just in the turmoil. the u.s. government moving to boost confidence in the banking system as lenders rush to borrow funds from the backstops. >> the ecb delivers a half-point height despite the credit suisse prices.

it was a very volatile session. secretary yellen's comments boosting the confidence in the banking sector when it came to the regular session. we had treasury yields rallying. we have not seen a 20 basis point move. we have for the past five sessions already. including in the treasury space. you can see the 10-year yield. we also have oil. it is under pressure. take a look at the after hours trading. everything that was done was to show i'm confidence in the banking system. where does the banking system go

from here? we saw the volatility in today's session. the stock fell 36%. then we saw it and 10% higher. that confidence does not seem to be remaining. we are talking about a plunge again. >> we also see this big rotation when it comes to deposit funding. banks will be taking up at the discount window. take a look at these numbers. a big deposit rotation happening right now from commercial banks. we are seeing banks borrowing combined almost $165 billion in the most recent week. there is a sign of escalating jitters and funding strands ever since we had the failure. the data we are looking at really showing the discount window.

the prior all-time high was 111 billion. we are looking at just shy of $153 billion that were borrowed from the discount window. >> maybe it is where it goes from here. how long will confidence really last in the banking system? with all these measures put forth? secretary yellen coming out saying the u.s. banking system is sound. when we are seeing banking turmoil. let's delve into what u.s. financial authorities have done.

it will suspend its dividend. let's go to the head here join me in the studio. 11 of them came together. it is in their best interest to do this, the stock market no doubt will get a bit of a lift from this.

silicon valley bank was put into their after a staggering run on deposits. banks have been circling for other parts of the business. it is a one lending business.

we will find out soon who is the actual potential buyer. we should have some certainty on first republic. people are not ruling out a sale of first republic you. >> what is happening with credit suisse, that was a big concern this week. it is buying back some of its debt. >> still so much.

u.s. stocks ended the day higher. the first republic bank rescue, that package was secured. we have a fed decision. we are seeing a bit of relief when it comes to sentiment. >> certainly in the stock market. bonds are signally fears of recession. there is a big for u.s. equities. particularly when you look at the tech sector. the nasdaq 100 has been outperforming for the week so far. also, this narrative we saw play out during the height of the pandemic, the fact that

technology stocks are seen as a defensive sector. investors seem to be flocking toward that area in a bid for safety. >> let's talk a little bit about financial stocks. what happens to the banking sector. how sustainable is this? >> we will have to see the volatility is definitely going to persist. most of my sources are saying we expect a lot more volatility. these are just stock options in general.

big moves there in rates. it is affecting how the bank stocks are trading and just adding two more of this volatility. >> he will of the markets calendar. confident in your area's financial system. kathleen hays joins us with more on this.

also, the idea that perhaps they don't do the 15 -- they could spark a panic. a 50 basis point high, that is with a signal.

>> in europe, we have strong capital and solid liquidity positions. as the vice president said, exposures are not concentrated and based on the work of the ssm. >> out i would say. that is appointed remark. there are some risks in this area.

our bloomberg economics team thinks it would be 50 basis points more. the peak will be around 3.5%. this opinion columnist gave the ecb and this is a decades-old facility. they don't think they would do the rate hikes like the ecb. they will try to separate the problems with the banks, with a need to fight inflation. >> bloomberg kathleen hays there.

the expectation that we will see that 25 basis point hike is playing into that short end of the curve. yields are rising. also, continuing to i that retreat back into those more safe havens. the same go once again back in positive territory. they are at the highest in around a month. traders are pushing above that 1900 level. the yen really once again acting as the safe haven currency. let's take a look at what we are expecting around the rest of the region.

that could be dissipating a little bit as well. >> let's now get over to vonnie quinn with the first word headlines and a little bit more on china. >> exactly. regulators in china informing some brokers they can resume data aggregators. it follows an abrupt suspension of such services.

