Rates. Not want negative the bank of englands own debate with subzero policy continues. Andrew bailey testifies today as the u. K. Chancellor sees a recession unprecedented in scale. 6 00 a. M. In london, 9 00 a. M. In dubai. The global debate on negative rates. Rbnz thatt was the shifted the dial in terms of monetary policy. Only thing i learned is steven major comes and gives me one phrase which is, what the aussies and the kiwis do, bets the global agenda or pushes back on negative rates. I think it will be interesting to see where the fed would be with the ecb. Their rhetoric is shifting further away from the and irp domain nirp domain. Lets see what happens with the bank of england. Nejra you love that phrase and i do remember it well. Absolutely saying that negative rates have got to jump the hurdles. When we heard from powell yesterday as well, where the focus was much more from the take away with him not being so gung ho about talking about fiscal the way he was in the past but then if we talk about what shifted the market, it all came back to moderna and concerns. We had the bank of america survey. Only 10 percent of investors expect an economic recovery to be vshaped. 68 of them say the rebound in equities is that bear market rally. If we take a look at how the u. S. Will open today, futures are positive. Negative in europe. Green on the screen in asia but it is the qb that is in focus in the fx market. With the comments from adrian orr, the 10 year yield is steady. And then of course oil, how Different Things look to a month ago in terms of what we are looking at in terms of the oil price. Wti up. 5 above 32 a barrel. Thats get back to moderna. Investors digested the report questioning early data from a small trial of its potential coronavirus vaccine. Biotech Company Closed down 10 after monday 20 gain. The gradual slide began when a report from the Health Publication highlighted the early nature of the vaccine data. Bloomberg Annmarie Hordern is in new york for us. What does the report say about modernas study . Annmarie what a difference 24 hours makes. We were here yesterday talking about the fact that moderna had this record high in the markets. Bloomberg did say yesterday the results should be viewed with caution. One thing they highlighted, the early nature of the vaccine. It said most of what moderna disclosed was words, not data. It cited the lack of a press release from the u. S. National institute of allergy and Infectious Diseases paid on diseases. They are waiting to see more data. It is clear from the Scientific Community that data is going to lead and what they view as stead of words. We talked about that with gilead. There seems to be any glimmer of hope in any of these vaccines we are seeing around the world. The market really takes that on with stride because any chance of getting a vaccine really does mean that economies could be lifted and go back to life before the pandemic. Of us should really undermine the palpable sense of relief that you would get if somebody says i have got something that can help possibly shift 20 Million People, 36 Million People from unemployment cues. I think that is why markets move. To the white house, and the president , he now argues good morning, by the way that the u. S. Is a badge of honor. Why . He is talking about pushing his narrative, saying that the u. S. , which has more than 1. 5 million cases, leads the world in terms of coronavirus cases. He says it is a badge of honor because it reflects how much the u. S. Is testing. That was kind of the narrative. This has to do with u. S. Testing. Contrary to what the United States is saying, the u. S. Is not extraordinary when it comes to testing to our data shows the u. S. Is falling behind the u. K. , italy, and germany. President donald trump was answering a question when he made this comment about whether or not he was going to block visitors from brazil. Spain,has overtaken italy, and the u. K. , now third in the world when it comes to coronavirus cases. President donald trump said he is considering that ban on brazil. Brazil is going to be want to watch, really chaotic, and many are saying it is just going to get worse. President bolsonaro had fired the Health Minister last month, and the replacement for that Health Minister resigned last week. Really a chaotic situation in brazil and you can see the infection numbers are ticking higher. Manus stay safe, Annmarie Hordern in new york headquarters. President trump is hoping reopening the economy. That sentiment is shared by Republican Leaders with senior senator Mitch Mcconnell saying the only way out of the crisis is for america to grow again. President trump is predicting a really great quarter for the u. S. Economy. Talks have soured with the u. K. s chief negotiator accusing the e. U. Of only offering lowquality deals. David frost says the block is treating britain as unworthy of a fair trade agreement. The chief negotiator, Michel Barnier, says britain wants to keep the benefit of being a member state without the obligations. New zealands essential Bank Governor says he is open to taking the cash rate negative but only if it passes a number of tests. Assays it has got to be seen necessary and effective. The reserve bank also has so far turned to quantitative easing. 02. 25 for rate at the First Quarter of 2021. South asia is bracing for the biggest storm over the bay in 20 years. Authorities are evacuating more than 5 Million People. The cyclone is expected to have wind speeds of 200 kilometers per hour. Bangladesh raised its warning to the highest levels. