of the new york fed? michael: it isn't all that much different from quantitative easing in the situation we are talking about. what we are trying to do now is hold the yield curve down. the fed was using quantitative easing to pull the long-term down and push people into more risky investments. now that they are trying to push more people into risky investments, from what lamere, mr. said -- from what loretta mester said, they are looking more the short end. the thing is he promised to buy as many securities is necessary to push it down. if you've got credibility, you probably don't have to buy very many securities because they won't start pushing the writeup. so it could be cheaper in the long run for the fed. matt: you've spoken to loretta mester today, john williams yesterday. i remember you talking to robert kaplan a few days ago. you spoke to rosengren a couple weeks ago. are you just on a hot streak as an economics editor for bloomberg tv, or is the fed trying to communicate a message to the markets

the fed was involved but was not primary lay fed program. this time the congress has a lot of faith in the fed and have given the fed 450 billion doors to lend. what do you think bows this? they're talking about buying securities at the municipal bonds as wells a corporate -- lending against corporate death and so fort. i wonder whether you're comfortable with the use of the fed to lend almost everybody, to basically be deciding who gets credit and who doesn't, and whether you think this is an inappropriate role nor central bank? >> i think it's an appropriate role for the fed given the circumstances. i think it's -- glenn hutchins this morning had an oneat talk about the importance of governance and making sure there are clear rules and oversight in the lehning process. the fed under jay powell and previous chair is hope has established a good record of nonpartisan, and objective analysis. so the fed might -- the fed is, i think, a vehicle for providing government supported credit that will be based on objective criteria and is less subject

the fed in this instance is also set up swap agreements with 14 central banks once again the fed will acting as a lender of last resort in dollars not just to u.s. banks and financial institutions but essentially to the rest of the world. it's also set up a facility whereby other countries besides 14 can pledge the treasuries they hold get dollars, get cash, and provide liquidity needed within their own economies. the fed is acting very aggressively to make sure there's enough cash and liquidity in the system. that's the first line. secondly, the fed has been aggressive on monetary policy. they lower interest rates, as you know over the summer last year they cut rates three times as insurance and that seemed to be what the doctor ordered so to speak. the recession risk at the time fell and it looked like the fed had achieved a soft landing. now we have a much different situation the fed has cut rates down to the minimal 0 to 25 basis points that we saw in the years after financial crisis it has issued guidance saying basically we are going to keep rates at zero until the economy is cl

that's what the fed is supporting it's supporting the existing financial system the fed is trying not to make the mistake that happened last time everything it did it was blamed for helping wall street and part of the reason for that was because wall street was the big problem back then. >> it's a key point. you also make the point that in this conversation, where he does talk about transparency and the importance of it, what that does also means for the markets and investors as they look forward to see how the fed will continue to, i guess, support, buoy or driver the narrative for the markets. >> yeah. he basically said clarity about the feds intentions gets the market to do what is evident to happen they said they would buy corporate bonds including high yields those markets got very liquid quickly. they took their word for it. that sort of the cycle that we're on now they do have to follow through and do something maybe next time it's not going to work as well. that's so far, been relatively effective. >> yeah. steve, rick, mike, thank you everybody have a good weekend. tonight, m

can you fight the fed? >> i think the fed has great power, but not forever.of all, i do not think jay powell talked about the fed will not have the ability to run out of ammunition. i do not know if the fed's ammunition is limitless. i know the fed can cause markets as long as stay up it buys. but i do not know if it can buy forever. we are in new territory here. the fed has never bought securities. this time around they included corporate securities and then moved on to include noninvestment grade corporate securities. it's buying can make these things rise, but only as long as it is buying. we have seen these things where there is a column of water and a bowl sitting on top of the water. if the water stops, the bowl falls to earth. fed hopes it's ,uying will inject confidence and they will take over buying. that remains to be seen, and whether that will be at today's levels. erik: is there any reason to expect that is going to happen? let's talk about the corporate bond market, but use as an q2, q3, andhad q1, every time the fed tries to pull out liquidity,

