>> i'm john holland with the first word news. on the second day of his visit to moscow, xi jinping touted its close ties to russia. he invited putin to come to china later this year. he called china their largest neighbor and copperheads a partner. bloomberg has learned that ukrainian forces will now get tanks by autumn. that underscores the urgency of the u.s. and its allies feeling about getting weapons to ukraine to hold off russia's barrages. here in new york, a bomb threat was called and just as a judge was about the start a hearing

against donald trump here at the 911 call was investigated and courthouse was temporarily closed, and the threat was deemed unfounded. sticking with that story, letitia james is asking a state judge to force trump's new accounting firm tempered on -- to produce documents. she sued trump and three of his children for allegedly inflating value of his realty assets. he provided hush money to a pornographic star. he denied wrongdoing. in miami beach, city commissioners have voted not to extend the state of emergency into next weekend, saying a one-time curfew was enough to curb violence during spring baked -- spring break. two people were shot and killed over the weekend. global news 24 hours a day, on air and on bloomberg originals, powered by more than 2700 journalists and analysts in over 120 countries. i am john hyland.

this is bloomberg. ♪ >> welcome to bloomberg markets. kriti: let's start right with the price action here. this is the day before the fed major historic policy decision. you are seeing green on the screen for the s&p 500. nothing to scoff at here. only -- almost 0.9% gain. you're seeing tech outperformance, which is crucial as they talk about sustainability and the breadth of the stock market rally. i will let you dive into the specifics. the idea that just perhaps the treasury department, fbi see, and federal reserve might extend the limits on deposited insurance, that is important when it comes to confidence in the banking sector broadly. and the potential m&a in that sector as well pushing stocks higher.

we should talk about the bond market. at the end of the day, it comes down to what the federal reserve is going to do tomorrow. you are looking at a 10-year yield of 3.58. go to the front end of the curve, that move is even bigger. to the far end, it is a little bit lower. you are still seeing treasury volatility very much part of the conversation, even when there is a semi-5% chance in the market that we are going to get a 25 basis point hike at of the federal reserve tomorrow. what's interesting is that even as we seal tire, the dollar is still lower ella tipped to the euro. euro-dollar at 1.07. the story is that yields are going be higher in europe. interest rate differentials between the ecb and federal reserve are playing a master of -- a massive role. higher by 2.3%. this comes off goldman-s saying $100 oil is no longer the base case. jon: that was obviously seen as a bearish sign for crude.

the demand and supply stories, in many ways, have not been supporting the price of energy of late. here in canada, where there are a lot of energy investors, they are seeing green on the screen in north american trading today. you see that reflected through names like dow component chevron or a name like exxon. investors giving energy a fresh look after those challenges we saw when prices were hovering around the six d5 dollar level. we are starting to sing that improvement. -- even though it is led by the banking sector, that is the point. getting messages of confidence out of washington, certainly leading investors act into the bank stocks. first republic, how could we not talk about the sizable advance in this volatile stretch, right up around 54%. you see this reflected with some of the standout names within the dow jones industrial average. a stock like jp morgan, goldman sachs, and also the renewed

interest in sub technology companies always for different reasons. we have seen this near 7% advance for tesla, as we have watched moody's change its view on the picture for the ev maker. then, we are going be watching earnings, out of that cycle right now, but we have nike reporting after the bell. tonight, we will watch for trends out of china and the inventory story as well, along with continued headlines crossing on all financial players across the world. kriti: that nike story is almost undetected, underneath the radar. it is interesting what that means for the federal reserve. it is the same bellwether as caterpillar and fedex. it is still driving the trade. morgan stanley cio mike wilson, back in october, said the macro is not going to drive trade, earnings will. that switch still has not kicked in. that brings us to exactly what we are going to get any four hours from now. the major rate decision from the federal reserve. are they going to pause or hike?

that seems to be the question. >> personally, i would like them to pause. i would like them to see what has been happening in the banking sector. everything that is happen this week and last week. we need a little breather to figure out what is going on in the markets. they can pause. they have another chance to hike six weeks from now. it's not like they pause and are never allowed to hike. jon: obviously, we are going to see a lot of views leading into that decision for the fed. the banking sector is going to be watching very closely because we are trying to determine the sensitivity of that sector right now. that brings us to our stock of the hour. we just showed you that 50% plus advance for first republic. those shooters shaking off the record low we saw on monday, as the lender looks for ways to bolster its finances. that's bring an action ali bassett, who has been covering every twist and turn of the banking turmoil. cinelli, what do know at this

point about the sentiment today surrounding first republic? sonali: the stock is up to the tune of about 50% after a 47% selloff yesterday. what that tells executives at least today, it seems in the clear. the rising has nothing to do with the financial positioning of the bank. the worry here is the deposit base and whether it faces any future runs. there are options on the table for first republic. that is why you are seeing so many people coming back in. you had reuters reporting the last couple of minutes that they are looking at ways to raise money in the form of selling certain assets. that could be the sale of certain loans to private equity firms or other options as well. they could sell parts of the business. we previously reported that they could have some kind of banking sector involvement. the financial times early today reporting that bank ceos are meeting in washington on the

sidelines of a form that has been previously scheduled. whether that leads to anything is an open question. they have already come in with that $30 billion deposit inflow to first republic. the government's own reaction to this kind of banking fallout we have seen the past couple of weeks, the fact that the tone today has come out with much more support, saying depositors are sake -- are safe after uncertain comments yesterday about banks getting treatment in terms of full backstops, there is more confidence in the market today that the government will do what it takes to get the job done, all political wrangling aside. remember, the further this goes, the worst tickets. -- the worse it gets. these external measures might need to go to congress or tapping resources from the treasury department. we are not there yet, but they are considering all options.

