Transcripts For BLOOMBERG Bloomberg Surveillance 20160608

We are seeing a clear risk aversion as the german bond yields are ever lower and the ecb buying Corporate Bonds. Tom we have some financial work with the yields lower. That began yesterday morning and it is grinding ever lower. We have the political news in the United States. Francine a packed day. It was a history making night for Hillary Clinton. She declared herself the winner in the race for the democratic president ial nomination, taking her the first woman to run as a candidate of a major u. S. Party. Tonight, victory is not about one person. It belongs to generations of women and men struggled and sacrificed and made this moment possible. Shery clinton won three of the six states that held primaries or caucuses tuesday, plus she has a big lead in california. Meanwhile, Bernie Sanders says he is not giving up even though the math does not look good. He is said to meet with president obama tomorrow, who called clinton to congratulate her. Another car bomb attack in turkey and it appears to target police. It low off the front of the building. That happened a day after eight people andlled 11 dozens were wounded. David cameron focused on the economy and a tv special on the eu referendum, warning a brexit would mean fewer jobs and less investment. Immigration was a focus of u. K. Independence party leader. He agreed that immigrants contribute to National Wealth but says there are more important things than gdp. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. Im shery ahn. Tom thank you so much. Sterling looking in a brexit direction. Lets look at equities, bonds, currencies, commodities. Euro stronger, oil elevated. Showsxt screen clearly the stable equity markets and those low yields, that is the switzerland 20 year yield. We will be talking a lot about that, 20 year paper in switzerland. Francine very quickly, i know you mentioned pound. There is something that is very interesting. Picture for the board. European stocks down 0. 5 . The Government Bond yield for 10 in germany is at 005. It was at a record low. I want to show you the jgb 20 year because it is also at a record low. Tom we are going to talk to mike mckee and the next hour. Francine, what do you have on the terminal . Francine basically the german bund. I want to focus on the 10 year. Basically this goes back just to risk aversion and it goes back to what we talk day in and day out. Growth is there and if we see many more forecast going downward it is going to be trickier and trickier. Chinas exports stabilizing last month. With the weakening currency giving some support to growth in the worlds it is trading nation, here with us is and the current. Curnd the current enda ran. When we looked at china we were worried that it was the end of the world a few months ago and now we have data showing it is stabilizing. How much does that have to do with government policy . Enda we have come a long way from those days in january and the broader narrative is around stabilization. It is around the amount of credit the government is pumping into the economy. When you look at export numbers you can say they are better than i have been but really quite a tepid reading per trade in china. Global demand still remains weak and china continues to lean on real estate and infrastructure. Look at imports, a better imports number may be pointing to improving consumer demand. So still aistortion tepid trade picture. Tom how do the low rates in europe full over into asia . You cannot tell me asia is removed from the stunning low rate. What does it mean for china . Also have to be very cognizant of their own policy moves and how it has a spillover effect beyond the border. The criticism of negative rates in japan, china is quite sensitive into how it its managing its currency. Asiaal has come back into since the emerging market out low following the fed break hike fed rate hike. The Brexit Debate is also popping up with the essential bankers. The Indian Central Bank warning of market turmoil if there is a british exit from the union. Francine thank you so much. Saiduite happy that enda that. The Asian Central banks care about brexit. Race john wraith is our guest host. John we have revised up some of our growth forecast. Admittedly from pretty subdued levels although there are as you say, lots of risks and concerns. There are there is good news. Andral banks are doing more although times are highly uncertain we think sentiment can slowly improve. Grindingare yields lower starting tuesday into wednesday . John one of the reasons is they vary so much on the stimulus and the money from the stimulus has to go somewhere. We have low bond yields but some equity markets are doing very well and arguably sending out different signals. This is the sheer weight of money and some of it undoubtedly is the ongoing risk aversion and that seems to have the upper hand. Brexit is one example in of that. A few weeks ago it seemed to be less of a concern. How dangerous is brexit versus the u. S. President ial election . John it remains to be seen. Happen, it is unprecedented and nobody knows. The uncertainty is what is having the biggest impact certainly on the u. K. Market. Tom we are going to bring it closer. Megan murphy will join us. We look at the historic moment for democrats in the United States, and for those of you worldwide, just an absolutely unique day for republicans yesterday in this United States of america. In our next hour, i read jersey will join us with Oppenheimer Funds. Thrilled to bring in mr. Jersey as we see yields worldwide grinding lower. Francine this is surveillance. I am Francine Lacqua in london, tom keene in new york. Shery a new turn in the defective airbag case that led to millions of recalls worldwide, they face a criminal complaint in japan. It is the first time it is happened in the companys home market. Daimler plans to boost earnings by sharing engines among its global units. Unlike passenger cars, heavyduty vehicles vary significantly from region to region and parts generally are not similar. They want to Share Technology in north america, asia, and europe. The dialer expects to beat its 2017 target of 1 billion in sales. The Worlds Largest chocolate retailer plans to open more than 190 stores and mainland china. They plan to go public in london in about four years. Tom shery ahn, thank you so much. The Brooklyn Navy yard was built in 1801. It opened in 1806. For966 created good jobs good democrats, at least that was the theory. She visited last night and we are thrilled to bring you Megan Murray Megan murphy. I want to cut to the moment where women were way out front. How did they perceive this victory last night for the secretary . Moment,wo most powerful the Clinton Campaign echoed the speech that was all about womens rights. What they had gone through to get to this point today, and there was the second moment when she got the biggest cheers of the night when she brought up her mother. She said, i wish my mother was here. Tom this is the new york post, esther murdochs paper mr. Murdocks paper which takes the high road. John i think everyone megan i think everyone was a bit surprised. Tom the town is more of a step back before the bitter feud can begins. Megan everyone taking a breath. If you look across the headlines , it is really looking at the hand of history on her shoulder and how important this is in terms of womens rights as opposed to this sort of brutal, nasty fight we know we are all going to get into. Francine of course to make real history she needs to win. How is she going to do that . Megan she has a big demographic challenge. Trumps campaign is very obvious. He wants to build share with whites. It is very unrealistic the donald trump is going to grow a share among africanamericans. Hee thought it is possible can grow a share among the latino vote. He is putting all his chips on the white vote. For her, she is going to use organization and discipline to rally the coalition that backed and 2012. 