We should not learn too much new but the dollar index is a little subdued. We do have gold continued to rise. Crude oil after inventory showed up 4 . Rawdown at lets get a deeper dive into the Market Action with taylor riggs. Taylor i wanted to take a first look at an index we have not shown recently. It talks a lot about companies that are traded in the u. S. And get revenue and business over in china. You can see that the nasdaq index is off 1. 7 . This is lower after headlines in the senate boosted an oversight of Chinese Companies. It would certified there is no firm control and foreign control and could request Chinese Companies to delist from control. ,his comes as a separate story but the nasdaq said it would delist the company after revelations of county fraud. We are getting a lot of interesting news. This is a risk on tone filling. Crude is higher, the dollar is weaker, gold rising a little bit but so was copper so im trying not to read into that much. The 20 year bond auction you mentioned you will be covering as well. Some individual stock movers are target falling. Margins are taking a hit after products people are buying our lower margin consumer staples. Facebook rising after announcing the shop feature which will boost social commerce. This could be a 30 billion revenue opportunity. Analog devices is up 7 . Nvidia trading higher today. A lot of optimism ahead of the report and seeing how they can benefit from gaming. Should mentionou the action because we are getting results now. The yield is 1. 22 . They drew a yield of 1. 22 . Direct versus indirect bidders hereof the numbers. Bidders,rded to direct 16. 7 awarded to indirect bidders. 24. 6 to primary dealers. Interesting the yield was 1. 22 . Typically the twentyyear would trade below the 30 year, but this is the first time we have seen a 20 year issuance in 34 years. Let us get to our guests. We are very lucky to have with managemental assets head of income, janelle woodward. Rate isd of success this Auction Going to be judged at . I think the two things we have been watching going into this, and been widely discussed and watched, is really about demand. We are digesting this live right now, but also what it does to long and liquidity. We see the introduction is significant improvement in liquidity. We have seen that more pronounced on the front end. One of the things we will be watching today is really what it looks like and how it impacts longerterm debt liquidity. Vonnie what would prompt the government to make another issuance of this particular duration . It is a long time since we have seen a 20 year and it was a little bit more than dealers were expecting. Janelle i think there has been a lot of consideration and we have heard about longer debt being issued into the market. When we look at a 20 year issuance it hit the sweet spot for treasury futures, but also the natural buyer base we see from plans and insurance companies. The other thing is it trades a benchmark for corporate. We have seen some 20 corporate issuances but it has normally been small. We will watch to see if does this create a curve that really changes the profile of corporate. Are you suggesting that because of fed involvement corporate would be more inclined to issue twentyyear paper . Janelle that is a real possibility. One, as we observe coming out of periods of Financial Stress we see corporates ultimately turn out debt reducing volatility of having shortterm maturities that could be refinanced. We think that is a natural reaction. Through the creation of the 20 year treasury it creates a benchmark bond. Right now it is interpolated from the rest of the market. We think this could pave a way. We have seen twentyyear corporate issuance growing over the last couple of years and think this could change the dynamic of the market. Vonnie one more piece of information coming through. 2. 53 . Io was they should be pretty satisfied, do you agree . Janelle i think that is right. That would be my initial read looking at the numbers and we will continue to watch this. Generally as you look across the curve are there spots where you might see opportunity or you think, perhaps, risk is slightly mispriced . Janelle one of the areas we continue to be focused on is Corporate Credit markets. Wen we look at spreads continue to see value there. We think it is interesting if you look at market last week with a risk off tone, the fed stepping in and buying etf through a secondary market continues to support that and as we do composite headlines as it relates to fundamental factors and cyclical performance, we see spreads tighten. We are also looking forward to the programs that the fed has not launched. Liquidity, the term assetbacked facility, and other opportunities and segments in the market that will continue to perform well Going Forward. Vonnie you mentioned highyield. Are you being discerning . Sectors youades of consider . Janelle i think we are being defensive and recognizing there will be some default as we go through this cycle. Discerning is absolutely the right approach. Csre thoughtful of triple and energy. When we look broadly across the space we think it is interesting you look at spreads and about 700 were priced into a 10 11 default rate. Rateis about a 6 default in 2019. When we look at expectations across the cycle and those