>> inflation is they key. the credibility is still on the line. >> do not think there is a risk of broad-based challenges and calling for this bumpy landing. >> what matters is what shocks my inflation world is how fast they cut when they start cutting. >> the market is anticipating a lot of rate cuts. >> the fed is going to be on hold until inflation gets down's to something closer to 2% and i think that is going to take a while. >> this is "bloomberg

surveillance." jonathan: i have forgotten what day it is. lisa: it is monday. jonathan: live from new york city, good morning. reliably informed it is friday. equity futures down three quarters of 1%. deutsche bank down 12% over in german trading. ubs down 6%. little drama. 6% is unchanged. pretty dicey stuff or some of these names. lisa: it is not just in the stock price. you are see it in the credit default swaps. at what point does indicate we are not out of the woods? this is a larger concern. debbie and these measures and officials saying all is clear

the banking system is sound and resilient but still. jonathan: secretary yellen for the is -- binding and different way to say the same thing. that's been the last couple of weeks for her. i feel bad for the treasury secretary. almost left for slaughter in the eyes of administration we have not heard much from apart from a statement from sunday evening. lisa: i would agree. there are certain things not in her purview. it was clear from the hearings in the house yesterday a lot of politicians were not interested talking about deposit insurance. they want to talk about the budget, debt ceiling and all these other issues. without the political will, how much can she say? she did amend her statement. she added, we would be prepared to take additional action if warranted. jonathan: what does that mean? it is the same thing she said

again and again. lisa: what else can she say? jonathan: nothing. she is in front of the individuals that can make legislation to change. while we criticize a the treasury secretary the individuals questioning her otherwise they should be making legislation? lisa: had she come out and said what we need right now is full deposit backstops. you have to get on board with that. that would cause panic in markets. why is this need a? why she lobbying for this at a time people are saying system is safe and sound? jonathan: price action looks like this on the s&p 500 down .7%. let's call it down .6% on the s&p 500. two weeks a making turmoil and poise for a second week of gains on the s&p 500. user down by 12 basis points. 330 on the u.s. 10 year. two year another 20 basis points.

10 year 362. that is near the lives of the week -- near the lows of the week. remarkable to see the two-year down here. yesterday we were down 10 basis points. the day before 23 basis points. we are dropping aggressively this morning. lisa: we take a look at what people are expecting in rate cuts they're pricing in 120 basis points. 1.2% of cuts to the end of january next year. it shows you how much this scenario has changed. we have been in windows economic data matter and we continue to say it is that were looking until it is not. we're going to get economic data and people will tell you why does not matter however i'm interested what the u.s. durable goods coming out at 8:30 a.m. what we saw in europe was ongoing strain in the good sector, disinflation and

activity only services. how much do we continue to see this? do we see softening in terms of durable goods orders and we see recovery at a time when perhaps interest rates are going down. 9:30 a.m. we have from fed president james bullard. has something shifted materially that fed officials can point to and say markets we got you, we see you, we understand what you are saying, or are they going to continue to try to push back. today bids are due for the silicon valley bank. there are some deal with customers bank been discussed for some all or some of the bank. the fact that the fdic pushback bids and averagely been due last week, the fact that they did that have to raise questions.

does nobody want a baby? do they want a better bid? they want more time to understand what the liabilities they taking on the auto jonathan: they like the people who are bidding? lisa: whether they wanted to be a big bank or another local or consolidation of the middle. they do not want that to be the case because they wanted to look good and feel good. jonathan: look good and feel good. what is this chemotherapy? -- what is this, therapy? jonathan: i feel for secretary yellen. >> as i've said we have used important tools to adequately to prevent contagion and they are tools we can use again. the strong actions we have taken issuer americans deposits are safe. certainly we would be prepared to take additional actions if

warranted. jonathan: chris marangi joins us now. your words, the bank crisis, the future, not a bug. what you mean by that? chris: we talked for a long time about chair powell pushing rates until something breaks and clearly something has broken. he has not been shy about talking about the fact that this credit crisis is going to be disinflationary. as long as we can manage through this, it probably helps that part of the equation. jonathan: if we can avoid a deeper crisis, is this sector attractive to you? chris: we have generally avoided cyclical -- the borrowed short log businesses and it has become

less attractive recently a part because funding costs are going to go up and banks are going to have to pay more for deposits. credit quality is likely deteriorating. if you opportunities. certainly more regulation including higher credit standards, higher ratios required. that is going to impact the p and e for the stocks. there are less attractive. lisa: i feel like this market has exert maximum pain on the maximum number of traders heading into this year people were talking about value stocks and how banks fit into that and how big tech will be left for dead. at this point do you still think big tech can lead even concerns around growth, given concerns cost-cutting is not over? chris: i would make a distinction. there has been rotation back to tech, back to growth. much of that is related to the

safe haven trade. investors looking for big nationstate type companies with big credit balances as a safe place to be. small tech has not shared as much in this rotation and the high interest rate environment is not going to be good for these companies. we are still looking for the cash flow generators, companies with pricing power, and that's been the formula for recessionary environment. lisa: we started the conversation talking about fed hiking rates until something has broken. i'm curious of what that means and how you invest. chris: we are looking for diversification across both industries. to certain extent, we want to

focus on competencies and put our eggs in the basket and watch that basket. that's what we have been doing unchanged. jonathan: are we sleepwalking into a crisis, a much bigger one? chris: i am not sleepwalking and i did not think the market is as well. the market is well aware of what it going on maybe too nervous given the 2007 recent crisis. lots of risk out there and that's what we get paid to manage. jonathan: those who experience 07 and 08 who said there is a it is not 07 and 08? chris: it is a little bit different. thosei do not think we have que systemic issues in the banking system that we did. the fed now having raise rates so aggressively does have ammunition to cut rates and

improve the situation, but it is what you do not know that you worry about. jonathan: totally and there's so much we do not know. chris, thank you. chris marangi there. lisa: the issue i am taking with what people are saying is it is a liquidity issue, not a credit issue. liquidity issues lead to credit issue. it happened back in 2007 with the commercial paper market. some people argued triggered all of the subsequent events. at what point are we looking at seizure in lending that creates the credit problems there not been priced into the market? i take issue with people who are trying to a distinction here because the two are related. jonathan: blaming canada. lisa: that is where joe biden

is. listen, i am not blaming canada. jonathan: i think that speaks processing to what you are talking about. lisa: this is the reason why people say no matter what happens, there's going to be more distressed for his is a been priced in? i do not know because if rates go lower, the parameters -- drawing a distinction between liquidity and credit issues, difficult for me to stomach giving they are interrelated. jonathan: treasuries on bank balance sheets. would not be underwater anymore. two year yield down 25 basis points. lisa: the second they are under water again list of the narrative all over again and we are back to runaway inflation. jonathan: can we talk about the ceo tiktok again? lisa: absolutely. jonathan: picture the scene.

everyone hates you. during the progressive questions at you. i thought he was a very well. then we can talk about way these for the company. ♪ lisa: u.s. prosecutors have charged co-founder with orchestrating a massive cryptocurrency fraud. it is said to wiped out at least $40 billion market value. he was already a fugitive from charges in his native south korea. he was arrested thursday. in japan, inflation slowed for the first time in more than a year. consumer prices excluding french food rose 3.1% in february from a year ago down more than a full percentage point but without the impact of government subsidies, inflation would have been as

high as 4.4%. janet yellen says regulators are prepared to take more steps if needed to protect the banking system. those comments to congress came a day after her remarks on nationwide deposit insurance the round of markets. she said officials had not consider the possibility of expanding federal insurance temporarily to u.s. bank deposits. china is or or europe to play a role in supporting peace talks for a just war in ukraine despite u.s. warning beijing's proposal would effectively freeze the kremlin's territorial gains. chinasoft diplomatic spoke to a french official not long after xi jinping wrapped up meeting with vladimir putin. global news powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> i hope we are through the wires. i think there are still questions around the world. have there been weaknesses that have been exposed. it certainly seems they cute of the crisis is done. jonathan: that is what everyone hopes. built winters there -- bill winters there. latest story is there might be a doj broke into credit suisse ubs

and other names as well. associated with helping russian oligarchs avoid sanctions. we are talking about this government guarantee. sometimes you inherent legal problems when you make an acquisition like this every what is already brewing. lisa: that was the speculation under the hood in terms of what took so long for ubs to sign all. -- to sign off. why did they demand such incredible concessions from the swiss government unless they saw something under the hood they did not like? lots of complaint of what happened over the weekend. of his rival earlier, vincent kaufmann, saying the following, the situation is a big failure of corporate governance and may send a poor image in terms of good governance. visit i am pleased to say john is right now. fantastic to catch up with you.

how much room do you think you have for legal action here? vincent: very small. we do not know the concept of class action, that is not exist in our law. mismanagement is very difficult. either gives former executives of credit suisse or -- there's really little to be done. we're still looking at options but the end of this weekend after having this discussion with many people, we do not see many options. we will still recommend the next meeting not to grant this charge to the board, to keep all options open.