that is giving covenants to this stock, as well as ripple effects to other stocks. you started your career -- kriti: you started your career with deposits. tell us about how these uninsured deposits might get insured. sonali: it's a great question. remember the deposit insurance went up at the wake of the lightest crisis. that was not the primary response from regulators. when i talked to my sources about this, there could be different measures being taken, whether it gets really bad, whether that means that for some time, deposits are backstopped, whether they have to go to the treasury department for the stability fund, another option discussed, but that will be bypassing congress. the idea here is to hopefully get to a situation that is not so political. that is why the banking system is also involved. the sooner this gets salt, the more confidence there is in the

system, and the political wrangling right before the debt ceiling issue comes to the four and a much bigger way is in the best interest certainly of the financial system these regional banks and even larger ones. jon: we have gone in such a short time from a period of uncertainty as to whether or not you can find some industry players that would want to come to the rescue of another player, but now we have some deals being reached where the reaction from wall street has been quite favorable. he think of new york community. i do wonder what you are hearing from different sources about whether or not, now that you have more signals of confidence coming not just from washington, but even here in canada, we have the banking industry that is lobbing the federal government on the subject of ensuring more deposits, whether or not it creates an interesting time for some of these banking players to carve out some more territory.

sonali: it's a great question because more territory for who? the regulators did not want to see thanks get weak, potentially fail, or sell to large, large, systemically important banks. there are a lot of people in the market who say it is not in anyone's best interest for the deposits to flow to the most systemic, even though we have seen tens of billions start to flow towards the biggest in the last couple of weeks. with that said, the point of signatures, selling to another regional bank, that is a perfect solution for the fdic. if we saw more of that happen, ec small banks come together. integration can be difficult, but you see smaller banks get bigger, rather than big banks absorbing small banks and the small banks completely going away. private capital getting involved is a different question. the scale of these big private asset firms in the last crisis was not so big. they have not only dry powder, but a lot of capacity to go through these loans one by one.

they have all their people on it. they are doing it at multiple banks. i think this most recent signal with first republic eventually selling assets potentially to private capital, will the regulators allow it? we have not seen in this cycle yet. will this be enough for them to stave over any potential concerns people have? guy's, i have never been so interested or ready for bank earnings season before. a lot of these numbers, we don't know what it looks like under the hood. kriti: bloomberg's sonali basak, covering everything across the atlantic. we think you as always. speaking of u.s. banks, earlier, janet yellen spoke up about shoring up confidence. >> our intervention was necessary to protect the broader u.s. banking system. and similar actions could be warranted if smaller institutions suffer deposit runs

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kriti: this is bloomberg "markets." traders betting on a fed rate pause or 25 basis point hike. though seem to be the two options. and harrison will add a little more cover for us. a 75% chance we will get eight when he five basis point hike tomorrow. is that something the market is ready for? ed: yes, i think a high percent, they are writing for -- they are ready for it. we believe this is the first time since we started the rate hike train that we had less than 100% chance of 25 basis points. even in the march meeting one

year ago, it was over 100% that we would get 25 basis points. there is, to a certain degree, some downside risk to zero for the first time since one year ago. jon: ed, helpful context. we will be watching very closely. and harrison of the bloomberg team. we want to get the few on the fed -- the view on the fed from mark dowding. you are talking about the conversation around a pivot perhaps being the wrong play. walk us through your thinking of what the fed will do tomorrow. mark: i think it is so messed up and volatile that you're speaking to me from a train station here in london. that is how stressful things have been. we think the fed is going to go 25 tomorrow. if the equity market is down hard, if financial concerns are still building, i think we have an issue. but i am delighted to see the

intervention by the european authorities yesterday. it seems to have really put a lid on some of the financial worries we were having in europe on the back of the swiss failure we saw over the weekend. we sought become the new basket case as far as we are concerned. very happy european authorities have calmed things down. i think that gives the fed a runway for 25 tomorrow. kriti: this is all coming on the back of the terminal paired we are seeing on both sides of the atlantic basis -- the crisis. we have seen not necessarily in the sovereign market, but in the 81 -- 81 -- at 1. i still holding onto your bonds? mark: yes. i would emphasize we hold these in a dedicated strategy. we have been very successful with that, so we have a very

