>> good morning. welcome to "bloomberg daybreak: australia." >> we counting down to asia's major market opens. >> the top stories this hour -- freighters overhaul bets on the fed's policy path as the collapse reverberates across market. a rate cut, expected next week. >> in tur -- >> the year treasury yield, slumping in its drop in decades. >> and a plan for a new fleet of nuclear powered submarines as they look to blunt china's reach in the pacific. >> u.s. futures coming online slightly higher in the asian session of course after we finish the session mixed. we have the s&p 500 under pressure. those bank stocks, plunging. we got tech benefiting from the

notion that we might see less rate hikes. we got the 10 year yield falling to a six week low. it was the two-year yield that we were watching closely, down below the 4% level, remember just days ago, we were above that 5% level, having to do with the idea of really repricing potential fed rate hikes from here. we are seeing crude prices coming online in the asian session under a little bit of pressure. not surprising given we saw the volatility spike to the highest level since the start of the war and invasion of ukraine. this of course as we continue to see the microeconomic challenges really hitting the price of oil. take a look at the bank stocks. we saw the biggest decline, the worst day since the start of the pandemic for the kbw index, the regional index, the biggest intraday fall when it comes to some -- some levels we have not seen since march of 2020. these two regional banks, really taking a hit because of concerns

of contagion in the markets. >> that just shows how vulnerable those small and midsize banks have become to fed policy. the fallout from svb, answering one of the biggest questions on wall street perhaps, when was something going to be breaking here from this tighter fed policy? perhaps the answer has come. bets are really building that the fed will be forced to rethink its path ahead, the recalibration around the rates, not just hitting the to your treasuries, but really shockwaves -- to your treasuries, but really shockwaves with the german two-year. shifting around the outlook for a hawkish ecb. the equivalent in the u.k., the two-year yield down the most since the early 1990's. seeing a huge pullback in the aussie three year yield and two-year yield. if you change on, nomura

saying we could see a cut at the march meeting or a pullback in the qt program. king dollar, knocked off its post-, even though we are seeing the aussie dollar and the japanese yen flat in the early moments of trading, but we've seen the dollar retreating. in terms of the equities picture, we are looking risk off year. semi futures guiding for a drop of nearly 2% at the open. it does tell us this fallout from svb, still a ways to go. >> we saw that through the market session, multiple u.s. lenders suffering record drops. investors, still rushing to the exits to reduce their exposure amid continued fears of broadening contagion from the svb collapse. let's bring in our panel for the conversation, when it comes to svb, there's a lot of concern it will take the next days and weeks to really see whether that systemic risk has been contained

by the regulatory action. we saw that in the reaction across regional banks in particular. >> yeah. that's exactly the case. i just want to emphasize we are seeing that in their stocks, in investor sentiment. i don't think we are seeing any other banks teetering or moving towards a brink as we saw over the weekend with signature very abruptly put into receivership. it seems to be that while people are still worried, people who are worried and pulling away from banks are investors more so than depositors, who are really the important players when it comes to a bank. >> all of this contagion fear, really leading traders to repress where the fed goes from here, kathleen, what are you seeing? >> we are hearing loudly from a lot of banks that when it comes to what svb is doing, pushing the fed, it is pushing a to think less about what hikes and how big they are and a lot more about the possibility of a pause, a possibility of recut. we are seeing the legs monetary

policy legs -- the lags, monetary policy lags. they have caught up with banks like svb, with so many risky assets on their books. goldman sachs, making the easiest call, that the fed will pause and they will do another rate hike. the terminal rate, around 5.2%, 5%. they are calling for not only a call of 25 basis point, but also halting quantitative tightening for a while, because they think the fed will look at the financial stability risk first and foremost. they are going to say, "we better cut, things are unstable." the whole thing about ending quantitative tightening is that they are -- they are selling off loans. i buy a bond, i give you my reserves, i give you the liquidity in the market. that seems to be one of the most solid things they are saying. in terms of blackrock, that's the other bull's call, that the

fed will go ahead and do a hike. 2008, all the monetary levers were being used to support the economy and the fed does not have to worry about shoring up the whole banking system as it did then, so that's why they have to focus on the 2% target, getting there, bringing down inflation. they are calling what we are seeing a financial crack from the fed hikes. but it's not like 2000 and -- 2008 with the mortgage backed securities, a very different situation. also interesting, the former treasury secretary, saying in an interview today with david westin that a pause would actually be a mistake by the fed. let's listen. >> my own judgment is that it would be a serious mistake for the federal reserve not to remain focused on its objective of containing inflation and bringing it down to the range of the 2% target.

