Ukraine Struggles to Get ‘War Bonds’

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube search Bloomberg Global News. Well, the EU set to unveil a plan as soon as this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending. As the block coops with the fallout from Russia's invasion of Ukraine. We know that there is a lot going on, and we thought we needed to get an update from someone who's been a great source

for us here at Bloomberg. That's Roz Mathison, Executive editor for International Government at Bloomberg News. Roz joins us on the phone from London. Ros a lot of quick moving parts here, especially if we look at the way that we you know, we see that things are changing every day, talks on, talks off, in comments from President Zawinski as well. What's the most important thing that we need to focus on when it comes to the latest development in Russia's

invasion of Ukraine. Well, in terms of the actual conflict itself, it's been relatively calm today. But what we're seeing is efforts by the Russian military to really regroup itself on the ground after being a bit bogged down, particularly in their effort to move towards the capital Kiev. And so what we're expecting as a result is an escalation in the aerial campaign against key cities in Ukraine. You can

see that that shelling has continued unabated. Certainly you can imagine the Russian president is probably getting frustrated with how long it's taking to achieve what he would see as his goals on the ground, and that could lead the military to really pick up in terms of shelling, bombardment of cities, meeting to take key infrastructure, and certainly to get control of the railway networks in the country, which

they struggled to do so far. So you can imagine we're going to see any escalation in their tactics in the coming days, a sense of frustration at what they see as their lack of progress so far. As a chance of talks between Ukraine and Russia, is that just off the table at this point. I know the Ukraine president says he's not ready to meet Vladimir Putin's demands, which include a rewrite of Ukraine's constitution to declare specific

territories independent. So talks off the table at this point. Well, there have been lower level talks with lower level officials that have happened three times now. They've mostly focused on trying to get agreement on sea spars, humanitarian corridors to allow civilians who are living in the areas where the fighting is the worst safe passage to leave, and we've seen at least four efforts so far to get those

corridors going without success. They tend to fall apart within hours, and Russian Ukraine they both say they will continue to talk, but there's no set date for a further meeting on that front. What's interesting, of course, that the Russian Ukraine foreign ministers are both going to be in Turkey on Thursday and we'll be crossing paths there at least in some kind of interaction, and that would be the highest level conversation between officials of the country since the war began.

So that's one to watch very closely in terms of any tangible conversations about what kind of things could come on the table, perhaps as a solution to the conflict. Her To that end, I'm wondering about some Zelinsky's comments to ABC News about NATO. Here's what he said in an interview with ABC News. Quote regarding NATO, I have cooled down regarding this question a long time ago after we understood that NATO is not prepared to accept Ukraine.

I never wanted to be a country that is begging something on its knees, and we're not going to be that country, and I don't want to be that president. Is that indication to you that, uh, perhaps Ukraine could uh see to some of Russia's demands, which include not becoming part of NATO. You can certain see a lot of pressure coming on the Ukrainian president to to see some ground here, to avoid perhaps even an escalation of fighting and conflict and the horrible toll that takes on

his people. You can also see a very strong sense of frustration that NATO. He's called repeatedly for a no fly zone over Ukraine, which is very difficult to do, impossible, NATO says, because it would would draw it into the conflict proper against Russia. The reality is that NATO has been very clear that while it has an open door policy, there's no chance of Ukraine joining in the foreseeable future. And by that we're talking, you know, years, possibly longer.

The obstacles are very severe for becoming a member. And that's more an expression really a frustration at that rather than perhaps Lynsky's saying that he's abandoning his desire to join NATO. It's more he's angry, it's clear at the alliance,

and he's expressing his frustration in those comments. Here is one thing I think you know in this war, in this Russian invasion of Ukraine, we are learning about Ukraine, whether it's I T, whether it's wheat, whether it's semiconductors, Russia of course, the energy needs and more, we're understanding more about the global economy and where we get stuff from.

