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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybreak euro podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Tuesday, the

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Speaker 2: second of April in London. I'm Stephen Carroll. Coming up today.

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Speaker 2: Israel strikes Iran's embassy compound in Syria, as regional tensions

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Speaker 2: in the Middle East escalate. Market's cool on the prospect

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Speaker 2: of a June ratecut by the Federal Reserve as the

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Speaker 2: US economy refuses to slow down. Plus, we'll tell you

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Speaker 2: why Donald Trump's net worth dropped by a billion dollars

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Speaker 2: in just one day. Let's start with a roundup of

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Speaker 2: our top stories. Iran says Israel has killed a top

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Speaker 2: military commander in several others in an attack on its

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Speaker 2: embassy compound in Syria. Iranian and Syrian state media reported

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Speaker 2: the airstrike in Damascus in what would mark a significant

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Speaker 2: escalation of tensions between the longtime adversaries. Iran's ambassador to Syria,

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Speaker 2: Hussein Akbari, vowed a decisive response.

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Speaker 3: Designist regime definitely knows better than anyone that such crimes

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Speaker 3: in violating international law will have its response in an

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Speaker 3: appropriate time.

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Speaker 2: That Iran's ambassador to Syria there. The Israeli military, meanwhile,

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Speaker 2: i said it wouldn't comment on foreign media reports. The

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Speaker 2: news of the strike comes after Israel agreed to in

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Speaker 2: person talks with the United States over its controversial plans

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Speaker 2: to invade the city of Rafa in southern Gaza. Bond

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Speaker 2: traders are scaling back expectations for interest rate cuts after

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Speaker 2: a measure of US factory activity showed expansion for the

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Speaker 2: first time since twenty twenty two. The ISM manufacturing report

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Speaker 2: for March exceeded all estimates in Bloomberg's survey of economists.

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Speaker 2: According to former New York Fed president and Bloomberg Opinion

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Speaker 2: columist Bill Dudley, monetary policy isn't restrictive enough to spare

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Speaker 2: rate cuts right now.

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Speaker 4: There's a bit of a a avail going on the

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Speaker 4: long legs of man policy versus the easing of financial conditions,

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Speaker 4: And my personal opinion is Madre policy is not really

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Speaker 4: exerting that much restraint on the economy, and that's why

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Speaker 4: the FED has been on this path of being having

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Speaker 4: to stay higher for longer.

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Speaker 2: Bloomberg companion columnist and former New York FLED president Bill

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Speaker 2: Dudley speaking there, traders are currently pricing and around seventy

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Speaker 2: basis points of cuts for this year versus more than

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Speaker 2: one hundred and fifty basis points at the start of

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Speaker 2: the year. Bloomberg Economics has run a million simulations to

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Speaker 2: test the fragility of the US debt outlook. Nearly ninety

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Speaker 2: percent of them reached the same conclusion borrowing is on

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Speaker 2: an unsustainable path. The forecast model, which uses market pricing

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Speaker 2: for future interest rates and data on the maturity profile

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Speaker 2: of bonds, shows debt equally equaling one hundred and twenty

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Speaker 2: three percent of GDP by twenty thirty four. The analysis

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Speaker 2: comes as Citadel founder Ken Griffin issued a similar warning

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Speaker 2: to his investors, calling the US national debt a growing

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Speaker 2: concern Bloomberg's Charlie Palette as it details.

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Speaker 3: He cites US national debt as quote a growing concern

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Speaker 3: that cannot be overlooked. In the letter, a copy of

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Speaker 3: which was obtained by Bloomberg, Griffin said net interest spending

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Speaker 3: is estimated to reach three point one percent of gross

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Speaker 3: domestic product for twenty twenty three. Citing Congressional Budget Office estimates,

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Speaker 3: He says that is a percentage point more than the

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Speaker 3: average from nineteen seventy four to twenty twenty three in

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Speaker 3: New York Charlie Pellett Bloomberg.

