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Speaker 1: Broadcasting live to New York Cloomberg eleventh ry old to Washington,

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Speaker 1: d C, Bloomberg one to Boston, Bloomberg twelve honer to

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Speaker 1: San Francisco Bloomberg nine sixty to the Country series XM

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Speaker 1: Channel one nineteen and around the globe the Bloomberg Radio

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Speaker 1: plus AVN Boomberg dot Com. This is Bloomberg Surveillance. Good morning.

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Speaker 1: I'm Karen Moscow along with Tom Keene and Michael McKee,

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Speaker 1: and the opening Vale is brought to you by s

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Speaker 1: c I have evolving investor and regulatory demands affected your

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Speaker 1: investment firms operational readiness. Imagine transforming your business with SCI's

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Speaker 1: global platform and sc i c dot com slash. Imagine

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Speaker 1: stocks higher at the open the SNP five hundred up

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Speaker 1: seven tenths per cent or thirteen points in nineteen thirty one,

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Speaker 1: Dow Jones Industrial average up six tenths per cent or

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Speaker 1: ninety five points to sixteen thousand, four hundred eighty eight,

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Speaker 1: and then asked to acts up one percent or forty

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Speaker 1: four points to forty ft eight. Ten year Treasury down

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Speaker 1: three thirty seconds, the yield one point seven five per

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Speaker 1: set yield on the two year point seven six percent.

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Speaker 1: Now I'm ex scrude oil up six or a dollar

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Speaker 1: eighty four barrel called my school down one point eight

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Speaker 1: percent or two dollars twenty says to twelve O eight

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Speaker 1: sixty and ounce the euro a dollar ten seventeen, the

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Speaker 1: yen one thirteen point one six, Tom and Mike Karen,

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Speaker 1: thanks so much. Let's cut to the chase took Lisa Brando.

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Speaker 1: It's w us with Bloomberg gadflies. She's thought extraordinarily in

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Speaker 1: the last oh three or four or five days getting

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Speaker 1: through the weekend on where we are in the bond market.

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Speaker 1: I know, we're wonderful article on hedging or the lack

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Speaker 1: of hedging in European bonds in the extremely sophisticated zero

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Speaker 1: hedge article which was done off Morgan Stanley and I

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Speaker 1: believe it was Deutsche Bank research on the CLO the

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Speaker 1: secure ice market is well. Let me cut to the

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Speaker 1: general chase. What's the sweat factor out there now in

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Speaker 1: fixed income that we don't know what we don't know?

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Speaker 1: And it's really bad? That's how do you guys? How

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Speaker 1: do you can I love what you just said? What

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Speaker 1: do you mean by a general phrase like really bad? Well,

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Speaker 1: so there's a general concern that central central bank policies

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Speaker 1: that we really have not explored before, which is really

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Speaker 1: the negative right policy everybody agrees with that are going

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Speaker 1: to create unintended consequences, whether you call it asset bubbles,

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Speaker 1: whether you call it just unintended consequences, And we're seeing

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Speaker 1: some of the effects of those in the US already

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Speaker 1: as the credit cycle starts to turn, and arguably you're

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Speaker 1: seeing the as you see the bust of the energy

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Speaker 1: boom in the one hil price boom, you're seeing the

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Speaker 1: losses materialize in a meaningful way from all of the

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Speaker 1: investors who bought the corporate debt of these market with

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Speaker 1: all of your context. Is the market operating right now

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Speaker 1: in a relatively comfortable and normal fashion. If you have

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Speaker 1: a piece and you need to go sell it, is

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Speaker 1: there a bid there? It depends what it is. But

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Speaker 1: most people who I talked to, particularly in more distressed debt,

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Speaker 1: say absolutely not. And even though the Federal Reserve of

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Speaker 1: New York Federal Reserve has come out and said treasury

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Speaker 1: liquidity in the bond market is not that impaired, they

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Speaker 1: said that again and again. TAB Group came out with

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Speaker 1: the report today where they said we're not using the

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Speaker 1: right tools to engage liquidity, and when I talk to traders,

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Speaker 1: they say, we cannot sell what we wanted. Like, I

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Speaker 1: don't have an opinion on this other than to say

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Speaker 1: I am certain. In the last four or five days,

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Speaker 1: this has become a new talking point. What Lisa just

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Speaker 1: brilliantly conveyed, Well, it's been going on for a while.