historically we think there is value. As you said, we are thoughtful that Consumer Behavior may change and cyclical sectors will respond differently to recovery and the duration of the impact to the broader economy. We are going to get the fed minutes in about 15 minutes. I am not sure the market is looking for anything particularly new, but will there be information for anybody wondering about Forward Guidance . Is the discussion around negative rates . Janelle we will continue to look for that. The fed has been very clear negative rates are not on the table, but we are looking to see what may be an option. Is there anything that can take place around guidance, curve control, they could give the economy and markets comfort indirection . Commentary earlier this week we are not expecting surprises at this point in time. Vonnie governor bailey leaving open a tiny bit the door to negative rates. There are already negative rates in britain. Fed tomarket pushing the accept there may be a need for this . Will the fed respond to the market . Janelle when we look at fed funds futures a few weeks ago we saw the move negative into 2021 suggesting there is some expectation. I think this reflects what other tools the fed has that are at should theport economy not rebound is expected. Again, the fed has been clear in its commentary and we have seen the trade a little bit better. Negativees Interest Rates are not on the table right now, but these things continue to evolve. Vonnie thank you for joining us today. Janelle woodward of bmo global asset mangement. I wanted to point out a note kidsjim vogel saying new getting treated like the new kid. Lets get a check on the first will news with Mark Crumpton. Mark the centers for Disease Control and prevention is unveiling detailed suggestions for different phases of reopening workplaces, schools, and restaurants. The 60 page document was released after an earlier draft was rejected by the white house for being too prescriptive. Most states have begun reopening. President trump is threatening to withhold funding from michigan, a crucial swing state, and nevada unless leaders refrain from facilitating absentee voting. The president s tweets comes as many states are considering expanding access to remote voting. Dozens of voters and poll workers were infected with covid19 after republicans in wisconsin refused to expand absentee voting for the primary. The president says he may reschedule a meeting of the group of seven nations to take place at camp david after having canceled the in person gathering due to the pandemic. The president tweeted he is considering the move now that our country is transitioning back to greatness. The event was scheduled for june and was set at camp david but in march the senate would instead be held by videoconference because of the virus. Racingnd bangladesh are for a cyclone into decades. Millions of people have been evacuated. This is the equivalent of a category three hurricane with per hour. 112 miles global news 24 hours a day on bloomberg. Powered by more than 120 journalists and analysts. I am Mark Crumpton. This is bloomberg. This is Bloomberg Markets and i am vonnie quinn. Chairman powell reiterated more fiscal aid may be needed. Our next guest agrees. This will help revive Consumer Confidence so let us get to michael mckee. Mike thank you. We are going to welcome our president of the dallas Federal Reserve, robert kaplan. I note that you are back in your office and we are starting to reopen around the country. Governor abbott wants people in texas out and about. What start this process are people who run momandpop shops telling you about how fast they see things coming back . Robert i have been coming to the office i live close by and have small children. I have been coming to the office for a couple of weeks but even at the dallas fed we have limited our attendance to essential employees cash, law enforcement, and i think that is true of many businesses even in texas. There are certain kinds of businesses where you need to have people back in the office like manufacturing. There are other businesses working through this effectively from home. I think the attitude, and my own, is that if we are effectively working, i dont think there is a rush to come back because we are productive and doing our job. I dont see the compelling reason. I think a lot of businesses are doing that. Big difference i see is hotels, restaurants, and many are giving it a try and going out to dinner. You are seeing a lot more traffic on the street. Mike how fast do you think the economy recovers . Robert here is the issue. For certain activities with businesses reopening, i think you can see a slow, steady recovery in the third and Fourth Quarter. What i am worried about is, despite with the government may are,r the guidelines there are certain behaviors consumers are going to be reluctant to engage in. Whether it is shopping or going to entertainment or arts or anything where people are gathered. Me, of an example, for what the fed have done on our lending programs that have helped stabilize markets break the fiscal policy is key, but at this stage to recover faster, the Health Care Policies are central. What do i mean by that . Ubiquitous testing, contact and ig, good procedures, am one that is concerned we are doing more testing, but