008 tonesne if donald trump it down is he still going to have the same appeal . Megan last night we saw a totally different donald trump than we are used to. He was trying to recover from a torrid week, constant backlash on his comments. Tom someone was speaking at a convention years ago when i was standing in the cheap seats. The New York Times this morning, senator flake, if donald remains donald i will not vote for him. As youwhat is going on come to a point where people are making these statements based upon personal morality. Ares saying things that affecting people as human beings and not just as republicans. Tom did he go to the teleprompter last night because he was ordered to . Questionere is no people in his campaign forced him into it. An olive to extend branch into the establishment of the Republican Party and quiet the noise. Try to get the wheel back on the cart and drive the campaign. It was a truly disastrous week. Francine what do we do with Bernie Sanders . He says he is doing a revolution. Is there any chance that Hillary Clinton picks him as vp . Megan i think that is a very long shot indeed but what i think is the next two days will be decisive. President obama called him and reminded him about the importance of the party and the agenda Going Forward into the future. The president will be meeting with him on thursday and will again impress on him party of her person, agenda over individual ego. He has invested a lot and he believes in what he is doing. Tom megan murphy will meet with us again and the next hour. Briefing on, for a as she said, the historical moment we are living. Futures up two. Stay with us. Francine we are overlooking the millennium bridge looking at st. Pauls, no dark clouds for the moment. We also had a surprising piece of data, Industrial Production posted its biggest monthly gain for april. My morning mustread is linked to the brexit referendum. One of our Bloomberg News reporters writes a survey of more than 10,000 people across europe show that voters have in the eu. People in france now see the block less favorably even than those in the u k. When you look at the disillusionment of eu citizens around the region with the product that it is the eu, does it make you worry there is a significant chance that brexit may happen . John certainly there is a real chance that it may happen in the fact that the referendum is happening and there is so much focus is concentrating minds across the eu with some of the things that are not working well , and the fact that Economic Growth has been so lackluster is obviously one reason people are feeling restless and unhappy. Francine if you are a central banker, if you are mark carney, do you stay put and Interest Rates could rise or fall very quickly . John they cannot fix it on their own. They can use their Monetary Policy to try to shore things up for it. Time, for a period of but some of the issues around the eu and eurozone more widely are not related to Monetary Policy. Hopefully they can sure things up while policy members address the shortcomings. Yesterday to Princeton University and it echoed what francine and i heard from Olivier Blanchard a couple weeks ago. Are we now with our concentrated minds away from the silliness of trying to game brexit or game in mathematically . John we have a situation and that u. K. Opinion polls have ofn called into question their accuracy or ability to foretell what is going on. The markets are highly uncertain and it is the uncertainty more than anything that has been undermining the currency and impacting on u. K. Sentiment and growth. Yes, we should play down some of the intense focus on statistics and probability but on another level, this referendum is barely two weeks ago and it is an enormous event. Tom for our global audience, layout the to do list for the chancellor and the Prime Minister. What do they need to do . John i think what they would probably be best advised to do is try and put the positive case across and build a vision of how things look depending on the outcome of the referendum in a way that gives people optimism about their side of the debate rather than pessimism about the other side. As you can see for most of the opinion polls and public reaction, it is not having a big impact so to try to focus on optimism rather than pessimism i think is the way to go. Francine u. K. Industrial output, the biggest monthly gain for the month of april. When we were in the midst of people pulling back investment, it pushes back against all the other surveys that say it was the brexit referendum that was weighing on economic activity. John i think this can be slightly volatile monthtomonth. I think it was related to Energy Output but it is a reminder that much is going well with the u. K. In terms of the underlying economy. Growth has been positive for three and a half years every quarter and although it has been slowing, in no small part we would do just about in certainty , it is still moving forward. I think investors need to remember that. Tom our discussion of brexit will continue. Yields drying ever driving ever lower, yields driving ever lower. Francine this is surveillance. Francine lacqua in london, tom keene in new york. Lets get straight to the bloomberg first word news was shery ahn. Shery president obama has signaled that the race for the democratic president ial nomination is over, calling Hillary Clinton to congratulate her on winning the number of delegates needed. It was a historic night. Clinton thanks to you, we have reached a milestone. The first time in our nations history that a woman will be a major party nominee. Shery clinton won three of the six states that held primaries or caucuses tuesday night plus she is leading in california. Bernie sanders says he is not giving up even though the math does not look good. He will meet tomorrow with president obama. The republican nominee donald trump says he will no longer discuss the federal judge in a Trump University court case after the House Speaker called him racist. Trump told supporters he will make them proud of the Republican Party. Saudi arabia may impose a tax on millions of foreign. It is one of the proposals they are considering as they try to lessen their reliance on oil revenue. Their status as a taxfree haven has attracted foreign workers. A former wall street banker is getting closer to winning the president ial election with more than 99 of the votes counted. He has 3 10 of a percentage lead. China plans to build a d. C. Project that could have military purposes. The South China Sea has raised tensions with vietnam. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am shery ahn. Tom thank you so much. Let me bring this to your attention, a further contraction in south africa. This is a big mess. News butittle bit of it is an overlay to what we have seen. Statistic off of what was estimated by economists. There was something in the air. When it somebody to talk to us about the elephant in the room, that would be germany. Carsten brzeski is with ing. October, he did crew for academics and harvard. It is like 700 teams on the charles river. You have done this. Carsten it is the best event in the world. Tom every october. Wonderful to have you here today. Bring up the german cpi number. There is something going on and i do not know what it is. There is a drive lower and to me the word is chronic, there is a chronic disinflation and lower rates. Why . Carsten because of globalization. Increase nominal wage and we have too much competition coming from other countries. Talkedseph stiglitz about the discontent of globalization. Maybe there was a 2006 globalization. What is the globalization now that is forcing this disinflation and South African contraction . Carsten globalization is having a pressure on wages. Germany is competing against asian economies which means there is no room for german producers to increase wages. We also have the refugee crisis so there is an influx. Tom you are going to pull that right in . Carsten they are at the lowest factor of the wages so there will be a downward pressure on the wages coming from the refugees. Francine what can the ecb do . We have these german yield next to the u. S. Term premium, they are down. Is, the morehere need there is to find a place for all this cheap money. Carsten i think the ecb will continue. There is nothing they can do except go on with qe and if need be, increase qa. Now they will begin banging on governments telling them to do structural reforms. Tom here is the headline, folks, right off the bloomberg. Notes toells twoyear yield rounded down 1 . Francine, that is not in any of my textbooks that i have at home. Francine i do not think it is in anyones textbooks. The ecb is buying Corporate Bonds and this was impossible just 18 months ago. We know they fought some Utility Companies bought some Utility Companies, bought ab inbev. This is the ecb trying to be as inventive as possible. Carsten it is highly contentious. Qe has had its detractors from the start but when you start stepping into the Corporate Bond market you are supporting the valuation of bonds issued by private companies. It was something the bank of but theshied away from ecb is needing to push itself in areas it had never considered. Francine would this work . Going back to the inflation talk, while this push these corporates to invest more and increase wages . Corporatesthink the were lowered were loaded with cash before so i do not know if this will affect them. Tom lets introduce our single best chart. You have seen this chart before. I have german in yellow, german 10 year now breaking near 0 . The u. S. 10 the u. S. 10 year up above. The swiss twentyyear now at a negative yield. This is almost the mathematics of your economics where there is a inertial force. When does this break, or can it go ever lower . A tip pointt to be where the social and financial aspects make it fall apart. Are we near that . Carsten we do see a rise of populism and opposition in germany. It is going to be a redistribution of wealth. Tom is the strength of german banking, you are with ing germany, i get the big banks are too big to fail. What about midsize and Smaller Banks across all of europe . Carsten i think when you look at germany, we will see not only by low Interest Rates but german by digitalization and to bigger too many banks. Francine will the ecb be able to contain the mess that europe is in . John they are certainly doing scope,est and within the they are pushing the boundaries of what policies they use. They are doing their best to push inflation backup, get companies reinvesting, and get savers to actively spend more than safe. On their own they cannot fix everything that is wrong. They need governments to use this breathing space to change the structural dynamics. Francine john wraith and Carsten Brzeski, both stay with us. Bid onrs prepared to this 20 billion sale of securities later today. This is the picture of the markets, european stocks down. As weressure on the rand had that pretty terrible gdp figure out of south africa. Francine this is our global surveillance. I am Francine Lacqua, tom keene in new york. Shareholders are set to voice ceos payr over the package. Up to one third of shareholders may vote against his composition compensation. Stephanie baker joins us. So with us john wraith, Carsten Brzeski in new york. This is not the first time his pay is under scrutiny. Stephanie and he has refused to apologize, saying his pay reflex that company reflects the success of the company. I think the reports suggest one third, perhaps even more of shareholders will vote down his pay package for 2015. It is not a binding vote but it will send a message to the board to rethink their policies Going Forward. Tom when i look at this, what it tells me is two thirds of the people will vote for the pay package. How independent is the board . Stephanie this is the issue you have seen it other companies. While there has been rising excessiveainst executive pay deals, shareholders have not and it together enough to gain a majority to send the message to boards that they need to rethink their policies. I think the board has taken on some of the previous votes on wpp which have been significant, but i think this may be a bigger vote. Tom is there a distinction between underperforming companies and the fact that over the last 10 years wpp has delivered 12. 2 per year to shareholders . Is there a distinction between those getting it done and those that are not getting it done . Stephanie if you contrast this with say the oil and mining companies, bp for instance, and Anglo American have witnessed large percentages of investors voting against pay deals because of the following profits and the falling oil prices. Wpp does not have that problem. Andas performed very well even investors who are recommending against this pay deal have a knowledge that Martin Sorrell has done a good job. Tom as francine has not bought burberry in years and they just 75 . Is take his pay somebody is cutting pay. Francine if you look at the anglosaxon model, i know in the u. S. In general, ceos are paid higher and there is more and more shareholder revolved in the u. K. Is it linked to performance or is it something more personal . Stephanie i think it is the quantum. It is outsized relative to others. I think you have seen other examples of companies that have witnessed shareholder revolt, maybe not majorities. Volkswagen, deutsche bank, even intoan sachs, and it feeds this notion of inequality we are talking about. Is anyone worth 70 million . That, there are a lot of media ceos in the u. S. Who are paid as much or more and have not performed as well. Francine we are may be more delicate when it comes to pay in some cases in the u. K. Stephanie baker, thank you very much. Stay tuned for bloombergs interview with the u. K. Former Prime Minister tony blair who will speak with our editor in chief john mikel for weight about brexit and the state of british