the move blindsided investors and sent jitters through some corners of the market. the u.s. has released a short video that shows russian jets dumping fuel on a u.s. surveillance drone and apparently clipping the aircraft. the chairman says he does not know if the downing was intentional. he says the video suggests russia's energy was aggressive. the leaders of south korea and japan have pledged the readiness to end a long simmering dispute. tiktok is reportedly in talks with potential buyers as the u.s. prices it's -- when donald trump threatened two the app in 2020.

it is been a tiktok from government phones citing security risks. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. click still head with oil prices higher -- hovering near the 15th month -- 15 month low -- we get more on the banking sector. this is not as severe as in past crises. this is bloomberg. ♪

>> i can reassure the members of the committee that are banking system is sound. and that americans can feel confident that the deposits will be there when they need them. this week's actions demonstrate a resolute commitment to enjoy our financial system remains strong. request the overall health of the banking system is still very strong.

they are seeing this come from bigger lenders. quick that was has to be a concern. the rise has been in place for about five or six years. this is a culmination of it. this is what happened last year with the mismanagement of the division of portfolios and the fixed income bonds. the backdrop is when you start looking at the capital ratios of the banks being significantly better than what you had, two to three times, liquidity excess

reserves and even the amount of liquidity into the household systems that has been built up. christman your focus on quality and cash flow across all areas in order to continue investing in this environment, what exactly are you talking about? close the meeting you're looking for is predict ability and cash flows. that is really hard to get right now. when you stratus gastritis where the earnings in the job market that looks kind of vulnerable, always remember it is a lagging indicator. when we have the sessions, they serve a purpose when they come about. they kind of deleverage and flesh this out.

i think when you look at it, the recession we have with the covid era was more synthetically driven. even though it will be shallow to a normal recession, the markets are starting to get wind of it. we look at predict ability of cash flows, diversification, you heard kathleen hays talking about it. europe is a much different situation right now. this is kind of a reversal of what we call a paradigm change in portfolios and a regime change. that is the shift we need to do. we are looking at more cash flow driven, more muted returns over the next decade as we try to battle this patient zero that got things started. christman you talk about emerging markets, is that because of a positive proxy to

the china reopening story? is that a lack of correlation with what is going on in developed ranking systems at the moment? grexit you saw the rise in the dollar with all the fundamental issues it still had. it still rose substantially. even during this bank crisis, if you wanted to compare it 1007 or 2009, dolly went up 2000% whenever there was buckling. you are not seeing that now because there are fundamental challenges whether it is a debt ceiling or budget deficit, we will have a lame-duck session in congress for the next couple of years. china's reopening is a very big driver of that. they never rose as quickly as the u.s. and never really got overbought. there will be some challenges along the way.

>> we have breaking news right now. clients have pulled $8.8 billion from prime funds in the past three days. this is according to our own company data that was compiled by bloomberg. and the data coverage through march 15. we are seeing that charles schwab was hit with eight point billion dollars in outflows from their prime money market funds this week. we have seen investors much more anxious and scrutinizing lenders. they have been looking at brokerages.

this would be the largest redemptions in at least six months. plenty more to come on daybreak australia. this is bloomberg. ♪ emerson software helps clean energy become reliable electricity. go “good night." go boldly. emerson.

>> let's take a look at our tracking when it comes to australia and new zealand bonds at the moment. as we continue to watch the dislocation when it comes to the banking story and the u.s. as we see that discount window for the fed being taken up as well, we are

course we are watching shares of

republic plunging after hours trade following another day of trading for the lender. let's discuss the outlook and bring in annabelle for morning cause. despite the volatility, some analysts say the worst of the banking turmoil is over now. >> that is what we are hearing but it is ready hard to say that when you take a look at where first republic bank is trading. we are seeing that plans really is celebrating down to the bank saying that in its capital provisions, it had roughly $34 billion as of march 15. it really was that reaction. in terms of what analysts are saying, essentially what we are hearing is analysts say one of the worst -- the rest of the crisis is over here. maybe the fed does not have enough money to avoid a banking collapse but individual lenders

