Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business app. We begin with our
Speaker 2: top story, hot US data pushing out rate cuts the
Speaker 2: Fed's preferred inflation gauge due on Friday, Michael O'Rourke of
Speaker 2: Jones Trading saying this, financial markets are at an inflection point.
Speaker 2: The Fed's overestimation and overconfidence as to how restrictive policy
Speaker 2: is has fueled easy financial conditions and excessive risk taking
Speaker 2: while fostering easing expectations. Michael joins us now for more
Speaker 2: So Michael bears FETA site by still on that.
Speaker 3: Yes, yes, definitely fair to say. I mean I think
Speaker 3: you've touched it, even when you talk about that ten
Speaker 3: year yield potentially going to five percent right now, For
Speaker 3: the past three weeks, the ten year yield has been
Speaker 3: higher than the S and P five hundred earning yield,
Speaker 3: even though the S and P five hundred is corrected
Speaker 3: six percent over that time, that relationship has stayed the
Speaker 3: same because yields have continued to rise. And that just
Speaker 3: shows you have a risk free instrument offering you a
Speaker 3: very attractive return versus risky instruments and equities that are
Speaker 3: pretty expensive.
Speaker 2: JRO downside five five percent from the old time heighst
Speaker 2: of match. How much down sound are you to can fall?
Speaker 3: I think there's a lot of potential. I'm not gonna
Speaker 3: sit there and say, you know, I can't put a
Speaker 3: number on it because a lot of it's driven by
Speaker 3: financial conditions. Right, We've had this easy financial condition environment
Speaker 3: that has basically fostered equity prices fawted ascer prices across
Speaker 3: the board. Even the FEDS Financial Stability Report released on
Speaker 3: Friday talked about how equity valuations are high, historically high,
Speaker 3: how credit spreads are tight. But if that relationship between
Speaker 3: treasury yields and earnings yields, it's traditionally the equity you know,
Speaker 3: the SP five hundred earns yield over the seven years
Speaker 3: prior to the pandemic was about average three hundred and
Speaker 3: forty basis points over treasury yields. Even to just get
Speaker 3: a third of that back, the S and P five
Speaker 3: hundred would drop twenty percent. And that's the type of
Speaker 3: risk we're talking about here that I'm not saying we're
Speaker 3: going right back to that relationship. It just gives you
Speaker 3: an idea of how expensive stocks are relative to bonds.
Speaker 4: I love this.
Speaker 5: Everyone who comes on the show today seems to think
Speaker 5: we're at an inflection point. Bob Michael also seeing a
Speaker 5: potential inflection point, but in the opposite direction, a potential
Speaker 5: opportunity to buy.
Speaker 4: Why is this.
Speaker 5: Inflection point in your view, going to inflect more negatively?
Speaker 3: Well, because, okay, you look at the earning situation we
Speaker 3: have earning season TOMP. We're talking about all the big
Speaker 3: earnings this week, right, Earnings this quarter is supposed to
Speaker 3: be basically sequentially flat versus Q four almost flat year
Speaker 3: of year. The big bump in earnings is supposed to
Speaker 3: come in Q two, three and four, where aggregate earnings
Speaker 3: are supposed to rise sixteen percent. Now we're analyst forecasting
Speaker 3: sixteen percent earnings jump for those three quarters in a
Speaker 3: five point three seventy five percent fed funds environment. You know,
Speaker 3: we're not getting the rate cuts we expected. We're not
Speaker 3: getting what the catalyst that should drive things. And you know,
Speaker 3: going forward in the economy, we've had an incredibly strong
Speaker 3: economy and a lot of that is fiscal monetary stimulus
Speaker 3: from the pandemic playing out of the past couple of years.
Speaker 3: So again, to expect that type of jump in earnings,
Speaker 3: it's pretty aggressive. And if you don't get that, then
Speaker 3: you realize how expensive this tape is.
Speaker 5: And do you see this idea of a sell off
Speaker 5: in stocks that comes along with an ongoing sell off
Speaker 5: in bonds sort of something that continues the divergence that
Speaker 5: you were talking about with a ten year treasure yield
Speaker 5: being above the S and P five hundred earning shield.
