>> welcome to bloomberg markets. i'm jon erlichman. matt: and i am matt miller. we are seeing a little bit of a drop in stocks right now. not much, really. just a bit of a fade to the rally that we've been watching, down about 0.1% at 4344. udc investors buying bonds, may be looking for safety and government debt. we do see the yield coming down. again, it is only marginal. still looking at 4.73. this is the two-year yield. we see similar action on the

longer end of the curve. the u.s. dollar index is down about 0.1%, not a lot of action there. at oil, we see wti still holding below $70 per barrel. there is a lot of geopolitical news right now. it looks like market participants to some extent are trying to wait it out and see which end is up. jon: watching the headlines for now, moving money into energy stocks. then, we have specific corporate stories we are tracking. quarterly results. the stock drop looks dramatic. we are down 10%. but remember, this particular stock, they have been red-hot recently. the fact that the profit picture in the current quarter played a role here. pfizer under pressure throughout the trading day, as they have dropped this planned obesity drug on safety concerns. we will continue to monitor headlines on that. it is merger monday, if you want

to say it that way, in the sense that ibm is back at it again with a major software accusation -- acquisition. investors like the news. shares are up about 1% right now. investors in pac west are also applauding the company for selling more of its long portfolio. obviously, they gets back to the balance sheet priorities we have seen from regional players after the banking turmoil over the last few months. matt: investors still digesting the top story today. that is geopolitical fallout from the turmoil within russia. wagner group chief said earlier that he had no plans to overthrow the russian government, or had no plans to do that when his army was marching toward moscow on saturday it he said it was more of a protest. here's a prominent guests on bloomberg television art interpreting these developments. >> i think it would've been even more unstable under him, definitely, but this is a clear

case of where the enemy of our enemy is our enemy. i don't think there is anyone in nato who was rooting for him to take over in moscow this weekend. >> the idea that he is disappearing off to belarus for a quiet and comfortable retirement growing vegetables is, frankly, incredible. we will have to see over time what emerges as the structure of the deal that is obviously being done. >> he is not a peacemaker. he presented data in this issue. he was sort of prudence messenger. it allowed him to stop the march and say peace. matt: for more on this, let's bring in angela stent.

great to have you with us. you heard some of those reactions. i will start with your own. how have you been assessing the situation? angela: first of all, i think this is the first act of a drama that is still playing out. there's a lot we don't know about what happened, and a lot of it does not really compute. he had putin threading on saturday to have this man and others arrested because they were traitors. by the evening, he signs a deal, an agreement to go to belarus. everyone stands down and he will not be prosecuted. i think what you have seen is a real challenge to what was going on in the kremlin, even though he did not challenge putin directly. he certainly challenged the whole ministry of defense. his demand was to have both of the defense minister and chief of staff removed. so far, that has not happened. there is circulating video today showing whether it is really

from today. there's clearly a lot of turmoil going on there. i agree that he is not going to cultivate his garden in belarus. i just got the message that he put out. we don't really know where he is in belarus, but he could use this as a staging point to have more military incursions into ukraine. before this happened, the ministry of defense wanted to disband his group. but i don't think that is going to happen anytime soon. matt: has he essentially won the state of the wagner group with this march and deal? do we expect it to be business as usual from now on for these mercenaries in ukraine? angela: that, i'm not sure about you have to remember that wagner is a very important arm of the russian state in places like africa and the developing world.

they have lots of assets, a true presence, particularly in africa and libya, syria, other places. you're not going to go away. we may not see bogner's soldiers going back into ukraine. wagner certainly is not finished. jon: how big is this group? i keep seeing references to the 50,000 number, which is a nice, round number. but it does not make sense that with only 50,000 people, he could hold troops and so many african countries, billion-dollar assets there, be active in ukraine, and march up in a mutiny toward moscow. it seems like it would have to be more people. angela: i don't think anybody knows because those things are public. they said on saturday that there were 25,000 bogner troops marching with him in the west of russia. two months ago, but it turns out

there were only 8000 of them. we really don't know how many troops he has. i think 50,000 would be a rather low number for all of the activities they are doing around the world. jon: the files for him, we have seen so many of them since the situation unfolded in ukraine. before that, generally speaking, this is someone who arguably kept a lower profile, at least on the world stage. now, with everybody constantly talking about this, do we even know where he is? will we be able to track his whereabouts are all of this? angela: someone does know where he is. maybe he is in belarus or his people issued this message a few hours ago. but he could be anywhere. we are assuming now that if he goes to belarus, he carries on activities there, i think we