in the industry can do that. he says what we are seeing now is reminiscent of something else that happened back in 1984 when 14 banks came together to bail out long-term capital management. he said that helps to avert the struggling hedge fund collapse and then a broader financial crisis as a result. crimes are we hearing about anything else coming in for asian financials? >> s&p global rating systems has been one of them coming through. really echoing what we have been hearing from other analysts. the crisis is unlikely to come across the asia given the capital buffers of lenders in this part of the world. i highlighted australian banks in particular. they are relatively well short across the crisis. we are unlikely to see any meaningful spillover effects. one area we are highlighting is the japanese lenders. they are saying perhaps these

ones are looking a little bit more exposed to what is going on given the interest rate sensitivity here. we have seen japanese banks on a tear, riser with anticipation that we would see some sort of pivot from the boj. correct let's turn to janet's comments. she says her department is monitoring for potential contraction in credit and the u.s.. this follows the collapse of silicon valley bank. that's parts contagion across the banking system. >> i can reassure the members of the committee that are banking system is sound and that americans can feel confident their deposits will be there when they need them. this week's actions demonstrate a resolute commitment to ensuring our financial system remains strong and that the depositors saving remains safe.

>> what are the key takeaways from yellen's testimony today? the system is sound. they have taken the steps necessary both with silicon valley bank and this was before the first republic news but that there is enough liquidity, we are adhering to the fact that people's deposits will be protected under the ftse rules and that there were a number of factors that had this occur. but things are sound. on the other hand, she did say the concern is there is no concern about that potential credit risk.

that there is some cause for concern about there being that tightening and credit which if that was to occur, that could really invoke that whole contagion risk. that is what everyone is worried about. she said it in measured tones. she was given to messages at the same time. clearly that is a concern. she said that is something the administration is closely watching. >> what were some of the more partisan comments on the lawmaking committee? >> she was supposed to be talking about the president's budget. this testimony have been scheduled before the events of last weekend and however, the

bankers, the lawmakers took the opportunity given the drama and the banking sector this week to make comments about things like the deficit, the republicans saying the deficit is too high and that the administration is not doing enough on it. democrats turning to republicans as saying we have a bigger problem. it is having to raise the debt ceiling that you are dragging your feet on. these questions came to her, some of them came to her in a way that did not necessarily see my questions which is often that formative tactic of testifying on capitol hill. but she did get a number of comments and questions from lawmakers that were pretty partisan. because that was jodi schneider there. the next guest says it is hard to recall large bank failures. daniel, always good to have you with us. what are your views on the

crisis? >> i don't think that is necessarily the case. we have to understand there is a lot in the way of concerns for deposits for moneys being held. you had the breaking news about charles schwab and that institution is on a list of a few others where the deposit flight had been high. it was not just a signature. this is a difficult point to impress upon people where the fed or the s&p is providing deposit support. that is not actually capital support. that is a very difficult issue to resolve in terms of trust for depositors. that is just the very first point. what is very likely is that that there will be downgrades. that makes things a lot worse,

we were talking about a minute ago is banks tend to want to be more restrictive on their lending. that is when you move into potential credit crisis. not just liquidity crisis. and from an earnings and operational perspective of banks, the way they should react is hold more liquidity and that means lower net interest. >> hopeful is the approach that we see is being taken in europe depending on what the fed does next week? we will have to wait and see but there is this prevailing view that they could continue with the inflation fight because they have the tools to be able to backstop these banks if they require that liquidity support. is that a helpful construct you when it comes to really addressing the core mandate of financial stability? >> that is a good point, is that the court mandate or is it