when the fed is going to the treasury because it's illegal for the fed to hold corporate debt on its own balance sheet that is precluded by the federal reserve act of $913.00 so in order to get around that to circumvent the law if you will the federal reserve has set up a special purpose vehicles on the treasury's balance sheet at which the in which these corporate bonds will be housed and ben i wanted to get more news in here on that too it's been leaked that the trump administration had asked the fed to help out the energy industry at the moment when the industry is facing enormous problems but the fed can actually make that move right. well really they can because they can be bailing out one particular industry over another so what the fed has done though is they are really putting out billions and billions of dollars that are supposed to go back to businesses the problem is that they have this main street linden facility that they put together and if you read through the paperwork they've actually up the cap on that the paperwork on that now says that you can be a company that ha

the fed is now buying corporate debt for the first time ever the fed is providing a significant backstop to the credit market -- credit spreads have not come in to the extent that equities have gone up so we think a balanced portfolio focusing on high quality is the best way to get through this right now. >> i'm glad you addressed the bond issue, because it was obviously a looming one. david speaka, thanks very much jim mcdonald, always great to see you. thank you very much for your time today kelly? >> all right, tyler, and thank you. coming up, the s&p in the red with energy and financials the worst-performing sectors today the banks are down 7% this week alone. we're going to have more on that move plus, corporate debt is exploding as the federal reserve begins to buy it up. but could the borrowing binge end up doing more harm than good for the economic recovery? tethe's much more "power lch un" afr is these days staying connected is more important than ever. so we're working 24/7 to maintain a reliable network, to meet your growing internet needs. we're helping customers who are expe

if the fed were to bow to the will of the president, as this fed did not, i think they had the credibilityy did, because they did not. if they were to have a chair that did that, you would have a heck of a rebellion among the president. this is not a single-led fed it is a committee that goes for it and the unanimous nature in which they rejected it really matters. >> you got it all in and we appreciate you both we hope to continue the great rate debate, so to speak that does it for "the exchange." i'll join tyler mathsten for "power lunch" now. hi, tyler. >> kelly, thank you very much, and we will see you at "power lunch" over here in a moment not actually over here, in my kitchen, but on the "power lunch" set i'm tyler mathisen welcome, everybody our breaking news coverage of the markets and the coronavirus continues right now. well, stocks, you know what they're doing, they're sinking, for the second day in a row, the dow down around 500. that as fears about the long-term damage to the economy takes center stage that's what's hanging over the market yesterday's testimony in front of the

the fed is not sitting on its laurels.t realizes that financial stability is contingent not just on their policy, but where the economy goes from here. --hink all the communication i think they are being deliberately slightly vague about policy. they are talking first about qe. they are hinting at yield curve control. i think negative rates are way down on their shopping list. ok, can we pursue the line of thinking that the biggest concern is the bank and financial stability. as i look at the proportion of downgrades, we are having to record downgrades. it seems as if the fed are worried about the morphing. where are we in terms of moving toward a more prominent solvency crisis in the u.s.? >> ok, i don't want to sound complacent at all, but i think the measures at the fed and other central banks have stabilized things for now. i'm not saying that things have gone back to where they were before the crisis, but certainly , thered to where they were have come back quite significantly. they are not at precrisis levels. have a

it was the fed that stole the spotlight.ay powell painting a gloomy picture for the economy saying he sees significant downside risks but also emphasized the central bank is not considering negative interest rates. >> it is an unsettled area i would call it. there are fans of the lessee but for now it is not something that we are considering. we have a good toolkit and that is what we will be using. scarlet: let's bring in market data. -- mark cabana. you are the perfect person to discuss the prospect of negative rates with. jay powell pushed back against it but did not rule it out either. market extent can the push him or pressure him into negative interest rates? we have seen them pricing in that prospect. mark: it is a great question. i think the chairman was very clear that negative interest rates are not attractive at present. there have been a number of fed speakers that have said -- some ung from thee -- s same songbook. it is unusual. negative interest rates are not something we will see in the near term and we think

