>>john welcome. the united states is prepared to respond with ukraine and other allies if and when russia is ready to work toward peace. secretary of state antony blinken says they can't legitimize vladimir putin's landgrab. cia director william burns made a sick visit last month to beijing where he met with chinese intelligence officials. while he was there, he emphasized he wants to maintain open lines of communication and intelligence between washington and beijing. the trip comes as the biden administration attempts to reset

ties that have freight in recent months. former vice president mike pence is off the hook. the justice department has ended its review of whether he mishandled classified documents with no charges filed. the department began review after lawyers set a small number of documents marked as classified were in his indiana home but he turned it over to the fbi. he will launch a challenge for his former boss donald trump for the presidential nomination. global food cost dropped to a two-year low. the united nations index of food commodity prices fell 2.6 percent in may as declines in grains, vegetable oil and dairy offset gains in sugar and meat costs. international trade commodities have fallen nearly 22% following the russian invasion of crane last year. global news powered by more than 2700 journalists and analysts in over 120 countries, this is bloomberg. ♪ ♪ ♪

jon: welcome to bloomberg markets. matt: we've got a real rally underway so let's look at what's going on in the markets on this friday. after we got an are in firm's payroll number -- a nonfarm payroll number, economist estimates were up. we added 300 39,000 jobs and this is the 14th month and a rope we have beaten estimates in our survey of economists. the 10 year yield is rising 8.5 basis points. the markets are still pricing in a pause from the fed in june but more aggressive about hikes coming in july and possibly thereafter. the dollar index is rising to two dollars $.41.

jon: energy and financials and some of the materials, the cyclical trade is alive and well and we are seeing that in canada as well. we've got 3m and dupont on the move after announcements tied to water pollution claims. they are up in the neighborhood of 3%. we continue to watch the retail sector and we have lululemon out with a quarterly number, and outlook that while wall street. we seen the shares climbing. they are benefiting from chinese consumers getting out and spending again but you talked about the jobs data. one could argue the economy staying strong is keeping people shopping even if they trend toward higher and consumers. matt: definitely at the higher end. if you look at the lower end, the dollar general's of the world are having more of a problem. nonetheless, a massive beat on the nonfarm payrolls number

makes things tougher for the federal reserve. the fed speak this week as hinted at a pause of the next meeting. it has gone beyond hinting, they are essentially guiding the market to no movement at the next meeting. mohamed el-erian thanks the board is putting itself in a corner. >> thinking that one month of data is going to make a huge difference is i think for yourself. that is the risk of being excessively data dependent. you get stuck in a smaller and smaller corner. the data will pin you there and as the data becomes fluid, it inns you there even more. jon: let's get more context from our chief u.s. economist. you heard those comments about data pushing potentially the fed into a corner but let's dig into this. beyond the headlines, i know you have felt this had some signs of

softness, this jobs picture. >> right, everybody has focused on the strong nonfarm payroll monthly gains. on the others of this report is the very week household employment change, negative 310 or so. much of this decrease in household employment is driven by a plunge in self-employed people. i think what's going on is these people during the pandemic were selling crafts on etsy or ebay are suddenly seeing perhaps a plunge in demand for the products so they want to go out and find a real job. that's what's being counted in the nonfarm payroll. however,, i think nonfarm payroll is capturing this transition from a sector that was not measured, rather than telling you about the overall

flow of the economy. overall, the labor market is softening. matt: why does it look like wall street only cares about the establishment survey, the addition of 339,000 jobs and is ignoring the household survey, the drop of 313,000. it showed 440,000 jobseekers. is the household survey less important than the nonfarm payrolls number? does one win out over the other? >> i think the wall street take mostly matches our own which is the fed will still go ahead and pause in june. i think that's because they are also reading in the week household employment data. if wall street actually took this report is superstrong, they

would be pricing in more rate hikes and i think stockmarket would have fallen rather than increased today. over all, our read is similar to what many people are thinking. matt: thank you so much for joining us. let's talk about the impact now on the economy of private markets with craig packer from blue owl capital who oversee $144 billion in assets and sonali basak. let me ask you about what private credit can do if we see a contraction in credit from the banks? does private credit pick up where the banks have left off? >> thanks for having me today. what we do is primarily finance

companies being acquired by private equity firms. and not small businesses. if you see contraction in conditions for small businesses that could create some opportunities for us but that wasn't where we were competing in the market before. we like figure companies. the banks participated in that market by committing syndicated leverage loans so that's been a competitive set that's been consistent. there may be opportunities but i don't think it's a big part of what we expect going forward. sonali: have you look at your existing portfolio? what does a potential recession mean for what you already own? what are the worries about conditions moving forward and are there any lag effects of higher interest rates? >> this started at the end of last year. private credit has done externally well right now. we are benefiting from rising rates and that's reflecting itself in higher earnings and dividends for investors and credit quality remains quite strong.