inflation or unemployment? >> i don't actually know if what they are doing now can be done for all institutions and the risk is that you bring in jp and city and all these others in europe. to support banks having liquidity issues. then you're talking about making a slightly isolated issue much more broad. i don't know if that is particularly safe for the payment system. >> what does it mean in terms of the banking sector itself? are we going to see more oppression on mart -- pressure on margins? when do they become a good investment? >> you should see pressure on margins. in ms. banks will want to be very liquid under acid side of the balance sheet. this means lower yield investments, there yield securities. it also means there will

probably want to hold a lot more capital. that is usually not a high-yielding item. we have seen over the past four quarters in the u.s. that the lord spans have seen interest expenses go from almost no growth very early last year to about eight or nine times growth in the fourth quarter. that was already in place at a time when credit costs were rising. now, we will probably see that much worse and instead of net interest growth at high levels. maybe very low levels or even negative as credit cost impairments are rising. you can get it not only on those numbers but securities. >> does it make sense, the fed, the treasury coming into help backstop the bank runs but at the same time you have the private sector, the big lenders

themselves coming into play. >> i don't know if it makes a lot of sense unless they are so fixated on inflation and if it weren't for that, they probably would have just cut rates a lot but they just want to stick with that and then their hand is forced to a degree. i am not sure how sustainable it is and you are seeing -- you still see a lot of people maybe don't want to have their money at certain institutions. i'm not sure that reassurances really help a lot of people in the mass market. maybe they will want to feel more safe with their money. but there is one other issue here which is also pretty important. if you remember over the past six to nine months, they were fairly high dividends, share buybacks with banks, especially in the u.s.. that is probably also gone. that was an enticing investment

opportunity for many people. >> when you take a look at silicon valley bank, the reason -- one of the main reasons it was beloved within that ecosystem that it thrived in was because it was a business that cater to vcs and startups across the breadth of services. not necessarily banking but it did not have a diversified business. within the financial sector, is there a model that exists that

should be like that do you think where we do have specific platforms and services that cater to one part of the economy? >> that is -- i don't know if there is a perfect model for every environment, one would need a perfect model for an environment where we have this kind of inflation and this magnitude of rising interest rates and then there might be a different model for a different environment. for that bank, under assets, they were heavily invested in longer dated bonds with big impairments. when depositors came to take their money out, they couldn't actually pay them all back unless they wanted to liquidate those and realized losses. that is probably more of their issue than just being heavily exposed to a very wealthy tech startup. they sort of go hand-in-hand. i don't think there is one single model. but to be fair, many banks around the world are very well diversified across many sectors although a lot of them are

heavily concentrated in residential mortgage lending. >> always great to have you with us. we do have much more to come on daybreak australia. this is bloomberg. ♪ drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees

and keep more of what you make. start saving today at godaddy.com 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. >> the u.s.'s biggest banks have agreed to -- it sent depositors playing. jp morgan, bank of america, citigroup and wells fargo will each contribute $5 billion of uninsured deposits. , sex and morgan stanley will ship in.

they offered few clues on the next move. officials lifted the rate to 3% as expected although there is no language in their statement about where borrowing costs are headed. it comes days after the market turmoil that quickly elevated level of uncertainty reinforces the importance of a data pendant -- dependent approach to a policy rate decisions which would be determined by our assessment of the inflation outlook in light of the incoming economic and financial data. the dynamics of underlying inflation and the strength of monetary policy transmission. greg's ubs and credit suisse are resisting the idea of a merger that some of the industry say would boost investor confidence. sources say that ubs is reluctant to take on it small arrival.

