This is what i am looking at, the 10 year yield. We are a little bit thin in terms of Economic Data this week, so a lot of focus will be on this mega auction sale. The first one kicks off today. That may actually hurt, or change the 10 year yield. Above 3 . About 3 600 the stoxx 600 basically unchanged. Coming up on bloomberg surveillance. , we talk the business of private jets with start up. We have an exclusive conversation with bp ceo bob dudley. Lets get straight to the bloomberg first word news. Isra the u. K. Government said to have plans to withhold billions of dollars if the eu does not give the u. K. The deal that they want. In a speech later today, brexit secretariat will reassure the European Union will not try to undercut the bloc by tearing up regulations. Signalhas sent a strong about her preferred successor as german chancellor by appointing a close ally. Critics on the right have called for more conservative policies as a way to win back voters. The unexcited move is a signal that merkel tends to keep the c. D. U. In germanys political center. Indias central bank is said to be tightening its approvals process for allowing companies to raise money overseas. The r. B. I. Is concerned that any increase in rupee volatility may hurt borrowers ability to repay debt. Bank of England Governor Mark carney says he is already preparing for the uks next financial crisis. He says it no central bank can limit all risk, but says the boe is creating a more secure defense by providing extra liquidity, and ensuring higher capital levels. He says excepting that a crisis will happen is the best way to prepare for it. Donald trump has endorsed mitt romney for the u. S. Senate seat in utah. The move sets aside longstanding differences as the gop looks to preserve its narrow majority in the chamber. Romney announced on friday that he would run for the seat left open by orrin hatch. The latvian Prime Minister says he will try to prevent European CentralBank Governing Council member Ilmars Rimsevics from returning to his post after he was caught up in a bribery probe thats rocked the baltic nation, the countrys Prime Minister said in an interview. Rimsevics, whos led the Latvian Central Bank since 2001, faces suspension from his job as a security measure following his detention. He rejects the allegations and says he plans to hold a News Conference tuesday. The head of opec says the rebalancing of the oil market is gaining traction. The uaes minister says the cartel, russia and other producers are looking at to continue production. He says he does not want to return the market volatility in the downturn experienced between 2014 and 2016. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine lets kick it off with the markets. Treasuries are back online after the president s day holiday. The dollar is rising as investors get ready for bond auctions. This is also what markets are waiting for. I think we hear from Jerome Powell next week. What will happen to u. S. Rates and assets . We are joined by the head of g10 fx research at Credit Agricole and our executive editor for economics. Thank you both are joining us. We are a little bit thin in terms of Economic Data. How much will the bond auctions actually steer us in what yields will do next. It istely is about about supply and demand. Most of the correction that we have seen so far is due to the pricing and inflation reliving high in the u. S. Down the road high in theing u. S. Down the road. Ultimately i think i will be really watching what is going to happen with the term premium as a longerterm driver of treasury yields. My expectation is that normalization of those term premiums should drive treasury yields higher. Francine i want to talk about financial conditions. Within your reporting and your editorial duties, what will you look out for in the next 10 days . There is a great story on the bloomberg looking at the fed minutes. Ther has appeared in the fed minutes. People whot the watch the Federal Reserve wondering what this means. Does it mean that the fed thinks that the neutral rate gap between boom and bust interestrate and whether that has moved tire . There is going to be a lot of time spent trying to work out what that means. Francine what do think it means . We stick with our three rate hikes at the time being. Moving that way. Expectations plus the term premium, all that seems to point to higher treasury yields. Francine they bring you over to my chart. This is a beautiful chart. It is u. S. 10 year yield. We brought it back to the 1980s. Of the last couple of days it has risen above its channel downtrend. What does that mean . Or 4 because of what we see here . Where going to see more investors betting on higher treasury yields from here. At the moment the part that is driving treasury yields is the repricing of inflation risk. What does not seem to be in the price is the changing them balance between supply and demand of treasuries. The Trump Administration is bound to issue more debt down the road. At the momentum is negative. Normalization back to those levels could drive treasury yields higher. Francine we need to look at financial conditions, right . If you look at the fact that the dollar has been weakening somewhat, this kind of ads a next her layer of stimulus. Absolutely. The weaker dollar will actually boost global trade this year basically by three percentage points. Certainly another element of stimulus that your sing on top of the tax cuts that you are seeing on top of the tax cuts. Francine if something happens with the auctions, could actually bring back some volatility could it actually bring back some volatility . The jury is still out. If we get higher yields on the