large fund. we are actually underweight relative to the benchmark. where we have actually done well has been through the senior debt in credit suisse. that has rallied very hard. in one sense, we have lost on the one hand, made on the other. what happened in switzerland over the weekend, we were my three -- we were mighty surprised by it. it seems like the swiss may have change laws over the course of the weekend, to force non-viability on the bank, which was failing. kriti: speaking of that almost shift in strategy, talk about strategy on your side. there are some words here that bluebay is effectively buying claims. if that is true, what is the strategy dairy? -- strategy there? mark: that's not something i am

able to speak to from a compliance angle. but we think this was authorities made some wrong steps on what they were doing. we think switzerland should be a bit careful here, in terms of undermining its reputation. it seems to us that, effectively, you would not expect the waterfall and you would be paying out cash to equity holders. maybe you had some friends who were equity holders you wanted to pay out, whilst writing down the tier one claims to zero. effectively, that is what really created turmoil in europe yesterday. effectively, you are sort of undermining what is a very important claim in financial architecture. well done to the ecb, eba, and bank of england, saying they would respect the waterfall and would not go down the route the swiss have gone, distancing themselves from the hurried

steps the swiss have taken over the course of the weekend. jon: it sounds like you are still committed to this asset class, based on some of the other jurisdictions, because it sounds like despite all the turmoil and despite what happened in switzerland over the weekend, this is an area you are focusing on. mark: absolutely. i am getting my comments in before the next train turns up and you cannot hear me. european banks are facing the best operating environment it has seen in more than a decade. european bank profitability is in a good situation of the moment. what you have actually seen is that yesterday, some of these bonds or down as much as 15 points paired we have seen them rallying all the way back hard today. others are claiming where facing a once in a generation buying option in this asset class. from that point of view, i think we can all be quite encouraged

that the outlook for this space looks very interesting. when you get 10% yields on high-quality banks, we think that is a very attractive asset class to own. rather than seeing investors looking to redeem assets, we have actually seen contact from another -- from a number of investors looking to buy and participate in this space at the moment. it is certainly something that seems to be an interesting opportunity to us. jon: we started the conversation with looking ahead to tomorrow and what the fed ultimately does. it is hard to ignore the actions that the u.s. government is watching very closely right now. this conversation around backstops for banks, walk us through your thinking and how that is influencing your banking decisions. mark: in terms of u.s. financials, it seems to be clear that we need some more regulation. forgive me for a moment.

at that even ever heard this on bloomberg tv before. but the things to say that regulation, it's likely to be tightened on these more regional bank players in the u.s.. at the same time, we think the u.s. won't let there be systemic instability in the financial system. we will see deposit guarantees being applied. we do think we may be passing the worst of the many crisis we have seen -- many crisis we have seen. this is similar to 2008, where we see things play out with svb and credit suisse. the answer is no, we don't have a situation like 2008, where you had bad lending, bad assets, losses on bain capital.

this is more the case that we had won in california who decided to become a macro hedge fund by betting on interest rates. we have another bank in europe that had a tainted history with a scandal attached. the reality of the matter is that going forward from this particular point, when we look at the european architecture, we think banks are in a very strong position. it merits to be overweight with interest-rate margins. kriti: are you hedged for that duration risk that you just said plagued the likes of svb on the duration front or even your at1 exposure? mark: we are running a whole suite of different strategies. we are going into tomorrow's decision by shortening rates. other strategies are underweight with benchmarks.

we are very happy to having express that view over the course of the last few days, having fought that projections, in terms of december 2023, way out of whack. at one point, when the fed shares raised a couple weeks ago, it looked like rates at the end of the year could be near to 6. last week, we saw those rate expectations dipped down to as much as 4.5. at the end of the day, there are other lots policymakers will be using to support banks paired ultimately, the fed needs to fight inflation and needs to get it down. interest rates are still lower. on the back of that, as long as there is not ongoing financial turmoil, we would see an outcome were ultimately, the fed would be wanting to hike by 25. if they don't, effectively the market will say that when you end up with an easing of

financial conditions, that is less than the federal reserve's -- the reserve once at the moment. kriti: a final question to you on the holdings. are you at all looking at litigation or legal action to recoup the funds that are potentially lost from the credit suisse breakdown? mark: again on that, that is a no comment answer. i'm sure there will be some groups looking at assessing a different option and alternatives at this particular point being -- point in time. i cannot comment. thank you for having me on. so sorry i managed to foul up the logistics. i feel like i should be working at the swiss bank at this particular point. your first and last ever call from a train platform. thanks for having me on. kriti: mark dowding, we think you as always, chief investment officer at bluebay asset management. green on the screen in these equity markets. the s&p 500 higher by 20%.

a 10-year yield of 3.58. higher for those yields. a lot more volatility on the front end of the curve than the backend. bloomberg dollar index is flat. more markets coverage ahead. this is bloomberg. ♪ i screwed up.

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romaine: all quiet on the western front. 30 978 on the s&p 500. kicking you off to the close on the tuesday afternoon. katie: we do have a bid in stocks. a big selloff in the treasury market. romaine: you are hearing risk