Better. Im tom kean in new york and joining me is taylor rigs this morning. I love the chart you put out on high yield this morning. What else do you see in the markets . Taylor what does it mean when the fed comes in and buys junk bonds, tom . Weve never seen it before, supporting the fallen angels. Massive rally in the high yield market not to mention a bit of the equity markets, coming off the best week since 1974. Some of that seems to be reversing this morning. Tom im really thrilled with the conversation were going to have with the vice chairman and we look for that at 6 30 this morning. Im particularly thrilled Michael Mckee will join me and there will be some interesting questions. Im taking a broader perspective and michael wants to drill down as he does at the press conferences to the minutia, the details, the mystery of all the alphabet soup that the fed has done as well. We continue our huge news flow this morning with our first word news in new york city with viffauno hurtado. Viff anna the Worlds LargestOil Producers agreed to cut output after more than 10 and come after a week of talks involving the group of 20 and now the focus shifts to whether the cut will be enough to shrink the massive glut of oil. Prime minister Boris Johnson thanked the National Health service for saving his life after a week in the hospital for the coronavirus. P. M. Johnson was released in a video that said, quote, things could have gone either way. Mr. Johnson is still too weak to resume leadership of the government. Parts of the u. S. Could reopen in may. This is according to dr. Anthony fauci but the Infectious Disease chief warning theres no universal light switch to flip on. Dr. Fauci telling cnn the availability of widespread deathing would be the key to resting social isolation. He also says theres a possibility the coronavirus could rebound in the fall. Global news 24 hours a day on air and quick take on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviananow to tom. Tom lets go to the tata. Im keeping it quick. Its a churning, interesting day to check with futures decidedly negative as well. Oil is really interesting. Our Stuart Wallace out with an observation on how fragile is rolling over the last hour. Taylor wants to talk about it as well. I would focus on the full facing credit twoyear yield which is very quietly come down to a lower 0. 21 and are not recent lows of 0. 19 but were really getting there. What do you see . Taylor flattening across the curve. I want to see how the equities are folding up going cross asset. You notice a decline. I would say the domestic small cap stocks highly dependent on the strength of the u. S. Economy clearly getting hit the worst and want to look at the high yield market coming down 86 basis points after the fed said theyll be the buyer of last resort for those fallen angels if youre downgraded march 22 and youre also getting a pier. A buyer of the fed within the Municipal Bond market and theyll step in thursday morning and announced it on the short end of the curve to help some of these states fund the deficit financings. You had muni yields dropping again by another 22 base points and the fed really stepping in here. Tom interesting over the weekend with comments from Governor Cuomo and the governor of maryland on the basic ideas of states need assistance now. Lets remind ourselves, they cant print money. It was a fabulous week and a weekend of adjustment for market economists as they have a thankless task and simply they have to adjust their forecast. Its moving in real time based on the pandemic and based on the market actions around the pandemic. One note, jp morgan with a substantial grimmer outlook for 2020. Right now neil sheering joins us from london with capitol hill economics and what is important is the acuity of the research notes. Neil, did you adjust your forecast over the weekend . Neil no, weve not adjusted our forecast over the weekend. I think the market is coming towards us this weekend. We said the start of march, mainly what were seeing in china as the virus spread and the disease spread and disruption spread the economic dislocation and the effect in europe and the u. S. Would be similar to those that others and i forecast. Theres market estimates that have a bit further to fall. I expect in q1 and q2 well , 20 lly sizable high r. Q. Especially in the u. S. Tom i like the idea theyre catching up with capital economics. What is the distinction, the collapse of the consumer causing a grim outlook or Something Else . Neil whats really interesting in this is we tend to think of that sector as manufacturing being very cyclical and those are the first to fall over in dying terms and whereas here were taking a conscious decision to shut down economies for Health Reasons and it is affecting all sectors, particularly those that are very labor intensive in the service sector. Weakness across the board. Whats changed the past few days and weeks, just the shared magnitude of the lockdowns and shutdowns across europe are