tv Bloomberg Surveillance Bloomberg October 14, 2021 7:00am-8:00am EDT
♪ >> it's not really about whether banks eat or miss -- banks beat or miss numbers this quarter. it is about what drives that beat or miss. >> i think that is going to be the real catalyst to bring everything back to normal. >> earnings season is going to give us a good clue where we are going with some of these supply chain issues. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: there is an equity market lift this morning. good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. this hour, morgan stanley.
next hour, citi. tom: the gloom crew gets a pause this morning. it's been a really good tape for two and a half days. to walk into the washington studios and see the vix under 18 is a big deal. jonathan: the doom crew gets a challenge. the transitory crew increasingly has a bigger challenge on their hands, too, going into year end. tom: lagarde making headlines, the president of the european central bank. the second round is a really distressing thing. when they take a second round at the university of cambridge, e 0 -- of cambridge, el-erian goes nuts. what is second round? are we substituting second-round for the even squishier transitory? jonathan: that's the story for inflation at the moment. yesterday i think the cpi, you
can't get away from that number. lisa: if you look at the fed meeting minutes, federal reserve officials are planning to potentially end their purchases by the middle of next year. i question this morning, how much is the market endorsing the idea of sooner rate hikes by the federal reserve to potentially tamp down longer-term inflation and get ahead of whatever may be next? jonathan: in that curve starts to flatten, which is what we have seen over the past couple of days. let's keep this one short. the s&p advancing 0.6%. yields on tens, 1.52 64%. euro-dollar positive, $1.1610. and $81 handle on crude, at $81.56. lisa: the highest level we have seen going back to 2014. as you were saying, we have 7:30 a.m. morgan stanley. citigroup spec at the report
earnings. we already got bank of america and j.p. morgan. bank of america beat on expectations for net interest income, and they did see credit card loan growth. this to me is interesting, especially given the fact that people are wondering if consumers flush with cash are going to start to borrow again. 11:00, we get the u.s. planning to release the crude oil inventories. the price of oil has been up. it is persistent, and we are hearing from the likes of francisco blanch that it could get to $100 a barrel sooner than later. at 8:30 a.m., we get the u.s. producer price index data. this follows what we saw in china, where they saw the fastest pace of factory prices going back 26 years. how much can we continue to say transitory if these are persistent, and we are seeing it brought an out respective two factories, with home prices?
jonathan: that final part is so important. at the start of the year, it was a possible story. we are temporary, connected to the reopening of this economy. the longer this year goes on, it gets harder to tell that story. joining us now, a man who needs no introduction. with us is mohamed el-erian. team transitory, how much of a challenge are they getting from the recent incoming data? mohamed: a massive challenge. i think anyone who looks at what is going on will tell you that unless you embrace the analytically meaningless phase persistently transitory, which i have heard, this inflation is not transitory. we should take it seriously, and central banks should move quickly to contain what could be something that ends up being more than just an inflation problem, but a growth problem. jonathan: how small is that window to act to make that
change? mohamed: it is getting smaller. the longer you wait, the harder it is to deliver a orderly adjustment. i think this notion that andy haldane introduced of a handbrake you turn, what -- a handbrake u-turn, what you want the central banks to avoid doing, is a risk that should be factored in. lisa: one of the more interesting aspects of the price action, the lift of assets with people bringing forward expeditions for rate hikes. we are pricing in potentially two rate hikes by the end of next year. is this a market endorsement of a more hawkish fed then has previously been communicated? mohamed: yes, the market is telling the fed two things. one, get going with tapering. we can take it. two, you are not going to be
able to separate cleanly tapering from rate hikes. look at the numbers today. look at pp in china. this is a very hot inflation environment, and the longer the central banks wait, the bigger with the risk. the market realizes this and is starting to price this in. lisa: what would you say to people who argue there is a self-correcting mechanism here, the higher prices will slow growth, slow demand, and that you right size without the fed interfering and curtailing growth that needs to hit some sort of acceleration pace to get out of the hole? mohamed: in syria, you're right. in practice, we haven't seen it -- in theory, you are right. in practice, we haven't seen it work too well. at argument is about demand destruction. when you destroy demand, there's a lot of collateral damage and unintended consequences. in a textbook, it works fine.