and that is probably going to require monetary policy to become more restrictive than it is right now. >> very important -- to things we are focused on besides what's happening in the banking system, with the bailout, from the treasury, the fed's new lending facility, consumer prices tomorrow, more emphasis, expected to come down the headline from 6.4 to 6% -- 6.4% to 6%. it could be important for these very volatile markets. also the european central bank meets this week, have been pushing for a 50 basis point rate hike. a lot of economists are saying that they don't have an impact like we are having in the u.s.. they can go ahead and do 50 basis point. the to another question for the markets as we go through the week. >> when you take a look at the market impact, what we are seeing in frantic repricing,

what's the sort of biggest aspect of the changes you are seeing that stand out to you over the last few days? >> definitely this day is going to be one that wall street traders remember, just because it really demonstrated how quickly everything can change. everything that kathleen laid out about the big banks coming out, now seeing the are expecting a cut, a pause. less than one week ago after jerome powell spoke, the market was pricing in a 50 basis point rate hike. that big shift in expectation is really what was driving the market. i find it really interesting that we had treasury yields plunging. the two-year yield falling over 50 basis points. this is something that stock bulls likely would've cheered a few weeks ago. this idea of a rate cut, lower yields. this is something a lot of my sources said risk assets would like. but now this cut and expectation of a cut is coming in the backdrop of the fed's going to have to cut because there

is this financial stress on the system. >> that was a really good quote my colleagues katie greifeld and donna h. had and their stories today from adam phillips, a portfolio manager, "we have always have to be careful what you wish for when it comes to a fed. monetary policy doesn't historically become accommodative when the skies are blue." we are certainly saying that right now with the plunge in stocks. >> talking about 5% in the two-year yield, emily, what other assets are you watching in order to see all this volatility player -- play out? >> the vix volatility index. for a while with the rise of zero day option, expiration, strategies, a lot of people have been saying the vix is broken, its ability to give investors an idea of the level of market stress is distorted now because traders are using other option strategies that are not used to calculate the vix. but we didn't see that today.

we had it briefly topping 30 for the first time in october. you can see the chart, the vertical line up, that is stuck volatility. we also had the dollar -- -- erasing the bloomberg dollar spot index erasing its year-to-date declines. also gold traders moving on to that safe haven, gold, coming to a one month high. a lot of superlatives. bitcoin, too, up about 13% today. still some pockets of risk assets in the market rally. -- rallying. >> in terms of what's next for svb, what are we waiting for, another round of bids? we have seen interest in different parts of the business at this point. >> yeah, the big question is, how do you have a bank close out a friday and not reopen monday with a new buyer? we had the bridge bank kickoff this morning, but we are trying to figure out who was buying, who was buying what -- who is buying, who is buying what.

but that's the big question going into the rest of this week. for svb, they still have to find a buyer for signature. that's essentially it after the chaos of last week. >> we will continue to watch where the assets go. max reyes, emily graffeo, and kathleen hays, thank you. we have seen u.s. futures perhaps a little bit of a rebound in the asian open. really not a lot given of course that we saw a lot of volatility in the new york session. u.s. stocks, dropping with bank stocks plunging. interestingly we had tech stocks benefiting from the idea that we might see if you were rate hikes and of course we saw that idea being played out in the two-year yield, with it plunging below that for percent level -- 4% level. >> the u.s. will sell up to five

nuclear powered submarines to australia in a deal aimed at blunting china's growing assertiveness at sea. the leaders meet in san diego in the august a lien -- alliance. the project is expected to take two decades. >> australia is a proud nonnuclear weapon states, and it's committed to stay that way. these boats will not have any nuclear weapons of any kind on them. each of us standing here today representing the u.s., australia, and great britain is deeply committed to strengthening the nuclear nonproliferation regime. >> the chinese president and the ukrainian leader are said to be planning a video call and what would be their first conversation since russia's invasion of ukraine. the ukrainian official says no date has yet been set for the meeting. the wall street journal reported it could come after xi visits moscow, a trip expected next week.

