The volatility continues to come down. 40 whenearly breaking it comes to the vstoxx. Monitor what is happening around the world. We are headed toward the european close. It looks more positive than it did earlier under the big story continues to be the efforts being made by governments to reopen markets, the effort being made by governments around the world to support Small Businesses and the everett for central bank to support the credit market. Lets get more insight into the bond and credit space. The fed and other Central Banks continue to make significant efforts. The fed is buying commercial paper today. Nice to have you on the show. We are in a situation where Central Banks are buying aggressively. Spacere buying in the bbb and the highyield space. What you make of price discovery right now . How realistic are these markets . Its a good question. You have had a huge bid to the market in the investment credit space and that has extended down the capital structure into highyield bonds. In have had a normas rally risk assets even today where the snp since 2. 5 higher and we are only about 12 from the alltime highs. Its important to separate the market component from the economic component. People are looking at the rally and risk assets and ready to sound the all clear. While policymakers have remade the right moves in there hopefully building a foundation for recovery come in many cases, the market function has been solved but the longterm consequences are probably being discounted too much by the market. The jpat do you make of morgan numbers today . What do you make of the wells fargo numbers . They are building up significant reserves. What can we deduce from what those banks are saying about the longterm trajectory of what is happening in the credit market . You look at the banks or any other sector altogether or any other asset class and the corporate space, and everybody is going to get hurt. The problem is how much they will be heard because it depends on how long this virus or this containment will last. If the disruptions are going to be larger than expected, the monthence between the 23 time and six or seven months is very substantial in economic terms. What investors are doing is reading the tea leaves and saying that maybe things are getting a little bit better and maybe we are peaking. We have the data will be that. They are discounting jobless claims, nonfarm payrolls. We have seen expectations of gdp negative 50 . As those are doomsday numbers but we said only 12 off the alltime highs in the s p. What the fed and other Central Banks are doing, they should be commended for their efforts, because they have acted extremely swiftly and they have done a number of things to be proactive and improve the market. They have supported the banks by the discount rate, supported the Corporate Market through the primary and secondary corporate facilities ,the cp facilities and the fiscal plan. Upsizing here is a given. Notfed, the treasury are done. Global Central Banks are not done. If this continues, we would expect for more stimulus than we see now. Vonnie some interesting things are being hundred by bond Market Participants and one of them is what would a vaccine be worth to the 10 year . We have been trading in this range. Where would we get to if we saw a vaccine or some kind of treatment . You will see a steepening in the yield curve. The likelihood of the fed reversing and hiking Interest Rates is very low regardless of whether we get a vaccine. Will slow play this on are likely not to constrict so the front and will stay pegged and that leads the backend exposed. Our argument around sovereign bonds as they typically provide a number of attractive features, they are less volatile than equities, typically, they are usually adversely correlated with risky assets. They offer tremendous diversification benefits. Sovereignure of bonds, particularly u. S. Treasuries, can retain those qualities Going Forward because we are starting at such a low level. You have seen this happen where the disconnect between Interest Rates and equities is really no longer there. There were many days over the last few weeks where equity markets fell significantly in only rates rallied a modest amount. People are wondering how much further rates can go. We manage our portfolios, we try to take the duration component output tickly on the long and and focus more on the front end because we think the fed will remain relatively anchored. Vonnie if we get a serious bid to equities at some point, if they require institution start getting back into the s p 500 and it has rallied, then do we see a big move on treasuries as well or will that disconnect continue . Think the disconnect will continue because the diversification benefits are not there. With the 10 year trading at 75 basis points, how much juice is really left . Our thought is that you want to err on the side of caution. Identify goodquality names. You cannot just be buying the names that the fed is buying. Its not necessarily a winwin situation for all the Corporate Bond sector. There will be beneficiaries in the shortterm but it doesnt mean to buy blindly across the credit space. I think what we will see is the fed has no choice to pick winners and losers. It will be difficult for them to support the entire market so there are certain names we want to continue to invest in but theres also names we want to avoid despite the rally we have seen so far. Intothe fed is stepping the highyield space and the bank of england and the ecb are not there yet. Would you expect those Central Banks to do what the fed is this if we continue to see virus affect dragging on quarter after quarter . Yes, absolutely. While some may say its a slippery slope and you cannot bailout the Overleveraged Companies