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Speaker 1: Good morning. It's Friday, the sixth of October here in London.

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Speaker 1: This is the Blueberg Day Bake. Here at podcast, I'm

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Speaker 1: Caroline Hepkere.

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Speaker 2: And I'm Stephen Carroll. Coming up today, Corporate giants struggle

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Speaker 2: to end their addiction to debt as borrowing casts rise.

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Speaker 1: Reports suggests that the former president Donald Trump shared secrets

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Speaker 1: about US nuclear submarines with a friend.

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Speaker 2: Plus a two billion dollar headache, while Sweden's real estate

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Speaker 2: crisis is threatening its biggest pension fund.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: Figures compiled by Bloomberg revealed a global bond route as

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Speaker 2: giving corporate borrowers pause for thought, at least for now.

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Speaker 2: This afterbig companies have wrapped up hundreds of billions of

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Speaker 2: dollars in debt, which is now getting much more expensive.

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Speaker 2: Chris Pitt has more.

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Speaker 3: Data from Bloomberg Intelligence shows companies with investment grade credit

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Speaker 3: ratings have added more than half a trillion dollars of

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Speaker 3: net debt since the first rate increase last year. Even

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Speaker 3: companies with shape finances have ratcheted up their borrowing after

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Speaker 3: scaling back in twenty twenty two. The debt boom indicates

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Speaker 3: that Jerome Powell and his colleagues may have to keep

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Speaker 3: pushing up rates to break the fever and curb the behavior.

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Speaker 3: The spike in ten year bond yields over the past

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Speaker 3: two weeks has cooled the debt sale frenzy for the moment,

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Speaker 3: a possible sign that executives may now be waking up

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Speaker 3: to the implications for their businesses. In London, Chris Pitt

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Speaker 3: Bloomberg Radio.

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Speaker 1: Well, longer term interest rates have been on the rise

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Speaker 1: since the Fed September meeting as markets adjust to the

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Speaker 1: message that rates are likely to remain higher for longer.

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Speaker 1: But the San Francisco Fed president Mary Daily in a

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Speaker 1: Q and A with Bloomberg, suggests that the recent jump

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Speaker 1: in bond yields offers a reason to hold rates steady.

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Speaker 4: Now.

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Speaker 5: The bond market has tightened quite considerably over about thirty

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Speaker 5: six basis points since we met in September. Well, that

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Speaker 5: is equivalent to about a raid hike, right, So then

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Speaker 5: the need to do tightening additionally is not there.

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Speaker 1: Daily's comments in a conversation with Bloomberg's Lisa Abramovitz come

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Speaker 1: after the yield on thirty year treasuries touched five percent

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Speaker 1: this week, the highest level since two thousand and seven.

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Speaker 1: The San Francisco Fed chief also told us that she

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Speaker 1: believes policymakers can hold interest rates steady if the labor

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Speaker 1: market and inflation continue to cool all financial conditions remain tight.

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Speaker 2: Metro Bank is trying to sell parts of its mortgage

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Speaker 2: portfolio to strengthen its balance sheet. The Challenger Bank's shares

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Speaker 2: have fallen by half after the Bank of England blocked

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Speaker 2: it from Challenging from changing its capital requirements. The company

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Speaker 2: has held talks with Lloyd's and not West about selling

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Speaker 2: roughly three billion pounds of mortgages. According to Sky News.

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Speaker 1: The UK's economy is losing steam as interest rate hikes

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Speaker 1: and vanishing household savings way on the outlook. That is

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Speaker 1: the view of the Bank of England's Deputy governor, who

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Speaker 1: spoke at the ECB's Manager Policy conference in Frankfurt. Bloomberg's

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Speaker 1: Mark Daniel Davies reports now.

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Speaker 6: Bank of England Deputy Governor Ben Broadbent says there are

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Speaker 6: now clear signs that the central Bank's most aggressive tightening

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Speaker 6: cycle in over three decades is dragging on the UK economy.

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Speaker 6: He said economic indicators including spending on household goods have

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Speaker 6: weakened quite a lot, and that the job market may

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Speaker 6: do the same suddenly as demand growth slows. He added

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Speaker 6: that demand until now has held up better than expected,

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Speaker 6: but that the war chest of savings built up by

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Speaker 6: households during the pandemic has dwindled. One bright spot though

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Speaker 6: business investments in some areas remained strong, but Broadbent says

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Speaker 6: he wonders how long that'll be the case. In London,

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Speaker 6: Mark Daniel Davies, Bloomberg Radio.