meanwhile, president biden plans a phone call with xi jinping once the government in beijing returned to work following the nbc. the white house security advisor declined to give an exact date. china's annual meeting ended monday with new premier li keqiang striking an auxiliary tone on ties with washington. visa free entry will return for cruise ships entering had high -- entering shanghai. it's the latest up away from the zero covid controls that had weed on china's economic growth. 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'm vonnie quinn. this is bloomberg. ♪ haidi? >> coming up -- more on the aftermath of svb's collapse. ♪ plus more details on the multibillion-dollar plan for austerlitz to get nuclear

powered submarines in a bid to blunt china's assertiveness in the pacific. we get the latest, next. this is bloomberg. ♪ was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com when you automate sales tax with avalara, you don't have to worry about things like changing tax rates, exemption certificates or filing returns. avalarahhh ahhh ahhh ahhh

>> the market is telling the fed to be done. >> it's too soon to make a call on the fed being done. >> what happens in march, i don't know. >> is not going to be 50 basis points. we are back to 25 basis points. >> we are pricing zero versus 25 basis points. >> what i'm concerned about is whether we are entering a period of much tighter lending standards. >> the financial stability risks seem to be somewhat ring fast and isolated with a couple of banks. >> one bank in california has struggled, may be a few more. doesn't change the fact that we have inflation still above and

has not come down. >> tomorrow's cpi print is going to be absolutely crucial and determine whether the fed is done. >> inflation is trending hot in a strong labor market. >> and that means more hikes, not less hikes. >> bloomberg guests on the collapse and how it could impact fed policy. our next guest is concerned about how risks to the sector as a whole can be managed. sarah joins us now. what if you days it's been -- what a few days it's been. some say it's too early to tell whether the systemic risk has been stemmed. what underappreciated risks there might be that we haven't seen yet. is it also too early to say that this is going to change or not change what the fed does? >> yes, it likely is. in that video we just heard, which -- we heard a lot of conjectures from economists and

strategists, portfolio managers across wall street, but there was no clear-cut consensus on what the federal reserve is going to do. part of that relies on the fact that we do get cpi tomorrow and also that we have just seen expectations for what the fed is going to do, change drastically from just a week ago. not just a week ago we were just talking about the federal reserve possibly hiking by 50 basis points this month after powell was a bit hawkish on capitol hill. you throw in the failure of two's and concerns over contagion, clearly that flips the script. there is no many on wall street saying that we are not going to see the fed move at all this month. i would say the ubs economics team is not quite there. we expect them to move 25 basis points. but really at this point in time, the fed announced the funding program trying to clear up any funding and liquidity issues, when it comes to was

going on in the banking industry, so hopefully they can turn their eyes back towards what they have been fighting for more than a year now, that is inflation. all eyes will be on the inflation data tomorrow one cpi comes out in the morning -- when cpi comes out in the morning. >> there's defensiveness within the u.s. market what you are also saying given the inflection points we've seen in china and europe, for example, there probably needs to be more thought on international diversification now. >> often times with many of our clients, largely with you as investors, you have home bias, investors feel as though especially because he was are performed for so long now, if feel as though they don't need any international exposure. for a long -- for the first time in a long time, if you look at different indexes and different regions, how they are performing this year, europe, china for example, they are outperforming u.s. markets. a long time, the argument for international outperformance has

been valuations. and sure, there are still valuation perspective -- there is still valuation perspective when it comes to this debate. but we do believe and our chief investment officer believes there are other inflection points and reasons now to actually be bullish on the international markets. especially if you are a u.s. investor. those who do typically home bias toward the u.s. they might not have as large of an issue but it's important to just think about diversifying beyond the u.s. now. >> it's interesting even before we had these issues with banks here in the u.s., for ubs, u.s. financials were some of the least preferred. why? did you make a differentiation between smaller banks and bigger ones? >> for quite some time our chief investment office has had a least preferred rating on financials. which is quite interesting. because we've been positive on value stocks.

