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Speaker 1: This is Bloomberg Daybreak Asia for this Friday, March twenty

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Speaker 1: fourth in Hong Kong, Thursday March twenty third in New

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Speaker 1: York and coming up today. Treasury Secretary Janet Yellen says

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Speaker 1: regulators would be prepared for further steps to protect bank

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Speaker 1: deposits if warranted. Credit Suisen Ubs are said to be

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Speaker 1: among the banks under scrutiny in a probe by the DOJ,

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Speaker 1: and the payment's company Block says it will explore legal

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Speaker 1: action against short seller Hindenburg Research TikTok CEO faces an

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Speaker 1: extremely contentious House committee. He says operations will come from

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Speaker 1: within the US China me while says we will have

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Speaker 1: to approve any attempt to sell while denying direct control.

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Speaker 1: I'med Baxter with Global News. That's all straight ahead on

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Speaker 1: Bloomberg Daybreak Asia, the business news you need to start

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Speaker 1: your day in just one fifteen minute podcast available on Apple, Spotify,

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Speaker 1: the Bloomberg Business App and everywhere you get your podcast.

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Speaker 1: Good morning, I'm Dog Prisoner and I'm Brian Curtiz. Here

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Speaker 1: are the stories we're following today. Treasury Secretary Janet Yellen

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Speaker 1: tried to soothe the US lawmaker concerns about whether American

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Speaker 1: bank deposits are safe. Here's Yellen speaking before a US

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Speaker 1: House subcommittee. The strong actions we've taken ensure that Americans

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Speaker 1: deposits are safe. Certainly, we would be prepared to take

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Speaker 1: additional actions if warranted. On Wednesday, bankstocks tumbled after Yellen

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Speaker 1: said that Treasury officials had neither considered nor examined the

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Speaker 1: possibility of expanding federal insurance temporarily to all US bank deposits.

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Speaker 1: She said that such a move would require congressional approval. Well,

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Speaker 1: we are told that both Credit Suite and UBS are

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Speaker 1: among the banks under scrutiny now in a probe by

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Speaker 1: the US Department of Justice. That story from Bloomberg's Charlie Pellett.

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Speaker 1: Those sources say investigators are looking into whether financial professionals

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Speaker 1: helped Russian allegs evade sanctions. The sources say the Swiss

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Speaker 1: banks were included in a recent wave of subpoenas sent

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Speaker 1: out by the government. The information requests were sent before

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Speaker 1: the crisis that engulfed Credit Suite and resulted in UBS's

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Speaker 1: proposed takeover of its rival. According to one of the sources,

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Speaker 1: the Justice Department inquiries are focused on identifying which bank

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Speaker 1: employees dealt with sanctioned clients and how those clients were

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Speaker 1: vetted over the past several years in New York Charlie

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Speaker 1: Pellett Bloomberg Daybreak Asia, while the payment company Block said

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Speaker 1: it will explore legal action against Hindenburg Research after a

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Speaker 1: damning report. It comes after the short seller issued a

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Speaker 1: report following a two year investigation into Block. The report

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Speaker 1: alleged that Block facilitated scammers taking advantage of government stimulus

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Speaker 1: programs back during the pandemic. Block called Hindenburgh's claims inaccurate

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Speaker 1: and misleading. More from Bloomberg's Jenny Seraine. I think any

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Speaker 1: implication that criminal actors are using Blocks cash app to

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Speaker 1: facilitate their transactions is really bad news. I think that's

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Speaker 1: when you get regulators looking at you. They could impose

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Speaker 1: different kinds of penalties, whether that's monetary or different remediation activities.

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Speaker 1: So that's something that investors will really keen on and

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Speaker 1: want to see further proof of Blocksher is slid as

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Speaker 1: much as twenty two percent after the news today, closing

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Speaker 1: down fifteen percent, the company's biggest intra day decline in

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Speaker 1: three years. Well US prosecutors have charged the co founder

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Speaker 1: of Terraform Labs Do Quan with fraud after he was

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Speaker 1: detained earlier in Montenegro. We have that story from Bloomberg's

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Speaker 1: David and Glass. Quan was caught while trying to fly

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Speaker 1: to Dubai allegedly using falsified cost The weekend travel documents

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Speaker 1: his whereabouts have been the source of constant speculation since September.

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Speaker 1: Quan was earlier accused of fraud by the US Securities

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Speaker 1: and Exchange Commission. The entrepreneur presided over a forty bill

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Speaker 1: million dollar cryptocurrency implosion last year. The terror USD stable

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Speaker 1: coin he helped create and its sister token Luna, suddenly cratered.