If the EU, as I mentioned on the lead in that they're getting ready to unveil a plan to jointly issue bonds, and this is to help it, you know, scale finance, energy and defense spending right as it tries to really figure out its way forward and maybe not

be so dependent on Russia. If indeed that moves forward and there's no going back in terms of relationships with Russia, how crushing will that be for Russia in terms of its economic might, if you will, and just kind of about forty seconds, well, you can see the extensive pressure that's coming on the Russian economy. These are unprecedented sanctions across the board, targeting all sectors of the economy and

also particularly the Russian consumer. But what you're also seeing is very nascent efforts by Russia to get around those sanctions by using China perhaps for the payment systems, by selling its gas and oil to other countries that be willing to take it. So you can't discount the fact that Russia might find some ways through to poke holes with these sanctions and trying to find some resilience in its economy, although admittedly right now it's under extreme pressure.

All Right, we're gonna leave it there. Thank you so much, really appreciate it. Rosalind Matheson, Executive editor for International Government at Bloomberg News, on the phone from London, her reporting and many of our team who are covering it day in, day out, our in, our out, just keeping us up to date on what's going on. Yeah, we certainly appreciate that. This is Bloomberg Business Week with Carol Masser and Bloomberg

Quick Takes Tim Stinovic on Bloomberg Radio. All Right, the new issue of Bloomberg business Week magazine do out later this week. Ongoing coverage, of course, of the Russian invasion of Ukraine and how Ukraine is struggling to get war bonds to retail investors, not just domestic ones, but out more broadly. The story by Priscilla as A Vedo roacha credit reporter for Bloomberg News, who joined this now on

the phone from London. Carol, as you mentioned, this story featured in the upcoming issue of Business Week magazine, though you can read it now like I did on the Bloomberg terminal also at Bloomberg dot com slash business Week. Priscilla, let's talk a little bit about about war bonds. Um Initially, Uh, this is this is the type of of product that is not available to the everyday investor, right, this is

available to institutions and and and larger pension funds. Um is that something that Ukrainians can actually change and pretty easily so retail investors can have access to these Hi, Tim, Hi Carol, goodnight or a good afternoon there, thank you for having me. Uh So, basically it depends war bonds can be sold to different investors for different purposes, right, Like we've seen that in the U S serving World War One, they sold bonds that actually the people could

buy to support the war efforts. But in the particular case of Ukraine is a bit treatier because what the sovereign it. They took the regular Tuesday auctions loot and they turned and turned it into like a military bond fundraising effort. So they used the mechanism that they already had in place, which was dedicated to institutional investors, central bank extension funds and more sophisticated as like asset managers,

and use these vehicle to put together this war effort fundraising. Well, and let's just remind everybody an auction did happened today and Ukraine raising twenty nine million in a second war bond auction UH, and they are using this U to fund its military UH and resistance to Russia's invasion. According to the country's Ministry of Finance, what's interesting, UM I was trying to find it. How difficult though is it

for it to go beyond the domestic home front? In terms of selling, it is very hard because you need to put a lot of legal protection in place, So you need to to put the prospect us together for those who are not very familiar, prospectives is a legal document that will detail the risks of the bond, the conditions in terms of payments. Who are the banks involved in everything? So UH, for them to do such a thing under war is extremely hard because the conditions are

not very favorable for them, not favorable at all. And it's something that also requires being fully integrated in the market right right well, But in terms of international demand, I do think about international investors who are maybe looking to lend a helping hand in some way. There is the demand for it. There is demand, and you could go like on the Ministry of Finance Twitter page or in a LinkedIn page and you see tons of comments of people saying how can I buye those bonds from

the US, from the UK and things like that. But right now, because those are domestic bonds and they're denominated in local currency, they're not in US dollars or euro you have to go to the primary dealer. The primary dealer is the bank that the solvers like. It's um it's a bank that works for the sovereign and sells that to investors. In the case of Ukraine, there are specific eleven banks. They're the sovereign primary dealers, and those

banks sell to investors, so they do the deals. So it's meet, Priscilla, I want to buy those bonds, I need to either a call broker or a private bank or someone who has a connection to the trading desk of one of those banks that could place the order on my behalf. So it's not something straightforward, it's something for very sophisticated investors. Now, at what point, though, could UH an investor actually get access to this through a retail trading platform if ever, in this case, I don't

think so. I don't think it's possible. I think they need to develop a new product that would allow retail and the stors to participate. They are working on it. They're indicating that they're trying to do their best, but under the circumstances they are not fully integrated to international capital markets, right, and they used that they current offer

is not in line to all the emerging markets. And they also had their their sovereign ratings downgraded because of the war and the risks that the war represent to the sovereignty of the country. That's a really good point, right, Like you think about it, like what happens on the other side. So if you know, international investors get in, our investors get in. We don't unfortunately know the outcome.