starting to come through and analysts are projecting that on to what might happen in the u. S. The second thing which i think rightly is starting to happen is the appreciation of the fact that even once lockdowns are listed, the workplace is reopened and well go back to a world where demand will be permanently subdued because corporate household, animal spirits will be diminished. Taylor Morgan Stanley coming out and saying the action by the Federal Reserve shows the fed is all in in trying to avoid a lshaped recovery. If animal spirits are subdueded and you dont think the demand feature comes back, what letter are you predicting when it comes to an economic recovery . Neil economists like to tie themselves up in the alphabet up of recovery, vshape, lshape, jshape. When the workplace reopens it will start to look like a v shape quickly because the production will come back, the supplyside of the economy will start to get working again. But then well quite quickly run into this reality of weaker demands so things will start to level off. If you look at the level of gpped g. D. P. It will look like a v shape and were going back to business as usual but then when the reality of weaker demands comes through and invest respect are slow to pick up and consumers are slow to pick up spending i think well be hit by the weakness of demand and things will level off. My sense is it will change over time. Taylor walk me through the economics. C. P. I. Data on friday was less than expected and one expert says deflationary sforses are a difference between a recession and depression. Are you worried about the lack of inflation . Neil i think this is another area where economists have tied themselves in knots. If it had a inflationary or de nation area shock. And you shut down the supplyside as well as demand. Depending how those two play out it could be inflationary or deflationary. My sense is in the first instance its disinflationary not in the least oil prices are coming down and will knock a fair chunk off inflation over the advanced economies in the coming months and quarters. As far as core inflation is concerned, that will dumb down, too. We know the phillips curve is flatter than has been in the past. And core inflation came up a bit but not negative territory, at least in the u. S. My sense of deflation, if i had to pick in the short term deflation or inflation is the biggest threat, i think its probably deflation in the short term. Most likely is that we end up with very low rates of positive inflation. For the next couple years. Whats really interesting is what happens beyond the next 23 years with the legacy of this crisis, one of the legacies will be higher debt loads. Will policymakers think inflation may be the way out of these times . Tom thats one of the themes well talk to the vice chairman about and well continue with mr. Sheering. More coming up, well have an important conversation on the pandemic and this new idea like the influenza of world war i, 1919, the idea of a secondary inflation. Fore that, Michael Mckee and myself with the vice chairman of the Federal Reserve system, michael clarida. Stay with us from new york. This is bloomberg. This is a crisis like no other. It is the worst weve seen since the great depression. And it requires extraordinary action by everyone. Including by International Organizations like the i. M. F. Our message is twofold. One, we must fight the virus and protect people. It is first and foremost a human tragedy due to that Health Crisis. Ought to do everything they can to support Health Workers and health systems. So the faster we beat the virus, the faster the recovery begins. And two, because its such a gigantic, dramatic development, a virtual stand still of the world economy, it requires massive, welltargeted measures. So we see governments stepping up globally up to that moment, trillion of fiscal stimulus and Central Banks, including the fed here, doing a heroic job. That has to continue but we need to remember there are countries that dont have these capabilities, and for that the i. M. F. , the world bank, we ought to step up and we do. We have a trillion dollars capacity. All of it is at the disposal of our members and were moving very rapidly responding to extraordinary flow of requests. All the 90 countries, 90, never in the history of the i. M. F. Have we faced such a demand and were very fast to act. So first on that basis, revive the economy. Tom what is so important here, you mentioned it in your opening comments an hour ago and quoted an economist from the 19th century, victor hugo, and talked about the fraternity of strangers. Your strangers are the g20 neighbors and you have to come together to find an increased vehicle in the s. D. R. , the special drawing rights. With a do you need from the g20 with more funding under s. D. R. And specifically what do you need from america . What i have to remember is the extensive stepping up of our membership including the United States to make it possible to have in a timely manner