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Carol Master along with Tim Steneek live here in our Bloomberg studio at Bloomberg Headquarters. Obviously, the main event is what we just heard from Fed Chair JP Howell up on Capitol Hill. Charlie breaking down some of those key points the Fed Chair reiterated to lawmakers at the US
Central Bank, no rush to cut interest rates. Feel like Tim, we got a little bit of everything, and the Fed Chair really pointing out the importance of not going too soon and also not going too late in terms of making moves to cut rates.
Yeah, here's what he said. We believe that our policy rate is likely at its peak for this tightening cycle. Repeated language you said his last press conference just at the end of January. He also repeated his claim from the January press conference that rate cuts are likely to be appropriate at some point this year. And you know, I think the market's reacting accordingly.
All right, So let's get to it with more on Shair Powell's comments and US financial market reaction. Delighted to have with us Bloomberg News International Economics and Policy correspondent Michael McKee. He's there in our DC bureau. He's been listening all morning, so too has Bloomberg News Markets reporter Abigail Doolittle. She's here in our studio, and Mike, I
want to start with you. It does feel like we understood the message at the last FOMC meeting, and I feel like we got a lot of that as well. But what for you? Was there anything that was new, nuanced, a little bit different from the FOMC meeting? What is it that was so important in terms of what we got from the FED chair today?
I appreciate your asking, but this was the functional equivalent of Wall Street hoping for a new suit and getting hand me down with the same old, same mold from the FED chair. You know, he really can't say anything else at this point. It was more explanatory than anything else. And it's a story that traders have heard now for some weeks from Chair Powell and many other members of
the Open Market Committee. But what did stand out today, and what was maybe a little bit of a surprise, was how much bipartisan anger there was at the Basel three end Game bank regulations that the FED is looking at right now. These grow out of an international effort to raise capital levels and regulation standards in banks around
the world. The US hasn't implemented it yet. They've put together a pro process for putting it in place, and they put it out for comment, and they've gotten a lot of negative comment from the banking industry who have also sent comments, apparently to their local representatives. Republicans didn't like it, but today we really got an earful from some Democratic representatives as well. They think it's going to result in less lending to the banks from the banks
in their districts. Their banks will be less profitable. In other words, the message from the representatives is this is bad for business, so it's bad for the economy. J. Paul was receptive. He was one of four FED members who originally said they had problems with the issue. He made that clear. He said that they are looking at it,
they're still digesting all the comments. But as he said, what we could see is broad and deep changes in the regulations before they come out, and he went so far as to say that it is possible they would withdraw the proposal altogether. So the congressmen were heard today at least on that issue.
Well, thank you very much, Thank you very much, Mike, because you kind of open the door to where we need to go with Abigail, because yep, we want to talk about more markets generally, but most importantly what's going on with New York Community Bank or if we may abigail because as the Fed Chair j. Powell was getting lots of detailed questions, as Mike said, on banking regulation,
how to prevent another crisis? Developing news on New York Community Bank card which is halted as we speak, but it was down as much as forty seven percent before that halt.
Yeah, it's pretty incredible here, this beleaguered regional bank. The news just can't get worse. It just keeps getting worse and worse, it seems. And to your point, they did. They are saying that they're trying to raise equity capital. That's been the big question with all the headlines that have come out recently in terms of they're talking about the poor oversight of loans, and then we had a
couple of downgrades. One of the downgrades was key because it was a downgrade of basically a certain poor portion of their business to junk and they suggested that if that happen that they could see outflows. One thing they have not updated investors on through all of this are their deposits. So in February deposits and liquidity was very
helpful or healthy. But to not make that update through all of this, you know, you could take it one way or the other that it's either really bad they don't want to share that, or they want to pull a rabbit out of the hat. So it's can to be interesting to see what comes on the other side of this.
Hey, Abigail, I want to broaden this out a little bit and just talk about the equity market reaction in a general to what we heard from J. Powell earlier. We do see stocks hire by eight tens of one percent, the nasdak can posit up by one percent, the Dow up by half a percentage point. Any surprising moves from you after yesterday's sell off given what we heard from Powell.
