Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 1: top stories in the coming week from our Daybreak anchors
Speaker 1: all around the world. And straight ahead on the program
Speaker 1: is more Inflation Ahead. I'm Tom Busby in New York.
Speaker 1: I'm Stephen Carol in London, where we're looking ahead to
Speaker 1: the next set of inflation numbers from the Euro Area.
Speaker 1: I'm Joe Matthew in Washington. We'll look ahead of the
Speaker 1: first hearings into the SVB and Signature Bank collapses. I'm
Speaker 1: Bryan Curtis in Hong Kong. We look at the restructuring
Speaker 1: plan finally delivered by China Evergrand Group in the court
Speaker 1: and what it means for China's property recovery. That's all
Speaker 1: straight ahead on Bloomberg Daybreak Weekend on Bloomberg ELEVEM FREEO,
Speaker 1: New York, Bloomberg ninety nine one, Washington, DC, Bloomberg one
Speaker 1: oh six one, Boston, Bloomberg nine sixty, San Francisco, DAB
Speaker 1: Digital Radio London, Sirius XM one nineteen and around the
Speaker 1: world on Bloomberg Radio dot Com and via the Bloomberg
Speaker 1: Business App. Good day to you. I'm Tom Busby. We
Speaker 1: begin today's program with inflation the driving force behind the
Speaker 1: Fed's decision to raise its benchmark lending rate again last
Speaker 1: week despite the banking crisis. And this coming week more
Speaker 1: headlines on inflation, with a key reading on consumer prices,
Speaker 1: also on economic growth in the final quarter of last year.
Speaker 1: And joining me now to talk about all this and more,
Speaker 1: Bloomberg's Global Economics and Policy Editor, Michael McKee. Michael, welcome,
Speaker 1: h nice to be here. Well, Michael will be getting
Speaker 1: and this is a mouthful. The US Personal consumption Expenditures
Speaker 1: price index from February this week. What is it? What
Speaker 1: is it? Measure? It is the Fed's favorite measure of inflation.
Speaker 1: It's constructed a little bit differently from the consumer price index.
Speaker 1: It has different weights on the kinds of things that
Speaker 1: people buy. But the FED looks at it as a
Speaker 1: much better indicator of where underlying inflation actually is. So
Speaker 1: they're expecting a three tenths increase for the month over
Speaker 1: month index, which would be down from six tents and
Speaker 1: that would be in theory good news. It would take
Speaker 1: the year over year level down to five point one
Speaker 1: from five point four. They're really watching core, which came
Speaker 1: in at six tenths in January, they think it economist
Speaker 1: survey by bloomberg'll go down to four tenths, and so
Speaker 1: that would show progress against inflation. The feed is also
Speaker 1: looking at these PC numbers to see what's happening with
Speaker 1: the services side, but that part is not forecast. Now
Speaker 1: we got a surprise increase in January, you know, also
Speaker 1: along with consumer spending, was that they think just an
Speaker 1: anomaly in January. Not an anomaly. What basically they think
Speaker 1: is happening is the low hanging fruit for inflation has
Speaker 1: been picked and now it gets harder to root out
Speaker 1: the inflation in various categories, and so we're going to
Speaker 1: see some lumpy inflation reports. Some months it'll go up
Speaker 1: a little bit in surprise people, and some months at
Speaker 1: the fall faster than anticipated. But we had their annual
Speaker 1: not annual, but quarterly new economic projections out this week,
Speaker 1: and they think that inflation is gonna fall the PC.
Speaker 1: Inflation is gonna fall to about three point four percent
Speaker 1: by the end of the year. So at five point one,
Speaker 1: if that's what it comes in at in February, that
Speaker 1: would still be a significant decline by the end of
Speaker 1: the year. And is that why this is often called
Speaker 1: the PC price deflator. Well, it's called the deflator because
Speaker 1: here's what they do. It's part of the collection of
Speaker 1: data for the GDP report, which we also get coming
Speaker 1: out for the fourth quarter, although they do the PC
Speaker 1: price collection monthly, but they take the GDP numbers and
Speaker 1: they subtract inflation. They deflate inflation, and so the data
Speaker 1: that they use is called the deflator. Okay, Now, more
Speaker 1: on inflation stubbornly high even after nine straight increases in
Speaker 1: the federal funds rate. So what are some of the
Speaker 1: main drivers of inflation that the FED is still concerned
Speaker 1: about right now? Well, we're still concerned mostly about housing.
Speaker 1: That's been the biggest problem for the FED all along.
Speaker 1: It has a smaller weight in the PC, which maybe
Speaker 1: one reason they think it's going to come down some.
Speaker 1: It is only about maybe twenty five percent or so
Speaker 1: of the PC, where it's about forty percent in the CPI,
Speaker 1: So that's an issue. They're also looking at some unusual
Speaker 1: things like used cars. People went out and bought a
Speaker 1: lot of used cars when they came back on the market,
Speaker 1: and now there's a bit of a shortage again. So
Speaker 1: on the wholesale level, we've seen used car prices going up.
