1
00:00:02,240 --> 00:00:05,640
Speaker 1: Global business news twenty four hours a day at Bloomberg

2
00:00:05,680 --> 00:00:08,760
Speaker 1: dot com, the Radio plus Mobile Act and on your radio.

3
00:00:09,039 --> 00:00:12,760
Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

4
00:00:12,840 --> 00:00:15,960
Speaker 1: There's updates brought to you by Eisener Emperor. When entrepreneurs

5
00:00:16,000 --> 00:00:19,439
Speaker 1: face challenges like choosing a business structure or access to capital,

6
00:00:19,640 --> 00:00:22,640
Speaker 1: they call the accountants and advisors at Eisner Amper connect

7
00:00:22,680 --> 00:00:26,400
Speaker 1: with them Eisner Emperor dot com. Slash tech global stocks

8
00:00:26,480 --> 00:00:29,480
Speaker 1: are dropping as a slump in Chinese exports drag commodity

9
00:00:29,520 --> 00:00:33,199
Speaker 1: prices lower and brought equities five day winning streak to

10
00:00:33,240 --> 00:00:36,280
Speaker 1: a halt. Japanese government bonds are surging in a haven

11
00:00:36,280 --> 00:00:39,000
Speaker 1: ascid rally that is lifting the yen, golden treasuries. And

12
00:00:39,080 --> 00:00:41,520
Speaker 1: we checked the markets every fifteen minutes throughout the trading

13
00:00:41,600 --> 00:00:44,519
Speaker 1: day on Bloomberg SNP E mini futures down eight and

14
00:00:44,560 --> 00:00:47,760
Speaker 1: a half points DOWNI mini futures down sixty nas documuni

15
00:00:47,800 --> 00:00:50,120
Speaker 1: futures down twenty two of the decks. In Germany's down

16
00:00:50,120 --> 00:00:53,199
Speaker 1: half percent and your treasury up sixteen thirty seconds, the

17
00:00:53,240 --> 00:00:55,840
Speaker 1: yield one point eight four percent. Non max screwed oil

18
00:00:55,880 --> 00:00:58,440
Speaker 1: down a tenth of upper center four since comex gold

19
00:00:58,480 --> 00:01:00,760
Speaker 1: up nine tenths per cent or eleven dollar twenty cents,

20
00:01:01,040 --> 00:01:03,640
Speaker 1: the euro a dollar ten fifteen, the again one thirteen

21
00:01:03,720 --> 00:01:07,080
Speaker 1: point oh seven. That's a Bloomberg business flash, Tom and Mike,

22
00:01:08,880 --> 00:01:12,400
Speaker 1: thank you. Karen Moscow joining us now I'm gonna count him.

23
00:01:12,400 --> 00:01:15,240
Speaker 1: He's global head of rates research at Deutsche Bank. And

24
00:01:15,840 --> 00:01:19,680
Speaker 1: have you put on your global hat because the big

25
00:01:19,720 --> 00:01:22,440
Speaker 1: issue of the week is the European Central Bank and

26
00:01:22,520 --> 00:01:25,160
Speaker 1: what they're going to do. You're on record is saying

27
00:01:25,400 --> 00:01:27,679
Speaker 1: they're going to do more, but it may not be

28
00:01:27,800 --> 00:01:30,480
Speaker 1: what many in the market thinks. It's not necessarily going

29
00:01:30,520 --> 00:01:34,560
Speaker 1: to be a deep cut in the deposit rate, right,

30
00:01:34,640 --> 00:01:38,520
Speaker 1: So the concern recently has obviously been negative rates and

31
00:01:38,600 --> 00:01:41,920
Speaker 1: the extents which they may be hurting the financial system,

32
00:01:42,480 --> 00:01:46,160
Speaker 1: although on the other hand and helping the economy um.

