>> i think the banking system is going to get through this. >> it is a complicated environment, the risk to the downside has increased. >> the economy does not tend to slow down in a stable way. up at some point it starts to deteriorate. >> the rule now, don't overdo things. >> we will have to watch if there is a next shoe to drop. >> this is "bloomberg surveillance" with tom keene,

jonathan ferro and lisa abramowicz. jonathan: do you remember walking to school? use low walk and hope things change. lisa: who knows exactly what chairman powell will be facing. jonathan: good morning, for our audience worldwide, equity futures with a bouts of .6% on the s&p 500. the latest on the banking crisis, this according to our reporting, u.s. officials are studying ways they might temporarily expand the fdic coverage on all deposits, one step further. lisa: without legislative backing, this raises the issue, why now? will this work, does this work to stabilize -- we've already seen stabilization in a way we had not last week. jonathan: jp morgan and jamie

dimon has a plan, my question over first republic, why is it so important to these big banks in america? 11 banks coming together to help out a competitor in some ways, putting $30 billion, depositing it in the institution did not help friday, down aggressively yesterday. what kind of plan solves this problem? lisa: my question is why do the big banks want to help this institution? is it because stability in the banking sector benefits them or because there are crosscurrents between clients, commercial real estate and wealthy individuals that have multiple accounts? we don't know which it is. but they are trying to be on the front foot, get ahead of what finger-pointing they're going to get in washington, it is a good pr move but potentially helpful for the banking sector. jonathan: we talked about how

quickly this is moved, two weeks ago it was a triple digit stock, one bad day away from a single digit. lisa: it is shocking, a 47% klein and this name as people try to shore this up. we heard about fdic guarantee is and the liquidity lines, whether it is a discount window, first republic tapped in big amounts but also the federal home loan banks which have been extending a tremendous amount of credit. at what point do we regain confidence? we seem to see stability, about last? jonathan: out of all of the calls for the fed tomorrow, 25 this, i don't sense any conviction. it is like on the one hand, we don't know. they are going to wait and see. lisa: i walked away being like why does it matter? maybe that is where i go. --25 basis points matter or is

it the signaling? if they do 25 basis points, the message to the market. jonathan: would love that, the dovish hikes. lisa: tom would hate the discussion. jonathan: say it is data dependent. companies adjust and adapt. lisa: i hate this game. we miss you, tom. you understand what i was saying about the fed. if they hike 25 or don't, it is the signaling. jonathan: futures on the s&p, are you fed up already? yields bouncing, four or five basis points on the 10-year, the 10 year dock through 4% on the two-year. up by seven basis points, i make it the euro-dollar, three or four days of gains just about.

lisa: it is dizzying. i very much enjoy all of this so i am not sick of it. it just is exhausting. all of the shifts in moods. today we get data. i asked does it matter in any way, economic data, philadelphia fed coming at 8:30. at 10:00 a.m., u.s. existing home sales. the expectation for the gdp in the u.s. has gone up. if you look at the fed gdp now index, at what point does that matter for a federal reserve looking for some sort of progress in fighting inflation? we get the two day meeting that begins in washington, d.c., the rate decision comes tomorrow. look at the zigzag in the two year yield over the past couple of weeks. it's hard to gauge the market expectation. as part of the reason the exhaustion is setting in.

at 10:00 a.m., this is going to be interesting. janet yellen is delivering a keynote address. she's going to be talking also with the head of the american banking association. what does she say in terms of additional measures of support and why they are needed now? how do you get confidence in markets at a time when you also are saying we need to provide a bigger backstop? jonathan: there are only 70 times you can say it is robust and resilient. and then they get into trouble. at some point you have to change policy. lisa: you would not say that unless there's a problem. you've to see what measures you are taking and why they are necessary if there is this resilience and a stability in banking. jonathan: someone at jp morgan said this, the fed is facing a difficult task but it is likely past the point of no return. he says a soft landing looks unlikely with the airplane on a tailspin. engines about turnout -- turn

off. steve joining us. wonderful to catch up. are we at the point of no return or past it? steve: we believe the u.s. economy it was going to stall even before these banking events happened. there was a sharp tightening in lending standards for any of this news, commercial real estate, ci loans, etc.. the yield curve is giving the same message. the backward looking data is still strong and implement data for the last couple of months has been stronger than we estimated. but there are continuities, it is common. there are industries that are going to have too many people working in them for the outlook to come. we do think that a stall was here. but it depends now where policymakers go. we are going to take definitive action to keep this within the boundaries of the economic slowdown with some areas of potential trouble, we can talk

about what those are. or are we going to experiment and see how bad this would be? lisa: i assume they keep hiking rates or pause, if they pause they have a shallow recession and if they don't, you could have something deeper. correct? steve: it depends. standard policymaking will be that we can segregate the issues of financial stability, address this with particular measures and still conduct monetary policy in an independent way that focuses on backward looking inflation. we disagree with that. we think they do interact. what has happened with this rise in policy rates going from over stimulus to period of restrictive policy in one year, that by itself has delivered a shock. this is going to mean there is price to pay in the economy, from that sharp policy tightening. lisa: how important is the fed

meeting to determine your investing thesis? steve: it can't be seen entirely in isolation. if they go ahead from a 25 basis point move, what are the actions there taking to keep confidence in the financial system? we don't know. making sure that banks of all sorts are not defaulting on the deposits, that is a clear line in the sand. if that is the case and we can have stability in the financial system and they start to see that the actions they have already taken, the lag effects are substantial, they have a window at the end. i think they can slow down on the policy tightening cycle or halt it. we will absolutely see a slower inflation rate in the next 12

months. jonathan: we are all struggling not just with capital allocation decisions but the world backdrop we are going through. this is changed multiple times over the last month. the consensus view even if not yours. from bank of america in their survey, expectations for stagflation have remained above 80% for 10 months in a row. is that investors have never had such strong conviction about the economic outlook. it sums like you are pushing back against the stagflation view. steve: it is not priced into the tips market where we have seen one year, 5, 10 year inflation expectations: us with something fairly consistent where the federal reserve is. how easy, how quickly you achieve that is to be seen. but backward looking stimulus creates permanent increases in inflation. i think we are going to come down.

we are not going to be at 82% inflation reading by the end of the year. very unlikely is going to headline cpi level. but in 2024 we are going to have low inflation. we are seeing the first declines in broad u.s. money supply, outright decline since 1948. this is what happens before you -- after you go through a procyclical monetary policy. 2021 using, 2022 reversing course. monetary policy is only going to reflect future inflation. jonathan: let's talk about stocks. the inverse correlation, clearly the nasdaq, the outperformer this year so far, do you see that continuing? steve: we think the market is going to move beyond interest-rate problems, economic growth and credit problems.

a high quality secular growth stock could outperform in that environment that is not exactly a rosy scenario for that particular segment of the market. it comes down to the idea that what happens in financial markets and banking is not going to be contained, not zero effect on the economy. i'm more worried about segments of the industrial, material sector and small caps. the banks, but also other companies that are more dependent on credit and finance. those that need outside funding will find it harder. it will be a higher return and they need earnings to drop this year in cyclical areas. you have to move beyond financials and the tech sector did take the hit from rates. we are less pessimistic. jonathan: thank you for joining us, from global city management. nasdaq doing well. lisa: it is an important point,

how much does this mean in the face of a significant downturn versus a interest rate play? jonathan: you wonder if you are one conversation away from the banking -- it has changed so many times in a month. who knows where we are a week from now? equity futures positive. from new york, this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word, i am a lisa mateo. the u.s. is studying ways to guarantee all bank deposits if the crisis gets worse, a move stopped by the coalition of banks. bloomberg is looking into whether regulators have the authority to temporarily ensure deposits order than a 250,000 limit without consent from congress. the federal reserve faces a tough choice this week, jay

powell and his colleagues will consider whether an interest rate hike should be abandoned. u.k., swiss and norwegian central banks will also set rates this week. president biden has issued the first veto of his presidency, drafting a bill that would prevent a rule allowing retirement portfolio management -- managers to include environmental and social issues in their decisions. esg decisions have grown in popularity in finance. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. 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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>> this is a different situation than the financial crisis. the banks is not a question of confidence in banks, it is not about the economy collapsing. in the last recession, during the great financial crisis, we were in recession beginning december 2's -- 2007. we are not now. jonathan: the former new york fed president speaking to us yesterday, this is what he said

this morning in a bloomberg opinion column. the u.s. federal reserve is facing increasing pressure to sacrifice its monetary policy goals for the sake of financial stability. it is a false choice. the fed can and should fight inflation and contagion at the same time. this implies that two objectives are in conflict. seth carpenter of morgan stanley wrote the following over the weekend "market volatility has the potential to tighten conditions and economic growth. so it is not a focus of financial stability at the expense of macroeconomic objectives, rather it is trying to calibrate whether more heights will push conditions so far the real side of the economy is hurt too much." jonathan: no one wants to do it this way, but everyone we have spoken to i will say 90%, something like 90% of the people we speak to over the last week leave this situation and the inking terminal of the past two weeks should lead to tighter

financial conditions and tighter lending standards. surely that complements the fed objectives around bringing inflation down. lisa: people are trying to game out how many rate hikes it would be equivalent to if the turmoil in the banking sector continues. bloomberg economics has, with a 50 basis point rate hike, exactly to your point, there is a commensurate readthrough. it is a question of how far it can go. jonathan: deutsche bank made it simple, the question the fed has been asking itself is how far are we from being sufficient restrictive. matt says this gets us closer. lisa: the ultimate question. lisa:we said the fed hikes until something breaks, until it isn't. in the bigger question, does the destabilizing efforts take the -- risk inflation again dr. -- ? jonathan: up in more than 20% --

can, -- ken. -- we drop on monday. there are reports that jamie dimon is somehow leading another coalition to do something else and something more. why is this name so important to these institutions on the street? ken: i think it is a symbol of financial stability where the large banks can work with the fed to arrest any run on deposits. it is like small cracks in the ice in the lake. this is the one that really matters. yesterday was a good day because what was in the red was first republic and of course attention to credit suisse in europe. but the other banks stabilized and moved higher. we need another a or two of the inequities.

but with the small cracks in the eyes, this is what will happen with the economy with small banks restricting credit to small business. it gets into the narrative for rates and employment. lisa: this has a few echoes of 2008. one is a question around credit rating agencies and the credibility when they are supposed to imbue confidence that there is oversight. first republic downgraded quickly over two consecutive weeks. we can see the markets say this is a good deal. what do you make of the role in this? ken: there is a lag factor. it is a process of committees and major rating agencies will notch down in their ratings. the situation in 2008 was this frenzy of term sheets and doing deals and ridiculous valuations.