Speaker 1: The question is does that translate over and then people
Speaker 1: keep an eye on things like medical care areas where
Speaker 1: we have seen inflation and they're trying to see if
Speaker 1: it if it continues. Now, let's dive a little more
Speaker 1: into housing. In February, we did see the first year
Speaker 1: over year price decline in in prices and over a decade,
Speaker 1: so prices are starting to soften. Bidding wars pretty much evaporated,
Speaker 1: Mortgage rates fluctuated right now, they've been down two weeks
Speaker 1: in a row. So is all this looking good for
Speaker 1: the PC? Yes and no good, but not for this PC.
Speaker 1: The problem is it takes a long time for the
Speaker 1: housing costs numbers to get into the indicators. They don't
Speaker 1: look at the actual cost of housing. They look essentially
Speaker 1: at what it would cost you to rent your house today.
Speaker 1: And what they find is it takes a while because
Speaker 1: you don't sign a lease every day, you know, by
Speaker 1: a house every day either. So even if prices were falling,
Speaker 1: and even if they were doing direct house prices into
Speaker 1: the index, this something that went down this month wouldn't
Speaker 1: make it into the data for six or eight months
Speaker 1: in general, because it takes that long to get enough
Speaker 1: housing activity to make a change visible to the Fed.
Speaker 1: They've been expecting because rents have been going down for
Speaker 1: about a year, they've been expecting it to start to
Speaker 1: show up anytime. And a lot of analysts think that
Speaker 1: maybe by April May will start to see housing decline
Speaker 1: and that will be one of the factors that would
Speaker 1: bring down the overall inflation rate as the FED anticipates
Speaker 1: towards the end of the year. Well, and that, let's
Speaker 1: talk about jobs and how that factors. And now we've
Speaker 1: seen a lot of headlines, a lot of tech sector layoffs,
Speaker 1: some other sectors tens of thousands, but the labor market
Speaker 1: still remains pretty strong. We won't get you the job's
Speaker 1: report for March for another week more. But what are
Speaker 1: some of the signs you're seeing in the labor market
Speaker 1: and is wage inflation still a factor? Wage inflation is
Speaker 1: a factor in certain categories. One of the things that
Speaker 1: happened was we did not refill all the jobs in
Speaker 1: a lot of service industries that went away during the pandemic,
Speaker 1: and so companies, restaurants, bars, people like that are struggling
Speaker 1: to find workers to fill the jobs, and so they
Speaker 1: have had to raise wages, and we've seen those categories
Speaker 1: of wages continue to rise. The question is do they
Speaker 1: start to flatten out. There are some tentative signs that's
Speaker 1: the case, even though hiring has been fairly strong. So
Speaker 1: we're really watching wages in the service sector and as
Speaker 1: far as prices, the FETE has been watching the service
Speaker 1: sector because of those wages. Since in services much of
Speaker 1: your cost is labor. When they have to raise wages
Speaker 1: to attract employees, then that's going to have an impact
Speaker 1: on what they charge you for the service that you get. Gotcha, Okay? Now,
Speaker 1: Also this week we talked about it, just for a moment,
Speaker 1: the latest read economic growth for the end of last year,
Speaker 1: fourth quarter GDP. This one looking backward a bit, but
Speaker 1: for all the hemming and hawing about economic weakness, it
Speaker 1: looks like it's going to be pretty good. Well, this
Speaker 1: is the second reverse to the number, and so it
Speaker 1: doesn't carry as much weight. The Commerce Department looks at
Speaker 1: a Census Bureau looks at all the sales of products
Speaker 1: in the United States, but it takes a while to
Speaker 1: get all the data in, so they will put out
Speaker 1: a first first indication and then they start putting out
Speaker 1: revisions to it, and this is the sort of the
Speaker 1: final revision of this series. It'll be revised again next
Speaker 1: year when they get benchmark numbers. But for right now
Speaker 1: they're looking at two point seven percent, which would be
Speaker 1: unchanged from the first revision and would be still much
Speaker 1: faster than the sustainable rate without inflation that the FED
Speaker 1: needs to see. And the Atlanta Fed GDP now number,
Speaker 1: which is sort of a NowCast of what they think
Speaker 1: the data are telling us about the current quarter, is
Speaker 1: showing three point two percent growth, so that really suggests
Speaker 1: that the economy has not slowed down. Now, we're only
Speaker 1: going to just start getting March data in the next
Speaker 1: few weeks, so that could change things. But right now
Speaker 1: between the fourth quarter and the first quarter still looks
Speaker 1: pretty strong. But that March data is certainly going to
Speaker 1: reflect the crisis in banking and what it means to
Speaker 1: lending and on economic growth. And you know, we don't
Speaker 1: know when this is going to end, if it's going
Speaker 1: to end, how bad it's going to get, but it's
Speaker 1: certainly going to weigh on things. Well, there's an old
Speaker 1: law in economics, if something can't continue, it will stop,
Speaker 1: and so at some point this will stop. We just
Speaker 1: don't know when. The data for March may not reflect
Speaker 1: a lot of this, because the way the crisis would
Speaker 1: hit the economy is if banks stop lending, if they
Speaker 1: raise their lending standards so high to keep from having problems,
Speaker 1: then we would see a restriction of the flow of
Speaker 1: credit into the economy. And that'll take a while to
Speaker 1: show up because the same sort of manner. You don't
Speaker 1: buy a house every day, you don't go to the
Speaker 1: bank for a loan every day, and businesses have to
Speaker 1: make decisions about whether they're going to still want to
Speaker 1: get loans. The FED does a couple surveys, won the
Speaker 1: Senior Loan Officers Survey, which will be out in April,
Speaker 1: and it will tell us whether banks have tightened credit standards.