the 1 trillion i spoke about. A part of the 2 trillion stimulus package, there was a component supporting the naps, the authority of the i. M. F. , reserves. Our so indeed make sure we have the resources, the 1 trillion i spoke about available and now we do. When we look into the future, if this crisis continues for languager periods of time, and this is the uncertainty were wrestling with. Or theres a second wave of the epidemic which epidemiologies are saying is not completely out of the question, then we eed to look into further the resources of the International Monetary fund. And to explain to the viewers, the s. D. R. Is a fast way to provide liquidity to all countries. What came in er 082009 there was a boost of 250 billion s. D. R. s spread among the membership to improve the liquidity position. Why is this valuable . Because many merging markets find themselves, beat a Health Crisis by a stand still on their own economies and complails flying to safety have left the merging markets and makes the liquidity of this position and countries more challenging. That poment, a mission of s. D. R. Can provide a much needed liquidity mark. Tom the managing director of the i. M. F. Managing fund. And we spoke about things and nigeria is bothered by the price of oil. Crude is lower with west texas but certainly not an ell race of oil after we saw the weekend. We can dovetail in here what we heard from the manage director is what we hope to have with the fed. You would at inside support and fiscal services, is it enough to give a shock to the economies . It wont be enough to provide shock in the upcoming quarters because weve taken our decision to shut down economics. Particularly not much the money policy can do in the face of these shutdowns. What appropriates can you do to get the Companies Back and running and replate exams once the lockdowns are listed in the Second Quarter, especially the Third Quarter but Second Quarter as well. Money policy will be at the very limit of work can do now and really the action by the fed and others over the past ew combeeks and month can be a ality project or deflate the bottom. And its fiscal policy that will play a key role in boosting demand in the coming eks and theres been a dig difference what different governments have done. The u look at the u. S. And. S. And there is a world to do and requires coordination and was a different situation in 2008. Tom neil, a number of economists this weekend showing confidence that the fed two years out, five years out can get things back in the molingts, back in the bottle. Are you optimistic the fed can reverse these many different programs . Neil in principle, i have no doubt that it can do this. And just as the commercial Bank Reserves can be created so they can be destroyed, and tossed at its disposal to get the genie back in the bottle so to speak. The question is will the conditions prevail such it will e able to do that . With we just managed to get off the zero and think of quantitative tightening after the Global Crisis and then we find ourselves back at the zero and there was some easing and not the q. E. But affects the feds Balance Sheet. Its not whether the fed has the tools to get the genie back in the bottle, its whether the conditions prevail that makes them think this would be desirable and at this stage i think were a long way from that. Taylor thank you to neil shearing. You can check out tv go and click on our charts and interact with us directly and go to tv go. This is bloomberg. Vivianna youre washing bloomberg, lets get the business flash. U. S. Stocks probably hit bottom because of what the firm calls the whatever it takes approach of policymakers. Goldman removing its prediction in the near term. The s p could fall to 2000. Apple plans a refresh of its top tier iphones. Bloomberg learned in the fall there will be a major refresh. Apple is borrowing huge from the latest ipad instead of the current curb design. Two high end iphones will have flat stainless steel edges and 5g will be added to as many as four new models. Thats your Bloomberg Business flash. Taylor and tom . Tom thank you so much. Greatly appreciated. Coming up, without question my interview of the day and perhaps yours as well, the vice chairman of the Federal Reserve system in conversation with our Michael Mckee and myself. Much to talk about including the Balance Sheet and yes, the many different programs of 2020 and this pandemic. Please stay with us. This is bloomberg. When Opportunity Knocks at the door, dont put your silver pajamas on. Were clearly going through some very unusual times and you know, enormous difficulties getting groups of people to agree on thing. Francine in the city of london, taylor welcome back to bloomberg surveillance. Im with tom keene in new york. The story of the past month has been massive dollar strengths and funding issues and the subsequent treasure it is putting on emerging market debt and currencies. No person better to bring us rspective than esther law, a portfolio manager. I