Then it could be that Ukraine remains independent and a sovereign nation right with its own debt markets and sovereign markets, or if it becomes part of Russia. T him like it's a it's a different story potentially, what would that story? I mean, you know, I don't want you to speculate, though, Priscilla, but this is this is kind of what's priced in in terms of coupon though, right that risk? Yes, that's right.

So if Ukraine, if the outcome of the war, you end up with a most call backed government in kievs uh, then you have questions like will this government honor its commitments to international creditors. Uh, it's just going to be sanctioned by US, the UK, the European Union. So you have all those questions that you need to assess when you get involved into something like that. UM, should we anticipate that there will be another raise by Ukraine, another auction?

It is hard to say. They do conduct auctions every Tuesday. But by saying that they will conduct more options to fund the military is saying that they believe that this war is going to go ahead for further weeks, so they will continue with their fundraising efforts as a sovereign nation. But if those ponds are going to be dedicated to the military or if they're going to be just general budgetary purposes, that is a different story and we have to wait and see, like closer to the end of

the week. Well, it's interesting, uh, and certainly something we're tracking, and it's a result of the current situation that war that we are in. UM really appreciate it. A big thank you to Priscilla as A Vedo Roacheck, credit reporter for Bloomberg News. Check out her story. It's featuring the upcoming issue of Bloomberg Business Week. You can read it now on the Bloomberg terminal also at Bloomberg dot com

slash business Week. You're listening to Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Chairs of PETC. They are rallying. I'm meant to bring it up nine point four percent. Thank you very much, Tim Stanovic. They are up more than nine percent, company beating on both the top and bottom line for the last quarter and upping its fiscal year outlook for adjusted earnings and revenues. Uh. Pets all the rage during the pandemic,

and they are apparently so too post pandemic. I get a second. Dogs, you're like, you know, the walking example of this. Uh. It's always great to speak with Ron Coglan, the CEO of pet He's with us once again in the Blueberrick Interactive Broker Studio. Ron. Good to have you back in New York. Have you back in person with us? Um, it's been a quarter. How are you. It's great to be here. I am really really good. Uh and um, this is more importantly in my thirteen year old Yummy dog.

Yummy is really good and business is really good we taught. We announced the seventh consecutive quarter of double digit growth. Of the fifty top retailers, there's only three companies have done seven consecutive quarters of double digit grow, So something we're really proud of. With margin expansion, how are you doing it? Yeah, we're executing against our strategy. So you know, I'm coming upon my fourth year and we made a

big bet. We made a big bet that we were going to develop an ecosystem of that's the full offering that pet parents want. So we have our own vets, we have grooming, we have training, we have supplies, we have food, and we do it in stores. We also do it digitally, and that was a big bet versus trying to be expert at one part of the thing, which is what basically everyone else does. Um parents say that's what they want. They want a partner to manage their pet libs. I'm sure it's not easy for you.

I used to go to one place for a vet, one place for grooming, one place where food. My hunches. You probably do that right now, kind of still do. But I do a lot online in terms of products like and that simplifies my world. Yeah, but if you could do it all in one place, and then that company knows you and knows your data, and the groomer knows the same thing that the vet knows. We take better care of you. And so that strategy is working.

The second thing that's working is our omni channel strategy. UM. Eight percent of our online orders get fulfilled through a pet care centers we call the micro distribution centers. That means there's faster the customer and lower costs. Does that mean they walk into or no, it's separate distribution center. So there's three. It's your local, your local pet co. Right,

it had three different versions. One we might ship from that store to you if you order it online too, you could same day delivery what you can't do online. Or three you might go and pick it up if you're short on order. Oh I need to get food and on my way home and you you know, bopus, it's just like you you order a head on your Starbucks as an example. UM, So that's really working for us. And then our vet business is working. And we had