Speaker 1: But they also have a survey of credit officers that
Speaker 1: the most recent one out a couple of weeks ago,
Speaker 1: showed that demand for loans was off significantly, and that
Speaker 1: was before the banking crisis. That was just saying that
Speaker 1: loans have gotten expensive, and companies at this point are saying,
Speaker 1: maybe we don't want to pay that. Oh boy, well,
Speaker 1: we live in interesting times. Michael, Thank you so much.
Speaker 1: Always a pleasure. That was our Global Economics and Policy
Speaker 1: editor Michael mckeeon coming up on Bloomberg Daybreak weekend. Inflation
Speaker 1: back in focus in Europe this week. I'm Tom Busby.
Speaker 1: This is Bloomberg. This is Bloomberg Daybreak weekend, our global
Speaker 1: look ahead at the top stories for investors in the
Speaker 1: coming week. I'm Tom Busby in New York and up
Speaker 1: later on our program What's Ahead in our Nation's capital.
Speaker 1: But first, after last week central bank meetings, inflation will
Speaker 1: be back in focus in Europe this week with the
Speaker 1: first March readings for the euro Area and some of
Speaker 1: its major economies. This after European Central Bank President Christine
Speaker 1: Lagarde said that underlying inflation wasn't trending down for more.
Speaker 1: Let's ad to London and bring in London Daybreak Europe
Speaker 1: Banker Stephen Carroll, Stephen Tom. February was a month of
Speaker 1: inflation surprises in Europe. The German and French numbers came
Speaker 1: in higher than expected, just like they did here in
Speaker 1: the UK. So will the March data bring good or
Speaker 1: bad news for officials at the European Central Buying quot
Speaker 1: To discuss. I'm joined by Bloomberg's chief Europe economists Jamie Rush. Jamie, So,
Speaker 1: we had a few surprises in February. The wider Eurozone
Speaker 1: reading was eight and a half percent, still en Rogy
Speaker 1: dictory from the peak that we had in October. What's
Speaker 1: the general expectation from March. Well, we're expecting headline inflation
Speaker 1: to drop from eight and a half to seven percent,
Speaker 1: so big drop, largely caused by energy prices, and you know,
Speaker 1: there's there's an element of inflation which is going to
Speaker 1: fall and that's just baked in because of the energy
Speaker 1: cost stuff. So that's what we expecting. Headline core though
Speaker 1: probably very similar to where it was in the last month,
Speaker 1: so around about five point seven percent, and we think
Speaker 1: it probably be around that number for the next few months,
Speaker 1: and that's something that's very important for the ECB. Will
Speaker 1: get to that in a moment, but I want to
Speaker 1: reflect a little bit on what happened in February, because
Speaker 1: first of all, we had the Spanish reading coming in,
Speaker 1: then France and Germany came in harder. You know, where
Speaker 1: did those surprises come from the last time around her?
Speaker 1: And it does it give us any clues as to
Speaker 1: where we could be looking for surprises this time. Well,
Speaker 1: I think that the troubling thing when you looked at
Speaker 1: all the numbers from the Eurozone is that services price
Speaker 1: inflation picked up, and so this is the thing that
Speaker 1: we need to probably pay most attention to. It's not
Speaker 1: always like the most clear read on inflation because it
Speaker 1: bounces around up and down because of like package holidays
Speaker 1: in Germany, for example, airfares. There's lots of stuff that
Speaker 1: moves things around. But I think that's that's where these
Speaker 1: people were focused. That's certainly where we're focused. In terms
Speaker 1: of energy prices, of course, the energy price shock was
Speaker 1: what drove so much of this inflation over the past year.