if anything is revealed afterwards, as you said there is still a lot of uncertainty. so we common shareholders not to grant this charge to the board of directors to credit suisse. jonathan: what do you think would have happened monday morning if deal was not made? chris: we will never know. i trust the was government that day make this decision as they would aware of things we did not know. i could clearly expect the crisis of 2008. i would not expect the lehman brothers case and the start of a really big crisis. just a postponement or can we manage to avoid this is still to be seen but they knew things. i still believe in trusting our government. jonathan: do you have any reason

to expect you were not given accurate information of the condition the bank was in the last couple of weeks? vincent: the laces information we had was the financial year in 2022. we already had the itinerary financial q4 result. the full report was one week and sec requests. the borders clearly quite quiet saying is that the material. we only had information of the financial year on tuesday. the situation collapsed during the first quarter. so we do not really have any further information about the outflows. we know from the statement of the saudi national bank on

wednesday. there was big outflows but we will never know. i think we'll never have the clear figures the government had a saturday. lisa: from your perspectives, giving you talk to other shareholders, what this does the swiss companies going forward in terms of the credibility, risk premium people want to bake in to whatever they own from switzerland. vincent: i think we made big progress in governance. we have a lot -- i have been seeing -- we were on the did move. the fact that the government is now deciding when i have any say on this and the antitrust authorities will have no say on this is quite interested for the future. i hope it is not great presidents that the government is overusing is power. will be looking at this in the

future. we remove such important right to shareholders, you need to have good reason otherwise it is quite frustrating. i'm not sure it has been seen already. lisa: i want to pick up on what you said which is if this happens again, if this mr. president, there could be consequences. have you talked to shareholders? have you talked to investors who are moving some other funds from certain swiss shares just because of the uncertainty, because there could be better options elsewhere? vincent: no. i do not here any think on this from international investors. and investors are still passive investors. that is the main part. as long as we have large cap being part of those, i think

international investors will have exposure and we have companies telling them to be leaders of the markets. in small cap, we have wonderful corporate field, but i think we need to ensure the governance of those companies remain at the highest level because all investors are looking at those environmental, social, and governance. i think the governance is coming back. we're talking about environmental issue, very important, but you need to have strong governance and those traders be in u.s. demonstrate governance may be what is on the look by investors. in governance, shareholders rights are preserved for the future. jonathan: visit thank you for joining us -- vincent kaufmann, thank you for joining us today. a difficult week. a long week for him appreciate no shareholder vote. he saw the complaints. he saw the quote, what is the

difference between switzerland and other jurisdiction we do not trust the rule of law. just like that, change it over the weekend. lisa: one of the questions have been the long-standing consequences of this and vincent suggested people -- that said it has been a number of articles about middle eastern investments and this is been there first full significant for backing into the banking system since 2008 when they make this capital infusion into credit suisse. now perhaps not as interested in investing some of the banking stocks around the world. there have to be consequences whether it is the contingent capital market or something broader that makes people rethink where they put there money. jonathan: let's talk about policy consequences. two year yield down 22 basis points. or a price cut by june? lisa: that is the latest. it is not only one cut, it is a

rate cutting cycle we are now pricing in. jonathan: markets are saying you are done. and you're going to start cutting interest rates, lisa: markets are screaming you are done and by the way may be made a mistake. that is the latest fair hearing in the mood this morning. i think it is really tricky. i think is going to be plant matter what he did. he told -- he towed very nicely. jonathan: week of the bullish in months to come or look like it was the right thing to do and it is why those decisions are impossible to make. futures down .7%. from new york, this is bloomberg. ♪ ♪

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jonathan: fascinating comments from the bloomberg bank president this morning. the chief of the german central bank, will keep raising rates as needed because of inflation. we welcome spinning cup qt in q3. that is a hawkish central bank. lisa: given the fact that people are pricing in cuts in u.s. and around the world, subtly perhaps a rate hiking cycle is over a you get hawkish comments like that is telling. our people buying it? german two

year yield taking. -- it is down. maybe he is making a lot of noise and people are like, no. jonathan: deutsche bank is down 12%. the fed's anger not going to cut. equities are lower on the s&p 500. we are poised for a second week of gains. might buy that out on the opening bell. you are familiar with the weightings on the russell's, the small caps are tilted to the financials on the way that the nasdaq does not have that tells. the russell is negative 1%. yields dropping like a stone. two-year down 22 basis points. they of the move -- think of the move yesterday on top of that. lisa: march 8 we saw the peak of more than 5% for the two year coming down to 3.6%.

something broke and it is the only way to understand this chart. why are fed officials, why are central bankers in europe not reflecting that? if we are wrong, what is going to give up it is to the market that nothing is broken? jonathan: the height of the session wednesday 425. that is two days ago. 425. lisa: this is the most liquid, most use benchmark in the world in terms of the bond market. you look at u.s. treasuries and you ceo stomach around to this degree. what does that tell you -- you see yields jumping around to this degree. what does that tell you? jonathan: that is a weaker euro. the stronger dollar. that has not been the story. lisa: it is behaving trade as people get worried about the banks. how much of people to the banks against u.s. eggs and making a currency called?

you cannot explain a bite and monetary policy -- beverages and monetary policy. jonathan: no real news for this name appreciate ubs down 7% or 8%. we know those fights can be hefty. lisa: they can also create reputational risk when they are solidifying the reputation. there is no news. deutsche bank buying back some other bonds to try to fortify the balance sheet. they should be positive. i did not understand unless there are people looking at counterparty risk. i did not want to spread rumors. what will cause this? jonathan: is there anything positive about this? the tiktok ceo in front of congress on capitol hill in front of a house committee. >> i have seen no evidence that the chinese government has access to the data. they have never asked us. we have not provided.

>> i find that preposterous. >> applicant have seen no evidence of this happening. the order to assure everyone here and our users our commitment is to move the data into the united states to beat soared on american soil by an american company overseen by american personnel. jonathan: nothing he said yesterday was going to be sufficient. let's make it simple. he cannot change them eyes. they do not like the plan he has two protectors started a here in the u.s. they do not trust this company. the longer they do this with the tiktok ceo, the more foolish representative of congress are to look because i need to do something about it and they have to make a decision. forcing a sale is the easy way out, unfortunately china when i allow the cell to go through. that agitates those who think china has the ultimate say over the company and it becomes much simpler than that. ban it or don't ban it but the

longer you have the hearings without panic it, the more bullish the government looks. lisa: i would say it emboldens the ceo because this is a pr move for him to. if you can about his responses he looked measured and cool and trying to answer and for all the people trying to say he's just another executive, that he will gain cut ability and on the flipside to your point, this is an issue of national security -- jonathan: do something about it? for sale would not be allowed by china so you're left with one option, not to ban or demand. it is not complex. lisa: it gets more complicated when it is the young voters. jonathan: that is about politics and not about national security. lisa: it is always about politics. jonathan: if is about national security, it should not a question.

but after that conversation in him an assignment. we have a euro today. euro-dollar negative. elsa lignos joins us now. can we start with the price action. can you -- but you make of what is developing at the moment? elsa: so interesting. we have gone up and down this week and back to where we were simply domesday. -- some were be were on wednesday. yet the rate differential and as lisa said, and isolation and on the other hand will be pivot away from worrying about u.s. banks to european banks as markets are this morning, that pushes euro-dollar lower. ultimately we are not going anywhere. that is he is held gives rise to some interesting trades. lisa: last year everyone was a

micro investor, this year everyone is a bank analyst over the past two weeks. given that, how much do you have to examine the balance sheets of banks on both sides of the atlantic to make a courtesy call? elsa: my ethics time is made that comment yesterday. it was whether balloons and now it is baked stocks. the reality is that is what driving the market at the moment and luckily we do have a good team a bank analyst and they will make some points around the fact that you have a very well regulated i banking sector in europe and that gives a lot of people a degree of confidence. when he starts getting it like it is today, you see large price action on the back of little. ed has white people and euro -- it doesn't worry people end of the euro is in the environment. lisa: there is no logic behind

it that is discernible. elsa: what is making it even trickier at the moment and in part perhaps explain the disconnect with rates effects and equities, it is that you have had investors positioned in some areas, lightly positioned in others. think part of the reason fx is not moving that much is precisely because it is not been the key area of focus for macro investors. we have had people heavily positioned in rates at the start of the year, but isn't getting extended further in february when people were sure is going to be tighter, longer rating increase cycle and now that is where you see the pain as i gets washed out. from a courtesy perspective, we have been saved -- safer rather than try to take a bet on dollar

of bordello down. lisa: how much does the dollar continued to act as a haven given what you are saying sounds like short squeezes, unwinds of trades, they specific to a market structure rather than macro event? elsa: it is interesting question because it is what you would have expected to some degree this week. if we listen to chair powell on wednesday, he was saying we cannot give you forward guidance at the moment because we can write things down in the dot plot but reality it is determined by facts on the ground. those because -- those cuts price by the market can be justified but the conditions pretty aggressive conditions. in that environment, what do you do? you buy havens, you buy the japanese yen, the swiss franc, and also the u.s. dollar against risk proxy and that is not what the market did this week. we saw at the dollar underperforming the riskier

currencies. does not make a lot of sense. today we are seeing more since returned to markets where you are in the dollar start outperforming the riskier currencies. in order to see that extended going forward, you begin to see in the actual data. there will be time before we get the survey from the u.s. but we have weekly indicators. vessel markets will be focused on going forward -- that is what markets will be focused on going forward. jonathan: elsa lignos thank you. the end of day or come up with a say data dependent, you have to ask dependent on what data? delong survey. that is it. it is what everyone seems to be focused on. it is lending standards in america. that is the data point going forward. lisa: people want to understand how much banks are restraining credit in response to the concerns around the balance sheets. people are plumbing some of the

federal reserve data that came out yesterday evening around 430 p.m. yesterday. to understand the balance sheet of the federal reserve, surging to the highest levels going back to 2021. we are seeing a resurgence of people want to understand why and what it means for the stress we are seeing in the banking system. jonathan: look at this move of the two year, 358. this move right now, 358. the yield curve was negative 110 basis points in march 8. right now, -30. moments ago, -28. if you take your pick on the curve, two-year against the 30 year, now positive. i tried to save the bond market jargon for you but that is one heck of a steepener coming into this bond market the last couple of weeks which means the front end lease the move, yields aggressively lower on the front end as we start pricing in what bosch.

the fed said median dot. this market doubts whether they can get there and if they can, they're not going to be there very long based on this market pricing. lisa: you are seeing a bull steepener and this led by the front end by lower -- longer yields are going longer and it is on the belief that cutting rates are going to cause runaway inflation. it is a reset of the whole inflationary backdrop that everyone has been talking about. it is a different time. jonathan: it is a secular story and now all of a sudden the financial stress is disinflationary shock. bob michele of jp morgan said every single point across the curve, dovishly called. -- that was the called. lisa: i'm old enough and people were calling for 7% 10-year gilts. jonathan: that was good.