here's what the fed said a moment ago about the extraordinary circumstances we're in >> the fed takes action such as these only in extraordinary circumstances, like those we face today for example, our authority to extend credit directly to private nonfinancial businesses and state and local governments exists only in unusual circumstances and with the consent of the secretary of the treasury when this crisis is behind us, we will put these emergency tools away >> dow down 283 now as futures did dip during powell's webcast. let's get to rick santelli and get your thoughts on this this morning. >> i find it all very fascinating. starting with the last sound bite, he talked about how right now we have to prioritize differently than when we get on the other side of the coronavirus. the problem is that makes good sound bytes, dealing with conservative issues regarding finance, how the fed's balance sheet and these tools were put back in the toolbox for storage, just never occurred in full force after the last crisis. we barely contained squee ed qug quantitative easing. this hole will be

that the fed was buying with h.-y. g.e. so again at a certain point you know the wizard of oz the barnum and bailey the show men you know nobody believes it anymore and there's a certain you do do a suspension of disbelief and everybody does russian to junk bonds and and fracking like that was part of the jump on industry is like if you actually open your eyes and look a little bit like it was never making money he said this is a bad investment the same with people rushed into wherever they thought charles saatchi was going to invest invest next because they wanted to front run him right well at a certain point people stop doing it they run out of chunks and possibly look at the because they are prizes in britain the turner prize awarded at some point to tracey emin for her unmade bed right that's junk art right and that's the reflection of our having been jungle fied by people like charles saatchi you turn it into a ponzi scheme and gave dame amos damien hirst who is doing spiral graft in his basement to sign on for a $100

fed tomarket pushing the accept there may be a need for this? will the fed respond to the market? janelle: when we look at fed funds futures a few weeks ago we saw the move negative into 2021 suggesting there is some expectation. i think this reflects what other tools the fed has that are at should theport economy not rebound is expected. again, the fed has been clear in its commentary and we have seen the trade a little bit better. -- negativees interest rates are not on the table right now, but these things continue to evolve. vonnie: thank you for joining us today. janelle woodward of bmo global asset mangement. i wanted to point out a note kidsjim vogel saying new getting treated like the new kid. let's get a check on the first will news with mark crumpton. mark: the centers for disease control and prevention is unveiling detailed suggestions for different phases of reopening workplaces, schools, and restaurants. the 60 page document was released after an earlier draft was rejected by the white house for being too prescriptive. most states have begun reopening. president trump

the fed put is in a totally different place from where it has been the fed put is if the market goes down a lot the fed will lower interest rates and that will stick with you and help the stock market the fed on put in this case is the coming corporate bond facility the fed has a put on equity in the sense that if the fed wasn't there buying bonds and those bonds went into default the equity could be wiped out. the fed doesn't have to buy stocks here because effectively the stock has put a floor on these stocks it's that guarantee, essentially because the jet won't go bad tht's huge part of the rally in the markets. >> it's extraordinary that this is a blank, cor rat guarantee for corporate america and the fed has not spent a single penny on it and we are on the high yield market and what happens, steve, with the blanket debt guarantee. what's left when the fed is left holding the bag. if this lasts longer and it's know just a short-term liquidity crunch and a short-term period of recession and no snap back recovery, things are more protected and as you say, companies do, in fact, se

the fed does not like it. powell has been against it. what does the fed do another cases?cast because they say it is too difficult. will powell offer any kind of forecast for what will happen to the economy with the next couple of months or the next couple of years? those are the things to look for from the fed chair. alix: looking forward to that. producer price index for april came in negative on a month by month basis. michael mckee, thanks a lot. that wraps it up for me. withg up on "the open" jonathan ferro, fed chair jay powell, and also tony dwyer will be joining him after jay powell finishes speaking. this is bloomberg. happy wednesday, everybody. ♪ ♪ jonathan: from new york city for our audience worldwide, good morning, good morning. the countdown to the open starts right now. 30 minutes away from the opening bell and just moments away from hearing from the chairman of the federal reserve. equity futures positive, up 14 points on the s&p 500. we advance around .5%. in the bond market for treasuries, yields set up as follows. your 10 year yield coming in a single b