Speaker 1: Has that effect largely petered out now? Not yet, not
Speaker 1: in the annual rate. I mean, it's still got quite
Speaker 1: quite a bit further to run, but by the end
Speaker 1: of the year we should be heading back towards sort
Speaker 1: of like three percent headline inflation rates, and the energy
Speaker 1: cost could even start to push down on the headline
Speaker 1: rate a bit further out, how much of the differential
Speaker 1: and rates that we see across the Euro Area, because
Speaker 1: I mean, look, if you look at the numbers across
Speaker 1: the twenty countries, hungry. CPI was nearly twenty six percent
Speaker 1: in February. The lowest reading was in Luxembourg at four
Speaker 1: point eight percent. How much of this is down to
Speaker 1: national factor and national responses to inflation. I'm thinking about
Speaker 1: things like the energy price cap in France. Does that
Speaker 1: does those sort of differentials still holds when we think
Speaker 1: about the numbers to come. Yeah, it's made a massive difference.
Speaker 1: I mean, you're broadly speaking has faced the same sort
Speaker 1: of shock. There's a bit of a difference in the
Speaker 1: mix which countries consume, what proportion of gas, electricity, this
Speaker 1: sort of thing. But generally speaking, it comes down to
Speaker 1: how governments have responded and how it's been priced and
Speaker 1: hedging against against changing energy prices. So there's a massive
Speaker 1: difference on the way up. There's going to be a
Speaker 1: big difference on the way down. Now, obviously this is
Speaker 1: going to be very important to work. The European Central
Speaker 1: Bank doesn't its next rate decision, although that's not until
Speaker 1: early May. Now, Christine Legard has been speaking about the
Speaker 1: inflation picture in recent days. Let's listen to some of
Speaker 1: her speech at the ECB and it's Watchers conference, which
Speaker 1: we brought to you live on Bloomberg Radio. The Urrea
Speaker 1: has been hit by an inflation shock which is now
Speaker 1: working its way through the economy. While headline inflation is
Speaker 1: likely to decline steeply this year, driven by falling energy
Speaker 1: prices and easing supply bottlenecks, underlying inflation dynamics remain strong
Speaker 1: and in such an environment, our ultimate goal is clear.
Speaker 1: We must and we will bring down inflation to our
Speaker 1: medium term target in a timely manner. So that was
Speaker 1: Christine the Guard speaking at the ECB and its Watchers
Speaker 1: conference in Frankfurt. Jamie the last ECB decision, which really
Speaker 1: isn't very long ago in the grand scheme of things,
Speaker 1: they got in a fifty basis point hike. There's been
Speaker 1: lots of speculation they're up to it, that perhaps the
Speaker 1: instability in the banking sector might affect that. How should
Speaker 1: we be thinking about the ECB's trajectory from here, given
Speaker 1: that they did manage to get through a fifty basis
Speaker 1: point hike last time around. So I think on the
Speaker 1: last meeting there's important thing to understand it, which is
Speaker 1: that you can be hawkish in two ways. Now. You
Speaker 1: can be hawkish because you're worried about underlying inflation being
Speaker 1: too high. But you can also be hawkish about the
Speaker 1: division of monetary policy and financial policy, and that's what
Speaker 1: we saw. You can be a dave about inflation but
Speaker 1: not want to muddy the water between muniture policy and
Speaker 1: financial stability. And so I think that's probably why they
Speaker 1: have much more support for the big fifty basis point
Speaker 1: hike than markets are expecting even up to the day,
Speaker 1: and that carries forward to the subsequent meetings. They're still
Speaker 1: going to be focusing on this division between monetary and
Speaker 1: financial stability, and we've heard from Lagarde they're going to
Speaker 1: be thinking about three things as they set policy. They're
Speaker 1: going to be thinking about inflation forecasts. They're going to
Speaker 1: be thinking about underlying inflation as measured now, and they're
Speaker 1: going to be thinking about how much policy is transmitting
Speaker 1: to the economy. So they're monitoring those three things. Our
Speaker 1: view is that the banking crisis isn't yet severe enough
Speaker 1: to take great hikes off the table, and we think
Speaker 1: they're going to keep hiking tony five basis points of
Speaker 1: meeting through the summer. What does that mean then, in
Speaker 1: terms of the sort of terminal rate, where do you
Speaker 1: see that now I think we're probably getting somewhere between
Speaker 1: three and a half and three point seven five. There
Speaker 1: has been a tightening of financial conditions in terms of
Speaker 1: the cost of credit for banks relative to risk free rates.
Speaker 1: That is going to be that is going to weigh
Speaker 1: on the economy a bit in future years. But it
Speaker 1: takes like it takes one hike out the cycle. It
Speaker 1: doesn't take it doesn't take three out. So I think,
Speaker 1: whereas markets for previously expecting a terminal rate of four percent,
Speaker 1: somewhere three and a half three point seventy five. Now,
Speaker 1: now that's reasonable to us. Christie and regard did mention
Speaker 1: wage pressures in that speech in Frank First, what is
Speaker 1: the situation as regards wage inflation in Europe and how
Speaker 1: does that feed into the broader inflationary picture. Well, so
Speaker 1: we've had this energy shock and we're going to decide
Speaker 1: who's going to pay for it, and it's a negotiation
Speaker 1: between employees and between is, and so far businesses have
Speaker 1: basically one like, they've expanded their profit margins quite a lot,
Speaker 1: and they haven't made made good on on wage gains
Speaker 1: all that much. So the question is our household, our
Speaker 1: employees gonna achieve these some compensation over the coming year,
Speaker 1: and the more they push for it and the higher
Speaker 1: their wage costs go up, the longer inflation is going
Speaker 1: to be is going to stay high. So I think
Speaker 1: that's that the it's a negotiation the moment, the balance
Speaker 1: is probably already song too far in favor of businesses,
Speaker 1: but there are upside risks the inflation outlook from that.