we are not in that situation. ratings will come down. it is another reference to what this means about financial stability or the wherewithal of each of these banks. so this process is happening but it is a lag factor where i think you have to pay attention to the fed on the third guardrail, bank supervision. lisa: we will get into that. but from what you have seen so far, do you have confidence we have seen the unseemly bodies in the closet of some of these banks? ken: i believe we have. there's been enough time and light in terms of looking at mismatches as it relates to deposit risk, duration risk, asset liability, mere versus long-term mismatch. i think we are there. the spark or this crack on the

edge of the lake, for ice, it is depositors can take their money and go somewhere else. that is the biggest fear to your first question of why the large banks want to save first republic. jonathan: officials are considering studying ways to temporarily expand the fdic coverage to all deposits. is that likely? would that solve everything? ken: i think it does solve everything. depositors will keep their money where does. you have to remember, there are 2.7 trillion dollars in the third tier of banks. 10 billion to $100 billion in total assets each. that is keeping everybody awake in terms of trying to have something which is the bazooka shot here as you mentioned. jonathan: to explore, if that

became permanent, someone has got to pay. i wonder how you think that might transform the banking model in america, if that is the direction we go in. ken: there is the moral hazard and the risk of what you do with those deposits. then if you are going to have any stronger control, you need to have an expanded regulatory supervision of these banks. small banks. that was in the mission of 2018. it was not the mission in the last week or two, just to go down to banks of $100 billion or larger. but all these cracks in the lake are happening below $100 billion and that is the risk. jonathan: always a difficult conversation, but where the opportunities in crisis? ken: we are past surprise and shock and moving to what one

called the forensic side of what happened, why, what can we do to remedy this? i was just looking at the manuals of the bank supervision of the fed and they would -- they have great policies and professionals but you have to bring it down to a smaller scale bank. unfortunately. that is going to slow down the economy and perhaps tighten credit where you don't want it and where job creation is, which is small business. jonathan: a big problem. can le -- ken leon of cfra. there is no free lunch. that could transform the banking universe in america. lisa: that means insurance premiums they have to pay. otherwise how do you justify ensuring all deposits? at what point do banks become utilities and heavily regulated and less a profit engine that can capitalize on the model of lending long and borrowing short?

jonathan: it is worth exploring. the regulatory snapback will be brutal. lisa: you have to imagine it would be to some degree anyway. if they are backstopping it, how do they say on the other side for an election cycle, the taxpayer is not going to end up bailing out any depositor, especially the wealthy ones who have more than $250,000 in the bank. this is a real issue. jonathan: first republic had a difficult day. a little more than 20% in the free market of first republic. futures better than ok, up .6% on the s&p 500 and yields back three or 4% on the two year, eight or nine basis points on the session. ♪ you're ever delivering with freight brokerage to transportation management, truckload capacity and dedicated trucks and drivers.

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jonathan: welcome to the program. the meeting for the federal reserve begins in a couple of hours time. futures on the s&p positive by .6% or .7% on the nasdaq. lisa: they are probably sleeping. jonathan: i'm sure some of them are locked onto the bloomberg to see where the banks are trading in the premarket. lisa: i don't think they are sleeping that well these days. jonathan: did not have much of a weekend either. in the bond market, looks like

this. two-year up 10 basis points. the 10-year, a lift. the curve shifting, slightly more inverted but still up by five basis points. the inversion has gone from -110 to -53. that is quite a turnaround. in the fx market, the euro-dollar the highest since early february. advancing for a fourth straight session. positive .2%. central banks say they are data dependent, depending on what data is being questioned. first republic, best stock in the premarket with a bounce after getting hammered in yesterday's session. up by 23% after taking a beating on friday and again on monday. lisa: maybe this is the day they

are looking at and we are getting the whips up and down. the shifts on the day has got to be part of the discussion. how do they navigate separating out financial stability from monetary policy when they are intertwined? when they raised rates at the fastest pace since the 1980's. you cannot extricate the two. these are in tandem. how do they draw a distinction in something that is absolutely interconnected? jonathan: there is a consensus it is all most inevitable we get these wider financial conditions that leads to softer growth. i wonder how the view might change if we get something big this week like a blanket coverage on all deposits in the united states, how quickly things might change again in the other direction. lisa: right now people are trying to read one article, one author from the wall street journal about what to leaves they might -- tea leaves they

might hear. if they will raise by 25 basis points, does that necessitate that kind of blanket move on the other site from other agencies? jonathan: you follow some of his work. the central banks are stuck between the ghosts of the 1970's and the ptsd of 2008. i reckon ptsd was out. that could lead to reintroduced rate hikes. i'm sure that weighs on them, the idea of a flip-flop. that makes the pause difficult. a pause and see approach would be tough to communicate and within market pricing more rate cuts. is that what they want the outcome of the meeting to be? figure rate cutting cycles? -- bigger rate cutting cycle? lisa: are they coming with a clear guide? none of us have known.

we don't know what kind of inflationary period we are in. bob michele said stickier inflation is off the table at this point. jonathan: two weeks ago they opened the door to 50 basis points. lisa: how do they have credibility if they change their narrative and parameters for the inflationary outlook? jonathan: gregory daco joins us now. let's start with chairman powell. can you get hold of a pause and see approach tomorrow? gregory: i don't think that is likely to be the approach. let's not forget just a couple of weeks ago we were talking about the possibility of 50 basis points rate hike. the fed use the economy as excessively hot from an inflation perspective. it is tight from a labor market perspective. that is the perception of the data. to some extent that is misguided and is excessive, that word

looking -- and backward looking. egg exposes the fed to an abrupt market pivot. i think they still go with the 25 basis point and a dual track approach. lisa: let's dig into that a little bit. what data should they be looking at if the data is so backward looking? gregory: it's an important element to look at forward-looking data. look at where the trans are heading in terms of inflation, in terms of labor market. we saw a fairly strong jobs report for february and january. if you look at the hours worked, at wage growth momentum, there is a slowing in economic activity on the labor market front. executives are being strategic about decisions to hire and right size their talent pools. adjusted for inflation, there is

a softening in the pace of growth. there are underlying cracks in the foundation on the credit front. this recent episode were credit conditions are likely to tighten will weigh further on economic activity both at the business and and the consumer and. that should point to slower -- business end and the consumer end. lisa: do you think this is driven by the banking sector? do you think the ongoing turmoil could drive the much greater tightening or this is something that has been in the economy for a while and we have not been paying attention? gregory: i think there are, as i mentioned in the past, weaknesses in the economy. we know sectors that are interest-rate sensitive are exposed to the rapid tightening cycle that the fed and other central banks have been proceeding with. the commercial real estate sector has a number of vulnerabilities.

there are other sectors that show liquidity issues in maturity mismatch issues. pension funds, mutual funds. there are the unknown unknowns. what don't we know about the underlying vulnerabilities in the u.s. economy and the financial system? could that be something the fed is also observing and making his decision on wednesday based on those unknown unknowns to the general public? that's a possibility as well. jonathan: when chairman powell sits in the news conference, does he say things we don't know? gregory: that's very possible. we have to be careful with mind games at this stage. this started as a confidence crisis. we are in this very fluid situation when it comes to the banking sector. there are a number of factors that could still play out. i don't think we are out of the woods yet. there is the possibility that policymakers, the treasury, the fdic and others know more information about the general state and condition of the

banking sector and financial sector than the general public. that is something to pay close attention to. there could be more signal in the fed's approach than simply a 25 basis point rate hike or not. i have suggested in the past beyond the 25 basis point rate hike there should be a suspension of the dot plot. ford guns -- forward guidance might not be that useful at all. jonathan: they should reach for the pandemic playbook and rip it up and not publish an sep this week? gregory: economic conditions are so fluid and financial market conditions are so fluid that providing an estimate of the dot plot at this stage for the end of this year and next year and the following year is not really useful. we are in an environment where situations are not fully resolved. you see a lot of stress on the banking sector front. we see a lot of pressure on some entities around the market. we still have a lot of

uncertainty as to the fed policymaking. if the fed needs to consider anchoring it's probably decision -- policy decisions. that comes not so much via forward guidance, but thinking about how the outlook is likely to be going forward and how that will impact policymaking. lisa: you look at the two-year yield and it looks like a roller coaster people have been on in terms of no landing, hard landing, no landing, hard landing. what is the stickiest narrative we can hold onto that could be realistic later this year? gregory: i have always pushed against the idea of making a simple narrative out of very fickle economic data. economic growth has been slowing. at the end of last year it was close to a stall.

we saw some upside surprises in economic data in the first couple of months of the year. if you look underneath the trend and talk to business executives, they are all about strategic growth. that means fencing growth opportunities, not investing like crazy but not retrenching on the capital front and hiring front. that leads to an economy that is softening. on the consumer side we are seeing cracks in the foundation in terms of rising delinquencies, increased burden of debt and of inflation, and a debt servicing cost that is rising. add the banking sector stress and the tightening of credit conditions, that points the softening consumer spinning activity, softening business investment and softening inflation. we are going to be in a disinflationary environment which should allow the fed to take his time and not necessarily continue to tighten as much as it had previously expected. jonathan: thanks for this, gregory daco.

thank you for joining us this morning. this is impossible. you acknowledge ultimately they might know things we don't know about the financial system. then they don't scrap. then they scrap their forecast. can you imagine how much people would be spooked? lisa: 100%. this is no -- that is them saying they have no clue. this is a game changer. by the way, get ready. people are pricing 200 point rate cuts. how long do people look around for the next shoe to drop? can you imagine jay powell coming out with sunglasses saying no sep, mic drop. no mind games. we all play mind games. jonathan: wti crude positive. what does this mean for the crude market? we were speaking at a conference in switzerland.

the ft global commodities summit. he said, the banking crisis will be bullish for oil prices. he thinks ultimately the greatest impact from the crisis will be on regional u.s. banks, which could limit the capital available to shale drillers which will curve crude supplies in america. lisa: butterfly wings. extrapolating out that far to next week is hard for me right now. jonathan: till tomorrow. -- to tomorrow. jane foley will join us shortly. from new york, this is bloomberg. ♪ lisa m.: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. shares of first republic rallied after plunging to a record low on monday. the regional bank was up 27% at

one point. other midsized lenders also rose. jp morgan's ceo jamie dimon has come up with a new plan to aid first republic. pimco and invesco are among the biggest holders of the credit suisse bonds that have been wiped out after the takeover by ubs. pimco holds about $807 million of the so-called additional tier one bonds. invesco has around $370 million. the bonds offer attractive returns in good times but take the first hit if the bank runs into trouble. the u.s. will send another $350 million to eight to ukraine military. the package includes ammunition, riverboats and other equipment. it is designed to keep ukraine from running out of artillery shells and missiles to use against russia. in the u.k., more than half of those surveyed believe the conservative government has not fixed problems caused by former prime minister liz truss's so-called mini budget.