want to talk about the dollar strengths and some of the funding pressures that are put on your emerging market world, has any of that eased in the recent weeks . With all the measures weve had especially in the past two weeks, and also with the fed trying to also help out on the collection side and also we have the g20 announcements there should be some delay in the payment, like a holiday for bilateral loans and i think that has reduced some cash flow pressure on the emerging market, especially the poor ones or more desperate ones. So to your answer, yes, i can see the pressure has been relieved or delayed for the really desperate ones. Taylor your smart note says youre cautious on e. M. Debt at the moment. What makes you cautious on e. M. Debt right now . Esther for me to become more confident, i need to see flows. Right now ive been observing rates very closely and encouraged to see the outflows and in two weeks weve seen an uptake in in flows in hot currency funds. However, i need to see a bit more contained info into the asset class i should say in the s evaluations. Tom we spoke to the managing director of the International Monetary fund and i would suggest in the literature its presumed i. M. F. , world bank and other institutions to the rescue here in the coming weeks and months. How do you find opportunity given a presumed i. M. F. To the rescue. Esther to look at this question we have to look at the logistics and dynamics and see which countries would benefit most on the i. M. F. Managers, either it be direct lobe loan funds or regular support. . January thinking if you look at the asset class which has been beaten up enough, a few more on the high currency funds. I think there may be some opportunity for the better ratings. Better gray names and especially when the storm comes down a bit. Tom what is the differential in fixed income in e. M. Between debt that has a coupon of the countrys currency or debt that has a coupon on of the United States dollar . Esther if i look at the latest data, the wild of high currency ebt i need a debt in high euro volume esity dias. From those funds, the hard currency is evaluation may be a bit more crucial at this point as well as less punk which you situation in the volatility which we may see a bit more to come with the different headlines hitting us. Taylor esther, weve had crude all over the place recently as low as 20 a barrel or so in the u. S. How much do low oil products make you nervous against the companies you look at . Esther im a bit less worried now than two weeks ago before the opec class effort to cut output as per the last weekend, i think its a good confirmation. We have a joint effort to reduce the output even though the amount may be slightly less than what the market was ooking for or what was first mentioned, that is important to know what happened over the weekend is everyone is trying to put a flaw on the oil price. It is a soft answer, doing good especially those with a Higher Oil Price in the budget. Taylor are you more worried about domestic demand or the xports of these country snps esther its important both ways. Both the demand side and the supplyside. The tricky part with the demand size is we have to see how long the covid19 lasts and which will be the second effect coming through. To answer your question, im equally worried both demand and supply. Right now youre correct to say weve seen in cause and effort on the supplyside so the demand will be a bigger focus Going Forward in the next two months. Tom tell me about southern asia. Im fascinated by the currency dynamics we see in vietnam and particularly in indonesia, is there an opportunity around the south china see . Est from the public sector, yes, for sure. Weve seen a lot of action from the Ministry Finance and the Central Banks in trying to support the market and communicate to the investors what theyre planning to do. I think all these measures and communication is very much welcomed. And indonesia, i think were all trying to assess the budget deficit measure that is trying to support this covid19 like other countries in the world and also for indonesia, the mark has not recovered more and often is to do with the petitioning. Ing do this selloff, its a top pick by many. Tom thank you so much. Esther law with us. Very timely and we thank her for that perspective as well. A wide set of headlines coming up. Pain looking at a better pandemic. Statistics for todayened well have much more on that. An important interview in the late hour, 10 00 this evening. And then headlines coming out from the saudi arabia family, aram go. Aarm co3. This is interesting with what we see of the price to the United States. And well talk to and murray in a moment. Right now with our news, in new york city heres viviana hurtado. Viviana mr. Johnson said he could have died. He was released and in video he thanked the service for saving his life. Hes still not Strong Enough to resume leadership of the government. He u. M. F. Is holding video discussion and they