when was that? last week. >> keeping up-to-date with news around the world. ubs and credit suisse are among the banks being looked at in a u.s. justice department investigation. the authorities want to know whether finance professionals helped russian oligarchs avoid sanctions. subpoenas with employees at some major u.s. banks. credit suisse and ubs both declined to comment. u.s. has carried out airstrikes in syria following a deadly attack there that killed one american contractor. and wounded five service members. officials say a drone crash into a coalition base. according to the pentagon, u.s. airstrikes had facilities linked to iran's islamic. in of korea, over solid tests of weapons designed to deliver nuclear attacks against u.s. and its allies. one of them was described as an

underwater drone but to create a quote radioactive tsunami. the official north korea news agency says the drone cruise for nearly 60 hours before detonating. the test included cruise missiles carrying mock nuclear warheads. leader bohne bessemer is joining the chorus. the chief investment officer sees the federal reserve cutting interest rates soon and markets are signaling the fed is wrong when it comes -- for talks about the prospects of further interest rate hikes. global news powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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have not provided. >> i found that preposterous. >> outlook is seen no evidence of this happening. in order to assure everybody here and our users our commitment is to move the data into the united states to be stored on american soil by an american company overseen by american personnel. jonathan: that was the tiktok ceo, a slick, polished performance. ultimately not making a difference whatsoever. he's not going to make a difference. the body's mind was ever going to be changed. terry hayes said this, this hearing is due process. completing the record before beginning to legislate. and creating an opportunity for tiktok ceo to compound negatively the issues. terry and places say joyce is now. what did you make of that? >> you have never seen a better

example of somebody publicly liking themselves on fire in a congressional hearing. the famous quote, will always be the quote to gather data despite all u.s. citizens response -- the response began i did not think spying is the right way to describe it. i comment on that as you know and i quote, kaboom. what you have here is a situation where there's lots of diversionary stuff being thrown around the basics are these, you have the head of united states intelligence community saying publicly a couple weeks ago to congress that they think tiktok itself is a national security concern because as the fbi director said can use -- can be used to control software on millions of devices and drive

narratives and divide americans. the bipartisan heads of the intelligence committees agree with that. you saw how bipartisan and how strong the belief is in you lead a committee in the house that does this stuff. what you end up with here is i think not outright ban of tiktok you are demonstration given the tools -- you're going to have demonstration given the tools to control whatever is the -- whatever is necessary in issues. jonathan: that seems like the direction of travel in the next couple of months. i wonder what direction the ministrations will choose. it feels like a full cell is a nonstarter. the chinese government has said they will not allow it. we have been talking about how that response alone agitates

those best believes the chinese government has the final say. it is the nature of doing business in china. how does the story end? terry: i agree with you about the for sale. not only are you write about -- policymakers respond to the chinese threats and demands. but the concerns that have been expressed by the intelligence community that i mentioned had never been countered by the chinese. they never said no, this is ridiculous. the algorithm is supposedly, some state secret or shrouded in commercial proprietary. would you have here is a situation where the u.s. government is giving some sort of ability to look at things broader than just individual apps but tiktok becomes the first example of this. i do think it is eventually

banned. before yesterday, i had it at 75% likely by the end of 20 right now, 85% thanks of the performance of the ceo yesterday. lisa: how likely is it a guess band before 2024 do we have to wait until the election cycle is over for anything changes with this company? terry: my view is tiktok probably guess band before the end of 2023 and not much before. distantly you have to have the legislation passed and people agree on the is worth it is a straight up ban. if the past legislation, get it to demonstration. set up the process and he is the process. we are at the end of march. but not before -- tiktok just

banned but not before the end of the year. i do not think election politics have anything to do with this one with something as bipartisan as this. lisa: there's lots with social issues or whether it is due to broader international policy. this quote from a biting white house advisor, indicative of the end of an era. this era were u.s. chinese business relations continue in consideration of geopolitics is over. how much does a potential banner tiktok implicate other companies of chinese origin the new business in u.s.? terry: it advocates them usually. -- it implicates them hugely. we are now moving into a situation where the geopolitics are different. when you're going to have is chinese companies looked at top to bottom and american investments in china looked at

top to bottom in a way that is broader that he's to be done solely under the sify is banner which was and is individual companies from individual circumstances. those survey continue to be assessed but you're going to be looking at -- those will continue to be assessed but you are looking at this most probably in a situation of what this -- what is the chinese government trying to do? what is our response to either permitting it or stopping it. jonathan: what happened to the basic argument of reciprocity? the idea they want to be here in u.s., the united states be able to be there. terry: i think that is still valid. but what you have is now a decade or more where american policymakers have gradually gotten more aware of other

basics and the other basics include the fact that intellectual property from american companies in -- stolen from china. china is using, they would say. piggybacking on american companies to gain advantage and there's an overwhelming sense that that era is over. jonathan: great to catch up. terry hangs there. great note. he is leaning hard to levan -- to a ban. lisa: he homes into that one moment where they ask if tiktok spies and the executive said i would not call it exactly spying and that was, in terry's word, kaboom. jonathan: he's never going to change anyone's minds. his point, it is the process to

get to legislate and it is over to the president and the administration to make a decision. lisa: he said at this point when there is this much bipartisan support you cannot imagine that politics get in the way too much. i can imagine it. i think that is always been in the back of people's minds. we have been talking about this for a long time. wonder how much a combo case the issue on social media on a broader level -- complicates the issue on social media on a broader level. jonathan: there a major divide between how congress fills both a national security issue with china, the reality of the situation, how the consumers who use the app bill about it. i do not think they care about it at all. lisa: did you see the comments by congress member saying i know people people are going to think i'm trying to take your find a way but he would about this someday and you a lot of trying to convince people. jonathan: the tiktok ceo. and up

incredibly popular -- and it is incredibly popular with the american consumer. lisa: i would argue and i know this is the case at home, a lot of people who use the platform think they are viewed to any kind of misinformation. they are immune to manipulation. they are immune to be influenced one way or another to the platform. they say we get silly news biz, fun a dance moves. i'm curious what kind of influences they could be subject to and whether we should have a class on propaganda. jonathan: anti-communism? -- and communism? lisa: i'm not saying that. i'm just saying critical thinking skills. jonathan: it is everything. i'm with you.

keep digging. troy gayeski joining us shortly. ♪

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>> inflation is thinking. the fed has to do something. his credibility is on the line. >> would not think there is a risk of broad-based challenges. we have been calling for this bumpy landing. >> what matters and shock my economic and ablation model is how fast they cut and when they start cutting. >> the market is anticipating a lot of rate cuts. >> if it is on hold it is until

inflation gets down to 2% and i think that is going to take a while. >> this is "bloomberg surveillance." jonathan: was a move to start friday with. live from new york city, good morning. this is "bloomberg surveillance." tk is back on monday. equity futures down. in the bond market, yields lower. two year more than 20 basis points. it was today, yesterday, the day before that. it has been relentless the last three days. lisa: since march 8 we have seen yields go from 5.1% to 3.6% in couple of weeks as people reprice a rate hiking cycle and as a look at something that appears have been broken. jonathan: deutsche bank down 13%

over in german trading. swiss trading, ubs negative seven. they're having a self session the closeout -- solved session to close out the week. lisa: there's a lot of new so what exactly is fueling some of the decline we have seen. she said it seems like big trades unwinding the people are making big moves that are reflected in different asset classes at the same time treasuries and bank stocks. i do not have a handle of the kind of outcomes or could be in losses, personal pain, and i did not want to use the i word. jonathan: idiosyncratic. euro-dollar right now is negative .1%. a weaker euro, stronger dollar in the mix. we go up going -- that euro weakness is developing through

the session this morning even with the chief of the german central bank saying we're going to keep hiking. we're not won the fight against inflation. qt, i would like the speed that up in q3. lisa: do you think anybody in the market is by what he is selling? german two year yields comedy thing people are saying, you're going to be caucus? they are saying, yet right. that is what you are seeing in the market. the data in terms of where is all that money going when people ask, going out of banks going into money market funds. you saw money market funds outstanding search the most since april 2020 two a new record, more than $200 billion flowing in which i think it is compelling. jonathan: make america a row of this this morning of 300 billion in the past four weeks. he had is a fight the previous

two searches, and quickly saying that coincided with big fed cuts. ventilation backdrop is different -- the inflation backdrop is different. futures negative 20% on the s&p 500. on the bond market, yields lower. 10 year sub 330. two your down 22 basis points. lisa: it is policy double of the moves the last couple of weeks and it is a reason why people say economic data no longer matters. 8:30 a.m. to get the latest elevated u.s. economic data until it is relevant. u.s. durable goods orders. i am curious if we see the disinflation continues. what happens if you get a free inflation? what happens if something that comes out that challenges the narrative?

weigh in on this, st. louis fed president james bullard speaking at an event in st. louis. are you going to be liked what we heard from the bank or come out and say we're listening to what the market is watching. if we see ongoing stresses in the banking system, two year yield accurately price in everett a cycle. -- a rate cutting cycle. the bid is due for silicon valley bank. fdic did pushback the deadline. there is discussion of lucas step in here. -- of who could step in here. how much of it important that is another regional bank? come to get a moment, band together? jonathan: just right. rice is a fairytale? not too hard, not too cold. just right. it is a mess, isn't it? first

republic right now down 3% which is a minor move considering them as we have seen this week. surprise me to go into the weekend without some kind of resolution solution to this paint given the reports we heard that we have gone from depositing money to discussing about doing something extra and do something extra has gotten quiet around that the last couple of days. lisa: we talked about this with ubs and credit suisse where credits -- ubs was concerned about liabilities. but liabilities are you bringing on we take on these banks has concentrated lending portfolio, greater risk of deposit flight and i think that is one of the hangs up causing delays as people try to assess the due diligence. jonathan: troy, thanks. this market is screaming the rate box is coming. are you pushing back against that of are you on the same

page? troy: we are very happy we have had yield curve steepen is on. we are in a situation where we know inflation is coming down but we do not think it is going to come down quite as fast as markets are pricing in. as you know, the fed having a delicate dance. on one hand, they continue to do quantitative tightening just to 25 basis points. on the other hand, they are ejecting massive amounts a liquidity to emerging facilities. that does 65% of qt in two weeks. from the banking system side, you get less lending which creates opportunities for liquidity providers to going to strain inflation but on the flipside money supply growth is starting to explode again and you do have a tremendous amount of cash and that cash can be used for consumption.

particularly in services where we still have an extremely tight labor market. up until the banking crisis it was pretty straightforward. the fed is ready liquidity. asset prices are going down. inflation going to simmer for longer. now you have opposing forces that are difficult to price in real-time. however as long as the banking system stresses remain, it is unlikely you get a significant surge in two year yield. lisa: what you said is pretty radical and parsing between the lines a lot of people point to with the fed is doing in balance sheet expansions. is a quantitative easing or is it not? it is a unique instrument that is that emergency lending told. you are saying is inflation is not going to come down as much and by the way, that is feeding a lot more capital into the system. how long cannot go on? is it quantitative easing that will continue to boost risk assess even if it does not rain down

inflation? troy: the boosting risk assess is a tricky one. in immediate short-term think about what this means forward revenue growth for companies. from a multiple compression standpoint, given how much money supply expanded in two lease, we probably hit the multiple low of 15.5 two 16 in october from eight revenue and earnings growth standpoint, is looking laughable record have a percent earnings growth in 2024 and it is likely earnings rollover significantly as q3, q4. you probably put a floor in the short term for multiple compression so the next leg down for equities will be driven more by earnings growth rolling over to earnings contraction and then recession risk which has been pulled forward significantly and now looks darker than it did as recently as three weeks ago. lisa: how do you determine

catching a falling knife and -- how do you parse out what is too risky and what is just risky enough? troy: they catch in a falling knife is something you want to avoid. unless you have to own assets that are going down by mandate, avoid that. look for areas on the margins that already had attractive opportunities whether it is interest only cash flows, residential mortgage backed securities,'s they'll be helped at least marginally by tighter credit conditions in the banking system. you're not sitting there saying i'm going to go along to kr e and hope for the best or stop wind up regional banks -- start buying up regional banks in droves is that you're at strategies already in good position and can benefit more as

credit conditions tightening. the flipside of that is when you look at ways to get marginally more expensive, but the things we continue to look at its is dividend futures which took on the the trinity the selloff but if you look at regional banks in general the make up a small percentage of dividends in the s&p and so even if you take those out, as long as we avoid a hard landing, it is unlikely that evidence decline. clearly if we have a hard landing, you can take market to market pain on that. jonathan: if you take your annual leave and came back you notice this conversation has shifted quickly from the landing to possibility of a hard landing and price in a rate hiking cycle from the federal reserve. it developments in the next two week that might reverse this conversation again? troy: it is hard for saving inflation growth data so what lag.

