>> clearly, the banking system is telling us there is some kind of issue here, and i would save money has been shut down. >> i cannot believe what is happening in the banking sector will have -- >> now the fears are way out there in the banks are more resilient than they've been in a generation.

jonathan: with a weekend. good morning, good morning. live from new york citygood morning, good morning. this is "bloomberg surveillance, , live on tv and radio. alongside tom and lisa abramowicz, i'm jonathan ferro. the federal reserve and fdic's said it will wind down silicon valley bank. people were asking where do we bank and do we open a new? tom: different is markets tick by tick to give us a score. i will call it systemic crisis monday as gerard cassidy talked about. greg peters is with us. there will be a lot of

explanation and understanding of where we are now that the markets are open. jonathan: the front end of the yield curve in america, these moves are absolutely phenomenal. on wednesday, the two-year guild is at 5.08% and this morning it dropped low for .2 0 -- two year yield is at 5.08% and is when it dropped below 4.22. lisa: does what we are seeing with banking system stress because the federal reserve to materially pullback, which they raise rates to combat inflation and what does that due to inflation where it is still an issue with the stresses of the banking system?

goldman sachs says no hike this month and they have no clue what happens after march. the federal reserve announced a new bank funding program that offers one year loans under easier terms. they are not going to accept collateral and securities that are deeply underwater. if you are a bank that hasn't failed and you have been run poorly and had -- haven't managed rates, is a lifeline the feds have thrown you. lisa: they are keeping a hole in banks invested in assets that are deep underwater because they don't want to stem panic. will this be enough to truly stem panic and what does this do in terms of both the moral

hazard but also with respect to fighting inflation given it is supposed to come from tighter financial conditions? tom: i would partition it into different themes of overlay but to the machinery the secretary of treasury announced yesterday, it is a one year repo, which is jargon for you get it when your grace period. it said you screwed up with your bond portfolios and bring them in and we will give you 100 cents on the dollar and you'll have to pay a nominal fee. the answer is it is one year. and if this falls apart they extent it out to two years. that has not been talked about. jonathan: that will be talked about. let's start with equities. features elevated and faded, features positive by .2% in the

s&p 500. the 10 year, the move on a two year yield is 30 basis points lower, just story and america. the takeaway now is we will see. 30 basis points lower on german two-year. tom: there are idiosyncrasies out there whether it is first republic of california. but look at credit suisse. it is a beleaguered bank caught up in this and i would like to know what swiss authorities do as a new york authorities did for signature bank with a vengeance straight afternoon. jonathan: the session 2.11, down

more than 11%. we are talking about record lows. greg peters, co-cio of p jim joins us now. what did you make of what is unfolding? greg: it is a source of volatility in highly volatile market. you talk about the moves in u.s. treasuries but the move in two-year is astounding. the move index helped fuel the rally. to me, you can't have a well-functioning arc it with such high volatility. tom: what would you like to see from our institutional authorities. to hide it but i believe you are old enough to remember 2008. i remember institutions with a vengeance stepped up almost on a daily if not hourly basis.

the president scheduled to speak -- speak at the 8:00 our. what do need to hear from chairman powell and secretary yellen? greg: this is very different from 2008 and even the s&l crisis i was a part of, unfortunately. this is not systemic but to me, there are lots of questions on the table. the regulatory authorities have to be called out here and it is mismatch, plain and simple. tom: it is a question we will go through today and it is so important. george sarah bellus made clear he thinks -- george sarah vallow's -- good the fed step aside and suddenly become

measured or dare i say stabilize or lower the rate? greg: i don't see that as a possibility at this point. what happens in march, i don't know. but that the end of the day the fed has to keep inflation under the goal and that is the main focus. the path is clear that the fed has to get inflation down and that is what i would focus on more than anything else. lisa: a lot of people believe the fed will raise one more time and that is it and we are looking at a fed funds terminal ray price in at 4.8%, down from nearly five point 7% thursday. i am curious -- 5.7% thursday. i'm curious about where you weigh in on this. greg: the volatility is so

extreme that it is really difficult to stay in any position. think about the move in the two-year. it is astounding. it is hard to take big steps. have to be close to home. we are close to home and not making large investments because volatility is too extreme and introduces too much of volatility into your fixed income portfolio. lisa: out concerning is it that we are seeing banks selling off this morning, even after the programs put in place? does it tell you about how long the volatility will last? greg: i think the banks are in a very different place than the regional community banks. i think the market will suss

that out. to me, it is a snap reaction within anything else. jonathan: when we typically observe the yield curve we say it is steeper or inverted. what is not talked about enough is how it steepen's and how it inverts and flattens. it is led by the front end. when you start to see that developed, is that a wolf in sheep's clothing for people observing that saying this is great? when you see that, what does it usually signal? greg: it signals the fed is on the precipice of cutting and i don't see that.

it is curious and doesn't make a lot of sense to me. i still think inflation is the issue. the fed is not going to back away from that. a bank in california having trouble and a few more doesn't change the fact that we have inflation above trend and it has not come down. the move in the yield curve is curious but i don't think it will hold. jonathan: how much of the move is about risk aversion, taking out fed hikes? how much is it about people saying i'm going to run into the front end of the curve and sit here for a while? greg: i think it is more just a hedge. investors don't have a lot out there and using the two-year and tenure treasuries do provide that protection.

i think it is as simple as that. i don't see them taking the money out of the bank. i think it is just a hedge. jonathan: greg peters there of p jim fixed income. -- of pgim fixed income. tom: you are looking for 6% but the answer is a 5% is where things change. jonathan: looking for the conversation with the head of u.s. bank coming up shortly. features unchanged and does not tell you the story of the weekend. from new york, this is bloomberg. lisa: bloomberg has learned

russian president vladimir putin plans to meet top business leaders in the kremlin this week for the first time since he invaded ukraine. the gathering with the top members of the russian union of industrialists and entrepreneurs comes as the government, which is struggling to cover rising spending, steps up pressure on companies to pay more in taxes. reuters reports xi jinping plans to travel to moscow to meet vladimir putin next week. the chinese foreign ministry did not respond for a request for a comment. xi jinping has started an unprecedented third term as the chinese president with files for stability and strength in party leadership. closing of the national annual people's congress, he opposed foreign interference in taiwan and veiled reference to increasing american support for the government in taipei. >> should implement our parties

overall policy for resolving the taiwan question in the new era, uphold the one china principle, and stick to the 1992 consensus. we should violently oppose the interference of external forces and activities of taiwan independence. lisa: and japan, mask grain is optional, making the country one of the last places to ease rules around face coverings. authorities will continue to recommend their use at hospitals, nursing homes, trains and buses during rush hour. they plan to reclassify covid-19 to ring it in line with sue's new influenza. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

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jonathan: it feels like we have a long week ahead of us.

equity futures turning lower, negative by more than .1% on the s&p 500. unprecedented over the weekend, the treasury, federal reserve, fbi see looking to shore up the financial industry in the united states of america. tom: and do it in the real-time getting trust and confidence into the system and beginning to think about where are we heading and what did we get wrong here and what do we need to do to fix it, maybe feeling a bit 2009? jonathan: did we scrap the limit overnight? tom: that it insulting to upper middle-class. it should be up to 40 million because i'm on my gulfstream from montana and can't decide to

land at sfo or palo alto hilliard -- palo alto. lisa: how much does this change the scenario for banks regulated under a very different set of parameters and what is the other side of this? jonathan: there was a basic question americans were asking themselves over the weekend, do they need to open a bank account monday morning. it was to make sure those kind of decisions were made and people were staying put in that the banks could meet the flows. that was the new funding facility announced. you still see single names and some banks down hard in premarket. lisa: how much is this concern about systemic risk and how much is concern about profitability? banks have to pay more and

telling depositors we will give you much bigger rates in order to keep your assets and that crimps the emergence and profitability. jonathan: yields are down 34 basis points on a two-year, 4.24%. tom: we will do more data checks through the morning, particularly in the fixed income . i look at the breaking news and also to look at where we are heading. we have gerard cassity joining us in moments with decades of experience, including living 2008 and real-time. we begin with mayra rodriguez valladares, managing principal at mrv associates