when you think of value, you think of energy, financials. we've been more positive on energy for different reasons than financials. the reason for this lease preferred -- least preferred financial for quite some time has not part vendor to recession risk and also the increase cost of funding which is partially what caused what we have seen over the past couple of days. with these smaller regional banks. so for u.s. financials, it is at large right now when you look at the banking sector -- the baby had been thrown out with the bathwater. particularly the regional banks. we believe investors need to be cautious within the industry. but there are likely opportunities to be had in the space. >> do you still like the energy sector? oil prices took a big hit given all the volatility and macroeconomic concerns right now. but we didn't really see that huge demand materialize from the

opening of china. >> we do still like energy stocks here and we do have an increased exposure to energy stocks in some of our portfolios. ubs is still optimistic on energy. part of the reason for that, we haven't seen that pick in demand from china yet, but we still believe there's a possibility that that will come through with the reopening. of the china markets. as well as the fact that cpi is going to be a big point of discussion. inflation is still very hot. if you want some type of inflation hedge in a portfolio, commodities, energy will provide that. so we still do believe energy is a good place to be. particularly for the fact that in a rising interest rate environment or in a high interest rate environment, when inflation is still an area of concern, that can be a good place to be invested. >> going back to the point of diversifying overseas, how do

you factor in the strength or weakness of the u.s. dollar in making those picks? >> certainly, a strong u.s. dollar can be very difficult for overseas markets. especially emerging-markets. but we have seen strength in the dollar coming off a bit. it's not the only factor at play. absolutely, you have to consider dollar strength, and what the federal reserve is going to do. also what global central banks are going to do with their tightening and monetary policy schedules. again, it's not the only factor. just one of the factors out there. another factor being valuations. there are many factors that play. >> sarah pnczek, good to see you. thank you. you can get around above the stories you need to know to get your day going and today is a vision -- and today's addition

of dayb to get the news on the industries and assets you care about. this is bloomberg. ♪

>> here's a quick check of the latest business flash headlines. hsbc, than the owner of silicon valley bank's u.k. unit is planning to inject $2.4 billion a liquidity into the division. the u.k. base ring fence subsidiary bought the unit for a pound. u.k. chancellor jeremy hunt said it would've been dangerous to let svb financial fail. >> we could've seen some of our most important companies, almost strategic companies wiped out. that would have been externally dangerous for the u.k. banking system, it is extreme the secure, it is well-capitalized, and i think we demonstrated that resilience by what was happening

over the weekend, and the fact that we were able to come up with a solution so quickly. >> the cost against the default surged to a record. credit default swaps jumped the most in the bloomberg index tracking 125 european hike rate firms. credit suisse stocks also plunged as much as 15% in switzerland monday to hit a record low. bunge will replace signature bank in the s&p 500 index. shares rose as much as 8% after the announcement. plenty more to come on "daybreak: asia." this is bloomberg.

>> australia will build

its own nuclear powered submarines as part of a multi-decade defense commitment under the alliance with the u.s. and the u.k. they tells of the deal were announced today by the u.s. president, joe biden, the u.k. prime minister, and the australian prime minister in san diego just about an hour ago. we did get some of the advanced details. now, here's the bigger picture. >> we've got the full picture now. by 2030, australia will received three virginia class nuclear submarines with the option to get two more, no word on if they will be new or secondhand. these are based on a bridge design that will incorporate u.s. technology. construction on those will start the second in adelaide. it's a very long process. they will be capable of carrying cruise missiles. what president biden was clear that while these are nuclear

powered, they won't be nuclear armed. here's what he had to say. >> australia is a proud nonnuclear weapon states. it's committed to stay that way. these boats will not have any nuclear weapons of any kind on them. each of us standing here today representing the u.s., australia, and great britain is deeply committed to strengthening the nuclear nonproliferation regime. >> still some challenges here, questions over the industrial capacity of the u.s. to deliver the virginia class subs. shipyards are already stretched and australia has to build nuclear capability from scratch because there's no program in australia. so a lot of jobs to be created in that space. a lot of money as well. an estimated cost of .15% of gdp every year for the next -- until 2050. we are looking at $386 billion. >> in geopolitical context,