in practice, we often overshoot and end up in recession. this is not something i would like to try especially for those who are lower income come because they could hurt the most in that sort of world. tom: you joined the international monetary fund in 1983, when the new york jets were actually good. you spent a good 15 years there. you saw all of the revolution and the different crises, but none like the oddity now. how important is it for the imf to distance across 19th street northwest? does the imf need to, and dialogue, break away from the world bank in the coming weeks and years? mohamed: no, on the contrary, you need really good imf-world bank collaboration going forward. we have a structural issue.
the developing countries are particularly vulnerable. the two institutions working together can have a huge impact. what the imf has to make clear and has been making clear is that the data integrity issues aren't about the imf. no one has raised questions about the imf's data integrity. this is an issue that relates to doing business report at the world bank, and the imf data integrity is as high as it can be. tom: within this crisis, are we at the point where marginally, we finally give way voting and governance power from the european nations of bretton woods over to selected emerging markets, particularly in asia? mohamed: we have had this governance issue repeatedly. you and i have been talking about it for decades. the governance and representation of the imf still represents the world of
yesterday, not the world of today and tomorrow. what we are seeing is little pipes being built around the imf and the world bank because other institutions are deemed to be more representative. so that is an urgent issue, and europe has to take the lead on this issue. jonathan: we talked about this great divergence this week because of the imf. let's talk about that from a "central perspective. we have had interest rate hikes from chile in the last 24 hours. . using something building -- do you think something is building for emerging markets that can spread to dm? mohamed: may next op-ed will be on that. i think there is a risk for developing countries that they have a perfect storm. that means massive cost push inflation, especially for commodity importers.
lower global growth as the china and u.s. low. on top of that, the risk of reversal in financial flows. that is why you are seeing the central banks tighten way before the fed. it is meaningful because i go back not just to divergence, but to what get ago vanessa calls -- to what gita gopinath calls dangerous divergence. it is something we should be keeping an eye on. i think the imf did a great service by introducing this notion of dangerous dispersion, and we should pursue it further. jonathan: let's pursue it a little more right now. if there is one thing to focus on, the spillover risk. what is the one thing your focus on right now? mohamed: i am focused on how
capital is responding because the good thing for markets, and you're seeing it again today, is that the behavioral conditioning of the marketplace has been to buy the dip. it has been incredibly successful strategy, and we still see residual buying the dip inclination. the one thing i am really focusing on, can we understand the behavioral conditioning of the market based on how that is going to evolve? we know that it's -- that the fed is late to this issue, and that we risk a disorderly tightening of policy. i think most people see that as a risk. what we haven't yet understood fully is how the conditioning of markets, the behavioral condition of markets can change. lisa: if the federal reserve does hike twice come next year, what does that do to emerging markets? how much more pressure does this
put on them, given how much they have already had to hike rates to compete? mohamed: it depends which one. that is why we are going to see massive differentiation. some countries have the financial resilience to cope with it and have the policy capabilities. others don't. that is a very important point for emerging market investors. so far, they have benefited enormously from riding the liquidity wave. we have entered a phase where you need a lot more granular analyses, and you need to understand that ultimately, you do get contagion, and you have to be able to differentiate between those who recover quickly and those who constitute nonrecoverable mistakes. jonathan: we miss you. we want you back in america. i understand there may be a free seat at the federal reserve soon. i'm joking. mohamed: what tom said about marmite, i'm in the u.k. and i
love my marmite. i do. jonathan: it is an acquired taste. you are not. thank you for being with us. tom keene, that point on emerging markets i think is so important. we are seeing real hikes over the last several months. tom: i can't believe i am saying it after 2008 and 2009, greenspan's famous speech at the imf, some of the other moments, the tension here is extraordinary, and it all devolves back to an imf of another time and place, and the imf of the future, which is the emerging markets. jonathan: we will continue that conversation through the week for the imf-world bank meetings. your equity market advancing 0.7%. morgan stanley results, seven: 30 eastern, 17 minutes away. from new york, this is bloomberg. ♪