. she is steeped in the banking discussion of washington. thank you for joining us. i am going to cut to the chase, the republicans, led by president trump, are highly suspect of bank concentration. is donald trump channeling his inner andrew jackson? i get it. did that go by the wayside yesterday and will eat republicans have to find common ground with the democrats to make -- will republicans have to find common ground with democrats to make this a one banking system? mayra: thank you for having me. what happened this weekend is a venture capital and those kinds of companies have been bailed out and this never should have happened. the republicans and some democrats back in 18 -- 2018

voted for regulation and once the vote came in, it revoked important liquidity and stress testing requirements for those banks around the size of what silicon valley bank is. so republicans should be finding common ground with democrats noun and revoke that legislation which ended up being incredibly damaging to unsuspecting, ordinary americans. tom: can we expand too big to fail constructively across the regionals, super regionals and larger institutions state-by-state, or do we need to expand for each and every community bank? mayra: we need to go back to title i dodd-frank signed back in 2010. those institutions that are $50 billion and were considered systemically important, yes, you

could have domestically at systemically important banks, regional ones, and once the size of jp morgan, which are globally important, but the so-called smaller banks. i don't call a 200 billion dollar institution like silk unbanked small, even those that we saw this weekend how much instability and payouts they can cause to americans that didn't know all of this was going on. those institutions should never have been changed. their designation never should have been changed. jonathan: whether they like it or not, haven't washington, d.c. admitted they were right? mayra: quite a number of consumer advocates and myself for decades have been arguing that it is important to pay close attention to the regional

banks, by definition, they are concentrated in their assets and liabilities. the fact that silken valley was not really analyzing how concentrated it was in its deposits and some of those were enormous. all it takes is one are two tech companies to withdraw deposits, to get on phones with friends and tell them there is a problem at a particular bank and think we know we have an old-fashioned run on the bank. you had people on twitter who should have known better, billionaire hedge funds managers fear mongering and none of that was necessary. but at the end of the date this is the fault of the executives at svb. and why is it they were selling thousands and thousands of their own shares a couple weeks ago

and why weren't they at least doing minimal interest rate risk management and liability risk measurements? lisa: a lot of people are saying this is highly idiosyncratic for the reasons you said. comerica shares are down 7.5% in premarket trading following moose we saw last week. a number of the bigger small regional banks are struggling. how idiosyncratic is this or is there a larger problem we will see in the days ahead? mayra: a couple of days ago we could say it is idiosyncratic. the problem is, nobody wants to be the last one in the room, soon as there is a problem with one bank, fear is real and immediately everybody says wait a minute, should i also have my deposits at bank a, b, c, d, etc. investors move and you see other

banks, bond yields go up which signals to the rest of the market there is an increase in probability of default, even if the bank is well-capitalized. yes, the problem is they can quickly go and become illiquid. lehman was single-a and it was insolvent and these things can happen incredibly quickly. that is why there is no way silicon valley bank and other banks should have been allowed to grow that fast. back in 2015 when greg becker was advocating for lighter regulations, in 2015 that was $40 million in assets. when it closed down it had grown by over 400% to somewhere in the range of $210 billion. yes, you are going to see gyrations in the market because investors are nervous. jonathan: thanks for being with

us. fantastic thoughts on the regulatory front. once the new lending facility was announced they said, a shift in collateral, rather than making record to market means the banks that have accumulated more than $600 billion in unrealized losses on house maturity treasury and pro folios and didn't hedge the interest rate risk should be able to ride out the storm. there are always trade-offs. these are difficult decisions, but there is a sense that some bad management has been rewarded here. tom: there is five standard deviation move. the answer is yes. jonathan: futures just about positive. this is bloomberg. ♪ introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. every day, millions of things need to get

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jonathan: nothing to see here yet equity futures. of course, there is something to see, the worst week of the year on the s&p and nasdaq. look at russell, down .5%. unlike the s&p, there is a big weighting toward financials on a russell 2000. keep a lookout for that. the russell down .4%. let's get to the bond market. the front end of the yield curve, two-year, 5.08% -- point

-- .0 .58. down 30 basis points on the two-year, and 80 basis point move in not even three full sessions are the 10 year comes down 13 or 14 basis points. you are seeing a similar move in germany on a week where people expect the ecb to go 50. this is what euro-dollar looks like 50 the yield down 37 points in germany, euro-dollar holding on. lisa: over the weekend, people were saying the reason why they came out with these programs was simply so they could raise rates without being systemic issues and that basically this gives them more of an ability to go further. nobody is buying that today the terminal federal funds rate being priced in at 4.8 percent, from 5.7% on thursday. tom: yesterday, there was a

certain tone and then it shifted sometime in the pre-oscars and it was simple, nobody wanted to buy this stuff. there was an assumption sunday morning that we are moving the watches and daylight savings time and somebody will be there. the ducks were lined up at 9:00 p.m. and nobody showed up to buy this stuff. jonathan: in the months to come we will find out what happened. got the impression the treasury secretary we heard from that of a morning on face the nation, she talked about turned out to be something different than what we got later in the evening. tom: we have many voices this morning. but right now, incredibly qualified guest. edward yardeni is founder and

chief strategist at yardeni research. far more, a passing understanding of the james tobin school of economics in new haven, connecticut. in learning from it yellen at yale, you have known janet yellen from the very beginning. what is her character as she confronts this greatest challenge? ed: she is a do-gooder and wants to make sure this ends well. i think her initial remarks on sunday morning suggested she was going to be somewhat tougher. once she got were other folks were involved in the discussions , she came around to the view that depositors had to be protected and that is exact we what they did. she does tend to be a government

mettler, as do other treasury secretaries and fed chairs and in this case, the oscar for bailouts goes to, i am not quite sure it goes to powell or yellen . tom: in the early 1970's, you talk about these xeroxed notes. but janet yellen had her notes. as a playbook now for this trauma? ed: this is a tough one because at the heart of it is the insurance system for deposits and that is where the problem lies in why the immediate knee-jerk reaction of the regulatory and monetary authorities was to make sure depositors of these particularly troubled banks are able to get their funds. it still leaves the question about how about everybody else?

this is sort of a de facto backed up -- backup of the deposit system in the united states. the wall street journal is warning this is a slippery slope you down right moral hazard where the banks get all the posits -- deposits guaranteed by the government. lisa: to build on the point that janet yellen sounded different, who do you think gave her the biggest pushback? where did it come from? ed: i suspect there wasn't much pushback. i think they were in panic mode. it is extraordinary how quickly they can put out bailout programs and come up with letters to describe them and they did that amazingly this time around but they have had experience doing this. i think we are concluding this is the payment for the free

money we had for so many years. now the fed is trying to tighten things up and realizing it is not that easy and the system may need to be short of an order for them to make this transition more smoothly. they don't want this to end badly. the markets are skeptical. first it rallied the futures markets and now they gave it all back. it is going to be one heck of a week. remember the economic indicators , before it happened we were worried about the cpi. we may be worried about the cpi on tuesday when it comes out that it is not going to be a pretty number. lisa: how concerned are you, given the fact that we have a hot labor market print on friday and people shrugged it off and looked at wages and look at a narrative that was more convenient and now a potentially

hot cpi print potentially into a 50 point basis-the ecb, how does the fed fight inflation if the market is basically telling them they are one and done in terms of rate hikes? ed: think they will have to slow down the rate hikes and maybe even stop. i am not sure it will have a rate hike at all at the next meeting. and certainly it is not going to be 50 basis points and back to 25 basis points. the two-year suddenly has a completely different lower terminal rate than we had before. i think the fed is just going to be winging it, which is what they have been doing all along, right. they are data-dependent and out event depended. lisa: this is a concern for people who think inflation is a problem and looking at real yields plunging and financial conditions easing significantly.

are you saying that it will be effective to curtail inflation or a more worried about inflation picking of and staying higher? ed: i have been thinking a good part of the inflation was pandemic related and the idea of transitory is relative the persistent part. it has been in services. there is the core services area that the fed is focusing on and i think in that area you will see moderation as well. i since there is resistance by consumers to the price increases and there will be resistance by employers to increase wages much more than they have. jonathan: the last time we spoke you said -- sounded constructive but you don't sound bullish now. ed: it is hard given the uncertainty created by all of this. i have to be realistic about

what is going on, but i do think we are going to get through this. i don't think this is going to lead to a recession. i am still in the soft landing camp. i feel stronger than ever in my conviction that the 10 year bond yield peach at 4.25% net info october and i still think october 12 was the low last year for the s&p 500. my level of conviction is lower because i have to recognize things have occurred in the past few days that are relative. jonathan: thank you. more cautious than the last time we spoke, with good reason. tom: cautious in crisis and what it means is uncertainty and there is no mathematics to it, no probability distribution. the uncertainty this morning is

off the chart. frankly the president and the 8:00 hour will not get it done and will maybe drive it forward and have a little news but this is about trust and confidence. here is the lead, it is about nothing else. jonathan: we all have a responsibility not to talk about bank funds without being super serious. at the same time, we have to observe price action. the first republican premarket is down by 70% at the moment. they are not alone. there are other names. some single name bank moves, think there was the hope that perhaps we would get a bounce in some of this stuff and i don't see that right now. tom: i don't see that in the bounce that you need to work out troubled banks and they will decide. the people in markets will decide. can you imagine the different types of people anymore bank

bank like silicon valley? the prices families have in the kitchen and the choices they have, the choice set a small business has. where i am, these are not big decision. the wall street journal had a great article, got on cell phones jetting around the west and attic totally what they were doing to get the jillions out of silicon valley. lisa: the question they had is are they going to meet payroll? it seems like what the federal reserve and treasury department has done is say yes, you can, but at what cost and that is what we are trying to figure out. is are going to be some cost to banks for extra insurance or who could potentially bid on assets and at what price. jonathan: is not about the banks

that have failed but about everyone else. number one question across the country over the weekend was whether they need to move a bank and open a new bank account. the question we had friday was just basically, who is next? waking up this morning at the regulatory moves and the policy effort, the question this morning is have they done enough? tom: what the magnitude will be more than anything. i was surprised the be tef, --btef, i thought was sort of a small period wonder if that will expand and be the first measurement. jonathan: too many acronyms. futures right now just about positive by .1% on the s&p. monster markets in the bond market.