i would love to see a National InitiativeManhattan Project to really emphasize testing. Quick testing in front of stores, restaurants, other facilities so people have more confidence that when they go in, they are not walking into a situation where they could be at risk. I think until we have that my concern is there will be limits to how fast we can recover and that we will cover, but without certain types of activities, fully recovering will limit our gdp growth. It will mean the Unemployment Rate will be more elevated than it would be otherwise. Mike the president argued it should be a statebystate thing. Why do you think we need a federal effort . Robert i am talking broadly to local businesses. Toalk nationally researchers, the cdc. The issue on testing there are lots of efforts going on at local companies. I can tell you that. I have talked to them. The issue is how much money they are able to spend and they are aware their efforts to produce the testing they are creating a product that may not have a demand three years from now. This is a product that has demand now. At least until we get a vaccine and i dont think it would take billions or tens of billions, to create this, scala, and make it ubiquitous everywhere. I am not saying we will not recover, we will. We will grow in the third quarter, the Fourth Quarter, but i am looking ahead. We think the Unemployment Rate will peak around 20 and we will end the year around 10 . Down fiscalrind it policy will help, the fed programs will help, but ultimately, money is not going to get consumers to engage in behavior they are not comfortable with and i think we could spend a fraction of what we are spending on stimulus on testing. I have said before, why not spend billions to avoid spending trillions . Mike i cannot let you go without asking you about the oil patch. You are in the center of it. You might as well be in the Federal Reserve bank of oil. Do you have any kind of forecast over the industry goes, how many bankruptcies might happen . They expected a 40 bankruptcy rate. Is that realistic . Robert it might be. We are seeing a globally, but we are seeing in texas a lot of drillers shutting in. It is not economic to drill and there shutting down. We think total u. S. Production will go from the Fourth Quarter yearst year and end this close to 10. 8 billion barrels a day. Bankruptcies,see restructurings, and failures not only in drillers but those who service them. Having said all that it is our own view that as demand returns, people begin to drive, activity resumes, which it must, we will work off the access inventory as early as sometime in the second half of 2021 or early 2022 depending on the rate of growth. Seectually think you could it is not surprising to us a firming in the price of o il. This year you are going to see a lot of pain, restructuring, bankruptcies, and challenges. Mike how quickly do the people who shut in those wells turn the back on . Robert that is what the price goes to. By the way, a lot of folks in the industry explained to me that once you shut in a well it takes some time to on shut it in. My guess is the magic price starts to be in the neighborhood of high 30s or 40s. You are going to see people resume and it is our own forecast here, even with the reduction of u. S. Production by 2 Million Barrels a day, the actual daily production going on right now is much less than that. We have further reduction. Some of those shut ins will come back by the Fourth Quarter. We think the shut ins in the United States may be at their peak right now. That, a lot off that, will come back. Why will u. S. Production recon . Because of a declining curve. Even if you start drilling again, even without new drilling, you will have a natural reduction in output because you need to drill a lot more wells to replace the rapid declining curve of shale. A lot of those shut ins will come back by the end of the year. Mike i am curious how the governments programs like ppp , because, or will do industryfear that the may be afraid of bad loans. Robert the issue on main street is this i think there will be good take up. Guarantees 95 d of the loan. The bank takes about 5 and so what i am hearing from bankers and companies is that Many Companies that are midsized will want to use that program. The issue is it has got to be credit worthy. There is an even coverage test depending on the program. Youou are credit worthy and are acceptable to your bank as a credit, you will be able to access the program and i think many will. It will not help those companies that are not credit worthy, that are more highly leveraged than what i said and their banks would not be willing to lend to them. Joint in yourecue parking lot is open. Robert it has been open for takeout and have gotten takeout many times. But yes, it is open for dining. Most restaurants i am seeing through the state are open for 25 ng, but they are open at capacity moving to 50 and people are going out to dinner. Mike rob kaplan, thank you for joining us. Vonnie thank you to michael mckee. Quite optimistic under the circumstances. Mike he is in a place where they are opening more quickly than other places. I thought it was interesting he said he was going out to dinner. Vonnie exactly. I would like to get some barbecue right now. This is bloomberg. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Mark i am Mark Crumpton with first word news. President trump ascending workers to fix a dam. The flooding may force the evacuation of more than 10,000 people. Governor whitmer says the city of midland could soon be under nine feet of water. The European Union is signaling it will not punish member countries for breaking the deficit rules to tackle the pandemic, but it may link access to recovery funds on how much they follow advice on how to manage budgets. Nearly every country has broken the deficit limit as they have spent money to Keep Health Care systems, businesses, and jobs alive. Prime minister Boris Johnson says the u. K. Will have a track and traces in place by june 1. Capable of dealing with 10,000 new cases a day. The Prime Minister has previously said the system of tracing infections is essential to lifting the lockdown. Answering questions in parliament today, the Prime Minister said the government will hire thousands of people to help with that effort. Global news 24 hours a day on air and on quicktake by bloomber. Powered by more then 2700 journalists and analysts in over 120 countries. I am Mark Crumpton and this is bloomberg. Amanda thank you for joining us. Here of the top stories we are following. Stocks continue to gain ground. All of 500 has recovered the losses and rising to its highest level in within 10 weeks as investors look for more signs of an economic recovery. Plus, what to expect from the fed minutes. We are counting down to the release with aneta markowska. The outlook for the retail space lower and target sinking as the session grinds on. Withll get the details camilla yanushevsky. A quick check on the markets. We do have a little bit of treading water ahead of those minutes. The markets are doing well today. We are seeing some momentum as well. The s p 500 showing all subgroups moving higher. 3 in is at almost communications, financials, and fairly close to the highs of the session. Tech really showing leadership. Crude Oil Moving Higher again. Still not where many people need to see that in terms of the profitability of the group, but we are seeing in terms of energy subgroups moving higher here and in toronto. We are seeing a bit of relief in the stoxx. Watching hisare Congress Passing this bill that could require the delisting of Chinese Companies. That could have implications across chinese markets. We will continue to monitor to see if investors are chilled by that. Ite a markowski is with need a markowski is with jeffries. Aneta markowska is with jeffries. Is this going to have a Chilling Effect . Aneta there was going to be a pause on the trade war for the election. The economy took a hit last year and i think it is a little bit strange that we are prioritizing, you know, this payback of china where the economy is clearly struggling. I dont think it will be able to take any additional tariffs or trade tension. I think this is definitely a big risk. Shery we really do not need additional risk especially at a time when we see Economic Data slowing down here in the u. S. We have seen a lot coming from the fed and the u. S. Government. The fed seems to have passed the ball to congress to do more. Could we expect anything anytime soon given it is an Election Year and it seems republicans do not want to pass anywhere stimulus package . Does the uniteda states need this . Aneta policy is very supportive. Act is makingares his way to the economy. You will see an april the despite income surges historic drops in unemployment. The income replacement was significant and that is going to support the economy through may and june as we start to be open. The problem is that the cares big, butimely, it was it was a relatively shortterm offset to what is a longerterm problem. But the time we get into june through august a lot of the programs are going to clip off. Personal income was going to be down toit will 2 . I think these programs will have to be extended if we are to avoid a little bit more choppiness in the data as we get into the summer. Amanda it is so interesting because we have come up comparison, the canadian model which is to make as much money available to as many people as easily and quickly as possible. In the u. S. A little more frontloaded. Those little clips the economy faces. By the time they show up in the data, is it too late to come back with additional fiscal support . Aneta it is never too late. Of can have a period choppiness or weakness and that gets congress to respond. That seems to be the scenario thats playing out. What we heard yesterday during the testimony is a lot of senators on the gop side think we need to let these existing programs run their course. It is really only when they last and the data starts to get worse they will be convinced we need to do more. It almost seems like things need to get worse before we get more fiscal and things improve again. I think the next two months are going to look great for my data perspective. You are going to see snapbacks from retail, to housing, to manufacturing. By the time we get into july i would expect more choppiness. Amanda how effectively are these dispersed . We keep hearing about potentially Small Businesses not really being able to tap these funds. Too small for the lending soilities, too big for the are they falling through the