program from the feds it all went to j.p. morgan 1st they took their cut which was substantial like 20 percent or more and then whatever was left over they dole it out to. your service and presence in america here paula is like you know people indulgences give us so we give you $10.00 if you give us $50.00 in banking fees says jamie diamond i'm the pope of bad money i'm the pope of fia jamie diamond my god what a crook well you know they continue to print apparently the u.s. deficit the budget deficit will hit 4 trillion dollars this year i remember the shock only just recently in the last few years here on the part of when the u.s. budget deficit hit one trillion and we were like oh my god like this is the end but apparently it's going to go to 4 chilian that's why they're borrowing 3 trillion but they're saying all of this infinite fiat's is going to cause infinity war because let's look at this central bank's pandemic battle could stretch into an infinity war big central banks are buying from an expanding menu of governmen

fed fund futures are there what is different about the fed than the boj and the ecb right now?only big difference right now is like outside, we are going into negative rate, but the fed has been insistent they don't want to do it and jay powell's going to speak tomorrow and supposedly he's going to say we're not going to go to negative rates and then you can punch fed funds futures on your screen and you'll see they'll price in negative rates and they'll supposedly not listen to them so they say they don't, about the japanese are very much in fife are on ever, but the bigger thing we have to be careful of in 2014 and especially 2016 when the japanese ratcheted it up, the liquidity in the bond market disappeared and it's ten% of where it might be two years ago. >> you take it over like that and shove out all of the private sector flares and it becomes a permanent fixture and the government itself. that's a, they really can't do anything with their markets and their economy with it, andy hope we don't get to that point, as well. >> jim bianco, of bianco research grasso, what are

the fed will use the full range of tools. powell also saying that the actions are only part of a broader response. powell also saying that the scope and speed of the downturn is without precedent. andill hear from jay powell treasury secretary steven mnuchin, two people who right now appear to be working relatively hand-in-hand. it is a big part of the reason why you are seeing risk assets rise as much as they have on a day like today. moderna that a vaccine might be in the cards. taylor: i think the key takeaway is, yes, the market could be trading on economic data. there, but for the majority, this has been a health crisis. the markets were really hoping for a vaccine. it could be sooner than expected. we know that it also has the potential to not go through. all of the vaccines, the testing, that is really what has been driving these markets. when you see something like 900 points off of one study about potential vaccines, certainly ,omething that catches our eye a very big day. i want to get back to our guest streetith us

he was at the fed listens event with jay powell. ♪ romaine: a little bit earlier, we did hear from fed jerome powell, who was hosting a virtual fed listens event, where he followed up with leaders across the u.s. about how the pandemic is affecting the community. on that panel was darrin williams, ceo of southern bancorp. southern is now considering a second round of ppp operations. on the advisory board. i want to start with today's event and jerome powell. we heard a lot of comments from him about the severity of the crisis but also about the fed effectively doing whatever it takes to provide some degree of susceptibility. -- of stability. is it enough to provide the stability in your community as of now? : i applaud the effort of the fed as well as congress to provide the relief in the wake of this pandemic. thes helping, especially in paycheck protection program. but, in the long term, beyond this, we begin to rebuild and economy, theres has to be more done to help those that we serve in the mississippi delta, some of the structural inequalities can be addressed and have a chance f

on negative rates, even if the fed fed were not to move and kept pushing back, as long as the marketse expectation of negative rates, how negative is that for the dollar? valentin: yes, indeed. it is one thing to be telling the markets that negative rates are out of question. it is another thing to retake measures. exit reserve to prevent rates going negative, so in other words, talk is cheap. and the markets really could continue to speculate that the fed could go negative down the road. and from what i can tell, that fedex to talk about it but not really act upon it. from that point of view, they are more than happy for the markets to continue to speculate about that. in terms of impact on the dollar, clearly, the speculation about negative rates is likely to hurt the dollar rate. the euro, the yen, swiss franc, the dollar is a current account meaning theency, u.s. has to rely on foreigners to fund its spending, and if indeed rates in the u.s. were to go this low or actually continue to go lower on the back of the mix by the fed, the foreign investors would simply demand the discoun