from new york, this is bloomberg. ♪ lisa: from noose around the world, with the first word i'm lisa mateo -- from news around the world, with the first word, i'm lisa mateo. nato vying for greater control of the arctic. estimates suggest the region holds one fourth of the oil and natural gas resources. ukraine's interior minister says russian artillery have destroyed 152,000 residential buildings it's the start of the invasion. the first public comment, the chinese premier said they will protect the rights of entrepreneurs and support private businesses. he also downplayed the and portion of beijing's modest both target of 5%, saying citizens are more focused on issues that affect their daily lives rather than the pace of gross thomistic product.

the u.s., australia and u.k. leaders will announce a new fleet of nuclear powered submarines as they counter the china in the pacific. upgrading australia's sub fleet is part of that effort and president biden will meet in san diego with u.k. prime minister rishi sunak and unveil plans to unveil the new submarine. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

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bank is strong. we are seeing the correct statement that if your bank is sensitive to both interest rate risk and credit risk, then you have a more difficult outlook. we will see good names getting short-term contagion. jonathan: from new york city, good morning. those comments ahead of the weekend. we will go through it in detail. futures are just slightly negative, down .1% on the s&p 500. so far, so good. equity futures. elsewhere, was in treasuries are unreal. down 14 basis points on a 10 year. on a two year, down 32 basis points. late sunday evening, the treasury department, federal

reserve and fdic said it will wind down the failed silicon valley bank that protects all depositors. the hope being you don't get a deposit flight from other banks going to other places and if you do hopefully banks can deal with it because the central bank announced new funding program that offers one-year loans to other banks in america under much easier terms. last night, i think we were all having the same conversation, have they done enough to prevent contagion and shore up the strength and resiliency in america. day by day we will find out. the process concluded with the failure of this bank that has been developing for several years but ultimately, things unwound quickly in the space of 24 to 48 hours. a week is a long time. tom: the answer is suddenly has changed. there were strong people on

twitter and i would suggest jim beyonca nailed it with the long thread this is what he did and with the great people do in law and economics, they go to microeconomic dynamics and he talked about the frictions out there and those frictions and rubbing my hands together in the twitter world are gone. in the cell phone world, justin smith who worked in digital and founded bloomberg digital, he said cell phones will change everything. jonathan: we saw some irresponsible tweets over the weekend. tom: you are going to get me in trouble. bramo save me. lisa: you can undermine confidence, especially if you are in a position of having money and there was a question

of what the motivation was to come out and basically sound the alarms. tom: i am the son of to depression babies and these are things you don't talk about. that is an american fabric. this is i'm sure for many view controversial. robert hockett is doing wonderful work. he has been an extremely intelligent voice of people outside of the capitalistic system in america. his service to progressive left candidates is noted. thank you for joining us this morning. is this a progressive opportunity? i thought 2000 eight was a progressive opportunity. is this a time where progressive scan pole capitalism towards the people of america?

robert: it is time we can pull capitalism toward rational basis. before the changes in 2005 and 2006, the deposit insurance fund was not funded by premiums paid in by insured parties or banks. the assessments were made only at a certain threshold which was a cyclical way of doing things and not countercyclical. the move almost 20 years ago to a system that is premium funded, which is great, but the problem we are living with is the problem of caps that could be insured is a relic of the pre-risk pricing days, but now that we are risk pricing, there is no reason not to offer it to

cover deposits in full and the right risk-adjusted premiums. i think we can move to a much more rational deposit insurance system and that will be very much in keeping with the wishes of regressive's but also with the wishes of pre-much everybody. tom: i want you to speak to a republican group that represents a huge body of rural america with the demographics. i stayed the work of you and dan alpert is truly world-class. i want you to speak to republicans who think like you but can't do it visibly. how do they change their republican party, given they want representation of depositors in america? robert: the best way to appeal to them is we are trying to get a reproductive resurgence and would like to make things again.

a bank like svb is situated for that endeavor. all the loans were essentially startup companies for the primary markets and all of the excess was invested in treasuries. it was a bit boneheaded for the management not to hedge against the interest rate risk it attaches to a portfolio, but it has been 45 years since we have seen rates rise this quickly and it is pretty easy to hedge at risk going forward, but that still leaves in place the question of -- are we going to ensure deposits in full at banks like this given that many startup firms and newly conducted firms need big operating budgets and can't deal with a quarter million dollar bank account as a transaction account. lisa: this is a new era of frictionless withdraws and that

changes the dynamic of bake runs but does that change the regulation of the oversight of the cost of how much some of these banks should have to pay to ensure their deposits? robert: i think what this does is render more urgent what i am advocating, the fact that we will be more subject to liquidity risk because everything moves at the speed of twitter and iphone messages. it is porton that we buttress the position of all banks and it ends with deposit insurance. if you price it rationally you're not imposing any costs on the taxpayer or public at large but offering a kind of insurance on a not-for-profit basis to all depositors and banks, irrespective of heart large -- how large they are. jonathan: what would you say to people who raise a particular word? robert: it afflicts all forms of

insurance and that is precisely why we determine with the premiums are accordingly. you deal with the moral hazard is to charge rational premiums. another way is to have safety and soundness regulations, exclusions and ordinary private insurance policies. that is what capital regulation as administered by the fbi see is. -- fbi c is. -- feid -- fdic is. treasuries of the gold standard where that is. there was a sense that this was the boring bank and investing merely in a loans on one hand, none of which were underperforming and the rest in treasuries which is what the fed does. in a certain sense, the

non-roman portion of the portfolio at -- private sector banks should have but that doesn't mean depositors should be protected against runs. jonathan: thank you for your perspective. robert hockett of cornell. a lot of people will have a lot to say about that conversation. tom: the politics of this is hugely engaged. i just go out to the simple question, did they just decide they wanted to find yield in profits and coupon versus doing the responsible thing? you tell me. two year, maturity and out past that and they went past that. lisa: we will have to see what the regulations and insurance ask like. tom: -- jonathan: a lot of

people will say the banks that failed didn't manage their risk properly and the federal is giving them a way out of that. features just about positive. this is bloomberg. ♪ harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent.

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telling us there is some kind of issue here. i would say that money has been checked out. >> for the first time, it is dealing with negative and positive growth. >> we don't see this as ace to stomach crisis. -- systemic crisis. >> this is almost like the opposite of a crisis.

the fears are out there when the banks are more resilient than they have been in a generation. >> this is bloomberg surveillance. jonathan: the market fallout from the biggest bank failure in the united states since 2008. from new york city, good morning good morning. this is bloomberg surveillance with equity of -- equities almost positive. the treasury department, the fbi see -- they said they would wind down silicon valley bank in a way that protects all depositors. have they done enough? tom: is it a bailout? we've been covering that on bloomberg surveillance. i am less concerned about the bailout dynamics then it what's different on a monday. we have market data and it was to be green on the screen and then not. because of europe and select

american banks. in the last 10 minutes, we get a little of that 3:00 a.m. back. jonathan: the two-year yields are down 27 basis points. that's more than 70 basis points lower than they were from wednesday. that is the bond market. some of those bank stocks in america in the premarket are down more than 60%. lisa: looking at shares, they are down 34%. there are others that are down it, but not to that same degree. you see some potential fallout in the expectation of what other banks could lose with customer assets out of fear and a knee-jerk reaction when they can do that from their phones, from their computers, triggering a much faster run on the bank that creates more issues. jonathan: we could go back to a

very simple question. where do we bank? do we need to close our account this week? tom: all to hunter 50,000 statistics have been shattered in 2008. i really think everyone is resetting. it's not a simple one iphone move. jonathan: these had better be quick decisions to stem the fallout from silicon valley bank. the fallout, the follow-through, some of the things were unwound five years ago, that's where the conversation is going to be. lisa: we are back to quantitative easing. then you have no rate hikes are just one more and then cuts later this year. the policy responses to save the financial system at all costs. what is the moral hazard?

