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Speaker 1: This is Bloomberg day Break Asia for this Monday, April

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Speaker 1: twenty fourth in Hong Kong, Sunday April twenty third in

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Speaker 1: New York, and coming up.

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Speaker 2: Today, President Chichinping pledges support for China's innovative firms to

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Speaker 2: counter the US. The Bank of Japan is said to

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Speaker 2: be planning a review of its policies over the past

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Speaker 2: few decades at its next meeting. Bed Beth and Beyond

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Speaker 2: files for bankruptcy, and the retailers planning to shut its stores.

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Speaker 3: Nations pull diplomats from Sudan, US conducts daring Special Forces

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Speaker 3: rescue mission. Chinese diplomat lights furer when he says ex

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Speaker 3: Soviet bloc countries currently cannot claim sovereignty. McCarthy says he'll

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Speaker 3: get his debt bill passed this week. I'm at Baxter with.

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Speaker 4: That's All straight Ahead on Bloomberg day Break Asia, the

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Speaker 4: business news you need to start your day in just

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Speaker 4: one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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Speaker 4: Business App, and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Brian Curtis.

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Speaker 2: And I'm Doug Krisner. Here are the stories we're following today.

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Speaker 1: Another busy week, and even for earnings. Let's get a

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Speaker 1: preview on that from Bloomberg's Charlie Pillett.

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Speaker 5: Technology. We'll be in focus when we hear from Microsoft,

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Speaker 5: Meta Platforms and Alphabet. Investors are continuing to sift through

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Speaker 5: corporate earnings looking for comments about pricing, power and the outlook.

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Speaker 5: Lisa shout Out is chief Investment Officer for Wealth Management

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Speaker 5: at Morgan Stanley.

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Speaker 6: So far, earnings have been mixed at best. I think

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Speaker 6: that you know, certainly we've had a sector mix issue

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Speaker 6: here that you know has prevented a material meltdown, but

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Speaker 6: we've had some big names missing and missing on fundamental

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Speaker 6: things like demand, like pricing, like margins.

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Speaker 5: This week, we hear from a wide range of companies

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Speaker 5: including General Motors, Caterpillar, x On Mobile, Ge, MasterCard, Visa, PepsiCo,

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Speaker 5: Ubs and Ups in New York. Charlie Pellett, Bloomberg, Daybreak, Asia,

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Speaker 5: Bed Bath and Beyond his file for Chapter eleven bankruptcy.

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Speaker 5: The retailer will close stores and liquidate after its turnaround

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Speaker 5: plans failed. The story from Bloomberg Susanna Palmer, the.

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Speaker 7: Retailer that sells all kinds of stuff for your home

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Speaker 7: will begin liquidating its three hundred and sixty bed Bath

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Speaker 7: and Beyond its stores and one hundred twenty Buy Buy

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Speaker 7: Baby shops. This while also searching for a buyer for

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Speaker 7: some or all of its assets. Bed Bath and beyonds

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Speaker 7: crisis got worse this year, starting in January, when it

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Speaker 7: floated the idea of restructuring its debts. A last minute

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Speaker 7: lifeline from the hedge fund Hudson Bay Capital Management and

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Speaker 7: an effort to sell more shares in the company didn't help.

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Speaker 7: A unit of six Street Partners is providing bed Bath

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Speaker 7: and Beyond with a two hundred and forty million dollar

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Speaker 7: loan to help it fund itself in bankruptcy. Suzannah Palmer

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Speaker 7: Bloomberg Daybreak Asia.

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Speaker 1: US Treasury Secretary Jennet Yellen has announced a proposal by

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Speaker 1: the Financial Stability Oversight Council that would revise the way

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Speaker 1: non bank firms are designated. These include changes to Trump

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Speaker 1: era guidance that had made it difficult to tag non

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Speaker 1: bank firms as systemically important institutions. Here's Yellen speaking on

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Speaker 1: Friday at an FSOC meeting in Washington, DC.

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Speaker 6: The existing guidance, issued in twenty nineteen created inappropriate hurdles

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Speaker 6: as part of the designation process.