Speaker 3: Yeah, well, if you go back, you go back to
Speaker 3: the nineties and and you know, probably the earlier two thousands,
Speaker 3: the old saying was, you know, stocks follow bonds, right,
Speaker 3: If treasure yields were coming down on that big bond
Speaker 3: bow market, stock's rallied, right because they're competing with each
Speaker 3: other for assets for investment assets. So now we're seeing
Speaker 3: treasure yields rise and basically, which is mean bonds are
Speaker 3: going down and stocks should be following bonds lower here
Speaker 3: from a price perspective to keep that earning deal for
Speaker 3: the S and P five hundred somewhat competitive with with
Speaker 3: the risk free instrument and treasuries, and we just haven't
Speaker 3: really seen that yet except in the last three weeks.
Speaker 3: We've seen this dip, but they've moved together.
Speaker 5: Do any of these relationships still stand or have we
Speaker 5: broken all of these?
Speaker 1: No?
Speaker 2: Well, so that's that's interesting.
Speaker 3: If you go back to late nineties, the treasure you know,
Speaker 3: the treasure yield was the earning five hundred, earning deal
Speaker 3: was consistently lower than the treasure yield, but that was
Speaker 3: a that was you know, during the Great Moderation, as
Speaker 3: as inflation was you know, coming down you know, for
Speaker 3: basically decades at that point, and bonds were just you know,
Speaker 3: cautious and investments were late to follow. This is the
Speaker 3: inverse situation where we're seeing inflation is more sticky. We're
Speaker 3: seeing a structurally different economy than we've from two thousand
Speaker 3: to twenty twenty.
Speaker 6: You say that the Fed policy does not need to
Speaker 6: change this point, but communication does. What are they getting
Speaker 6: wrong when they're speaking to the market.
Speaker 3: Well, I think they're just taking what they're seeing in
Speaker 3: front of them, and they're they're being overconfident in what
Speaker 3: they're seeing. So in twenty twenty one, the story was
Speaker 3: it's transitory, and we heard that for a year. When
Speaker 3: the Fed finally raised interest rates, core PC had actually
Speaker 3: peaked in February of twenty twenty two. You know, the
Speaker 3: Fed raised rates in March, and they finally ended QE
Speaker 3: in March. They were late and they were too confident
Speaker 3: too long. So for since last summer, we've heard policies restrictive.
Speaker 3: Policy is restrictive, but it hasn't been. In Q three,
Speaker 3: we put up a five percent GDP print. At that point,
Speaker 3: the Fed has to go back to themselves and say
Speaker 3: we're missing something in this economy. And they instead of
Speaker 3: doing that, they continue to say policy is restrictive, and
Speaker 3: they keep this estimate of the long term you know,
Speaker 3: long term FED funds rate down at two and a
Speaker 3: half percent, which is only a fifty basis point, you know,
Speaker 3: real neutral rate. Whereas even the New York Fed's dsg
Speaker 3: MO has it at two percent. So they're basically going
Speaker 3: off of a you know, a forecast that interest rates
Speaker 3: are going back to lower levels, or the markets taking
Speaker 3: their forecus they don't actually even believe it anymore, and saying, oh,
Speaker 3: this is where going in the future, so we can
Speaker 3: keep equity evaluations inflated a little bit higher.
Speaker 6: We start hearing some FED officials talk about whether or
Speaker 6: not they are actually restrictive though, and Michelle Bowman last
Speaker 6: week said we're restrictive, but we might not be sufficiently restrictive.
Speaker 3: What's the difference, Oh, it's massive, because if you're underestimating
Speaker 3: or if you're overestimating how restrictive you are, then you're
Speaker 3: making a policy mistake because policy is far looser than
Speaker 3: you believe it to be. So that is why, you know,
Speaker 3: for the past three quarters, if you include what this
Speaker 3: Q one is going to look like, we've put up,
Speaker 3: I think we've averaged GDP about three point six percent,
Speaker 3: which is double the fed's long term forecast of US
Speaker 3: potential GDP. It's funny Chairman Powell talks about their risks
Speaker 3: being balanced. Now if you go back to pre pandemic,
Speaker 3: when we had one hundred. You know, one point eight
Speaker 3: percent core PCE. The FED was willing to do anything
Speaker 3: to push inflation up to two percent, and micro manager
Speaker 3: there here we're at two point eight percent PCE. We're
Speaker 3: talking about things being balanced. Meanwhile, the unemployment rates three
Speaker 3: point eight percent, which is thirty basis points lower than
Speaker 3: the Fed's long term target're at a four point one percent,
Speaker 3: So we're still in an inflationary environment per the guidance
Speaker 3: they give, per their models, per their forecast. But they
Speaker 3: don't talk about like that. All they've talked about for
Speaker 3: the past six months is cutting rates until the past
Speaker 3: couple of weeks.
