The issuance of costly promises is virtually limitless. Shery Central Banks release Meeting Minutes with important clues for investors while Neel Kashkari shares inside insight on the fed stock proccess. Wall street overreacts to everything. They overreact to the upside they overreact to the downside. Shery plus, the earnings drumbeat continues loud and strong. What is pleasing is all parts of the business are performing well. There is still a lot more work to be done, but we are pleased with where we are today. Shery it is all straight ahead on bloomberg best. Hello, and welcome. Im shery ahn. This is bloomberg best. Your weekly review of the most important business news, analysis, and interviews from Bloomberg Television around the world. Markets were closed in the United States on monday, but there was plenty of drama elsewhere as a euro group put forth a nominee for the vice presidency of the European Central bank. Nejra the euro group has nominated luis de guindos for the ecbs Vice President ial role. It is a move that will hand madrid a top seed at the bank for the First Time Since 2012. It is a controversial decision because it is very unusual to see politicians making these transitions from government into the central bank, especially because that is the whole point of a central bank, it has to be independent from political interference. De guindos has tried to portray himself as a hawk, so to speak. He has spoken in favor of austerity. He has been a strong supporter of the policies that have been taken in the euro era in the in past few years and spain has been a star performer for the past few years. Its Economic Performance has rebounded dramatically since the crisis. He doesnt have much of a track record when it comes to Monetary Policy. Coming straight from politics to the central bank. Julia opening the debt floodgates today, the u. S. Treasury sold 179 billion worth of debt. Theyre working to rebuild their cash balances. Yields on the threemonth notes and sixmonth notes rose to levels unseen since 2008. What you saw in the threemonth auction and twoyear auction, was a repricing. You saw twoyear notesstarting notes starting to flatten a little bit against longerend and issues. One of the reasons for that is there will be a lot more of them. So the Treasury Department is going to issue 6 billion more every month of twoyear and threeyear, whereas they are only going to issue an extra billion dollars for longerterm securities. I think one of the reasons you have seen the front end do a little bit worse here is on the supply. Abigail were waiting for the results of the fiveyear auction and theyre coming in right now. We see that the long end of the curve is just a little bit stronger, but investors care about a few Different Things here. The one issued rate on 35 billion, fiveyear note and the actual rate to come out is 2. 658 . Those are the actual results. In terms of the bid to cover, were looking at a ratio of 2. 44 . That is slightly stronger than the previous auction. That is good. It tells us demand is here for auctions. Shery if we see more hawkish fed, we have the statement coming up this afternoon. What could this spell for bond markets . One thing we are keeping a laser focus on is what the fed said at about inflation in the last meeting. The last meeting was a nonpress conference meeting. We didnt see a rate hike, but we did see the addition of the word further a couple of times in the statement. If that turned out to be a hawkish addition because the fed is anticipating more inflation, what you are going to see is markets getting a little bit nervous that the feds will be more aggressive in the ratehike path. A somewhat hawkish set of minutes for the january fomc meeting. A number of fomc participants said they already upgraded their forecast for gdp growth in 2018 when they met at the end of january. Why . Because of quickening Economic Activity in the u. S. , a brightening picture on the global outlook, and because of the tax changes that appear or may appear to be having a greater impact on the economy than originally anticipated by fed officials. I think the markets have gotten the take away pretty correctly, that the fed will continue on the rate path it had already announced, theyre not ready to raise the number of rate moves they will make this year. Interestingly, we also heard from the Philadelphia Fed president , who suggested he is still in favor of two rate hikes, rather than the three that is the consensus forecast. Julia interesting price action today. If you take a look at the performance, just on the daily session before we got the minutes, we were in positive territory and there you see the repricing. The u. S. 10 year spiking higher, and that impacting what was going on as far as sentiment into the close. There was expectation that the fed might telegraph a pullback of that rate hike path that we have for 2018. I think when we first got the statement, it looked like there may be a pullback, but once they read between the lines, they realized the fed is not going lower than three. They will probably not go higher than three. We are basically back to where we were this morning. What this said is there has been a major mispricing in this market or at least a misalignment between what the market sees, the stock market sees, what the bond market sees, and what the fed is telegraphing. Francine barclays ended a torrid 2017 on a mixed trading. Mixed note. Trading income slumped 18 in the Fourth Quarter, but that beat both the 26 decline estimated by ubs and the average 25 drop posted by wall street banks in the same period. The chief executive is more optimistic about the path ahead, and he is putting his money where his mouth is, increasing the banks dividends and considering a Share Buyback for the first time in more than 20 years. We begin 2018 with a clean operating amount, that is the first time in five years for barclays. But also, we close 2017 with a Strong Capital position. 