Speaker 1: From that negotiation, we of course are sitting here in
Speaker 1: London looking at the picture as well. How different is
Speaker 1: the picture for Eurozone inflation versus inflation in the UK. Well,
Speaker 1: here in the UK and in the US, we do
Speaker 1: have really strong wage growth which is pushing up costs
Speaker 1: for businesses and extending the overshoot of inflation, and as
Speaker 1: the target and the Zone, it's not quite there yet.
Speaker 1: So I think that's the main difference. We have a
Speaker 1: difference in the amount of underlying pressure in the economy,
Speaker 1: and you could definitely say I think that the UK
Speaker 1: and the US were overheating by more. We have a
Speaker 1: couple more data points to come before the next ECB meeting,
Speaker 1: but I am conscious that we're looking ahead to the
Speaker 1: March figures. I suppose how important will it be in
Speaker 1: that scheme of policymaking when you come towards the next decision. Well,
Speaker 1: I think they're going to want to see underlying inflation
Speaker 1: come down. I mean they've said as much, and they're
Speaker 1: not going to see that probably until maybe even as
Speaker 1: late as September. So I think there's nothing There's not
Speaker 1: going to be a major change in core inflation or
Speaker 1: the underlying cost pressure until you get to the end
Speaker 1: of the summer, so that that keeps them hiking. And
Speaker 1: the main risk to that is just that something else
Speaker 1: blows up in the banking sector or that the tensions
Speaker 1: we've seen so far turned out it's been more painful
Speaker 1: than people in visage, in which case you know that
Speaker 1: all bets are off okay. Bloomberg's chief europe economist, Jamie Rush,
Speaker 1: thank you very much for joining us with those insights.
Speaker 1: I'm Stephen Carroll in London. You can catch us every
Speaker 1: weekday morning here for Bloomberg Daybreak. You're at beginning at
Speaker 1: six am in London and one am on Wall Streets. Tom,
Speaker 1: thank you, Stephen, and coming up on Bloomberg Daybreak weekend,
Speaker 1: the latest out of our nation's capital. I'm Tom Buzzbee
Speaker 1: This is Bloomberg broadcasting live from the Bloomberg Interactive Broker
Speaker 1: Studio in New York. Bloomberg elvon Freo to Washington, d C,
Speaker 1: Bloomberg ninety nine one to Boston, Bloomberg one oh six
Speaker 1: one to San Francisco, Bloomberg nine sixty to the country,
Speaker 1: Sirius XM Channel one nineteen to London DAB Digital Radio,
Speaker 1: and around the globe the Bloomberg Business app in Bloomberg
Speaker 1: Radio dot com. This is Bloomberg Daybreak Weekend, Tom Posty
Speaker 1: in New York, where your global look ahead at the
Speaker 1: top stories for investors in the coming week. On Tuesday,
Speaker 1: the Senate Banking Committee will hold the first of several
Speaker 1: hearings on the collapse of Silicon Valley Bank and Signature Bank.
Speaker 1: For what we can expect, led ted to our Bloomberg
Speaker 1: ninety nine one newsroom in Washington and sound On host
Speaker 1: Joe Matthew. Thanks Tom. I'm joined by Kaylee Lines here
Speaker 1: in Washington as we look ahead now to the week
Speaker 1: on Capitol Hill. You thought this past week was fun.
Speaker 1: We may not have TikTok influencers crowding the halls of
Speaker 1: Congress next week, but we do have a lot of
Speaker 1: heavy duty stuff on the calendar here, Kayley. It begins
Speaker 1: with the first banking hearings, the first hearings into the
Speaker 1: collapse of SVB and Silicon Bank. We've been waiting for these,
Speaker 1: and as Emily Wilkins at Bloomberg Government will help us
Speaker 1: look ahead to as well, some important energy legislation will
Speaker 1: dominate the House next week. So you know, rest up
Speaker 1: this weekend, right, Yeah, definitely, because it's going to be
Speaker 1: two days of probably what is going to be pretty
Speaker 1: intense questions of regulators on Capitol Hill. We thought the
Speaker 1: first hearing in inquiring as to what happened at Silicon
Speaker 1: Valley Bank and Signature Bank was going to be in
Speaker 1: the House. They announced it first Chairman Patrick McHenry and
Speaker 1: ranking Member Maxine Waters that they're going to have the
Speaker 1: hearing on Wednesday. Then the Senate Banking Committee came out
Speaker 1: and said they are actually going to have their hearing Tuesday,
Speaker 1: so that will be the one that we get first.