i would say it's been surprisingly strong but for our clients is not a surprise. we lend to bigger companies and the economy remains good. what happens if the economy weakens, i think there is a good chance it will come i think we will continue to do very well because we are lending to bigger companies in recession resistant sectors. this has been our approach for seven years. we are not trying to time an economic cycle and we left -- we let the space cycle but not to the dramatic effect it will impact credit quality. we can withstand little bit of credit issues in moderation because we are earning more with higher rates. i think credit issues in the private credit landscape will be manageable in the fund will continue to perform well. jon: what are these clients looking to do with the money to get a sense on where the economy

is going? is it saving for a rainy day or are there opportunities to grow with capital? >> we are seeing significant interest in private credit from institutional investors as well as high net worth investors. i think they have a similar objective in mind. our phones can generate high levels of consistent income and whether you are in institution with 30 or 40 year time horizon or an individual investor, having the steady income in your portfolio is very attractive. the last couple of years, the fixed income markets in the lower rate environment has had poor performance a we are seeing clients in both areas say i'm willing to lock up my money in exchange for getting premium and consistent yields. it's primarily income driven and there is some opportunity for capital appreciation. sonali: let's talk about private credit as well in terms of the big buyouts you are seeing in the market. do you think there is a chance

we see almost $7 billion deals being done when you think about like finastra. how big can these deals get? >> it has been really exciting to see the growth in the asset class is more capital has come into the space. our ability to finance bigger and bigger deals has helped us. and this growth has followed our debt has followed our growth as well. we routinely look at deals of $1 billion and more. we looked at 60 in the last 12 months. when you get to the 3-6,000,000,000 dollar range, not as frequent but probably two handfuls of deals in that time. i think you will see that bar get higher and higher. we could see a $10 billion deal in the next couple of years. what's exciting is not just to do a bigger deal. what's exciting is that if we

are lending $10 billion and we are lending to accompany were typically of 45% loan-to-value lender, that means you're talking about a $20 billion company. these are some of the largest companies in america so to us, we have a chance write a bigger check for a bigger company. for our clients, that's exciting. sonali: for the last couple of months, you have seen closed off markets. the leveraged loan market was left for dead and banks were stuck with debt. you are up and you are seeing places like goldman talking about leaning in with deals coming back to market. where to the private credit providers fit in? >> there are two different trends. one is the secular shift over the last seven or eight years toward bigger and bigger deals getting done direct. that trend is consistent i think it will continue. private credit today's probably

20% of the leveraged finance market. over the next five years, it could go to 30% which is a 50% increase. there is also the cyclical, periods of time where the banks were not trying to make loans, trying to distribute loans, markets move and the distributions get hung and they pull from underwriting deals. that's the last six months. growth in private credit as a function of the secular change and that will continue. the private equity firms we work with are getting more and more comfortable using direct lending for their bigger deals. they like it and they will continue to use it more and more. sonali: there is the sense that private credit gives you double digit returns which is part of the allure. the realism is that there are so many players, there is no way you will not see compression return at some point. at what point to the double-digit returns become less and what to normalize returns look like?

>> i think we are in the early days of the asset class. there's plenty of opportunity is new capital comes into underwrite bigger deals. the addressable market is going and is not the same capital where you see fewer deals. it's more capital chasing bigger deals. it wasn't that long ago that returns were in the high single digit. the higher returns are a function of the rate environment. this has been one of the best environments in the last six months where spreads have widened despite these trends. this is a really great environment there will be a natural wax and wane up returns. there will always be a premium to syndicated markets and there's always a nice steady return, depending on the interest rate environment for those institutions and high net worth investors that can afford the illiquidity. matt: i have a viewer writing in and he asks, is there difficulty for companies to service debt