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Nejra. Nejra coming up, further stimulus may be needed but jay powell dodges the debate on specifics. More from his testimony to the Senate Banking committee, next. This is bloomberg. Is is bloomberg. What congress has done today has been remarkably timely and forceful. Theres scenarios in main street where we could lose all of our capital and we are prepared to do that. I want to call out the risk to longerterm damage to the economy. There is the risk of permanent damage. We are conscious of the health issues. It is all about the Service Sector, particularly those parts of the Service Sector where there are lots and lots of in person contact. We do not intend to send anybody back to work without the protection spirit i was prepared to come there today. I thought it was safe to testify. We need to take a step back and asked, over time, is it enough . We need to be prepared to act further if the need is threre. Ands now is jay powell Steve Mnuchin testifying before the Senate Banking committee. Powell tried to remain neutral as he was drawn on the debate of whether congress should build on stimulus. More fiscalr said aid may be needed. The treasury secretary said he plans to use all of the 500 billion dollars congress provided to help the economy. He did this by backstopping fed programs. The head ofst is g10 fx research. A lot of warning from both mnuchin and powell in terms of the risk to the economy. A lot of people are debating whether the fed would go to negative interest rates. You say no. You say the next logical step is if so, when, how express would it be, and the consequence for the dollar . Good morning. Good. There is a debate. In thes a Recognition Market that the fed has been impacted very early. Unprecedented relief in anion, we are uncertain outlook for the u. S. Economy. We think more measures may be needed and by referring to yield curve control policy, we are just referring to the fed and what itself has been saying. Fomc members have been talking about the fed considering yield curve control policy down the road similar to the boj and indeed the rba. The other Central Banks doing that at the moment. You mentioned negative rates. For a period of time, the markets have been speculating about negative rates but the fed has so far ruled that out. Never say never. It may come but i think that they will try to use other options, yield curve control included, before they resort to considering negative rates. Nejra i find it interesting that you point out the further out the curve that the fed were to target with yc see, the more negative the impacts would be for the dollar whereas if the fed were to signal the focus of purchases at the near end of the curve, he would see a steepening and that would be positive for the dollar so that is an interesting distinction that you make. On negative rates, even if the fed fed were not to move and kept pushing back, as long as the markets have expectation of negative rates, how negative is that for the dollar . Valentin yes, indeed. It is one thing to be telling the markets that negative rates are out of question. It is another thing to retake measures. Exit reserve to prevent rates going negative, so in other words, talk is cheap. And the markets really could continue to speculate that the fed could go negative down the road. And from what i can tell, that fedex to talk about it but not really act upon it. From that point of view, they are more than happy for the markets to continue to speculate about that. In terms of impact on the dollar, clearly, the speculation about negative rates is likely to hurt the dollar rate. The euro, the yen, swiss franc, the dollar is a current account meaning theency, u. S. Has to rely on foreigners to fund its spending, and if indeed rates in the u. S. Were to go this low or actually continue to go lower on the back of the mix by the fed, the Foreign Investors would simply demand the discount to continue to buy u. S. Assets and that discount will be a weaker dollar from here. Manus if that is the trajectory, i want to circle back to the yield curve control argument. Bang, bang, bang. The shift has been quite monumental. I want to get a sense from you, are we hitting a critical point where there is steepness at the longer end and therefore yield curve control is something coming much more quickly down ,he pike, perhaps in the market which really comprehends . Valentin that is a potential risk and there is a degree of steepness it can tolerate. Overall, oure that expectation is for the measure to be implemented later on this year or actually more likely has year before the fed exhausted other options. Current asset purchase program. It is also the case that the result of the yield curve control policy, it will try to keep or flatten the curve as much as possible. Nejra was highlighting, our analysis is suggesting steepness of the yield curve could be quite negative for the dollar. The most sensitive dollar changes in the box spread is in the dollaryen so the implementation of a yield curve control at the long end of the curve resulting in a flatter curve could be quite detrimental for dollaryen from here. From Valentin MarinovCredit Agricole stays with us. The boston fed president has defended the risky loans being handed out. He told bloomberg the aim is to save jobs in a weak labor market with the reopening of the u. S. Economy set to be a slow process. Eric it is wonderful news that we are getting to the place where we can Start Talking about reopening. But i would highlight that is only the first step that we need to take. Consumers have to be comfortable actually going to businesses and buying in stores, going to restaurants. Employees have to feel comfortable going on the subway, the train, or a bus, and with Community Spread still continuing