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Speaker 8: These additional steps.

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Speaker 6: Are not legally required by the Dodd Frank Act, nor

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Speaker 6: are they useful or feasible.

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Speaker 1: Top Us regulators hope that their new proposal will address

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Speaker 1: threats to financial stability. The FSOC proposed a new framework

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Speaker 1: for financial stability risk identification as well as assessment and

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Speaker 1: then the response areas under the proposal could attract scrutiny.

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Speaker 1: Those include from insurers, from private equity players, hedge funds,

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Speaker 1: mutual fund firms, as well as some newer industries such

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Speaker 1: as crypto.

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Speaker 2: President Chi Jinping is encouraging Chinese companies to break technological

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Speaker 2: barriers to counter what he sees as containment by the West.

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Speaker 2: She stressed the role of enterprises in innovation and he

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Speaker 2: says that's key to realizing high level technological self reliance.

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Speaker 2: And it was on Friday she told a Communist Party meeting,

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Speaker 2: it's important to remove institutional barriers that impede competition. Beijing,

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Speaker 2: as we know, has been grappling with US efforts to

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Speaker 2: curb China's access to key technologies, particularly advanced semiconductors. The

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Speaker 2: Chinese president also stressed the importance of reforming state owned enterprises.

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Speaker 2: She said this would help insure national economic security.

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Speaker 1: The Bank of Japan is said to be planning a

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Speaker 1: review of policies taken over the past decades at its

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Speaker 1: upcoming meeting. We get that story from Bloomberg's Joan Wong.

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Speaker 9: The BOJ what examined whats worked well for Japan's economy

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Speaker 9: in the past. It will be done with hopes that

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Speaker 9: the central bank can come up with effective policies under

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Speaker 9: newly appointed Governor Kazuo. That's according to the sign Key newspaper.

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Speaker 9: The BOJ is expected to consider the past quarter century

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Speaker 9: of Japan's deflationary economy, and the report said the review

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Speaker 9: could go back as far as about thirty years, when

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Speaker 9: Japan's bubble economy burst. The BOJ has employed unconventional tool

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Speaker 9: since adopting a zero interest rate policy in nineteen ninety nine.

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Speaker 9: Earlier this month, Weda said in his inaugural speech as

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Speaker 9: governor that the bank's yield curve control and negative interest

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Speaker 9: rates were appropriate for now, but he added that he

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Speaker 9: was open to the idea of a longer term policy review.

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Speaker 9: The Bank of Japan's next policy meeting will be on

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Speaker 9: April twenty seventh and twenty eighth in Hong Kong, Joan One, Bloomberg,

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Speaker 9: Dave Braagaisia.

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Speaker 1: I'm Brian Curtis, along with Doug Krisner and Rashad Salama

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Speaker 1: will join us in a few moments, so Doug. I

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Speaker 1: know this runs a little counter to conventional wisdom, but

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Speaker 1: volatility has quietly dropped out of both the stock and

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Speaker 1: bond markets. Last week. We had yields on the two

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Speaker 1: year and the ten year finish up the week roundabout

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Speaker 1: world where they were on Monday. And as for the

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Speaker 1: stock market, the Vicks is under seventeen. It may not

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Speaker 1: stay that way, and perhaps it's a common head of

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Speaker 1: the storm, but it's a good question for guests is

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Speaker 1: what has brought that on.

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Speaker 2: That's a good point. At the same time, when we

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Speaker 2: consider the fact that we're still in the earning season

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Speaker 2: early innings, yes, but the results so far have been

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Speaker 2: coming in strong enough to lead some on Wall Street

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Speaker 2: to wonder maybe they were too pessimistic. Twenty percent, roughly speaking,

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Speaker 2: of the companies in the S and P have posted

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Speaker 2: their results so far, seventy seven percent have been better

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Speaker 2: than expected. And you highlighted earlier, Brian, it's going to

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Speaker 2: be a key week for big tech earnings. Oil producers

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Speaker 2: will also be key in the week ahead.