Speaker 2: So why should I just buy stocks? There's nice sign
Speaker 2: of them hiking anytime soon. Growth is good, inflation sticky
Speaker 2: top li like grud it's going to be settled off
Speaker 2: the back of that. Why wouldn't I be a bye head? Well,
Speaker 2: it's funny.
Speaker 3: I know when you guys had Torston slocking and Tom
Speaker 3: King talks about he talks about it's a GDPGE driven event,
Speaker 3: and he is he is right about that, and that
Speaker 3: is that is something I agree with. I think the
Speaker 3: risk here is we've had so many people chasing these
Speaker 3: rate cuts chasing these these higher valuations that I think
Speaker 3: we're due for that correction at this point as long
Speaker 3: as these treasuryelds continue toize. If Treasury you'll stabilize, you
Speaker 3: will start to reevaluate. But once that risk free instrument
Speaker 3: starts to become more attractive, I think you do for
Speaker 3: an equity correction.
Speaker 2: Very close to five percent this morning on a two
Speaker 2: year four ninety eight sixty four, Michael enjoyed. It's good
Speaker 2: to see it. Thank you too long. It's like years
Speaker 2: in person since we've done this. Michael Rock there, Thank you, sir,
Speaker 2: Tasnim gil wadwella following the impact of those and more
Speaker 2: as City Commercial Bank Cantantinim, I please to say join
Speaker 2: us now for more Tasdin waterfol to catch up with you.
Speaker 2: I can just say a little bit about our travels.
Speaker 2: We've just got back to New York from Washington, d C.
Speaker 2: We spent a week. We thought we were going to
Speaker 2: spend a week at least talking about the economy, and
Speaker 2: what we met was a load of economists who were
Speaker 2: national security experts now Tans and I just wonder from
Speaker 2: your perspective whether you can speak to some of the
Speaker 2: trends that you've seen evolve that might speak to that
Speaker 2: worries over what's happening between China and the US, the
Speaker 2: US and maybe other countries too.
Speaker 1: Yes, of course, thank you, Fusley, thank you very much
Speaker 1: for having me. It's a real pleasure to be here. So,
Speaker 1: I mean, definitely, we are seeing a lot of activity
Speaker 1: with our clients as they try to navigate the environment,
Speaker 1: which just seems to be getting more and more intense
Speaker 1: on the macros, around inflation, around interest rates which are
Speaker 1: proving to be definitely higher for longer, and clients eagerly
Speaker 1: awaiting when the cuts are finally going to come. But
Speaker 1: you know, as you just mentioned, on the political side
Speaker 1: as well, lots of things for our clients to navigate.
Speaker 5: Desnim how much has this actually altered the view for
Speaker 5: mergers and acquisitions who are speaking with Bank from America's
Speaker 5: CEO Brian moynihan, and he said, it's very difficult for
Speaker 5: companies to get any conviction to buy another company or
Speaker 5: merge at a time or a lot of things are
Speaker 5: being rejected the name of national security concerns, the name
Speaker 5: of antitrust, the name of whatever. You can't predict it
Speaker 5: Are you seeing the same thing among your clients.
Speaker 1: Yeah, it's it is a very very difficult time on
Speaker 1: the deal deal front for companies to you know, go
Speaker 1: about and although we are seeing some deals closed, you know,
Speaker 1: we've had some cell side opportunities at City and some
Speaker 1: of our clients you know, have have been able to
Speaker 1: go through the cycle, but you know, lots of things
Speaker 1: in the way exactly as you mentioned, and also with
Speaker 1: the high interest rates, you know, capital to fund the acquisitions. Also,
Speaker 1: you know, another factor that is proving to be a
Speaker 1: sticking point for our clients that you know, it's not
Speaker 1: cheap anymore to buy another company. You've got to, you know,
Speaker 1: make sure that it's really worth it, that the valuation
Speaker 1: you're not going to overpay, and the valuations are going
Speaker 1: to be there to see you through kind of the
Speaker 1: medium in the long.