also have to watch whether he is in fact there on this earth within the next couple of weeks. maybe something will happen to him. there's a lot that we don't know. it is very unclear. jon: ultimately, what does this mean for ukraine, in your opinion? angela: some people are saying this is an opportunity for the ukrainians to gain more ground there. i don't quite see that. the ukrainian counteroffensive is going on. it is a hard ride, a hard slog. they are losing a lot of people, gaining territory incrementally. the russian defenses are very strong. what i think it will probably do is for the western countries, ukraine's allies, to realize that we have to do everything we can to help the ukrainians win and embed them in security structures with other western countries. we have a nato summit coming up next month. ukraine is not going to get admission to nato then, but

maybe there will be some more concrete offers made to ukraine. i think it has really shaken up the result of the allies of ukraine to do more for them. matt: to put it bluntly, angela, is prudent going to kill this man now. -- this man now? and if he doesn't, is he encouraging others to challenge his rule? angela: it's true. he challenged the kremlin and so far, he has gotten away with it. i think we have to watch this space very carefully. on the other hand, he and peyton go back a very long way. they have worked together quite closely. i would just say to watch the space. matt: thank you so much for joining us brookings institution's angela stent talking to us about the mutiny from the wagner group in russia. coming up, aston martin teens up with lucid help electrify its fleet. details next. this is bloomberg.

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jon: this is bloomberg markets. i am jon erlichman, with matt miller. time for our stock of the hour. we are watching both aston marson -- s tomorrow and and lucid. they are teaming up. the gains on the day overall have been trimmed. aston martin is saying it will pay more than $230 million in cash in exchange for battery electro power chain components. it is worth noting that saudi arabia is a big schiller -- a picture holder and both of these companies pay that spring in ed ludlow, who has been tracking the story as well. for an industry that is going through some big change, you

have some relatively speaking small players that are coming together, it seems. ed: yeah. a lot street pointing has been logical. they have been relatively under duress for naturally -- duress financially. has to martin has a habit of relying on third parties. mercedes has a financial interest in aston martin as well. it goes back to the origins of lucid. it was founded in 2007 under a different name. its original goal was to be a maker of powertrain. and battery pack, rather than a full luxury ev maker. it later pivoted. but that is there for differentiation. lucid feels it has superior technology when it comes to the energy situation. they want to be a supplier of that. matt: this is interesting. i would read it as a

consolidation. i think they have a 20% share max. they own the majority of lucid. how do you see this going for the british carmaker? because essentially, lucid is now a saudi entity. ed: taking aston martin at face value, they're going to pay lucid $10 million to work out how to get the lucid powertrain into the aston martin design. i explained it to bloomberg very simply. the lucid technology is available right now. as to martin has the goal have its first factory electric model on the road by 2025. they are going with lucid because they can get their hands on it. mercedes is not yet available. the consolidation question is

interesting. the other question that i would pose to you, given the public investment fund relationship is that we know lucid is going to build a factory in saudi arabia. do we see smr and manufacture vehicles they are the future? that is a question unanswered. jon: unlikely. it is unlikely, right? ed: right. jon: now, even though the dots connect on these two having some kind of arrangement, the fact that you have an announcement like this after we already saw legacy players like ford and gm teaming up with tesla, for example, on the charging network , is the door now open for older or newer players to team up or find some common ground? ed: it's interesting because the ceo of lucid has been talking about the potential to sell the powertrain as a product. the thing is that lucid is not really have its own house in

order. remember, they planned to build 20,000 ev's in 2022. they built around 7000 in the end and only delivered 4000 customers. this year, they were going to build up to 14,000 ev's. now, they are striding toward the low end of that range. they are trying to do two things at once. trying to scale their own footprint here in the united states, but also be a supplier of technology to a high-end partner. that is the disconnect. lucid has always positioned itself as having superior technology, but what it does not have a scale. hence the very high price point for their own vehicles. thus, being able to expand into the more mainstream market with other players, it's a really good question. matt: but they now have a choice, right? if the saudi's own 62% of lucid, they have more than a sugar daddy. whereas esther martin continues to fight for its life. ed: yeah, it continues to fight for its life. there is an important story about mercedes.

aston martin continue to get components from mercedes, but instead of doing it on equity, they will do it -- they will pay it in cash. i think the lucid stake is 3%. mercedes has a financial interest in it as well. there is a cap table on that business. it is very interesting. following the bailout in 2020, ge also has an interest as well. it is very complicated. i think everyone wants to see electric aston's on the road. matt: we just want to see aston martins. who is not excited to see an aston martin? thank you for joining us, ed ludlow. you can catch him every day from noon to 1:00 new york time. coming up, corporate default rates are extremely low right now. but our next guest says they were nearly double -- they will nearly double by march.