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Speaker 2: Radio Inflation in UK shops has slowed to its lowest

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Speaker 2: level in more than two years. The British Retail Consortium

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Speaker 2: says the pace of price rises slowed to one point

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Speaker 2: three percent last month, the lowest since December twenty twenty one.

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Speaker 2: Food price inflation also eased for tenth month in a row,

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Speaker 2: to three point seven percent, as if markets continue to

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Speaker 2: compete for customers. The survey offers encouraging signs that headline

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Speaker 2: inflation is slowing, raising hopes for interest rate cuts from

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Speaker 2: the Bank of England. Donald Trump's net worth fell by

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Speaker 2: a billion dollars as shares of his social media business tumbled.

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Speaker 2: Trump Media and Technology Group stock fell by twenty one

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Speaker 2: percent after it disclosed a fifty eight million dollars loss

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Speaker 2: for last year that's erased and he gains that it's

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Speaker 2: made since its back merger last week, though the company

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Speaker 2: is still worth six point six billion dollars. The form

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Speaker 2: president's legal woes also continue, with Boomberg's at baxteron Air reports.

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Speaker 5: The payment of the one hundred and seventy five million

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Speaker 5: dollar bond puts his massive civil fraud verdict of four

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Speaker 5: hundred and fifty four million on hold while he appeals,

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Speaker 5: and it assures that Attorney General Letitia James cannot begin

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Speaker 5: seizing Trump assets in another trial, the hush money. The

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Speaker 5: judge has broadened the gag order after he says Trump

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Speaker 5: attacked him and his daughter on social media. Ed Baxter

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Speaker 5: Bloomberg Radio and.

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Speaker 2: The US High Speaker Mike Johnson is calling for a

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Speaker 2: new aid for Ukraine to be approved right away. The

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Speaker 2: Republican leader is still working to soften opposition the plans,

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Speaker 2: leaving doubts about whether assistance will reach Kiev in time

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Speaker 2: to make a difference. Evelyn Farcas, executive director of the

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Speaker 2: McCain Institute, says US support will be pivotal in deciding

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Speaker 2: the war's outcome.

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Speaker 6: There are a lot of factors that indicate that Ukraine

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Speaker 6: is not only winning, but will come out victorious in

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Speaker 6: the end provided we give them this assistance. The frozen

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Speaker 6: assets are three hundred and thirty billion dollars. If Ukraine

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Speaker 6: could get that, it will for sure outlast Russia in

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Speaker 6: this war and likely prevail. And also it'll provide a

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Speaker 6: nice glide path for them into European Union membership.

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Speaker 2: Avelan Farcass of the McCain Institute speaking there. The Senate

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Speaker 2: has already passed its own Ukraine aid plan in February,

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Speaker 2: in u version from the House could cause further delays

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Speaker 2: to the funding. Another story that caught our eye this

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Speaker 2: morning about so called golden passport schemes from Caribbean countries

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Speaker 2: getting much more expensive. This as the US and European

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Speaker 2: Union puts pressure on states to crack down on such sales.

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Speaker 2: So a group of four Caribbean countries, including Grenada and

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Speaker 2: Saint Kitts and Nevis have agreed to charge at least

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Speaker 2: two hundred thousand dollars for their passports starting on the

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Speaker 2: thirtieth of June. That's double the current rate in some cases.

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Speaker 2: The countries are also going to close loopholes that allowed

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Speaker 2: passports to be sold at a discount now. These golden passports,

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Speaker 2: as they're known, give Visa free access to the EU,

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Speaker 2: the UK and other countries, which make them popular with

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Speaker 2: nationalities that would normally be required to apply for travel permits.

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Speaker 2: Demand for these passports is soaring, according to APEX Capital Partners,

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Speaker 2: which is a firm that advises individuals on second citizenship.

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Speaker 2: They say that interest is up three hundred percent during

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Speaker 2: the first two months of this year. These citizenship buy

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Speaker 2: investment programs are also big money makers for these countries.