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Speaker 1: South Korea also issued a warrant for his arrest. The

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Speaker 1: country stripped him of his passport and said he's the

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Speaker 1: subject of an inner pole red notice. In Hong Kong,

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Speaker 1: I'm David Ingless lumbrig de Brick Asia. The Bank of

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Speaker 1: England raised its benchmark lending rate as expected, by a

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Speaker 1: quarter percentage point to four and a quarter percent. The

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Speaker 1: central bank brushed aside concerns about the banking system after

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Speaker 1: the rescue of two major institutions abroad. It suggests that

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Speaker 1: policymakers see inflation as the main priority, and BOE Governor

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Speaker 1: Andrew Bailey signaled that further rate hikes may be required.

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Speaker 1: We've seen signs of inflation really peaking now, but of

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Speaker 1: course it's far too high now. We think it's going

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Speaker 1: to come down sharply really from the early summer onwards,

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Speaker 1: but we haven't seen that happen yet. We had some

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Speaker 1: news this week which was unfortunately going a bit the

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Speaker 1: other way with it was probably some one off elementths

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Speaker 1: of that, but we need to see it starting to

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Speaker 1: come down progressively and get back to talkt The Bank

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Speaker 1: of England is predicting that the UK will avoid the

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Speaker 1: recession it had predicted earlier this year, and the central

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Speaker 1: Bank upgraded its growth outlook over the coming months. However,

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Speaker 1: the BOA did not comment on its forecast for the

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Speaker 1: second half of the year. I'm Brian Curtis along with

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Speaker 1: Doug Christener. Paul Allen will join us in a short while,

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Speaker 1: so Doug. The SMB five hundred is flat over the

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Speaker 1: past month. So here are some of the numbers that

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Speaker 1: promise you. The Russell two thousand, an index of smaller

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Speaker 1: sized companies down ten percent in a month. Microsoft up

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Speaker 1: nine percent in a month, so that's a nineteen percentage

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Speaker 1: point swing. The KBW Bank Index is down twenty eight

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Speaker 1: percent in a month. Google or Alphabet is up sixteen percent.

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Speaker 1: That's a forty four percentage point swing. Now, these trends,

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Speaker 1: I would suggest to you, would seem to be a

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Speaker 1: little stretched, and the read through that is probably that

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Speaker 1: the benchmarks will need to fall from here. But I

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Speaker 1: think you have to put your finger on the banks.

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Speaker 1: I mean, the weakness that you cited in the Russell

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Speaker 1: has to do with the high concentration of small and

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Speaker 1: medium sized lenders, and I think it's fair to say

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Speaker 1: that these stocks have been just under enormous pressure right now.

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Speaker 1: And this is one of the things I think that

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Speaker 1: Janet Yellen is trying to address, to solidify that customer

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Speaker 1: base so that those folks aren't inclined to continue to

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Speaker 1: move assets from those perceived weaker institutions to stronger ones,

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Speaker 1: right And this is the thing that is I think

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Speaker 1: troubling the market right now, particularly when you consider a

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Speaker 1: situation like First Republic. Really that problem has not been

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Speaker 1: solved yet. I mentioned that the KBW Bank Index was

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Speaker 1: down twenty eight percent in a month, and that's not

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Speaker 1: even the regional index. But think about it. You have

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Speaker 1: four four forms of tightening at the moment, the new

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Speaker 1: rate hikes and the Fed said they may not be

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Speaker 1: done yet, qt the long and variable lag of the

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Speaker 1: previous hikes, and then the bank's cutting lending. Now we

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Speaker 1: can argue that we are probably close to the end

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Speaker 1: of the new rate hikes, but we're probably only at

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Speaker 1: the beginning of the bank's tightening. And then on top

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Speaker 1: of that, how has this impacted sentiment, not just on

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Speaker 1: the part of consumers but businesses as well. That's probably

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Speaker 1: going to contribute to a little bit of contraction, I

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Speaker 1: would imagine, assuming that a sentiment begins to decline or

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Speaker 1: is declining already. And we'll see whether these implicit deposit

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Speaker 1: guarantees are enough. They're not explicit, but I think that

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Speaker 1: many people do realize that the authorities are prepared to

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Speaker 1: step in if there is a run coming at a

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Speaker 1: particular bank. Anyway, lots more to talk about. We'll get

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Speaker 1: to our guests in a few moments, but now it's

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Speaker 1: time for Global news. TikTok CEO show ch ran into

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Speaker 1: a pretty hostile group of lawmakers in the House Energy

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Speaker 1: and Commerce Committee Today at Baxter is tracking that he