pres. biden: the port of los angeles announced today it is going to begin operating 24 hours a day, seven days a week. this is across the board commitment to going to 24/7. this is a big first step in speeding up the movement of materials and goods throughout supply chains. our goal is to not only get through this immediate bottleneck, but address the long-standing weaknesses in our transportation supply chain this pandemic has exposed. jonathan: this is the big issue right now. we have a supply-side problem. wall street has been talking about it all year. now it is at the epicenter of the conversation in d.c. as well. good morning. your equity market climbing 0.75% on the s&p, up 33 points. let's pick out bank of america. trading revenue other than expected. the investment bank better-than-expected. ceo brian moynihan saying, "the economy continued to improve, and our businesses regained the
organic customer growth moment of we saw before the pen -- growth momentum we saw before the pandemic." here's the bottom line, stock is up 2.5%, rallying hard into today. investors like what they hear. tom: full disclosure, bank of america with the clearest charts. they do a great job in their presentation. the slide on consumer banking, i must admit, it is most impressive. jonathan: things are getting better. is that the take away from yesterday? tom: everybody is gloomy out there, and i have been talking up some of the optimism. we will see if we break out, but all i know is bank of america moves, and that is in urschel force. what you heard yesterday in the president's speech, as the president left the podium, you heard the rude questions from the press, including two with a long island accent, the rude annmarie hordern, who joins us now.
this is a habit from trump. why do you people berate him when he turns around and walk away? annmarie: i disagree. you have to shout. we are a few feet away. him and his staff in the room know what the press is asking. my question was, because yesterday, jennifer jacobs and i read that there was this late-night meeting regarding crisis talks, regarding higher energy prices, what he will do about higher pump prices. my second was about his plans for the federal reserve because we know that the vice chair of supervision, his term ended yesterday, and we do not know who is going to be taking on that top job in terms of banking regulation. tom: i just look at this and i say an important speech, but who was he speaking to yesterday? annmarie: he even started out with a bit of a joke.
supply chains, what does that mean to the everyday american? he pretty much, in everyday terms, explained what the supply chains are. it is the president responsible for these bottlenecks? this is a pandemic. so much of this is responsible for the pickup in the was economy. he was trying to explain why your toasters, your sneakers, whatever you are buying online, is not getting two-year door quick enough. i think jonathan would understand where the president is potentially coming from because he was in the united kingdom last year when the headlines leading up to christmas was boris johnson is the grinch who stole christmas. these are the headlines. president biden is trying to avoid -- the headlines president biden is trying to avoid this christmas. lisa: the headlines this morning have to do with banks and how much they are crushing it. earnings definitely coming in strong. we are seeing bank of america crushed it on every count, including seeing credit card balances rise for the first time since the pandemic. how much will this put in the forefront of the minds of people
in d.c. the issue that senator warren has been raising because of fed and regulatory pressure on banks, versus that they are the stalwarts during a tumult was time? -- a tell multiple -- a to mulch was -- a tumultuous time? annmarie: at this moment, we don't have the past for the fed yet at the white house. they are going to want to make sure that they have hawks and those seats when it comes to banking regulation. we don't know yet exactly what the white house will be doing. earlier reporting from bloomberg potentially had this path of putting governor brainard in that post, but keeping powell, potentially to give a nod to the progressives, but still not changing horse mid-race when it comes to the top spot at the fed. but on the republican side, you hear a lot of questions and anger towards chair powell as well. one of them is definitely from
senator rick scott. he talks about this all the time . he holds briefings on it, and says that powell, he thinks, i asked if he thinks he's a dangerous man, after what elizabeth warren said. he said he is not sure if he would go there, but he stopped buying treasuries. lisa: so is the balance of sentiment in washington, d.c. that the fed is to dovish broadly -- is too dovish broadly, or that they have too much power as they do? annmarie: you're seeing anger from progressives about banking and those on the right who think that there's just too much buying of treasuries and too much stimulus, and they relate this to inflation. but for the most part, powell does have bipartisan support when you look down the middle from the democrats and republicans. tom: it felt like my morning this morning, 4:00, wallow in self-pity. 5:00, stair into the abyss. and i am wearing green as well.