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Speaker 2: Staying in the UK, The Labour Party has taken a

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Speaker 2: parliamentary seat from the SMP in a key electoral test.

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Speaker 2: Michael Shanks won the by election in ruther Glen and

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Speaker 2: Hamilton West, south of Glasgow after the previous MP for

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Speaker 2: breaking COVID rules.

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Speaker 6: People weren't bringing up Margaret failure.

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Speaker 3: That was all news. The recall petition dealt with that.

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Speaker 3: What people were talking about was one in seven people

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Speaker 3: on an NHS waiting list, people struggling with the cost

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Speaker 3: of living crisis.

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Speaker 6: Well, the SMP is about division and distraction. They wanted

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Speaker 6: to vote for something different and they've gone out and

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Speaker 6: done it today.

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Speaker 2: Shanks flipped the seat with a majority of nine thousand,

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Speaker 2: five hundred votes, a mass of twenty percent. Swing posters

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Speaker 2: have seen the special election as a crucial chance to

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Speaker 2: test how well the Labor Party could do in Scotland

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Speaker 2: ahead of a potential general election expected next year.

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Speaker 1: Exon is in talks to buy shale focused Pioneer Natural Resources,

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Speaker 1: in its biggest deal in more than two decades. It's

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Speaker 1: reported that an agreement could be worth as much as

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Speaker 1: sixty billion dollars and maybe completed in the coming days.

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Speaker 1: A takeover would be the energy chant's biggest acquisition since

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Speaker 1: merging with Mobile in the nineties and help Exon in

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Speaker 1: its goal to become the dominant US producer of shale oil.

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Speaker 2: There are multiple reports that former US President Donald Trump

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Speaker 2: may have revealed nuclear submarine secrets to a billionaire friend,

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Speaker 2: who went on to share this sensitive details with several

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Speaker 2: other people. Bloomberg's at Baxter has the story.

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Speaker 7: The shared information reportedly included how many nuclear warheads US

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Speaker 7: submarines carry and how close they can get to a

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Speaker 7: Russian submarine without being detected. Part of a conversation after

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Speaker 7: Trump left office at mari A Lago with Australian businessman

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Speaker 7: Anthony Pratt, who runs one of the world's largest cardboard companies.

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Speaker 7: The report says special counsel Jack Smith has reviewed the claims.

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Speaker 7: A Trump spokesperson says the DOJ should be looking into

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Speaker 7: criminal leaking instead of perpetrating baseless witch hunts. I'm at

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Speaker 7: Baxter Bloomberg Radio.

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Speaker 1: Carlin.

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Speaker 2: Story that has us all talking this morning is a

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Speaker 2: column from our Bloomberg opinion columnist Dave Lee about the

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Speaker 2: moral case for no longer engaging with Musk's X platform.

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Speaker 2: This is a conversation I've had with a lot of

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Speaker 2: my friends about the use of the platform, and I

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Speaker 2: mean there's a bigger conversation about use of social media

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Speaker 2: in general and how good or bad it is for you.

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Speaker 2: But I mean, Davely lays out really the case for

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Speaker 2: why he's deleted the app from his phone, a story

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Speaker 2: about after a murder in his neighborhood.

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Speaker 1: He's really powerful. Yeah, it's a hugely powerful story that

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Speaker 1: Davely concludes that Twitter is basically incentivizing violent content, and

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Speaker 1: he says that it's only going to get worse in

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Speaker 1: order for the former Twitter I ex to stand out

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Speaker 1: even more to users. So this is the video of

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Speaker 1: an innocent man murdered in New York that has then,

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Speaker 1: according to Davelye, been used as fodder for millions of

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Speaker 1: views on x and he sort of talks about the

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Speaker 1: structure of that of social networks being molded by the

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Speaker 1: incentives that are presented to users. And he is very

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Speaker 1: tough on Elon Musk, you know, very critical of him

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Speaker 1: as leader, saying that the former leadership of Twitter when

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Speaker 1: it was Twitter was at least not trying to make

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Speaker 1: things worse. But he also doesn't, you know, he specifically

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Speaker 1: does not name the account that is sharing this, and

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Speaker 1: he pointed to it as one example of where really

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Speaker 1: horrendous footage is being turned around and kind of used

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Speaker 1: to attract viewership. It's a tough read.

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Speaker 2: Yeah, and also some of the highlighting some of the

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Speaker 2: changes that users feel they've seen on the platform since

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Speaker 2: Elon Musk took over and rebranded then Twitter as ex

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Speaker 2: as well. Definitely worth a read from davely from Bloomberg

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Speaker 2: Opinion this morning.