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Speaker 1: Yeah, I think it's smart that you highlight the earnings

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Speaker 1: because that's one of the reasons I suppose that the

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Speaker 1: macro scene has kind of quieted just a little bit.

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Speaker 1: And it's not like we haven't seen volatility in the

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Speaker 1: stock market. It's just that overall we are where we are,

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Speaker 1: but there's been a lot of individual stories where stocks

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Speaker 1: have either gained a lot or.

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Speaker 4: Dropped a lot.

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Speaker 1: I wanted to offer a quick comment about China and

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Speaker 1: the policy that you just mentioned in our a block there,

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Speaker 1: that it runs a little counter to what we saw

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Speaker 1: back in twenty twenty one and twenty two, because at

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Speaker 1: that time China was regulating and raining in the private sector,

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Speaker 1: and now shi Jinping wants to stimulate the private sector

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Speaker 1: and thinks that there are a lot of things that

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Speaker 1: they can do to remove some of these institutional barriers.

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Speaker 1: And some might call that a reversal of policy, but

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Speaker 1: it might end up being good for the private sector

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Speaker 1: and thus the stock market in China. Something we'll be watching.

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Speaker 2: And as long as we're talking about China, I want

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Speaker 2: to ask you to keep your eye on the Chinese traveler.

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Speaker 2: We're going into the Golden Week holiday next month, and

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Speaker 2: I saw data from JP Moore and Chase saying that

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Speaker 2: jet fuel demand so far is up about seventy five

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Speaker 2: percent of pre pandemic levels. That in the latest survey week,

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Speaker 2: which I think wrapped up up on the fifteenth, So

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Speaker 2: we know that Chinese travelers are returning to the sky.

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Speaker 2: If you're talking about the macro in China, maybe things

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Speaker 2: are on the up and up.

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Speaker 1: I think definitely in terms of small items travel and

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Speaker 1: restaurants and bars and that sort of thing, that's going

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Speaker 1: very well in the recovery. We're still waiting to see

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Speaker 1: whether the big ticket items cars and houses really start

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Speaker 1: to move. We've seen some encouraging activity in the housing market,

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Speaker 1: but it hasn't translated to big numbers just yet. All right,

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Speaker 1: it's time now for global news. Many nations are moving

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Speaker 1: to evacuate consular workers from Sudan this weekend at Baxter

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Speaker 1: has Global News from the nine to sixty news room

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Speaker 1: in San Francisco, Ed.

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Speaker 3: Yeah, exactly right, Brian, Both UK and US for example,

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Speaker 3: managed to airlift their diplomats to safety. Prime Minister Rishusunak

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Speaker 3: saying the operation was a total success, imit a significant

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Speaker 3: escalation of violence and threats to embassy staff. Meanwhile, the

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Speaker 3: US flew hundreds of Special Service members by helicopter under

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Speaker 3: the protection and the hazard of dark.

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Speaker 2: Anytime you're flying at one hundred knots very close to

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Speaker 2: the ground in pitch black, there's certainly some risk there.

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Speaker 3: Lieutenant General dasim the operation was fast and clean, with

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Speaker 3: service members spending less than an hour on the ground

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Speaker 3: and cartoon. Meanwhile, work is underway to get hundreds of

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Speaker 3: aid workers out as well. Senator Mark Warner on ABC

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Speaker 3: has heard here on Bloomberg says many countries are involved.

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Speaker 10: We are working with a lot of international partners in

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Speaker 10: this case, partners from them at least even believe working

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Speaker 10: with China and Europeans to say those aid workers, we

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Speaker 10: need to find a safe way to get them out.

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Speaker 3: Warner says one path is to establish a corridor to

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Speaker 3: evacuate them. Meanwhile, Italy and France also coordinating evacuation plans

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Speaker 3: as we speak. European states are reacting with fury to

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Speaker 3: a Chinese envoy who's questioning the independence of former Soviet

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Speaker 3: Union countries. Chinese ambassador to France lu Chau saying that

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Speaker 3: ex Soviet Union countries do not have effective status under

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Speaker 3: international law as a sovereign nation. The diplomatic firestorm threatens

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Speaker 3: to overshadow China's attempts to portray itself as a peacemaker

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Speaker 3: in Russia's war in Ukraine. House Speaker Kevin McCarthy says

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Speaker 3: the House will pass his one point five trillion dollar

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Speaker 3: debt ceiling increase plan this week.