politics. Tom good morning, everyone. We are looking at yields worldwide, a softness to say the least. The lower yields, weaker gdp indicated by south africa as well. Francine lacqua in london, i am tom keene in new york. A Bloomberg Business flash. Shery south korea creating a nine and a half alien dollar fund to help restructure their shipbuilding industry. They will buy bonds issued by state run banks. They are struggling under mounting debt and a restructuring is likely to cost tens of thousands of jobs. More problems for lending club. Club abruptly suspended its annual shareholders meeting. They say they are not ready to speak to investors after a management shakeup last month. Shares are down 60 this year. Amazon will spend 3 billion to increase its business in india. Retailer isonline targeting india. Serious into competition from alibaba. They are looking for a new product to sell globally. That is our Bloomberg Business flash. Francine it is a busy day and a busy week. Alpha that holds its annual meeting in california and we will have the very latest. Willls central Bank Announce their latest Interest Rate decision. We sell what the stepping down of dilma rousseff. Mario draghi opens the brussels economic forum. Focus on the ecb as mario draghi has started buying Corporate Bonds. A lot of Central Banks have tried to raise rates this year and had to reverse course. What will the next 12 months bring us . Brzeskiith and carsten are with us. Carsten, let me kick it off with you. If you look at big central bankers across the world, you have the opportunity, or who has the biggest risk of messing it up . Carsten i think they all have. The fed still is running the risk if they jumped the gun to early and it is going to be hard to get out of it. The ecb is lagging behind in the cycle but we have a lot of Downside Risks from the loose monetary policies. If you look at the bank of japan and the bank of england, they all have the big risks that they will not get out of this mess. Anyonee john, is there i know it is probably the toughest job at the moment being a central banker is there ofone who has the risk insipid growth that we are seeing . I think carsten is right, and a one of them could cause problems if they make a misstep. The ecb is doing what i can to keep growth moving forward and we are talking about a lack of Global Growth momentum and inflation pressures, if they do it prematurely and end up recovery,f the u. S. They are the ones that currently have the biggest risk in front of them. That is why they have rightly been incredibly cautious and have only managed to raise rates one time. Tom one of your charms is you have worked as a traitor and have enjoyed watching the bid walk away from you 32 seconds after a trade. One of the assumption is that we have smooth curves. I do not buy it. How will we observe that if we see rates drive ever lower against the backdrop of what christ change is doing or what gdp is doing price change is doing or what gdp is doing . When do we see a abrupt this . Carsten looking at the u. S. Is a good example. We have seen that 10 year yields fall since the fed raised rates last year and i think that shows worried, butare also because a global wave of money pushing into all of these markets. If the ecb were to bring a premature halt to qe or signal that they were going to do so, and this wall of Central Bank Money and accommodation was put into threat, bond valuations may, under said in pressure, but what we are seeing i think is a willingness to add more stimulus or hold off tightening. I think yields will continue to stay very low. Tom the critical question is, is germany and equivalent to denmark and other negative rate countries, or is it taking off and open enough where it needs to be open in our analysis . You cannot do a denmark analysis. Carsten no, you cannot. There is still a lot of demand for german bonds. This eurozone breakup risk is also in the market so if you want to buy european, you will buy german. Has toothe bundesbank low a voice in the ecb to really say no. Francine overall, our yields in a bubble . How much lower can they go . I think we can go lower if the ecb continues its easy its qe. We could even see 10 year bunds in negative territory. Francine what does that tell us about the state of the world . John we are only a few basis points away so we have to be able to entertain that. It is more about what Central Banks are doing and as long as we know the ecb will carry on buying for another year and a half, it is not a bubble. We do expect yields to drift higher in due course. Francine is there a risk that in all implants . We talk about fiscal spending and the fact that politicians do not do anything. Will it arrive in time for the world not to implode . Carsten i do not think the world will implode but if we want higher growth we need more political action. In europe, we need some kind of fiscal policy. It does not have to be extreme stimulus, useax the low rates right now to have a good mix of monetary and fiscal policies to get growth higher. Tom Carsten Brzeski, with ing germany and john wraith from ubs. Absolutely extraordinary. I do not know if it is the overlay of brexit upon us but what we began to see yesterday a little bit at the end of the weekend coming off the u. S. Jobs report, and i will tell you, to be where we are right now with the german twoyear negative zero point 544 off the terminal, just remarkable. Francine we could see it going in negative territory. I do not know psychologically if that changes anything but who would have thought . Tom usually with us on said day, we could not wait on fed day, we could not wait. Ira jersey will be with us from Oppenheimer Funds on global rates. A most interesting time. Stay with us. American history is made. A woman will run for president. Secretary clinton will face mr. Trump the first tuesday of november. Let the bitter battle begin. This morning, global yields continue to press lower. In this hour, ira jersey of Oppenheimer Funds on disinflation and your deflation. And help wanted in one of those coamericas, in one of two americas, a shortage of jobs. This is bloomberg surveillance. Francine, absolutely remarkable, the breakdown in yields we have seen in the last 18 hours. Francine i really like the way you put it. We were on currency and now we are on yields watch. We have a record low for the japanese 20year, and we have a record for the german bund, 10year. Tom without first word news in new york, here is shery ahn. Was a historic night for hillary, declaring herself the winner for the democratic nomination. That makes her the first woman to run as a candidate for a major u. S. Party. Hillary clinton victory is not about one person. It belongs to generations of women and men who struggled and sacrificed and made this moment possible. Shery clinton won three of the six states that help primaries or caucuses tuesday that held primaries or caucuses tuesday. Bernie sanders says he is not giving up, even though the map does not look good. Withrow he is set to meet president obama, who called clinton to congratulate her. Another car bomb attack in turkey. Again it appears targeted at police. The turkish Prime Minister says one Police Officer and two citizens were killed in an explosion outside Police Headquarters knew the border with syria. 