it is difficult to capture the degree of potential of lack of credit creation and potential credit declines. the banking system had already started to flatline in terms of loan growth prior to the regional and community bank issues we are seeing now. we are certain that lending growth is going to roll over and become negative. but that would not show up in the data in real time. . show up in commercial bank lending growth -- it will start to show up as commercial bank lending growth. we're not saving the fed is cutting as aggressively as markets are pricing in. we doubt they will. it is very hard to see the next week or so were you get a positive catalyst from inflation or economic growth that causes the recent drop in yields to reverse as rapidly as they have fallen. very different environment in two weeks.

when the fed to tighten some real things breaking the real things are breaking now. jonathan: troy gayeski, thank you. lisa: i'm just sitting on my hands right now. jonathan: patrick armstrong joining us shortly. ♪ lisa: u.s. prosecutors have charged co-founder with orchestrating a massive cryptocurrency fraud. it is said to have wiped out at least $40 billion in market value. one is already a fugitive from charges in his native south korea and was arrested thursday. in japan inflation slope for the first time in more than a year. consumer prices excluding fresh

food, rose 3.1% in february, down more than a full percentage point. without the impact of government subsidies for energy and travel, inflation would have been as high as 4.4%. china is urging europe to play a role in supporting peace talks for russia's war in ukraine. that is despite the u.s. warning the proposals with effectively freeze the kremlin tort oil gains. nello gabbert, c be wrapped up meetings with vladimir putin in moscow. global news powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> we have used important tools to adequately to prevent contagion and they are tools we can use again. they shall act as we have taken a short americans deposits -- the strong actions we have taken a short megan deposits are safe. we will be prepared to take additional actions if warranted. jonathan: that last line is a but it is not making a different. five different ways to say the same thing by secretary yellen less week criticize heavily which i do not understand. lisa: the only thing people are

little more rightly criticizing is that jay powell and janet yellen seem to have a different tone in all deposits are guaranteed versus we have emergency measures we can take. are they different kinds of comments? you can parse out the questions but there is an issue of anything that can be done has to come from congress and there is not the will to do it in congress. jonathan: was the purpose of congress asking these questions of her? were they trying to do? lisa: are you setting me up? they are trying to say we are on top of it but we did not want to take legislative action because it can set us up for political liability. jonathan: what is she not say that back? -- when she not say that back? lisa: she is sending a signal to the banking system needs that. she is caught between two difficult decisions. she tried this the first day and

it did not work saying totally resilient, we do not need to do anything more. we can step in potentially if there's a problem but we are not discussing major measures because everything is fine. it did not work. next day she comes out and says how about now, and she is like -- jonathan: go back two weekends. there were banks that some people the people -- that built the people have never heard of. how small do you think the bank will have to be, how irrelevant the financial institution we need to be at this point in this moment for a not to be given the systemic risk exception? there's so much she's implying here. so much information implied that what she is saying that is ultimately are going to be there again through the same thing to make depositors whole because at this point you have to imagine any financial institution they

make depositors whole will have some degree of contagion risk associated with it. lisa: the problem is the cost associated with that but continues to make stock investors nervous and you're not solving the ultimate problem, a mismatch is the duration of the smaller banks that more volatile deposits and also traded basis. if you are not solving the problem, she cannot talk her way out of this and it is not her problem to talk out. jonathan: we are on the same page. give it a few days. this bond market rally is growing fast. tear down. equities software this morning down -- softer this morning down. the euro even with hawkish central bank talk, still weaker. euro-dollar negative .9%. the euro against the dollar 107

39. joining us now, amh what mark market secretary yellen say? annmarie: the strategy if she does not say anymore. yesterday was the cleanup for the markets and for congress. if there is this idea of the fdic insurance limit handicap in there hands and i think that as what secretary yellin was trying to say only say in her cute when she was asked about this and she said we have not discussed this bike approach to fdic insurance depositors assurance because that is in the hands of legislators. the markets tanked so yesterday she wants to make sure that she put the markets aware of there was a systemic emergency need for this, this is something they could to step in. for now that is all there to here from the treasury secretary but of course if there is going to be more contagion, we have to step in. there will likely be more statements from secretary yellen

or chair powell. lisa: perhaps you're talking too much about janet yellen and really the interest lies in was not discussed in the hearing or the lack of questions around deposit insurance. people were curious about the budget and the debt default selling and things of this nature. what kind of signal do you take from that in terms of building this for congress members to take action in deposit, given there are political liabilities around that? annmarie: when it comes to depositors, when i speak to congressmen and women they keep saying they want to see all the details first and they do not want to just shoot at the hip because it was a crisis and react. next week there's going to be a ton of hearings and you're going to have regulators on the hill. they invited bank executives of the failed banks and after that you potentially will maybe see momentum in -- if congress is going to raise the cap likes and said.

-- like senator warren said. they do not know a number yet but potentially north of $250,000 could be lifted. when it comes to the debt ceiling this is actually starting to heat up a little bit. we heard from the republican budget chair and they said they are ready to go to the white house with what is called a debt sheet. a debt limit sheet telling the biden administration first speaker mccarthy's office these are the demands in order to sign up to raise the debt ceiling. one thing in the white house said they want to see the public and budget. that's not going to make it by april 15. they're trying to go with this minimum sheet is that these are our demands and can we start negotiations. it is the first time since mccarthy invited -- mccarthy and biden spoke we are seeing an inch to potential discussions on dazzling talks. jonathan: how to toss with justin trudeau? -- talks go with

justin trudeau? annmarie: the president is still there. they are discussing potential asylum-seekers and a deal on that. they're going to be discussing things like the war in ukraine, canada's efforts to support the u.s. and other allies. this is a normal stop for the president. you have to visit your neighbor to the north. i would not expect a lot of news but it comes at a great time for biden. he has not been out front talking about what is going on in the markets. he has left that this treasury secretary. the fed chair talked about it this week. he has been talking with the celebrities. bruce springsteen was there this week. ted lasso was there. he is in canada. when he comes back his demonstration and him is going on a 20 straight poor and pitch the legislative -- 20 state tour

and fish those legislative. jonathan: you're saying the president is in campaign mode? kailey: it is partially campaign mode and pointing the finger at congress, pointing finger at bank executives and letting his cabinet members and janet yellen and the his chief of staff letting them deal with the market fallout and not getting the president in front of reporters or chemists talk about it. this could be because they do not want to spark more fear and risk. at the president is concerned us are talking about it, it is probably nervous jitters for the market as well. jonathan: amh, thank you. there are two ways of looking at this. one, he is just leaving his treasury secretary hanging out to dry. another, they are damned

if they do, and damned they do not. lisa: that's a reason why they not come out. they are trying to do that but behind the scenes and it is a reason why people are looking at the data, looking at how much money is still being lent out to banks and saying it is not alter yet. jonathan: ted lasso. it that why tom is off? finally just understood why he is off. lisa: he is down there. jonathan: is a season out? did they drop the whole season all at once? lisa: i do not know. jonathan: britt box. lisa: british television in the u.s.. ♪

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jonathan: is this show available on britbox? it should be. lisa: i think tom would like it more on breadbox then you -- britbox. every conversation is, this is how they do it in america. [laughter] jonathan: i am not bitter. anyway. lisa: isn't it so much better in the united kingdom? tom: he asks me that all the time. the reason is to try to get me to offend americans. he hopes one day i will go home. it is not happening.

from new york, good money. equity futures negative point 75% on the s&p. two year sub 360 right now. still love it, aggressively so by 18 basis points. on a 10 year, down by 12 basis points. 3.31 on a 10 year. this whole curve gravitating towards 3%. i do not know what is going to disrupt this trend. this is what the trade --from jp morgan was talking about. 30 basis points away from a 10 year. fx market, german central bank governors saying there is more to do. q3, i would like to speed up qt. euro starts dropping. euro-dollar 1.745. a real turn in a real turn in risk. the last two hours, equities

fell out of bed. dollar ripped and front end of this curve started to rally hard. lisa: i do not like giving a narrative to this. i will be made to look foolish quickly. i wonder how much is turk nicole -- technical in terms of unwinds. hard to explain the underpinnings of it. we take a look at some of the names in the bank complex, deutsche bank adrs. they are down more than 10%. why? i do not know. pick your reason. we are not seeing it. similar with ubs, those shares down not as much as deutsche bank. you saw the turn lower recently. accelerating with losses on both of these shares near session lows. this is bleeding back into the regionals in the u.s. pac west and western alliance, not first republic, but other shares of banks that have come into pressure in the united

states. pack west shares since march 8 down 60 5%. western alliance shares down 56%. jonathan: mental. lisa: massive. it continues at a time where there is not a sense of what is going to cap the fear some have been perpetuating. jonathan: everything we have talking --been talking about all morning. other than ted lasso. episode by episode. season three is out, available on apple tv. what is this, a commercial? i knew that already. i didn't know it was all at once. lisa: do you watch it? jonathan: i watched it after it was already out. i binged that. i was not that impressed with season two. lisa: all right. jonathan: i will see what is in store for season three. everyone has an opinion. lisa: i think i should get britbox. jonathan: are you going to watch coronation street? lisa: i'm going to watch soap operas. jonathan: switch off and relax. lisa: and watch british soap operas. jonathan: other people's