say a lack of forceful action could set the stage for damaging debt twults. We went with this, possible 18 months for rolling shutdowns for the u. S. He told cbs as countries are exercising economic control, the virus could flare up and he says coming up with the vaccine or therapies for the coronavirus. Global news 24 hours a day on air, powered by more than 2,700 journalists and analysts in more than 120 countries. Im viviana hurtado, this is bloomberg. Taylor and tom . Tom thank you so much. Much more coming up. Well look at the same theory of this transaction. Were loyal and fragile here churning on best texas intermediate, as well. Michael mckee will join us and michael and i will talk to the vice chairman clarida about the state of the monetary experience. Taylor, what did you see over the weekend after this wide set of actions. Dont kill me if i say this, time to question monetary theory, m. M. T. From helicopter money and neil shearing is looking at the long term nsequences of ignoring the laws, and what it means for m. M. T. Hell donter money re send. Tom michael will descend before we hear from the vice chairman and i believe will be a little bit after. Michael darda channeling manly johnson over the weekend. An important voice in the early 1990s. Much more to talk about today including the interview with the vice chairman. Stay with us. This is bloomberg. Taylor i am taylor riggeds with tom keene in new york. We know the opec plus alliance has come to an agreement to cut petroleum output to 9. 7 million a day. After a week long marathon of bilateral calls and video conferences to tackle the pandemic on demand. Joining us to discuss is bloombergs amry, is 10 million enough . Its a good question. Goldman sachs noted after the deal its historic but insufficient. 9. 7 million Million Barrels a day and double that and some traders are saying as much as 35 million wear ells a day and will help stave off these tank tops in terms of storage but in terms of impact and prices today its really tiny and a drop in the bucket but up they were able to do organized cuts. Rather than just letting the market dictate what was bound to happen which is they were going to have to cut regardless. Tom you and manis do the vienna walz and used to be where the game theory was seven or nine or 10 different nations. Im counting at least 16 in this traps action. That gang theory doesnt work. Can anybody trust anybody in this . Thats a good question and there are more than 20 in this group and the talks stopped thursday evening because of mexico which is not a large producer. The oil minister left the meeting and had her president call donald trump to help broker a deal and the United States put mosh pressure on the kingdom. Its very hard and saw the talks break down because of this. It is much harder when you have all these other producers and they have ideas on how much they want to cut and what they want for base lines but you look back at home, mexico dictate what is they can agree in this national setting. Taylor what does it mean for u. S. Shale . The u. S. Is the biggest winner. For u. S. Shale the size has been bemanneding, the size and demand and for the United States it was a huge victory in the sense that the u. S. Is not cutting a single barrel voluntarily. They will cut due to economic and Market Driven decline but they were able to secure a deal in a sense. The president of the United States brokered so many of these calls with mexico and the king of saudi arabia and president putin to round out the last four days. This was a victory for washington and texas. Tom i look in, marie, at the the president of the United States. What is the next step now r. B. C. Says hes the de facto president of opec plus . Its a good question because this really changes what happens on these next meetings. Does the United States now play much bigger role in the oil cartel and jond . Because now weve set a precedent the u. S. Would be involved and following the meeting last week that broke down and republicans were putting a lot im talking about strategic relationships nd how that might be in flox if they didnt act and cut it in the direction but how does the United States play with russia and saudi in the future on these opec plus deals . Will the United States take a more active role . Thats a big question. Tom thank you so much on this opec transaction. Everybody wrote about it over the weekend. Emery mentioned in Goldman Sachs and looking at ed morris as well. Pretty extraordinary all in all. A lot more coming up and well talk to president clarida. The nations financial representatives in wall street, the chairman of baird were thrill john kaplan will join us. This is bloomberg. Good morning. Tom good morning, everyone, bloomberg surveillance. Taylor riggs in for francine lacroix. Thrilled that youre with us in what will be indeed a historic week. Coming up later this will be fun, Michael Mckee, our chief International Correspondent will join me and of course you know Michael Mckee with those