0:03

Broadcasting live to New York,

0:05

Bloomberg to Washington,

0:07

d C. Bloomberg to Boston,

0:10

Blumberge under to San Francisco,

0:12

Bloomberg nine to the country

0:16

and around the globe. The Bloomberg Radio

0:19

plucks and Bloomberg got gone. This

0:21

is taking stock, coming upon taking

0:24

stock. What's next for the Bank of England

0:26

after it failed to buy all of the government

0:28

bonds it wanted at a reverse auction. This

0:31

is the first shortfall since

0:33

the Bank of England started its quantitative easing

0:35

program in two thousand and nine. Investors

0:39

they are not willing to part with their

0:41

holdings of longer dated bonds.

0:43

We've got details right now. We've got more details

0:45

from Charlie Pellett in the Bluemberg news room.

0:48

All right, thank you very much. Pim Fox, the DAL,

0:50

the SMP, NEZDA, they are all

0:52

declining right now. SMP five

0:54

index falling the most in more than

0:56

a week. It is down nine points to

1:00

pulling back from that record, down four tenths

1:02

of one percent. Energy producers

1:04

are tumbling along with the price of crude oil.

1:06

West Texas Intermedia Crew down a

1:08

dollar one of barrel forty one seventy

1:11

five right now, That is a drop of two point

1:13

four percent. Bank shares sinking

1:15

on speculation interest rates will

1:17

not rise this year. Yelped

1:19

gaining the most in three months after better

1:22

than estimated quarterly profit and revenue

1:24

spurred analysts to raise their recommendations

1:26

on the user review site, citing

1:29

strong local advertising and partnership

1:31

deals. Yelped surging now

1:33

by thirteen point one percent. The

1:36

Walt Disney Company is paying a billion

1:38

dollars for a one third stake in band

1:40

Tech. That's a technology and screaming

1:43

business formed by Major League

1:45

Baseball, and I launched a new web

1:47

based e sp and service

1:49

this year. Paul Sweeney is director

1:51

of North American Research at Bloomberg

1:54

Intelligence. I think this is a you know, a big

1:56

bet on tech. Technology is Bob Bobier

1:58

suggested, this is a technol that they believe

2:01

can bring their content over the top, make them

2:03

competitive in the marketplace where they really haven't

2:05

had an offering yet. And we've seen HBO go over

2:07

the top, of seen CBS go over the top,

2:09

going directing a service, but we haven't seen necessarily

2:12

anything out of the what this can't coming, particularly

2:14

with ESPN, But I think this is the first step that kind

2:16

of move them down that road, and Disney shares are

2:18

up one point four percent. Ralph Laurens

2:21

surging today after an earnings beat.

2:23

The forty nine year old brand known for preppy

2:25

fashion and premium prices, reported

2:28

first quarter profit that exceeded analysts

2:30

estimates. Ralph lauren up nine point

2:32

three percent, SMP down nine

2:35

to seventy two. A dropped there of

2:37

four tenths of one percent. It

2:40

is to thirty two on Wall Street. Now, let's look

2:42

at other news from around the world. Thank

2:45

you, Charlie from the Bloomberg newsroom. I'm Ramy

2:47

in essentio. Delta Airline

2:49

says it hopes to return its operations

2:51

to normal by tomorrow. CEO

2:53

Ed Bashton issued a video statement promising

2:56

customers they can rely on the carrier

2:58

in the future. I'm sorry we you down.

3:00

We'll do everything that we can to make certain this

3:02

does not happen again. Delta has canceled

3:04

another two five flights today

3:07

and it's still working to find seats for stranded

3:09

customers. The federal government

3:11

and Baltimore Police say they will negotiate

3:14

reforms after today's release of a Justice

3:16

Department report it criticizes

3:18

officers for using excessive force and

3:20

routinely discriminating against blacks.

3:23

The city's police commissioner says he and all

3:25

their officers are upset by the findings.