a big announcement last week. We we had a joint venture with a VET partner and we bought them out. Last week we announced it and so we're bringing eight hundred veterinary professionals into our system. And one of the biggest questions I get from investors is can you hire enough vets? And you might have hired my vet who we loved and adored and he became part of a bigger practice and then is gone. Our investors seeing the

story though, though are they hearing this story? Because the stock is doing well today, but it did hit a hit a record low in late February. It's down thirty percent from its highs of last year. What are investors missing here? Yeah? I mean we got caught in some of the market downturn um that that happened, and we just need to prove it over time. And that's why I'm so proud of the seven quarters of a double digit growth with margin expansion. And also our bullishists was

evidenced by our guide, which was above consensus. There were people who questioned whether we could grow in the second half of the year. We did so at double digit rate.

There are people who question whether we can lap next year. Uh, And we showed a big you know, a nice guide going forward that people appreciate, and I think that's why the stock is responding in addition to the fact that I think that there is a premium for companies that can execute in these times, whether it's the labor issues, um, whether it's the different economic issues. People who can execute are getting a premium. Right now, what second of your

business sees the biggest growth? Because you talked about a couple of different things, and I'm you know, there's a channel, there's digital, there's in the store, there's you know, the vet services they're selling, pats. What is it? What is it that really juices the top and bottom line and profitability? Uh? I love all my kids and uh that's not my love a little bit more. Um. The truth is, are

all growing. But if you look at our digital business, yeah, we grew a hundred and forty on a two year basis. We more than doubled our digital business in the last two years. I mean that's astounding. How much How often do you more than double the business that already had scale in two years? We did last quarter. We picked up eight hundred thousand customers this past quarter. So it's truly remarkable. What's going on? So how much of revenues

is digital? Purely digital? Digital is between fift and how much of somebody who is digital then walked into store, Like, what are you looking for when you're your omni channel? I was just talking to Chippotle their omni channel, right, they have chippot Land. You're digital only, you can go to the store, you can use the app. There's all these different things. How many like how many people are going to the stores buying online? Like you want somebody

who's all in. That's the way the world is going. So if I go through the recent sequence two thousand twenty happened and everyone went online, right, even my father who loves going to stores, all of a sudden became an online customer for the first time. Then into one one people thought maybe they won't come back. They came back to our stores in droves and more and more.

It is this omni channel customer. We call it retail three dita where you really bring this promise of omni channel that we've all been talking about for years together, not only for that experience, but also as fulfillment centers. You hear Target talking about using their targets as fulfillment centers, and we're very killer strategy. Got me to go to a Target store in a long time, very very and we truly believe we're one of the retail three ditto

leaders in defining that. Combined with the services that we have, combined with the fact that we make a difference in the communities that we live in or operate in, to us, we're one of the definitional companies of retail three dita. Where are you seeing inflationary pressure beyond what every other

business talks about transportation and wages? I mean, is it pet food going to get so much more expensive because of the rise in commodity costs, Fertilizer getting more expensive, meat getting more expensive, grain being shut off from so much of the world with Russia's invasion of Ukraine. Where concerned about inflationary pressure? Yeah? You never like to see inflationary pressure come at you as a retailer, and you don't like to pass it through. UM. There's been quite

a bit in UM. We have the highest end customer in the category UM, so we've been able to pass that on. But at the same time, we're making sure that we provide options for customers. So whether that you know, all the way from the top end of fresh frozen too high end kibble to medium price wholehearted own brand UM to our vital care program that we actually announce an enhancement to today where for nineteen dollars a month you can get you know, grooming veterinary discounts on products

and you can save two dollars. So yes, we're having to pass it through, but we're also coming up with options and ways for customers to save to offset some of that, so you're able to maintain margins. We're able to. We actually we we had sequential improvement in our margins this past quarter, and that can continue with those inflationary pressures. Whether it's food, whether it's labor, I mean trust, we're talking about energy, and that's a throughput for everything. So

the guide that we provided had EBITDA margin expansion. We had margin expansion pretty much every quarter. How do you feel about the second half? And I think about the conversation we have with Gina Martin Adams earlier who covers the markets, and she said another month of maybe the war and things that I start to rethink, um, how the second half looks. In terms of the equity front.