, why is he on the fed?said the same thing about chairman powell. how is the chairman doing? powell has confronted a challenge only ben bernanke has confronted. two different kinds of challenges. ben's challenge was originating in financial markets, and everything was imploding because of the vulnerabilities in markets. chair powell is facing a situation in which an external shock has created an unprecedented situation. he moved quickly to push the fed to get in place a set of emergency programs. he has made it clear the fed will do what they believe needs to be done. i am sure he will be the first to say he has a lot of work ahead of him. jonathan: i do not want to cause any trouble between you and your i wonder whenut he first got the job and there was a sign of thing -- there was a side of him where he wanted to play the hard guy with financial markets, the god was going to run the fed cannot respond to where the s&p 500 was on any given day. is there a part of you that feels the federal reserve has compl

that commitment from the fed. for the markets to blow up on the back of whatever he will say, it's going to take more than what they have done so far. i think for the markets to go up, we have to continue to open the economy and not have a flair up have a reversal somewhere. as long as that is the case, the markets will probably continue to make progress >> great to see you. thank you for your time. we'll hear from the chairman coming up in a moment. that happens right now "squawk on the street" is next >>> good wednesday morning this is "squawk on the street. i'm carl quintanilla with david faber and jim has the morning off. you'll see him tonight powell set to make some comments this morning we'll go there live. the futures coming off off the late-day selloff let's get to steve liesman with some of powell's remarks >> good morning. jay powell will say that the path ahead is "highly uncertain" and he sees significant downside risk to the outlook. he is concerned about a prolonged recession and a possible weak rec

fiscal policy will help, the fed programs will help.ut ultimately money is not going to get consumers to engage in behavior they're not comfortable with k -- and i think we could spend a fraction of what we're spending on testing.on >> what will the economylike like post-pandemic? >> president cap land knows what -- kaplan knows what he's speaking about. we're both here in dallas, texas. restaurants here are opened up at 25% capacity as of friday. bars will be open, restaurants will increase to 50% capacity. but again, you cannot force consumers into that comfort level and i think a lot of businesses have been surprised at the reopening efforts they've made and the consumer has not shown up. the reason we're talking about the third quarter and the fourth quarter and the fed actually going so far as to say that it may place an end date, it may place a promise end date on when -- at which rates will stay at the zero, has to do with the fact that there's so much uncertainty about when the u.s. consumer's going to feel that confidence. we s

there's what the fed does and congress does and we talked about what the fed could do. what about congress? a lot of people kind of have dismissed the push by senate leader mcconnell of the liability shield as not maybe doing enough to help the recovery although arguably could make all the difference of businesses feel like they should try to reopen and being concerned that those efforts will be met with litigation, lawsuits if anybody gets sick they, of course, not only feel terrible and might be held responsible so where's that priority seeming very far away from speaker pelosi >> a significant concern for businesses there are a lot of significant concerns here. the concerns that states and municipalities not sufficiently funded to get through the rest of the year given the ability to raise money and borrow in the ways that they can do that the businesses with the liability shield and this, you know, what's going to be undoubtedly a herky-jerky reopening for so many businesses, it is hard to imagine the businesses that reopen, the ability to open at something like pre

also it to :00 p.m., the fed is going to release its beige book -- also at 2:00 p.m., the fed is going to release its beige book. i hear that someone i very much respect is interviewing the new york fed president, john williams, at 9:30 a.m. eastern on bloomberg television. i think that's you, jon. jonathan: i seriously thought you were going to say michael mckee. he will be interviewing alongside me. we will be catching up with the new york fed president. i think something we really got to drill down on, what is the objective of monetary policy at the fed now? two months ago, it was market functioning. that's got to have changed in the last couple of months. as you go from shut down to reopening, just the nature of the effort at the federal reserve need to change? i think that is going to be the focus for us at 9:30 eastern. lisa: this morning i was looking at ccc debt, the debt of companies closest to default, gaining more than 4%. you have to wonder how uncomfortable fed members are with the idea that they are pushing investors further into risk at a time they said they don't want t

whether the fed will stand up and say no, we won't go there.hat's your assessment of that tension? simon: as usual, i think you have nailed the challenge here. monetaryhe margin policy at the moment? we have assumed that it is at the zero lower bound of the fed funds rate. it will be bond buying and bond buying moving up the risk curve. does the marginal tool now shift back towards the policy rates and does the fed funds rate go negative? part of guessing clarity in terms of pricing will be for jay powell to set up what the fed's thinking is for the next bit of stimulus, should it be required, to support the recovery in the u.s. economy. anna: i was interested in your note around the bank of england, simon. this applies to central banks globally. they are all trying to wrestle with an equation that says shut down economy for one week equals what damage to economy and whether you can take that into the future and use that to assess the length of a lockdown and its impact. how close are we to being able to establish that? the more we are locked d