problems. global liquidity markets cio joins us now. this is a monster move. the two-year to see the yield down 18 basis points. no we have gotten used to moves like this, but it is unusual. to see the bond market move the way it has the last couple of weeks. what do you think it signals? >> i think it signals there is unrest and an surety in the economy. over the course of the last two weeks, you look at fed funds futures, we have gone from prior to the regional banking issues in the u.s. expecting a terminal rate of 5.70, all the way down to expecting a terminal rate of 4.60. now, kind of backup in the 5.10 area based on the fomc meeting. there is no conviction of people

seeing different statistics being reported from an economic standpoint, whether inflation, retail sales, any number of statistics. then, they see stories about credit suisse. stories about silicon valley bank, the bank term funding program. there is just --i think it is sentiment based on what the last information was that you saw. it is driving the market on a day by day, hour-by-hour basis up and down. lisa: yesterday afternoon, the investment company institute came out with data of total inflows into money market funds in the u.s. over the past week. it has been the biggest two week increase in money market funds outstanding going back to april 2020. jon was talking about prior episodes were 2008, other crisis period's. what is the implication of where that money is not going? about what that does to an

economy where there is that kind of fear that causes hundreds of billions of dollars to flood into money market funds? deborah: it is a little different than the issues of the pandemic and the 2008 financial crisis time period. i think those were driven by mostly fear and people were living the risk markets, the equity market, the longer term fixed income market. they were being driven into deposits and money market funds. for this one, i think there is money coming out of deposits. maybe it started from a fair perspective way back two weeks ago. seems like it could have been two months ago. only two weeks with issues of silicon valley bank and signature. ultimately, i think what that did is cause people to look at where their short-term liquidity is. a lot of it is in neutral deposits or in insured deposits,

but with very low rates. 70 five basis points, 1%. when you look at a money market fund, you look at something that is climbing towards 5% with a lot of diverse --diversification and higher credit quality than what a bank loan portfolio with -- would give you, which would typically be backing bank deposits. it is different as to the origin of this cash for this time versus what it was in 2020 and 2008. lisa: is it not reflected necessarily in what your clients are doing, what want to see in terms of positioning of their assets? have you not seen the same degree of inflows at a time of rush into? money market funds deborah: we have seen a huge amount coming in to our liquidity and money market fund products. much of the information the ici has provided, very much

reflected of crane data. money market assets are at all-time highs. we are not seeing it go out of our equity and longer-term fixed income products. instead, what we are seeing is deposits at banks down over the course of the last two years to trillion dollars. on a week over week faces, the most recent data showing that continued to decline. i think it is coming out of other liquidity products that are much lower in yield and given what happened with silicon valley and signature bank, i think are reflective of diversification in the liquidity markets, in the money market funds from those deposits. jonathan: is this a problem that can be solved with rate cuts? deborah: i think it is something that'll timidly -- that ultimately could get you back to zero if they were truly at crisis. i do not leave we have a banking crisis.

simply cutting rates by 50 or 100 basis points as the fed projection stating they might do in 2024 and 2025 isn't going to change it much because bank positive rates lag interest rates going up, but are sticky with interest rates going down. i do not think you are going to see a return to zero or not in that type of situation. bank balance sheets are very healthy. there is lots of equity, lots of healthiness in the bank market. i think that minor cuts that might come in 2024 or 2025 is something that is not going to see parity in that sector for a while. jonathan: what do you think is more important that a rate cut would receive or signal? deborah: would signal. they see little from a achievement perspective. i think they got a little cover from what the ecb did last week with 50 basis point rate

increase and no huge ramifications that came from that. they were dealing with a larger issue with credit suisse. i feel like that gave the fed a little cover to increase rates this week 20 five basis points. i think that it's exactly the signal they wanted to provide. they are fighting inflation, dealing with their core mandate, not fighting some sort of financial crisis in the u.s. jonathan: deborah cunningham, thank you. to some point, let's explore this. the fed could get themselves in a bind. they have basically told us the financial stress, the difficulties, the instability of the last two weeks is a substitute for hikes to some extent. it might have put a number on that of about 50 basis points. let's say it gets worse. we are in and around where the median dot right now is for 5.1% for 2023. if it gets words, wouldn't it

make sense to reduce interest rates? you are saying financial instability is a substitute for rate hikes. if you think you are close to what you think is going to be sufficiently restrictive, isn't some form of adjustment required? lisa: this is the logic underpinning perhaps some of what we are seeing in markets. the question is, if you see data that comes in hot, if you see that consumers are spending although it is softening, how do you diverge from what you said two weeks ago, three weeks ago, which was inflation is the number one concern, not, we want to make sure banks are ok? before you get the data showing how much lending is not --is being constricted at some of these banks losing deposits we were just hearing about, how do you justify that with a consistent message? jonathan: it is the fear of what you signal. that is the issue with fed policy, is the obsession of what you signal as you adjust interest rates.

the other difficulty i have is that you can reduce rates but have monetary policy that is tight, particular leave you have financial instability concerns and lending standards tighten. you have to think about it this way. if we had the scp two weeks ago, that median dot was coming up to 5.50. the fact they left it at 5.1 on top of financial instability the past two weeks, don't think that is dovish? they are saying, they are putting a number on it, we were going to be at 5.50, we are 5.1. lisa: it is not encouraging to think banks are suddenly not having deposits and cannot make loans given how much that was a driver of growth. jonathan: the markets essentially saying, this is not enough. you have to cut loads and it could get worse. it is just interesting, the equity markets been resilient in

the face of that conversation. really resilient. lisa: people want to see some strength there. honestly, that federated comment, they are sticking with it. jonathan: rallying through the storm in the equity market the last couple of weeks. -- is going to join us on tiktok and a whole lot more. lisa: keeping you up-to-date with news from around the world with the first word i am lisa mateo. ubs and credit suisse are among the banks being looked at in a u.s. justice department investing issue. authorities want to know whether finance professionals helped russian oligarchs evade sections. subpoenas went to employees of major banks. credit suisse and ubs declined to comment. the ceo of standard chartered says the worst moments of the banking crisis are over. bill winter spoke to bloomberg's david in glace in hong kong. >> i hope we are through the worst. there are questions around business models around the world.

the weaknesses have been exposed in the countries that have had trouble that need to be addressed at this point. it certainly seems the acute phase of the crisis is done. lisa: when asked if he would be willing to buy a new credit suisse assets, he said standard chartered is always interested in looking at things with a decent return. global news powered by more than 2,700 journalists and analysts in over one hundred 20 countries. i am lisa mateo, and this is bloomberg. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> i do not think you can describe -- >> facepalm. really hard. just, brutal. i do not think spying is the right way to describe it. i thought his performance yesterday was polished. said it a few times this morning, slick guy. that was a tough moment, a tough moment. lisa: they were looking for one slip up. they got one. it is not necessarily substantive. the bottom line is, there is an impression the chinese government could get access to the data that is collected by tiktok at any time they wish. he was not able to relay those fears in the way those politicians would have liked, not that they could have had those fears late anyway. jonathan: that exchange, has bite dance spied on american citizens? i don't think spying is the way --is the right way to describe it. i think i could play that all day. that is insane. lisa: pro tip, anyone asks you

that, you say no. then, say anything wet. you answer directly so the soundbite captures. jonathan: he said that instead. what kind of question consent is that raise? how would he describe it? lisa: collecting data that could be used for lots of other purposes. jonathan: right. ok. lisa: what is the distinction between tiktok and other social media companies? jonathan: a massive one. a huge distinction. facebook is not there. lisa: well, is that the issue? or is it that the chinese government has shown recently they are more willing to in pro -- encroach on business government divide and always have been? jonathan: why isn't facebook there? the concerns of the chinese government about foreign tech are the same concerns the u.s. has about tech coming out of china right now. this goes back to reciprocity.

why are we talking about that more? lisa: at what point does that stretch into apple, all of the big tech companies that have substantial businesses in china regardless of what ip or other types of security issues could get breached? jonathan: true. henrietta treyz joins us now. what a moment. i would not some -- subscribe it that way. i do not think spying is the right way to describe it. what were your thoughts when you heard that? henrietta: please stop. that was terrible to watch. it was one of the most aggressive hearings i can remember watching. i have seen a few of them. i agree with your point. he did as great of a job as you could have done. the members knew what they wanted to get out of that five-hour hearing. some of the members were saying, the most bipartisan committee and most bipartisan hearing in a long time. that is what drove the attention yesterday.

they got the soundbite they wanted. lisa: how quickly can they get something done? where is the political will to do something that could make serious ripple effects, particularly among younger americans? henrietta: i do not think there will be material registration targeting tiktok specifically. i do not think there will be a national ban. i understand yesterday's hearing was explosive, got a lot of attention. it was the banner headline across all platform yesterday. congress is not in a position to pass legislation to ban tiktok right now, even constitutionally if they could. what i think is happening, investors watch catherine tied when she is in the second hearing in front of the ways and means committee. she is writing a big china bill. there were dueling hearings at the same time. it you did not --if you were interested in policy, you would have watch the senate finance

hearing. i would encourage people to watch catherine tied today at 9:00 a.m. they have issues about china's expansion into latin america, brazil, russia, ip theft, human rights, climate issues. this --the tiktok issue is one that effectively brings everybody to the yard, gets that bipartisan support that allows them to craft a comprehensive china bill, which the biden administration is hoping to do after the debt stealing standoff is resolved. worst scenario, it is next term when he gets elected. lisa: how much are you watching tiktok and apple and other big tech companies that has substantial businesses in china? henrietta: this is what is in the restricted act. that is the one bill i think could pass on tiktok. it is about all emerging technologies, all social media. it is not just target china. it targets iran, russia, venezuela, cuba. it is the most conference event

could theoretically put every social media company on the table and allow the department of commerce run by a competent secretary to study the issue and restrict or ban as they see fit. jonathan: the tiktok ceo has had a tough day. secretary yellen has had a tough two weeks. where is this policy for going on the banking front? henrietta: nowhere fast. i had spoken with democrats and republicans, house, senate for the last two years, however it has been since this maybe collapsed. the reality on capitol hill is the house republican conference is not prepared to move legislation on banking at this time. there are many ideas floating around, but there is no path to two hundred 18 votes for a majority of the republican conference in the house on any legislation. what i hear time and time again is you need to see the impact of this banking crisis and the

collapse of a couple boutique firms, which is how a lot of house republicans think about this, really start to hit. you need to see farming banks, farming state impacts. it cannot just be commercial real estate that is reeling from this collapse and potentially seeing their lending ability squeezed. you need to see real heartland impact that is not in a certain couple of places. most of the republican caucus, about 80 percent, was not in office during the great recession and were not here during the bank collapse. a lot of them ran on the campaign, we are against bailouts. when they look at ensuring deposits and passing legislation to hike the two hundred 50 thousand dollars cap, all they see's bailout. that is not going to pass in this congress. jonathan: can you identify a mechanism for the treasury to temporarily suspend the limit on deposits? is there a mechanism that exists in your mind? henrietta: absolutely.