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Speaker 2: They rake in around five hundred and eighty million dollars

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Speaker 2: a year in the Caribbean. In some cases can make

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Speaker 2: up more than half of the national revenue of some

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Speaker 2: of these tiny island nations. Saint Lucia, though, where passports

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Speaker 2: sell for one hundred thousand dollars, didn't sign this agreement,

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Speaker 2: which could undermine the new deal. But another store that

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Speaker 2: of interest to us this morning. That's turned though. Now

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Speaker 2: to those reports from Iranian and Syrian media of an

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Speaker 2: Israeli air strike on Iran's embassy compound in Syria. It's

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Speaker 2: the latest episode and the long running shadow war between

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Speaker 2: Israel and Iran. Our Midleast Breaking news editor Dana Christ

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Speaker 2: joins us now for more. Dana, great to have you

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Speaker 2: with us. What can you tell us about what we

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Speaker 2: know about this air strike?

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Speaker 7: Good morning. Ron and state run Syrian media, as well

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Speaker 7: as activists on the ground there, say Israeli strikes struck

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Speaker 7: a compound linked to Iran's embassy and Damascus, killing two

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Speaker 7: generals and five others. So images out of Syria show

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Speaker 7: a building completely destroyed demolished as a result. This is

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Speaker 7: quite a major strike and comes a few days after

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Speaker 7: another suspect that Israeli a strike in Syria killed six

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Speaker 7: ALA members, but that was in a Leppo, not in

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Speaker 7: the heart of Damascus. Well. Israel rarely comments on these strikes,

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Speaker 7: but has repeatedly said it would prevent first weapons transfersd

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Speaker 7: to Iran linked militias via Syria and that it is

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Speaker 7: part of its ongoing war and would attack anything that

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Speaker 7: would threaten its existence.

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Speaker 2: Pretty much yeap, Israel has been striking targets linked to

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Speaker 2: Iran and Syria for years. These strikes have stepped up

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Speaker 2: though since the war on Gaza began last October. How

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Speaker 2: much of an escalation is this to target more directly

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Speaker 2: around By targeting this compound link to the embassy.

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Speaker 7: Israel has up the ante with these strikes, especially this year,

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Speaker 7: actually more so then since October seven, and activists say

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Speaker 7: that at least thirty suspected Israeli strikes have hit a

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Speaker 7: round linked acid. This one is an escalation because like

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Speaker 7: you said it hit an Iran embassy compound. This is

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Speaker 7: a direct hit and not just some base somewhere in Syria,

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Speaker 7: a direct attack on a more official representation for Iran.

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Speaker 7: It's also at the same time embarrassing for Iran and

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Speaker 7: its allies who have reduced the attacks from Syria and

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Speaker 7: a rock on US assets there, and now it has

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Speaker 7: to save face somehow and to these attacks, as many

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Speaker 7: of of the officials have been saying, what.

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Speaker 2: Sort of response might we expect from Iran in this case?

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Speaker 7: So earlier this year Iron struck Irbil and said it

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Speaker 7: attacked a spy base and claimed it was linked to

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Speaker 7: the mazade It could perhaps do the same and hit

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Speaker 7: somewhere that doesn't really hit a nerve, but it shows

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Speaker 7: that it can retaliate. We could see the Hothy step

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Speaker 7: in up attacks in there at sea, or we could

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Speaker 7: see militias in Iraq and Syria regaining that momentum and

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Speaker 7: start attacking perhaps US basis. We did see a report

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Speaker 7: that's still unverified by US that the US shot down

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Speaker 7: and attack drone targeting and outpost in Syria today.

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Speaker 2: And at the same time, of course, the background to

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Speaker 2: this Dona is the continuing war in Gaza. What we've

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Speaker 2: been hearing there is that the US and Israel have

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Speaker 2: agreed to an in person meeting to discuss and expected

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Speaker 2: Israeli invasion of Rafa, the city in the south of Gaza.

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Speaker 2: Is that a sign of improving ties between the US

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Speaker 2: and Israel.