Not really, I mean the biggest surprise is actually Apple it's down ever so slightly. I mean, it's not down a lot, but you would think that we'd start to have a snap back for that stock at some point, and some of them more mental indicators suggested that given the fact that it is down about fourteen percent from its peak, you would think that it would also be participating in this rally. But this rally is a nice
snap back from yesterday selloff. To your point, the S and P five hundred of about nine tens of one percent, chips doing really well, up three point two percent, So a big rally there, I think very interesting to take a look at his bonds, we have yields down just
a little bit, so this tells you. I mean, my take on this on FED chair Powell's testimony so far, to Mike's point, you know, nothing new here, but I think that there was probably a little bit of fear was would Powell suggest that there would be no cuts this year? Now, if that had happened, I think we would have seen, you know, yields spike sharply higher and
stocks tumble. The fact that the worst case scenario didn't happen, we seem to have this relief rally doesn't mean it's going to continue, not really because you actually put a little bit of near term technical damage for stocks, but investors feel a little bit more sure of themselves today.
You know, our New York team also reporting that treasury yields hit a new session low after that initial Wall Street Journal report about New York Community Bank Orp looking to raise equity capital. We've also reported this story out. And I was looking at kind of the KRE Regional
bank ETF. It's down about two percent, and it looked like it took a dip as well on concerns, And I do wonder, you know, when we think about the broader market, we always, Abigail talk with you about the importance of the megacap tech names in terms of momentum, whether it's Apple or some of the others. And you laid out some of the move to the upside that we've seen. How important is it to what we see in the financial sector, broadly in the regional bank sector, to the overall market trade.
Well, you know, it's interesting to see the simply that we do see in the KRE. So the biggest decliner, not surprisingly was NYCBB four. It was halted. I'm looking right now only three members are up out of one hundred and forty, so we have one hundred and thirty seven banks down. But what's so interesting is as I've dug into the commercial reel and it is trading again now KR or excuse me, and yet it's not. Sorry, I was looking at KRI, got a little bit excited to see we have a.
Lot of screens up right now.
Yeah, we have a lot a lot of screens here. But as I've been digging into this, so of the twenty five top regional banks, they have maybe thirteen fourteen percent exposure to commercial real estate, and apparently they are well funded enough that there shouldn't be an issue. The smaller regional banks they have roughly forty four percent. So there could be some other blow ups. But I was talking to an expert yesterday and he was saying, it's not going to be the saving and loans crisis back
in the nineteen nineties. It's not going to be you know, hundreds of banks. If anything, it's not even going to be dozens he said it. He said, maybe it would be a dozen. So the fact that you have this contagion trade here right now in terms of stocks down, now that even though the bulk of them are down. The next biggest one to NYCB is down five point nine percent, which is a sizeable decline. That's South Side Bank Shares. But I guess what I'm saying is that
the contagion may not be. It's headline contagion as opposed to actual fundamentals. A lot of folks don't think it's.
Going to be.
It's important to understand the fundamentals of each of these names.
I want to go bactly.
Yeah, I want to go back to Mike McKee on this and stay on New York Community Bank because there are there are some parts of this that are tied to the FED and two regulators might just weigh in on this with your observations.
Well, it's interesting. J. Powel was certainly asked about banks and commercial real estate, and he said it's going to be a problem that can be worked out. They're not particularly worried about it, but it's going to take years for all this to go through the system, and there will be losses. But he was not direct directly asked about NYCB, either because members of Congress didn't know what was happening today or because they realized that the FED
does not regulate NYCB. It's the Officer of the Controller of the Currency that is NYCB's regulator. And one of the interesting things Abby was talking about the deposit base. Most of their deposit base is insured, so it's not like SVB was where people felt like they were going to lose their money. And the other thing about their deposit base is about a year ago they bought Flagstar Bank.
They moved all their deposits into it, and apparently the deposits from Signature Bank when they took that over also went into Flagstar. Now who knows that Flagstar is owned by NYCB, So the average person isn't rushing to pull their money out of Flagstar because they don't know the connection there greatly.
It sounds like the members of Congress god gets some terminals if they don't know that. During the FED we did get where they subscribe to the terminal.
I did thought I heard a few call outs there, Mike.
Yes, I mean more than I think any other news organization to brag a little bit, but two or three times members cited stories from Bloomberg when they were prefacing their questions.