30 are reported injured. The Prime Minister says the pkk organization is responsible for this attack. This comes a day after car bomb after a car bomb destroyed a Police Vehicle in istanbul. 11 people are killed and dozens were wounded in that attack. British Prime Minister David Cameron focused on the economy. He warns that a brexit would mean less investment and fewer jobs. Questioners questioned him about the influx of refugees from the eu. It was agreed that refugees contributed to National Wealth, but there are more important things than gdp. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world, i am shery ahn. Tom quickly, your equities, bonds, currencies, commodities. The euro stronger. The 10 year yield, a chronic 1. 71 . 0. 06. Rman 10year, 0. 04ive that was a earlier. Dollaryen, 107. It was a 106 when i walked in the door this morning. Francine . Francine bonds are rising on peculation of Central Banks policies for equities down. It is the main story of the day. Crude oil holding above 50. Tom this is the synthesis of where we are. This is productivity. I have shown this chart a number of times, away from bonds, away from Foreign Exchange. This is the role of we have seen yields, Foreign Exchange dynamics. We will talk with megan murphy in the next 10 minutes, the idea of lower productivity, unusual. The fouryear moving average of u. S. Productivity is remarkable. Francine . Francine i like the you i like the low yields. Morning that the 10year in germany fell to a fresh record low. Probably Global Growth risk. This is the a great chart. This is the green line. This is what we are seeing, aware of the 10year Government Bond yield. This is what it was six months ago. It is going ever lower, and we just do not know what the end game is. We could see negative very soon. Tom the dynamic in the long term paper really moving abruptly is important. This is a wonderful time to speak with ira jersey. Steve major of hsbc is a call on 1. 50 . When you are at Credit Suisse ages ago, you had a lowyield call that shocked the financial public. Now we have chronic low yields. Is it a cause for concern there are chronic low yields, or do we just get used to it . Ira the world has to get used to it because it is going to be here for a long time, but it will not be everywhere. We have been talking about college see about policy diversions. Even though the United States is hiking very slowly, there are other countries that are on hold like mexico, for example, might hike. But countries like europe and japan will continue with the negative yield policy. Tom i will be blunt. You can speak freer now with Oppenheimer Funds than working or whateverswiss bank. The idea that the Financial System can put up with this negative rate regime i do not buy it. Polish,talian, german, danish banks exist with chronic negative rates . Hopefully the point here is that rates go down for everyone, so loan demand picks up. Financial institutions in europe are supposed to be lending more to corporations and individuals. Tom this is the key question, francine. Do you see that . Ira things have stabilized. When you look at bond issuances, it is quite robust in a lot of places. Tom bond issuance is not loan demand. Ira i should say bond issuance by corporations. Corporations are leveraging themselves. The question is, will they use it for extending their end upses, or will they using it to buy back shares . We do not even know if in europe there is enough Corporate Bonds for the ecb to buy. Are we really going to see more issuance just to satisfy this ecb appetite to try to kickstart the economy in a way we have never seen done before . Ira i think we will. Generally speaking, supply can meet demand, but it takes time. You have to make it attractive for companies to actually issue this debt. That is the reason why the ecb wants to buy this corporate debt. We like the corporate debt. We have been long on corporate debt and International Bond funds for quite a while now, and we think that valuations are still attractive. But we will see what happens when the ecb starts to buy. A lot of times you get a big runup in anticipation of actual purchases, and then you wind up seeing a muted reaction when the ecb or other Central Banks start to buy assets. In might not see the run up bonds quite yet, but look three, six months from now when the ecb gets going and starts to buy these securities. Francine we have negative rates in japan, we are talking about helicopter money in europe. We are doing the unthinkable, by and Corporate Bonds and stretching Monetary Policy. No one seems to have a problem with the german 10 year. Ira i think it ends up badly for people buying negative yield assets. Negativey a bond that 40 basis points, you need someone to buy a that 50 in order to make money. Your expected return is negative, so if you buy a fiveyear german note right now, it winds up your expected return is negative. Why would you want to buy that unless you had a reason like a bank, for example, getting to buy it for capital reasons. Tom we will come back with ira jersey. Here is a headline clearly signaled by the Associated Press yesterday. Secretary clinton wins the California Democratic primary. That is a nice precursor to our conversation with megan murphy. Really looking to speaking with her about the moment we saw at the Brooklyn Navy yard, across the river from manhattan last night. Secretary clinton took a decided victory lap. Stay with us. Onncine yields entrance is the move. We had to corporate stories. Lets get straight to the Bloomberg Business flash with shery ahn. Already has Ar Partnership with google on driverless cars. Say a venture with uber could be announced by the end of the year. A new turn in the defective airbag case has led to millions of auto recalls worldwide. Executives from tech how to akata now face a criminal complaint in japan. They say the complaint came from a woman injured by a takata airbag. Tom the headline just coming across, a woman will run for president. Something we have known for days, but officially Hillary Clinton wins the california primary. The Brooklyn Navy yard night, the enthusiasm of the assembled over the secretarys win. A lot of this happening in new jersey as well. Megan murphy runs our washington shop and she joins us on set this morning. Why is new jersey important . New jersey really shows what her strength is, that in highly populous areas, in diverse states, fitting into the changing demographics of america, Hillary Clinton has done externally well. She do in ohio and florida, which are not new jersey . Where weio this is will see how much trump can whether he can resonate with his promise of no bad trade deals, better jobs, etc. That will be a testing ground for her ability to appeal to the workingclass segment of the population. I do notportman know what he said the other day, but he said the same thing other senators are saying. How does Hillary Clinton get disaffected republicans . What is the strategy to keep the and the people affiliated with senator portman of ohio . Megan she needs to drift a little bit leftward in terms of her message on income inequality and marrying the gap. Her discussion will have to be on trade deals. That has proven to be one really surprisingly strong undercurrent of this election between the left and the right, where sanders