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Speaker 1: has global news from the nine to sixty newsroom in Strancisco. Ahad, yeah, boy,

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Speaker 1: you talking about a tough crowd, Brian. The tone set

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Speaker 1: by Representative Kathy Rogers TikTok is a weapon by the

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Speaker 1: Chinese Communist Party to spy on you, manipulate what you see,

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Speaker 1: and exploit for future generations. Now, one of the allegations

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Speaker 1: is a China demand's removal of some content the massacre

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Speaker 1: in Tianamen Square. That kind of content is available on

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Speaker 1: our platform. You can go and search it. I will

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Speaker 1: remind you that making falls from misleading statements to Congress

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Speaker 1: as a federal crime. I understand again. You can go

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Speaker 1: on the platform. You will find that content. So show

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Speaker 1: says assurances should come from Fars in order to assure

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Speaker 1: everybody here and all our uses, while a commitment is

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Speaker 1: to move day data into the United States to be

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Speaker 1: stored on American soil by an American company overseen by

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Speaker 1: American personnel. But Bloomberg's Alex Baranca says this is the

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Speaker 1: most contentious and hostile hearing she's heard in a long time,

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Speaker 1: and there was another exchange with Arab Zona Republican Debbie

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Speaker 1: Lasco that I think was really illustrative. She laid out

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Speaker 1: that other countries like India have banned the app, the

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Speaker 1: FBI has voiced concerns about the app, and ask you,

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Speaker 1: why then, do all of these folks have concerns if

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Speaker 1: you're sitting here in front of us today saying nothing's wrong.

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Speaker 1: He came back and said, look, those concerns are hypothetical.

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Speaker 1: They are theoretical. That kind of gap has been kind

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Speaker 1: of the theme all day where she feels like he's

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Speaker 1: not getting enough substance to combat with the facts that

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Speaker 1: he loves to bring to the table, and the lawmakers meanwhile,

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Speaker 1: are just not believing anything he said, leading to kind

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Speaker 1: of a really contentious back and forth at the hearing today.

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Speaker 1: So even Democrats or o'kanna, for example, saying the only

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Speaker 1: solutions of sale, Senator Marc o'rubio coming out saying two

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Speaker 1: options or sale or commerce deprivment regulation. Now, China has

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Speaker 1: issued a statement saying that it would firmly oppose any

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Speaker 1: sale if TikTok forced by Washington, saying it would undermine

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Speaker 1: confidence in all commerce globally Bloomberg's Dan flatly says, I'd

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Speaker 1: really dnded any argument by show of any separation. Now

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Speaker 1: that's been a very big concern of you concluding this

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Speaker 1: national security review that TikTok has been working with the

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Speaker 1: US government is whether China would have any say in

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Speaker 1: how that would be concluded. And it also kind of

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Speaker 1: cuts against his arguments that TikTok will not share data

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Speaker 1: with China, because if they have to approve the sale

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Speaker 1: of this business, then you know they are obviously involved operations.

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Speaker 1: But Henrietta Treys Veta Partners on Bloomberg says about more

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Speaker 1: than just TikTok today, it's a more holistic approach to

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Speaker 1: social media because we're talking about domestic problems from mental

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Speaker 1: health to national security issues, and it's not unique to

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Speaker 1: just TikTok. So what they're looking at in legislation that

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Speaker 1: I think can actually pass is more akin to passing

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Speaker 1: the back onto the Department of Commerce to have it

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Speaker 1: regulate TikTok in all social media apps. Yeah, and she

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Speaker 1: says regulation as opposed to sale here. But very interesting,

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Speaker 1: by the way, political Tight wrote for democrats as a

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Speaker 1: younger demographic group is more heavily TikTokers if you will,

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Speaker 1: and the fair would be they could just set out

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Speaker 1: twenty twenty four. This is just the beginning Global news.

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Speaker 1: I'm more than twenty seven hundred journalists and listen over

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Speaker 1: one hundred twenty countries. In San Francisco. I'm Ad Baxter,

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Speaker 1: and this is Bloomberg. And I'm Brian Curtis here in

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Speaker 1: Hong Kong. This is Bloomberg Daybreak. Agia Paul Allen joins

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Speaker 1: us now in Sydney, and our guest is Joanna Gayegos,

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Speaker 1: co founder of Bond Blocks, on her market outlook, Well,

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Speaker 1: let's start off with that gap that I mentioned. You've

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Speaker 1: got bank stocks going down a couple of percent every day,

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Speaker 1: and you've got Microsoft going up two percent every day.