that resulted in a drop in the pound and higher mortgage rates. the survey was conducted by delta bowl for bloomberg news. car sales have increased for a seventh month in a row as supply chains improve. the european automobile manufacturers association says registrations jumped 12% in february to just over 900,000 vehicles. battery electric autos expanded the most, surging 34%. the u.k. and spain saw significant gains and renault ha\ change. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ ♪ h. 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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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. >> the real trouble starts when the yield curve re-deepens.

they will have to be cutting at some point so that you have been your note rallies -- two-year note rallies. the equity market is in denial. jonathan: yesterday afternoon on bloomberg television. you get the inversion. that leads to recession around the corner. you get the aggressive bull steepener, that might be right here, right now. lisa: that's why some people are saying it is time to buy. that is what the bulls are saying. this could be an optimistic story and buy up the smaller regional banks. how much is fear of missing out the issue? there was a story talking about fund managers were more concerned about missing the rally, not getting in on the bottom than they were about losing all their money.

how much of this is people having been through a crisis before and they are trading? jonathan: there has been great journalism here at bloomberg. francine has pushed this story with credit suisse in the last couple of weeks. they did a phenomenal job. they put together the weekend events. there's a quote from a middle eastern investor. you and i have discussed this. the decision to wipe out 81 and provide value in equity. people were asking that question in real time on sunday evening. the pushback was there for all to see. if you were part of a 4 billion capital raise if you want to go and the whole bank was sold for $3 billion in a single weekend without a shareholder vote, you would probably be unhappy about that. this was the quote in the ft. one person close to one of the three major shareholders in credit suisse. read between the lines.

"you make fun of dictatorships and then you can change the law over the weekend. what is the difference between saudi arabia and switzerland now? it is really bad. there will be consequences for this going forward." we said 20 minutes ago there is no free lunch whatsoever. it is not like you make the decision and this goes away. rule of law is really important when it comes to attracting capital. that decision over the weekend to suspend certain laws and push this through, that is not going to be taken well. lisa: how much of that -- is that raising the cost of capital for swiss endeavors? if you cannot count on the rule of law -- middle eastern investors had not invested significantly in the banking sector since 2007. how did that go? single-handedly, mohammed bin salman pushed for this investment right before the bank collapsed. what is the brie through in terms of the appetite to invest in global banking sectors going

forward? jonathan: particularly if this gets worse and let's hope it doesn't. good morning to you. welcome to the program. equity futures positive 5.7%. we've had -- positive by .7%. first republic rallying in the premarket. positive by almost 22% in the premarket. jane foley joins us now. wonderful to catch up with you. we're looking back to the ecb and thinking about what that means for the federal reserve. can they take a page out of the playbook from last week? jane: i think they probably will. we have been through this argument in the run-up to the ecb. if they don't it will affect their credibility more. the market given 25 basis points anyway. i think they will probably take that. i would agree with something you said earlier on in your show. the way we are looking at the transmission of monetary policy

has altered. if there was a difference in the about a credit that banks can lend than the transmission of monetary policy means there may be less need for them to hike interest rates going down the next few months. that is something which will be really crucial in trying to get a read on what the fed thinks about that. we had comments yesterday from lagarde. she said the transmission of monetary policy may have changed. that is part of the data they will be looking at in the month ahead to determine how much or what they do in terms of interest rate moves. lisa: will interest rate moves drive the differential between the euro and the dollar? will it be something more akin to growth? more akin to what kind of landing this will be? jane: i think it is all going to be in the pot together. what is there now is just the amount of risk aversion versus risk appetite.

things look much calmer today but everyone is sitting on the edge of their seat wondering of this will hold to the end of the week. there are many unanswered questions about what has happened and what the applications of what did go on this weekend really mean. in the u.s., we have a bank which is still really struggling. we have the economic data to worry about. the dollar is a safe haven but there has been so much liquidity thrown out there from the fed that it should allow the dollar to soften. it has allowed the dollar to soften relative to last week. however, the dollar will not suffer significantly until the market really wants to go right back into high risk currencies. that is not going to be imminent. we might have a little bit of softening on the dollar. if the stock market holds of this week. we will not have a big rush away from the dollar because the risk appetite has been impacted and will continue to be impacted.

lisa: a lot of the commentators in europe say the u.s. is in a worse situation than europe right now when it comes to the banking sector. there are more fragility's among the regional banks. the european banking system is strong. that is why people poured money into it earlier this year. do you agree with that, the vulnerabilities are greater in the u.s.? jane: it would appear to be that case. that certainly seems to be the case. i am not a bank credit analyst. it is difficult for me to make up my own mind about that. from what i can tell that would appear to be the case. there are so many if sandbo -- if's and but's. we have to look at the growth projections. what happens if we have a bad winter? what happens if energy prices in europe spike higher? that would probably change the situation. that is how it appears. i would not be feeling too well

insulated in europe. there are many headwind here too. jonathan: what is the signal from the bcv? -- ecb? jane: they did a good job getting the message that the banking sector in europe is well-capitalized and quite liquid. our own analysts are saying the same sort of thing. the market is reassured. not all of those uncertainties have gone away. that is what the euro is telling us. there is a slightly softer turn of the dollar that has given us the same message. the risk appetite has improved slightly but there are so many uncertainties here that i would not be selling the dollar heavily given the risk of recession, given the global uncertainties. the dollar is a safe haven because it is the currency of

the global payment system. people need dollars in times of stress to pay invoices and debts. that is why it is a safe haven. as long as the recession risks rains it will not be sold off too far. jonathan: jane foley. you get the sense everyone is struggling to make a call here. don't you feel that? lisa: 100%. people are hedging. it is not about jane. it is literally everyone. bill dudley, who has been hawkish for so long, not sure. it is difficult to make a concrete call. we can go to sleep and we will probably be in it completely different spot. jonathan: try to navigate the psychology of the news conference tomorrow. they might know something we don't know about financial stability and the financial system. at the same time, if they really did, why would he open the door to a 50 basis point hike a few

days before banks fail in america? lisa: it is not a time for mind games with jay powell. that is what everyone is doing. it's apparently about mind games. that is what we have been doing all year and the mind has been switching at the data has been switching and where are we now? you will see. jonathan: the ecb was playing mind games. they would worried -- they were worried about the signal it would send if they committed to hike. they will be mind games if you like it or not. lisa: we don't know what they want to send, whether or not they can execute it. how will the market take whether they raise rates were not? that's probably less important than if they indicate they will not be hiking further and what they do with the economic projections. jonathan: this is the toughest fed decision in at least a year. the others have been easy. we need to hike. lisa: it was easier. jonathan: this is much, much

harder now. from new york city with equity futures positive point 6%, we will catch up with christian mueller-glissmann of goldman sachs next. ♪

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>> i think the banking system will get through this. >> the wrist to the -- the risk to the downside has increased. >> it kind of slows down and then at some point it starts to deteriorate. >> there is one rule. don't overdo things. >> we have to watch whether there is a next shoe to drop. announcer: this is "bloomberg

surveillance." jonathan: the federal reserve has 31 hours to come up with a decision. this is bloomberg surveillance on tv and radio. equity futures positive .6% or .7% on the s&p 500. what will that decision be? lisa: how will it be communicated? all the rhetoric around it and projections at a time where it is incredibly difficult to project to tomorrow. jonathan: we will hear from chairman powell tomorrow. the meeting starts today in washington, d.c. you will hear from secretary ellen later this morning in front of the american bankers association. we have some text here. "it's important to reaffirm the broader point. are dynamic and diverse banking system is critical to the american economy. large banks play an important role but so do small and midsized banks." thank you for that. what is the policy effort?

lisa: to be clear, this is to a room full of small and medium-sized banks. understand the audience of it. that said, you're right. what is the main implication? they are too big to fail? is it a backstop to deposits? something greater in terms of generating greater liquidity lines? if that is the case, what is the cost to these banks and how to change? jonathan: it is implied they are systemically important and too big to fail. it's implied all deposits are guaranteed. that is not in the law and that is the problem secretary ellen had in the past week. we understand if things get worse, they are studying the next effort and it sounds like the u.s. officials are studying ways they might temporarily expand the fcic coverage to all deposits. can they actually make that happen? what we need to happen for them to push through and ultimately

see that materialized? lisa: how would that change the model of their business? if we think about smaller and regional banks, the reason they are crucial is because of how much of the credit they provide to small businesses, to commercial real estate operators, to individuals. if they have to pay a much greater cost of capital akin to a bigger banks do, do they provide this role? can they play that piece in the economy? two then foots the bill for this protection? --who then foots the bill for this protection? jonathan: some banks are getting much smaller. first republic hammered on friday and yesterday. positive about 15% in the free market. more reports that jamie dimon, according to our report, is leading another effort to do something different to try to restore confidence in this name. lisa: is this because they want to make a pr move so they can

say we came to the rescue and we did it for the good of our hearts, or is it because there is a readthrough to larger banks? janet yellen said the u.s. will intervene to protect smaller banks. to me, is this also janet yellen calling up 1-800 jamie dimon? jonathan: good news for ubs. it took us three or four minister mentioned ubs. we will see how this goes. intraday is higher by little more than 4%. closed high yesterday up about 1.26%. let's give you a flavor of the broader price action. yields higher, up for basis points. the two-year up 10 basis points. close to 4.1% on a two-year. do you know will be worth at the close the last time the fed made a decision on a two-year?

basically where we are now. lisa: i hate that. it absolutely erases the turmoil we have been living. jonathan: round-trip. the fed officials went into the bunkers and looked at the price action already newspaper or watched tv and came back and said the two-year, nothing has happened here. lisa: is that the application that is what we should do or gives you a sense of just how much the price action belies what's going on under the surface? there is economic data. does it matter? what data matters? is just basically bank stocks? we get the philadelphia nonmanufacturing activity at 10:00 a.m. we get existing home sales. i look at the data put together by the atlanta fed forecast and you can see the gdp is now projected to be 3.25%. we are looking at an economy that seems to be chugging along

just fine. how does the fed put a greater priority on strains of the banking system as you have officials coming out to backstop the banking system. today the fomc begins deliberation of looking at each other and saying i don't know. i think it looks like a roller coaster that you would see and not want to go on. that is where we are at. choose a direction. you can hear everybody's lack of conviction and calls. janet yellen delivering the address we were talking about at the american banking association washington summit. she will speak with the ceo of the association about the health of the banking system. maybe you will get details about what kind of backstops there are. what the consequences are in terms of the credit impulse and the role of the banks. jonathan: she struggled last week in front of the senate. what can she say? is she going to give us anything new about the policy effort in washington? lisa: is she going to be asked?