you can be sure i am the grinch at christmas. i am thunderstruck how little talk i am hearing about two massive pieces of legislation. who is the grinch for the democrats on capitol hill? annmarie: i need to be careful with how i answered this question as a journalist in washington. [laughter] tom: and i'm not. [laughter] annmarie: i would say potentially people who have created hurdles for the infrastructure path would be the two moderate senators. nothing can get done without them on board, and that a senator manchin and senator kyrsten sinema, and there is reporting that she is in europe fundraising. potentially that could irk some progressives. jonathan: i had forgotten those headlines about boris johnson stealing christmas, and i see them again in the last 24 hours. annmarie and i cooked last year for thanksgiving, tom. we weren't allowed to see other
people. tom: did you cook a turkey or an eagle? annmarie: we did a turkey and we had a vegan, gluten-free pumpkin pie. tom: get rid of her. come on. [laughter] jonathan: if you ever go to a grocery store with annmarie, it is a nightmare. you want to get your ice cream. it needs to be very fee, gluten-free -- to be dairy free, gluten-free. annmarie, thank you. have you ever had a dairy free, gluten-free ice cream? come on. lisa: get a piece of fruit. tom: i've got to be emotional here, as i know we are going to morgan stanley. i'm supposed to be up in new york, and my family has gone gluten-free because they are having a gluten-free birthday today. i am doing my duty in washington. it is the birthday of vet bill. jonathan: happy birthday, vet bill. that is special. tom: for those of you on radio,
vet bill is styling the cashmere this morning. jonathan: sometimes when you tune into this show, you wonder, is there nothing to talk about? happy birthday, vet bill. [laughter] morgan stanley in a moment. i assure you, we will bring you those numbers. from new york, heard on radio, seen on tv, this is bloomberg. ♪
♪ jonathan: morgan stanley earnings coming at any moment now. from new york city, good morning. on radio, on tv, this is "bloomberg surveillance." alongside tom keene and lisa abramowicz, i'm jonathan ferro. your equity market up 0.7%. your numbers drop now from morgan stanley. third-quarter net interest income, $2.06 billion. the estimate, 1.7 $1 billion. that is a beat. wealth management net revenue, $5.9 billion. stomach, $6.1 billion -- estimate, 6.1 billion dollars. just shy there. we get into sales and trading revenue. equity has been a good spot.
that is also a beat. some of the headlines there for you. sonali basak looking at this as well. we are up 1.5% in the premarket. sonali: morgan stanley breakthrough. the equities trading number was that one i was really watching for because of jp morgan's massive beat yesterday. morgan stanley maintains its lead at $2.8 billion, the biggest equity shock on wall street. let's see what goldman has to deliver us tomorrow. i will say the avenue -- the revenue came in a little lower-than-expected, so that is something analysts may ask about. but again, that solid beat in equities is really all morgan stanley had to deliver this quarter around. lisa: where, if anywhere, are we seeing the effects of the e*trade and eaton vance acquisitions? sonali: we can see it in the cost ratio because when you look
at the other banks, morgan stanley had done well by guiding early on their efficiency ratio could be between 69% and 72% which is a little but higher than its rival investment banking counterparts in those businesses. but morgan stanley has eaton vance and e*trade to integrate. you see it in morgan stanley stock as their market cap today is bigger than yesterday, and still bigger than goldman sachs. that has been the talk of the town for many months now. lisa: we are seeing morgan stanley shares up 1.5% as people parse through the details. i want to go2net interest incomes, following but what bank of america showed, including the first quarter over quarter credit card loan growth going back to before the pandemic. how much are we starting to get hints the consumer is starting to borrow more, that companies
are starting to look to banks as lenders again? sonali: it is so important to recognize that the clients of these bangs are all different. for morgan stanley, e*trade give them a bigger, younger audience, but their clients are very wealthy compared to the big consumer bank that might have a much broader set of america. jp morgan said yesterday they were intentional about also opening in a lot of the logan -- in a lot of low income areas. but i'd morgan stanley, why is this a big deal? because they are really trying to grow that lending book, and you're seeing that net interest income payoff for them today as things start to come back. jonathan: stay close. we've also got steady group coming up -- got citigroup coming up at the top of the hour. morgan stanley up by 1.65%. bank of america numbers tidy, likewise with jp morgan, again with morgan stanley. let's talk to stephen biggar
now, director of financial research at argus. what is the number one take away for you? stephen: certainly it has been a powerful third-quarter for market activity. equity underwriting, ipo activity in particular. over 100 companies went public in the third quarter. if you include specs, over 500 -- includes -- include spac's, over 500 companies. another important one would be loan growth. we saw that over the summer, according to fed data. that is starting to pick up again. for the regional banks, you've got an improving story there as well. tom: james gorman has the respect of everyone on wall street. without question, he was the manager of the decade with the move to wealth management. everybody likes to talk about