there is a larger question of the interconnectedness of venture capital, of some of these banks who grew so quickly and then didn't know what to do. the risk is in the safest assets. all of these questions way more concerns about what is next to the drop. tom: the math doesn't work. there is so much emotion going on. i did a lot of fancy math. the answer is on that thursday in 2007, it was a for standard deviation a move. that was considered outrageous. the move of a 10 year bond in recent months have been over five standard deviations. that was a shock they had to manage. jonathan: the federal reserve is quiet, no fed speak on the counter. we have cpi coming up tomorrow. retail sales after that. final piece of fed speak, the final piece of it was after the

session on friday where the richmond fed president refused to rule out a 50 basis point move. he said he wouldn't rule anything out. are we still talking about rate hikes? a lot of people have woken up this morning and come to the conclusion that everything has changed. we won't get a move. we have some important information still to come. tom: i am of the camp there is still value to the tuesday cpi data. there are others that just push it to the side. i will say -- the newtonian vector of the funds rate was irresponsible. it was not what they did it was the speed that they did it, it

was totally unprecedented. it was very non-greenspan. jonathan: it was on the 16th. zero to close to 5% in 12 months. you say that was a mistake? tom: one example of this from engineering it, they moved too fast. that's it. the magnitude of getting from here to there, that is fine. in hindsight, some are suggesting along the way it just took too long. jonathan: they moved so fast because they were so slow. tom: they had to play catch-up. the silence of the fed, maybe we will hear from chairman powell today? jonathan: we will see. the deputy of fixed income, i want to start with this move in the treasury market.

what do you make of this move on the two year yield? >> the market has taken out any chance of them going 50 in the next meeting. we are debating and pricing zero versus 25. that is very rational at this point. the fed got a relatively weak wage number on it payrolls. they are opening they are going to get a 0.2 cpi. they have the data to justify this. i think the fed is going to be looking at this as a quasi-permanent tightening, not unlike the conditions they been generating the last year or so when it's been more stock market driven, tradable financial market variables. it is going to impact the real economy. they will have more comfort in the idea the economy is going to slow and they can slow the hikes

quickly. lisa: how has that reset what you are expected in the way you arrange your boat -- portfolio? >> we been thinking the peak of fed hiking was in sight. that is driven by review. we were going to have a 48 hour banking crisis. the idea is the market is trading and the bond market will have more pressure in credit spreads and steep yield curves. we've gotten to the endpoint for a different reason for how this was likely to play out. here, we have the banking issues. the credit markets are widening spreads. we will not see what we've seen the last two years where spreads could have a quick snap back from these widening events. we are likely resetting to a

higher income. i expect the treasury market to be bought and not sold. lisa: would you expect a higher rate of the faults a result? the question around the access to capital and investing in a company that could be tied to what we see right now? >> i don't want to be super negative. corporate america is in pretty good shape as a statement. we are coming from an environment of 1.6% default rates in high-yield markets globally. we are starting from a low point. it is going to be a lot harder to get lower from that. i do think this rate shock which we've now seen in a bank, our expectation is this rate shock over the coming quarters will have impacts on the real economy

and corporate america. tom: i can ask this with great respect, they lived the lehman brothers moment. they were private. they built this out for years and they were taken out by lehman brothers and blew up in 2008. your team lived this. should we fear the big banks? if we are going to get new bank concentration, is that unfair to americans? >> there are so many questions wrapped up in that. i would say first, the u.s. needs small banks and regional banks. the focus is on the regional banks. we have a lot of them doing local banks against real estate and small business. that is important now. they are not under the same regulatory frame rate -- work the big banks are. this is different in 2008.

2008 was a bank -- about collateral that was not worth anything or a lot of opacity around where it should be valued. our expectation is not in terrible shape. they are in good shape. this is more of a psychology and deposit flight issue. it's more of a traditional bank run type of issue that it is a solvency issue. in some ways, it's easier to solve. it is also more in the psychology of how capital is moving. jonathan: some things don't change. it's just an old-fashioned bank granite. thank you. this past week, the sudden collapse and the real idea is the fed's actions over the past year.

this remains too high. markets will price that risk more quickly. as the setback good news? tom: that is right. they are going to do it for the reasons they got this wrong. i don't think the usual fed speak tour is going to get it done. this is where the chairman has to come out with clarity and state a new vision. that is a real vision -- ciao -- challenge for the chairman. jonathan: this is from the wall street journal, china's leader to speak with volodymyr zelenskyy and meet with vladimir putin. we knew already about vladimir putin. last week, they talked about brokering a deal between iran and saudi arabia. tom: we will try to piece it in here in our financial calamity. jonathan: futures and the s&p up

0.5%. a big rally in the bond market. >> keeping you up-to-date with the first word. bloomberg has learned the russian president plans to meet top business leaders in the kremlin this week for the first time since he launched the invasion of ukraine. the gathering with top members of the russian union of industrialists comes as a government -- the government steps up pressure on companies to be paying more in taxes. the chinese president will travel to moscow to meet vladimir putin next week. the foreign ministry did not respond to requests for comment. he has started a third term as the chinese president with vows to restore strength in party leadership.

he vowed to oppose foreign interference in taiwan. german airline passengers are facing disruption today with commercial departures canceled at the biggest berlin airport. it will be affected by walkouts as ground staff strike amid a drown out pay dispute. the action comes less than a month after they scrapped 1200 flights due to strikes in frankfurt and unit. global news 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com what does it mean to be ever better?

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lead to financial crisis. we sold a failed bank to a

healthy bank. usually, the healthy would cover the insured. they want the franchise value. that's off the best outcome. this is a liquidity failure. they did not have to -- time to prepare the market. jonathan: it all came together very quickly. from york city, good morning. futures on the s&p 500 are positive by 0.5%. the bond market is phenomenal. the 10 year is down 11 basis points. 26 basis points lower, we had a break of that a little bit earlier on. it was much lower than that. we have come down from 5%. it's just unbelievable. tom: brent crude is 8171.

that would be a huge deal. we are not seeing that yet. there are some correlations out there. sheila bair and it was brilliant. i spoke to her. that's the way it was in the crisis. this is someone out of umass. she was an acolyte out of kansas. she understands small banking in america. she lived with bob dole in the early part of the savings-and-loan crisis. jonathan: is 250 a limit anymore? tom: it should have been hired to begin with. i thought it was artificial. lisa: how do you determine that? if it's not 250? is it as much as you want? tom: the issue is -- have we done that data check? we will come back to it later.

what is so important here is what is so different in the time of bob dole. gerard cassidy joins us. he is with rbc capital markets, the fabric of american banking. is that what this is all about? we were sitting over a cup of coffee at that coffee shop near government center in boston. what the hell is a money market fund? now we know. is this about the fear of bank deposits moving to money market funds? >> thank you for having me on the program again. that is part of it. you have a very good memory. when the reserve fund broke, the fed it came out and guaranteed all the money market neutral funds to instill confidence in the industry back then. today, because of what has happened with silicon valley

bank and signature bank, there is not a lot of confidence by depositors to keep large deposits over the limit and keep them in the bank. the action that was announced yesterday by the fed and the fd ic should give depositors confidence that they are insured. it's going to take some time to cool down the certainty. a lot of fear showing up in the bank stocks. it will be a bumpy rough day today for bank equities. jonathan: i think that's what stands out for a lot of people, you think what they have done overnight is sufficient to prevent a deposit flight to the sib's? >> i think it is. it takes time for the message to get out there. all of us are zeroed in on this. we do it for a living. we drink and eat the stuff

everyday. the regular fund, not so much. the messaging has to get out there stronger to reassure everybody that the community banks reach out to their customers and point out that they are well-capitalized. this is not a credit problem. this is a problem with the bond portfolios being upside down. i like your comments about the 10 year government bond yield. that shrinks any unrealized losses because of the bond market. jonathan: the treasury department and the fed of wind down these institutions. they fully protect all depositors. we are trying to work out the profit challenge. how much will small banks have to pay out for those deposits? i was thinking about this, if i am a major bank right now, i'm

expecting deposits to line up at the door, no matter what the interest rate is. we will give you zero. you are safe here. how is that going to change? >> you bring up a very good point with the larger banks. depositors are moving to them for safety. the concern about things going up may reverse. as you said, they don't need to pay interest if someone is moving there for safety. on the smaller banks, they may pay deposits because of the uncertainty. it's a volatile time. we do expect this to come down. the treasury secretary came out very clearly saying that deposits over 250 will be fully insured. that implication to me is all

bank deposits are insured up to an unlimited amount. lisa: you talked about how this will come down to. in the process, there could be bumps along the way. i am looking at credit suisse, default swaps pitting a high. the follett is hitting some of the weaker players. how muddy more casualties do you say as opposed to friday? with respect to regulators not being able to stave off the concern in markets? >> it's a good question. what they came out with is quite strong. some of the stocks that are down the most today have plenty of access to the lines as they announced yesterday. they have home loan advances they can tap. that's one of the reason why what happened was the speed in

which it happened. at 3:59 p.m. on wednesday, everything was ok. early friday morning, the bank was out of business. we've never seen anything that fast. other companies have time to tap lines. that should stave off the fear and handle any deposit disruption they may feel. jonathan: listening to the word of bailout, it is so emotionally charged. i just wondered what you mentioned, this new bank term funding program, to come in when some of these treasuries are deep underwater. they have mismanaged it. how much of a lifeline is that for those problematic institutions? >> you are right.