it is really putting china on notice. was there any mention of beijing? >> yeah, listening up for that, no mention, but you could print minister that mention china and is growing assertiveness, in the same sentence as russia's adventures in ukraine and north korea's growing belligerence. but the u.k. also used this opportunity to announce it is upping its defense budget from 2% of gdp to 2.5% of gdp. yes, it's pretty clear what these nuclear submarines are designed to do. they have immense range, they have been described as the apex predators of the scene. they don't need to come up for refueling or air like conventional powered submarines. now there will be based in perth. china has previously set this is going to fuel military confrontation in the region, and xi jinping views the closing of

the address to say that china is going to organize its military and a great wall of steel. china, saying it will defend its sovereignty and interests in the region. >> lumber's paul allen -- bloomberg's paul allen, with the details. >> president biden, seeking to reassure markets the u.s. financial system is on solid footing. he promised to hold responsible those behind the collapse of svb, amid fears of a full-grown banking crisis -- full-blown banking crisis. >> americans can rest assured that our banking system is safe. your deposits are safe. and we also assure you, we will not stop at this. we will do whatever is needed. i will ask congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again, and to protect american jobs and small businesses. >> members of the ecb's

governing council will set to oppose a large interest rate hike due to the fallout from svb. dovish voters will argue the economic environment has shifted and more caution is needed. the ecb president said last week a half-point increase is in her words "very likely," as they seek to tame inflation. the european union may not get a chip plant from taiwanese companies if it continues to refuse to engage taipei and trade talks. that's according to an editorial column published by the government bent essential news agency. semiconductor money for has been talking about setting up a plant in germany. that taiwan central news agency says the commission has refused to enter a trade and investment talks. the department of justice has reportedly opened an investigation into the collapse of the crypto stablecoin tara ust. the fbi and new york attorneys have questioned former team members of the terrausd creator, who is currently in hiding. south korea has an arrest

warrant for do kwon and a civil suit litigation for fraud. 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'm vonnie quinn. this is bloomberg. ♪ >> time now to assess the market and central-bank impact of the svb fallout with annabelle, in hong kong. bond yields, plunging, by the most in more than four decades. >> let's put those moves in perspective year. we saw the biggest repricing around that since the era of paul volcker in the early 1980's. you can see that circle in red. surpassing what we saw in the black monday market crash in 1987. a third straight day of massive moves to yields. a repricing of more than one percentage point over the past three sessions alone. that does really -- that is being really driven by the expectation's of the fed and the outlook for rates and

bond plays for instance joining goldman sachs, saying the fed will be forced to pause at its upcoming meeting next week. nomura, expecting a rate cut of 25 basis points. also a halt to the quantitive tightening program at the march meeting. the reason they are saying that is because the moves we are seeing so far from u.s. regulators have been insufficient to calm markets, they say, more is needed to do so, and it is possible they could create any lending facility. -- a new lending facility. >> and the bets are helping u.s. tech stocks, actually. what's a recommendation, the longevity of the optimism? >> we saw in the u.s. session overnight the nasdaq getting around half a percent, even in futures today, still pointing higher. morgan stanley is saying if you see any post svb bounce in

stocks, we will sell and that opportunity because we do have morgan stanley, one of the more bearish on wall street, correctly predicting the selloff and also the recovery in october of last year. he says essentially we are going to see a new bear market low still forming. he's not saying we will see any sort of systemic risk coming from svb and other banks that have collapsed, given the fed, but -- and other u.s. regulars, but he sees a negative impact on economic growth. he says essentially we are going to see the trend of depositers taking their money away from the smaller, midsize banks continuing. michael wilson says we could see perhaps banks being forced to offer those in term but also that would lower their margins,

and that will still be a negative for these lenders. >> quite interesting. we thought higher rates would help with net interest income. bele was telling us about the rally in the treasury space. government bonds across the world have rallied in the rush for havens after the collapse of svb. shares of global corporate risk spiked, coming is the pipeline of company that was already running dry. major central banks continuing to raise borrowing costs with investors increasingly wary after a series of high-profile corporate blowups, including brazil's americana, and others. thank you both for joining us today for this conversation on emerging markets. we had seen a huge issuance at the start of the pandemic. where are we are now? >> we are almost at the complete