that's another question. jonathan: i don't know. do you know? christian mueller-glissmann might know from goldman sachs. wonderful to hear from you, sir. welcome to the program. this came from dario perkins. central banks are stuck between the ghosts of the 1970's and the ptsd of 2008. i reckon ptsd wins out. what do you reckon? christian: it certainly looks like that. certainly near-term. inflation normalization progress would have been very slow anyhow. to some extent we were quite confident in markets. inflation expectations never on anchored -- unanchored like they did in the 1970's. i think the bigger concern is the banking systemic stress. i would lean towards gse

concerns dominating right now. lisa: how do you play through the concern versus the opportunity? ok, when you smell blood in the water sometimes it is time to pounce. christian: you want to see some type of overshoot. you want to see some type of asymmetry arising. i'm not sure we are there yet. the challenge you had was coming into the year people were getting excited. despite the fact it was late cycle and the fed had pushed up the cost of capital materially. there was a since the u.s. can deal with it. it is resilient. the spot data is still resilient. you have china reopening. the euro having less of an energy crisis. risk appetite indicator went up to 0.7, one of the higher levels. you have now unwound but you don't have bearish levels. what bothers me is risk premium. the rates markets are clearly sending us a very bearish signal. you have the front end pricing

cuts from the fed. you have steepening in the curve. all those are signals recession risk is being put forward. if you look at risk premium, it is quite low. i'm not sure we have that type of asymmetry, that type of washout where you can see a huge amount of opportunity. lisa: what you looking at to buy if the volatility washes out european or u.s. banks? christian: banks, there is clearly stress. there are overshoot in terms of valuations and credit. at the margin that's an area where you can look but the uncertainty is huge and is a leveraged business model and systemic stress is going in waves at this juncture. it's a bit early. if you asked me which banks to go for, european banks have a slightly different set up because they have less liquidity.

they have a systemic capital concern and profitability problem. that seems to happen put under control. whereas from a deposit side of things, you have less pressure and less liquidity pressures and a different set up. there are not even that many money market funds in europe. it feels like there's a slightly different problem in the u.s. that might linger longer if the fed continues tightening. jonathan: how much of a challenge is that to the yield curve? christian: like i said, u.s. banks are not completely in the clean yet. there is more steepening that was exacerbated by positioning. he had this enormous rate quality driven by micro-investors unwinding these hawkish calls. we need to see what it does settle and if the steepening continues. a comes from inverted levels. we find the risk to equities increases the more the yield

curve stevens. it's it -- yield curve stevens. if that can -- steepens. jonathan: do you have a base case now? it sounds like perhaps the situation in europe might have been a head fake and you respect further inversion again. christian: it looks a bit like that. our base case from economists and europe and the u.s. is that we are not done yet on the hiking cycles. there is the ideal of separation between systemic stress and inflation fighting. if that is true, it's a bit premature to see the steepening. we have to look at the market a bit. i think the market is worried we reached the point where central banks are constrained to hike and where the financial conditions tightening, which has been relatively controlled for most of last year driven by front end rates has become much less unpredictable, much less predictable and a bit more

uncontrollable. that means that you have much more risk narrowing. much more risk of central banks having to backpedal. jonathan: thanks for that, christian mueller-glissmann at golden. -- goldman. it is going the other way today. two-year up by 20 basis points. a little curve inversion. for those of you just tuning in, all that jargon in the bond market, ultimately that means you have durations across the yield curve. it is the front end, the two-year that has rally harder than the rest of it. but curve does this. lisa: to put it in similar terms, does the ecb start to hike more again where people worry less about banking contagion and more about inflation? jonathan: are we a bank solution away from this no landing stuff over again? narrative table tennis. lisa: you are talking to me.

marvin loh of state street is coming up. lisa m.: with the first word, i am lisa mateo. the u.s. is studying ways to guarantee all bank deposits if the current crisis gets worse. that's a move sought by a coalition of banks. the treasury department is looking into whether regulators have enough authority to temporarily insurance deposits larger than the $250,000 limit without consent from congress. the federal reserve faces a tough choice at the meeting of policymakers. jerome powell and his colleagues will consider whether the global banking turmoil is so concerning that and interest rate hike should be abandoned. they will announce a decision on wednesday. the u.k., swiss and a widgeon central banks will also separate -- and norwegian central banks will also talk about rates this week. joe biden vetoed a bill that

would allow portfolio managers to way environmental, social and governance issues in investment decisions. the esg factors have grown in population and finance. bloomberg has learned vanguard has decided to close its remaining business in china. u.s. asset management giant has notified beijing it will shutter its unit in shanghai, abandoning a $3.9 trillion fund market. it's also exiting a joint venture with ant group. it's peers are still building up their chinese operations. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪ get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach.

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>> after the financial crisis, we lifted the cap on protecting deposits from 2008 to 2012. i'm open to it but i want to get the facts first on what caused this. when you start raising the caps, i don't know where you top it off. if your midsized bank and you have a lot of corporate deposits, even one million will not be enough. jonathan: that was senator mark warner of virginia on balance of power. it's a really important point.

it is not about rich individuals. this is about corporate america who needs to have a lot of money to make payroll. lisa: how many small businesses are having open calls with all their employees saying, this is where our money is. this is where we deposit. this is how we will get your payroll. trying to calm nerves that have gotten afraid over time. how much of this is a question of people not moving money out of smaller accounts but individuals who are employed not feeling certain about their future employment getting a paycheck from moment to moment simply because of this question? jonathan: real nervousness at the moment. so nervousness for chairman powell. they are petrified at the federal reserve. lisa: i don't think they are petrified. jonathan: working their way around a dark room and getting punched in the face weekend after weekend. futures positive .7%. yields up by four or five basis

points. two-year higher by 13 basis points now. 4.1%. i mentioned did about 10 minutes ago but it's worth going through again. i do this every time the fed is meeting. i look back to where we were at the close when they last met on wednesday, february 1. two-year closed at 4.1%. it is at 4.1% right now. we are unmoved since the close after the fed last met, except it has done all this in between. lisa: isn't that kind of you retaining? i think it belies the drama under the surface. the two multi-was moment they have to face and understand how to navigate -- the tumultuous moment they have to face. jonathan: the front half was the data. payroll was two days after that. monster print. retail sales. take your pick.

the second half is the last couple of weeks which is financial instability. before the financial instability we were talking about 25 or 50, not 25 were nothing. the two-year has done a complete round trip. lisa: i wonder if there is a way to mathematically quantify it. we were talking about potential for 6% fed funds rates. at what point is what we are seeing in the banking sector something that is going to help them get to their goals sooner and that they don't necessarily want to completely eradicate and stop raising rates? they are in a tough spot right now. jonathan: let's get down to d.c. annmarie is joining us now. >> the government could take drastic measures once again. this is that what we have from her preprepared remarks that do just that. she talks about the intervention necessary to protect the broader banking system and similar

actions could be warranted if small institutions suffer deposit runs that pose the risk of contagion. what the treasury secretary is saying is what everyone has been linking. will they are wouldn't they if there was more contagion, if we see another smaller midsized regional banks start to go under, with the regulators and the u.s. federal government potentially ensure all those deposits? this is something that banks are asking them to do. if this goes through congress, it will take many months. potentially secretary yellen giving this verbal signal, maybe the treasury department think they can stop potential outflows and exit is of deposits we are seeing. lisa: every representative has a regional banks under their offices to protect. how unanimous is this desire to protect some of these institutions and play an important role in credit creation? annmarie: when it comes to the fbi see the big question -- fdic

the big question is should it be e limitless or have a timeframe? potentially you have two years. there is some bipartisan support. the issue this administration will have if they want congress to take action is that potentially they could get it through the senate but when it comes to the house you have house conservatives, the freedom caucus saying they will not do this. they think this encourages bad behavior. they will not sign up for this. it will be potentially dangerous to get to the house. this is part of the point we brought up with senator mark warner yesterday. he said he wants to sit and make sure he gets all the material and details on what went wrong before they start firing off new legislation. the issue the banks say is we need this to stop now. for congress, it will likely be months, may be years before they act. i think what you hear from wall street as they want some more immediate action. lisa: it's a difficult thing to

tease out. the immediate action has been taken by the federal reserve, by the fdic, these bodies that have taken measures to ensure none of these banks suffer some sort of rapid demise that have a contagious to -- contagious effect. what scrutiny do they bear for making unilateral, trillion dollar decisions that have real policy applications? annmarie: there will be hearings. there will not be one. there will be many. the first will be for the end of march on march 29. we heard that from house financial services chair patrick mchenry and the top democrat on the board maxine waters. their first individuals to speak to is martin greenberg from fdic and michael barr at the fed. they will potentially going down the list to find out what exactly went wrong.

hearings, fact-finding, all this will take weeks and months. when you were talking about potentially an exodus of deposits, which is what we saw over the weekend with the coalition of banks writing a letter to regulators saying please lift the fdic insurance limit, they want that to be immediate. jonathan: wants to play debt ceiling roulette with this going on? what is going on? annmarie: debt ceiling discussions are still -- reporters are asking about them. what you hear from both sides is they maintain their positions there is not a ton of medication going on for them to may be potentially find a middle ground in this. the white house maintains this needs to be a clean lift. republicans say they cannot do that unless there is some sort of negotiation about federal spending cuts. we are pretty much at the same place we have been for months. jonathan: looking forward to the

program later at 5:00 p.m. eastern time with john matthew and annmarie. no one is talking about the debt ceiling anymore. lisa: i wonder if they talk about it closed -- behind closed doors. it has real implications if they don't come to some sort of resolution. jonathan: nobody is talking about the debt ceiling. the fed would be constrained and how quickly everyone is saying the fed will back away now. it is done. lisa: and take it a step further, not only will it back away, it will provide intense liquidity lines to any bank that needs it. has the story changed? have we faced something new that has been stress tested by inflation? are people going to wake up and realize that playbook does not really work in the same kind of

way? jonathan: chair powell has the opportunity to set astray tomorrow. we will run you through a special program, the fed decides. round-trip on the two-year. below since the fed last met, 362.83. lisa, where we are now at 4.1%, where they were when they last met, 4.1%. lisa: doesn't that break something in and of itself? they're using short-term rates as a borrowing mechanism. how does that play out really? jonathan: some short positions got squeezed hard. what else is out there? futures up on the s&p 500. ♪