Speaker 1: But same witnesses will have Marty Grunberg from the FDIC,
Speaker 1: Michael Barr, the Vice chaff Supervision at the FED, and
Speaker 1: Nellie Lang, the Under Secretary for Domestic Finance. At the
Speaker 1: Treasury Department, so they will all three be testifying both days,
Speaker 1: and in the statements that the committee's put out, the
Speaker 1: language is the same. We want to get to the
Speaker 1: bottom of how Silicon Valley Bank and Signature Bank collapsed,
Speaker 1: and they say that's to maintain a strong banking system
Speaker 1: going forward. My question, Joe, is how much of it
Speaker 1: is going to be backward looking at what happened versus
Speaker 1: forward looking? What should we do now so it doesn't
Speaker 1: happen again. Well, that's what we've heard. Let's add Emily
Speaker 1: Wilkins voice to this. Emily, there's been a lot of
Speaker 1: talk about an autopsy, write a post mortem, and lawmakers
Speaker 1: don't want to sug just a solution in many cases
Speaker 1: until they figure out what happened to bring us to
Speaker 1: this point. But are we ever going to do anything
Speaker 1: beyond hearings? That is a really good question, because I
Speaker 1: think the question is what could actually be done. Republicans
Speaker 1: in the House have been pretty firmed that they do
Speaker 1: not want more regulation, that they are not very interested
Speaker 1: in a long term increase of these FDIC deposit insurance caps.
Speaker 1: And you do see, you know some Democrats who are
Speaker 1: interested in it, but we have split government and you
Speaker 1: really need that bipartisan support. And what you've seen from
Speaker 1: Patrick McHenry is a lot of that level headed cautiousness
Speaker 1: that let's look into this, let's actually find the causes.
Speaker 1: You know, some of his colleagues have veered into some
Speaker 1: more partisan talking points when it comes to the banking
Speaker 1: crisis that he has not. He has kind of kept
Speaker 1: things very, very level. At the same point though, for
Speaker 1: a lot of these lawmakers, you know, at this point,
Speaker 1: we haven't heard of any more banks closing. It seems
Speaker 1: like for now the bleeding has been stopped. At least
Speaker 1: that is the sun Song Capitol Hill. And if that's
Speaker 1: the case, then the momentum for actually having more legislation
Speaker 1: is going to lessen the more that lawmakers see this
Speaker 1: as a crisis that has already been addressed. Kaylee, I'm
Speaker 1: stuck on this. Moody's warning that we got risk that
Speaker 1: banking system stress will spill over into other sectors, unleashing
Speaker 1: greater financial and economic damage than anticipated, and we're still
Speaker 1: trying to figure out what happened a month ago. Yeah. No,
Speaker 1: it's an excellent point because obviously, as we're trying to
Speaker 1: dissect the failures that have already happened. You risk if
Speaker 1: you overanalyze too much or spend too much time doing so,
Speaker 1: that you don't prevent the failures that could be to come.
Speaker 1: Perhaps because we're all still watching First Republic, which has
Speaker 1: been in our focus for several weeks, they had the
Speaker 1: thirty billion dollars in deposits put in by eleven larger banks.
Speaker 1: We know that the Treasury or Secretary Janet Yellen had
Speaker 1: a hand in navigating that, and then there was the
Speaker 1: talk of potentially converting that into a capital infusion that
Speaker 1: doesn't really seem to be going anywhere. We really haven't
Speaker 1: in any real news, and I keep asking people, is
Speaker 1: no news good news or is no news bad news
Speaker 1: in this case? And we really we really don't know.
Speaker 1: So I think there are still things we're on high
Speaker 1: alert for. And it raises the question emily, especially when
Speaker 1: we have had a week in which Jane Ellen has
Speaker 1: had to clarify some of her remarks, try to make
Speaker 1: tweaks to her language to convey to the markets, perhaps
Speaker 1: what she really is trying to say about ensuring deposits,
Speaker 1: if there is some kind of systemic risk, just kind
Speaker 1: of if that is let the market seem to be
Speaker 1: latching onto each and every word, and yet it's not
Speaker 1: really anything that the Treasury can do except for in emergencies, right,
Speaker 1: And Congress isn't likely to give her much room otherwise. Yeah,
Speaker 1: I mean Congress. Congress tends to act two different times. Ay,
Speaker 1: if there is a giant emergency and Congress is the
Speaker 1: only one who can do anything to fix it, or
Speaker 1: be if there is some absolute hard deadline coming up
Speaker 1: that you can't pass, see the debt limit later this
Speaker 1: summer into this fall. And at this point, I mean
Speaker 1: there is that sense that, Look, I don't think lawmakers
Speaker 1: are thinking that they're out of the woods. When I
Speaker 1: say that the bleeding is stemmed. I'm not suggesting that
Speaker 1: Capitol Hill is now ignoring banks were no longer paying
Speaker 1: attention to this issue or no longer feels that this
Speaker 1: issue is important. But I do feel like there is
Speaker 1: a lack of a crisis mode and just a cooling
Speaker 1: of some of the urgency then that you saw previously. Now,
Speaker 1: certainly if that reverses, if we do see more banks
Speaker 1: get in danger, if we do see you know, the
Speaker 1: Treasury and that day I see having to step in more,
Speaker 1: you might see that urgency increased on Capitol Hill and
Speaker 1: you might start seeing folks talking about some sort of
Speaker 1: increase in caps But I think at this point Congress
Speaker 1: is kind of watching to see what happens next, and
Speaker 1: some of the urgency that was really there in the
Speaker 1: early days of Signature Valley Bank and Signature Bank, it's
Speaker 1: just it's it's not as palatable on the hill right now.