Speaker 5: Term, a lot of people are talking about this week
Speaker 5: is a pivot point. We're going to get the earnings
Speaker 5: of one hundred and seventy eight of the S and
Speaker 5: P five hundred companies.
Speaker 6: You focus on our whole host.
Speaker 5: Of smaller banks and smaller excuse me, smaller companies that
Speaker 5: have individual challenges and might have an even better view
Speaker 5: in terms of the direction of travel of both economic
Speaker 5: strength and inflation. Are the signs that you're seeing consistent
Speaker 5: with this general feeling that we're going to get a
Speaker 5: no landing with inflation that's going to run hot for
Speaker 5: the foreseeable future.
Speaker 1: So, I mean, I think one of the things that
Speaker 1: I think is interesting that we're seeing with our clients
Speaker 1: is that their ballot shoots are actually really, really quite strong.
Speaker 1: For the vast majority of our clients, we've been supporting
Speaker 1: them as they think about diversifying. You know, although the
Speaker 1: environment is very tough, I think it's also posing quite
Speaker 1: a lot of opportunities for clients as well. You know,
Speaker 1: they're really thinking very very strongly about their supply chains
Speaker 1: and how they make them more resilient, how they secure,
Speaker 1: you know, make them very very secure as well. And
Speaker 1: I think, you know, things like near shoring, things like
Speaker 1: diversifying the funding environment for our supply chain. I think
Speaker 1: these are the opportunities that our clients are kind of
Speaker 1: playing into. So I think it's not all doom and gloom.
Speaker 1: Quite frankly, where our clients are concerned.
Speaker 6: Is that near shoring due to the market or because
Speaker 6: of policies and you know, this urge by certain governments.
Speaker 1: I think it's a bit of both. I think, you know,
Speaker 1: on the supply chain side, I think clients are trying
Speaker 1: to address things like logistic costs, like ensuring that you know,
Speaker 1: their goods actually get there there's no delays, and manage
Speaker 1: it from a kind of a cost and to get
Speaker 1: a security right. And then of course there's the incentives
Speaker 1: as well. You know, last week I was in Mexico
Speaker 1: where I actually saw this, the whole phenomena of near shoring,
Speaker 1: like with my own eyes. It was quite amazing. How
Speaker 1: you know, when large companies, the big MNC's, announce either
Speaker 1: a new investment or an expansion of a factory like
Speaker 1: in Mexico, the entire supply chain kind of follows them
Speaker 1: there and the whole kind of ecosystem gets built out
Speaker 1: around those large supplies, like you know, Kia announcing the
Speaker 1: big expansion of its plant in Mexico for ev cars.
Speaker 1: There's a whole kind of tier one, tier two, tier
Speaker 1: three impacts around the supply chain.
Speaker 4: With that.
Speaker 6: Do you see Chinese firms moving into Mexico, Because that's
Speaker 6: been a big concern with lawmakers and officials in the
Speaker 6: United states.
Speaker 1: That there are a couple of Chinese firms, but I
Speaker 1: think it's wider than that. You know, we've seen Korean
Speaker 1: firms as well. We've seen other other Asian companies moving
Speaker 1: there as well, So I think it's it's more mixed.
Speaker 1: I think there's you know, what we're noticing and with
Speaker 1: these these kind of corridors is there's a big North
Speaker 1: Asia to Latin corridor that is very very vile, and
Speaker 1: it's not only into Mexico as well, it's also into
Speaker 1: Brazil and other lat Ham countries as well.
Speaker 2: Tas'tan. What it sounds like is for multinationals, it's becoming
Speaker 2: increasingly complex, and it might lead you to believe that
Speaker 2: perhaps they just stay local and avoid expanding beyond their
Speaker 2: own borders. You're not saying that, are you. That's not
Speaker 2: what I.