3:27

There are officers right now that are just

3:30

as offended as we are to

3:32

see the details that are laid out

3:34

in this report. Why

3:37

because they wear this uniform proudly and

3:40

they serve the citizens of Baltimore honorably

3:43

each and every day. In Venezuela, the

3:45

National Election Council has derailed

3:47

opposition hopes of holding a recall

3:49

referendum on President Nicholas Maduro this

3:51

year. The council set a new date for Madua's

3:54

opponents to collect signatures. Then

3:56

there would be a ninety day verification

3:58

period that would push a reference him into

4:00

the coming year. And the jury is

4:02

deliberating the fate of a Yale educated investment

4:05

banker who insists he never told

4:07

his father to trade securities based

4:09

on the insider information he shared.

4:12

The Manhattan Federal Court jury began deliberations

4:14

yesterday in the case against Sewan Stewart. In

4:16

an afternoon note, jurors asked for a

4:18

definition of insider trading. Global

4:21

News twenty four hours a Day, powered by more than journalists

4:24

and analysts in more than one twenty

4:26

countries. I'm Rainy in Essensio. This is

4:29

Bloomberg, Charlie, and we

4:31

thank you and again recapping stocks

4:33

are trading law SMP five. How did

4:35

it index down? Nine?

4:38

A drop there of four tenths of one percent.

4:40

I'm Charlie Palett and that's a Bloomberg

4:43

business flash Bloomber

4:45

j Stock. Fed in Focus.

4:47

There's certainly a lot of discussion about whether or

4:49

not the Fed is going to try to hike race again

4:52

this year. We think the Fed by December

4:54

will be ready to do another hike. That sounds

4:56

like a big difference from the markets, but it's not that big

4:58

a difference. Think at this point the Fed

5:01

is going to remain on the sideline through

5:04

and most likely that better part of because

5:07

they have a huge communication problem with

5:09

the public about what's driving their

5:11

policy decision. They basically have

5:14

no strategy. The Fed in focus

5:16

on gloom Word Radio, The

5:18

Fed in Focus, Central Banks in Focus.

5:21

What happens if you throw a party and nobody

5:23

comes well. Chris Whalen, Senior

5:25

Managing Director, Crow Bond Rating

5:28

Agencies here to tell us more. Chris

5:31

Whalen. That party at the Bank of England

5:33

was inviting all of those bondholders

5:35

too. It seems as though not all of them were willing

5:37

to relinquish their bonds to the Central

5:40

Bank. What do you make of this? Definitely

5:42

not there's a shortage of yield

5:45

out there, Keim. There's a shortage of cash

5:47

flow. That's what we're fighting about here. No,

5:50

they didn't want to sell the bond, so you

5:53

know, to me, that's such a big deal. But the bigger

5:55

issue is why are we doing this in the first place.

5:57

Well, that's what I was gonna get to is that you know, whenever

6:01

you you know, you throw a party, or whenever you

6:03

look to buy something, you

6:05

do a lot of work to figure out whether

6:07

they are ready sellers. Did

6:09

they not really canvass

6:12

the market? Do they not recognize that people

6:14

are yield starved? Their

6:17

yield starved? Him? And also, I think the bigger

6:20

issue that no one wants to focus on is

6:22

that the dealer community in government

6:24

securities and agency securities has

6:26

been decimated. JP Morgan

6:29

is going to stop clearing treasuries at the end of the

6:31

year, and the street has just said

6:33

no, we can't continue to lose money

6:35

to tight spreads, no carry on

6:38

the book right because rates are zero, so

6:40

you know, the street has had to essentially get out

6:42

of that business. There's literally a handful of dealers

6:45

now who will handle this business. So

6:47

in a way there's a liquidity issue too, because

6:50

and nobody facing the Fed has any inventory.

6:53

Nobody facing the Bank of England has any inventory,

6:55

so of course they can't fill the auction.

6:58

You see what I'm saying. They want what I

7:00

want you to You just hang on, Chris, because I want you to just

7:02

explain and perhaps in a little more detail, or

7:04

maybe even give an example for those that

7:06

are not familiar with the way that government bonds

7:09

are traded and the role

7:11

of the central banks. You talk for

7:13

just a second there about

7:16

the bond clearing operations

7:18

and how JP Morgan was getting out of the Treasury

7:21

bond clearing operation. Tell us about

7:23

that. How does that work? The process? Well,

7:26

it's it's a back office sort of process.