for the companies that have poor ratings, is not going to stop. I think the fed has really called into question the concept around moral hazard. I would commend their efforts because what they have done, they have done swiftly, there is no stopping point for them. Things deteriorate and we go past this 23 month mark of where we will potentially extend ofo longer periods quarantine or higher unemployment, they will have to continue to move down to various different assets and that will extend to other Central Banks. You have seen the bank of england is on the sidelines as it pertains to highyield. Has notof australia done much aside from quantitative easing in the government space so there is still a lot of work that Central Banks can do. They are looking at the fed as being the leader but i think we want to make sure to point out that when we are investing in corporate names, you cannot widely by credit. It has performed well but there are other sectors we want to avoid. For us, we have come up with the moniker that we want to stay away from the beach related names like booking agencies, energy names, airlines, cruise lines, hotels and leisure. Identify goodquality names that can last throughout this period and come out the other side stronger. Vonnie thank you for your time today. Up, we speak exclusively with werner hoyer. This is bloomberg. Guy from london, im guy johnson. Europe is struggling with a unified approach on how to deal with economic consequences of the virus. Notar, the regional plan is to increase that but rely on the ecb, credit lines and the esm and lending for the European Investment banks. There appears to be limited coordination when it comes to with countriess like austria implementing the phased in returns. Joining us is the European InvestmentBank President , werner hoyer. Lets start with the issue of debt neutralization and the debate that its taking place in europe. Saystalian Prime Minister people will write europe off and everyone will do their own thing without an agreement on shared data. If there is not a leap toward federal lysing debt in europe, what you think the implications are economically . I think the question of mutual is asian of debt or euro bonds is too much in the foreground. Whats important is that the european citizens need solidarity. That can take different forms. Solidarity is not felt might people, then they lose their belief in the european project and that would be extremely damaging. Who are theountries toughest opponents to euro bonds or corona bonds or whatever you call it, they will suffer the most because they might be economically the most dependent upon the internal market. The internal market might be risk of people dont believe in the european project anymore. Guy do you think we are at that point now . Do you think faith in the European Union in places like italy have now been completely eroded . I appreciate what you say about the nordic countries are now much they rely on the Single Market but nevertheless, you feel for those countries that are at the bottom end of the scale at the moment economically. Where are we now in terms of that process . Week, until we of 600 the big package billion dollars, it was very dangerous. Italy forn polls in instance were dramatically going down against europe. Therefore, it was time to act. This act was successful i think. It might even be scaled up one day. This is the right approach but what is more important psychologically is if, for instance, you put a ban on the expert of certain goods like respirators or lung machines or this is a lack of solidarity and this is people will and this is what people will not forget. Maybe one day they say we dont need your cars either . Vonnie we dont know the implications but for now, there have been 25 billion pledged by eu governments on that supposed to allow up to 200 billion worth of mending to small of lending to small and mediumsize businesses. Is that enough . I doubt it is enough but it is a good and forceful beginning. The big difference between this crisis which is probably the challenge thatme we ever had to meet, is that this time its not a question of state finances or fiscal policy decisions. It is a real crisis in the real economy. Its not the states who are suffering. Its the companies, individual households, the small store owner and they will not get through this crisis if they are not helped with liquidity. And bridge financing. This is the key priority now. These companies will not wait for months until they go down. They will die much sooner. Its a question of days and weeks. Vonnie why are only a certain number of countries blocking legislative efforts for things like coronavirus bonds . Im talking about germany, for example and the netherlands. I cannot speak on behalf of germany or the netherlands but since the European Union is not a state in the legal sense, it is very difficult for the union to take up the date for the debt. Now of course we are in a different situation than a european financial crisis. I think the European Council and the heads of state and government our meeting next week and will have a new look at this. What about leverage . Builtve a leverage ratio into the current plan. Is that realistic . From what i hear, its not that those kind of leverage levels will probably not be achieved in a certain number is likely to be a lot smaller. Exclude that. This is not rocket science. Dependsguesswork and it upon the quality of the efforts at the end of the day. It might be less or more. Cannot predict this with mathematical precision. We have had some sex success we have had some success with leverage levels and we were always too modest when we calculated the leverage ratio. Hopefully, this will be the case this time as well. Its not a time to be