33
00:01:46,200 --> 00:01:48,360
Speaker 1: And the issue is if they cut too deeply, some

34
00:01:48,400 --> 00:01:52,639
Speaker 1: people are gonna perhaps worry again about the financial system

35
00:01:52,680 --> 00:01:56,280
Speaker 1: in terms of profitability being a concern for raising capital

36
00:01:56,360 --> 00:01:58,880
Speaker 1: and things like that. Well, the question is, on the

37
00:01:58,880 --> 00:02:02,040
Speaker 1: other side, do they even have an impact. We are

38
00:02:02,080 --> 00:02:05,680
Speaker 1: not seeing a big increase in bank lending in countries

39
00:02:05,920 --> 00:02:09,960
Speaker 1: where they have imposed in larger open economies where they

40
00:02:10,000 --> 00:02:12,919
Speaker 1: have imposed negative rates. But I think some people look

41
00:02:12,960 --> 00:02:16,000
Speaker 1: at Sweden and Switzerland as a negative rates actually being

42
00:02:16,120 --> 00:02:19,840
Speaker 1: quite helpful. I think the issue there has been the

43
00:02:19,880 --> 00:02:23,280
Speaker 1: structure of the balance sheets of the banks, whereby perhaps

44
00:02:23,320 --> 00:02:25,600
Speaker 1: they have sort of higher loan deposit ratios in the

45
00:02:25,680 --> 00:02:28,760
Speaker 1: contrast to say the Japanese system and perhaps some of

46
00:02:28,760 --> 00:02:31,480
Speaker 1: the other core European facts. So I think it's an

47
00:02:31,480 --> 00:02:34,120
Speaker 1: open debate, and certainly the policymakers are on record as

48
00:02:34,160 --> 00:02:38,040
Speaker 1: being quite constructive on how negative interest rates are helping

49
00:02:38,040 --> 00:02:41,480
Speaker 1: the economy and have the potential to to to to

50
00:02:41,600 --> 00:02:45,080
Speaker 1: raise lending growth potential. But the proof is nerved are

51
00:02:45,160 --> 00:02:48,920
Speaker 1: yet uh not not not definitively, but perhaps going in

52
00:02:48,960 --> 00:02:51,760
Speaker 1: that direction. So I wouldn't rule it out. And I

53
00:02:51,840 --> 00:02:55,160
Speaker 1: think the only issue is comes down to spreads. Basically,

54
00:02:55,200 --> 00:02:58,160
Speaker 1: the idea that banks are constrained to some extent on

55
00:02:58,160 --> 00:03:00,960
Speaker 1: the deposit side because they can't pass through those negative rates,

56
00:03:01,440 --> 00:03:04,519
Speaker 1: and perhaps there's a transitional phase whereby the assets that

57
00:03:04,560 --> 00:03:06,720
Speaker 1: they're buying, uh, you know, they've got to be encouraged

58
00:03:06,760 --> 00:03:09,919
Speaker 1: to to take on sort of assets that are yielding more,

59
00:03:09,960 --> 00:03:11,880
Speaker 1: which obviously means a little bit more risky, but those

60
00:03:12,080 --> 00:03:14,760
Speaker 1: those risky loans are perhaps more supportive to growth. It's

61
00:03:14,760 --> 00:03:17,640
Speaker 1: always great when you're on out on Twitter, somebody said

62
00:03:17,760 --> 00:03:20,960
Speaker 1: Dominique Constant, he's a socialist, and of course you know,

63
00:03:21,000 --> 00:03:24,399
Speaker 1: it's an analysis of balance sheet dynamics. There's an American

64
00:03:24,880 --> 00:03:30,040
Speaker 1: strand lackey in American ethos, everyone for themselves and if

65
00:03:30,040 --> 00:03:33,240
Speaker 1: we had less taxes things would solve out. It's sort

66
00:03:33,240 --> 00:03:37,000
Speaker 1: of sort of a pseudos supply side feel. Can America

67
00:03:37,240 --> 00:03:42,000
Speaker 1: move forward given the realities of global balance sheets and

68
00:03:42,000 --> 00:03:46,920
Speaker 1: and just the mass, the inertial mass of the global system,

69
00:03:47,000 --> 00:03:51,520
Speaker 1: that that nineteen century American spirit can retain. I mean,

70
00:03:52,000 --> 00:03:56,440
Speaker 1: I'm definitely not a stationist. Everyone who knows me, I'm

71
00:03:56,480 --> 00:04:00,760
Speaker 1: a libertarian, and I guess my only issue is I

72
00:04:00,800 --> 00:04:05,680
Speaker 1: still understand the role that sort of socialist economics has

73
00:04:05,760 --> 00:04:08,880
Speaker 1: and and there is a certain logic to when you

74
00:04:08,920 --> 00:04:10,920
Speaker 1: have a problem, how you deal with it, and having

75
00:04:10,960 --> 00:04:12,960
Speaker 1: to just accept that there needs to be some sort

76
00:04:12,960 --> 00:04:15,760
Speaker 1: of transfer. If you're so, we have a we have

77
00:04:15,800 --> 00:04:18,120
Speaker 1: a low growth problem, and we have some debt, so

78
00:04:18,200 --> 00:04:23,280
Speaker 1: we got drug on Thursday. He's working within different flavors

79
00:04:23,320 --> 00:04:26,720
Speaker 1: and sets of austerity or at the minimum, with one

80
00:04:26,760 --> 00:04:30,560
Speaker 1: hand tie behind his back, with no fiscal effort, right, yeah, exactly.

