>> welcome to bloomberg markets. a bit of a bid under the bond market and moves as treasuries are falling across the curb. wall street looks ahead to u.s. inflation data on wednesday. let's get a quick check on the markets because you have markets roughly frat -- roughly flat. the s&p 500 down on the day. the nasdaq 100, half the stocks in the red on the day but you have a little more of a selloff. three basis points higher or more. we have had the 478 level heading for 79 on the day nearly.

the 10 year yield three basis points higher. the selloff still underway before the inflation print. let's get a little under the surface. not all is bad. companies rising. bitcoin rallying back over the $71,000 mark. bitcoin up more than 3.5%. microstrategy up almost 7%. coinbase up six percent to shares of tesla jumping after elon musk announced plans to unveil a long promised robotaxi later this year and that comes as the carmaker struggles with weak sales and competition from cheaper chinese vehicles. tesla up 5% on the day. now to a new report from the imf. the imf his saying regulators should scrutinize the 1.7 trillion dollar private credit market more closely and they are highlighting possible risks from the lack of information and

transparency and the fact it has not been tested at a downturn at such scale. far be a is deputy director at the monetary capital markets at the imf. you are part of what authored the report that urged regulators to be paying more attention. what is the chief concern? >> the concern is one of rapid growth should this is part of the trend going on for decades from public to private markets and there are benefits including borrowers as well as for investors. there are vulnerabilities and possible risk. we highlight one has to do with more risky borrowers. for liquidity mismatch between asset and liabilities. the mismatch is less of a concern in this fund. it is a growing size growing to retail. leverage is another liability.

this is the point that could prolong the economic downturn. she and i will be curious about the layer of concern. i'm curious on the surface how much of a force is private credit becoming in the economy? the second fabio: is a significant source of credit. represents about 7% of the overall credit nonfinancial sector should it is 10% of bank credit. it is the size that is relevant. this is why we decide to freeze in the sector. sort of returns for investors including distribution investors. that is the reason we look into the sector. sonali: there is some language i'm curious about. the idea of potential systemic risk that could be created. what future worries do you have down the road? fabio: two main concerns.

when is the connectedness. we have not just private credit funds. we have insurance companies as investors. we have private equity and the link between private equity and insurance company is a growing feature in the market. banks are one of the providers of credit. it is the link between the funds private equity insurance companies -- we did not have much data to use for assessing the industry risk. sonali: is the problem for the funds themselves or the impact it could have on the economy of something could go wrong? is the implication here that there is a lot more leverage than meets the eye? fabio: we don't have data. the entire report is based on public data. the fed estimated it to be around 200 billion. there is the leverage at the borrower level and the leverage

the investor themselves may use. this is the layering we try to emphasize. i have no idea in a prolonged stress environment how the deleveraging would play out. how the layers of leverage would work out in the end. sonali:sonali: how do you think about the locations for investors yet you spoke how more retail investors are entering the space. liquidity profile changes drastically in those vehicles should fabio: for the crab credit funds, those are -- for many years. there is less of a liquidity concern. they can redraw money on a quarterly basis. there are liquidity management tools. what is not clear is given how the sector is opaque, what is the expectation of retail investor? do they expect they can only get a quarter or --

sonali: how do you think about this in the imf with regard to how banks are stepping back from the global economy? you are seeing regulation increase in many continents. you have seen crunches from the banking system for other reasons maybe provisions for loan losses or otherwise as there are worries about the economy. what is private credit played a role in the future knowing those constraints will exist yet fabio: there is a benefit which is the differentiation. the fact credit is not in one segment of the financial system should that should reduce financial stability risk. they are starting to play a significant role. if you -- more regulation coming for banks going forward, the sector is growing. it will play an important role for credit provision should that is the linkage we are concerned about. sonali: there is still a warning here. it is balanced but there is a warning there could be liquidity risks down the road if the economy were to seize up at this