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jonathan: equities picking up by .8% or .9% on the s&p 500. you will hear from the treasury later this morning. we have a few snippets from her address. here's an important quote. "our intervention was necessary to protect the banking system. similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion." that's as close as you are saying we will be there if you need us to be. lisa: we will protect all deposits, not just those

of the $250,000. restoring confidence without having to execute that backstop. does that work? is that enough? that is what people are looking for to get a sense that all is clear. jonathan: the difference between being a fed chair and the treasury secretary. as the treasury secretary, you are targeting not wall street but ultimately the consumer. does that restore confidence in the smaller and medium-sized banks? do you need to see a real broad change to restore that confidence? lisa: good question and we will not know the answer right away. we will have to see how the consumer sentiment plays out. we have to see what other fragility submerge from the other banks that had pretty severe mismatches of duration and deposit data with what we are seeing in their longer-term loans that were underwritten during a very indifferent interest rate regime. jonathan: the most effective

backstop is the one that never has to be used. when you look at president draghi at the ecb in 2012, when he said whatever it takes any came up with a new program, how in t -- omt. never had to be used. i don't think you can do the same thing with words and bank deposits. you have to establish a mechanism. there is no backstop if all you are saying is we could do the same thing again if it poses a risk of contagion. does that apply to what bank? does that apply to the one we have been talking about in the last couple of days? the other banks? depositors? you have to be clear about that to satisfy concerns. lisa: what is the legislative parameter they are operating under? people are concerned because the federal homeland banking system, which was operated to protect some of the smaller and regional banks from some of the liquidity issues has seen their loans

extended and climb to $1.1 trillion, which exceeds what we saw in 2008. this is some of the tea leaves people are looking at an asking, why do they need capital? jonathan: let's see if they can restore confidence. first republic rallying after two difficult days. we are up by 14%. leasable go through the names in a moment. i want to get to the bond market. two-year in germany up by 20 basis points. similar on this side of the atlantic, up by 11 412 basis points. euro-dollar advancing for four straight sessions. there is a better tone in the last 30 minutes following some of these comments. euro-dollar 107.80. lisa: that has been something that has built on a feeling that

perhaps we are past the worst. if you look at faang stocks, not only in the medium-sized -- in the bank stocks, if you want to look at first republic, shares popping less than they were before but up by more than 14%. is this a feeling the worst is at the end and solutions that came out of jamie dimon will help stave off distress? citi, bank of america and wells fargo shares recovery just a bit. i want to look at two tech stocks, meta and amazon. meta shares rising after boosted overweight because of new efficiency measures. though shares are up almost 3%. the reason of 20 to amazon's yesterday they came out and said they will cut 9000 more jobs, including at aws and twitch, some of the more profitable areas of the business. the job cuts have been

interesting and given some people have the big tech will actually perform better because they have taken some of the pain. it raises a question of what they are seeing that has yet to play out at a lot of the companies. jonathan: meta, the year of efficiency. the stock is up 64%. lisa: they feel like they have moved past the high fluting ideas that don't make money and moving towards a more realistic model. jonathan: given the idea to shareholders they have moved past that. maybe he's not throwing money at it. if he has truly moved past us,, i don't know. lindsay, we caught up with greg peters on sunday to talk about convertibles. all those things that turned out to be bad things. why have you managed risk around the securities differently to maybe other shops?

i'm thinking invesco and pemco that reported they are holding the bag on this one. lindsay: the documentation around these influence has been murky. we have not needed to go down and capital structure to take advantage of the banks we like. we like u.s. money center banks. we think that looks really good. we've had opportunities with a lot of inception's divide banks cheaper -- inceptions to buy banks cheaper. lisa: there's a question about regional banks and the credit of them and whether they need to be some sort of premium baked in because of potential greater risks. less regulation, deposit data. lindsay: that is true and that has been our thesis. we want to be in the big u.s. money center banks. the idea that regional banks were smaller and may less

important to the structure, we have learned that is not the case. how are they compensated in terms of spreads? something you talked about earlier, the kind of main street versus wall street. main street banks and the regional banks going back to that he of confidence, we have not solved the problem. there is fragility in the system and a small business cannot operate with $250,000 at multiple regional banks. we are looking for a solution there. it may take a while. the government is studying. i was a public policy major in college so i don't how long studying lasts. small businesses are concerned and you are seeing money to moving to money market and government funds. that's a big heads up. small businesses are concerned with what is going on with regionals. lisa: this is why economist are trying to game out ongoing

distress in the financial system and how many rate hikes that is equivalent to. bloomberg economics coming out with 50 basis points of a rate hike. how much of a tightening feature is this? how much does this impact credit quality? for risks? for default? lindsay: it's hard to put an exact number on it. we are trying to figure out what this looks like. lending standards are going to be much stricter going forward. you have this deposit flow. i think what is different about the flavor of this crisis, if you want to call it that, is how fast the money is and how digital it is. we can all move money in our own accounts from our phone. that was not the experience in 2008. the risk of a recession has ticked up. it's a question of how much.

we are seeing some results this morning in europe with european corporate's 20 basis higher this morning. yields across the government in the u.s. or abroad are higher. there seems to be a little less concern. we have a lot to figure out as we wait to hear with the fed is going to do tomorrow and what they tell us they will do in the future. jonathan: you mentioned speed. it's an important point. a reminder how quickly some of these institutions can fail. with that mikey pointed out that is not the same as an industrial. not the same story. there should be a valuation gap between the different industries now. similar to what we saw after 2008. how long that can last? how long does that take to ultimately resolve the gap that opens up between one industry and all the rest? lindsay: there is no reason industrials and banks have to trade on top of each other.

historically, -- a trend we have likes is banks versus industrials because we were compensated with more spread. i think we believe it in terms of active management is teasing up which balance sheets are going to do well. i think we have a clear support here for the big banks. that the big banks can rally. jonathan: you mentioned the fed. where are you tomorrow? 25? nothing? lindsay: the base case is 25. that's with a major degree of confidence. there is a lot of concerns. i don't think we are in the camp that the fed were to cause, we don't think the situation is there is a crisis brewing and they know something we don't know. you discussed this on sunday. they can pause.

they have another chance to hike six weeks from now. it is not like they are never allowed to hike. they have flexibility. i think we should not panic if we see them pause. i would like them to see sometime in between to work out what's happening in the banking sector. all this happened this weekend last week. we need a little bit of a breather to find it was going on with markets. jonathan: lindsay rosner, thank you very much. when yes people they think they will do versus what they should do, the gap opens up and starts to open up. lisa: pretty much consistently. i wonder if the fed chairs would do the same thing. this is my venting. i'm just saying this. the problem with waiting six weeks for a rate hike is that everything can change in six weeks. we have seen that again and again and we could get worried about inflation and all of a sudden it's another error.

this is a fraud situation for them. it is not so simple. waiting six weeks is difficult in the world where people's narrative ping-pong -- jonathan: narrative table tennis. lisa: i translated. jonathan: just taking his words. i'm sure americans understand. lisa: i'm translating into american ak state is -- in case they didn't. jonathan: is highly competitive so i don't play. coming up, ellen wald of the atlantic counsel. ♪ lisa m.: keeping you up-to-date with news from around the world, i am lisa mateo. shares of first republic rallied in premarket trading after plunging to a record low on monday. the regional bank was up 27% at

one point. other midsized lenders also rose. jp morgan ceo jamie dimon has a plan to aid first republic. kimco and invesco are among the biggest holders of the credit suisse bonds that have been wiped out after the takeover by ubs. pimco holds about $807 million of the so-called additional tier one bonds. invesco has around $370 million of them. the bonds offer attractive returns in good times but take a hit when the bank runs into trouble. the prime minister of japan is becoming the final leader from the group of seven nations to visit ukraine since the russian invasion. he is meeting with the ukrainian president volodymyr zelenskyy. japan sent nonlethal military equipment to the ukrainian forces. it has imposed sanctions on russia. in the u.k., where the half of this surveyed believe the conservative government has not fixed problems caused by the former prime minister liz truss's mini budget.

that resulted in the drop in the pound and higher mortgage rates. the survey was conducted for bloomberg news. car sales in europe increased for a seventh month and, as of. the european automobile manufacturers association says registrations jumped 12% in february to just over 900,000 vehicles. battery electric autos expanded the most, charging 34%. the u.k. in spain saw significant gains. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

jonathan: there is a risk there is a financial crisis going on.

the federal ease as much, if not more than the market is pricing in. i would not put that as the only scenario that can play out. if we don't go into recession in the next few months, the fed is not easing. jonathan: brilliant yesterday. chief economist at jp morgan looking for the federal reserve to make a move tomorrow potentially. some pauses in between. i cannot get a clear answer from anyone at the moment. lisa: i was listening to bruce and other analysts. they were coming up with potential outcomes and throwing a dart. at this point 25 basis points, no sep. talking about no more rate hikes. potentially seeing a collapse of another bank. how many parameters can you come up with to understand where we are right now. jonathan: in a little more than two hours you will hear from janet yellen. we got a release of some of her

comments a little earlier. here is the quote that stands out from a lot of you. if you're just tuning in, welcome. our intervention was necessary to protect the broader u.s. banking system and similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion. the question is, are those words sufficient to restore confidence in a shaky system? lisa: ellen wald set --lindsay rosner says this does not solve the problem. there is a mechanism of people withdrawing from the banks and what they do and whether their business model is sound. that problem has not been solved. what is the longer term solution for this banking sector? jonathan: first republic up by more than 17% in the premarket. there is an assumption that this will all lead to tighter credit

standards, financial conditions and all of the above. what is it mean for crude? jeff curry had this to say. everyone has a take. "the problem is not the regional banks in the u.s. what kind of lending gets hit? it is what is going into the shale patch." it is likely to be a demand hit. more supply than demand. that was in the ft global summit conference on commodities in switzerland today. lisa: on one hand he is correct, that is the case. what about slowdown in demand and the fact there could be also some sort of global slowdown in response to tighter credit conditions? what about what the opec response is? trying to get oil right is as easy as getting jay powell right. jonathan: ellen wald joins us now from the atlantic council. can you tell us how dependent