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Speaker 11: When we send this to the Senate, we're showing that, yes,

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Speaker 11: we're able to raise the debt ceiling into the next year.

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Speaker 11: But what we're doing is we're being responsible fiscally and

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Speaker 11: bringing our house back in order. It doesn't solve all

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Speaker 11: our problem, but it gets us on the right path,

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Speaker 11: and Churtis gets us to the negotiating table.

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Speaker 3: McCarthy on Fox did dodge when asked whether he has

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Speaker 3: the two hundred and eighteen Republican votes he needs. He

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Speaker 3: says they are about five members who can still sink it,

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Speaker 3: but he thinks the Conference will pass it along. The

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Speaker 3: race for the Republican nomination in the United States is

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Speaker 3: in full swing. Ron Dea Santis and Utah.

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Speaker 11: Republicans need to shake the culture of losing that has

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Speaker 11: developed in recent years.

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Speaker 3: Others in Iowa, Tim Scott, Joe.

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Speaker 8: Biden and the radical left has created a blueprint on

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Speaker 8: how to ruin America.

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Speaker 3: I gotta tell you not on my watch, Mike Pence.

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Speaker 2: They also want a new brand of leadership, but at

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Speaker 2: least has the possibility of bringing our country together around

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Speaker 2: the major challenges that we're facing.

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Speaker 3: And Donald Trump, we will make America great again. Yes,

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Speaker 3: that was this weekend Global News, powered by more than

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Speaker 3: twenty seven hundred journalists and analysts and over one hundred

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Speaker 3: twenty countries. In San Francisco, I met Baxter. This is Bloomberg.

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Speaker 1: I'm Brian Curtis, along with Rashad Salomon. Our guest is Priamsra,

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Speaker 1: global head of rate Strategy at TD Securities.

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Speaker 6: Bri.

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Speaker 1: I mentioned there that at least last week we had

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Speaker 1: a drop in volatility in the bond market. Is that

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Speaker 1: just temporary or do you think that we've sort of

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Speaker 1: come to a point where we understand, at least in

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Speaker 1: the short term, what the Fed will do and where

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Speaker 1: rates will move.

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Speaker 12: Sure, thanks for having me on. I think in the

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Speaker 12: near term, yes, we're almost priced for a twenty five

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Speaker 12: hike in May. We do expect the FED to hike

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Speaker 12: twenty five but I think really volatility is likely to

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Speaker 12: pick up after that because we're not hearing much from

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Speaker 12: the FED about the meeting after that or how long

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Speaker 12: are they going to pause, or when are they going

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Speaker 12: to cut What is that threshold of pain at which

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Speaker 12: point the FED will start to cut rates? And I

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Speaker 12: think the data is turning. We're getting mixed data. We're

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Speaker 12: seeing the slowing. It's not obvious whether we're heading into

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Speaker 12: a recession or is this a soft landing. So I

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Speaker 12: think there's enough uncertainty on the economic outlook as well

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Speaker 12: as how the FED might respond, So I think volatility

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Speaker 12: will go back up. But in the next week or two,

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Speaker 12: as we're heading into the May FED meeting, I think

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Speaker 12: we can stabilize because we're sort of well priced, and

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Speaker 12: I think the Fed might be happy with the way

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Speaker 12: the market's price just now.

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Speaker 8: How closely do you think they're watching events in Congress

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Speaker 8: right now with regards to the budget, etc. And the

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Speaker 8: debt ceiling.