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jon: this is bloomberg markets. i am jon erlichman with matt miller. some interesting data points. the u.s. trailing 12 month speculative grade corporate default. now, the s&p believes that could reach 4.25% by next march. reporter: --nick kraemer is with us. also joining us for the conversation is katie greifeld. nick, nice to have you with us. i guess the keyword is could. the determining factors on what happens from here? nick: ask for having me, guys. we are in a period now where defaults have been very low. we have been in a really sub-2% default rate for an extended period after covid.

we got to about 6.5% peak there at the end of 2020. but all of those liquidity infusions, market reaction, the surge in issuance we saw in 2021 really helped to keep the default rate fairly low. now, we are seeing the effect of this rising interest rate cycle really start to pick up. the composition of the debt is more loans that are more sensitive in the near-term. and so, as this pressure rises and we think it will be higher for longer, it is just going to start to wear away with cash flow slow down that we expect in the economy coming forward as well. matt: i guess the question is when, right? we were just talking to jeff sherman, the deputy cio at doubleline capital. he said yeah, that is going to be a problem because those are floating rate loans. whereas in corporate ig and

high-yield, public debt, most of those companies already refinanced closer to zero and are good, in his view, for the next 12 months to 18 months. what is your view on it? nick: i have to agree on that. we have semiannual refinancing studies. we are not showing a lot on the fixed rate side, especially with what's coming due in the next 18 months or so. think it is probably in the u.s. around $20 billion or so that is at the weakest levels. so, there is going to be some sticker shock there, we think. but for the time being, they are still enjoying those fixed low rates. those got taken out when rates were at their all-time lows. katie: while the maturity isn't as scary as it sounds this time

around, when you think about that forecast, that high-yield defaults could reach 4.25% by 2024, historically speaking, that is not very high. that is somewhat pedestrian. how is it that this maturity wall may isn't as dire, how does that factor in? nick: it is again looking more toward the loan side you can contrast that $20 billion with closer to $550 billion or more. that is outstanding in floating-rate debt. that is constantly being worn away, a slow burn, if you will, at higher rates. that is where a lot of the weaker credits are. we have seen a big surge in new issuers in the last 5 to 7 years, taking out terms and conditions which are very favorable, almost no covenants during that period. very low rates. the floors were low. all of that has changed in the last 12 months. we are already seeing roughly

about a 10%, closer to 12%, increase in costs on the year-over-year basis for corporate's in the u.s.. it is even higher in some other regions. matt: so, how much does the fed raising rates affect your base case, nick? the base case, as we all know, suggests the fed is going to raise two more times. it seemed after the meeting nobody believed they would raise at all, but now they're pricing and one increase, then a cut shortly thereafter. what is your base case? nick: ours, we are looking for one more as well. maybe a little bit less than the fed is communicating. but it is kind of more about the speed and slope at this point that we have been thinking about. when you think about it that way, the trajectory is far more placid if you ignore the absolute level.

that pace of increase is calming down. you are seeing primary markets respond with more issuance so far this year. i think it is just easier to find the price on a deal. i think we saw treasuries increasing by about six basis points every five business days last year at the peak of it. right now, a lot of it has been about that stability in rates that we think is helping to calm things down a little bit more in a relative sense. matt: thank you so much for joining us. s&p's nick kraemer joining us, as well as a bloomberg's katie greifeld. thank you both. that is jon and i am matt miller. we are watching futures drop of about 0.25 percent. we are waiting for details in the wagner russia case. jon: it is certainly something we are going to watch. you mentioned the energy price as well. energy stocks up for now, but we will see how things play out. this is bloomberg. ♪

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romaine: it is a new we sentiment still the same. live from studio two. romaine bostick he can walk to the close and we take a look at u.s. treasuries extending gains for the second day led by the belly of the curve. stoxx all for a second day in the dragged down by travel companies, big tech and financials. financials poised for their longest losing streak since october. the s&p has been pinned in a tight range. 4300 on the lower bound and 4400 and change on the upper.