Abigail Let's brought it out a little bit too. I mean, as we continue to track the trade after we've been concerned a lot. Yesterday there was a lot of conversations about, you know, overvaluations and whether or not we were kind of maybe a new trend line and so on and so forth. You know, we're gonna go back to Mike in a moment because we've had a lot of economic news and obviously Jay Powell covering a lot of the
economic backdrop, if you will. Having said that the trade, the momentum behind the groups that are moving to the upside, is it some momentum behind it.
So overall the momentum for the markets is down. We've been talking about this for a while, the R side, the momentum indicator. The last time we saw high it was last year. So all of these record highs that we've had recently not today, but they've been made on less good momentum. And I think some of that does have to do with the Apple trade, the fact that that stock is in a correction now relative to the breadth.
Today it's much better because we have most we might even at this point we have all eleven s and P five hundred sectors higher, So it is broad based from a volume standpoint, Let's see how excited investors are about this relief from Powell that it's not going to be a year of no cut. So it's a little bit above a little bit above average, so it is
somewhat healthy. I would say, though it's the consolidation that we saw yesterday for big tech, the worst day at one point going back to the last year.
It's healthy.
So it wouldn't be a bad thing to see a little bit more.
And it was interesting because we saw buying into the clothes yesterday, which was really significant. Hey, Mike, back to you. In terms of the economic backdrop, it's still I think back to the last FOMC meeting where Ja Powell several times in the press conference is like, folks, it's good out there the US economy. Do we get that message very strongly as well?
Oh, well, you put it that way. We got the message, but not very strongly. There wasn't a whole lot of focus on it. It was in his opening statement that job creation has been strong, inflation's been coming down. Overall, things looked pretty good in the US economy. Later in the hearing, he was asked about the possibility of recession, and he says there doesn't seem to be any indication that there's any short term risk of recession in the
US economy. A couple of the Democrats used their time to talk about how good the economy was, maybe from a political stance, but the economy was not front and center today. Interesting also not front end center was the stock market. You would think that maybe he would have gotten asked about asset prices being overvalued or something like that, and that didn't really come up either. Members were more concerned about things like whether the Fed is getting involved
in climate change. The housing market maybe the closest thing to the economic issues that were talked about. And basically all Poul could say is, yeah, we raised rates, but as rates come down, the housing it should loosen.
Up, all right.
So having said that, we do also get a lot of economic data points. We have been over the last couple of weeks, some data today as well. Jolt's always an important number to watch. We're gonna have the Beige Book in about forty five minutes or so, give us, you know, remind us Mike about the backdrop that we continue to get in terms of some of the data points.
Well, that's the key thing. If FED says it's going to be data dependent, they're going to look at all broad range of indicators, including jobs, and we get the jobs report on Friday. It's expected to show a relatively strong job creation continued during the month of February. They'll be looking at average hourly earnings, wanting to see if there's an inflation problem there. And then next week we get another CPI report. Seems like only yesterday, doesn't it.
We'll get a CPI report. They'll be looking at that and then PPI and we'll see where inflation is. The FED meetings the week after that on the twentieth, they've already said they're not going to move in so then the focus turns to the May first meeting and we'll see what the numbers add up to by then. But right now it looks pretty good. The question is does inflation keep going down? That's going to be the one major point to trade upon.
Hey, Mike, how does this set things up for j. Powell tomorrow when he's in front of the Senate. Do we have any indication that the line of questioning will be similar? I hear more about Basel three and questions about that.
I think that's what you'll get. Senate questioning tends to be more detailed, more specific, less political, and so probably some more questions about when they might cut interest rates. But then I would imagine a lot of people are going to be on both sides of the issue tomorrow in the Senate on banking, because you can bet Elizabeth Warren is going to let the chairman know they should be as tough as possible on the banks. That's been
her position. So we may get some interesting cross arguments from members of the committee.
Tomorrow.
May get more on climate change. That's also been an issue. How far is the FED allowed to go in what it's doing on climate change. There was one question today about the FED and its balance sheet, but it wasn't really about when they're going to start running it down. It was more about the Fed's losses, Jay poll saying doesn't affect our operations. It's really just a bookkeeping exercise. So we might see more of that as well. I
wonder if we'll see much more political posturing. We really didn't today, which is something you usually get from members of the House.