this other stuff. what i see is $6.2 trillion with the bold hans of e*trade -- the bolt ons of e*trade and eaton vance. will they start to rival like rock -- rival blackrock at $9 trillion? stephen: i'm sure that is a goal of theirs. these bold on -- these bold -- these bolt-on acquisitions are a tremendous way to get there. just a perfect blend of their asset management and wealth management units, and i think that puts them in a great place looking out the next several years. tom: i can't emphasize enough how invisible james gorman is at davos and anything else. he loves to play it low. but this news of he has
stabilized wealth management is one they will be writing in the mba textbooks. jonathan: it is why we call him the quiet man on wall street. there's nothing pretentious about it when you sit down with him. even, i remember at the time when those acquisitions were made, we were talking about the equity market going into a shut down, and people were saying this was terrible timing. no one could have predicted the pandemic. what was it that this c-suite thought yes, we need to do something, and we can't do it organically? what was it? stephen: if you think back to the time, there was a bit of a scramble for acquisitions in general, the waning days of the trump administration. they thought they would probably have an easier time in absorbing these, getting through the regulatory issues. they are just great franchises, i think. when using about wealth management generally, what you saw in this unit, and they had
more of a fledgling advisory unit as well and e*trade, and that could be blended and leveraged with the existing. so i think it was a bit of a leap of faith, given that the commissions at that point had gone to zero. you got to make money other ways than just trading commissions. but just the whole franchise, and eaton vance fit the same mold. i would call mr. gorman strategic, but he's not spending a lot of time on the tv talking about these strategies. tom: we noticed. [laughter] james, come on. lisa: he could spend a little more time talking about it on television, just as an unbiased opinion. james gorman wrote, "your to date, are successful into gratian's of e*trade and eaton vance have supported growth of
$400 billion across wealth and investment management." when we talk about assets, how important is it that we are starting to see some consumer lending pick up at the likes of bank of america, and seeing net interest income beat at bank of america and morgan stanley? stephen: bank of america had a nice chart in the presentation about how loan growth had bottomed in the summer and has started to pick back up again. i think as the pandemic recedes, as the companies which went gangbusters last year on fixed income issuance and building up that corporate cash horde ahead of what was expected to be a longer downturn that haven't needed the cash in the last year are starting to come back out of that and take some credit down again, and consumers, credit card lending, we certainly expect that to pick back up. home lending has been pretty
strong. but the key here is that the higher interest rates we expect are not going to do much good unless they can put new loans on the book. as the economy recovers, a steeper yield curve, rater capital market environment, we are long financials at this point. lisa: ken leon was saying he likes wells fargo over bank of america, not because he thinks they are a stronger bank, but because there is more upside. do you agree? what is your takeaway in terms of specific calls we have seen on april a minari basis? stephen: we have -- on a preliminary basis? stephen: we have eyes on both of them for different reasons. institutional, capital markets all doing well. wells is a bit of a special case. they've got the asset cap, which we expect at some point will be lifted. it should have been already
probably, but they have had additional missteps and are getting through that. i think that is an additional catalyst when they get removed. they are handicapped until they can get that removed. in the meantime, they are focusing very much on costs, so we are seeing that coming down. they talked about the $10 billion that needs to be saved to be much more competitive with the large banks, and i think we will get there, but it will take some time, and the asset cap is critical here. so they are buys for different reasons. jonathan: thank you for giving us some of your time, especially after morgan stanley dropped. morgan stanley decent, jp morgan descent, bank of america decent. this slide comes from max reyes at bloomberg. headcount was 253,008 hundred 71. jp morgan, 206 t 5790. wells fargo no longer the largest bank by workforce in the united states. lisa: they have been focused on