7:28

You're confirming orders, You're you know, sending

7:30

a variety of different electronic communications.

7:33

You're trusted third party.

7:36

Essentially you're the clearing agent for both sides

7:38

in many cases, so it's a

7:40

very important function. But the

7:43

more interesting issues in the front of JP

7:45

Morgan, the dealer doesn't keep a lot of

7:47

inventory. They don't trade their own book

7:49

anymore. They can't since the whale, remember

7:51

the vocal rule and all of this. So there's

7:54

there's no inventory for the central banks

7:56

to take because they have to go to the dealers.

7:58

They're not going to go directly to call and these

8:00

other owners of paper and say hey,

8:02

sell me the paper. They could, I suppose they

8:04

typically deal with the dealer. So that's

8:06

traditionally how they buy papers. So they do an

8:08

auction, and the dealers didn't fill in

8:10

this case. That's you know, they didn't They

8:12

didn't respond to fill the order.

8:15

And I think, to me, I worry about the liquidity

8:17

aspect. I was just at a mortgage conference

8:20

left two days. I'm worried about the market

8:22

for Jenny Mays. For God's sake, you

8:24

know, that's that's a problem. And that

8:27

G in Jenny May means

8:30

government yep.

8:33

And there's no liquidity. There's no liquidity

8:35

in the in the back of that market for

8:37

for mortgage servicing rights. And

8:39

it's a real issue because that whole market

8:41

is now non banks. All the banks are

8:44

getting out, there's no liquidity, there's no balance

8:46

sheets that market anymore. So

8:48

again, you know, all of these regulations

8:51

and the QI and the low rates and the

8:53

asset purchases I think have combined

8:55

to actually constrict liquidity PIM and

8:58

that's, to me, is very worrisome. We've

9:00

written about this a lot. If you go, we did a

9:02

piece of mortgage servicing rights last week.

9:05

Is this a case of unintended

9:07

consequences? Yeah?

9:10

And I think also just over reaction. This

9:12

is what we do in democracies. You

9:15

know, Glass Steagle was very harsh. It was passed

9:17

in the dead of night with no debate. Um,

9:20

and I think similarly the reaction after

9:23

two th eight was quite harsh. Um.

9:25

But I wonder if we're not I guess

9:27

I would like to see people get together in a room

9:29

in Washington and say, Okay, what do we want,

9:33

and then work together to make sure

9:35

that the different things that they do. You

9:38

know, for example, the Consumer Protection

9:41

Agency that was created after Dodd Frank has

9:43

been very harsh. They've trebled

9:45

the cost of servicing a mortgage loan. UH

9:48

and a lot of firms are going to get out of business. Tim.

9:50

I mean, I'm telling you. The head of Jinnymate, Ted

9:53

tos Er, is a very dear friend or wonderful

9:55

colleague. She's been there for seven years.

9:57

He knows what he's doing, and he's gonna leave

9:59

soon. And he's leaving the market with less

10:01

liquidity and with a lot of global

10:03

investors who owned Jenny May paper

10:05

all over the world, central banks who are

10:07

worried about the quality of that market going

10:10

forward because they can't get a bit if

10:12

they want to sell, even a reasonable size blockage

10:15

any mays it's hard to get a bid today,

10:17

and that's the result of regulation. Give

10:20

you ten seconds. What's the worst case scenario,

10:23

doorst case scenarios. We keep doing what we're

10:25

doing and expecting a different outcome of science.

10:28

Stein said, right, Um, I think we need to stop

10:30

chewey. Let rates go up in the US. We can

10:32

we can take the lead on this, Thanks

10:34

very much. Chris Whalen is the senior Managing

10:37

director for Crow Bond Rating

10:39

Agency giving us his views

10:41

of quantitative easing and

10:43

the lack of liquidity in the

10:46

government bond market. This is

10:48

taking Stockheim, pim Fox, and

10:50

this is Bloomberg. The

11:00

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