Speaker 1: Hear, Absolutely not. Of course, you know, companies want to
Speaker 1: make sure that they're strong, you know, in their domestic
Speaker 1: and markets, and they're operating very well. But I think,
Speaker 1: you know, the vast majority of our clients and the
Speaker 1: reason they come to city is because they have global ambitions,
Speaker 1: and so you know, as they think about how they're
Speaker 1: going to grow themselves and how they're going to succeed
Speaker 1: in the market. That more and more our clients are
Speaker 1: looking at cross border opportunities as the way in which
Speaker 1: they are going to grow and access new markets, and
Speaker 1: that's where you know, bank like House can really help them.
Speaker 2: Can we just talk about just finally how that growth
Speaker 2: is being funded with interest rates near multi decade highs
Speaker 2: in some res agents, including here in the United States,
Speaker 2: and the sources of funding shifting tasknum, Have you noticed that?
Speaker 1: Definitely?
Speaker 4: So.
Speaker 1: I think one of the first things I'm going to
Speaker 1: say with the with with such high interest rates for
Speaker 1: quite some time now is that clients are are really
Speaker 1: getting absolutely focused on their own liquidity and looking at
Speaker 1: any kind of trap cash that they may have looking
Speaker 1: at very sophisticated even mid market clients that you know
Speaker 1: probably didn't pay that much attention as closely to their
Speaker 1: liquidity as say some of the very large clients would
Speaker 1: would would would traditionally be doing. They're they're paying a
Speaker 1: lot of attention to ensuring that they're they're efficiently using
Speaker 1: all the sources of capital, that payments are like swift there,
Speaker 1: their collections are really quick as well, and that the
Speaker 1: whole cash converstion cycle is is as tight and as
Speaker 1: efficient as possible, and and of course you know, we've
Speaker 1: got lots of solutions that can help with that. But
Speaker 1: but I think you know, there's there's other pools of capital.
Speaker 1: Of course, as you know, bank funding, and then we're
Speaker 1: also seeing the rise of private credit as well as
Speaker 1: coming up as being a kind of complementary to bank
Speaker 1: funding for these clients. So lots and lots of kind
Speaker 1: of innovation happening on the financing side.
Speaker 5: Has that innovation led to basically an environment or where
Speaker 5: higher rates have not crimped the expansion plans of a
Speaker 5: lot of these companies, even though it might be more
Speaker 5: challenging you have to be innovative, it's just as available
Speaker 5: in terms of credit creation to go out and to expand.
Speaker 1: Yeah, I think so, Liza, I mean, I think you know,
Speaker 1: what we're seeing is that with companies that are strong,
Speaker 1: they are just getting stronger, and high rates and even
Speaker 1: you know, just general geopolitics don't tend to kind of
Speaker 1: take the wind out the sales of these types of companies,
Speaker 1: and they do use almost kind of volatile environments to
Speaker 1: get even stronger and look for opportunities to expand you know,
Speaker 1: pick up sort of do small. We're seeing a lot
Speaker 1: of mid market companies like doing not like big transformative
Speaker 1: kind of deals, but small bolt on em and a
Speaker 1: like you know, picking up a kind of a ten
Speaker 1: million dollar company, twenty million dollar company, you know, adding
Speaker 1: a particular expertise. You know, those are some of the
Speaker 1: things that we're hearing a lot from our clients.
Speaker 2: Interesting, Tassanium, Let's do this again next time you're in
Speaker 2: New York City. We'd love to have you with us
Speaker 2: around the table tasnim gil wand whilea there of city.
Speaker 2: European Investment Bank President Nadia Calvino is here in New York,
Speaker 2: but it's for more President Calvino, good to see you,
Speaker 2: very good to see it's greater cash up once again.
Speaker 2: You're back from Washington, d C. We are as well,
Speaker 2: so maybe we can compare notes. We've talked a long
Speaker 2: time about a lack of cooperation maybe worldwide, a breakdown
Speaker 2: between the United States and what the Europeans need and
Speaker 2: what Ukraine ultimately wance. Did you sense the same thing
Speaker 2: at all in Washington and were coming together or moving apart?