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Speaker 1: That can't continue, can it. Yeah, it's hard to make

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Speaker 1: calls right now. I think it's been hard all quarter

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Speaker 1: to understand where the markets were going to be going.

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Speaker 1: And some of that recovery and technology may be reflective

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Speaker 1: of the actions that those firms are taking to manage

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Speaker 1: costs and think about what's coming up in twenty twenty three.

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Speaker 1: But what we think about for twenty twenty three is bonds. Obviously,

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Speaker 1: we're a nasset manager that focused solely on fixed income,

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Speaker 1: and we think there's a lot that we can lean

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Speaker 1: into right now because yields have changed so dramatically in

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Speaker 1: twenty twenty three. It helps investors really take advantage of

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Speaker 1: the power of that carrying their portfolio and actually do

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Speaker 1: something in the total return space their portfolio, which just

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Speaker 1: isn't straightforward in equities right now from where we sit,

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Speaker 1: is it particularly straightforward and bonds though either. I mean,

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Speaker 1: you say it's a place to hide up from volatility.

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Speaker 1: But take a look at the two year. You know,

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Speaker 1: a couple of weeks ago, we're about five. Now we're

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Speaker 1: three point eight three. Yet the whipstoring seems to be

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Speaker 1: happening in across assic classes. For sure, there was a

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Speaker 1: volatility this month in the two year, But think about

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Speaker 1: this very simple trade. You know, if you're in the short,

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Speaker 1: shortest part of the curve, it may be a great

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Speaker 1: place to wait out and figure out what you're going

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Speaker 1: to do next, because you're getting paid, you know, upwards

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Speaker 1: of four and a half percent for at least being invested.

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Speaker 1: And I think that's the action that we want to

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Speaker 1: see investors take, is consider that we also maybe recharacterize

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Speaker 1: looking at credit because of some of the fundamentals that

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Speaker 1: look pretty strong across credit, not only what you mentioned,

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Speaker 1: but the capital appreciation is there too, that movement that

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Speaker 1: Paul brought to It's basically the bond is going up,

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Speaker 1: so the yield is falling a lot. If you think

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Speaker 1: that that's the trend that will hold in, that recession

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Speaker 1: could be coming and bonds will go up and the

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Speaker 1: yields will go down, you're not only getting the hefty

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Speaker 1: yield that you bought, but you're getting the capital appreciation too. Yeah,

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Speaker 1: I think, but you're referencing is somewhere in between the

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Speaker 1: two year and the three year. Just this month year

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Speaker 1: to date, sorry, month to date that ranges from being

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Speaker 1: up two to three percent in a month on the

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Speaker 1: price return plus the yield. So bonds really need to

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Speaker 1: be part of your consideration for twenty twenty three, really

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Speaker 1: need they're They're very powerful in your portfolio a way

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Speaker 1: that they haven't been for over a decade and longer.

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Speaker 1: And you know it's you hear people say bonds are back,

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Speaker 1: but we want to see investors really consider taking action

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Speaker 1: in their portfolio with them. Yeah, we've also got trade

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Speaker 1: as effectively pricing and cuts from the fit by yeah,

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Speaker 1: and do you feel that's a realistic scenario, So the

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Speaker 1: markets pricing that in the FED definitely didn't say that yesterday.

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Speaker 1: They didn't indicate that there'd be any rate cuts in

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Speaker 1: twenty twenty three. But if you do want to again

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Speaker 1: lean into the end of the rate hiking cycle and

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Speaker 1: possibly the softening of the economy or downturn in the economy,

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Speaker 1: you might consider adding more duration your portfolio, taking on

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Speaker 1: reposition your portfolio to go longer out on the curve,

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Speaker 1: just even in treasuries with you no credit risk. But

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Speaker 1: we are seeing some activity in our products that even

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Speaker 1: just this week we saw, you know, a little bit

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Speaker 1: taking stepouts in the two three years also the five

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Speaker 1: and seven year traded for US. And so we think

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Speaker 1: that people if you do take that view and the

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Speaker 1: market does have that view that rates may be going

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Speaker 1: down at the end of the year, you can step

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Speaker 1: into that. In a way, I think it's really smart

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Speaker 1: using treasury products. Well, you have four forms of tightening

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Speaker 1: that I mentioned earlier. I just run through them quickly

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Speaker 1: again and get your response to the last one, because

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Speaker 1: that's the only one that's kind of controversial new rate

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Speaker 1: hikes QT, the long and variable lag of the previous

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Speaker 1: rate hikes. Those are all working to suppress the economy

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Speaker 1: and bring down inflation. The last one, the fourth one,

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Speaker 1: would be the bank's cutting lending and the tightening that

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Speaker 1: that provides. And even if you think that the new

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Speaker 1: the new rate hikes are almost at the end of

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Speaker 1: their run, the banks are only just getting started with this. Now,

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Speaker 1: how pervasive would this be? Yeah, I think it's complementary. Um.