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Speaker 7: I'd say it's a sign that both countries one of

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Speaker 7: cool tensions that have really hit a peak last week

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Speaker 7: with the US abstaining from a Security Council resolution that

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Speaker 7: demanded a ceasefire. Israel now is growing more under pressure

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Speaker 7: and more isolated in the region and kind of the

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Speaker 7: war with the world and needs its most important ally

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Speaker 7: and the US at the same time also needs Israel

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Speaker 7: to listen to show that it can rain in Prime

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Speaker 7: Minister Natan Yeho and appease its own allies in the

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Speaker 7: West and Arab countries as well, who have also grown

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Speaker 7: frustrated with Israel not listening and just doing things as

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Speaker 7: it wants.

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Speaker 2: Okay, Dona Chrishar Middleast Breaking these editor, thank you very

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Speaker 2: much for bringing us up to date with those stories

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Speaker 2: from the region. Let's turn next to the major market

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Speaker 2: story today that's stronger than expected US factory data reinforcing speculation,

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Speaker 2: the federalers are won't rush to cut interest rates. ISM

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Speaker 2: manufacturing index stering expansion for the first time since twenty

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Speaker 2: twenty two. Poomberg TV or Crazy Gift is with us

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Speaker 2: for more on this morning to you Crazy. Let's talk

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Speaker 2: to this data first. How much does the ISM reading

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Speaker 2: feed into the other pieces of data that we've had

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Speaker 2: and the kind of overall narrative around the US economy.

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Speaker 1: So the ISM numbers don't usually get that much attention

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Speaker 1: unless they confirm a trend that you've seen in CPI

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Speaker 1: numbers and PPI numbers and pc deflators and all sorts

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Speaker 1: of other fun economic data. And that's where the ISM

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Speaker 1: data actually matters in particular. And when you look at

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Speaker 1: the ISM specifically, we tend to look at it more

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Speaker 1: for its manufacturing numbers and services numbers, simply because manufacturing

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Speaker 1: in the United States has been the kind of the

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Speaker 1: laggard in some ways. That's where you've seen the deceleration.

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Speaker 1: It's more kind of capex and sensitive industry industry sensitive obviously,

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Speaker 1: but it doesn't necessarily matter for the broader economic picture,

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Speaker 1: simply because some of that is the function of supply

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Speaker 1: chain issues. Or union issues for example, Whereas services make

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Speaker 1: up you know, seventy eighty percent of the American economy,

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Speaker 1: so you really want to keep an eye on the

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Speaker 1: services data. When the ism comes in hot, though, that's

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Speaker 1: when it becomes a problem, especially because it's in such

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Speaker 1: stark contrast to the down trend that you've seen in

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Speaker 1: that particular data set, and that's when you start to see, okay,

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Speaker 1: we'll hold on a second, maybe those qualms around reacceleration

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Speaker 1: of inflation start to kind of come to the forefront,

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Speaker 1: and that's why you saw such a massive reaction in

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Speaker 1: treasuries yesterday. Of course Europe was off, but when you

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Speaker 1: look at the United States and even in Asia, this

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Speaker 1: big ten fourteen basis point move in today, it's that

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Speaker 1: sensitivity that you're seeing.

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Speaker 2: So put that sort of scale of that move in

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Speaker 2: context first, because we were talking at one stage about

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Speaker 2: traders pulling back on their bets on caught in June

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Speaker 2: to less than fifty percent, So that's sort of rebalanced

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Speaker 2: a little bit since kind of in the scale of

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Speaker 2: how much recent data points have moved markets, why does

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Speaker 2: this come in.

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Speaker 1: It comes in as pretty strong actually, So this was

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Speaker 1: a pretty knee jerk reaction, because remember, if you look

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Speaker 1: at the FED swaps pricing, and you mentioned the June

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Speaker 1: pricing in particular, you've had it go from at the

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Speaker 1: beginning of the year, which was just three short months ago,

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Speaker 1: seven to six or six to seven rate cuts now

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Speaker 1: pricing in somewhere between three to two. I think you're

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Speaker 1: now at about two rate cuts at the moment, and

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Speaker 1: even that time, Whene's getting pushed back further and further

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Speaker 1: because the initial one was priced in for June. Now