We did see some questions about housing affordability Mike, which I found interesting given that things aren't necessarily going the way that economists typically think they'll go. When rates go higher, home prices should go down because mortgages become more expensive. That got thrown out the window over the last couple
of years. What did you make of the line of questioning around housing affordability, because as the point that you've made many times before is the idea with the FED raising rates is things do get more expensive, so demand goes down.
Well, that's the problem here is we're in a different environment with housing than we've been in that anybody could remember. Because rates got so low, a lot of people out there, I think something like forty to fifty percent have rates under four percent, and right now we're over seven percent. So nobody wants to sell their house because they don't
want to have to buy a more expensive mortgage. It was different if you were selling a seven percent mortgage and you're looking at a six or an eight percent mortgage. It's not that much different, But now it would be a huge difference in monthly payments. So everybody's just sitting there. There's no inventory on the market of existing homes. There aren't enough new homes being built so the price goes up simply supply and demand. They need to get interest
rates down, mortgage rates down. Then maybe pent up demand to move will take over and we'll see some additional inventory come on the market. But this may be a one time significant jump in home prices that doesn't go away, Hey, Mike.
Theoretically, at least, the FED is not supposed to be looking at the stock market or stock prices. But one stock that's really tough to not watch is in Nvidia, and of course for that AI play. You know, a lot of people are thinking that AI is going to juice the economy in a massive, massive way. You know, if not this year or a couple of years. How much did Fetcher J. Powell speak about AI and the possible influence on the economy.
Not very much. He was starting to get asked about it when the questionnaire ran out of time, and they really didn't come back to it all that much. The fence position is, it seems to be something that will add to productivity, but we're going to have to watch it and make sure and see where the productivity comes from and what downrange impacts that has, who loses jobs, who gets jobs, That sort of thing they're not really
ready to comment on that. There was a big conference on Friday of FED officials in New York City and that was one of the major topics, but it didn't come up as much as you might have thought today on Capitol Hill.
Maybe tomorrow.
One of the few people who aren't just talking about AI. Hey, Mike, just real quickly thirty seconds. One thing that struck me is Fetchaer J. Powell saying, the pandemic still writing the story of our economy right now, and we should be prepared to be surprised with the next chapter. A reminder that we still don't know how this all ends.
We don't, and if you keep up with some of the medical literature, the doctors are all warning it's still out there. There's still mutations and we have to be careful. We've also changed our inventory systems, and the supply chains that we have have been modified, but have they been modified enough for the next occurrence. Those are the kind of things that FED has to worry about.
YEP.
It's why we're data dependant and just kind of finding our way through. Hey, guys, thank you so much. A lot of news obviously on this Wednesday, great breakdown fetcher J. Powell his testimony first of two days, and of course the market reaction are thanks to our Bloomberg News International Economics and Policy correspondent Michael McKee and DC and Bloomberg News Markets reporter Abigail Doolittle write in studio, We're coming back in just a moment.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple card Play and then with a Bloomberg Business app or once just live on YouTube.
Just to rehash our top story, I would say safe to say here on this Wednesday, New York Community Bank are planning to announce an equity investment of more than a billion dollars led by Steven Mnusi's Liberty Strategic Capital, Hudson Bay Capital, and Reverence Capital Partners. According to a spokesperson for the bank, Liberty will be investing four hundred and fifty million, Hudson Bay two hundred and fifty million,
Reverenced two hundred million as part of the transaction. Also, NYCB will add new directors to its board, including Steven Manus and Joseph Adding, a former Comptroller of the Currency, the board of NYCB to be reduced to nine members and this transaction to close on or around March eleventh, and a quick check in terms of shares of New York Community Bank still halted, but we are getting some more details here. We'll continue to follow it as they cross the Bloomberg.
The New York Community Bank also to sell an issue shares at two dollars per share and named Joseph Adding as the company's CEO. For more, let's bring in Herman Chan, Bloomberg Intelligence, Senior analyst for US Regional Banks. Herman, A lot has happened just in the moments that you've sat down in our studio this afternoon. Is this infusion enough to save New York Community Bank?
It does offer a lifeline for them, especially given the way the stock is traded in the past few days. That being said, the existing equity shareholders have been massively diluted. We're talking about a bank that has a bit over one billion dollar in market cap and they're raising over a billion dollars with this equity infusion. So it's a tough pill to swallow for the for the shareholders that we're riding it. But it does give them some time to shore up all the issues that we've talked to.