shale producers are on regional banks in america? ellen: i will not totally speculate on just how dependent they are. i will guess a lot of them have actually probably reduced some of the exposure they might ordinarily have been facing given the fact that for some time we have seen lenders tightening and not shelling out capital to oil producers. this is an industry that has gone through a huge amount of consolidation over the past decade essentially, for little less than a decade. i venture they will probably not be quite is exposed as some of the startups in silicon valley. my concern is definitely on the demand side. it's a supply -- it's interesting on the supply side. we are not seeing much in the change of the slope like -- supply-demand forecast but

prices have moved substantially. the forecast for prices are on the move. jonathan: talking -- lisa: i will give you another somewhat fantastical scenario. what happens if the middle east investors that lost money in the banking issues suddenly want prices to be higher? if they lost money in markets, what if they don't want to produce more oil because they want prices to go up? how much of that is a feature in the opec response mechanism? ellen: it's definitely a concern. opec or at least saudi arabia has a particular range they like to see prices in. triple digits to them are too high. that threatens them on the demand side. if prices hit $80 this summer, that is still in a good range for them. they are not going to be making any kind of supply cuts. if we see a sudden drop in oil

prices due to a major global financial crisis, we should definitely look for opec to act like they did in 2008 to protect oil prices. what i think is more interesting is they definitely see this and they came out with some comments last week. this is mostly a financial issue. they don't see it as a supply-the main issue. how would changing supply and demand impact the market? what i see it as an interesting potential is the u.s. has potential to impact demand-side. we have the u.s. government having said when oil gets to a certain range they will rebuy for the spr. can you imagine what a major influx of demand from the u.s. government could do to oil prices right now? it would be saying here's a huge surge in demand that we were not necessarily expecting. we are in a situation where supply-demand is pretty tight, or at least expanded -- expected

to be tight. that could be at factor that could push oil prices up if nothing else. jonathan: i'm happy lisa brought up the middle east. we talked about a quote in the financial times this morning. i will share the quote with you. the ft put together a story of developments to secure the deal between ubs and credit suisse. the saudi's have been burned. the saudi national bank. this is a quote from the story. "you make fun of dictatorships and then you can change the law over the weekend. what is the difference between saudi arabia and switzerland now? it is really bad." you know about the kingdom. how do you think this might in change investment decisions from saudi arabia? ellen: that's an interesting perspective. i definitely think the idea of changing the law over the weekend is absolutely something we see and expect to come from a

dictatorship. we don't expect -- this is a monarchy. they don't really run the rule of law. they generally, because they want to be seen as a stable force and they want to be seen like other western economies, tend to try to wait here to global principles. when it comes down to it, they don't have to go through any kind of real legal processes. if the saudi government or the saudi royal family is hurting for money due to investments or particularly bad investments, i think you could look to see them potentially try to recoup that from what really is the saudi cash cow, aramco. aramco had a banner year and are flushed with cash. i would be surprised to see if they try to -- the royal family or the government tried to raise their dividends or whatnot from the company in order to make up

for a potential shortfall caused by bad investments. lisa: 30 seconds. is there another implication in terms of what saudi arabia is willing to invest in globally as they try today diversify away from oil streams of revenue? ellen: they are investing all over the place. i don't think this will stop them. i think this probably speaks to the fact they need more diversity. they feel like they have a lot of cash and they want to invest it. jonathan: thank you for joining us. the brilliant ellen wald of the atlantic council on the situation with saudi arabia. thanks and crude -- banks and crude. lisa: this was the money they kept credit suisse afloat. if you think about what that means at a time when potentially they are getting some money before the 81 holders get money endocyte get on wap -- and does

i get unwound for further investments going forward? there are questions about the rule of law and the banking center of the globe at a time when it seems to have been upended in the past couple weeks. jonathan: i'm demanding rule of law and the west is an important element. rule of law is what attracts money from places like the middle east. that is why they buy houses. that is why they buy mega-mansions in the city of london. it is because they know it is not just going to disappear overnight. you will not have a shakedown like they did in their own country. changing the rules like that over the weekend and switzerland. i don't think we fully realized or recognized with the consequences might be. lisa: one investor said what he looks for is their contracts at how well they hold up. and can you trust them. jonathan: futures positive by .9% on the s&p. imagine you are a shareholder and you get no say in the deal whatsoever.

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

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. >> the developments in the banks

over the last couple of weeks

have moved forward recession probabilities. >> if there is no confidence, there is no >> ability to have a foundation. >>inflation is coming down but it will not be sufficient. >> see fed 's 25 pips on wednesday -- if the fed goes 25 bips on wednesday. >> this is bloomberg surveillance. jonathan: the central bank is about to confront its toughest meeting of this hiking cycle of the last 12 months. alongside lisa abramowicz, i am jonathan ferro. equity futures with a left, up 8 .8 or .9%. secretary jan will be speaking

and said, intervention is necessary to protect the broader u.s. banking system. action could be warranted if smaller institutions experience deposit runs that pose a risk of contagion. it that sufficient? lisa a.: let's see. we have to see evidence that banks are stabilizing in terms of deposits and consumer confidence, but help much does this really avoid bigger legislative changes and more credit distress with increased credit tightening on the part of some of these regional banks. jonathan: first republic is up by 15% to 20% over the last couple of hours. the news suggests that jamie dimon is leading some kind of effort to support this lender. the effort last week was insufficient. what is next? lisa a.: do they need a what is

next? the thinking from some of these big banks was that $30 billion did not move the needle in terms of overall deposits, but if you infuse that with capital instead, it will go further. that is perhaps what people are seeing. can you read anything into any of these moves in terms of who is doing the trading and what they are trading on and how much money is actually moving around in terms of deposits? we heard cassidy yesterday saying they are not seeing deposit outflows, not tightening credit conditions. help you get your head around the straight -- how you get your head around the straight? jonathan: why is it this bank that wall street is coalescing around? lisa a.: the fact that it is a major commercial real estate lender? is it the fact that clients are perhaps overlapping between that bank and some of theirs? i do not know, but we have

redefined systemically important. that has been the take away. we have redefined systemically important to indicate which banks are important for which industries. this is a new definition. it will require policy changes. jonathan: systemically important used to be the big names. i am not sure signature bank was part of that. lisa a.: they were not part of that view. the swiss national bank was saying, silicon valley bank, why did you take them credit suisse and all of a sudden people around the globe are pointing to this bank in silicon valley that is not a traditional bank of the region but more of a driver of loans to startups. it tells you where we are. jonathan: policymakers are doing the prudent thing. this is what you do. and that is studying ways to do this, waived -- ways they might

temporarily expand the fdic to all deposits. how close are we to that moment? lisa a.: and how much would it change the business model? ed a certain point, who is holding the bill? if this bank makes responsible -- irresponsible decisions, is it the taxpayers? jonathan: they will work hard to make these decisions must profitable. lisa a.: which means they will do less of the credit lending they have been doing. money is more expensive for them. jonathan: you end up with a tougher growth profile. is that the take ultimately? lisa a.: i do not see the way for that not to be the take. how can these banks lend? alex of bloomberg put this out that a survey of consumer expectations shows that auto loans denied roast to the highest percentage of overall applications going back to 2017.

there is credit tightening that is ongoing and it will continue. jonathan: tight wonder how many big banks are saying, no more accounts, no thank you. you think they want on these deposits? lisa a.: definitely not. they have to hedge against it. it becomes costly. jonathan: equity futures right now at session highs, up 9% on the s&p. 500 if you follow first republic, battered on friday, pummeled on monday. nice bedtime story. lisa a.: battered, pummeled. [laughter] jonathan: first republic up 21%. not lost on many of you that a couple of weeks ago this was in triple digits, now holding on to double digits at 14.75. joining us now is marvin, senior global macro strategist.

welcome to the program. because for 25 basis point hikes, there is a call for the likes of goldman, berkeley, credit suisse, wells fargo. not for you to speak for nomura, but what we need to happen between now and 2:00 p.m. tomorrow for this federal reserve to cut rates? marvin: date couple weeks ago -- a couple of weeks ago we were debating how much higher they were going to go in terms of expectations. for us to go to banks on the 25, potentially nothing, and then they cut his -- and then a cut is based on systemic risk. that view requires the systemic risk type of concerns we have seen call me that over the course of the past week come back with a vengeance. you mentioned the market is focused on some of the larger regional banks under pressure. for sure, those situations would

need to get much worse for to get a cut of it. lisa a.: my favorite part games has been not only tell me what the fed is going to do but how will the market react? let's take they raised by 25 basis points tomorrow. how is the market react? marvin: it is more than just the 25. it will be signaling what it expects afterward. if it is a dovish hike the way it seems to be building, i think the market takes that as risk on. we have taken out the 6%, six plus percent that we were talking about. just two weeks ago, and now we are wondering can they hike at this meeting? that is much more dovish than where we were a few weeks ago, and it gives us a better sense of when they are going to stop. we either genuinely thought they were going to be done by the

they meeting, possibly june, but we were not sure. now, if you do a dovish hike, you get comfortable that they will be done hiking within the next 6 to 12 weeks at the most. lisa a.: if we will pass this narrative that the fed becomes less aggressive, can you gold fully into equities? marvin: the problem is that valuations do not make that possible. it is a real challenge when valuations remain expensive. i do not think we should lose sight of the reason we are able to pivot. ultimately, recession odds have increased. credit tightening is something i expect. i do not see how banks go back to lending the way they did. that is a bigger challenge for the economy. i do not think it is risk on. i think it focuses investments around the greater recessionary odd where you can expect the fed

to possibly cut next year. and positioning a portfolio for those types of scenarios. jonathan: typically, when the curve starts to anticipate that, what do you want to be in the equity market? marvin: i still think if we are talking about a recession and tighter credit conditions, you still look for stronger companies. we always want to own the best companies. i think quality growth has been something i have held on to. financials have always been challenged with us. it is a parsing of the sectors around that viewpoint. jonathan: is the nasdaq 100 quality growth? marvin: for the moment, it is. i think we had the opportunity to look deeper and decide which parts of that we really want. jonathan: interesting. thank you. looking ahead to the fed

tomorrow potentially going 25. the consensus still is 25, but two weeks ago, the conversation was different, 25 port 50. now it is 25 or nothing because of the financial instability. lisa a.: is it because of the raised story or the job cuts story, the efficiency story a number of these big tech companies have put out there? amazon cutting another 9000 employees. we talk about why apple has not done massive layoffs but is doing more efficiencies. that is the theme. you wonder how specific that is that i do not want to use the "i" word. jonathan: idiosyncratic. lisa a.: how specific it is to the tech sector. jonathan: it was an economic