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Speaker 1: I think the first one is being priced in for

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Speaker 1: July last time I checked. This is significant as well

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Speaker 1: on the nominal side, because one of the concerns here

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Speaker 1: was that you see all this kind of repricing in

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Speaker 1: the FED swaps market kind of in that nitty gritty piece,

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Speaker 1: but you're not seeing it on the surface, which is

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Speaker 1: why you kind of see this kind of range bound

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Speaker 1: four twenty to four thirty move within the ten year

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Speaker 1: yield for example. The problem here is that the surface

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Speaker 1: kind of volatility has been not volatile at all, so

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Speaker 1: very lack of volatility not moving, whereas the kind of

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Speaker 1: underlying mechanics and the contracts have been more volatile, and

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Speaker 1: that disconnect has been an issue to some who've said, well,

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Speaker 1: maybe the bond market is too sanguin right now. Maybe

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Speaker 1: it's pricing in the wrong thing, or maybe it's pricing

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Speaker 1: in too much of inflation or too many rate cuts,

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Speaker 1: and some would argue it both ways. The concern here

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Speaker 1: is for the people who are very excited about bond

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Speaker 1: volatility would say, well, actually, now this is the bond

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Speaker 1: volatility way up to the economic data, and you're seeing

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Speaker 1: it up on the surface as opposed to just on

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Speaker 1: the underlying. The other side of this equation is that

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Speaker 1: this is a pretty big move if you don't want

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Speaker 1: ten to fourteen basis point move, because that's what happened

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Speaker 1: last fall in the long end of the curve. And

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Speaker 1: if you see sustain a volatility like that for say

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Speaker 1: a month two months, that's what catches the eye of

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Speaker 1: not just central bankers in the States, but central bankers

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Speaker 1: around the world, saying this adds to some of the

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Speaker 1: treasury and guilt pain and boons pain and JGB pain

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Speaker 1: that you see around the world.

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Speaker 2: And of course another factor involved in all of this

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Speaker 2: too is the question of supply in the markets linked

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Speaker 2: to the debt outlook in the US as well, and

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Speaker 2: Buber Economics it has been looking at this, running a

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Speaker 2: million forecast simulations on the US debt outlook and the

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Speaker 2: pointing the vast majority of the most ninety percent borrowing

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Speaker 2: being an unsustainable path. How big a problem is US

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Speaker 2: government test?

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Speaker 1: Oh, it's a big problem, but it's one of those

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Speaker 1: it's enormous, but it's one of those things that's kind

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Speaker 1: of like viewed at the moment rightly or wrongly, as

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Speaker 1: kind of in that government shut down era train of thought. So,

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Speaker 1: which is basically that this will solve itself out. This

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Speaker 1: is a long term problem. It's not going to affect

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Speaker 1: us at the moment. So you hear these warnings from

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Speaker 1: the Congression crisis, right, You hear from the Congression Budget Office,

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Speaker 1: for example, making this really big claim that I think

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Speaker 1: by twenty thirty four that you're going to start to

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Speaker 1: see one hundred and nineteen percent of debt to GDP

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Speaker 1: for example, for context, those are along the numbers that

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Speaker 1: you saw in Portugal or Italy back in the European

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Speaker 1: debt crisis. Now imagine the world's largest economy having those

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Speaker 1: same GDP numbers. Bloomer Economics saying, well, hold on a second,

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Speaker 1: it gets a whole lot worse. To your point, and again,

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Speaker 1: this is something that's going to have longer term implications,

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Speaker 1: but for the short term, it's that longer, thirty year

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Speaker 1: kind of maturity that you want to look at in

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Speaker 1: the long term, because remember, these were the concerns that

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Speaker 1: showed up last fall that created issues in terms of

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Speaker 1: liquidity in the long end, that created issues for the BOJA.

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Speaker 1: For example, Governor you wade A famously saying that they're

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Speaker 1: watching what's going on in the thirty year mortgage market

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Speaker 1: in the United States, which is weird for Japan. But

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Speaker 1: it's a problem, just not yet.

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