Speaker 4: Well, we're definitely coming to Indeed, I think it was
Speaker 4: a very productive Spring Meetings week. We had many exchanges
Speaker 4: and I really see a momentum in coming together and
Speaker 4: supporting Ukraine very strongly, but also deepening our cooperation within
Speaker 4: the Multilateral Development Bank family to contribute to climate change, financing,
Speaker 4: peaceful and more. How would I say, sustainable world going forward.
Speaker 2: We'll get some more details on your lending plans in
Speaker 2: just a moment. There has been a sense of fatigue
Speaker 2: in Congress around what is happening with Ukraine in its
Speaker 2: war against Russia. There are some people asking whether there
Speaker 2: is a different way, whether there should be something we
Speaker 2: continue with, stick with, continue funding what looks like maybe
Speaker 2: another runding war. What would your view on that argument be.
Speaker 4: Well, absolutely, we need to support Ukraine. It is a
Speaker 4: very serious situation that we're living. It's a threat to
Speaker 4: democracy at the end of the day, and the way
Speaker 4: we see things, I think in the US and Europe too,
Speaker 4: and so from the European point of view, there's no
Speaker 4: doubt our support to Ukraine is I think the decision
Speaker 4: that has been taken by the US to provide support
Speaker 4: for more than sixty billion dollars is very valuable and
Speaker 4: these joints. Also the previous decision of the European institutions
Speaker 4: to provide fifty billion euros in the Ukraine facility, which
Speaker 4: we will manage at the European Investment Bank, and I
Speaker 4: think it will provide much, much valuable support for the
Speaker 4: reconstruction as well as the military effort.
Speaker 6: Of course, But President, did you see the vote counts
Speaker 6: on as AID bills, So when you look at something
Speaker 6: like the Indo Pacific, it was three eighty five to
Speaker 6: thirty four in the House. When it comes to Israel,
Speaker 6: it was three eleven to one twelve. It barely got
Speaker 6: through and it came sorry, excuse me, to Ukraine. How
Speaker 6: concerned are you about how deeply divided US politicians are
Speaker 6: about AID in Ukraine oversay other issues like Israel and Taiwan.
Speaker 4: I really think that we should continue to support Ukraine,
Speaker 4: as President Zelenski was just saying on the screen, they
Speaker 4: have a chance if we continue to support them from
Speaker 4: the European point of view. You know, Ukraine is our neighbor,
Speaker 4: It is a prospective member of the family, if I
Speaker 4: can say this way, and thus we need to ensure
Speaker 4: that we keep a secure environment in the region. The
Speaker 4: other conflicts are just as important. I mean, the Middle
Speaker 4: East situation is very warring. It's a source of concern
Speaker 4: for all of us, and we should try to stop
Speaker 4: that war and that conflict, you know, as soon as possible.
Speaker 4: But Ukraine should not be forgotten.
Speaker 6: But in the numbers, it shows that Ukraine was the
Speaker 6: hardest one for lawmakers to get through. What does this
Speaker 6: mean potentially if you were, say to deal with a
Speaker 6: different administration, a Trump administration.
Speaker 4: Well, I wouldn't like to speculate on US politics and
Speaker 4: I wouldn't dare to comment on the internal wheelings and dealings.
Speaker 4: But I think the most important news we have today
Speaker 4: is this got through more than sixty billion euros dollars
Speaker 4: support and these will provide a very valuable support to
Speaker 4: Ukraine at a crucial point in the conflict in the war.
Speaker 5: President, you know, how much is this actually the uncertainty
Speaker 5: helping you to raise money for military efforts within Europe
Speaker 5: to bolster military spending within the continent.
Speaker 4: But it's obvious that you know, some people woke up
Speaker 4: to the fact that we were more fragile, and maybe
Speaker 4: we thought because of the war in Ukraine and the
Speaker 4: unwarranted aggression by Russia, many members states the frontline members stays.
Speaker 4: I think we're already wide awake and very aware of
Speaker 4: the challenge of having this kind of neighbor. But you know,
Speaker 4: it is absolutely clear we need to step up and
Speaker 4: support Europe's security and defense industry, and the European Investment
Speaker 4: Bank can play a role in that.