questions that stop the press conference. Michael mckee will join me as we speak with the vice chairman of the fed. Really looking forward to that here in the next hour. Right now one of my favorite people on wall street is the Federal Reserve chairman john taft joins us and he wrote a wonderful book about the stewardship. And the fed chairman has come to the rescue and you understand lender of last resort. Have they become fiscal provider of last resort . John well, they certainly have made a statement to the markets. That they are willing to do hatever it takes, shock and aw imam tear policy, reach out to the shelf for every Monetary Program created during the last financial crisis and add to that more and do whatever it takes to prevent the Financial System for seizing up as it threatened to do back in 2008 and 2009. And as a result, tom, as a participant in the financial markets, things are not nearly as dire as they were a decade ago. The system is still working. Theres plenty of liquidity, lots of problems to confront, but they are problems that can be navigated over time, not problems that are standing at the edge of an abyss the way we faced in 2008 and 2009. This feels very different thanks in large part to the fed. Tom john, i would respectfully reflect the taft family has a greater grasp of the collapse of the Financial System than any family lifting today and say that with respect from the good family up in hyannis in massachusetts. John taft, 2007, the depression, all through the various crises, the steel crises of 1958 and on and on to the modern day, what is the taft formula for losing confidence and getting it back again to participate in the markets . John of course, tom, you know ive written about stewardship hich is responsible leadership and grateful for the fact over centuries my family has stood personally, gloom, o the doom and certainly facing a financial crisis but im personally void and encouraged by the stewardship examples i see played out every day. I look at our society in the United States and globally is responding to the crisis. Its not perfect. But the fed, congress, state and local level leadership, governors, i look around and think this is the way its supposed to look when we crisis an existential like this and im proud of the response. And i do believe well get to the other side. Taylor john, as we await the horserace of all the bankers coming out this week, what would you like to hear from the Financial Institutions and what would you like to see from them this week . John well, the thing that are ody is looking for either signs of or encouragement that were not going to see systemic risk. The good news is that in the regulated sector of the financial markets, all of the reforms that were put in place after the last financial crisis are coming home to help us. You know, much higher levels of capital in the major Financial Institutions and lower levels of speculative activity. The question is how much of that has been squeezed out of the regulated sector into the shadow Banking System and are there any players over there in areas that face contagion risk, its high yield corporates, corporate real estate and derivatives linked to that. Energy, munis, are there any areas in the shadow Banking System where a failure of one or more institutions caused systemic risk. At least at this point there doesnt seem to be any indication of that. I think what people will be looking for as the major banks report earnings is that are there any indications other than Short Term Impact on earnings and capital ratios, are there signs of systemic trouble . None that are flashing red at this point. Taylor thank you as always to john taft, he is baird vice chairman. Tom, i think every strategist can agree banks come in much stronger this time around than in the last financial crisis. And consistently ive heard o. S. Spread is not to look at because banks are healthy. Tom earnings coming out and well get a snapshot but the critical Conference Calls that bloomberg will be monitoring, all of our finance team i know will be looking at each and every bank, the big and small as well. Richard clarida and before that were thrilled to bring you michael darta with a good brief before the vice chairman. Stay with us. This is bloomberg. Nowadays you do more from home than ever before. The xfinity my account app puts you in control with Digital Tools to give you the help you need when you need it. Get fast and easy answers with personalized help 24 hours a day, 7 days a week. Change your wifi password to a phrase thats easy to remember. Even troubleshoot your services on your own. Were working to make things a little easier for everyone. Download the xfinity my account app today. Tom this morning, call it the monday blame game. The president goes after dr. Fauci and china. Congress, democrats are in the news media. Title called mr. Trump president. O i get the genie back in the Balance Sheet bottle. Talk with a, i vice chairman. Is with usat taylor today. Francine lacqua out t