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Speaker 12: I think they have to be watching it closely, but

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Speaker 12: they have to be very careful not to influence it

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Speaker 12: or not to make it explicitly influence their policy because

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Speaker 12: it is up to Congress to raise the dead ceiling,

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Speaker 12: which I really hope happens. I think it's going to

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Speaker 12: go down to the wire and thatmanship is going to

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Speaker 12: tighten financial conditions, which then impact growth, and the FED

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Speaker 12: would respond to that, but I don't think they want

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Speaker 12: to respond preemptively or do anything that would make the

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Speaker 12: dead ceiling passage more difficult for Congress. So I think

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Speaker 12: they watch it for the impact that it has on

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Speaker 12: financial conditions and on growth. I also think if there

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Speaker 12: are spending cuts and that's the way we get the

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Speaker 12: dead ceiling raised, that's our base case view. That's negative

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Speaker 12: for growth because then you have fiscal tightening at the

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Speaker 12: same time as credit channel tightening, which we think is

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Speaker 12: happening with the Bank and the lagged impact of Montrey policy,

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Speaker 12: So then you're setting up for a bigger slowdown later

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Speaker 12: this year. But that's only if there are these spending cuts.

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Speaker 12: So I think they have to be watching it, but

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Speaker 12: not maybe comment on it until something actually happens.

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Speaker 1: In trying to make that assessment about whether or not

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Speaker 1: we have a soft landing or a mild recession, or

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Speaker 1: indeed something worse come. So what's the most important set

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Speaker 1: of metrics to watch.

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Speaker 12: It's tricky. We're watching everything, but I would say the

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Speaker 12: high frequency metrics. So we're looking at high frequency measures

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Speaker 12: of the employment situation. We're also watching high frequency spending,

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Speaker 12: consumer spending. I think that's the early read. Labor market,

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Speaker 12: inflation are all pretty lagging indicators. But let's see how

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Speaker 12: the consumer's shaping up.

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Speaker 8: Okay, well, then that's just the thing that the consumer

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Speaker 8: seems to be doing fine. And you know, we used

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Speaker 8: to talk about the indefatigable American consumer. They're proving to

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Speaker 8: be just that for the time being at least, But

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Speaker 8: there are some cracks emerging.

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Speaker 12: They're not there are I think ISM services showed a

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Speaker 12: big slowdown. That's the early read on consumer demand for services.

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Speaker 12: Now the pmis were okay, but that ISM services was

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Speaker 12: a little bit concerning. I think consumption is slowing on services,

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Speaker 12: and so we're watching things like that. We're watching consumer confidence.

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Speaker 12: There are cracks, as you pointed out, and I'm also

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Speaker 12: watching the consumer savings buffer. You know, the consumer still

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Speaker 12: has savings, which is why they've continued to spend the

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Speaker 12: labor market strong as that savings buffer runs out and

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Speaker 12: you can't take out another credit card because banks are tightening.

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Speaker 12: I think that's when the consumer can slow down more sharply,

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Speaker 12: and that's what we're looking to see in the second

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Speaker 12: half of the year.

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Speaker 1: PRIA, how nervous are you about the rapidity with which

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Speaker 1: markets react? And if you go back to two thousand

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Speaker 1: and eight, even the stock market for instance, and even

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Speaker 1: the level of the vics, we're pretty well contained and

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Speaker 1: pretty in a nice position, actually only say three weeks

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Speaker 1: before or just completely going haywire. Is that something that

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Speaker 1: as someone who analyzes markets, troubles you or does it?

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Speaker 1: I mean, it's just a fact of life.

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Speaker 12: I think it is a fact of life. Now the

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Speaker 12: markets are more fragile. I think part of it is

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Speaker 12: regulatory changes posts two thousand and eight have made banks

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Speaker 12: and dealers less able to take risk. So I think

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Speaker 12: that warehousing capacity on the dealer side is just not there,

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Speaker 12: so you're going to react more. And then, frankly, the

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Speaker 12: FED has a lot less policy flexibility now with inflation

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Speaker 12: that high. Even if growth starts to slow down, I

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Speaker 12: think the FED will struggle to cut rates that fast,

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Speaker 12: which they had that flexibility. I think for the last

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Speaker 12: twenty years because there was no inflation fear. So I

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Speaker 12: think there's good reason for the fragility. But I think

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Speaker 12: that is something I'm glad you brought it up. That

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Speaker 12: something every investor should keep at the back of their mind,

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Speaker 12: and that means you should have liquid assets just to

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Speaker 12: prevent fire sales because market's going to overreact. We went

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Speaker 12: from earlier in the year no landing to hard landing

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Speaker 12: to soft landing, all in a spate of four months.