they are going to have this program at least until march next year. if they still need some assistance, i would anticipate the program extending into 22 before. it's going to come down to a matter of building up equity over the next 12 months and possibly selling some of these underwater securities and taking losses they can handle and moving through the problem. time will solve this problem. with this program, you will find that the banks are being given time to solve the problem by growing earnings through mobile banking operations and possibly taking unrealized losses and eliminating the problem. jonathan: thank you, sir. we talked about this earlier. you said the funding program

from the federal reserve, you expected to be extended. tom: there was a brilliant note from high-frequency. what do you do with greece? what do you do with ecuador? six banks in ecuador were not talked about. he is that encyclopedic. the answer is you put up cash, you extend time. you set up a gift of an interest rate all you catch up to it down the road. it's no different than the debt work out of ecuador. jonathan: that is one heck of an announcement from the fed. this is bloomberg. ♪ our dell technologies advisors can provide you with the tools and expertise you need to bring out the innovator in you.

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never closed on friday, waiting to hear from the authorities in the united states. positive, a little more than 0.1%. a snap back on the nasdaq. be wary of that. here is the wife of the nasdaq -- why for the nasdaq. the two yields aggressively lower, down 35 basis points.

that moves from a level of not 5% from wednesday. i just wonder if chairman powell had his third or fourth go it testimony and how different it might be. goldman sachs was out earlier. they said no hike this month. tom: it plays off 8:30 a.m. tomorrow. do we do and inflation show? do we do a banking show? i think we will do a banking show with an event that is bigger than jobs day friday. jonathan: the fed will not have a single focus on inflation. there will be something else to think about. tom: constitution is the wrong word. on a foundational basis back to 1913, this completely overwhelms monetary policy. jonathan: does it change things

for the ecb? the move on the german two-year, we are lower by 37 basis points. people expect the ecb to go 50. we will see if they go for that. what's coming later? tom: i pontificate that this fiercely upgrades the netherlands and germany and austria view with the ecb. jonathan: the wrinkle here coming up this week is not about a 50 basis point move that commits. the conversation would have been we need pre-commit to a 50 basis point move? given the instability over the weekend, it's going to be cautious to commit to anything. lisa: before we had the banking crisis, we were looking at this divergent of people who thought there was inflation and we had

new peaks and inflation had. where has that discussion gone? is it no longer a problem? has there been enough natural tightening to risk inflation to the same degree? jonathan: that would be good news at the moment. we have real policy conflict on her hands. if we solve the inflation issue and they were satisfied with developments and said we will see how things break, that's not the case at all at the moment. they haven't done enough. inflation is still high. the concern is at the surface. tom: everybody's got an opinion. the opinion is to wait for the president. we will get follow-up from secretary yellen. maybe we get a statement from chairman powell. lisa: policy conflict and how it

gets resolved and how they signal that, i want to take a look at some of the banks that are most affected ahead of the open. we talked about first republic, though shares are down at 60%. that's ahead of the western alliance is down 47%. you can see the losses building. as we move forward, though shares are down 30%. i include bank of america because the big banks have been isolated from some of these moves. you see they are flat in premarket trading. bank of america has been hit harder than the others. i wonder how this makes sense. you made a great point, if people are worried up putting their money in a smaller regional bank, don't the big banks when? they don't have to pay anything because they are safe. what is the argument for some of these banks? is this a deposit issue? is it a profitability issue?

jonathan: the authorities have come out and said all deposits are insured based on these banks over the weekend. we are asking this morning, have they done enough to tell everyone who was asking the question, do we need to new -- move bank accounts? the answer should be no. based on what we see right now, they are opening up new funding facility to say you've got the securities that are deep underwater. we will give you this. that will be great for you. you should be able to stem the tide as well. let's see where we are at the end of the day. i've got no idea. lisa: people think of the government is backstopping these deposits, should there be some sort of relief? we are seeing the systemic

interconnectedness in a way that is new for the cycle. assets or parked at silicon valley bank. this sounds esoteric. it highlights the connective tissue of the market that is been inflated by a decade of low rates. tom: the chief executive officer , he is very astute out of the university of manchester. he joins us this morning. we will save that for another day. we all learned in our school that one of the great things that provides liquidity in the system are people without hysterics looking along to buy something with enthusiasm with time to establish a trade and look for the price to go down. i don't want to get into

individual securities specifics. do you sustain it shorts today and banks you know about that we don't know about? do you just step aside in crisis? >> a lot of it has happened. if we talk about why they are down today, they have lost deposits. a lot of that money isn't going to go back. they have damaged profitability. we are down 80% from where you were last wednesday, a lot of that has happen. the question now is what are we going to face? if we assume the bullish scenario that regulators are able to clean up this in short-term, looking ahead, we have standards in venture capital and real estate. if you look out three months, who could potentially be damaged?

you look to who took advantage of ultralow rates. our concerns would be centered around private credit and private equity. if there is a secondary crisis, that's where we would be. tom: we have heard from many guests that the shadows out there, there is silicon valley. this magnitude of money that floated into these people. who do we blame for the giant norm us move of money. it? >> pretty much every happened after may 2020 was a mistake.

we had a real crisis in may 2020. the second and third waves of ppp was a mistake. sending checks to everybody was a mistake. taking interest rates where they were was a mistake. we talked about it in real time. this looks like one of these classic moves for ultra easy policy ended something much tighter. the fed isn't what we should be focused on. i don't care if they go 25 or 50 on wednesday. the market will care in the short run. i am concerned if we are entering a time of much tighter lending standards. that's what will affect the economy. jonathan: what gives you the impression we will? >> taken out the most aggressive lenders. the lesson from this is the shareholders lost everything.

if you are running a bank and you are looking at your own personal wealth and your share her lose wealth, you are going to have to run a more conservative bank. you've lost a ton of your deposits. they are in these very large banks. they won't be as aggressive at the margins. the advice i would give people in the business world is i would be securing lines of credit from high-quality banks before you need them. they may not be available. jonathan: you have to make a market call. what is it. >> we will clean up this mess and rally. later, there will be a real problem coming. i think certain assets do ok. lisa: is this a win for big tech?

>> the reason the nasdaq does so well it doesn't have any banks in it. everyone forgets that. this is helpful at the margins. interest rates don't go as high as before. the big spenders are the banks. jonathan: are we going to face higher inflation? >> there is a lot of money forced to do something. the strength doesn't seem to have ended. gold it kind of stands out. tom: he is a venerable and small banks. this is the backbone of their business. when they do lines of credit with larger banks, are they

nothing more than a proxy for jp morgan or bank of america? are we deluding ourselves if they have to get lines of credit from large banks? >> this isn't where you want to be. exactly. this is not where you want to be. 18 months ago, as great is this boom felt it doesn't lead to good outcomes. jonathan: you are just excellent. thank you. coming up on this program, tom mentioned it. the ceo of kp w. that conversation is coming up. futures on the s&p 500 are just about unchanged. this is bloomberg. >> keeping you up-to-date with the first word. in norway, forces are gathered for joint drills as a defense

alliance compete for control the arctic. the region holds around one fourth of the globes oil and natural gas resources. ukraine's interior minister says russian missiles and artillery have destroyed one hunter 52,000 residential buildings since the start of the invasion. in his first public comments, china will protect the rights of entrepreneurs nicotinic support private businesses. he downplayed the importance of modest economic growth targets around 5%. citizens are focused on issues that affect their daily lives rather than the pace of post a mystic product. leaders will announce plans for a new fleet of nuclear powered submarines. katarina china in the pacific, upgrading australia's fleet is a linchpin.