boom, now it is a great cuts, bank failures. we are not even through q1 yet. lisa a.: i feel like it is narrative war stories as we try to work out the head spinning. i like that idea of narrative table tennis. we will be back where we are right now, but in between, i do not know. jonathan: futures up .9%. the matthew will be joining us in 18 minutes. equities doing ok. ♪ lisa m.: treasury secretary janet yellen says the u.s. will

intervene if needed to protect depositors at smaller banks. she speaks to an american bankers association conference today. she says the government's recent intervention was necessary to protect the banking system and a similar action could he wanted if there is a run on smaller banks. the federal reserve faces a tough choice this week. jerome powell and his colleagues will consider whether the global banking turmoil is so concerning that the rate hike should be abandoned. they will announce on wednesday. u.k., swiss, norwegian central banks will set rates this week. joe biden has issued his first veto, rejecting a that would prevent a rule allowing retirement portfolio managers two-way environmental, social and governance issues in their decisions. esg factors such as climate change have grown in popularity and finance. the u.s. will send another $350

million to ukraine, including ammunition, riverboats and other equipment designed to keep ukraine from running out of artillery shells and missiles to use against russia. the most expensive city in the world for business travel is still new york. according to eca international, it will cost you $796 a day in new york for a business trip including four-star hotels, taxis and incidentals. powered by more than 2700 journalists and analysts in over 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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>> type of afraid -- i am afraid regional banks are still sensitive to this crisis in confidence. the state regulators have to be empowered. the fed should be required to disclose more about liquidity, capital, other risks such as leverage, the concentration. jonathan: truly a crisis of confidence. i was the managing principal at mrv associates. coming into today's session, session highs on the s&p 500,

equity futures doing nicely. yields higher by seven or 8 basis points. two-year up by 15 basis points going into the fed tomorrow. the two day central bank begins today. for a quick look at first republic, that name doing ok, up by 23% but not doing ok the last few weeks. a triple digit stock bubble of weeks ago now double digits. secretary yellen will the speaking in an hour and 40 minutes. here is the quote from her, "our intervention was necessary to protect the banking system. similar actions could be wanted if smaller institutions suffered deposit runs and post the risk of contagion." is that sufficient? what is the policy backup? lisa a.: it is sufficient if you

look at very early trading of certain bank stocks in idiom banks. that is what people are looking toward. this is one of the indicators are probably fed reserve officials are looking for, parsing the heelys. we are seeing western alliance shares, pac west, some of these regionals are getting they left. is it enough to be sustainable? who knows. jonathan: what is the problem? lisa a.: deposits cannot leave quickly and they are invested in things that are rate sensitive. how do you solve that issue? we do not know how the echoes. jonathan: does the fed know? lisa a.: you raise the question. didn't they have any indication of that before jay powell got before congress and said 50 basis points as possible? jonathan: remarkable they open the door to 50 basis points and we had bank failures two days

later. lisa a.: how much intel do they have? how much do they understand the imminence of this kind of collapse iesco -- collapse? jonathan: the united states is studying the option of ensuring all deposits, an emergency option. do you have any clarity whatsoever on what it would take to trigger that option? >> because important, the emergency option. what we are getting from our sources is that the mood in the biden administration is such a measure is not required. they are hoping the steps they has already taken should good enough to stabilize the market. that may not be reflected in the stocks just yet, but they are hoping deposits will stabilize. they will not need to take drastic measure. however, the importance of being able to say that they are studying this option tells you

they have not drawn a line in the sand. they are not saying we will not go to that extreme. that is clear from secretary yellen's comments this running she is taken a play for mario draghi of whatever it takes. jonathan: credit suisse true got to be 10 billion a day. crazy. any idea what the numbers are now for these regional banks? sridhar: from a lot of these banks, everyone is acknowledging that they had seen a lot of deposit fight, but that has slowed down. we are not getting specific numbers. there is a call for these banks to come out and give us numbers, but it is unclear if that helps. look back to what happened on the day the biggest banks in the country injected $30 billion of deposits into first republic. everybody thought, great move, show of strength, but when first republic cannot with a statement and detailed -- came out with a statement and detailed the steps they had taken, that did not

instill confidence in the market. you have a bank stock down 90% since the start of the month. that bank would be a key to what steps the government might have to take that everyone we have spoke with headset committee next few days are critical. you will see some sort of resolution to look on valley bank thomas signature bank, but what happens with first republic? is there a government backed solution? can they stabilize the situation? that would give us a path forward. lisa a.: there is a different type of regional bank from those who serve mom and pop shop owners in a community versus something that has more concentrated lending specific industries, commercial real estate, home lending, startups. do we have a sense of how many banks are not dominant in specific industries? sridhar: i had an interesting conversation with a senior banker yesterday who pointed out

banks 1 to 12 in the u.s., you do not have to worry, perhaps 300 to 600 due to not have to worry, but from 20 to 60 is where the fears are. how many not confident enough customers exist at those banks that want to pull out their money and placed it at a bigger bank? that is where the critical aspect lies. it feels talking to people in government that they are looking at a group of a few banks that probably still are problem children. they want to major it does not spread to them and they do not teeter and topple. lisa a.: is the only way this ends with consolidation of the top, the bigger banks get bigger? we see that roll up in a massive way that will only continue? sridhar: what an extraordinary turn that would be. the posture has been we cannot afford to have the big banks get bigger.

if anything, we have seen calls to break up the big banks. is the solution from this point on for them to get bigger? that is not something anybody would have been expecting heading into 2023. jonathan: there was a hope for this big banks that ultimately fed fund deposits would happen but do these guys need to put up rates to attract deposits when everybody is throwing money at them? sridhar: i would look back at some of the earnings calls from january. you could actually sense they were talking about the need to fight for deposits. bank of america in q4 had seen $ 800 billion in outflows and had to work harder to attract deposits, but when silicon valley collapse, bank of america had $50,000 of inflow. jonathan: what does that tell

you what profits might look like. i am already looking ahead to next season. what will that look like? sridhar: it is not q1 that we are most concerned about, but q2, q3 and forth. we -- where is that margin? that is what everybody is paying attention to. it will be tricky. lisa a.: concerned nor excited? that is the key question. if they do not have to pay anything for their deposits and they can lead to ulcers source of people who need money. jonathan: you got to be careful if you are excited not to sound excited at a moment like this. lisa a.: [laughter] that is true. jonathan: is a difficult time, you just keep repeating it is a difficult time. i have full faith in the financial system. lisa a.: 10 they want to be the backstop for it. jonathan: good to see. great reporting. let's get you the latest on this market going into the opening bell. equity futures of the s&p 500

near session highs, elevated through the last 90 minutes or so, up by .8%. coming up, he or she key of x-unit capital, not mis-given cameron dawson. lisa a.: and tomorrow, are you excited for what the fed decides? are you knowing to pursue the body language -- are you going to parse through the body language, how he does his air? i want to see the press conference, what questions he is asked, how he reads from the document in front of him? jonathan: lagarde was close to the script. i imagine he might be, too. we imagine what happened -- we know what happens when he goes off script. can provide you with the tools and expertise you need to bring out the innovator

in you. lisa a.: welcome back. was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

jonathan ferro is off to his next company and tom keene is on vacation. michael mckee is going to breakdowns of economic data that nobody is going to look at because everybody's watching bank stocks. if you look at faang stocks, you are seeing a pop. janet yellen plans to deliver comments talking about helping these banks to market you are seeing s&p futures up, 4015.

a bit of stability across the board. i have been watching two-year yields which have been all over the place. it has been a bouncy ride over the past three months and we are back to the same place we were the last time the will reserve met. it is interesting to see that some other regional banks are also seeing a pop, pack west, western alliance. with that economic data you have been on the edges of your seats for, here is michael mckee. michael: -12 point8, a decline from february. do not know what it means other than service industries in the philadelphia fed district not doing as well as a month ago, but this is something that will not influence the fed's decision tomorrow. lisa a.: this is actually an important question, not

necessarily about the philadelphia fed manufacturing index, does economic data matter? michael: no, not to this meeting. the data are backward looking. the event is looking on a forward basis at what is happening with the banking system. they are looking at the incoming inflation data and that is why most economists still expect a 25 basis point move, 30 when we see some healing in the bank stocks. they were all green in the market yesterday and some finished down by the end of the day, but obviously the treasury department wanted to get yellen's comments out before the market open. her speech is not until 10:00, but they put out that part that they might rescue other people, because they want to give the idea that they will backstop and everything is ok. in that case, if the fed buys

that permit and there is no reason they should not the 25, because the inflation problem is still there. lisa a.: to be fair, i am looking at the 10:00 a.m. data on the home sales and this idea of do you start to see that ongoing rebound in the housing market on the lower mortgage rates, on the skittishness around the banking industry? this is circular, but what we are seeing right now its potential resurgence in activity in areas that were the most interest rate sensitive. as people present in lower rates, how much are you watching that kind indicator to understand the momentum behind some economic growth? michael: this is a weird period coming out of the pandemic. it does not in our models from the past. but americans are still buying houses, builders are still putting holes in the ground. we have seen mortgage rates come

down a bit hurt if that continues, you will have another question about home prices and whether they start going up because there is not a lot of availability. this is just about to be the spring selling season. you people say maybe i can sell my house? that will be an open question for the fet. this is going to happen at a time when we are expecting the housing part of the cpi and cd to start to decline. lisa a.: stay focused. thank you so much. but let's get into how we can understand inflation and how big of a battle it will be for the federal reserve, even as they have a night towards the banks. dean, what is your take on that? how do you understand the inflationary pulse and how it has been dampened? dean: recent data have suggested that inflation is not coming down as fast as the previous data might have suggested.

this does interfere with the fed's narrative that we are headed down in a steady way down to 3.5 or seven core pce by the end of the year. the recent data do not show much sewing. that is important to the fed's decision. lisa a.: what does that mean in terms of them having to raise rates by 25 basis point and that that should be digestible for the market? dean: the fed is likely to raise rates by 25 basis points this week. the data point in that direction, whether it is a strong employment data, inflation data that is been less favorable for the fed than expected and gdp growth that is picking up. it is not slowing down the way many had expected. so economic data are telling us clearly the fed should continue to raise rates. there is other factors that fed is worried about, but that is what is going to be the dominant

course for the fed. they think they have other tools to address system issues and problems at the banks and the policy should be aimed at getting inflation back to target. lisa a.: my favorite thing about this moment is you have five guests on and they all say you are looking in the wrong data. some people come on then say, that backward looking data shows resilience and a sense of inflation that has not died down nearly enough and others say you've got looking at that because it has been right. where do you make the argument you have to consider this data that maybe backward looking but gives you a clean sense of where we are now? dean: i think the data tells us where we were coming into the past two weeks. and where we were is an economy that was growing at a strong rate. the unemployment rate load by the inflation waving about where the fed wants it that way above where the fed once it.