executives are focused on turning the background. jp morgan analysts are saying the prices and credit suisse will most likely end in its takeover. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> the japanese by minister says wage gains are pivotal to his new capitalism plan and efforts to change the way business and the economy operate, a major japanese organization has announced a wage rise, averaging around 3% for more than 160,000 workers and manufacturing services and logistics. kathleen hays has this conversation next. >> we are joined by ken. a member of the new capitalism panel. we are very happy to have you here in studio with us. you are hidden -- you are here in new york. you are a very dizzy man. take you for taking time out for us. you are on the new capitalism

panel that was set up. why wages so important and how do you assess what is happening today? >> wages have not gone up in the last 30 years. japan used to be the most expensive places in the world 30 years ago. when you live in japan, you don't feel it. it is very expensive here. >> how do they play into the new capitalism plan? >> as a politician, you need to get some public support. one thing is always to push for higher wages. higher wages initially were talking about tax incentives. that is a one-time often. but we are thinking is you need to increase the metabolism or the liquidity in the labor market. they have not pushed so far as promoting liquidity and labor market but they are talking about reskilling.

in japan, you know it is lifetime employment, if you work one job, what is the incentive for wages to go up? people are looking for talent. >> there are wage negotiations going on for years. generally, some of the big corporations increase wages but small and medium-sized ones, 70% of all the companies in japan, they often can't. right now, there are materials costs. there are electricity costs. they are being squeezed. what are you seeing to date? >> the smaller companies had a fear of raising their prices. they thought they would do sales. it is getting to the point where it is just ok to raise prices. pass on the prices. once that goes, the wage prices will follow with that as well. until now, they thought they had this cap. smaller companies are under more

pressure compared to large corporations to keep wages low. i believe we are in a different era in japan. >> the governor who is just about done, 10 years at the bank of japan, the doj's position has been to date that we just don't know if the wage increases will keep going. we just don't know if inflation will keep rising. as a businessman and someone watching not just your business but others, what do you think? >> if it was just because of the commodity prices going up because of corona, it might be a one-time pop. we think about unleashing human capital for higher wages, it might be structural. it will have structural inflationary pressure. there will be a different world the boj needs to operate on.

from the past decade or so. >> if it is a different world, what do we need? >> a new governor. i don't know. he seems like a very pragmatic person. he will probably make his judgment on the data. if he shows prices going up, the monetary policy will change. >> does this mean inflation getting higher? >> that is an important point. the politicians may get higher wages, higher prices, it becomes more difficult for the central bank to manage their monetary policy. if the interest do go higher and higher, japan has a lot of fiscal spending. there might be some uncertainty in the market about that high level of debt the japanese government has. that has been the issue.

>> you are here in new york but you have been following the news about the banking turmoil, a lot of steps being taken since friday, the u.s., credit suisse, california banks, etc., how is this affecting japan? >> it is part of the global market. because i think the backstops have come down an awful lot. given the positive yield curve in japan, it is basically back six months ago is what it is. in that respect, it looks ok. the japanese banks don't have to mark to market. their jgb holdings. in that respect, six months ago, with interest lower, maybe it gives the boj more freedom toward another policy then when it was higher. christlike yield curve control? >> yes. it is there so let's make sure

that it did not go flat. now it is going up and so it was a ceiling. it was like 0.50%, the 10 year. you can tell he wanted to go higher. i am sure a lot of hedge funds are betting that. maybe they had the government positions. >> thank you so much. he is a member of the japanese prime minister new capitalism panel. because that was kathleen hays there. you can also dive into any of the securities of the bloomberg functions we talk about. plus, join in on the conversation. you can send us instant messages during the shows. this is for terminal describe -- terminal subscribers only. this is bloomberg. is it not

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and relentlessly working with you to make them real. ♪ because grit and vision working in lockstep ♪ puts you on the path to your full potential. ♪ >> here is a quick check of the latest business flash headlines. credit suisse is losing several senior executives. our sources say the head of the japan equity esteem is leaving. documents seen by bloomberg show the head of equity sales for the region. meta-platforms have started carrying out job cuts earlier

this week. and beginning with 1500 employees and human resources. mark zuckerberg want the restructuring could last many years. about 10,000 of current staff are facing the act. up from the prior forecast. they are well ahead of the s&p 500 gains. that is it for daybreak australia. daybreak asia is next. this is bloomberg. ♪

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