Speaker 1: Kill did you hear what Larry Summers said about the
Speaker 1: deposit insurance. You can talk to David Weston about it
Speaker 1: and actually made a little bit of news. Yeah, well
Speaker 1: wants to have a much more full throated amen. Ye're
Speaker 1: coming out of the Treasury Department. Yeah, basically make it
Speaker 1: clear and he thinks they should pledge that they will
Speaker 1: back uninsured deposits in any banks that fail in the
Speaker 1: next year. How palatable is that though? Really politically exactly
Speaker 1: here's what he said. There needs to be clarity on
Speaker 1: the situation regarding deposits. Authorities do not have the authority
Speaker 1: to say that there's going to be some kind of
Speaker 1: universal guarantee on deposits, But what they do have is
Speaker 1: the essentially equivalent power to declare that in the event
Speaker 1: of a bank's failure, they will use the systematic risk
Speaker 1: exemption in order to assure that depositors are paid off
Speaker 1: in full. Okay, so as long as the Treasury if
Speaker 1: they did that, If Janet Yellen came out today and
Speaker 1: said that, what motivation to lawmakers have to stick their
Speaker 1: neck out and act as a really good question. And
Speaker 1: I wonder what we're going to hear about this next week.
Speaker 1: I wonder how much we'll be questioning to the regulators. Hey,
Speaker 1: what is your preferred policy initiative going from here? Should
Speaker 1: we just leave it up? Leave it up to you guys,
Speaker 1: leave it up to the Treasury Department. Hey, Emily, we
Speaker 1: got to talk about energy legislation as well, not just
Speaker 1: any legislation, but HR one. This is the one they
Speaker 1: put HR one on, which typically means an important bit
Speaker 1: of messaging from the majority, in this case the Republican
Speaker 1: party in the House. I'm assuming this is going nowhere
Speaker 1: where the Democratic led Congress, Emily leave it? How does
Speaker 1: it work? Well? HR one is I would not expect
Speaker 1: to see this go to the Senate and to the President,
Speaker 1: but Republicans are hoping that maybe some smaller parts of
Speaker 1: this bill could actually advance. I'll get to that in
Speaker 1: a minute, but basically HR one is Republicans big energy package.
Speaker 1: It is about producing energy in America. It is about
Speaker 1: making it easier for companies that do produce. And we're
Speaker 1: not just talking you know, oil and gas here, but
Speaker 1: we are actually talking nuclear, we're talking solar, we're talking
Speaker 1: with Republicans have really kind of adopted in an era
Speaker 1: where more and more people are being to care about
Speaker 1: climate change, including in the Republican Party. You see Republicans
Speaker 1: kind of changing their message to really start to include
Speaker 1: this all of the above energy approach where they aren't
Speaker 1: actually talking about renewable energy sources while continuing to talk
Speaker 1: about you know, oil, gas, coal, other different types of minerals.
Speaker 1: And so this is kind of their big package, their
Speaker 1: big proposal on what they're going to do. It is
Speaker 1: a messaging bill. It's something that Republicans can take back
Speaker 1: and see, see this is what we did to lower
Speaker 1: your gas prices. Thanks to Bloomberg Government's Emily Wilkins with
Speaker 1: Kaylee Lines, I'm Joe Matthew in Washington. Back to you
Speaker 1: in New York time. Joe Matthew reporting from our Bloomberg
Speaker 1: ninety nine one Newsroom in Washington. Thank you Joe, and
Speaker 1: you can hear Joe on sound On's new Time weekdays
Speaker 1: one to three pm Wall Street Time. Right here on
Speaker 1: Bloomberg Radio. Coming up on Bloomberg Daybreak Weekend, a close
Speaker 1: up look at what's happening with one of the u
Speaker 1: huge players in the Chinese real estate market. I'm Tom Busby,
Speaker 1: and this is Bloomberg. This is Bloomberg Daybreak Weekend, our
Speaker 1: global look ahead at the top stories for investors in
Speaker 1: the coming week. I'm Tom Busby in New York. New
Speaker 1: details coming in on what's happening at one of the
Speaker 1: best known names globally in the Chinese property market. For more,
Speaker 1: Let's go to Hong Kong and Bloomberg Daybreak host Brian
Speaker 1: Curtis and his colleague Doug Krisner. To Doug, and I
Speaker 1: thought we'd take a closer look at the China Everground
Speaker 1: restructuring and what it means for the overall state of
Speaker 1: play in China's property sector. The plan calls for offshore
Speaker 1: creditors to swap their debt form new securities, but Everground
Speaker 1: needs an additional thirty six to forty four billion dollars
Speaker 1: worth of financing to ensure that it can deliver all
Speaker 1: of its properties, and as a result, it could mean
Speaker 1: a delay for some of it's more than thirteen hundred developments,
Speaker 1: and it could be a new blow to buyer confidence
Speaker 1: in projects brought forward by a number of property developers.