Explain what this does to existing shareholders of the bank. If you're offering new shares at two dollars per share and at a billion dollar value, what does it due to existing shareholder right.
So basically your ownership of the earning stream is now down by fifty percent. So it's great for the company that it can still operate given all the uncertainty, But it's just the changing of the guard and changing of the shareholders.
Getting a billion dollar lifeline. Does that guarantee that this is a bank can continue to exist? And I don't want to be inflammatory, I want to be smart here, but a billion dollars is a lot of money. Is that enough to fix the balance sheet and the risks that are out there?
It really depends on what's going to happen with the deposits right now. It should placate a lot of folks that were maybe a little bit uncertain about what the past is ahead. But we've changed the management team yet again. There's a new CEO now with Joseph Adding. He's got a lot on his to do list to shore up its capital even more reduce their exposure to commercial real estate and make sure their employees and customers stay within the bank. That's a lot.
We just had a new CEO New York Community Bank, Sandra Denello.
Right, So Sandra looks like he's out now and Joseph Adding is has been announced the new CEO. Sandra will remain as the non executive chairman of the board.
Can I ask you when we've talked about this before when we initially got that headline, just was it a couple of days ago or so about material weaknesses and we talked, We had this conversation that that's what a bank's supposed to do, right in terms of risk oversight. So I mean, do we know whether or not that they've fixed that problem? Does a cash infusion just fix that problem?
It doesn't. So that's also I should have mentioned earlier on the to do list.
And forgive me about thirty thirty seconds here.
Sure, And so that's something you know, Joseph Adding was a former head of the OCC and they're regulated by the OCC. So that should give them a good plan to go ahead and make sure their regulatory issues are dealt with in a proper manner.
We should also mention another headline crossing investors include Citadel Security. So reaching out to a bunch of members of kind of the financial community. That's right, all right, what's next.
On your radar? You know this has taken up so much time, so we're just looking for the fallouts ahead. We've got a webinar going on tomorrow about the year after with USBB.
All right, going to look forward to that, Herbin Chan, thank you so much. A member of our Bloomberg Intelligence team watching these regionals for US again. Shares of NYCB not trading yet. This is Bloomberg Business Week.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern to Applecar Play and Android Auto with the Bloomberg Business And you can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Well here on Bloomberg Business Weekend. Bloomberg News. We follow for in direct Investment very closely because each year countries around the world compete for more than a trillion dollars in FDI flows. Multinational corporations must weigh the shifting landscape. The evolving risk return profile of countries, will governments and international trade bodies laid down foundations and incentives to compete for their investments.
Maggie sweet Tech a senior director of the Milk and Institute's Research department. She focuses on access to economic opportunities in the US and around the globe. She joins US from Santa Monica, California. Maggie, great to have you here. A busy day, but we did want to include your report that you've got a new report about the most attractive countries for foreign direct investment. And what struck us
is that they are all advanced economies. Just briefly go over kind of some of the key findings here.
Yes, absolutely so. In the report that we just put out, we use our Global reportdu in the index. So what the Global Report do in the index really does, said It's court. It provides a benchmark for country's attractiveness to international investors. And the way we do it is we use one hundred different indicators that we classify in to fight different categories that our business perception, economic fundamentals, financial services,
international standards and policy, and institutional framework. And so in the report itself, we find the findings for we com pair the findings from the Global Opportunity Index together with capital movements around the globe, and what that does is it really provides a comprehensive overview of opportunities for investors outside of their local markets as well as it provides information to countries that are interested in improving their business
environments by letting them see, you know, what are the factors that they could work on in order to become more attractive to investors. So what you mentioned there is that the countries that tend to perform among the top twenty URL advanced economy. So this is actually something that is not surprising.
I was going to say that seems to be expected, right, we think because in terms of all those metrics you laid out, you know, it's interesting. And here we are focused on new your community bank COORT today and there's been lots of concerns surrounding this bank over the last few weeks in particular, in the last week in particular, and yet you know, there are the means often sometimes
from investors to kind of help out the situation. And I think about in the developed economies that is available versus some of the emerging economies where that's not likely are as easily done.