and trump have unified. The bigger question is, is this going to be an election on policy . We have seen Hillary Clinton drift away for policy and toward the full frontal attack on trump. I am not sure we will see those headtohead policy battles we thought she would do so well with. Francine this leads me to ask we talk about policy, she has the credentials and the qualifications. How does she turned the public to liking her more . Megan both of them have likability issues on both fronts. Donald trump and Hillary Clinton have last night she made a concerted effort to personalize with that she talked about her history, her mother, and herself in a way she does not usually do. Tom when somebody says i have likability like bob dole, that is why i am in trouble . Francine likability, this is all new for me. I do not know if you do get for me, she has the credentials. She probably should have been more popular than she is at this moment. Megan, does she need to make sure that Bernie Sanders at some point in the next six to eight weeks supports her . There has to be a carefully choreographed coming together of bernie, of hillary, and president obama. Difficult to win a third party candidate. That is what this is. Tom i am a big fan of tom friedman of the New York Times. There is tom friedman who writes thoughtful, likable essays, and then there is tom friedman livid. Lets look at Thomas Friedman livid this morning. Tom on hatred of hillary, megan murphy hatred of hillary is really out there, isnt it . Is out there. It is undeniable. But Thomas Friedman says there with thesebankruptcy politicians failing to come out and criticize. Tom is it enough to make the middle ground go into the booth and push aside their hatred, interest inke, or un Hillary Clinton . Megan how willing is america willing to how willing is america to blow up its american political system . When we will see is, is america willing to distance itself from its traditional conception of what politics is and what a president is . If they do that, trump has a chance. If they do not, it is going to be Hillary Clinton. Francine who is the stronger candidate right now, megan . Megan i think the polls will see her dressed up by a sizable amount of points after his last after his bad week last week. For her, it will be about discipline, organization, focus on her message, and making herself that kind of candidate where people rally behind her. That has been a challenge, getting momentum. Tom megan, thank you so much. Megan murphy of our Washington News bureau at all of our politics and government, economic affairs. For more tonight, with all due respect, Mark Halperin and john heilemann. They will pick up the debris from new jersey and from california. I believe they are already moving forward to the conventions. Bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. Few daysteresting here. Francine lacqua in london. I am tom keene new york. Going from fx to rates with rates lower. Lets look at the dollar. Lets come over to a chart we have shown many times. Strong u. S. Dollar in the 1980s, the reuben dollar. This morning we will call this the jersey dollar. This is the ira jersey dollar. Lot of people saw this coming i see real indecision about the dollar. What now for the dollar . They ares are low but going lower elsewhere. We think the dollar could probably rally back a little bit. It has been relatively weak this year against the euro. Tom a higher fed rate would attract money in, which would bring the dollar up. Ira which we would expect it to be doing anyway. With negative rates in germany and japan, you wind up with u. S. Yields even at 1. 7 for the u. S. 10 year looking attractive to the 0. 6 that you have in germany. The dollar could probably rally back here, but like this chart shows clearly, there are long periods where the dollar has the trend, and we are think we we think we are in the midst of one of those churns where the dollar could weaken against those currencies for for seeley the next couple of years for foreseeably the next couple of years. Is your basic thought that janet yellen cannot raise rates before december . Are the way i put it, we one bid at two hikes this year . We think they want to hike. One of the things that they have made clear as that they want to hike. They say there are going to be two hikes this year. A july hike is completely possible. But the data has to support that. They are very data dependent. They are as data dependent as you could possibly be for central bank. So the bar for hiking is still relatively high. With the jobs number like we had last friday, it is unlikely they are going to hike this month. July and december are not out of the realm of possibility. With that, the market is almost priced for that at different points. We keep pricing in and out hikes in june. Francine you are saying the dollar can rally a bit. Can you quantify it . China is a unique situation within all of this because China Exchange has a managed rate, and they have a lot of foreign reserves. They have been using those foreign reserves to make sure that their currency does not depreciate too much. When they did devalue value last year, one of the fears was that it was going to become an unstable devaluation and that you wind up with a much lower chinese currency vis a vis the u. S. Dollar. They have taken steps to avoid that. , ironically,basket has fallen quite a lot, and so the question is, how much of those foreign reserves are they going to have to use . They have been using those foreign reserves. They have not been buying treasury bonds. They are the largest owner of treasury securities. They have been using that money to support their currency. Jersey on the ira dollar, and we will get back to the new lowrate regime we are seeing. Lets do a data check. Oil, 51. 11. That is american oil. Stunning. Bloomberg surveillance. . C sv tom good morning, everyone. Francine lacqua in london. Lets get to first word news with shery ahn. Obama hassident signaled that the race for the president ial nomination is over. He called Hillary Clinton last. Ight to congratulate her she will be the first woman to run for a major u. S. Party for president. Meanwhile, Bernie Sanders says he is not giving up. He will meet tomorrow with president obama. Another car bomb attack in turkey, and again it appears targeted at police. Reports that three people were killed, and more than 30 were wounded. That happened the day after a car bomb destroyed a Police Vehicle in istanbul. 11 people were killed in that attack. British by minister david british Prime Minister David Cameron focused on the economy in a tv special. That British Foreign policy would be affected if the country leaves the eu. David cameron in area after area, things affect our great country, we would have no say over. We want to be strong in front of Vladimir Putins aggression in the ukraine. We need to work in these organizations, in nato, in the u. N. , and in the eu. Shery immigration was the focus of u. K. Independent Party Leader Nigel farage. He said there are more important things than gdp, even though the refugees can contribute to interNational Wealth. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world, i am shery ahn. Francine oil is trading higher for a third day, a 10month high above 50, and brent and of eta and wti are gaining. Still with us on set, ira jersey of Oppenheimer Funds. Great to have you on the program because i always learn things when you talk to me about the energy markets. What is the one thing that people misunderstand . Demand is much stronger than we think. Shale production is down. I think one of the studies that meeting is how Strong Demand is, driven by u. S. Drivers, this big season of the summer will be the highest ever, at 2007 levels. Is like 10, 15 years ago. China is taking off. Francine supply is decreasing because of supply disruptions. That thealways told us problem is that it will be between the 50 and 65 range, because this one because as oil prices go up javier we know that between 50 and 70 oil is when shale gets reactivated. We have already seen the indication of that with the count going up less week. What could happen now is that prices are set to increase to the point where u. S. Shell texas and oklahoma and north dakota come back and start increasing production. U. S. Shale companies in texas and oklahoma and north dakota come back and start increasing production. The the cycle be one where sweet spot between 50 and 70 adds to the cap on the oil price. Tom the responsiveness or elasticity of supply is original this time around. Is saudi arabia ready for the responsiveness of u. S. Supply . Javier that is going to be what we are going to see in the next few months. As it took longer than expected for Shale Oil Production to start coming down in the face of low prices. It is believed that shale oil in the United States will be slower to come back in the response to higher oil prices. The industry is very divided. You could ask three different Shale Companies how long it will take for the response, and they will give you about six different answers. We will see in the next few months. I cannot pretend i know what is going to be the answer. I kind of think it will take a bit longer than expected for the companies to come back. Tom ira, do you put on a flak jacket when you go to talk to Portfolio Managers at Oppenheimer Funds . Peoples heads have to be spending peoples heads have to be spinning. Shock to go 100 to 30, on to 60. Ira it has affected a lot of countries, and it is not only oil, but iron ore. Itntries like australia was really a commoditydriven story, so countries like australia did poorly or as poorly as emerging Market Countries that had big commodity exposure. Now with the rebound in some commodities, countries like australia can wind up coming back along with countries like canada, where they are big exporters of a lot of these commodities, including oil. This helps the credit markets a lot. , itfixed income investors helps a lot of companies that were kind of teetering on the verge of default. They have been going through a lot of cash. This helps a lot of them. Highyield credit spreads versus oil, and they have been very correlated. The reason for that is this big over indebted sector needs that cash flow from higher oil prices. Francine thank you so much, ira jersey, and javier gblas. Stay tuned to bloomberg tv. We have a great interview with former Prime Minister tony blair. It could not be more timely, with two weeks before the referendum. They will talk brexit and the state of british politics. Francine this is where the action is at. It is all about the Government Bond yields that hit a little early on, a fresh record low. We just had an open Commerce Bank saying that given the strength in yields, ammon bundy yields may drop 2 german bund yields may drop 2 . Two weeks until the referendum. The state of on the u. K. Economy, here is the Bloomberg Business flash with shery ahn. Shery Industrial Production rose in april by the most in four years. Much of that was in carmaking and pharmaceuticals. Gas and electricity production were up because of cold temperatures. That increased demand. Rose for auto sales the ninth time in 10 months. Sales were up 11 or it analysts give some of the credit to a cut in the purchase tax. Automakers were expecting tax cuts to lead to bigger increases in sales. Amazon will spend 3 billion to increase its business in india. The Worlds Largest online retailer is targeting the yeah has targeted india for growth. In india foroking new products to sell globally. That is the Bloomberg Business flash. Tom here is a dirty little secret. Jobs day is a big deal. We go beneath the headline data at 8 30. We make a big deal about it with jim glassman and bill gross and others. Here is the quiet little thing you need to know. Mckee dives into the jolts survey. What is the jolts survey . Opening andis jobs data turnover. I do not know where janet yellen studied, but we know she is watching the jolts data and the quits rate within that. It is back to prerecession levels, she said on monday. Rate is news, the quits a leading indicator. The white line is the quits rate. The yellow line is average hourly earnings. The quits rate polls up hourly earnings. It started in 2013 and then gathered speed into this year. Finally, we are getting really is we are getting wages higher. I know you like to look at the wage tracker. Between those who could their job and those who kept their job over the past year, the green line is those who could their job. They are making more money now. More people are quitting, making more money. It is all very logical. The question is, can it continue . Tom does this come out monthly . Michael it is a monthly report but two months delayed. They are working on making it more timely, but that is the one problem. Tom sort of like caseshiller. Michael the number of jobs openings are near record. If that goes down or if the quits rate falls, that will be another thumb on the scale against the fed move, and it will be disappointing to ms. Yellen, wherever she studies. Francine when you look at jobs openings, is it difficult to break it down by industry to give us a better sense of strength and weaknesses in the u. S. Economy . Michael they actually do break them down. There are a lot more openings than people filling them in the Tech Industry and other higher paid industries. On the lower end of the scale, there are job openings. It is the manufacturing area where you are not seeing as many openings. Francine yesterday paul donovan was arguing that what we look at in terms of u. S. Jobs data is flawed because there is so much Flexible Work that is not accounted, or the way we work from home and do jobs here and there. How much truth is there in that . Michael there certainly is truth in that. We talk with alan krueger, and he spent a lot of time on the gig economy. We do not measure people who work for uber and other jobs like that very well either. There is a lot that needs to be done. But people do like the jolts number. The only problem is, they are not as timely. Tom ira jersey, why are rates so low, the Unemployment Rate near nirvana levels . Might just mentioned that wages are starting to go up. U. S. Treasuries, the benchmark globallyrates are set these days. So where are Interest Rates in germany, in japan, and is there a better alternative to that that you can get into and hedge back for little cost . Tom where should you be if china and others were not getting enough . Ira it would probably be closer to 3 . Tom three . Ira we were at 3 only a couple of years ago. Michael janet cannot control