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Speaker 12: We've talked about literally every possibility in the economy, and

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Speaker 12: that just tells you the market's very quick to price

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Speaker 12: in a certain outcome we should be. I think that's

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Speaker 12: the new normal trend.

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Speaker 1: Maybe it's a good thing. Maybe it forces on people

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Speaker 1: a little bit of more conservatism instead of looking at

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Speaker 1: the stock market as a casino. I mean, I'm not sure.

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Speaker 1: I mean, it's there for everyone to use the way

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Speaker 1: that they see fit. That's the way the system works.

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Speaker 1: But maybe a little conservatism is a good thing.

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Speaker 12: Now, that's fair and appreciating the importance of liquidity and

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Speaker 12: a diversified portfolio. Bonds are giving you five percent four

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Speaker 12: percent depending on which bond you're picking, interest rates and

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Speaker 12: is likely to be less volatile than risk acids, So

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Speaker 12: making sure you've got something in your portfolio when the

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Speaker 12: stock market's struggling, or making sure you've got enough liquid assets.

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Speaker 12: I think we have to think about portfolio construction differently

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Speaker 12: now with the market that's a lot more volatile.

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Speaker 8: Well something okay, and you know you look at the

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Speaker 8: yield curve and you'd say that perhaps the best place

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Speaker 8: to invest is obviously short duration, given more juice there.

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Speaker 8: But it's a bit new on stemoniums and that isn't it.

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Speaker 8: I mean, where would you be going on this given

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Speaker 8: further price appreciations, perhaps down the road.

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Speaker 12: So I'm going to be a little contrading here. I

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Speaker 12: think the front end it's very attractive with these high rates,

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Speaker 12: but it's a very short term view. If you think

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Speaker 12: a little longer term in the FT's cutting rates. You know,

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Speaker 12: we can debate whether they cut rates this year or

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Speaker 12: next year, but five to five and a half on

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Speaker 12: FET funds is not normal. They're going to have to

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Speaker 12: cut rates down to two and a half three percent

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Speaker 12: in the next few years. So I actually think the

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Speaker 12: long end, the tenure, is a better investment for the

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Speaker 12: long run rather than the front end because with the

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Speaker 12: front end, you've got reinvestment risk. When the Fed starts

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Speaker 12: to cut rates, you're going to reinvest it at much

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Speaker 12: lower rates. So I actually like the tenure. I want

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Speaker 12: to keep some in the front tend for yield and flexibility,

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Speaker 12: and some in the long end for price appreciation because

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Speaker 12: that's where that's your hedge. If the economy heads into

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Speaker 12: a recession, those long end rates are going to decline

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Speaker 12: very quickly, and that's where you want to be.

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Speaker 1: Yeah, let me ask you a dumb question. Does the

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Speaker 1: ordinary investor trade treasuries a lot? For instance, the scenario

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Speaker 1: you describe is, you know, if we have ultimately those

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Speaker 1: yields going slightly lower, which would reward you for having

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Speaker 1: bought at this higher position, that you get capital appreciation

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Speaker 1: on the bond. Do do people trade treasuries a lot?

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Speaker 12: Increasingly they do.

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Speaker 4: Yes.

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Speaker 12: I think ladder portfolios are popular ETFs on the long end.

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Speaker 12: There are different ways you can position in the long end.

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Speaker 12: You can set up a treasure direct account and buy

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Speaker 12: treasuries which the Treasury issues every second week. So yes,

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Speaker 12: I think retail and institutional and in participation in longer

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Speaker 12: end treasuries has started to pick up as treasuries are

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Speaker 12: giving you some yield.

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