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Speaker 1: Now, let's get to more details on our reporting around

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Speaker 1: the boom in corporate debt issuance and what the recent

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Speaker 1: route in treasuries means for companies. It's been the big

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Speaker 1: bond market story of the week, hasn't it. Our Economy

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Speaker 1: and Government editor Jill Desis joins us now for more.

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Speaker 1: Good morning, Jill, great to have you with us. Can

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Speaker 1: you talk us through just the scale of courtporate debt

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Speaker 1: that is piling up this year. I was sort of

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Speaker 1: staggered at the numbers, you know, this year alone, the

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Speaker 1: kind of debt pile.

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Speaker 8: Yes, Caroline, it's truly massive. I mean, you heard Chris

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Speaker 8: run through this at the beginning of the program, but

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Speaker 8: it's really really worth emphasizing again. Since that first interest

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Speaker 8: rate increase back in early twenty twenty two, companies with

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Speaker 8: investment grade ratings, so these are, you know, big ones

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Speaker 8: like Pfizer and Meta, the kinds of companies that are

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Speaker 8: really playing this role and driving the US economy. They've

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Speaker 8: added more than half a trillion dollars of net debt.

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Speaker 8: And that's according to the data compiled by Bloomberg Intelligence.

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Speaker 8: I think really the short of it is, look, not

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Speaker 8: only as corporate America displayed very little desire to actually

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Speaker 8: pay down debt that's become more expensive because of these

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Speaker 8: rate hikes and money, of them have actually heaped more

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Speaker 8: of it onto their books. And it's really this reflection

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Speaker 8: of how, you know, we've really had these these two

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Speaker 8: decades near zero benchmark rates. The borrow and spend model

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Speaker 8: has become so ingrained within corporate America that even you've

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Speaker 8: had this really aggressive rate hike cycle, it's really really

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Speaker 8: just hard to put the genie back in the bottle, Jill.

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Speaker 2: What's happened then to the appetite for debt since we've

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Speaker 2: seen yield soaring?

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Speaker 8: Sure, so you know, obviously we've seen that spike over

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Speaker 8: the past couple of weeks in the benchmark ten year

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Speaker 8: bond yields. That's cooled the debt sale push for the moment.

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Speaker 8: So maybe that's a sign that investors are now waking

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Speaker 8: up to the reality of what's happening here. But in general,

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Speaker 8: I really have to stress that this urge to take

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Speaker 8: on debt hasn't completely wavered yet. I mean, even accounting

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Speaker 8: for the yield spike, September was still one of the

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Speaker 8: busier months of the year. You saw companies rates a

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Speaker 8: gross one hundred and twenty four billion dollars in the

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Speaker 8: bond market. So we're not really seeing that broader, more

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Speaker 8: more holistic slowdown yet.

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Speaker 1: So I suppose what was the concern and what could

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Speaker 1: be the consequences of the accumulation of this kind of debt.

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Speaker 8: Sure. Look, I mean the risk, of course is that,

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Speaker 8: you know, if the FED is going to continue to

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Speaker 8: push up interest rates, We've got this higher for longer narrative.

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Speaker 8: You know that's going on right now. But we're also

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Speaker 8: thinking about, you know, whether there's going to be another

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Speaker 8: rate hike in November and beyond. If the FED ends

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Speaker 8: up going too far with its rate hiking cycle and

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Speaker 8: the economy falls into a recession, those risks are going

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Speaker 8: to really be felt most acutely by companies that are

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Speaker 8: piling on a lot of debt. The Bloomberg Intelligence data

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Speaker 8: that we're looking at shows us that the indicators of

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Speaker 8: financial health within investment grade companies has already begun to

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Speaker 8: deteriorate as their leverage was ticking up. We were looking

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Speaker 8: at a key gauge of their ability to make payments

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Speaker 8: known as interest coverage. Over the last year that's edge lower.

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Speaker 8: We're obviously incredibly concerned about strains on less credit worthy businesses.

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Speaker 8: You've seen some defaults and speculative grade debt markets. Look

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Speaker 8: at real estate and retail ben bath and beyond comes

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Speaker 8: to mind from earlier this year, for example, and then obviously,

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Speaker 8: you know there's that concern about corporate upheaval in general.