back of those options, and if you think of measures of fair value for global stocks, these are still well below treasury yields. This will highlight that stocks still look a bit overvalued. I think the big risk going into the next few days would be indeed a potential correction in risk again on the back of evidence of higher yields in the u. S. Stocks still look relatively rich given where treasury yields are. Francine do we need to look at possible u. S. Assets overheating . If there are signs of overheating, where would you look . Certainly that Inflation Report that we saw last week. Very few of these things that people have expected have actually met the pregame billing. We are going to be looking at inflation, then the Unemployment Rate, and also whether those wage growth that hasnt been here will start to be issued. That will be the real focus on markets. Francine were still waiting for the vice chair. When will that come . Different deadlines have come and gone. The Trump Administration never meets the deadline. Others seen various discussed. Until there is a nomination, there is no name. Francine we will be back with both of our guests. Stay with bloomberg surveillance. Will hsbcs chief executive hand over to the rains to his successor after a rare earnings miss . Plus, theresa mays cash grab. Up next and this is bloomberg. Economics, finance, politics, this is bloomberg surveillance. I am Francine Lacqua here in london. Hsbc is about a doubt our biggest corporate story of the day. Is givingship of hsbc some news in a Conference Call to reporters right now. Shareholder returns under his tenure are satisfactory is what you think is what he is saying. The incoming chief executive officer saying that gulliver strategy is working. He has ended his tenure at hsbc on it low note on a low note. Returns wereer sent lower. It is a rare miss for gulliver. Bloomberg data has shown that he has delivered higher profit in six of the last seven quarters. Ian mckay highlighted areas of weakness. The Fourth Quarter from our perspective and the industrys was a little bit weaker industries was a little bit weaker. We also took a couple of provisions part significant corporate exposures provisions for significant corporate exposures in the Fourth Quarter. Francine our guests are still with us. This was one of the rare misses. It is a shame that he is leaving out now. Will he be remembered for this . They took to very large impairments 2 very large impairments on steinhoff, the south african conglomerate, and carillion, a u. K. Contractor and builder which also kind of collapsed at the beginning of the year. There was a general trend down in the markets businesses, fixed income trading, bonded trading, that type of thing bond trading, that type of thing. Gullivers ruin legacy, but it tarnishes it. There was a little bit of disappointment on the top line growth, the Revenue Growth. Francine this is europes largest bank. Can you say without a doubt that Stuart Gulliver is leaving the bank in a better place than he found it . Absolutely. He said he was going to shift 150 billion asia and couple of asia a couple of years ago. Asia is now about 77 of its profit. This really is a bank that is transitioning from back to its traditional homebased in hong kong towards markets out there, trade finance, the type of thing. Francine over the years i imagine that they have had to shrink the bank. Now they are ready for growth. What are the main challenges for the new ceo, john flint . The new ceo says that he can build on that. He has to show that he has more to say than just exiting countries, cutting costs, and show that he actually has something more to say. This will probably be heavily digitalization, automation, probably because on cutting costsly on that. Asset management is an area where lots of banks want to expand. It has got low capital cost, it is a complementary business. We might see some action and m a, organic growth in the coming year. Francine i want to ask you about banks and hsbc, but also spoke to the leader of Credit Suisse last week. That always is certain 2018 is a pivot point to where Central Banks start normalizing and volatility is back in the market . Fixed income trading should definitely pick up. It had been dormant in some places for quite some time, and that is now changing. Especially if treasury yields had higher from here, that could have some repercussions for the mobile income Market Global fixedincome market. To the extent to which that also triggers flattening of the yield curves around the globe, that may catch of the ability cap the ability of the banks to produce profit. The big risk for the u. K. Banks apart from brexit is that if there is a flatter yield curve should result in less revenue from them for them down the road. Francine thank you. Brexit, theresa mays backup plan. Could the Prime Minister withhold billions of pounds in payments if the eu does not give the u. K. The trade deal that it wants . We will have answer next. This is bloomberg have the answer next. This is bloomberg. Good morning, everyone. This is bloomberg surveillance. Theresa mays team is said to have secret plans to withhold billions of pounds in brexit payments if the eu does not give the u. K. The trade deal that it wants. Brexit, we have Simon Kennedy and a guest from Credit Agricole. What do we know and what do not know do we not know . It kind of fits within this idea that you are starting to see her vision come together for just what brexit requires. In some ways it is that cherry picking approach. She hopes that she has got some muscle in this warning of backing away from commitments. We will see if that comes to fruition. Obviously there