13. 3 , that is above our target. First time we have done that in a long time. And what that will enable us to do is, the announcement we had this morning, that in 2018 we plan for a dividend of 6. 5 cents for our shareholders. That is more than double what we paid in 2016 and 2017. We feel good about that. David we learned from the ecb account of the january meeting out this morning that although they were comfortable staying the course for now, some officials were ready to remove a pledge to expand the Bond Buying Program if needed. This is to quote from the account, some members expressed a preference for dropping the easing bias regarding the Asset Purchase Program from the governing councils Litigation Program as a tangible reflection of past inflation. They went on to say however, it was concluded that such an adjustment was premature and not yet justified by confidence. It is important not to read too much into this because these governing Council Members expressed in that, they do not carry the day. For some of them, it is a natural step that you get to the point where instead of continuing to be promising to extend and expand your qe program, you say we will carry on up to a certain date. We may extend it, but will not expand it. Alternatively, you start to shift to saying at total stimulus, negative Interest Rates, free loans to banks and the stock of assets hend under held under qe provides stimulus, and that is enough. That is what some of them want. Shery so the sevenyear ratio is 2. 49, which is lower than the previous auction. 62. 2 to the right bidders. How would you compare that to the shorter treasury feels earlier this week . It is just like the rest of the auctions. Back to the same kind of demand structure you saw in october, november, and december of last year. Which you know, it was kind of hohum. This was an ok auction. The fact that it tailed a little bit shows that there was indigestion in the market that needed to be taken down. Interestingly, in two weeks we get the 10 year and the 30 year auctions, and those will be telling, because will there be demand for the longer and more Interest Rate risk product then we have seen this week . Haslinda china is to take control of anbang, removing the chairman and prosecuting him. What do we know . What we know is that regulators say that they will be taking control of anbang as of today for one year. As you said, the chairman will be pushed out of his post, and he will be prosecuted for economic crimes, is what they are saying. They also said that the reason they have to step in is because illegal operations at the company were testing and putting pressure on the solvency of the company. Anbang has been one of the biggest swaggering conglomerates in the last five years or so, spending billions of dollars in acquisitions overseas. It has about 320 billion worth of assets. Including those not just the flagship ones, in new york, but strategic hope tells and resorts and also and resorts, Insurance Companies in countries ranging from the netherlands to korea. And they paid in many cases, for many people, skyhigh valuations and skyhigh prices for some of those assets as well. So, it will be a long process of trying to unwind some of these problematic purchases for the regulators. You have regulators and officials from the pboc, the Foreign Exchange commission, and securities and banking, all trying to pick apart this problem. Shery still ahead, as we review the week on bloomberg best, Neel Kashkari says market blips should not not the fed office knock the fed office course. A Bank Consolidation coming in europe. Plus, we sort through a heaping helping of reports. Up next, more of the weeks top business stories, bloomberg reports that Deutsche Bank plans to cut hundreds of jobs, but how does that square with the promise to grow revenue . The challenge is to create topline while cutting costs at the same time. Obviously, it is a big conundrum. Shery this is bloomberg. Shery this is bloomberg best. I am shery ahn. Lets continue our global tour of the weeks top business stories, in new york where j. P. Morgan chase announced plans to build a brandnew headquarters. Vonnie j. P. Morgan chase is getting a new address. The largest u. S. Bank is planning to consolidate its new york city offices and 15,000 workers into a new headquarters on park avenue. The announcement came this morning in a joint statement between Ceo Jamie Dimon and the mayor bill de blasio. They are tearing down their current headquarters, which was built in the 50s and 60s and was meant for a much smaller staff. And so, they will build a sleek, new, modern tower that is about twice the size. So this will be about getting all of their people into one spot. Right now, they have that building, they have the old bear stearns buildings, this is going to be a major project that they are going to tear down the building starting next year and it is going to be five years of construction. So if you work for j. P. Morgan , you will be spread out into other offices for the next years but then you have a new tower to come back to. In some ways it is jamie dimon leaving a present for his successor. It will be done around the time that he is planning to step down about five years from now. So this certainly commits them to new york in a big way. Nejra germanys largest bank is cutting at least 250 jobs globally at its corporate and Investment Bank, Deutsche Bank is trying to limit expenses amid a sustained slide in the securities unit. The cuts could run