cutting, and people are still saying they are not cutting costs quickly enough, while the other banks are expanding at the fastest pace we have seen in a very long time. you wonder at one point these cost expenses, how much the cost ratios start to bite into some of the questions and some of the performance of the shares. jonathan: james gorman hurt us and is going to -- aims gorman heard -- james gorman heard us and is going to join sonali at 10:30 eastern. did he hear us? sonali: he heard us. he's having a good day. tom: if he comes on, can we talk australian football? jonathan: will sonali let us? lisa: no. [laughter] jonathan: i think this is the reason he is on at 10:30 and not with you and i and about 20 minutes. tom: first question, how do you like your vegemite? jonathan: run, sonali. this is bloomberg.
♪ leigh-ann: with the first word news, i'm leigh-ann gerrans. president biden is heading to global climate talks at the end of the month. he has embraced climate action as no other u.s. president has, promising to cut carbon and shift to electric cars. u.s. negotiators at the glasgow summit may have nothing to show other than promises of action. a down payment in funding to help poor countries fight climate change is unlikely to clear congress this month. the white house has once again said it will support former president trump's assertion of exec it if religion relate -- of executive privilege related to the -- has had once again it will not support former president trump's assertion of executive privilege related to the january 6 insurrection. a new bill in the u.s. senate would crack on big tech
companies. firms like amazon and apple would be prevented from giving an advantage to their own products over those of competitors. they would be barred from using data to hurt competition, stacking search results in their favor, or restricting the way other services use their platforms. taiwan semiconductor manufacturing is calling for a bullish end to the year. the world's largest chipmaker forecast fourth-quarter sales and margins that exceeded some estimates. demand for semiconductors has stayed robust in the face of growing disruptions in the supply chain. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm leigh-ann gerrans. this is bloomberg. ♪
jonathan: live from new york city, this is bloomberg. equities advancing on the s&p by 0.8%. that is a nice lift. we add to the gains from yesterday. we add some weight to this equity market. in the nasdaq 100 futures, we advanced by 0.9%. that lift is broad-based this morning. yields come in a bout a basis point on treasuries, 1.5264% on tens. on the front end, that rate hike getting pulled forward all the way to the very front end of the yield curve on twos. they are now talking about the backend of 2022. that's the conversation at the moment. lisa: and the auctioneer has a lot of securities hinged on what he has to say. i was looking at the gap between three year two-year yields, at about the steepest level going back to 2017, as people start to price in the rate hikes. you're seeing those longer-term
yield curves flatten out as people expect them to get ahead of some of the longer-term inflationary impulses. jonathan: here's a picture of the banks for you right now. let's take a look at morgan stanley, bank of america numbers out this morning. they were good for morgan stanley. equities very important. strong for jp morgan, strong for bank of america, and better than strong for morgan stanley, up by 1.7 percent. for citigroup, we advanced by 1.25 percent. those numbers come been about 11 minutes area we are getting a fuller picture of the banking universe on wall street, and citi, so far for investors, they are liking what they hear. dollar lirar -- dollar-lira through nine. that is a weaker turkish lira off the back of the president of turkey firing three more central bankers of the central bank of
turkey. let's be clear right here, there is pressure on this central bank to cut interest rates further. that is not the story elsewhere in em. they are hiking big time. chile the latest. lisa: the idea, trying to attract capital at a time when money has been going to developed markets accelerating faster and considering tightening policy. turkey is its own story. there is an unorthodox belief by president erdogan that if you lower rates, that will reduce inflation. that has not been established or agreed upon by pretty much anyone else. jonathan: that is the diplomatic way of putting things. going us now, damian sassower, chief emerging-market credit strategist for bloomberg intelligence. let's start there in turkey. the turkish central bank looks very different to what else we are seeing elsewhere in em. your take? damian: we have seen all this before. they try to impose their dovish view on the market. the market reacts i selling off the lira. dietrich us central bank has to burn ash the turkish central
bank has to burn through its access -- the turkish central bank has to burn through its excess reserves. jonathan: tightening rates elsewhere in chile, colombia, mexico, brazil, singapore. typically when something happens in emerging markets, the pros like yourself come out and say you don't understand the nuances on the ground. this is idiosyncratic. this doesn't feel idiosyncratic right now. damian: no it doesn't. i know how much we love that word, but the reality is there are three things driving em currencies to depreciate. one is the developed versus emerging market growth differential, which is actually expanding. developed markets are growing more quickly. it is the inflation impulse or get obviously, it is the term premium buildup in developed market yield curves. look at the u.s. yield curve, the steepening therein.