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Speaker 8: Harken back to the Silicon Valley bank failing in March,

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Speaker 8: happening after the surgeon interest rates was triggering a run

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Speaker 8: on deposits at the regional at that regional level. So,

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Speaker 8: I mean, there's certainly a lot of concerns here that

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Speaker 8: we really have to keep an eye on, and that

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Speaker 8: I'm sure Jay Powell is looking out for as well.

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Speaker 2: Yeah, well, in some senses, I mean, is this really

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Speaker 2: what the Federal Reserve wanted to happen? The point of

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Speaker 2: raising interest rates is to tighten the market? Is is

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Speaker 2: this an intended consequence?

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Speaker 1: Sure?

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Speaker 8: Yes, I mean, look, I think j Powell has acknowledged

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Speaker 8: this even just last week, saying that one of the

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Speaker 8: goals of the Fed in raising these rates is to

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Speaker 8: influence spending and investment decisions. Of course, when you're using

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Speaker 8: interest rates to change that behavior and steer the economy,

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Speaker 8: there's always going to be the risk of just whether

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Speaker 8: people are actually going to listen to you. And I

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Speaker 8: think that at this point we're really at that testing

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Speaker 8: moment in time as to whether everybody's going to follow suit.

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Speaker 1: Yeah, absolutely, Jill, Thank you so much for being with

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Speaker 1: us this morning. Our Economy and Government editor Jill Deese

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Speaker 1: is there just talking about the boom in courtporate debt

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Speaker 1: issuance in the US.

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Speaker 2: Well, let's bring you a story from Sweden next. Earlier

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Speaker 2: this week, the chairwoman of the country's biggest pension fund

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Speaker 2: resigned from her position. The fund elector had incurred two

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Speaker 2: billion dollars of lasses from three failed bets tied to

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Speaker 2: the collapse of Silicon Valley Bank in the US. Now

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Speaker 2: it's facing bigger problems with another investment. Our reporter Luvea

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Speaker 2: Liman joins us now from Stockholm form more of a

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Speaker 2: good morning to you. Why is Sweden's biggest pension fund

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Speaker 2: back in the spotlight?

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Speaker 4: Then, yes, good morning. As you said, Sweden's biggest pension fund, elector,

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Speaker 4: with around one hundred billion dollars in as it's under management,

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Speaker 4: is once again in the cross service. Here. It has

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Speaker 4: made a nearly five billion dollar bet and it's the

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Speaker 4: biggest it has on a single real estate company called

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Speaker 4: him Stodd and bullst Dodd, and that is a landlord.

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Speaker 4: And there is a risk that this bet could sour

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Speaker 4: if the pension giant doesn't commit even more capital, and

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Speaker 4: then you have, of course the media and the wider

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Speaker 4: public scrutinizing the investment after what happened earlier this year

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Speaker 4: with the investments in the failed US banks.

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Speaker 1: Yes, so then what's at stake for Elector.

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Speaker 4: Well, it is really that it may be forced to

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Speaker 4: throw even more money on an investment that the new

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Speaker 4: management team thinks students have been made in the first place.

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Speaker 4: The risk is too high and the reward is too small. Essentially,

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Speaker 4: it's an investment in which elect has has the most

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Speaker 4: large share of capital, but it doesn't have so high

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Speaker 4: voting voting rights in the company.

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Speaker 2: Are there similarities in this issue to the SVB fallout

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Speaker 2: which last elected nearly two billion dollars.

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Speaker 4: Well, there are some similar similarities. Electa made a huge

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Speaker 4: loss that time around, as you said, on sub and

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Speaker 4: two other US niche banks, and it's essentially the same

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Speaker 4: strategy that is behind those investments, namely large bets in

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Speaker 4: single stocks, and they have all kind of been affected

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Speaker 4: by the shop arising interest rates in one way or another.

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Speaker 1: And then the reaction in Sweden. What are people thinking

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Speaker 1: about this?

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Speaker 4: There is obviously angry that people savings are being mismanaged.

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Speaker 4: A large share of the Swedish population they have private

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Speaker 4: pension schemes through their employers, employers and labor unions and

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Speaker 4: for Electa in elected cases, it's almost a quarter of

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Speaker 4: Swedi's population. And these people trust that the money is

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Speaker 4: being looked after, obviously in a responsible way, so they

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Speaker 4: can benefit from it once they retire. And here in

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Speaker 4: Sweden people very rarely move pensions, but there was a

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Speaker 4: marked increase of from his leaving Electa in the past spring,

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Speaker 4: and then that could obviously well happen again if this

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Speaker 4: property bets hours.

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