that's floating in our 50% more expensive? >> is the question we all have. our portfolios continue to do externally well. we just reported results for most of our funds a few weeks ago. credit performance continues to be excellent and i think the companies are taking the steps necessary to make sure they can support their debt. we do primarily private equity backed deals in the private equity firms, everyone has seen the rate move coming. the private equity firms are the equity investor and they are motivated to make sure they keep their companies and they work with the management teams to take the steps necessary so they can support their debt service. i think we should all expect some modest pickup in stress but over all, the impact is more and equity returns than it is on credit returns. i think credit returns will continue to do well and companies will have less free cash flow but will work with their private equity partners to make sure their companies can

make it through what most people would expect, a relatively limited amount of time at higher rates. matt: great having you in the studio and thank you for coming in. he is the cofounder and copresident of blue l capital -- blue owl capital. coming up, a new all electric vw bus to move here from the ceo of beat -- a vw of the americas. this is bloomberg. ♪

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time for our stock of the hour. we are taking a look at volkswagen which just introduced a full electric version of its

iconic bus. the companies u.s. listed shares are moving higher and delivery should begin next year. speaking of deliveries, the company just reported a 39% increase in deliveries i in april. matt: i spoke with a volkswagen north american ceo who is in huntington beach, california. i asked him about the u.s. labor market following today's jobs beach. >> we just hired 50 people in our manufacturing facility. we are over 6000 employees in the state of tennessee. this is aligned with the numbers i just gave you. if we increase our numbers and we start production of vehicles in the last year and we ramp it up to 7000 vehicles per deuced in the state of tennessee in the last month.

this is only the start of our beginning in the u.s. market. matt: you got to manufactured to meet demand. in the left has couple of years, there have been other things holding manufacturing back, specifically supply chain issues and chips. how are you doing them in terms of your supply chain? >> significantly better. it has grown 26% year-over-year which is a huge achievement by our team. not only that, we are the only automaker the qualifies for the inflation reduction act for the $7,000 credit. that means our team has been able to relax. the job, the innovation, the battery are within the u.s. and that's a huge win forever team. matt: prices have gone up substantially across the industry over the last few years. is there still so much demand

you can essentially charge what you like? >> the market continues to be strong. it's growing 9% in the cost of the raw materials particularly in the electric spacer coming down. you saw commodity prices, particular on lithium. i think that will accommodate rcep -- our suppliers and be normalized in the next couple of years. matt: how are you sourcing lithium? many automakers are vertically integrating for nickel and aluminum and other materials necessary for electric vehicles. how are you sourcing for those things? >> today, where one of the few that have battery production within the u.s. but we take it a step further. just announced one of our companies sourcing all the minerals, producing the cells and doing the manufacturing here in the u.s. this will be a complete package and in a couple of years, we

will be 100% sourced out of north america. matt: let me ask about the dealership network. how does that look now? do you grow a dealership network like the typical american franchise or do you sell direct to consumers? >> our dealer network is right here right now and we will continue to have conversations. matt: is there more online purchasing? our customers doing more online with volkswagen as well? >> they are so we have different programs particular in the digital space that can be started with the dealer mark work -- with the dealer network or vw directly. these digital tools are even more relevant. we have an aggressive plan of more tools in the next few years. jon: coming up, the apple market cap nearing the $3 trillion mark

after major rally this year. more next, this is bloomberg. ♪

jon: this is bloomberg markets. time for what it's worth. our number today is $771 billion which is how much the market cap for apple has climbed this year. is moving back toward a $3 billion valuation and they are getting ready for the big monday event where they will reveal her first new product caret -- category since the apple watch. matt: it will be interesting to see what they come up with. there has already been mixed reality headsets in the market like oculus rift but when out and got bought by facebook. we speak with htc who has won in the u.s. as well. apple typically takes these

products and hopefully makes them better and produces luxury versions. i can't wait for the worldwide developers conference monday. . this is bloomberg. ♪ you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh you've been a real rock star. rock star? what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses workday. thanks, rory. i'll show you rock star! be a finance and hr rock star. workday. for a changing world. billy idol just stole your golf cart!

romaine: range bound no more, the s&p rallies for the third straight week, punching through a key point of resistance. i'm romaine bostick kicking you off to the close. about 93% of the stocks in the s&p 500 and the green. looking like it would be the broadest rally in about two months. it is not tech or ai, materials, energy, and industrials leading the charge. dupont, 3m, caterpillar among th