We have yet to hear companies taking down the revenue numbers you raise them for the year, you feel really confident or is there something out there that says this could change. You know, we haven't no excuse mentality in our companies. So we took labor hits, we took supply chain hits, and we still delivered eighteen percent growth on the year and four growth on the quarter. So yes, we're we take those, but at the same time, we

have massive addressable market opportunities. We are just moving into the r X eleven billion dollar r X business. We grew on the quarter. That's all upside that. It really doesn't matter how the market does. That's share capture for us. We have a thirty billion dollar vet business that we're still young in but we're growing rapidly or services grow, So we have such tam opportunities for us that the market dynamics or something we have to navigate. But we're

really masters of our own destiny. If we controlled the market, I'd really be worried about that, but we have such opportunities ahead of us. I want to hear more about the vet business and how you plan to grow the that business. Because you call them pet parents. I've been a pet parent. Carol is a pet parent. Uh and we spend, especially when it comes to medical services for animals. How do you grow the insurance business and the business

that's business. Yeah, So first last week, I'm thinking I wish I had insurance by the way from my pet. So here was the progression of us into that business. We did a partnership with a very well established company called Pathway for a thrive joint ventures in our stores, uh and it worked well. Then we started launching our own vets and we learned how to operate our own vests within this is within only within our pet care center. So we like the financials of the VET, but we

like the financials with a total box even better. We have a four to five point merchandise sales lift when we put a VET in one of our stores. So we learned how to operate them. So then we got in a conversation with Pathway and we just culminated a purchase of those joint ventures. So now it's all under one brand, vet Go Total Care. It's all one operational playbook. We have higher throughput in our own own veterinarias than in our joint venture vets, so that is a huge

You think about eight hundred vetinary professionals. It just became part of the pet Go family last week. That's a huge boost to our system. And what we said is we'll do seventy a year after that acquisition integration, seventy new vets a year. That's a lot of growth. And I get where where that growth can come from. That's a lot of in terms of initiatives. Just got about thirty seconds. Here is the plan to keep it all together? Or as you grow, could you ultimately spin out some businesses.

The explicit strategy is an integrated ecosystem of customers, one on one stop shop. Pet Go is the only company that can do it. All right, I'm gonna hold it to it, or we'll check back with you. Get on that. Um. Always fun to check in with you. Ron, Thank you so much. When Coglan he's the chairman and CEO Petco here in our studio, I'm roam. Yeah, but you let me drive, No, no, no, all right, please, I'll do the dravels. I want to drive. It's a good question.

D This is the drive to the clothes on Bluebird Radio. All right, just about ten minutes left in today's trading session. That means it is time or the drive to the clothes and with us is Stephanie Pierce, she CEO of Dry Fast Melon and E t F A b n Y Melon Investment Management, and she's on the phone from Boston this in what has been another volatile day with big swings, whether it's crude oil, whether it's the SNP, whether it's UH the NASDAC. We continue to see a

lot of volatility, Stephanie. Great to have you here. The market environment, it is a tough one to call. How do you make calls though for your investors in this environment and where do you go? Sure, it is a difficult environment. And for me and our team sitting in the index and cash businesses, we are really at the tip of the sphere of some of the changes that

are taking place. Just as an example, you know we've seen in the index space most of the major index providers have started the process or end of the process of removing Russian securities from their benchmarks altogether and have reclassified the region from an emerging market to a quote unclassified status. So as you think about what that means in terms of what we need to do for clients and in portfolios to make those adjustments, it's you know,

it's it's tricky. It's these are tricky times, right. Similarly, in the cash markets, you know, we're seeing a lot of clients allocating and moving cash around and we just have to work with them. You know. One of the things that you know, we are very proud of us. We have a lot of tenure in our team, and we you know, we're very comfortable making these moves and these all the markets. As you said, it is, uh,

these are tricky time. It's interesting and I love that you say that there's a lot of tenure out there because I do think about there's a point where we need to draw on people who have seen erratic market cycles, right, and there's a fair amount of us who have seen the ups and downs of the markets different stress points to a political or otherwise. I do wonder, though, how

do you look at Russia. I'm trying to assess for our audience that when a Coca Cola or McDonald says we're temporarily closing something down, or when M. S c I, you know, talks about removing right Russia from indices, is this something that's a longer term play here or a longer term thing that as investors need to consider. It's not something that maybe changes again in another month or six months. Look, I mean, I think, you know, the truth is nobody knows the answer to that question. So