Speaker 5: When you talk about financing it, how much are you
Speaker 5: on board with the idea of monetizing Russian assets that
Speaker 5: are harbord in Europe, maybe in tandem with the United
Speaker 5: States in terms of coming up with some sort of plan.
Speaker 4: It's very important. I think that we act united and
Speaker 4: so the G seven discussions are extremely valuable so that
Speaker 4: we move ahead as one. Of course, the situation is
Speaker 4: not comparable between the US and Europe in terms of
Speaker 4: the volume of assets we are discussing, and on the
Speaker 4: European side we are making progress. The European Commission has
Speaker 4: put forward a step by step plan and so you know,
Speaker 4: we're making some progress in making sure that these assets
Speaker 4: are put to good use in supporting Ukraine.
Speaker 5: In supporting Ukraine, is that also include in investing in
Speaker 5: some of the military development in Europe.
Speaker 4: I think this is a bit you know too soon
Speaker 4: to say how is the best use of these assets.
Speaker 4: Just see that we are really unwavering in our support
Speaker 4: to the country, and we're making progress in mobilizing all
Speaker 4: sources of financing to provide that important support.
Speaker 6: When it comes to the Russian assets, particularly the ones
Speaker 6: in Europe, there's lots of different things being thrown around
Speaker 6: on how to actually monetize it. Do you expect a
Speaker 6: decision when the leaders meet in June in Pulia.
Speaker 4: I certainly think this is going to be on the
Speaker 4: table and there it is a different issue to talk
Speaker 4: about the assets than talking about the proceeds coming from
Speaker 4: those assets. I think there is more unanimity on the
Speaker 4: second than the former. Many considerations are on the table,
Speaker 4: and we need to calibrate well our decisions so as
Speaker 4: to make sure that there are no unwarranted side effects.
Speaker 2: I just wanted to wrap things up, President Calvina, with
Speaker 2: the changes you've proposed to the EIB, which is a
Speaker 2: plan to ultimately make it easier to fund defense projects,
Speaker 2: could you talk to us a little bit about that.
Speaker 2: What can we expect at these changes going to go through?
Speaker 4: I certainly think so.
Speaker 2: Yes.
Speaker 4: For the past eight years, we've been already financing europe
Speaker 4: security and defense industry. What we're doing now is adapting
Speaker 4: our lending policy whilst preserving a very strong financing capability capacity.
Speaker 4: I mean, THEVIB has a triple A plus consideration in
Speaker 4: the market. We are a very strong player in financial market.
Speaker 4: Last week we had an auction. I was following your
Speaker 4: program this morning and it is impressive because last week
Speaker 4: we did a five year bond of five billion issuance
Speaker 4: which was heavily oversubscribed on twenty one billion euros in demand,
Speaker 4: and we closed with an interest rate that was just
Speaker 4: ten basis points over the US Treasury. That shows the
Speaker 4: important financing capacity of the bank and this is what
Speaker 4: allows us to be very competitive in financing our clients,
Speaker 4: public and private clients and contributing to growth and prosperity
Speaker 4: in Europe and beyond. So we really need to calibrate
Speaker 4: our respons as well. So far, the market is responding
Speaker 4: as we had anticipated, and I think we certainly will
Speaker 4: step up our support to europe security and defense.
Speaker 2: Just the final comment if we can. You, of course,
Speaker 2: were part of the Spanish government for a little while.
Speaker 2: I'm used to calling you minister. I want to get
Speaker 2: your thoughts on whether the defense spending will overwhelm the
Speaker 2: capital that could be used for developing the European economy
Speaker 2: more broadly, you concerned about that in any way, shape
Speaker 2: or form.
Speaker 4: Certainly, That's why I said a moment ago, we need
Speaker 4: to mobilize all our funding sources so as to make
Speaker 4: sure that funding our security and defense effort contributing to
Speaker 4: peace at the end of the day, is not weakening
Speaker 4: our support to social infrastructures, innovation, the digitalization, and of
Speaker 4: course climate action, which is a top priority and the
Speaker 4: key challenge of our time.
Speaker 2: Nadia, was good to see you, thanks for dropping by,
Speaker 2: very good. Thank you very much in Joy, New York.
Speaker 2: Nadia Calvin of the European Investment Bank. This is the
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