Yes, no, and so absolutely these countries, these top twenty countries and our index, they're really strong and institutional framework. They have a good business perception, which again as you mentioned, is not surprising. These advanced economies really do attract the majority of capital inflows. They attract around sixty five percent there our top twenty countries of capital inflows from around the world, so it's also not surprising again as you
mentioned that they're on the top. However, what we say in the report and what we also highlight is that in addition to paying attention to these advanced countries, which are increasing their attractiveness as interest rates are remaining high among the advanced economies, investors should really also keep a lookout on the emerging countries and emerging and developing regions. And the reason why is because those are for well
two reasons. First of all, of all, they can offer high growth returns, right and also yeah, and also at the same time, these are countries that really need capital, right, I want.
To talk about That's exactly what I want to talk about, and sort of the idea of the risk profile. So if we remove some of the criteria that you include, but only look at where there's a potential for ag a bigger return for these investments. How does that profile change when it comes to advanced economies versus not advanced economies.
So yeah, so definitely among the non advanced economies, that's really where the growth is still remaining. So we see we have a lot of investment moving nowadays into Latin America, especially in twenty twenty two. So we know that emerging and developing Asia is really the region that captures a lot of the capital and flows in general. However, in twenty twenty two, we saw a movement of capital a little bit out of Emerging and Developing Asia into Latin America.
And there's really a lot of growth potential in Latin America. And when we talk about Latin America, there's really two countries that stand out. It's Mexico and Brazil, right, these are the two major economies in Latin America. However, there's also other countries such as Chile, which is a slightly smaller economy but still considerable economy, and Latin America.
Hey, Maggie, one thing I want and I'm glad you talked about Latin America because we've certainly spent more time year at Bloomberg focusing on what is happening there in terms of investment opportunities. Having said that, we spend a lot of time on another country economy that is so important to global growth, and that is China, and we've done a fair amount of story about investors not so keen to be putting money into that country. What can
you tell us on that front? Because when we think about China, right the second most important economy to global growth.
Yes, no, and so China actually continues to score high in our index its course, at number thirty nine. We're considering that it is still an emerging and developing economy as classified by the IMF is relatively high. In China, we have still a very strong innovation economy that is
continuing to be paying off. However, what we did see and exactly what you're saying, is that in twenty twenty two, for the first time in a long time, capital inflows into China became negative, which means that more money left China than entered. So that is what we are seeing there. So when we think about the factors that really are
strong in China are financial services. They have a very developed or relatively developed for an emerging nation financial services sector, and precisely this innovation economy, which tends to prop it up in the institutional framework. Right However, innovation as we know it has been in the past observed to be stifled by excessive government intervention. So to the extent that that becomes an issue in China in the long term, investors are can anticipate that and start moving their capital out.
What I want to say is also this is something that we're observing right now. Whether or not discontinues into the future is another question.
We're going to leave it there. Maggie, Thank you so much. Maggie Sweetech. She's senior director at Milkin Institute's Research department. Joining us from Santa Mank, Monica, California.
Bromco Journal.
How about you let me drive, honey, please, I want to drive. It's a good question.
Of the trum. This is good drive to the globeng TM thing well, build don on Bloomberg Radio.
All right, everybody, just about eighteen and a half minutes left in today's trading session. Carol Master along with Tim Stenevik, Charlie of course, breaking down the trade here, we're definitely off our best levels of the day when it comes to the equity trade, but green across the board, albeit kind of small moves here, but we do have Yeah, the Nasdaq one hundred looks like beating the major equity averages on a percentage basis, up about six tensive a percent.
Okay, So what does our next guests have to say about all of this? She focuses on bonds.
Not like Ivie was going on today.
Yeah, exactly like that, everything was going on, joined Bianco's investment partner and client portfolio manager at Bond Blocks. It's an etf issu. We're focused on fixed income, about two point six billion dollars in assets. She joins us from Chicago. Carol, I want to toss it over to you because you got a really good question. That's very timely for Joanne.
Joanne, great to have you here with Tim and myself, and we just want to start with the news of the day. And we're kind of a little obsessed, but rightfully so, watching New York Community Bank Corp. Stock is up about five percent here, quite wild swings, but on a day where they raised over billion dollars in an
equity investment, a handful of investors, well known investors. As we heard from our Matthew Monks, US Deals reporter earlier, having said that with this one billion dollar equity investment, would you buy the debt of New York Community Bank Corps.