cracks . Aneta i think so. Were5 of Small Businesses able to get their hands on the funds. The second round is ongoing, but i think it would be another 5 10 that will get the loans. There is still big chunk of the Small Business universe that was not supported in any major way. Even for those that did get ppp loans they only offer eightweeks of loan forgiveness. Those millions of jobs that were saved will be back on the chopping block by the time we get into early july. The question is will those programs be extended . Again, right now that looks questionable. Minuteswe are about 22 away from the fed minutes. Those are from the prepricing of negative rates by the futures. Do you expect any mention of that and what might that due to the markets . Aneta i think there might be some mention of it because powell said clearly last week that officials were essentially against it. They clearly had a discussion about it so we will see. Definitelyy will dismiss it as very ineffective. Of all the tools the fed has available this is the one with the worst riskreward tradeoff. There is a limit to how negative rates can go because they could swap out excess reserve for cash to avoid paying that and putting that cash in ewald. By the feds own estimate the breakeven rate is minus basis points. The ability to cut deeply is not there so why bother . The risks are very obvious. It could undermine the whole money Market Industry and disrupt the funding channels for a lot of Financial Institutions that do not take deposits like foreign banks. I think it could potential be potentially be very disruptive with not a lot of benefits. I think the fed would do better just continuing with the programs. They seem to agree. Shery great to have you with us. Up, betting on credit. Tment management investing into apollo. This is bloomberg. Amanda welcome back to Bloomberg Markets. I am amanda lange alongside shery ahn. There is 250 million committing to apollo. Christian hensley is managing director at emco. Thank you for being with us. Let us start with the decision and the opportunity you see. What is the opportunity in the space for you . Christian thank you for having me. We think when credit blows out to this level this is probably a good time to put capital to work. For our part, we are happy to announce this because it is the first of many partnerships we are looking to announcing to build our new credit department. Shery why apollo . We know there are blackstone and all of them raising capital at the same time. Christian we have had time to sectorsiligence on the as well as partners and their reach. We think this product is a good fit for the strategy we need which is looking at dislocated credit, usually highquality. We are able to move pretty quickly. Im happy to pay able to do that i am happy to be able to do that. We will be getting into other segments like Corporate Credit, soalties, Balance Sheets, this is more of the beginning. Apollo is a great start. Amanda do you have a geography in mind or does apollo have a global mandate . Christian they do have a global mandate. We think the developed markets are the place to be right now. Many of our Legacy Assets are canada focused, but given where the markets are, we do not want to miss any opportunities or leave any stone unturned. We will focus on north america and western europe. Shery where do you see the biggest opportunities . You recently launched the global credit program. What kind of partners are you looking for to enhance opportunities for your clients . Christian we are looking for partners overall that have the same sensibility, the same longterm horizon we have got. I think the willingness to make a two way street making Partnership Works both ways, but we want to leverage those with strong distribution and origination networks, good underwriting skills, and deep background spread they can work with us for the long time to build up the program we are hoping to build. Amanda there is an awful lot of cash in the world and much of it is focused on this part of the market. How do you make sure in this crowded space we should at the fact you have government competition in some places how do you make sure you are getting the value here . Christian i think we really rely on the fundamental underwriting with security selection to create value. I think you are right there is plenty of capital chancing. Luckily the market is significant, but having partners and the ability to be in deep with specific companies and subsectors you have come to know over long periods of time is going to let you find those rare opportunities in the churning markets. You plan tove heard boost assets under management. What is the target right now . Christian generally our purpose overall is to help consolidate what is still a fragmented space in ontario. We do have ambition, but joining us is voluntary. Our job is to create very flexible platforms that can accommodate the wide range of assets and pools of capital. Over 100get us billion in the coming years. Withoutthis is a crisis precedent but we have seen many big funds including pension related funds with Big Investments that have gone bad and make volatile place. Do we ensure investors how do reassure investors you will not increase the volatility . Sightian we cannot lose of the fact that everyday our job is to