81
00:04:30,600 --> 00:04:33,039
Speaker 1: I mean he's he's in a really difficult position in

82
00:04:33,080 --> 00:04:35,920
Speaker 1: the sense that he's he's the only person who's really

83
00:04:35,920 --> 00:04:39,600
Speaker 1: sort of doing the heavy lifting in terms of European

84
00:04:39,640 --> 00:04:43,560
Speaker 1: growth and trying to sort of keep the whole, the whole, uh,

85
00:04:43,600 --> 00:04:46,520
Speaker 1: the whole union together and being challenged from left and right,

86
00:04:46,520 --> 00:04:49,600
Speaker 1: including the Brexit issue. Um. But I mean, I think

87
00:04:49,600 --> 00:04:52,440
Speaker 1: within that confines, he's doing a pretty good job and

88
00:04:52,480 --> 00:04:55,680
Speaker 1: he is delivering, and I think the key thing for

89
00:04:55,760 --> 00:04:58,680
Speaker 1: Drug is to basically make it clear that he understands

90
00:04:58,720 --> 00:05:02,320
Speaker 1: all the issues that people have, for example regarding the

91
00:05:02,440 --> 00:05:05,440
Speaker 1: role of banks and banks being profitable enough to sustain

92
00:05:05,480 --> 00:05:08,520
Speaker 1: growth and broader economy. He understands that. He doesn't necessarily

93
00:05:08,520 --> 00:05:10,880
Speaker 1: do anything explicit about it. He needs to make people

94
00:05:10,880 --> 00:05:13,599
Speaker 1: feel comfortable that if it becomes an issue later on,

95
00:05:13,680 --> 00:05:16,839
Speaker 1: then then he's he's there to help out. Basically, if

96
00:05:16,880 --> 00:05:21,320
Speaker 1: they don't do a significant cut in the deposit rate

97
00:05:21,360 --> 00:05:23,640
Speaker 1: and they do more q E as you suggest, how

98
00:05:23,640 --> 00:05:25,000
Speaker 1: are they going to do that? They're at a point

99
00:05:25,000 --> 00:05:29,000
Speaker 1: where they're going to have trouble buying bonds but well

100
00:05:29,040 --> 00:05:30,880
Speaker 1: remember that. I mean, they can also cut the refi

101
00:05:30,960 --> 00:05:32,520
Speaker 1: rates as well. So that's going to be perhaps the

102
00:05:32,560 --> 00:05:35,080
Speaker 1: most interesting thing, because they're the refi rators are slightly

103
00:05:35,080 --> 00:05:37,359
Speaker 1: above zero. I mean you could take a negative. People

104
00:05:37,400 --> 00:05:39,480
Speaker 1: may complain of own. Look, you're paying banks to borrow

105
00:05:39,560 --> 00:05:42,120
Speaker 1: money from from the ECB. But then obviously if the

106
00:05:42,160 --> 00:05:44,760
Speaker 1: banks are then taking that and and on lending it

107
00:05:44,800 --> 00:05:46,560
Speaker 1: in a more aggressive way than that would be very

108
00:05:46,560 --> 00:05:48,600
Speaker 1: good for profitability. So they could do that. The Q

109
00:05:48,880 --> 00:05:50,400
Speaker 1: thing is there's lots of things that can do in Q.