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Speaker 1: They're concerned about liquidity in the markets. I guess um

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Speaker 1: the big issue is that in March we get the

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Speaker 1: resets from the banks and the energy industry and nobody knows.

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Speaker 1: And I don't know why nobody knows that if people

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Speaker 1: aren't counting up the loans or I mean, why is

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Speaker 1: there so much uncertainty about this? Do you suppose when

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Speaker 1: you say the unknowns about whether banks will re up

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Speaker 1: the credit lines with how many energy companies loans are

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Speaker 1: likely to be in distress at that point, and then

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Speaker 1: you know, you can try to guess whether or not

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Speaker 1: they're going to be re uped or not. But uh,

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Speaker 1: you know, how bad is it? Well? I think the

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Speaker 1: US banks have disclosed some information. There's a question about

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Speaker 1: how complete that is or whether it's it's a fair

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Speaker 1: evaluation of the potential stresses in these companies. I think

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Speaker 1: underlying this is attention where banks do not want to

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Speaker 1: step away from companies in distress. This is their job

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Speaker 1: to stick with them. Jamie Diamond has been very very

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Speaker 1: vocal and I've spoken saying we're not going to abandon them.

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Speaker 1: That is our job. We stayed by them during the crisis.

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Speaker 1: They don't want to basically mess up themselves because they

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Speaker 1: have a lot of money tied up with these companies.

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Speaker 1: But that is going to prolong the pain if these

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Speaker 1: companies are going to survive. So that's another big question

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Speaker 1: underlying via. Part of this is a trunch analysis. I'm

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Speaker 1: not asking you to come up with wisdom here, but

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Speaker 1: the last time we had the fun Derby, the surprise

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Speaker 1: was better quality tranches or pieces of slices of derivatives

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Speaker 1: or breakups of bonds, better quality tranches were affected. That's

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Speaker 1: somewhat in the big short as well. Is the analysis

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Speaker 1: now about the garbage out there entranches or is it

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Speaker 1: as well about better quality paper? Well, the credit lines

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Speaker 1: that the banks hold arguably are comparable to those top

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Speaker 1: tier tranches because their first lean loans. This has to

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Speaker 1: do with whether these companies are going to get so

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Speaker 1: wiped out that their assets will be completely worthless. At

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Speaker 1: that point, you'll see really big losses for these banks.

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Speaker 1: Now there's a question of whether that could happen. But

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Speaker 1: with the shale companies, should this low oil price environment

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Speaker 1: persists for long enough, there could be pretty low recoveries,

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Speaker 1: especially given some of the financing that these companies have

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Speaker 1: managed to sort of survive on. So this is a

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Speaker 1: big question. I think in Europe there is a lot

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Speaker 1: less certainty around how much exposure there is. Let's go

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Speaker 1: to your article. We have like, excuse me, ten, twelve,

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Speaker 1: fifteen of these articles a day. Lesta is usually the

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Speaker 1: weakest um. But today, good luck, good luck trying, good

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Speaker 1: luck trying to hedge against a European bond risk. This

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Speaker 1: is a brilliant story led by by by yield, negative

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Speaker 1: interest rates, non correlations. Can anybody get any business done

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Speaker 1: in Europe right now? Well, here's the issue is that

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Speaker 1: people are being pushed into negative yielding debt and there's

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Speaker 1: no way for them to hedge those bets. You can't

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Speaker 1: short sell negative yielding government debt, you can't. You know,

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Speaker 1: they're not There's like an active options or there's no

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Speaker 1: clear derivatives that actually are negative, so you got to

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Speaker 1: find an alternative. Well there, It's just it's a very

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Speaker 1: lopsided market, and it's a problem when you have such

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Speaker 1: a high concentration such a you know, a flood in

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Speaker 1: one direction, you're going to get potentially a very messy

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Speaker 1: X and when everybody moves in the other direction. And

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Speaker 1: you know, there was some of that in the US,

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Speaker 1: given what the monetary policies over here were like, but

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Speaker 1: in Europe it's even more so. So why do you

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Speaker 1: buy it? Why? Why do you play Russian roulette? Well,

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Speaker 1: if central bankers are going to continue to buy this stuff,

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Speaker 1: first of all, then you're going to potentially get a

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Speaker 1: momentum trade where you can profit from prices going up

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Speaker 1: and people buying that I don't buy as much. There