make sure we put groceries on the table. Beody in our shop wants to out there and being a hero. Staying humble, asking if we are good at this, making sure we are accountable, and going with what is steady, predictable, well thought out, and disciplined are the real principles we embrace. We can go out there and ultimately deliver for our stakeholders. Shery great having you with us. Thank you. Coming up, retailers are raising 31 billion from banks as the pandemic batters sales, shutters shops, and heightens online competition. More on the retail earnings next. This is bloomberg. This is Bloomberg Markets and im shery ahn with amanda lange. Begin to reopen stores, but most consumers remain cautious staying at home and shopping online or using curbside pickup. For is closing retailers tens of billions of dollars to offset the impact. Here to discuss that is camilla yanushevsky. Great to have you with us. We are seeing an upside and equity markets really helped by earnings coming from target, lowes, and the reopening of the states. Seewe going to continue to a bit more of a rebound when it comes to sales with more traffic and stores . For our consumers going to be fundamentally have changed consumptionterns the could affect the month ahead . Camilla first, thank you for having me. I really appreciate it. We have a lot of Companies Reporting tomorrow. Maxx, and it is different for all of them. How are Shopping Patterns going to change . On t. J. A strong buy maxx and think they will be one of the biggest winners. It really comes down to the business model. They are opportunistic purchasers. They are later in the buying cycle the Department Stores or wholesalers. Right now apparel manufacturers are over inventory. They are really looking to quickly offload for pennies on the dollar. Tjx has unprecedented hold for the supplies. Amanda we heard the u. S. Aid to consumers is frontloaded and they would make these many clips happen after july. Do you think retailers are prepared for that . There may be a burst of spending followed by a dry patch . Camilla it really is going to depend on the industry you are in. For example, best buy is also reporting tomorrow and from the analysis we did electronics and Appliance Stores are faring callr and what we like the the age of covid19. Longer term, when these orders are lifted, and analysis we found was that Consumer Electronics witnessed steady growth over the past two decades including times of economic slow down. That goes against the conventional wisdom that industry is discretionary, voluntary, or cyclical. Shery we are finding that despite all the challenges posed by the pandemic most of these retailers saw a huge boost in online sales. How important will this be Going Forward and who is the winner when youre taking a look at digital volumes being available to consumers . Robust best buy has online channel solutions. They have done a great job delivering on Consumer Expectations for convenience and speed really to rival amazon. Have sameday delivery for 99 of customers. We overrated them and other retailers that have robust channels of solution. They are definitely going to be beneficiaries Going Forward. Especially if you look at statistics. Service data says two thirds of consumers are going to avoid Public Places once stayathome orders are lifted. Amanda it does feel as though the mall will be hard hit. Give me your lens on macys. You have got it right behind j. C. Penney. Camilla one of the questions we get sometimes from our clients the next j. C. Penney . If you look at it for my Balance Sheet perspective, they are next in line, but it is important to expand that to a realistic perspective. Both of these companies have been shutting down hundreds of stores over the past few years to conserve cash. If you are going to stack up the real estate portfolio, j. C. Penney has 850 stores, macys 630, but j. C. Penney has half the revenue. They are definitely in worse in enclosedey are malls which we are negative on in terms of we do nothing customer traffic is going to navigate their first when the orders are lifted. Shery Willie Seymour chapter 11 filings in the next few months will we see more chapter 11 filings in the next few months . Camilla yeah. We think we are going to see a piling of filings. We are expecting that to be disproportionately impacted to smaller businesses, specialty stores, and apparel retailers. Shery great to have you with us with the latest on the retail earnings. From new york and toronto, this is bloomberg. Staying connected your way is easier than ever. Youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. It is 2 00 in new york, 7 00 p. M. In london. I am scarlet fu. Romaine and i am Romaine Bostick and this is Bloomberg Markets the close on this wednesday afternoon. Getting a rebound rally today after yesterdays losses. Yesterday was the day a lot of focus on the vaccine and promise that did not live up to expectations. Now, folks taking more stock of what is out there with the relatively decent earnings reports. The s p 500 is up 1. 5 on the day. Transportation stocks getting a bid led primarily by cfx and railroads after getting upgrades. Fedex, jb hunt also seeing strong bids. Seeing some interesting buying in the treasury market. Today, we had the first 20 or Auction Going back 20 year Auction Going back