one thing i recall, i was during the senate during the banking crisis. the ability for regulators to act is unparalleled. the things they can pull out of the hat are impressive. the most focus right now that i know treasury is working on, shoring up the things we would think of forex ordinary measures in the debt ceiling. i would encourage folks to look at secretary geithner's letter in 2012 where he lays out five baskets of funding the treasury has exclusive funding over they can tap into in the event of a crisis. this circumstance was the debt ceiling, they can use that as well. the esg fund is getting a lot of attention. treasury secretary yellen once president biden gives her the signoff is authorized to use the funds they, which were $260 million as of january 31st of this year to deploy as she sees fit. i think that is where a lot of the focus should be, on regulators. i think he know congress is

incapable of action and are already prepared to move. they have experience if the members of the house do not. jonathan: on secretary yellen, she was asked whether she discussed some of these issues. she said she had not discussed them. i struggle to believe that. just struggle to believe the treasury had not had a discussion about doing away with the capital deposit insurance through the mechanisms through which you have identified. were you surprised she used that language? henrietta: i think there has been back and forth in terms of what they are telegraphing. but, i get the since the treasury is trying to exude, and stress -- exude calm and stress there is not a systemic banking crisis. i think acting unilaterally to provide unlimited backstop would have gotten a lot of blowback if she committed that. just think about how quickly that sounds like a bailout,

especially when you've got gary cop throwing out numbers. it is too high. there was some strategy involved there, which was the worst scenario. say you are considering on a limited basis or saying you had that conversation, i think she picked the least bad option. jonathan: what a tough spot. who would you prefer to be this week, bramo? tiktok ceo or secretary yellen? lisa: tiktok ceo. you have nothing to lose. jonathan: you lose, you lose. you have lost already. lisa: [laughter] exactly. ♪ >> took him back to world number

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>> what you will see in the united states and the u.k. is disastrous.

data will show and central banks will move into panic mode. as markets are pricing in already. >> they have got to show they can manage this and a crisis in confidence within the regional banks. >> banks are where the rubber meets the road in terms of taking financial policy and pushing it into the real economy. >> as the banking situation calms down, the data will become more porton. >> it is going to have to shift in the next few weeks as the --what does the path to one to two years look like? >> this is bloomberg surveillance. jonathan: i usually start friday by saying, let's get you to the weekend. the last two weekends haven't been much weekends. let's get you to a better weekend. this is bloomberg surveillance. equity futures down point 9%. a couple of names to stay on top of this morning. deutsche bank down 14%. ubs down 6.7%.

first republic was a little softer earlier. i would call that unchanged. lisa: i would agree. those shares of trading with a 12 handle in terms of how much they have fallen. if you look at the other regional bank stocks in the u.s., also under pressure, whether western pack -- pack west, wester lines. what happened to trigger ongoing selling? this is the difficulty we are having. what --we do not have a sense of where the risks lie. where the tea leaves highlight there is still enough stress the banks are borrowing from federal authorities. jonathan: when you have stress and push it through bonds, you get a big rally. two year yield down 24 basis points. sub 3.60 on the session. 10 years down 14 basis points. 10 year 3.29. what a move. lisa: two months ago, we were talking about the potential for

a --fed funds rate. now, we are talking 5.5% as of january next year. there has been a repricing in terms of how much the fed is not going to have to hike rates, but how much they are going to cut in the face of some stress we are seeing in the baking system. officials are not saying is the case. you have asked a good question. you ask again and again. our rate cuts good for risk assets in an environment where it means the economy and credit tightening is doing the work for the fed? jonathan: not all rate cuts are created equally. if you are cutting interest rates because things are breaking, i am not sure things are great yet. the people who want to play the recovery, the point of tension for me and i am asking questions about --she was talking about

the trade after the trade. the recovery to the recession we have not had yet. do you want to start planning the recovery until you have start seeing the re-cession? lisa: where people see real yields going lower is much lower. does that give you a boost?to risk assets if people think, the fed backs away from rate hike sooner, does that mean higher inflation for longer? how do we play that trade out if the stresses in the financial system cap the potential for how much this fed can fight inflation when it still is an issue? jonathan: that is the wrinkle in this story. there is a belief it will back away because it is a disinflationary shock and will get rid of the inflation problem. nasdaq ripped of the last couple of weeks. s&p down 1% on the s&p 500. futures are softer.

dollar is stronger. euro negative .9%. a big rally in the bond market. joining us now is the cio of peru me wealth. you've usually got a interesting trade. you held some of the debt. walked me through how that worked out. >> i was part of credit suisse last year. the beginning of march, i covered it at 2.9 swiss francs. a 70% return on the store. thesis was, not much upside in the equity, even though it was incredibly cheap. bonds are going to be safe. they are systemically important company, bonds could not fail. had a little bit of a scary wide over the weekend -- right over the weekend. jonathan: i am sure you did. patrick: some are senior bonds at the group level. there were scenarios were if it was a forced asset sale and ubs didn't buy the group, those

bonds would have come under pressure. it has turned out to be a good trade on both sides of those. this week's closed credit suisse, we are bank --bank of canada now. the canadian banks became the biggest banks in the world and the financial crisis. they were not impaired by the same issues all the other banks value. i think they are viewed as a beacon of safety. canadian banks have a property bubble to deal with. they are very expensive. you look at every other bank in the world they are trading at fractions of global value. canada is still trading of multiples of tens above value. very well run banks with a profitable --property bubble that creates risks. jonathan: how bad is that situation? patrick: property is always very high to quantify. affordability index, canada is near the bottom of the world.

property prices have gone up four hundred percent. incomes are rising with the rest of the world. zero interest rate policy, property price jumps every, were magnified in canada. canada -- canada has big commodity exporters. zero interest rate policies have led to a strong property market, especially in big cities. lisa: disclosure, you are from canada. this is a place where you can criticize your own home more easily. i'm curious whether this is just a symptom of the quoted a being thrown out of a system exposing other areas as overly inflated that have not gotten repriced down where you see a potential trade. patrick: a combination of banks are expensive versus other banks, very high --value, high under earnings. you are going to see impairments. banks business model, you lend money to people to buy houses. if those house prices come back

to normal on any measure versus history, you're going to have bad debt in canada. lisa: that is not just a canadian story. there is pockets of issues and the scandinavian countries and other areas where there is an affordability problem. it is also private equity, private debt. we have heard this from a number of people. others push back and say, either repriced or you won't have to repriced because assets will return to their value later on. do you think that is fair or do you think there are notes of potential contagion should there be forced sales, price discovery in? patrick:. if you mark to market properly, there is no way private equity dodged the selloff and treasuries, the selloff in equities, the selloff in every asset in 20 20 two. private equity funds mark their assets down 6%. those are not realizable level.

qt, private equity loan by private --a play on higher interest rates and companies that have profitability. it is tying into what you just said about marking to market about what you want the market out. jonathan: tell me about the longs. what is your favorite long right now? patrick: my favorite long. i like the bda. if we are talking about banks. that is a company that is going to grow its revenue probably at 15% minimum this year. they expect to grow revenue at 20 5%. interest rates are not zero anymore. that was a big headwind to profitability. i am not anti-bank. i think some of the banks make sense. i like spare longs with shorts. bbv is attractive jonathan: jonathan: to evaluate renault. the ecb is coming out swinging talking about more hikes. you heard the government --

patrick: price stability, financial stability is first and foremost. the central banks --i think we are not going to get as hawkish of a response as we would otherwise. it is going to fill the seats for future inflation down the line. future banks playbook when there is future stress throw liquidity at it. you've got conditions tightening that are offset by liquidity right now. it is not inflationary right now. they have a tendency to leave those policies in place longer than they should. i think inflation is dying out quick right now. i think it has probably got another leg up in response to what is happening from central banks in the coming months. jonathan: what is the growth profile associated with that inflation call? patrick: i think the u.s. is going to fall into a technical recession probably just based on the tighter financial

conditions, access to credit. my view as a month ago it would not. my view is now, it probably will, but it is going to be relatively minor. the employment situation is going to be a bust. one point six job openings for every unemployed person, that is going to paint a lot before you get a meaningful --as a consumer. jonathan: patrick armstrong, i am sure he hoped he held on another two weeks for that sure. 77% move. lisa: he did well for himself. what you asked was important, what growth profile is associated with inflation over the longer term and the increase you might see in stimulus. a lot of people calling for stag inflation. that is where a lot of people are concerned about, where do you go if you have that kind of environment, if central banks are forced to throw money at a problem driven by the financial system? it leaves us back to square one

in terms of finding inflation. jonathan: the call on canada's inflation. it is not just canada, equities, banks. we have heard of the fx call being associated with the property bubble. lisa: you want to go into a place where they do not necessarily have to see a significant decline in home prices. again, the fx analysts are becoming experts and whatever is the narrative did sure. right now, it is where there are notes of contagion and where are the mispricing's in the market? jonathan: nodes of contagion, it is about that. deutsche bank down 14%. first republic down 4.5%. on market, two-year 3.58. 10 year, 3.29. ♪ lisa: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. u.s. prosecutors have charged terraform labs co-founder with

orchestrating a massive cryptocurrency fraud. it has said to have wiped out at least 40 billion dollars of market value. he was already a fugitive from charges in his native south korea. he was arrested thursday in montenegro. which a bank has become the latest focus of the banking turmoil in europe. shares fell and the costs of insuring against the german lenders default arose. deutsche bank has staged a recovery in recent years after a series of problems. today, it has said it would redeem a peer to subordinated bond early, a move intended to give investors confidence. in japan, inflation slowed for the first time in more than a year. consumer prices excluding fresh food rose three .1 percent in february from a year ago, down more than a full percentage point. without the impact of government subsidies for energy and travel, inflation would have been as high as four .4%. ford raising its projection of how many electric f-series pickup trucks it can build at a factory under construction in tennessee.

the new estimate, 500,000 a year. that is about 40 percent more than the company forecast in november. the ford factory is due to open in 2025. hundreds of funds reportedly will lose their esg ratings at msc i. according to the financial times, it is planning to lower the environmental, social and governments ratings of thousands of funds. move comes amid growing concern the esg label is applied to easily. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo, and this is bloomberg. ♪