That's a really good question. It's definitely a very fast moving situation, and it's obviously a very good news for them to receive this billion dollar equity investment. It's certainly a vote of confidence. You know, we don't think that their troubles translate yet into a more worrisome contagion effect, but it's just going to be a matter of time to see if this does give the market the confidence that it needs to be willing to invest in their debt.
So is that a no, you wouldn't buy their debt at this point?
No, it's a tough question.
Well when when would you What would you need to see from from the bank and from the balance sheet in order to say, okay, yeah, I would do this.
I think you you would want to see that this really does stabilize the situation. So something this, this equity investment would be such that it's big enough such that it does really shore up their capital situation. And so I mean, I'm just not close enough to the situation to really know for sure what it means.
No, that's fair enough. But when you look okay, so wide, Now let's just stick with before we get into kind of J Powell, which was how we kicked off our broadcast a few hours ago, coming off of his testimony up on Capitol Hill. But when you broaden out more broadly in kind of the corporate bond space, what's attractive at this point? Where do you find opportunities?
Well, we're at elevated yields for corporate bonds because of you know, the interest rate scenario that the market is faced with and so and also a very resilient economy which has translated into strong fundamentals that continue for corporations. So we like corporate credit, both investment grade and high yield. But within investment grade, corporate bonds were particularly constructive. On
the triple B rating category. We feel like, why why shouldn't investors take advantage of the increased yield until return potential and triple bs.
So across the board in terms of so nothing in terms of sector industry specific.
Well, there's you know, there's a number of sectors that we like as well. I mean, the energy sector has been very strong, really good credit quality. There's been a lot of focus on balance sheet management there, and you know, the price of oil and it has been very helpful in terms of the type of cash flow that those companies can generate because of current commodity pricing. So that's definitely something we like. We also like companies in the
core industrial sector as well. It's just again, the resilience in the economy. Resilience is not an overused word to describe the economic conditions that corporations are based with.
You know, we talked a lot of our program, and at least in the first special hour that we did following j. Powell testifying in front of the House, he'll be in the front of the Senate tomorrow of course, talking a lot about the raid environment and the way rates move to change. Rates may change this year. What happens when to your business when rates do fall.
Well, there could be a total return tailwind for investors in fixed income. Prices would go up of the securities that they hold, So it would be a good thing there.
What about new money coming into the ets, Yeah, what about new flows coming into the ETFs though in a lower rate environment.
Again, you know, we're still we're not expecting that rates are going to go back down to the really low near zero levels that they were at before. So there's still going to be a place for fixed income and fixed income ETFs and people's portfolios in terms of the type of attractive opportunities that will be available.
I do want to ask you about your thoughts on what FED Shair J. Powell had to say today. Basically, you know, our analysis with our in house group and externally is that basically we got a lot of what Ja Powell said at the last FED meeting and so
not necessarily any new surprises. Didn't talk a ton about the economy, but the FED of course concerned about going too soon when it comes to cutting rates, but also we're you know, concerned about staying where they are too long and the impact it could have longer term economic growth. What was key for you if there was anything here that you thought was constructive, especially when it comes to the investment environment in your world.
Well, I mean, he definitely reiterated that there is no rush for the FED to cut rates, that they definitely want to continue to watch the data that comes in.
I don't think that, you know, it was I think positive for the market, positive for fixed income and equities that he was saying that we're at peak rates, you know, because that obviously it would be if we expected rates to have to be increased significantly from here, that would be something that would be probably more negative, certainly for the equity market, possibly could be harder on the economy as well.
Would you just in the last ninety seconds that we have with you, last minute, I should say, well, what would have to happen, in your opinion for the FED share to not follow through with the idea that we're at peak rates right now? Like what would have to happen in the economy for the Fed to raise rates one more time? Like we heard posited from Larry Summers a few weeks ago.
Well on a reacceleration in inflation that sustained. Okay, I mean that's a short answer and the long answer.
Well, look, I mean you bring up a good point. We're getting we're getting the February jobs numbers on Friday, and if that's you know, comes in way past expectations. CPI happens next week also and if that number comes in once again hot, then I think people might start asking those questions.
Carol.
Yeah, absolutely all right, good to leave with there. Hey, Joe Anne, thank you so much. Really appreciate your input here today. Joeanne Bianco, She's an investment partner and client portfolio manager of at Bondbox, joining us in Chicago.
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