it could slip. So is that are you saying that that it could flip quickly if this situation, if you know, stops. Look, I think I think index vendors have a responsibility to be prudent in the changes that they make, which are typically based on a set of rules, and they're going

to follow those rules, and that's what we're seeing. Took a week or so for that to occur, but we're now seeing them follow you know, that the rules that and I think that if things were to change again that whether it be Russia or any other country or any other segment of the market, they would follow those rules. And that's I think what gives investors um that work with us and that we invest for comfort in you know, passive management, is that there is a set of rules.

There are you know, human beings making those rules, and is understandable and transparent. So from that perspective, I don't think this is something that changes quickly overnight, but if it does, it would be based on a set of rules that are explainable and understandable to our clients. Stephanie, what are you What are you hearing from your clients right now? Do they are they actually reaching out about

the world about Russia's invasion of Ukraine? Are they do they want to make sure that there they don't have money invested in Russia? What are you hearing from them? Sure,

we absolutely are well engaged with our clients. As an interesting anecdote, one of the things that we have talked to them about is if you look at the e t F portfolios that we manage, we've seen not not dissimilar from the March markets sell off, that e t fs have once again proved to be a source of price discovery and liquidity for investors during this event where the underlying securities read or not treating or we're delisting or things like that, and so for investors in emerging

market strategies, particually, in the t F, we've seen the vehicles continue to trade on the US Exchange while some of the underlying Russian markets and securities have not been liquids. So that's a conversation that we continue to have its ets.

Investors that we've worked with to understand that what was once seen as kind of a you know, a flaw of the vehicle, meaning discounts and premium on these vehicles, that it's actually a feature right, that it may be the only place you can find liquidity and understand where prices will settle out is in the E T F vehicle when somebody underlying markets and securities are not not particularly liquids, you know, speaking at kind of the world being at crossroads over a lot of stuff right now,

and certainly the investing world as we watch that Russian invasion of Ukraine. E s G finding itself across roads after investing in Putin's Russia. This was the headline of a story basically sustainable funds are holding Russian bonds as well shares of companies like state run gas Prom. It's kind of a moment of reckoning where we are increasingly seeing E s G being looked at um as like, wait, is it really E s G? And I think about some of the work you guys are doing also when

it comes to diversity and inclusivity. Um Melon's Pathway Inclusive Investment study that looks at men investing, women investing on this international Women's day. What are you guys finding. It is a fascinating topic, and I would say one thing. We have just published probably one of the most expansive global studies on women investment behavior event particularly why women

do not invest at the same rate as men. And if I could offer you one conclusion, it is that now is absolutely the time to create a more inclusive

investment world for generations today and generations to come. In this report, we found that if women were to invest at the same rate as men, it could result in an additional three point two trillion dollars of capital being invested in globally, much of which would, as he said, low toward investments with a positive impact on society and the environment, which is really the proclivity or or way

in which women like to invest. And so the eight thousand women and men that we surveyed, we found that over seventy of the women under thirty said they would invest in companies that reflected their personal values, and over half of the women we surveyed said they would invest if there was a clear purpose for good. So I think the takeaway is women want to invest both for financial return where they could do well, but also by doing good so how do you get more women to

invest in we just have thirty seconds left. Sure, very quickly, we found three hurdles to doing that. One is women feel that they need at very high level of disposable income to start investing in the US. That was six thousand dollars a month or seventy two thousand dollars a year. The second is that and related to the first, is that women see investing is inherently high risk, and very

few women see themselves as high risk takers. And then the third and which is probably related to the first two, is the way the industry engaged with women probably needs

some change, and that is really our call to action. Today, most asset managers gear their product solutions and the benefits they talk about towards men as the customers, and that was part of the survey, and so our call to action is both as an investment management firm and everybody else thought there really needs to start to change the way we engage the products and services we offer and

how we talk about them to women. Know your audience, no, your complete audience that's out there, or your potential customer. Stephanie Pierce, thank you so much, Chief Executive Officer of Dreyfus mel and An E. T. S at b and Y mill And Investment Management on the phone from Boston.

Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News.