the president will meet in san diego with the u.k. prime minister and the australian prime minister to unveil plans to develop the new submarine. a film made for less than $20 million with the big winner at the oscars, picking up best picture. everything everywhere all at once won out over some the highest grossing pictures in history. global news 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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should have not gotten to the point where there is a run on the bank and the fdic has to take over. jonathan: good morning it you all. futures and they're not doing it very successfully. the bond market looks like this, the 10 year yield is lower. down by 19 basis points. look at this move on the two-year. the two year yield is down almost 47 basis points. i will keep going back to what i said earlier this morning. wednesday, 5.08%. we have had almost a 100 basis point move in a couple of sessions. tom: i am going to make clear in

the last hour it's been a series of lower highs and lows. the moving average basis, i am eyeballing credit suisse today. jonathan: when you see the curve steepen it, that doesn't usually tell a nice bedtime story to help asleep at night. >> i would take it in further from the conventional two-year statistic. we are now with three-month dynamics. the old days, there is some new alphabet soup. lisa is dying it to get in here. lisa: there is a good point about the steepener. are we looking at fed it rate cuts in the face of something very dramatic in the next couple

of years? jonathan: a 50 basis point move on a two-year. that is 100 basis points lower than just wednesday. a monster move. tom: as we worked through the weekend, i said get him. he has been attached to small banking and securities analysis. he showed the ceo. we are glad he can join us in california this morning. i don't know where to begin it. cut to the chase. you have lived this. what should jerome powell do in the coming days? >> i think this is still a moment about confidence. it is confidence for depositors to know the money in the bank is safe. it is also confidence among investors. you've got a company whose stock

just went to zero pretty quickly. investors want to know -- want to have confidence in the system as well. we need and orderliness. that's why it's necessary at the moment. we are going to find out if it's enough or if more is needed. tom: very simply, my theme for the year is the great zombie rollout. they are expert at guessing the zombies out there. how troubled is our banking system? how many zombies are out there for 2023? >> i will tell you, the bank it fell last week, it was probably one of the biggest risktakers in terms of interest rates with her

bond portfolio. they were an outlier. my conversation with many bank ceos is the deposit outflow had not spread throughout the industry. i know that concern was raising. you could see if this continues, you could see it affect them. that's what happens when consumer behavior or commercial behavior for deposits changes quickly. that's why we need the government support mechanism to make things orderly. if it's not enough, they should do more. what's really interesting it, this is all about the unwinding of covertly. there are two things that happened that impacted the banking industry. we had a rate increases at the fastest pace of my career. it's been fast and significant

in terms of measure. number two, the system during covid was flooded. there is a purposeful effort right now to drain liquidity. it is happening at a pace i don't think any management team has ever seen before. while that is happening, you have a crisis of confidence that is compounding the issue. that's why we need this broader support. if i show you the metrics of the typical bank, they are outstanding. credit quality is a of no concern. you've got companies that have stable capital but warrant necessarily built to have this type of stress put on deposits overnight. that's why we need a calming influence. lisa: what are you doing it to attract deposits and keep the

ones you have? >> my firm, we are a securities firm. we don't attract deposits. i think when talking to most banks in the industry, they have the liquidity. there are plenty of lines and avenues that a bank can go down to augment their liquidity. my sense is depositors the man's will be met. i think other banks are seeing tremendous influence. it's not equal everywhere in the industry. things are steady enough as long as they don't get worse. lisa: do you expect smaller banks to pay more to attract regular depositors? when we put our bank in the big

money centers that are too big to fail? >> in the third quarter of last year, the light switch went on. it we saw that competition greenlight in the third quarter. it's not just the banking industry competing with itself. it is market rates. treasuries were offering a compelling alternative to deposits. this is how funds a been a draining out of the system. jonathan: i just got a headline i need to get to. the president will speak at 9:00 a.m. eastern time. in about one hour and five

minutes from now, it's on the schedule. this is the move we need to talk about. we are down by 45 basis points. i will put this out on twitter for you. tom: the 10 year yield, these are extraordinary charts. i don't know if you have read it yet. the conventions -- conditions index, the answers, i've never seen this. it's a compendium of issues. we were accommodative and the plunge to a new tightness in the system, i would editorialize we've never seen it before. jonathan: the market is right, the second is the moves announced yesterday allow the federal reserve to keep going

and a focus on inflation. they know they've got the tools to deal with a failed institution. i'm not going to offer my view. the federal reserve is done it. the other is it gives them the tools to carry on it. tom: this does come down to what is it going to do to the economy? the gdp statistic needs adjustment. jonathan: the president addressing the nation and wall street one hour from now. ♪

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>> the banking system is telling us that there is some kind of

issue here. >> the banking system is dealing with negative deposit growth year-over-year. >> we do not see this as a systemic crisis. >> i do not believe what is happening in the banking sector will not give the fed pause. >> this is bloomberg surveillance with tom keene, jonathan ferro. tom: good morning, everyone. on television across the station, around the world this morning. there is financials crisis. the president of the united states will speak at the 9:00 hour. jonathan: they are going to go to things piece by piece in

point through things in the european phrase, they do not get anything they get built into the whole process. there is a lifeline for wall street banks. the lifeline has been provided by the federal reserve with the new lending facility allowing them to place facilities that are deeply underwater post the collateral. tom: we told you about the bond markets. the rework of the silicon valley bank all moving in real time before the president. what they show is in the urgency to figure out where the haircut is going to be on troubled banks, troubled bombs. let's work this out now. jonathan: in the meantime the

market is screaming, boj, you're done. to see the two-year done pricing at more rate cuts. there is to very clear camps. what was announced yesterday will allow the federal reserve to say look, we have the tools to do with -- deal with failed banks. what will be helpful is some fed speak for months. unfortunately, you are not going to get it. did i see this coming to be honest? tom: brent crude under $80 a barrel. it signals a linkage of all we are talking about in the global gdp and american gdp call. lisa: the idea of your rate hikes or no more rate hikes and actually the fed cutting rates is viewed as a negative because

it comes on the heels of potential true distress. one of the key questions is, how much do lending standards -- lending standards tighten over the last couple of months that really accelerate some of the disinflationary process without the fed having to raise. if it doesn't, what does that mean in terms of the dual mandate for the federal reserve. going back 40 years. tom: the president speaks at nine p or the chairman comes out and has to makes comments from a written statement. he says they are into a super restrictive america. jonathan: i do not know what he will say, i'm in his questions will be, do have to deal with elevated inflation risk at the same time.

the government of the bank of england has some experience of this back in september. they really wanted to communicate that we have the tools to deal with one and another just to me know what we have heard in the last hour, michael talked about lending standards. banks are going to have to be more conservatives. ceos, shareholders. yes, depositors have made whole. if you're running one of these banks, all of a sudden you have to run your institutions a little more tightly than we were previously. tom: moments ago, credit suisse breaks down not quite the lows for the days, not quite the record lows, but the stock ending terribly. lisa: we have messing the end of the pricing, but other banks which raises the questions, why

not. why was the move by u.s. authorities over the weekend not enough to stay in some of the concerns about more bank runs or greater weakness. tom: do we need to do any data? jonathan: we would be here all day. tom: right now on this are dates with society. i want to speak towards what the president will comment on here. what can we glean from the fixed income markets that can help politicians gauge the moment? what should they be watching in fixed income? subadra: they're not watching anything specifically in the fixed income market. what i think we should be encouraged by his the fact that

financial commissions are relatively easy. he and i seeing a meltdown in the equity market, broader risks and the contagion. it seems to be very localized in the bond market. you will a genetic decline in yields as the market starts to price out rate hikes for this year. to the most part thus far, it seems to be localized and price actions into the bond markets. we are now seeing a big risk of contagion. jonathan: your call for lower yields can get in a major way this morning. we have been discussing them in the last half hour or so. the second campus, the fed has shown it has the tools to deal with banks.

subadra: i think it is very soon to make a call on the fed being done. like you guys are discussing over the last few minutes, if you look at inflation, you have a very strong labor market. financial conditions are easy. financial stability risks seems to be morning -- isolated with a couple of banks. the question comes one of, does the fed have all of the tools it needs to be able to contain this problem? you guys did a good job about planning what happens in the u.k.. the fed can threaten people on two separate issues and continue to raise rates at the march meeting and even beyond if we can deal with the problems at hands. lisa: i want to talk about the mechanics of a bond market when you are seeing a 50 point move

at a time when someone will have a park cash in this debt. there are such incredible volatility in the benchmark, basic instruments people use as tools of safety. subadra: if it is a total of safety you want to be at along the bottom. we have been talking about us is the beginning of the year. this is the price action you tend to see in the bond market where the market gets a little skittish on a potential turn in policy. especially given the fact that yields have risen dramatically, our view has consistently been the risk is skewed toward the downside. that is what you are seeing in the price action. the moves look very dramatic because the two-year was above 5% a week ago.