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>> we are watching it very carefully. we have been heavily involved in the last two weeks and all of that. i am encouraged by the signs in the u.k. banking system. i think we have got a banking system that is safe and sound and one that people can rely on. that is the thing we must have, a banking system people can rely on. i am optimistic. i think the banks are in a strong position in this country. jonathan: that was governor bailey, that has been pretty much everyone worldwide. europe, the u.k., the united states. as a finance minister of a financial bank somewhere saying

their financial system is robust and their deposits are safe. lisa: even australia. the governor coming out and saying, the reserve bank of australia coming out and saying our system is strong and people are buying it. what is it going to take? jonathan: bank lower. first republic down four point five percent. ubs down 6%. deutsche bank down 14%. maria tadeo is in brussels with finance ministers meeting. maria, what is on the agenda here? maria: this was supposed to be about the economy. i can tell you, it has been blackout. nothing has leak. we know in this meeting, the head of the ecb met with european leaders in --and 27 of them. it was a meeting behind closed doors. no phones allowed. the information there is being kept tight. --tightlipped. there was supposed to be a final

press conference today with the heads. both european commission and the european council we hear that has been canceled now. up until now, the message from the european central bank has been, there is no trade-off between price stability, financial stability. we can handle both and will do both. for europeans today, what a cold shower. how sentiment flips so fast. yesterday, i was speaking to one of my sources. he said, i feel the worst of the storm for europe is over. our banks are capital, well-regulated. you come in this morning, look at these banks in the picture today is not a pretty sight. lisa: you were talking a lot this morning about u.s. leaders and the aversion to being associated with additional bailout in a post 2008 world. how much does that cohere with the rhetoric from european leaders in brussels? maria: it is a difficult question to answer. we have not really had any access to european leaders.

usually, this is a place you scream and shout questions. you get information. you have to hustle a lot on the sidelines to get access to what is being sent behind closed doors. this one, when i'm struck by is the fact this is so well productive. the discussions about the state of the economy by implication and extension the banking sector. we are waiting for a number of countries potentially to brief us. overall, not a lot has come throughout of this. the standard line up until yesterday was, european banks are strong. they are well-capitalized, have liquidity and are well-regulated. the market today, very jittery. jonathan: this market is all over the place. market taddeo out of brussels. joining us now, jan patrick. deutsche bank down 14%. why, what is the news, where is the news, what is the why? >> to me, it is not a thing about deutsche bank on its own.

it is a random move. i would even say last week, we had -- the worst performers. what we are seeing today is a pure recession trade. you see this across the market from sectors ranging from banks, energy, construction. you see quality factors being in the market, low quality factors being sold off. you have a bank like deutsche bank with exposed to corporate landing and germany, which is exposed to the real economy, it is a stock you are selling more than others if you are repositioning for this hard landing story we are seeing the past two weeks. two me, it is not about deutsche bank being in trouble. it is more like the market picking up that story of hardly a hard repositioning of the economic narrative. lisa: this raises the issue of the head of the bundesbank coming out earlier this morning with hawkish rhetoric and whether this hawkish rhetoric

only accelerates the selloff we are seeing in some of these recession trades you are talking about. are you connecting the dots, ecb officials lean into we have a lot more do, the more rate hikes are price down and recession is priced in. jan-patrick: i think the central banks to -- need to be careful. i understand the fed as well as the ecb, both are focusing on inflation. our job is not done, we do not want to create the impression we have to tap the brakes immediately because that would send the signal there is something bigger wrong in the system. i feel like the speed of which this breakdown in economic activity with that inflation has he celebrated a lot in the past couple of days. central banks need to take that into consideration going forward with the right path. the job they are trying to achieve might come in much quicker than anticipate. they need to move quickly from

breaking inflation to supporting their economy. that is a difficult thing to do for them. they need to be careful in the action they are taking the next couple of weeks and months. lisa: a lot of people are going to say, we understand the recession trade. why is deutsche bank down 11% on no news? is that because people are forecasting there could be some sort of downturn in the future? how much are people looking at serious issues with counterparty risk, the potential for the flight of capital bondholders, other types of contagion effects from not only credit suisse, but in general what we have seen across the banking complex? jan-patrick: i do not want to sound naïve. as always in the baking sector, you have an issue with the economy slowing. you are based in the country, europe has the biggest exposure to the global economy. i do not want to be naïve and say there is no issue at all. for the moment, this is an

earnings trade. of course, deutsche bank's earnings will be much higher than the others. we are not at a stage where this is a capital trade where we see massive problems within the capital position of those banks. that is an important distinction we should make. jonathan: that is a vital one. i think that is a difficult one to make sometimes when you see a stock down aggressively. you start thinking about existential risk. there is a lot of daylight between existential risk and peer profit challenge. i think we can all agree, we can escape the worst of this. there is going to be a pure profit challenge for the whole industry in a big way. lisa: especially if the economy does have a recession and if europe is facing potentially more issues. right now, not so much. pmi's in the service sector earlier this morning came out better than expected in a year. if that emboldens ecb officials to hike rates more, does that send the downside further self going forward in the future? jonathan: you know what i do not get?

schwab was down yesterday 6%. the ceo spoke to wall street journal. and said, there would be a sufficient amount of liquidity to cover if 100 percent of banks deposits ran off. they are saying they got all the liquidity in the world to deal with this. yet, the stock finishes the session lower. in the free market, softer, too. lisa: this goes to the profitability question. at what point does this challenge the business module --business model? when does the price action become a self-sufficient link prophecy in terms of profitability and confidence from investors and depositors? jonathan: the emergency meetings, are we done with that? lisa: i hope so. we do not know what we do not know. hopefully, there is stability. the data suggested that. the data we got yesterday. jonathan: sub two hundred k on claims. who is paying attention to that data now? lisa: the data from the federal

reserve, showing that lending went down a little bit from the fed to some of these banks but is still elevated. people think maybe banks have taken the funds they need at this point so they can sit on that. and, that make not signal as much distress --mike not signal as much distress. the money market funds, that is going to challenge long creation and profitability read jonathan: coming up, cassie barrow of j.p. morgan asset management. that conversation on bloomberg tv in the next hour. ♪ ♪ whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management

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lisa: one hour before the open of u.s. trading. it looks softer as we await some sense of whether we can go into this weekend with some calm. this is bloomberg surveillance. tom keene back on monday. i am lisa abramowicz taking a look at markets that are soggy after trying to assess what --how much damage is being done. the real move this week has been yields, so much lower with two-year yields sharply under three .6%. right now, we have economic data coming up.

let's head over to mike -- michael mckee. michael: we are getting the february durable goods orders numbers now. this is february, he little old. it goes back to before the banking problem. i do not know whether that would influence you to buy a new boeing or not. durable goods orders fall 1% after four point 5% drop. the month before. x transportation is flat. capital goods orders non-defense x air, the one economists watch because it is a proxy for business spending, that is up .2% after an eight point --point 8% increase the month before. these are the non-revised numbers. i am looking for the revised numbers on those. it looks like a little bit of an expansion in terms of business spending. but, not a huge amount. the headline number, what we usually see is it is heavily

influenced by boeing. those jets are really expensive. i will take a quick look and see . non-defense aircraft were down 56.3% for the month of december and january. january 2 february, down 6.5%. boeing taking a lot out of the first two months of the year. overall, initial impression is, it is not terrible. this is not going to influence it in any way. lisa: or markets. i will give you a chance to parse through some of it. not seeing a big change in markets. we have been talking all week about how economic data doesn't seem to matter as much with the focus front and center on the banking situation whether we see more stress is emergently financial system. as we think about that, it is important to question the

underlying strength of the economy and underlying inflationary impulse, particularly on the services side. how much have you seen this ongoing divergence with weakness, downside surprises, to the good side of the economy even at a time where you continue to see upside surprises in services? michael: you look under the hood here of the numbers, machinery orders down, computer orders down, communications equipped orders down. ultimately, this does not come out as good as maybe the headline would suggest. not that it was great. you have some key parts of the u.s. industrial economy seeing a slowdown in orders from his this. it is not as good as news as you might think. we also saw the prior month's numbers, the january numbers, revised down from 4.5 on the headline to -5 on the headline. capital goods orders shipments were revised down from .8% to

.3% in january. numbers are weaker than initially appeared. lisa: michael mckee, thank you for breaking that down. next week, we will have hopefully a better look at how the data breaks down trying to understand whether the banking crisis has been resolved. pairing these ideas of the economic data and concern about loans being extended from banks, the potential credit impulse to the american population. david peterson joining us now, chief economist at the conference board data. i want to start by asking, how much is your outlook for the u.s. economy changed the past two weeks? >> it has not. we have been calling for a recession starting in the second quarter extending through the fourth quarter. this might accelerate things. certainly, consumers have dialed back spending on goods. businesses are not spending on investments. the housing market has folded in on itself.

the last shoe to fall is services. a credit crunch does not affect services because people do not tend to finance restaurant visits other than using their credit cards. we think in terms of durable goods and the ability for businesses to invest, tighter credit conditions are not a good thing for them. that will potentially cause the economy to have maybe a little worse recession then we are expecting. lisa: that is what a lot of people are saying. this brings forward the recession. you bring in other to the table here, this idea of a potentially deeper recession. at what point to liquidity concerns that banks become a credit problem for the consumer, a credit problem for the economy akin to what we have seen in history when there are liquidity issues? dana: if you are a bank and concerned about your deposit levels drop in, you are less likely to lend money.

the things consumers are pulling back, they are not going out and buying cars and homes because interest rates have risen significantly, almost five percentage points in roughly a year. they --there may not be much of an effect on the consumer. there is a risk for businesses who tend to need cash, especially to pay their workers and invest in short-term and long-term ventures. i think pressures will probably be more on businesses relative to consumers. lisa: does this shift your view on how much unemployment could go up, or do you think we could get this downturn without some sort of structural increase in joblessness because of the mismatch right now in the labor market? dana: the industries that are letting people go are the former pandemic darlings. it is tech, finance, real estate , construction, transportation, warehousing, which were linked to the strong demand for goods. that is what we are still seeing in terms of layoffs in weakness.