her own yield curve. Ira she could. If the Federal Reserve was really concerned about runaway inflation, she could sell some of the trillions of dollars of bonds that they have in their portfolio. That would certainly steep and the yield curve and get 10year yields up. I do not think they are going to do that. This, theyry about are going to be very normal in their exit from their yields. Entedly low that means 10 year yields might stay at 2 because of what is going on in japan and germany, but it is really twoyear notes that have to decline as the Federal Reserve continues to hike. Francine is there any value anywhere on the curve . Ira in the United States . Francine in the United States. Ira there is not, in general. The curve looks very fair given economic outcomes globally. What you can look at his other places. There are some credit sectors, Investment Grade credit looks reasonable. We like double b highyield bonds because they look they offer good riskadjusted returns. Landau david folkerrts david tslandau says the ecb must change course. We are talking about the spirit to reflate. Do you see any evidence in the . Ast that the ecb can reflate is there any successful reflation . The first thing that the ecb is trying to do and what the boj is trying to do as well is inflate their own prospects. They have done that. Tom that is not reflation. Ira it is not, but can you reflate . What is reflation . Is reflation trying to get core inflation up toward 2 . Tom what is reflation . Michael at this point we do not know because the Central Banks have all said 2 . Tom eight years ago it was 4 . Michael he wanted them to overshoot. Janet yellen said it is ok if we go over a little bit. Ira if Oil Gets Back to 70 a barrel, you will get inflation francine the point that mr. Folkertslandau made is that the ecb babysits too much and politicians do not take the reforms on fiscal spending that are needed. Tom the heart of this matter is, then bernanke talked about deflation in tokyo 13 years ago, i am guessing, and we are still talking about it. Michael really growing questions about how much Monetary Policy can do anymore. The that gets back to weterity question that talked about with carson bresky earlier. Michael mckee and i will speak gartman. D Dennis Gartman we will talk with him on Bloomberg Radio about a plethora we may even talk about clintontrump with Dennis Gartman. Bloomberg surveillance. Tom it is your brexit scorecard. Euro sterling i am going to call it a churn over the last three days. Francine . Francine coming up shortly, it is bloomberg with david westin and amanda lang. What do you have today, amanda . Bloombergs editor in chief John Micklethwait is interviewing tony blair. We will have that, which should be fascinating. As the ecb starts Corporate Bond we have a guest from jpmorgan to talk about his expectations about whether that will have much effect. Tom february 9, 2016, it was his new hampshire. We also had a warning when jim bush got 11 when jim bush got 11 when jeb bush got 11 of the vote. Greg, i got a ways to go this morning. First of all, the moment of a woman as a president ial candidate what does it signal to the nation . Greg i think it is really big deal and a lot of women would agree. That is one of many reasons why Hillary Clinton is the favorite. Tom how does she get the centrist vote . She has had to run to the left to appease mr. Sanders and others. Is it easy to gather centrist votes in those key states . Greg it is going to be difficult. On issues like trade where she has moved far left, i hate to say this, but i think it will be almost and exclusively negative campaign. A race to the bottom, if you will. I think she will rip into trump starting today. Trump is going to rip into her starting today. Whoever winds up with the hagan with the highest negatives, wobbly trump, will lose probably trump, will lose. Francine greg, how critical it her choice for Vice President . Greg i think it is a big deal to this extent. If the endorsement from sanders and it has to come at some endorsement has to be enthusiastic. If it is not, she has to move to the left. Look at sharon brown of ohio. She might even look at elizabeth warren. If sanders endorses her enthusiastically, then she could move to the center. Maybe looking at tim kaine from virginia. Francine now we have a more aggressive Hillary Clinton focusing on her opposition, and donald trump . Greg donald trump has to start listening to people, listen to Mitch Mcconnell and paul ryan. These people in the last several days have told trump to cool it with his with this judge from indiana. If trump the still unwilling to listen to seasoned professionals, he is going to have a very tough campaign. Ohiowe see mr. Portamento we see mr. Portman of ohio stepping way, Jeffrey Flake of arizona. Jeff flake was heated in his comments about mr. Trump. If jeff flake is upset with you and you are a republican, you have got a problem. How does mr. Trump get back jeff flakes trust . Said, he hasas i got to listen to people. He has got to moderate his tone. People like jeff flake and paul ryan, they are real conservatives. They worry about two things number one, the republican brand being damaged for years to come. Number two, massive losses in the house and senate with trump at the top of the ticket if he does not change his rhetoric it if he does not change his rhetoric. Valliere, thank you. Ira jersey, you were so good at this, writing from the trenches. Does this fold over into your world . Ira it certainly does. Who winds up in the white house does matter for things like the debt ceiling, like what is the budget like in the u. S. Tom uncertainty . Marketsertainty makes volatile, but it does not change trends. We have something called our compelling wealth book, which one of my colleagues did a great job creating. We show clearly that politics is not a good way to invest, that ultimately it still winds up being macroeconomics that matters. Francine how do you protect yourself against different politics, or discouraging, dangerous politics . Ira protect yourself stay the course. You want to have your financial plan, stick to that plan, stick to your asset allocation, and do not just do not get nervous and upset because one person is in the white house versus another, because over the long periods of time, it really has very little impact on your investments. If someone comes into the white house and says we are going to do a fiscal stimulus or we are not going to do trade deals, that affects individual investments. Tom ira jersey, thank you so much. Ira jersey of Oppenheimer Funds. Coming up, bloomberg on television. Mr. Jersey will continue with us on radio. Good morning. David stocks inch closer with the s p 500 closer to a fivepoint high. Phase, marionew draghi jumps into the Corporate Bond market. While the new strategy pay off . Trump,preparing for Hillary Clinton formally declared victory last night. Setting the stage for what many expect to be a vicious election battle. Welcome to bloomberg. I am david westin along with amanda lang. We had Economic Data breaking across the world and it should give us a better sense of the global economy. Amanda we has some great risks guess, including the former Prime Minister tony blair. David another interview that you will only see on bloomberg, we will speak