point and you have private credit playing an increasing role. what does that mean for borrowers? fabio: during covid that sector was still there for business, providing credit, financial services and liquidity. that was a relatively short period of stress. there was not a prolonged recession. the concern if you have a prolonged recession, some of the valuation is stale so it may not be immediately market to market. you start seeing liquidity pressure. investors want to take money out of some instruments. those are the liquidity stresses we have not seen in a prolonged contraction. sonali: liquidity stress and credit stress. because the sector has so rapidly grown, it never experienced a severe downturn at its current size and scope and many features designed to

mitigate risks have not been tested. current wrigley tory requirements do not consider the credit performance of the underlying loans. we have reported a lot on the valuation disparities. how much do you worry about the credit quality? fabio: we have seen for insurance and pension, insurance company linked to private equity, the share of linked asset is larger three times then those that are not linked to private equity. you go from seven to 20%. it is a large difference. that is the concern. we are focusing on the link between the private equity and the insurance company. that can be another issue. in terms of valuation, the issue is there is no visibility. there are some instances you can use but they only represent a subset of the market. we have no idea how this pricing

would work in a prolonged recession. sonali: what is the recommendation? when you speak to authorities, what now? fabio: you need to close the data gap. there are too many data gaps. what is missing is a systemwide view. ability to assess the interconnectedness. banks, insurance company, private equity, there is no data. another is a more intrusive supervisory approach. there is also the retail i mentioned before. the bar for transparency is higher once the retail investor is involved. finally there are cross-border implications. u.s. credit funds are an important share of the fund provided to the instrument in europe. there are few people who have the ability for cross-border implication. sonali: we thank you for your

time and analysis. a sober view of a hot market here. the deputy director of monetary capital markets at the international monetary fund. coming up next to talk about david ellison honing in on a deal to take over paramount. we will have the details. this is bloomberg. ♪

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sonali: this is bloomberg markets. it is time for the stock of the hour. movie producer david ellison gaming out a potential deal to

take charge of paramount global. in $2 billion deal with sherry redstone's national amusements which has 77% ownership of paramount voting rights. michelle davis who has been all over this joins me now. she is going to bring us into the particulars of the deal as it stands to their been a lot of moving parts and what do we know lately? michelle: everything is in flux but we know david ellison's sky dance act by kkr and redbird are in exclusive negotiations with paramount. paramount special committee agreed to that last week. they have 30 days to hang out a deal. the contours of the deal involve david ellison sky dance cashing out sherry redstone who is the chairman of paramount. it is her company. a true billion-dollar deal in merging sky dance with paramount in a stock deal. sonali: i'm wonder if there are more public it in factors should

you have reported there's already been some pushback. michelle: what is complicated about the situation is paramount has a dual class structure. class a voting shares and national amusements hold 80% of that. they have the bulk of the control but only 10% of the outstanding shares. the rest of the shareholders don't have any voting control. someone has come out from matrix saying with a letter to the paramount board saying this deal is not fair. they went paramount and the board to consider other offers that are out there. apollo last week made an offer for all of paramount. it was a $26 billion cash offer. this came after paramount's debt was downgraded to junk and apollo's view is because of this downgrade they can leave paramount's capital structure in place, not have to raise any new financing and put up equity. paramount has said it believes

-- it doubts how much financing apollo has for this and apollo stance would be it does not need financing if it can roll over its stake. sonali: when you have the competing bid with the likes of apollo which still does have a massive tie to the capital markets, you have sherry redstone banking elephant. what comes next? michelle: at this point david ellison group and paramount have 30 days to negotiate. if they cannot reach an agreement, some of the other bidders can come back. apollo, warner bros. has been talked about as a potential suture. at this point it seems like it is up to the paramount special committee to make some sort of recommendation and to ellison and his group to continue their diligence and hammer out the terms of a deal. sonali: you had a great profile piece about david ellison. what does he bring to the table? michelle: he has sky dance which is a movie studio.

they partnered with paramount on a couple projects to one thing they have proposed is bringing over ai capabilities from david ellison's father's oracle to help propel paramount into the future. as jamie dimon said today, ai is going to cause ripples through everything. that is one thing paramount sees value in. he is an individual raised this industry and has a vision for how to take it forward in an age where traditional views -- traditional ways of doing tv are in decline. sonali: we like to keep it in the family. coming up next we are going to talk about blackstone continuing to buy up the real estate business. you're going to discuss the $10 billion investment into a luxury apartment. this is bloomberg. ♪