have been countless threats made to rub this process, some have not. It will be a test of her meddle to see if she can accomplish this. Francine who do you listen to . I had a guest kaman on and say of course we are leaving the Customs Union i had a guest come on and say of course were leaving the Customs Union. I think it is definitely theresa may. She certainly keeps her cards very close to her chest. She does not tell you much. The decision has to be made, but ultimately it is brexit that i think would prevail. Both parties, the eu and the u. K. Will agree to the softer deal, which will benefit both sides. It will not be as disruptive as it is apparent at the moment appearing at the moment. Francine what does this chart tell us . There will be some noise especially going into the eu summit in march. Brexit willd a soft receive some support. Curve volatility curve we have in the pound, i think it becomes more inverted in the coming days. We are ultimately moving volatility curve lower from her. Francine thank you very much. Were back in five minutes. This is bloomberg. Francine economics, finance and politics. This is bloomberg surveillance , and im Francine Lacqua in london. We are getting breaking news out of germany. We understand Angela Merkel could be voted in the second week of march with of course, the supporting vote of the spb. Its not moving any german bunds for the moment. That will be at the pleasure of the ecb to do. Lets get to nejra cehic. Nejra the u. K. Government has plans to withhold billions of does not giveeu the country the trade deal it wants. The move is not the preferred option, but some believe it could be necessary if the eu tries to renege on a future commitment to the deal. Meanwhile, frances secretary david davis will reassure the European Union will not try to undercut the block by pairing up regulations after the separation takes place. Indias central bank is said to be tightening the approvals process for allowing companies to raise money overseas. They are concerned that any increase could hurt the borrowers ability to repay debt. Governor markd carney says he is already bracing for the next financial crisis. While admitting no central bank can eliminate all risks, you says the boe is grading a more secure risk. Accepting a crisis will happen is the best way to prepare. Donald trump has endorsed mitt romney fo ra u. S. Senate seat in utah. Longstandinge differences as the gop looks to preserve the majority in the c hamber. Romney announced on friday that he would run to succeed orrin hatch. Ecbould try to prevent the returning. Ember from he has led the Latvian Central Bank since 2001, but faces a suspended from his job as a security member. He rejects the allegations and says he plans to hold a News Conference today. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Francine thank you. He has won the backing to become the ecbs president. On decision puts spain back the board after a sixyear absence and marks the start of a shakeup that will end in late of mario the seat draghi expires. This comes at a crucial time for the central bank as it prepares to unwind unprecedented monetary stimulus after a decade of crisis. For more, we are joined by our economic reporter from brussels and paul gordon, our European Central banks editor from frankfurt. Good morning. He was very heavily criticized for not having the experience of central banking because he comes from the finance ministry in spain. How does he placate the criticism . Good morning. He is very aware of this. We spoke to him last night and people doe that some not like this transition from politics into the central bank. For that same reason, we understand he will resign from the Spanish Government in the coming days. Thats his plan, to leave the government as soon as possible. That is one thing. Secondly, he did tell us there is no conditionality to this job. There is speculation that this is part of a bigger deal to get germany, the ecb, to replace draghi. Now he says there are no conditions. Of course, when you talk to people here in brussels, some are still very concerned about this idea that a politician will now sit at the bank. Francine paul what do we know about de guindos Monetary Policy . Paul not much, partly because he has been in government and has refrained on commenting on Monetary Policy. He does not have much of an academic track record with economics. We do not know much about where he is coming from. But in his testimony to the European Parliament he was relatively reserved. He did point out that quantitative easing and negative Interest Rates are temporary, but anyone in the European Central bank would agree with that. The feeling is generally that he will be more hawkish than his predecessor. He might be coming from spain, which has taken an ultradovish position on the governing council until now. Some say he is too much in line with the germans, if you believe it. Francine two questions. What do we know about de guindos and his relationship with banks and npls and all of that . And does the de guindos appointment make it more likely that a german takes over the ecb . That is a tricky one to say. Supposedly, no backroom deals have been done over this. You could take that at face value or not. But draghis position is coming up in october of 2019. The money at the moment is on the german, who have never had a position at the top of the ecb. This could mean we get a northerner at the top. Youve got two southern european nations in those positions at the moment. A lot depends on the environment. If we are in a tightening cycle. If the ecb is coming out of the extraordinary monetary stimulus. Then somebody like him could be warranted.