and a lot of that weakness is going to happen in the end. that is not surprise me at all. what we have to see going forward is not really reading too much into the price action. the market was extraordinarily short heading into the march fomc meeting. when you have more information about how this route will play out. lisa: are you going to lean into the long end? cash in on some of the short positions? subadra: we really did not have any short. we have been leaning long in bonds for a good portion of this year, given the fact that it is really hard to call the pivot on policy. especially when you have given such good returns in bonds, yes

we might lose the last 25 basis points of rate hikes or not be able to -- the market is going to look towards a trajectory of lower yields over the next year or two. we moved significantly lower. i think you take apause to look -- i think you take a pause to see how things evolved. jonathan: your bond calls is looking pretty good this morning. thank you. tracy said this moments ago. a bank with subpar risk management and fleecy depositors

just changed the u.s. financial system forever. many dimensions to the story, but that take is an important one. tom: tracy has tech credit in her travel. she spent a lot of time out there. if i say flaky i sound like an 80 it appeared credit suisse moments ago breaking down. we are moments away from testing . you begin to wonder a handle in suisse. jonathan: we are down a little lower than 13%. future on the s&p session lows right now from new york, this is bloomberg. lisa: bloomberg has learned vladimir putin plans to meet

business leaders in the kremlin for the. first time since he launched the invasion of ukraine. the gathering with the top members of the russian union of industrialists and entrepreneurs comes as a government, which is struggling to cover rising spending steps on pressure on companies to pay more in taxes. the wall street journal reporting that chinese leader plans to speak with ukrainian president for the first time since his start of the ukraine war. the visit will likely come after he meets with russian president vladimir putin as early as next week. china's president with fresh vowels to ensure stability and strength in party leadership closing up the anil national people's conference. increasing american support for the government in taipei. u.s. authorities took extraordinary measures to shore up confidence in the national

system of the collapse of the silicon valley bank. federal reserve officials say it is big enough to protect the entire nations deposit. the treasury department, federal reserve, federal deposit insurance corporation all of a frantic we can this on the surprise closure of new york signature bank along with mounting concerns about spillover effects to other regional lenders. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over journalists and analysts in over 120 countries. the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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continue to fashion that out. if you go back to svb, it was a outlier in almost every metric that wanted to look at it. it is a snappy action more than anything else. jonathan: for the regulator it was systemic. they cannot, say will all depositors -- it tells you about how they are dealing with the situation. a lot of you have written in. revelatory support from the fdic, federal reserve are the appropriate ways to deal with bank executive. monetary --. we keep using the phrase non-systemic, the way they treated it yesterday, there was a fear it might be. lisa: they took actions.

you are still seeing the fallout in chairs. it was nonsystemic, was it enough, what is immune longer-term, especially in this time? you do still have to have a policy to combat that. tom: that is why the markets open now and it is a good value. i have brent crude going down to a new low. global oil, 72.77. in west texas intimate would begin to the a 60 handle. the markets are reacting and that changes the political dialogue. jonathan: lisa mentioned some of those single names. credit suisse is down by almost 13%, that is just about a two market handle. more than 40 basis points on a

two-year. the market at the moment, not my view, it is streaming to the fed, but have you think you have done. >> the two-year bringing down below one from 50 will be a new test. lisa: he things that markets are once again under -- and how long they will stay there. e. lisa: the market has apprised about a percentage point below that. tom: george bush, over the past few weeks many americans have felt anxiety about their finances in their future. i understand they are worried in frustrated. joining us, anne-marie. simply, you have been listening,

reporting on this, listening to white house people. what is the -- at the white house that the president will speak to the nation? >> a massive lack of sleep at the white house this weekend. the individuals come fdic individuals were working together to put this plan in place. the president is going to speak at 9 a.m., something we were not expecting over the weekend. after last night's news, they come out to say he will address the american people. >> this administration wants to make sure to everyday americans that this was not a bill out. these depositors, even if you were below the threshold, these boxers all being insured, the statement says all money would return and you have access to it today. that is not tax payer dollars. that is going to be one thing the president will want to emphasize and talk about the fact they have not moved

properly yes i guess that means they were concerned up potential risks for their financial markets and they wanted to protect everyday consumers. the president said in a statement, i am firmly committed to holding those responsible for this mess accountable and continuing our efforts to oversight larger banks that are not in this position again. jonathan: this goes back to 2018 subadra: the trump . the trump administration. i believe there was 17 democrats couples alongside republicans on the bill. much of that in the coming months? >> there were 17 democrats that voted alongside. you are correct appeared they were in states that trump one.

this something they want to lean into because a lot of them was up for reelection. there a lot of bank lobbyist out in full force at this time trying to get them to unwind some of this. one of the dakota senators have come out to say they do not understand the royal regional issues we are facing. the issue now is, senators voted for this, like senator warren in virginia, would they be on board of a rolling back the the regulation. we have heard from senator bernie sanders. 2018 law needs to be deregulated. for trump, he said this is a bipartisan issue. what is going to be the consequence of some of the management teams that you have to tap into the resources.

that they did have control over. >> i think what you want to see in terms of consequences in washington will be hearings in washington. there will be hearings for svb, signature bank, you can expect congress to call these individuals. tom: the brilliant david westin is going to stand aside and focus on wall street week. what a way to kick it off. where you focused on a little later? >> today we have to focus on the conversation we just had right now. the response from washington

following the collapse of svb, swift and prompt decision from treasury of the white house and the fdic. what comes next and how do we prevent this in the future? tom: i think that will be a good conversation. did we hear from yellen and powell today? >> we will first hear from the president. i think he will that they are in recent out some deputies. i doubt we are going to hear from chair powell. he just had to hearings last week. another awkward moment. remember all of the republicans were telling him -- warning him to ease up on the requirements for banks. . just last week jonathan: miser and if we do the hearings this week. jonathan: it seems like it was yesterday. tom: it was the same as

willingness they are, you look at -- i am looking forward to the show on balance of power on tv and radio. massive lineup, loads of people offering their views on the situation. amy silverman, kim leon. their view on situations of this market. making a huge bond on markets. tom: this crisis, if we get the evercore isi view on disinflation, if we ever get a inflation factor, how does that change everything that we talked about this morning? jonathan: we've barely discussed the data this morning. it is retail sales on wednesday.

last week ethically started the conversations about 50 in chairman powell talked about increasing the pace or maybe opening the door to where i sat here repeatedly. it is so much more than that, lisa. lisa: it is suddenly becoming -- again. tom: 35-year chart. the large slope of fed action is unprecedented. how quickly they moved. jonathan: this is bloomberg. g and disciplined risk management are needed most.

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tom: we welcome all of you to an american crisis. the president will address the nation at the 9:00 hour. do we know when the president will talk? maybe we will hear from secretary ellen. right now we're the markets open. lisa and i will address that. there is a new lag.

you noticed the two year yield is off to a shocking level. lisa: move has accelerated. do we get a sub 4% to year yields today. right now we're looking out for .05% on the two year yield. when you take a look at fed expectations, now we are pricing in a peak fabs fund rate of 4.7%. is of the inflationary picture disinflationary enough to justify any potential for the fed to move? tom: the idea following efforts -- frc, first republic bank of california seems to be the -- to follow. this morning. . lisa: people are trying to parse out which ones are the most vulnerable. tom: you need to know in

technology, people get chosen. there was a woman out of minnesota who was it operational researcher at stanford. i remember the day as clear as i can. marissa who was anointed as the leader as yahoo!. the gentleman who founded her was michael j wolf, the cofounder and ceo of activate. he is a voice -- it is michael wolff online to -- on line two. michael: either on twitter, message boards really blowing up over the weekend.