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>> commercial real estate which i'm sure we will talk about. the sentiments has gotten negative and the fundamentals feel like they are bottoming. as investors once -- sometimes, where the risks is you miss it by being overly cautious. now is a good time before rates come down to move. sonali: that was some of john gray's comments on bloomberg a few weeks ago which brings us to our wall street beach. blackstone struck a 10 billion-dollar deal for another apartment landor -- land load in the latest sign the right moment to pour money into the property market. patrick clark and abigail doolittle joined me to discuss what is going on to the world of blackstone and real estate. if you think about how the last year has gone, how do you put

this into context about what we have seen in the last year and are things changing? patrick: they are changing because blackstone is changing its behavior and when blackstone starts buying come of the market takes note. you heard john gray's say if you wait too long you might miss the buying opportunity and once interest rates start coming down everyone expects there will be a huge rush to deploy capital. prices are going to get lifted up by that and blackstone wants to be ahead of that. shelley: you've see the -- sonali: i'm interested in how this is lifting more boats. patrick: we have a lot of other -- abigail: we have a lot of other multifamily reits across the board. to your point, in terms of blackstone and john gray saying they are getting into real estate, this is well telegraphed.

kkr, a lot of the other big players in this space have been talking about the idea of raising money for the opportunity ahead. today up more than 2%. the question is is this space in play? the really big question is whether or not this deal will mark the bottom because it is such a big deal. and so very well telegraphed to a net is not so often we are talking about -- very well telegraphed. it is not so often we are talking about reits. sonali: curious because you talked about office and that getting a bid today. i'm curious about sectors and a rental properties. how do you describe what is going on with air and what it means in terms of the money blackstone is willing to put to work? patrick: of the things i thought was interesting in air is its focus on high rental markets

. average household income is 237 thousand dollars in this portfolio. it is miami, l.a., boston, philadelphia. it is not what you think of as the sunbelt bull markets. phoenix, dallas, atlanta, those things got a lot of new development over the last few years to it is leading to softer rents in those places. i'm not saying blackstone would shy away from those markets. abigail:abigail: that is interesting because there is so much supply in those areas. this company went public in december of 2020. it is a spin out of the sister company. it is still public. i think this is for the most part in terms of when we think about commercial real estate, a little bit mixed but this is giving signals some of these other markets -- they are also here in new york.

they have a lot of little buildings. i lived on a -- lived in building on 70 six st owned by these massive private equity companies. interesting this is in the news. sonali: air was down more than 37% in 2022. barely up 1% the year after. how much is blackstone putting a floor to the industry and being a saving grace? do you think more reits are going to get more love now people know buyers are willing to get in? patrick: blackstone is the takeoff for everyone at the end of the day. if you're going to aggregate assets, you're hoping someone like blackstone is going to buy them. sonali: abbey was just talking about other players. what else do we know about other players? abigail: i have heard reports about different companies raising money and it is interesting because you are speaking about a floor. we have been waiting for this crash in commercial real estate.

it has not come in part because there is so much money. if you did by air apartment or apartment income, the reits in 2020, you would be up about 23%. even though it was down last year, some life brought back into the space. heinz in texas have launched a private wealth vehicle in part because of this. they think the bottom is ahead in couple years and they want to be in now. sonali: we have to have you back. there is a lot going on in rent too driving the activity should patrick clark and abigail doolittle. we thank you for that analysis . we're looking at a tough tape in the market. the s&p 500 trying to break into the green up less of 1/10 of 1%. the nasdaq 100 trying to break into the green in the last half-hour. putting much even on the day. yields riding high.

478 on the two-year. incredible ahead of inflation print should a lot of economic data to come. some real moves in the bond market. that does it for bloomberg markets. keep an eye on us through the we have a market hitting on the edge. this is bloomberg. ♪

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>> from the world of politics to the world of business, this is balance of power. live from washington, d.c. joe: benjamin netanyahu says there is a date for the invasion