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Speaker 1: also are just mandates we're certain fund managers have to

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Speaker 1: buy the developed market sovereign debt in Europe. One minute,

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Speaker 1: what's the number one thing you're trying to observe this

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Speaker 1: week when you do read your research, when you're right

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Speaker 1: for glad flight, what gadfly? What's the one thing you're

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Speaker 1: trying to figure out this week I'm trying to figure

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Speaker 1: out some of the losses, and I'm also trying to

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Speaker 1: figure out how the big institutions are managing their allocations

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Speaker 1: right now. How do you know the losses if you

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Speaker 1: haven't taken the bond a bid? And know that's a

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Speaker 1: great question. When you start seeing the bankruptcies, you have

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Speaker 1: a better sense. As they say that the wind is

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Speaker 1: shifted in the last five or six I mean, it's

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Speaker 1: just amazes Well, it doesn't amaze me. Markets being markets,

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Speaker 1: there would be so much fear on so little information.

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Speaker 1: I guess that's why there's so much fear. Um. You

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Speaker 1: could have done time a favor and you could have

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Speaker 1: said that your goal this week is to figure out

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Speaker 1: how the Red Sox are gonna play in two thousand sixteen.

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Speaker 1: I'm with Mets. I'm a Mets affiliated, so they're gonna

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Speaker 1: win everything this year. At least they told me five times.

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Speaker 1: Um be fly out on Twitter, pay attention to Bloomberg,

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Speaker 1: gad fly there's always something where you go. I didn't

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Speaker 1: know that. It's very cool. It is. Seriously, ten twelve,

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Speaker 1: fifteen articles a day. You're not going to read them all.

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Speaker 1: We get that, but you're gonna find one or two

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Speaker 1: change your dialogue through the day. Thursday's Lisa's Day, So

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Speaker 1: just you don't think you're gonna ignore until Thursday at

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Speaker 1: wis is with Bloomberg gad Fly as well. A nice

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Speaker 1: move sixteen thousand, five seventies seven on the damp up

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Speaker 1: twenty three points. The vix a positively average twenty point

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Speaker 1: one zero hours. Brought you by Volvo Cars, White Planes.

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Speaker 1: Visit Volvo Cars, White Planes dot com. Here's John Tucker

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Speaker 1: with the latest news headline. Well, Michael and Tom and

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Speaker 1: the Afghan officials as a suicide bomber targeting and police

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Speaker 1: commander killed at least thirteen people today, including nine civilians

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Speaker 1: in the northern province. The Taliban claiming responsibility. Senator Bernie

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Speaker 1: Sanders ahead of tomorrow's South Carolina primary. Campaigning in Greenville Sunday,

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Speaker 1: got a big response from a crowd while talking about

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Speaker 1: going after Wall Street. Sanders has two more shots South

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Speaker 1: Carolina in Super Tuesday to level the playing field on

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Speaker 1: the race for the Democratic presidential nomination after his loss

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Speaker 1: in Nevada Saturday. He's tied with Hillary Clinton for pledged delegates,

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Speaker 1: but Clinton establishment party representatives are giving her hundreds of

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Speaker 1: super delicate soun. A lawmaker is again considering a bill

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Speaker 1: to raise the smoking age from nineteen to twenty one

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Speaker 1: in New Jersey and Assembly committee there is scheduled the

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Speaker 1: way in on the legislation. The bill would find retailers

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Speaker 1: up to a thousand dollars if they sell to anybody

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Speaker 1: twenty years old or younger. And Bill Cosby's wife will

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Speaker 1: finally have to answer questions under oath today related to

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Speaker 1: the sexual assault LOS sits against her husband. Camillo Cosby

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Speaker 1: has been finding the deposition for months, setting spousal privilege,

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Speaker 1: a judge's rule that as her husband's business manager, Mrs

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Speaker 1: Cosby has more to share than pillow talk. Yeah, gloob

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Speaker 1: will News twenty four hours a day, powered by twenty

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Speaker 1: four hundred journalists more than one hundred fifty news bureaus

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Speaker 1: around the world. I'm John, Tucker, Michael and Tom John.

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Speaker 1: Thanks so much. Gold South Oil Up, Gold Down Travel

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Speaker 1: nine make a twelve ten the ounce at West Texas

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Speaker 1: up almost two dollars from New York and worldwide. Bloomberg

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