you have these huge labor shortages in areas that are less sensitive to interest rates, such as health care and restaurants and hotels. what we need to see is consumers turn that downward sentiment we are seeing in our consumer confidence gauge the last year into, i no longer want to purchase services. certainly, higher interest rates may not give them that issue. if consumers think, i might be next in terms of layoffs, they will pull back on spending. all in all, we think the on appointment rate is probably going to rise to about 4.4% next year, roughly one million jobs lost. i would not want to be in that number, but not as bad as what it could be. lisa: we are speaking to dana peterson as we look forward to another week, another month potentially of rate cuts in the face of what some people are expecting is a decline in economic momentum. here comes the rub on the issue

as we talk about a sooner recession, a deeper recession, cutting rates in response to that. have we dealt with the inflation problem given the stickiness that we have seen in recent? dana: i do not think we have. when we see the stickiness, it is linked to wages through services through wages and very strong demand for services. also, food prices which are being influenced i out side effects --i out side effects. declines we expect in rent, inflation, it is in the pipeline. we have to wait for it happen. mably -- maybe it will start in the spring or early summer. we are not anticipated the fed is going to cut rates this year, even if there is a mild recession. if you have prices that are so far above the two percent target, why would the fed be cutting interest rates especially if they think that there is a recession, it is not going to be that bad? lisa: this is not just an

industry story, it is a balance sheet story. we saw the balance sheet increase to medically the past two weeks in terms of the federal reserve and its holdings. part of this is not necessarily stimulative. these are emergency loans to certain banks. at the same time, can this central bank kill inflation if it keeps going back to the same crisis era tools to try and solve? financial instability dana: i think the fed is trying to say it can do two things at once. it can address inflation to the credit channel by raising interest rates and also the continued dialing down of its balance sheet. it can provide liquidity, which does hit the balance sheet. you can think of it as two different wallets the fed working with. the fed is saying, we can provide liquidity to banks and it is non-stimulative because banks are taking this money because they need it to make sure they remain stable. they are probably not going to lend this money. that prevents it from being

stimulative or inflationary. i think that is the key thing we have to understand. the fed has many different tools. it is using these different tools in different ways. it can address inflation and providing liquidity at the same time. lisa: how much do you think the fed can?cut rates dana: we think there is no rate cuts for this year. we will probably start seeing consideration of rate cuts may be the second quarter of next year. we think we are not going to go back down to the low levels that we saw even before the pandemic because inflation may be structurally higher, it may be more difficult for the fed to maintain that two percent target. we think may be the federal funds rate year goes down to around 4%. certainly, not back to 2%, one percent, or 0% unless we have some major crisis or very deep recession. lisa: dana peterson, thank you for being with us. we were talking about the balance sheet. i want to bring michael mckee back.

we saw a massive increase in the fed's holdings from a $.3 trillion to eight $.7 trillion over the course of the last two weeks. what is the distinction between stimulative balance sheet expansion and non-steam lit of balance sheet expansion? michael: what is going on is the banks that have these liquidity mismatches on their balance sheets with assets that may be worth less because of higher interest rates are able to lend those to the fed at par and get cash for that, which they can keep in their accounts so they have enough money in case there are withdrawals. they are not going to use it to make loans and not going to be stimulating the economy with it. the loans are temporary. 90 days through the discount window a year through the new lending program. they have got to give the money back. this is a different animal than the normal qe where the fed buys

bonds, takes duration out of the market and puts cash out there to be put to work. lisa: does the data we got yesterday indicate that banks have largely borrowed what they need? michael: we do not know. i would assume that we are essentially there. by now, you would know if you were a packer if you had real problems on the balance sheet. it may take another week or two for this to work out. lisa: great work. it is important to keep watching the data. people are watching the data that comes out at4:15 p.m. today. as we look for the senior loan officer survey in next week. we are looking at markets on the move, lower, down almost .9 percent on the s&p. yields continue their dissent. 10 year yield 3.3%. lisa: keeping you up-to-date with news from around the world with the first word.

ubs and credit suisse are among the banks being looked at in a u.s. justice department investigation. authorities want to know whether finance professionals helped russian oligarchs invade sanctions. subpoenas went to employees at some major u.s. banks. credit suisse and ubs both declined to comment. eeo of standard charter says the worst moments of the banking crisis are over. bill winter spoke to bloomberg in hong kong. >> i hope we are through the worst. i think there is some questions around business models around the world. the weaknesses that have been exposed to business models in the companies that have had trouble that need to be addressed at this point. it seems the acute phase of the crisis is done. lisa: when asked if he would be willing to buy credit suisse assets, winters said standard charter is interested in looking at things with a decent return. in north korea, kim jong-un oversaw tests of weapons designed to deliver nuclear attacks against the u.s. and its allies.

one of them was described as an underwater drone that could create a "radioactive tsunami." the agency says drone cruise nearly 60 hours before detonating and the tests included cruise missiles carrying mock nuclear warheads. shares of activision blizzard jumped in premarket trading. u.k.'s antitrust agency has narrowed the scope of its investigation into microsoft's $69 billion takeover of activision. the regulator says the deal will not lessen competition in console gaming. global news powered by more than 2,700 journalists and analysts and over120 countries. i am lisa mateo and this is bloomberg. ♪

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rigorous over time. i think more importantly, it has become too protectable. the whole purpose of a stress test is you are trying to stress against the unanticipated, not the anticipated. lisa: how do you stress test against a twitter rant? that has been some of the questions. how do you anticipate the unanticipated? former fed governor speaking on balance of power. as we talk about bank issues and the concerns under the hood, one big question mark has been the value of commercial real estate, residential and particularly on the coast. there is no one better for insight on that the jonathan miller, president and ceo of miller samuel. i want to start there. this question around commercial real estate values and a lot of people happen pointing to a potential note of distress. how much is that true? >> i think it is probably more true than we realize.

the work from home phenomenon has fundamentally changed the metrics of commercial real estate. the idea that people are going to return to the office five days a week is simply no longer a viable assumption. we are seeing that play out in the security swipe data from castle. we are seeing the numbers stuck at about half, meaning about half of the work the lings are being used compared to --work buildings are being used compared to their pre---usage. we are having residential real estate on the rental side in cities like new york maybe not rising like they were, but remaining stuck at record levels. there is this disconnect between commercial and residential. lisa: there is a lot of issues to impact there. i want to start with this question of, if there is 50% occupancy, do you need to see a

50 percent decline in valuation for office space in big cities? jonathan: the short answer is, yes, that is possible. we are already seeing a significant drop. the numbers are not reflecting that yet because with commercial real estate, people with five, 10 year leases at a rate that was market prior to the restructuring of pricing, it is going to be a long process. but, we are seeing that. one of the reasons why landlords are unable to -- why you are not seeing the market levels drop as much as they have been is because they have debt service to cover. that debt service was based on the cash flows that existed before the reset in the whole market. i think this is a long, slow process. lisa: how much does some of the

concerns about recent banks, in particular, signature, which accounted for a significant portion of commercial renting in the nation, how much does that accelerate the process? jonathan: i think it accelerates it probably at an uncomfortable break to landlords themselves. they were the go 24 and a lot of land --go to bank for a lot of landlords in the residential world. it is one less lender to service to business. it is going to make things more expensive for landlords in that sector. lisa: can we dovetail this into the residential sector? you talked about new york. i would pair san francisco into that. some would argue with office space is getting decimated and people are not going back to the offices, it will let people live wherever they want. more people are moving to the south, to florida, the sun belt.

at what point is this residential with new york and commercial uncomfortable and needing to be bridged? tom: i think it is already uncomfortable and needs to be bridged. jonathan: unfortunately, the solution for that is i think a lot of people are pinning their hopes on office, residential conversions from durham office space. the reality is for probably 80% of those buildings, it is unrealistic because there is a number of problems with that. the cost of converting to residential building codes almost from the start makes it a nonstarter. the other is the debt that is attached to those buildings as collateral would have to be redone because it is a change in the status of the building. i think one of the bigger

problems is that the floor plates, especially in larger office buildings, are not compatible. you cannot create apartments that are 300 feet with two windows. it is a major challenge. i think people are going to be struggling with this transition or figuring out what to do over the next decade. lisa: some people might listen to this and might get nervous, especially with banks that are traditionally the disproportionately are's to real estate investors to issues and saying, this could have a significant downturn in tandem with what we saw in the housing crisis, particularly in areas that are not big cities that have been typically office space havens that will no longer have the same alert. do you think there is some sort of buffer or something to offset those doom and gloom? prognostications jonathan: i think it is an oversimplification.

when you think about the banks that a failed right now, it is a small number. there is a concern it could spread to other institutions. at this time, we are not seeing that. i think you are in a panic mode and over the next couple of weeks, and if nothing else happens, maybe that is indication we are going in the right direction and out of the crisis. lisa: do you think rents have to come down on residential and you have to start seeing more significant declines in the residential price tags in order to right size things and bring something to a greater sense of stability? jonathan: one of the problems with the rental market has been, it was already tight. the spike in mortgage rates doubling --more than doubling over the past year has pushed homebuyers into the rental market, which has exacerbated the problem. we have seen nationally rents,

residential rents begin to klein. in new york, not so much. rents have been flirting with record levels since last summer. the only way i can see rents fall in a meaningful way, we have some sort of recession or their is a much more damaged seen in the employment sector. other than that, i cannot think of a reason with high mortgage rates that rents would see a significant improvement in affordability. lisa: i would love to talk about that mortgage rate, which has started to come down especially on heels of expectations of rate cuts. where does the mortgage rate have to be to make the affordability proposition much more attractive to buy and send people back to that market, rather than rent? jonathan: i think any not slower improves -- notch lower approves

-- improves affordability. the rates should sit in the mid-fives, that should be the new normal. the idea of 2.5 seven 30 for a five 734 a five-year fixed is preposterous. i think mortgage rates that are somewhere between -- somewhat lower than where they are, rates are not too high. they are just too high relative to the unbelievable lows that we saw over the last several years. lisa: jonathan miller of miller samuel, thank you. i hope we can catch up again soon, especially as the real estate story does evolve. headlines coming out of that meeting in brussels where we were talking with maria tadeo. christine lagarde remarking to eu leaders according to a person familiar with the matter, saying there is no trade-off between price and financial stability. this has been her line for a bit, saying there is a need to

progress on a banking union. this perhaps talks to the closing of the spreads in the periphery and this question of whether greater unity to fight inflation does lead to a closer union in europe it also talking about the euro area banking sector, it is strong, there is no concern. deutsche bank shares notching lower in germany. down about 12 percent. berkeley shares down almost 6%. ubs shares off earlier lows, there is a feeling perhaps there could be something that is playing out whether it is a recession trade or whether it is something more concerning about contagion. coming up at 10:30 a.m. eastern, the cofounder and ceo of avenue capital management talking about the private credit impulse and how that plays at a time of potential liquidity mismatches and price distortions. from new york, this is

bloomberg. ♪ this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

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>> let us get you to the weekend, good morning. equity futures down 6/10 of 1%, the countdown to the open starts now. >> everything you need need to get set for the start of u.s. trading. bloomberg the open with jonathan ferro. jonathan: the boa