, the actual brick and mortar branches here

in california opened up at 9 a.m. specific -- 9 a.m. pacific, 12:00 eastern. the treasury stepping into make depositors whole. the question is really what the broader ramifications of confidence are in this sector. kriti: what happens next when you look at the venture community? where do we go from here? ed: there were hundreds of signatories to that letter. we had them on the show earlier saying that list has now grown to 600 signatures. the thing that still needs to be answered is, how does this whole sector do banking going forward and who does it do banking with the echo silicon valley bank was not just where vcs put deposits. they relied on it for a lot of services. it was the first bank to take risk on early-stage companies.

the first person or bank a founder would go to. it would take calls when other main street banks would not, or wall street firms would not either. that is a big question going forward. there's a lot of hope from the vc community that somebody comes in and buys silicon valley bank and it is able to continue operating in the way that it has always done. jon: briefly, for the venture capitalists themselves, are they stepping up in the short term as those startups try to figure out some funding needs? ed: i had dozens of phone calls over the weekend, with people telling me they had to plug gaps. they work or vcs they had done investment with. a member, they are not themselves flush with cash. they do not keep it all on hand. it is a very interesting dynamic. kriti: certainly something we will be keeping an eye on. we should note that ed's new show is now at 12 p.m. new york

time. as we get a quick check on markets, green on the screen, hire by four tons of 1%. yields are down by 40 basis points on the front end of the curve. more market coverage ahead. this is bloomberg. ♪ these days,

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romaine: too big to fail or too small to save? another day in the banking crisis in the u.s. in the markets trying to ship things off. romaine bostick and scarlet fu kicking off. scarlet: the market is betting on the idea that it is more important than inflation and their repricing with the fed might do, giving equities a support. romaine: interesting, the s&p