deep, widening to over 500 layoffs. Over the past few weeks, they have cut positions in london and at the u. S. The challenge is to increase topline while cutting costs at the same time, obviously it is a conundrum. We have to keep in mind that this is part of a broad strategy at Deutsche Bank to cut costs. I think what people need to look out for is what is happening at the management level, because i think there is a struggle there between the forces that want to cut costs on the one side and the ones that want to invest and expand the Investment Bank on the other side. It is hard to reconcile those two forces, and we will have to see how it plays out in the future. Lisa south africa is released its annualeleased budget today, raising taxes and curbs spending in an effort to avoid another credit downgrade. The president yesterday saying that he will take personal charge of the stateowned companies. He will take personal charge of the Structural Reforms and stateowned companies, giving direction as to Structural Reforms in the economy. And i think that it will do just enough for us, not stave off a downgrade, but also to realize a change in the outlook for s p, so we can regain our investment rate. Siemens is planning new ipo for its health care. The new company will be called siemens health. This has been a long time coming. This is something that i spoke to them about many times. Asking, what is the timing of this . We are getting news today. And it will be one of the largest ipos in europe. They are talking about 40 billion valuation and they might raise as much as 10 million euros. It is also part of this broader thing we have seen across europe and even globally, of these really big complicated conglomerates with businesses everywhere, simplifying and saying what are we good at and lets focus on that. Nejra u. K. Prime minister theresa may is planning the trade deal she would like to achieve in brexit negotiations, britain will seek to stay close to the e. U. s rule book in some areas while breaking away from others. It is an approach that some in brussels are calling cherry picking. At bloomberg, we have gotten the scoop, we have landed that if britain doesnt get the deal it is prepared to hold back from brexit payments. Can the u. K. Do this, is this illegal . Is this legal . There is a chance that this kind of protest statement from the u. K. Could cause disruptions. We might end up in a court or a European Court to try to arbitrate on this. What we do know is that britain has a contingency plan if the trade talks go wrong if at some point in 2021, 2020, or 2019 after brexit has after taken place, the e. U. Doesnt honor those promises and the e. U. U. K. Thinks one option would be to hold back the payments of the money it has already promised. Nejra apple is moving to security supply chain. The company is in talks with cobalt mines to buy the metal directly from the with no middlemen. Apple is worried that demand for cobalt in batteries could threaten its own supply, which it needs for its iphone and ipads. Is this unprecedented for apple . For apple, yes. Apple has never gone and bought cobalt directly from miners before. It never had to, because the cobalt market has been quiet, a pretty tiny market in the global world. There has never been a question about whether they would have enough supply. Nejra this is to secure the supply chain. How likely are they be able to do it . If they are willing to pay up then there are plenty of companies to have plenty of cobalt supply, planning increases in supply, and no doubt at the right price a deal could be done. A spacex rocket carrying three satellites went into space from the california coast. The falcon 9 carried a satellite and two, smaller satellites for a system that would provide Internet Access to remote regions. Mark talk to me about the crossover and how potentially this can be and how important it might be to tesla in the future. The idea of tesla and spacex merging together is a tantalizing idea. I personally think that this will absolutely happen, there is a tremendous amount of technology overlap, both companies are committed to seeing ai and Machine Learning develop and incorporate those technologies into their respective businesses. The spacex business is actually a great business. And when you look in the future, call it 2025, it is a business that could dramatically improve teslas revenues and operating profits. Mark we caught up with a treasury secretary Steve Mnuchin who is not worried about rising prices and growing debt. In an exclusive interview with bloomberg, he said there are a lot of ways to grow the economy. You can have Wage Inflation and not necessarily have inflation concerns in general. We got some insight from jeff gundlach. Check out these tweets, ill run it for both of them. Mnuchin, policies will raise wages without inflation. Yeah, sure, and we are going to expand the Buffalo Art Museum without making it bigger. Then he said if inflation is no up with wages, if inflation goes up, it is not good for bond owners. Can you get the wage Growth Without inflation . You need productivity, that has been talked about a lot. So hope springs eternal. But im not sure theres a lot of credibility coming out of the administration on the policies and what they will do. Is it inflationary, disinflationary, progrowth, low growth, it is really hard. Shery welcome back to bloomberg best. Im shery ahn. The past two weeks have given the fomc a lot to chew on with a january surprising inflation spike, rising bond yields and turbulence in the stock market. This week, our Bloomberg International and economics policy correspondent Michael Mckee sat down for an exclusive interview with the minneapolis fed president , Neel Kashkari, who sa