in massachusetts, i think we are a little ways away from that point, so as important as it is to take the first steps to open up businesses or allow businesses to open up, i think we should be cognizant of the fact that many people, particularly older americans, are going to be very leery of going into restaurants, going onto mass transit, or going onto planes until the Public Health problem is more resolved. What our ceos of companies in your district, and even people who run momandpop stores, telling you about their expectations for business, for the economy, as you reopen . Eric they are very much hoping there will be a pickup in the second half of the year. I think in gdp terms, there will be a pickup. I also think that, unfortunately, the labor markets are still going to be pretty weak. In a talk i gave today, i highlighted that by the end of the year, i expect the Unemployment Rate to still be in double digits, so it is probably going to be significantly down from where we are right now. The Unemployment Rate was 14. 7 . Many americans that took that survey said they were employed but were not working the week of the survey so the numbers are probably a little closer to 20 and we will see in the next couple of months, if it still goes a little bit more, but i think by the end of the year, we are probably talking in the low double digits. That is still a very high Unemployment Rate. What that reflects is the fact that i do not think many employees are going to want to go into some of the cities that are still having significant problems and i think consumers are still waiting to feel more comfortable before they go into stores, before they go into restaurants. One of the other programs that has come under some criticism is the secondary Market Lending Program because some critics say you are propping up Zombie Companies that really cannot continue to survive unless they continue to borrow, and at some point, we will have a lot more defaults and bankruptcies. Do you see that happening in your district . Streetith the main program, we are definitely doing somewhat risky lending and that the borrowers we are providing finance for were borrowers that were in good shape at the end of the year but are now facing difficulties as a result of the pandemic, so partly by design, these are going to be problem loans, and so what we are trying to do is get the right outcome for employment. If all these businesses end up failing, that would be a Significant Impact on employment. We want to avoid that outcome. That means we are taking a little bit more risk than we normally take in order to try to make sure theres sufficient financing. During the financial crisis in new england during the 1990 crisis, where it was a credit crunch crisis, one of the problems was creditors and finances could not find financing. We want to make sure that does not become a problem right now and make sure that what is hopefully temporary spells of unemployment actually stay temporary and people are able to be reemployed but the longer people are unemployed, the longer businesses have to finance themselves, the more risky it becomes for the economy overall. Many companies have discovered the joys of working from home and may be the savings working from home. Do you anticipate any problems in the commercial market . Valentin i think commercial eric i think commercial real estate will go through a major shift as a result of the pandemic. Clearly, office space is certainly one area. There are probably more warehouses than we needed before, and i do think that some multi Family Housing and downtown areas may be more challenged as people rethink whether they want to be downtown downtown or in suburbs. I think we are in a period where real estate is going to be going through some manus real estate from boston fed president eric rosengren. Coming up, the kiwi climbs for a third day after the new Zealand ReserveBank Governor, adrian stillignals native rates some way off. We will get the details. This is bloomberg. Erg. It has not to jump the huddles, it has got to be seen to be necessary, effective, efficient, and operationally capable. Zealandst was new central Bank Governor, adrian orr, talking to bloomberg tv about the possibility of taking the official cash rate negative in the future. The reserve bank has turns to quantitative easing to battle the candidate make pandemic. Mironov is still with us. The kiwi is catching a bid for a third day today on those comments from adrian orr, talking about there having to be many hurdles to jump for negative rates. Kiwi herebe long based on that view from the rbnz . Valentin you can make the case the kiwi will regain some ground. If anything, that view should be expressed against other Commodity Currencies and the same region, really. Ill see kiwi looks across like it is topping out. So a return of demand for the new Zealand Dollar could indeed push it lower from current levels. Comments also come to highlight how much of a struggle for any central bank from here would be the consideration of negative rates, and equally, how much of an important driver negative rates have become for the currencies, our outlook. To the extent the markets are now repricing the risks of negative rates, that will continue to boost the kiwi, especially against the Australian Dollar. The other narrative in the past 24 hours has been kudlow telling us the trade deal is not dead between the u. S. And china. Many people have questioned the veracity of that trade deal anyway. And then you have the chinese lashing out at the australians. Many people say the chinese are pinned into a corner and going on the aggressive offensive with other nations beyond the u. S. What are the ramific