there used to be a feeling that you can't trust the fed on this because the fed, back in the temper tantrumays, said they were going to do one thing, the markets priced in another, and the fed backed down. you had jay powell over the last year or so, remember when jay powell was an idiot who couldn't communicate in december of 2018, 2019, and the fed had to back down from its plans to continue 2019? thetes into market seems to have the view that if we say it, they will do it eventually. at some point, the fed has to say no and withdraw this idea. this may be the hill on which the fed is going to die because they really don't like the idea of negative rates. and a lot of people in the markets don't like the idea, but if you are trading that, you're going to try to push the fed as far as you can go and see if it happens. alix: can we play it out for a second? say we go -10 bips. jp morgan says in the short term, that could do some good stuff. what does that mean? what do you think? damian: negative rates are clearly bad for banks in the u.s., but i have to say, and a market like this, i, quit

powell said in the fed minutes. mr. powell has been much more aggressive in talking about the need for more fiscal stimulus. i'm sure that will come up in the minutes. stay tuned for steve i've been talking about broadening in the markets. we're not far from the highs today, but what you want to see happening, the broadening, it's happening again today. the banks are up, the transports are up we're seeing moves up in the russell 2000, the small caps stocks energy, materials, these were all laggards and now the last day today and monday, their leadership groups. that's what i call broadening here where are we in the market internals? breadth, that's the advanced decline line every day how many more stocks are advancing? it's kbrooumproving and getting better there's oceans of liquidity and more corporate debt out there. market multiple, it's expensive. 23 times forward earnings. you can argue the market may be a little pricey, but certainly, that's understandable given the rallies that we've had one other thing i want to

stimulus has to come from fiscal authorities, not from the fed. the fed is a lender. caution, is to to the extent we're going to get more stimulus to help the economy grow faster, that's going to have to come from congress, the treasury and fiscal authorities. maria: so what about the oil sec or? that's one area that has pushed back on any stimulus from the government, and yet i spoke with the ceo of chevron which has a fantastic balance sheet, but there are a lot of smaller oil companies, shale companies that are the job creators in this country. but with oil prices where they are, we are worried that they may not make it out of this. what's your take on the present state of oil and the impact to really what was the growth area of the economy for so many years, robert? >> so we've got dramatic oversupply to the point where there's so much oversupply, we're getting to the point there's no place to store it. which is why you're seeing these strange movements in oil prices. there are going to be a number of companies that are going to fail, going to be restructured or g

" interview, don't fight the fed.ut his mike's take until 2021 to recover. which message is more pressing to you? >> good morning. in terms of messages from the fed, it has been quite consistent in that they will come to the rescue if needed. if you think about the market turnaround that started since late march, march 23 to be precise, it was very much catalyzed by central banks coming to the rescue and if you think about how investors have responded to central-bank's message, in particular from the fed, it has been don't fight the fed. of course the fed will flag the risk of economic damage, the risk of permanent, long damage like jerome powell said last week, but those are caveats against which they get the message across, which is that they will be ready if needed. that has been the source of market taking comfort. interests in areas that the fed ig, for example, getting record inflows off the back of their messages. definitely, it is sticking. nejra: great to speak with you this morning. q also talk about investo

said fed policy members are resistant about. i wonder if there will be a ground swell they all come around to it >> if we could meet at a restaurant one of these days and have a steak, you're right i'm happy to buy if we can meet at a restaurant and buy a steak. >> i don't want to be right. >> i think my point is the right one that the fed will try to do a whole bunch of other things before it has to resort to negative rates it may be worth pointing out that the president urged the fed to go to negative rates. i think it's a lot more the fed will try to do before it goes into that. >> thanks. can it lift the market back to february highs the fact we asked about going back to the highs says a lot about coming off the lows. what do you think happens from here in. >> well, it's interesting. i think that we're going to see some settling in the market. everybody has been really nervous. march was a horrific month the up and down even in april until the fed came in and started taking on these programs that's added calmness to the mark