110
00:05:50,600 --> 00:05:52,480
Speaker 1: I mean that they are once they cut the deposit rate,

111
00:05:52,480 --> 00:05:54,200
Speaker 1: they can buy more bonds because there is a limit

112
00:05:54,279 --> 00:05:56,440
Speaker 1: to what they can buy if anything is training blow

113
00:05:56,480 --> 00:05:57,920
Speaker 1: the deposit rate. So they've got that, and they can

114
00:05:57,920 --> 00:06:00,960
Speaker 1: obviously signal other types of sits that they may be

115
00:06:01,000 --> 00:06:03,640
Speaker 1: waiting to buy. What you said two hours ago, is

116
00:06:03,839 --> 00:06:10,520
Speaker 1: demand there for that new money. It's a demand issue. Yeah,

117
00:06:10,600 --> 00:06:13,280
Speaker 1: I mean it's really I mean I don't think it's

118
00:06:13,279 --> 00:06:15,960
Speaker 1: really difficult. I mean I take I take an example away,

119
00:06:16,000 --> 00:06:18,200
Speaker 1: and if I were to pay you to take a

120
00:06:18,200 --> 00:06:20,560
Speaker 1: mortgage from me, would you do it? And I do that.

121
00:06:20,600 --> 00:06:22,440
Speaker 1: But when I have client meetings, I go and I

122
00:06:22,480 --> 00:06:24,760
Speaker 1: asked the room and how many of you would take

123
00:06:24,760 --> 00:06:26,360
Speaker 1: a loan if I was going to pay you one percent?

124
00:06:26,760 --> 00:06:29,080
Speaker 1: And you know a few people will get obviously definitely

125
00:06:29,080 --> 00:06:30,839
Speaker 1: not because I have to pay this back, you know something.

126
00:06:31,080 --> 00:06:34,359
Speaker 1: And all some people say well, you know, more more

127
00:06:34,440 --> 00:06:36,040
Speaker 1: subtly some people and say, well, yeah, but if the

128
00:06:36,200 --> 00:06:38,040
Speaker 1: rates are going to continue to fall, maybe our delay

129
00:06:38,080 --> 00:06:39,600
Speaker 1: for example, you know, I don't necessari want to lock

130
00:06:39,600 --> 00:06:41,440
Speaker 1: it in now. And they may have credit issues of

131
00:06:41,560 --> 00:06:43,880
Speaker 1: refinancing and things like that. So so there are those

132
00:06:44,000 --> 00:06:46,600
Speaker 1: more subtle issues. But in general, most people would would

133
00:06:46,640 --> 00:06:49,160
Speaker 1: would borrow, we would take the loan. So I'm not

134
00:06:49,800 --> 00:06:52,800
Speaker 1: entirely convinced that, you know, there's there's always demand problem.

135
00:06:52,880 --> 00:06:54,480
Speaker 1: And I keep coming back to one of my basic

136
00:06:54,560 --> 00:06:57,360
Speaker 1: economic tenants, which is supply creates its own demand. If

137
00:06:57,400 --> 00:06:59,840
Speaker 1: you supply these loans, someone will probably take them. But

138
00:07:00,000 --> 00:07:03,600
Speaker 1: you go to spine on the right price, brilliant, I'll

139
00:07:03,640 --> 00:07:08,679
Speaker 1: take a little. Those are weekly briefing from Dominant Constant.

140
00:07:09,360 --> 00:07:11,840
Speaker 1: Good to have you in Dominic Constant with Deutsche Bank,

141
00:07:11,840 --> 00:07:15,720
Speaker 1: had to rate strategy there and just terrific work over

142
00:07:15,760 --> 00:07:19,480
Speaker 1: the years into, during and out of this crisis. Just

143
00:07:19,560 --> 00:07:24,880
Speaker 1: it just never gets dull, mic I wish it would. Yeah,

144
00:07:25,320 --> 00:07:29,920
Speaker 1: not at three months T bill point three zero percent

145
00:07:30,920 --> 00:07:35,840
Speaker 1: ten year yield one, I believe we're still ultra accommodative

146
00:07:35,880 --> 00:07:39,400
Speaker 1: in this way or that way. Stay with us more

147
00:07:39,480 --> 00:07:47,560
Speaker 1: of Bloomberg's surveillance. Good morning Bloombergs, Brought you by Bank

148
00:07:47,560 --> 00:07:49,840
Speaker 1: of America Mary Lynch, committed to bringing higher finance to

149
00:07:49,960 --> 00:07:52,760
Speaker 1: lower carbon named the most day investment bank for climate

150
00:07:52,800 --> 00:07:55,240
Speaker 1: change in sustainability by the banker. That's the power of

151
00:07:55,240 --> 00:07:57,880
Speaker 1: global connections. Back of America in a f D I

152
00:07:57,960 --> 00:07:58,000
Speaker 1: C