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Speaker 1: It's not a great thing to talk about when you're

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Speaker 1: thinking about tightening um liquidity or lending standards at the banks,

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Speaker 1: because that does affect companies and starts to really put

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Speaker 1: a little bit of pressure on the economy. But at

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Speaker 1: the same time, it just it would help the other

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Speaker 1: inflationary fight that's going on that the Feds waging. And

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Speaker 1: so it would be complementary. And you know, if we

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Speaker 1: have to get the only way forward is through that

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Speaker 1: may be inevitable, and that may be a side effect

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Speaker 1: of this UM financial stability issue in place or in

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Speaker 1: today that you know, could help us get through this UM.

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Speaker 1: But hopefully it will be you know, as as soft

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Speaker 1: landings as we would hope it would be but that

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Speaker 1: is what market expects. That market expects some kind of

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Speaker 1: downturned right now and is looking at rates reducing by

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Speaker 1: the end of the year. That is not with the

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Speaker 1: FED is saying. And you know, if you take that view,

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Speaker 1: you have ways to the risk to your argument. The

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Speaker 1: risk to your argument and your thesis is that inflation

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Speaker 1: doesn't come down because you're not going to be very

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Speaker 1: happy getting a bond yielding three to four percent of

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Speaker 1: inflation is running at seven percent, So that's the main

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Speaker 1: threat to your argument. Do you think that inflation is

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Speaker 1: that sticky? I don't. I don't I really have a

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Speaker 1: view if it's that sticky. I think this quarter is

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Speaker 1: just so dramatic in terms of what we thought we

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Speaker 1: were going into the year expecting, and we need more

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Speaker 1: time to process all the conflicting economic data, the confounding

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Speaker 1: banking situation. So I think everyone needs more time, but

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Speaker 1: I think they're still You can't deny the opportunities and

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Speaker 1: using yield in your portfolio this year to help combat

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Speaker 1: any of it. Some of it you need to need

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Speaker 1: to really consider it before you just you know, go away. Yeah. Look,

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Speaker 1: we also had Jaipal this week reiterating its commitment to

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Speaker 1: that two percent inflation target that does seem very little,

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Speaker 1: very far away. Yeah, do you think it's realistic? And

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Speaker 1: if so, how long before we get there? Well, the

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Speaker 1: thing is is that even through all of last year,

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Speaker 1: when we ignored what the FED said, the FED double down,

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Speaker 1: and the FED has just demonstrated conviction and vigilance against

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Speaker 1: this fight on inflation. So m realistic if if, if

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Speaker 1: you know, some of the other confounding factors come to

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Speaker 1: be with either financial stability or an economic downturn or

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Speaker 1: tightening lending standards, like, it's realistic that the Fed's going

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Speaker 1: to continue their fight, and they reiterated it yesterday. And

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Speaker 1: we know many many were calling for a pause, many

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Speaker 1: were calling for you know, a lookout point to see

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Speaker 1: what would be next. But they seem that they're going

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Speaker 1: to charge ahead and that's their goal. And I think

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Speaker 1: other central banks have also conveyed the same. So you

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Speaker 1: mentioned we talked about sovereigns, so we haven't talked about munis.

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Speaker 1: You did also mention credit. For you what's the sweet

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Speaker 1: spot in credit? So we we really like UM people

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Speaker 1: to consider high yield and one of the sweet spots

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Speaker 1: we see is in UM we have a product that

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Speaker 1: focuses on credit ratings, and there's a we have a

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Speaker 1: product that only has single b names in it, and

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Speaker 1: so we really want people to think about, you know,

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Speaker 1: some of the fundamentals that are in high yield right now,

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Speaker 1: either in the credit rating side or even in sectors.

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Speaker 1: Because there's a lot of resiliency in corporate balance sheets UM,

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Speaker 1: that would lend that some of these some of these

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Speaker 1: hild issuers have resiliency through this downturn and may actually

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Speaker 1: be rising stars out of high yield and maybe being

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Speaker 1: upgraded to UM investment grade. But we would think the

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Speaker 1: single bum space is one of the sweet spots because

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Speaker 1: of its lower duration related you know, in relative to

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Speaker 1: investment grade, and people should consider looking at different cuts

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Speaker 1: of credit are closely even in hygyel. This is Bloomberg

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