opposite. you are mentioning high borrowing costs across the world. these negative surprises we had in india with adani and ame ricana. we saw issuers disappear. the companies that want to issue can't. and the companies that -- because it is too expensive, and the companies that can't afford to issue don't have to. they can wait until rates are down and it is cheaper for them. >> given the rate volatility, everything we are seeing with the concerns about financial markets, does this make emerging-market assets a more difficult but? -- more difficult bet? >> thanks for having me on your show. so, for now, certainly, with emerging-market assets, for the last 10 years, a lot of money has moved offshore into the emerging-markets looking for excess yields. the fundamentals and em

corporate's remain quite strong. they have used excess cash flow to deliver balance sheets. but with higher return opportunities being offered in domestic markets, what we are seeing is global investors in the u.s. and europe looking at their home markets, given the yields that have increased quite substantially, and that subsequently increases the hurdle for emerging-market issuers, both sovereign countries as well as companies to come to market. >> akbar, when you take a look at china at the moment, do you see this more broadly as a tailwind or a headwind risk? stemming from the property market, for example? >> china's had a very difficult last 12 months. the property market, we are observing the data improve subsequently. with the covid reopening, that should also be a tailwind. overall, it should also be a tailwind, also from an asset buying standpoint. given the chinese offshore bonds

tend to be purchased by a captive investors based in hong kong or other parts of asia. >> in our report, china was one of the biggest issuers of debt and emerging-markets. >> that's right, we've had a lot of high-grade issuance. a mod of emerging markets companies. but we do have china, south korea, and saudi arabia issuing some of the debt we are seeing. pretty much all the debt we are seeing. >> akbar, i wanted to ask you, something we were talking about here on bloomberg tv earlier was the fed rate cycle. that is a major -- it could be a major help to em issuers, no? >> yeah, so, typically, em assets do not perform well when the fed is hiking rates. it could potentially put a pause to some of their hiking. if and when the fed doesn't stop hiking, we should expect em assets to perform quite well. we are very opportunistic in our

approach across em assets. we look at local markets and hard currency bonds as well. within today local assets are more attractive given em central banks were quite fast to start hiking rates. we think they might've gotten ahead of inflation may be even more so than developed markets. >> when you talk about the risks associated with secondary liquidity concerns, what are you seeing at the moment in terms of that pressure? >> the em corporate debt market, that market in particular has been one of the less liquid markets within the broader credit landscape, including the u.s. and europe. i think in the last six months, we find liquidity has gotten even worse. i would attribute this to maybe two reasons -- broadly speaking, since the financial crisis, banks have just been allocating less capital to the trading desk stand therefore their ability for corporate bonds which are smaller in size is less limited

, and in addition the em corporate buyer based tems to be more buy and hold like. . only about 15% of the bonds are held by dedicated em corporate funds. a lot of it is held by other crossover portfolio managers. they tend to warehouse that risk in the portfolios. that causes less turnover, hence less liquidity. it's almost like a lack of liquidity begets more liquidity. >> the vicious cycle. akbar, where are you seeing value in your portfolio? how are you measuring jurisdiction risk as well when it comes to emerging-markets? >> we continue to see value in the sense that the em universe is a large universe with thousands of issuers and multiple different business models. our approach is to look for high-quality businesses we think generate strong cash flows, with good governance. even if a tough environment, we think those companies should

have alternate sources of financing to refinance short-term obligations. we are being very selective. we recognize the next 12-24 months, the refinancing opportunities may be limited, and we have to be very selective in the kinds of companies and countries will enter money to, to ensure we get paid back. -- we lend money to, to ensure we get paid back. >> thank you so much, julia and akbar. you can get more on the top emerging-market stories on the terminal. next, we discussed the fallout from the collapse of svb and what it could mean for venture capital firms and startups. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates, exemption certificates or filing returns. avalarahhh ahhh ahhh