there were concerned they would not make payroll this coming week. they were concerned monday there would have to start letting people go. tom: i want you to express the behavioral construct. it was fancy tech guys with fancy educations on fancy golf strings flying back quickly to northern california to salvage the mess. that is the image america has of your world. is that accurate? michael: the venture capitalist started that. starting on wednesday, they already started advising started to take money out. by thursday, already $40 billion have already left silicon valley bank. it was different about this, at

that time you have twitter that had 200,000 daily users. today, all of the medication is happening through social media. it is not surprising. tom: what was so important to the quality over the weekend, brad, at the end of his threaded, he was scathing about the lack of humility among tech types. lisa: they're investigating and bringing enforcement actions if we find violations. this raises questions about potential conflict some of these individuals had. was that one of the discussions people were having over the weekend? michael: the concern about what this meant for startups themselves in the concern overall about what will this do

against innovations that are taking place. these are small companies taken advantage of venture capital is money. lisa: michael was on earlier and he was saying, regardless of it happens and what the fed was trying to do to offset some of the concerns about a failure to be able to withdraw deposits, much higher rates. if is that in the conversations you are having? michael: absolutely. even though the fed is going to backstop you think in therefrom drug were to be available. -- think there found was are

over the weekend a group of venture capitalists and others in general catalyst put out a statement that said, matter what happens, they will back silicon valley bank. if you look at some of the anecdotes, companies want even set up to take money into other places. condors were putting money into their personal accounts. lisa: is there discussion about venture capitalist firms helping some of the portfolio companies to actually meet payroll to deal with some of their concerns on there, and requirements? michael: based on the conversation i was involved in, that was not an option on the table. everybody was concerned about the laws in california in terms of what happens. tom: one of the same voices this weekend, he was cryptic. there were others that were a little more hysterical all caps and mouthing off at the time

of financial crisis. how do we get a behavioral change that affects a humility towards the entirety of america away from hyper educative finance of technology? michael: the innovation world is already moving away from silicon valley. used to be when you started a company you could only be located at one place, which is the bay area. when we move into new technologies, like to generative ai, self driving cars, even the metaverse, it is in other places . i think that silicon valley mafia will change. tom: how do we reconnect massachusetts institute of technology, stanford, caltech,

georgia tech, purdue, that is my pick in the ncaa. how do we connect technology engineering back in america where the stereotype is they are flat on their back. michael: boston, in a lot of ways in cambridge, other places around boston and others where you got people. it is also opening up the world. a lot of the tech jobs have gone away. they are not necessarily going to find work in silicon valley. there to find it in mainstream businesses. lisa: the potential fallout in the interconnectedness of markets that have been separate. i wonder about stablecoins, the crypto acid that is pegged to assets, for example, i am thinking about the u.s. d coin. suddenly it broke the book, which is the backing of its assets.

how do you view that in terms of testing a real permanence to it over -- that were previously reported as the winners. michael: this idea that this would not have happened if we had decentralized financing and blockchain. usd, usd coin, it is a stablecoin. it is supposed to always be stable at a dollar. it dropped down over $.87 over the weekend. they have $3 billion on deposit. it is meant to have a chilling effect on crypto. it is -- chilling effect on crypto. tom: john says, can you ask him if it was a bailout? michael: this is very different. it is very different than 2008. this was about liquidity.

this was not a bank that made risky investments and mortgage backed securities. this was a bank that had a liquidity problem. they made about mistakes in terms of their investments. tom: if you are asked to serve on the board of the new svb bridge, what would be your advice? michael: you better understand the credit risk officers and other people that are in place. we have got to go. we are 30 minutes away from the president of the united states. on short notice, thank you for coming in today. tom: lisa, i was watching this as you were talking to michael. the phrase we use on a normal day, there is no -- on the screen except it is so complex on the crisis.

everybody just wants to pile in. lisa: we're looking at a sub 4% to year treasury yields. 3.99% has come back around. i am looking at this and wondering, what is the bet, no more rate hikes and rate cuts by the end of the year. as we keep hearing, conditions are tightening. is it enough to cartel inflation that running at the fastest pace in 20 years. tom: we are never to be inflammatory about it in terms of individual names and guessing where they are going to be doing . it is a fragile in the discussion. what do you expect to see from the president? lisa: it is going to become a

this is not a bell, this is not a bailout, thanks. this is not to be a issue where they are printers a we had to do to make sure these innovative companies can meet their role, we are going to take the actions we need to since art our banking system. thank you. no questions. tom: on the radio and television stay with us. michael wolff with us. i am thrilled to tell you, no, we will not talk about basketball. the last time we talked sports in the crisis. we will speak to him in the shadows of the private markets. this is bloomberg. lisa: in norway nato forces are gathered for joint drills as the defense alliance along with

others compete for greater control of the arctic. the region holds one fourth of the globes oil and natural gas resources. ukraine's exterior missiles have destroyed 152,000 residential buildings. in his first public comment since taking office, china will protect the rights of entrepreneurs and continue to support private his mistress. he downplayed -- saying citizene focused on issues that affect their daily lives rather than the pace of the growth domestic product. u.s., australia come u.k. leaders will announce plans for a new fleet of nuclear powered submarines. president biden will meet in san diego today with u.k. prime

minister and australian prime minister to unveiled plans to envelop the new submarine. a film made, everything, everywhere, all at once won out some of the grossing pictures in history. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

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advancing flight for future generations. ♪ welcome to a new era of flight. >> i>> to be a broadly systemic

problem. it is going to have substantial consequences for silicon valley, economy, the whole venture sector, which has been dynamic, unless the government is able to assure that this situation is working through. tom: in the defense, that was taped prior to the festivities of the weekend like a lot of other people, he is monitoring the moment. when you get to a very -- we will get to a very important voice. the vix over 30 is a significant sign for equity. lisa: much as measuring volatility in stocks, but also in bombs. n peopled expects this

volatility in the bond yields. two accelerate. tom: looking at switzerland and credit suisse. this morning we see it in some of the selected stocks and finance in america as well. within the bond market, the dynamic of a real yield 18 basis points for global wall street is a shock. a highly restrictive environment. moments ago, the financials index is showing a restriction. at the wall street, that is a sign of a tighter economy and tighter financed. something familiar, senior advisor of bain capital. the last time we spoke was a buswell team in boston.

we will not do that today. you are a veteran advisor to all of technology. steve: many conversations all o the technology firms and start ups were shaken by the event. half of them had money with the bank. there was a bad scramble on wednesday and thursday which started the contagion, then it ended with the bank and liquidations. how do we make payroll and protect our capital that we had? tom: folks are beginning to see images of the president's speech being set up here, a podium and the flags in the white house. we will look for that in the 9:00 hour. a new humility, the hallmark of people like steve --, a guy who

owns a football team in the england and in boston. you guys had a built in humility that drifted away in the biden stimulus, the massive cash move into technology. how does the industry get back a new humility in crisis? steve: the tech crash that was driven in 99. this one has been similar, driven by web three, crypto, bitcoin, a blockchain of all sorts of exuberance. venture advancement has slowed. you get a counter reaction. that is what is happening here. that contributed to the downfall of a bank that specializes in the area. lisa: we were speaking earlier

with michael -- talking about tighter lending conditions going forward for some of the smaller companies, venture capital world, private equity world. are you seeing the likelihood and expectation of it being difficult to borrow? steve: it will not be the easy money -- that does not include venture capital, that includes the entire corporate world appeared interest rates are up, banks are concerned about their spread in yields. you will see the tightening. we will see that as we move from a easing period. we are moving back to a normal. lisa: last time you spoke about a golden era for creditor. this seems like a fruitful error not only for the borrowers, but for the lenders.

potentially we could see more shoes to drop within the private asset markets? steve: private credit will continue to grow dramatically. the difference between private credit and bank credit, private credit, specific investors have put money into a fund. it only affects those certain investors. it does not have that such an effect on the economy. there are millions of companies who have viable loans. i'm still bullish on private credit. lisa: what about the equity side of things in the private markets? steve: unprecedented highs. now we are back to kind of a new normal wear supply will meet demand.

i think to unsustainable levels and i have been saying that for a couple of years. now they have come back down. we will get back out to a baseline level. this would have affected many goods from all companies. this was the move they needed to make on a classic big crime -- bank run. , i think really the right thing to do to kind of --. tom: we have got to go because of moving markets. i am fascinated with the new internal rate of return looks like and of the new length of a private agreement. do you extend out and lower the internal rate of return or can you do better coming out of crisis? steve: if you look at the track record, we have maintained the

same level of returns in the cut of the 18 to 20% level. we had a very good returns from investors. when interest rates go up, have you see values of companies that have gone down. the return should be basically the same. tom: thank you so much. what a greathour. lisa: what is so difficult right now is the psychological impact versus fundamentals. fundamentals are being shaken by a psychological risk factor. pre-much everyone said this was not a systemic

event. it is systemic. you are seeing things come out. it shares are down significantly trying to shore up confidence. how do you parse this out to a longer-term macro call of inflation. frankly, with bitcoin trading 24/7, bitcoin pulling, but from the enthusiasms of two hours ago. tom: maybe that is more sensitive. bloomberg technology, caroline hyde anded will be a valuable resource in the coming days. i am sorry, listen. credit suisse breaking down right at the cusp of a new lows,

2.14. lisa: people are looking for what will be the next weakest link in the banking sector to go. this to me is the big question, if this isn't systemic, does this change of the scenario with respect to inflation, rate hiking at a time where you are seeing the mic it -- market priced in. tom: inflation tomorrow. when is retail sales? friday. i was wrong. lisa: you were right. i was wrong. tom: what we do see here is economic data is of importance to a nation in financial crisis. coming up, the president of the united states with the markets open will address this banking crisis. stay with us on bloomberg radio

and television.

jonathan:jonathan:. morning, good morning. the countdown to the open starts right now. >> >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york, the u.s. banks stopping bank deposits of failed banks.