Speaker 1: China's housing sector, as we know, is beginning to recover.
Speaker 1: Even so, there remain many uncertainties. No matter what, Everground
Speaker 1: will remain the world's most indented developer. But this overhaul
Speaker 1: could provide a guidepost for other builders restructurings, and that
Speaker 1: might be the key to unlocking the property sector for
Speaker 1: China's broader recovery. Joining us here in our studios in
Speaker 1: Hong Kong is Alice Wong, a Bloomberg China Credit reporter. So, Alice,
Speaker 1: what's the general reaction to this much awaited overhaul? Yeah,
Speaker 1: I think you know. Markie is still trying to digest
Speaker 1: this news. To be honest, it has been a sudden
Speaker 1: quick turnaround after fifteen months of waiting following Everground's first
Speaker 1: public dollar bond default. So what we're seeing now actually
Speaker 1: Everground's dollar bonds this morning has jumped lightly, but it
Speaker 1: is still trading around license on the dollar. Now, that's
Speaker 1: much much lower than some of his peers that have
Speaker 1: shown US plans so far. For example, Sunac, which used
Speaker 1: to be China's fourth largest developer, is bonds have been
Speaker 1: trading above twenty cents on the dollar. So that's that's
Speaker 1: double what what Evergrands dollar bonds are doing now? Um?
Speaker 1: But you know, arguably Evergrands debtload is a lot a
Speaker 1: lot more huge than all the other ones that we're seeing.
Speaker 1: It is China's largest dollar debt borrower among his peers.
Speaker 1: So yeah, that really um shows that it will have
Speaker 1: a lot more work to do before people can start
Speaker 1: to see his money see their money back. So I
Speaker 1: would imagine this is a positive development not only for
Speaker 1: property developers, but for the overall dollar bond market as well.
Speaker 1: I know shares in China Evergrand have been halted since
Speaker 1: March of last year. Does this necessarily mean these developments,
Speaker 1: this restructuring. Does it mean that we've or will avoid
Speaker 1: a delisting of Evergrand in Hong Kong. Not really, that's
Speaker 1: a very good point. Actually, Evergrand has a few things
Speaker 1: it needs to work through before it can avoid being
Speaker 1: delisted in September. Since its shares have been halted since
Speaker 1: March twenty twenty two. So number one, it actually needs
Speaker 1: to get the winding up petition. It's a hearing a
Speaker 1: lawsuit that's facing in Hong Kong to be either dismissed
Speaker 1: or withdrawn. And the proposal that we're seeing so far
Speaker 1: is an important step because this shows the Core that
Speaker 1: the company is doing something. It will convince the Core
Speaker 1: that it's working toward a debt resolution. So perhaps at
Speaker 1: the next hearing the judge will actually be able to
Speaker 1: dismiss the case. But just seeing the plan is not enough.
Speaker 1: Evergrand needs to get a bondholders support. Now we have
Speaker 1: reported that it got a major group of dollar bondholders support,
Speaker 1: but they only represent about twenty five percent of outstanding
Speaker 1: dollar bonds, while because every gonna want to go through
Speaker 1: what's called a scheme of arrangement, it typically would require
Speaker 1: seventy five percent of bondholder agreement. So you can see
Speaker 1: there's a lot to be done. Alice, thanks so much
Speaker 1: for joining us here in our studios in Hong Kong.
Speaker 1: Alice Huang Bloomberg, China Credit reporter. I'm Brian Curtis along
Speaker 1: with Doug Christener. You can catch us every Weekday. Here
Speaker 1: for Bloomberg Daybreak Asia, beginning at six am in Hong
Speaker 1: Kong and six pm on Wall Street. Tom, thank you,
Speaker 1: Brian and Doug. That does it for this edition of
Speaker 1: Bloomberg Daybreak Weekend. Join us again Monday morning at five
Speaker 1: am Wall Street time for the latest on markets overseas
Speaker 1: and the news you need to start your day. I'm
Speaker 1: Tom Busby. Stay with us. Top stories and global business
Speaker 1: headlines are coming up right now.