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>> it's been incredible chaos. so my phone has been blowing up. >> the people that will be the most affected here are early and mid-stage companies more so than late stage companies. >> venture capitalists like to run around saying they like to provide value, this is the time to provide value to your portfolio companies. >> events like this are massively bullish. for the crypto complex. >> the fed should have been on top of what was going on. the bank's explosive growth, now is very quick failure. -- its very quick failure. >> some vehicles from our guests commenting on the svb follow. the collapse is prompting a

global reckoning and the tech and financial sectors, also reverberating around the world. let's talk about the issues and what it means for startups, the ecosystem, venture capital firms. we are joined by the cofounder of square peg capital. paul bassat. great to have you with us. we are under challenging circumstances for the business at large. let me start off by asking you about the exposure that you guys have, in terms of dollars, how many portfolio companies do you have exposure -- to have exposure to this? >> we were pretty lucky, we did not have direct exposure ourselves. that's number one. in the portfolio, a large minority of companies did not bank with svb. there were a reasonable number of companies that did. a good chunk of those got out on thursday and friday, prior to the bank collapsing. then there are a number that

still had moneys on deposit. none of those had a situation where they had a short-term or long-term is essential crisis. we were very fortunate, in terms of that portfolio. obviously that's become a hypothetical set of actions. >> not hypothetical is what happens now for svb and the broader ecosystem. who fills that void? svb played a very unique role across so many of the other services that it provided. this is an extension level -- some say this is an extinction level event for startups, do you agree with that? >> you've got the direct implications of the collapse, you've got a bank that banked a

lot of start of global. that was particularly true in the bay area and throughout the u.s. we see this in rally startups, the rally markets. silicon valley, southeast asia. it has important implications because it had such deep relationships with some of these startups across the ecosystem. others will step in and help fill that void to some extent. in a perfect world, some will take advantage of that important goodwill. this is another issue -- if the fed and the treasury had not taken decisive action, you would've had enormous implications for many startups. it was going to be existential for many of these businesses.

that would've been really significant. but also obviously, we are already in a risk off environment. that would've rightly intensified a risk on onset, if depositors would've kept up. we are going to see applications as a result of what's happened the last few days. but i think significantly less then we would have seen if depositors wouldn't have kept up. >> you say that you were lucky and fortunate that you were not more exposed to what's happening here. but i do wonder, isn't that the issue? should there have been more transparency and more understanding of what this bank's balance sheet looks like? what are the lessons that you take away as you look back and you think perhaps you need to do more due diligence along with your portfolio companies? >> i think, no question about it. it's every 10 or 15 years folks are reminded that banks can be inherently risky businesses.

you have to understand the bankers that you bank with aunt risk mitigation -- and risk mitigation. have deposits spread across a range of different institutions. you don't want to have exposure to a single organization. you want credit worthiness of these institutions that you work with, etc. all these things are really good points. in my career, this is the third or fourth crisis that we have seen. we saw a deep recession in this country in 1991 and 1992. just the implications might be mainly related to that -- but it's an opportunity for us to think about the risks we are taking and how to mitigate those risks. >> do you expect tech m&a, fundraising to stall, as stability returns, until panic fades a little bit?

>> i don't think so. i think it would've been really different if depositors were not able to access their money and essential there was some sort of return to normality -- and essentially there wasn't some sort of return to normality. any event that creates uncertainty in an environment where there is already uncertainty, of course that has some implications. but we don't see this -- i don't think this feels like crisis mode. it feels like people were in crisis mode. but it's obviously a little bit uncertain and unpredictable how the next few weeks will pan out. i think most folks will go back to business as usual. it was not quite usual anyway. we are in a slightly different environment. what markets were functioning fine, fundraising deals were getting done. the right companies were

getting funded. valuations have obviously come off. but if you were comparing the 2023 market, the startup market for -- with a 2019 startup market, it was not very different. it was very different in 2021. >> thank you so much for your insights, paul bassat. we have more to come on "daybreak." this is bloomberg. ♪

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>> let's take a look at how we are setting up when it comes to this tuesday session. we had another day of bond yields plunging, the biggest since the paul volcker era. concerns about u.s. banking, continuing to spike, despite the concerted efforts to stem those losses. taking a look at what we are seeing, i'll say futures are setting up for some steep losses going into the open. the aussie dollar also sitting a little bit risk off at the moment, going into the start of trading in tokyo. chicago naked futures, up about .3% -- nikkei futures come up about .3%.

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