thinking about such things but nevertheless, when money is being spent in europe under an eu umbrella, do you think any effort should be made to try at the fringes to sort of deal with , the clear and present danger of the virus but also the issue of europes agenda when it comes to the environment and the Green Economy . Do you think it is possible to deal with both issues at the same time when spending european money at the moment . We are verye, active in the financing of research and development. We have been doing this in the off tubercular laces tuberculosis, ebola and other Infectious Diseases so we put a lot of money into the research for medication and vaccines forward corona. Its roughly 5 billion euros for that immediately. The other question is really very relevant. Were asked to, we be the climate bank of the open union and we are very ambitious. This objective months not suffer from the present situation. It will be difficult to keep up the pace but we must not forget that the ecological situation is at a limit. We have to go both ways, maybe lose a little bit of time now, but there is no way one can hide behind corona when talking climate. The imfim sure you saw forecast for contraction for the euro area of 7. 5 this year. Soly itself would be 9. 1 without programs to help, there will be a massive recession this year in europe. What other things can the European Investment bank offer europe on its own without help from the European CentralBank Institutions . Of course, we could expand the program we have just proposed. The 20 billion dollar package with a leverage package up to eight. We could do more of this but then you need the backing through a guarantee mechanism like what we have with the Member States who have pledged 25 billion. On the other hand, we know that one day we will stand in front of a huge mess when it comes to the recovery of europe. Bank willi think, the need to go full speed. That requires them definitely to supply capital injection into institutions which is the most fight effective Financial Institutions around. I am optimistic that the eib will play a significant role. Vonnie thank you for your time today. Lets check the markets. Is a riskt certainly on day on this tuesday, bouncing back after yesterdays relatively small declines if you can call 1 small. What we have on this day are gains of almost 3 on the s p 500, the dow and the nasdaq and 2000 are indicating that viral signs or easing plus lots of talk about reopening in the u. S. Also maybe Acceptance Around what the imf is saying this could be the worst recession since the great depression. Where we also have a rally in europe, the stoxx 600 is up about 1 so perhaps some of the officialmism in an bull market from the lows earlier this year, up 20 . You can lookor not at a technical standpoint, we have a bull market. The banks, jp morgan and wells fargo and the news is larger loan provisions than expected in a long time. Jamie dimon says the u. S. Wont fully open until at least june. J j put up a strong quarter. Wells fargo is trading back down and jp morgan is just flat at this point. Overall, risk on in the u. S. Vonnie we have the perfect guests. Thank you, abigail too little. A legendary investor has been noticing some interesting dynamics in the marketplace and we will get to him next. This is bloomberg. York guyive from new johnson in europe. Its time for the latest bloomberg flash. Bank of america has raised its price target for netflix to one of the highest. B of a is calling for shares to hit 460. Is theonavirus pandemic perfect storm for the streaming service. Netflix has strong content with stayathome orders suspending Sports League and shut it and shuttered movie theaters. In china, shipments of the apple iphone rebound last month as they roamed as they rose 19 in march. That came at a time when the Smartphone Market in china shrank by 22 . Iphone sales were hammered in february when the Chinese Government imposed its coronavirus lockdown. Intel is seeking a bankruptcy loan that we keep the Satellite Service alive. The company is waiting for later this year from the government. That is your latest Bloomberg Business flash. Laszlo birinyi is up next. This is bloomberg. York, imve from new vonnie quinn, along with guy johnson in london. Is is Bloomberg Markets so far, the government has paid out more than one billion pounds to Small Businesses come about our Companies Getting what they need . We spoke with Howard Davies earlier. It is very important because they do create a huge amount of employment in the country, and for many of them, theres been a complete stop on their business. The most obvious being restaurants and hotels, but a lot more who are in the supply chain for the leisure and Tourism Industry or for the manufacturing industry. It is absolutely crucial. I think the key thing is that we need to ensure that there is productive capacity in the economy for when the opening up in the upturn eventually comes because if weve lost productive capacity because firms have given up during the crisis, then we will have a constrained upturn. So it is both important on the downside, but also better for the upturn. Vonnie that was matt miller speaking with matt davies, rbs chairman. , a legend ini markets thanks to his impeccable timing over decades, has seen some intriguing Market Action the past few days. The last time we spoke with him, laszlo was building a bit of cash, saying stocks were harder to analyze. We welcome him now. Thanks for joining. First, to a chart of the s p 500 in recent days and weeks. Tell us what has been jumping out at you. What you are seeing is institutions are buying, and they are buying aggressively in the s p cash market. Its a little bit counterintuitive, but basically they are putting mone