higher yield curves forces central banks to hike, and that is typically not a very good environment to be in emerging-market assets. lisa: how perilous is it in certain parts of the emerging markets complex? we heard mohamed el-erian talking about potential serious issues. damian: i think the imf flagged many of them. if you look at debt to gdp across the whole of emerging markets, it surpassed 100%. there's definitely debt building in emerging markets. they are going to need to repay this debt. the fiscal revenue is at an all-time high, so this is all negative once rates begin to tighten, growth begins to slow. it could be a really bad cocktail for emerging-market investors. lisa: which areas are you most concerned about? damian: it's got to be anything denominated in local currency. even though that is pretty much -- that has pretty much borne the brunt of the downturn from an investor standpoint, i think you have to stay away from local currency assets. we might see some capital flows
the other way, and that would obviously be very negative, but now we have to start looking at em dollar credit. turkey, while it has a very small piece of the pie in em local debt, it is actually 4% of em dollar credit. it is the second largest issuer of em high-yield credit. that is the place a lot of global investors have gone to get that excess yield. jonathan: such a good final point. always good to catch up, sir. damian sassower of bloomberg intelligence. this is the ultimate em dilemma. we talk about it a lot on this program. em has been used to it for a long time. upside risk to inflation, downside risk to growth. when you face that dilemma, typically the market pushes them to tighten monetary policy. that is what we are seeing in chile, mexico, brazil, singapore. i am losing count. colombia in the mix as well. the question is whether that em
dilemma becomes a dm dilemma, the emerging-market story becomes a developed market story. that remains to be seen. tom: i agree, there could be contagion into other systems. the overarching question here is do the emerging-market countries, selected ones, do they have a new mature financial structure where they can go it alone or adapt and adjust in crisis versus dialing what it hundred georgieva -- dialing 1- 800 georgieva? do they have the tools amid crisis? jonathan: what are they saying about it now? tom: it is a raging debate, all of it derailed by the destruction that dr. el-erian talked about, of the world bank and the imf and data transparency. it is a most odd set of meetings here. it is all wrapped around china.
the real discussion here is whether em, is it the old em, or is there something new going on? jonathan: from new york city this morning, coming up shortly, not ella val -- shortly, not you -- shortly, nadia lovell of ubs. this is bloomberg. >> another exclusive bnp paribas open update for bloomberg tv and radio from tennis channel. the first women's semifinal is set, and a huge upset in the men's draw wednesday at indian wells. two-time champion viktoria azarenka powered her way into the final four for the fourth time in her career. >> it feels like you are starting from the beginning, so i am really happy, and i am motivated to keep going. >> earlier, grigor dmitrov upset
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>> it's not really about whether banks beat or miss. it is more about what is driving the beat or miss. >> i think we will find out companies still see a lot of topline growth. >> as covid problems fade away, i think that is going to be the real catalyst to bring every thing back to normal. >> earnings season is going to give us a good clue where we are going on some of these supply issues. >> it is either inflation or growth, and it looks like we are having a little bit of both. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa ab