the last two weeks mean the data do not matter anymore? it is too soon to say that. the fed will be thinking about how much tightening be happening as a result of the problems of the banks, but once the fed is convinced there will be a sudden stop in credit and that means no further rate hikes are required to commit the fed will go ahead with steady rate hikes this week. lisa a.: some argue that the factor there will be a credit tightening and some of these medium-sized banks who will restrict who they long to and how much they like. you argue that that does not necessarily mean a sudden curtailing of economic activity. can you elaborate on why that is an important realization between from what the fed has two do in response? dean: one has to think about what is happening at the banks. the large banks do not seem to be having a problem with extending credit at this time, at least in a way that would

cause a seven stop on credit. there is credit tightening in general going on. at small and medium-sized banks, the question is does the typical bank have a severe deposit outflow right now that will cause them to say we are not making more loans? that would be with a severe and sudden stop in credit would look like. that would cause the fed to immediately stop tightening. my perception from various things is that that is not happening right now. it certainly is happening and some of the trouble banks, but most human small banks do not have -- most medium and small banks do not have severe deposit outflow problems and are likely to continue to make some credit available. if that is right, then there is more they gradual tightening process underway rather than a severe and sudden stop. lisa a.: how far are we from

going back to a no landing discussion or this idea that we could softly glide lower, regardless of recent troubles with banks? dean: that is something we will be sorting out in the coming weeks. if i am right that this is more of a gradual process, then the strong economic data does continue to matter. this would be a headwind against that. there are some forces pushing the economy forward that are underappreciated, like the continued normalization of the service sector, which continues to our jobs every month. also, the strength of the consumer matters as well. if those matter in terms of the momentum of the economy, credit tightening is pushing against that. you will weigh opposing forces going forward. lisa a.: what do you make of this table tennis, this idea

that people are turning themselves in circles, trying to understand the moment to moment titrations in a market that is more volatile than it has been in decades? dean: to make me, it reflects the difficulty of the situation. we are dealing with an unknowable amount of financial stress. how bad is it going to get in the next two weeks? how that is the credit tightening going to be? markets are struggling to figure it out. we have our own views on things, but the market is bouncing back and forth trying to figure out which narrative is correct. lisa a.: one of the biggest issues is the longer-term trajectory of inflation, this question of are we headed back to a 2% inflation reality, which is really what the market is pricing in? or harm -- or are we heading

into something where the federal reserve wilhite -- tolerate a higher pace of inflation to avoid disruption in the banking sector? dean: there's one reason why this week will be an important signal from the set. -- the fed. if the fed is putting inflation front and center, it is important to tighten and signal that that is our main focus. if the fed does seem to be distracted and focused on other issues than inflation, then i do think this impression that the fed is going to allow inflation to persistently run above target will gain traction. lisa a.: dean maki of points 72, thank you. important given that inflation expectations have remained contained. right now, you are seeing a left dirt it is interesting to see the nature of the lift, we are seeing it in a

broad-based way with big and small banks getting a reprieve from the comments that janet yellen put out there. we did get some printed comments before she delivers them at 10:00 a.m. she says, our intervention was necessary to protect the broader inking system. similar actions could be warranted if smaller institutions suffered deposit runs that pose the risk of contagion. the concern about medium-sized banks having broader implications. dear seeing almost -- we are seeing almost a 19% gain on the s&p but not a lot of drama based on the tumultuous couple of days we have had here. this is bloomberg. ♪ lisa m.: the u.s. is studying ways to guarantee all bank deposits if the current crisis gets worse.

that is a moves up by a coalition of banks. the treasury department is looking into whether regulators have enough authority to temporarily ensure deposits larger than $250,000 without consent from congress. pemco and invesco among the biggest holders of its response. pimco holds about $807 million of the tier one bonds, invesco around 370 million. they are attractive in good times but take the first hit when in its into trouble. the prime minister of japan becoming the final leader of g-7 nations to visit ukraine. he is meeting with zelenskyy. japan has signed nonlethal military equipment to ukrainian forces and has also imposed sanctions on russia. vanguard has decided to close its remaining business in china.

the giant has notified beijing it will shatter its unit in shanghai, abandoning a 3.9 trillion dollar fund market and also exiting another joint venture. peers such as blackrock and fidelity are still building chinese operations. rent increases in single-family homes in the u.s. slowed for a ninth month in a low to the lowest since the spring of 2021. typical rent for single family home rose 5.7 percent from a year earlier. orlando led the way for rent increases, followed by charlotte and boston. global news 24 hours a day on-air and on bloomberg quicktake. this is bloomberg. ♪ to guide you through a changing world. ♪

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last decade. i did not forecast the sovcombank issue, but i had the view we were headed toward a crisis. we are seeing it. lisa a.: that was leanne cooperman of the omega family office, who made his name over decades with fickle stop taking. that is what he says we are going back to at a time where there is so much volatility and he expects middling returns for we say reprieve of some real angst, particularly in bank stocks. we are joined by somebody with intimate knowledge through these cycles, as well as understanding how to play in some difficult moments. how are you understanding the tank distressed he seen so far and how are those? dan: we are still in the early stages. we have got a couple of banks

having failed and another couple teetering, but there are issues plaguing banks that could result in a number of outcomes, compression or interest margins as these banks have to pay up to attract deposits, a decrease in loan growth, which is not necessarily a substitute for rate hikes which will somehow curtail economic activity. it is a higher regulatory burden on the 100 million plus size banks. and probably means consolidation of the sector as well. what it means for the economy at large will probably only be negative. and other people are talking about 2008 as if that is somehow ok, but while the issue is not rising to those levels, i think in an environment characterized by elevated interest rates, what is happening is not going to make things any better. lisa a.: to raise important

point that has not been emphasized enough. people talk about what is going on is temporary tightening, that they are going to pull back on some of their credit expansion. at least in the near term, as some of these banks decide how much they can count on deposits, but you are talking about a longer-term consequence of less lending. can you talk a bit about which sectors of the economy this affects the most? which sectors duties banks need to dominate in when it comes to credit expansion? dan: we know that the commercial real estate market is probably going to get weaker. a log smaller and midsized banks do most of that lending. i forget the last -- the exact number, but even though smaller banks only have 40% of all deposits, they are 50% of total loans. they are punching above their weight in that respect with relation to their deposits. the first but you have to look at is the commercial real estate

market. there is something going on in cities right now. it will take multiple quarters if not years to fully play out as some of these leases reset. you can see this in public markets for those large office suites. something is not right. this type of situations that aid that aspect of the economy at all. lisa a.: what is something is not right mean? we see a recession, how deeply the? what will we look like on the other side? dan: from an office standpoint, we know the depending on which city, the return to the office is running anywhere from 40% to 60%. let's say on balance across the country, certainly in the 30 largest markets, you only have

about half the people back to work in any regular capacity. as those leases roll off, everyone is going to be dealing with the repercussions of what that means from a lending standpoint, from a bankrate get her standpoint. that is that sector specifically. for the economy as a whole, i have not been the work myself, so i will not say i know exactly how it pans out, but the curtailment of loan activity, which will probably persist, is not going to take a weak economic environment and make it any better. the fed has set interest rates and elevated levels. i do not think they should raise tomorrow, but i also do not think that is the end of the tightening cycle because inflation is elevated. to repeat a point that cannot be said enough, yes the euro -- year-over-year rate is coming down but the month over month rate is at concerning levels.

that is much more consequential. even though in the immediate term, date may pause under raising rates tomorrow, when you are dealing with .6% -- 4.6% readings on cpi, there is little they can do to alleviate this crisis. lisa a.: your vantage point is coming from solus, a company that oversees distressed debt opportunities as well as long opportunities. i am curious where you are seeing the most potential at a time when a lot of people are struggling to get their hands around exactly what the end result will be. dan: i do not think the full ramifications of this episode has fully played out yet. that will take a couple of quarters. in what form and exacted what sectors we will be on guard for that. in the meantime, there are plenty of opportunities for a fund like ours. he would like to see more

distress than the fault which we do not have but there are plenty of sectors in the economy that will contract without weighing in at all about what we own or maybe doing. the change in behavior at offices is worth exploring. who are the winners and losers there? on the content and media distribution side of things, there is a change in behavior that i do not think people are appreciating with what it means for streaming services, movie theaters, vendors. in the travel and leisure space, hotels, cruises, skiing, there is a tremendous shift in consumer behavior. in each of those sectors and others, there are clear winners and losers. on the debt and equity side, our job is to sift through that and find out where there are mispricing pricings and exploit them. even though we have not seen the full ramifications of this episode, we are actually pretty

busy. there is plenty to be looking at. lisa a.: in the aftermath of the great financial crisis, one of the most lucrative trays was claims from lehman brothers after they close. the returns wrecked asterisk--astronomical. i wonder if there is an analog here with the at1's, maybe from credit suisse, which possibly do not look good but then regulators say that is a bad president. is that something that looks like it has potential as other investors see this as uninvestable? dan: as i now find out in terms of my career, i will say that the bad president to be set -- precedent to be sent is set in every crisis. never put it past lawmakers to set bad precedent. the at1 market is clearly

unfolding. you can see in the performance of various bank activities who has better language in the documents than others. we are not traditionally a financial fund. we not have any particular expertise in this, but clearly that market will be right or exploitation going forward. at the outset, it looks like it will be difficult for investors to not think that there is a downside to those investments and that is not the small-market. it is $270 million depending on how you enter it. considering that $16 to $17 million was just wiped out, people will be taking a closer look. lisa a.: does it all in change the investing landscape in switzerland? dan: to get back to my other point, i would not comment about

switzerland specifically, but for governments as a whole, there is a famous saying that if you do not like the law, get a new lawyer. there was 2008, the debt crisis or what is happening now, politicians have never failed to change the rules to suit their needs. in some cases that is right, in some cases it is not, but everybody has to understand that that in a crisis is likely to be the outcome. l dan green of solus alternative asset and is meant as we try to make sense of a market that has been anything but calm. we have seen a round-trip in the two year yield, s&p a lift this morning. coming up at 12:00 p.m. eastern, cathie wood, chief investment officer and ark investment management. this is bloomberg. ♪

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meeting starts right now. equity futures positive .9%. candor to the open starts right now. -- countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is bloomberg: at the open with jonathan ferro. ♪ jonathan: live from new york, coming up, the u.s. stating ways to guarantee all deposits.