Lack of Bids For EM High Yield Debt: Bloomberg's Sassower

for a lot of fund managers. You have seen outflows continue from the largest emerging markets debt e t F and emerging market high yield yields are currently lower than similarly rated debt yields in the US UH. This has only occurred twice. In both instances, it has reversed in less than one month. Here to talk about that with us, Damien Sassauer, our own of Mberg Intelligence, who focuses on everything having to do with emerging markets. Thank you so

much for being with us. So tell us what is going on and why has there been this resilience in emerging markets do you haven't seen as much in other US as a classes. Well, first of all, Happy Year of the Dog, Lisa pim Um. So you know, wait, yeah, of course, you know China is emerging market, so anyway, UM, yeah, So let's talk about emerging market high yield relative to US high yield. So yes, only twice before since twelve have emerging market high yield yields will yield to worse

uh drop below or dip below US high yield. And the reason for that, quite frankly, is because US high yield monk to date has sold off at a quicker pace. And the reason for that is the prevalence of call features in US junk debt. Right, So what that does adds extension risks. So when yields are rising, you see an exaggerated impact, well an exaggerated effect on US high yield relative to e M high yield. And that's actually

what we're seeing right now. But let's talk about the actual market dynamic, because you pointed out some thing that was fascinating I thought, which is the bid ask spread, basically the differential of what people want the price that people want to sell the bond for versus what people are offering to buy. It's widening out a sign of illiquidity in the emerging market complex. Can you talk about that and what does this signify to you, Well, it's happening in US highyield as well, but yes, and e

M high yield. What it signifies for me? And you really have to kind of drill down and see exactly which junk bonds in emerging markets are are effectively where the bid offer spreads are widening. And it's these single b these you know, I mean Zambia or Angola, these kind of smaller small terms of market value, small terms of the size of their country and their economies. There's

just no demand there, the bids aren't there. When liquidity, you know, kind of drives up like we saw last Friday, and so when that happens, you know, it gives a lot of investors costs for concerning what they are then forced to do, especially the big fund managers, is they have to sell their higher quality investment grade debt in order to meet redemptions, which as we all know, are coming through this month. I mean we've seen that not just in the world's largest emerging market bond ETF, but

in all emerging market that ETFs hard currency. That is, we've seen a lot of redemptions month to date, and we're only halfway through. And the Act of funds they have to meet redemptions at the end of this month. And uh, if they're seeing the same trend we're seeing uh in ETFs, it could get it could get a

little uglier. So let me understand this, Damian. If an investor wants to lend their money to a middling credit emerging market company, they're going to receive less money than if they decide to lend their money to a similar rated company in the United States. Right, well, phim, let's just differentiate. I mean, it's really sovereign debt, right, I mean we're talking about a country, not a company, right, which is even worse to your point, I mean, so

so you're right. So, so you're telling me that if I want to lend my money to the government of Angola, I'm going to get less than if I lend my money to the United States government or to the United States I know and equivalently rated you s high old corporate, Okay. And the reason for this is not because the United States is a better or worse bet, although you could certainly make the case that it might mean a better bet.

It's because no one wants to buy your angal and sovereign debt, So you stick it in the drawer and you look for something that someone will buy, and then it shows up and it goes, oh yeah, US debt will sell that because we know someone will buy. But there lies the opportunity ten because what it does these fund managers are forced to sell higher quality, better bonds in order to meet in order to raise cash to

meet redemptions. Right, So you're seeing these kind of outliers so and and they're exaggerated in environments like this, and this is where you know, the real savvy EM fund managers, you know, really earn their keep, right if they're able to kind of manage their cash balances. So what is one of these So, what is one of these uh, sort of savvy investments that is being thrown out because someone is trying to meet a redemption call and they can't find anyone to you know, by their paper from

Angola at a price that they're willing to take. Well. And and I mean look the two largest most liquid credits in e M high yield our Argentina and Petrol Buss, right, I mean they are huge issuers of high yield emerging market debt and invariably, if you need to sell m e M high YELD debt to meet redemptions. I would imagine those are a source of liquidity for fund managers. So learn Portuguese, learned Spanish and lineup for some petrol

bras and some Argentine bonds. Pretty much. Yeah. So, so here's my question right now, how much of this is a currency bet? Because you did see a bit more dollar strength I mean obviously now, I mean I don't want to say that a bit mar because now we're back at four year lows with a dollar. But you know, there was a little bit more strength which would which would make these investments less valuable for people who hadn't hedged, right because e M currencies were losing value against the dollar.

Uh So, can you talk to us about how much that plays into this or is this something to me? At least it's all about the dollar and em local currency, especially today. And I mean this has been a big story all day long with the dollar declining to three or lows, but I mean it has fully decoupled from safe safe haven assets such as this was frong the

en and gold and um. And that's good for emerging markets for now, right because you know that's Basically e M and commodities are are continuing to perform well, but it is a In fact, it is the second most crowded short and global financial markets today if you listen to Bank of America and I just I'm not sure how long dollar bears can hold on given the magnitude of this week's move. Okay, so let's say the dollar does strengthen. How much of a problem is that for

these investments. Oh yeah, I think that's going to be a problem, certainly for e M local currency debt. I mean, I've seen a lot of emerging market managers come and go, you know, getting barished on the dollar. It's it's just, you know, it works when it works, and when it doesn't, it really really doesn't. How much fear are you hearing from portfolio managing? You know, I don't think it's a lot of fear, really. I think it's just more, um, it's just more that people are trying to get accustomed

to this new paradigm. I mean, we all yields are rising. I mean we have autom than US yields and the impact and total returns in all emerging market asset classes, hard and local currency here to date have been you know, materially impacted by rising US yield has just dominated the impact on spread, compression and carry. So um, so that's a bad thing. What happens if this continues? Um, well, I don't know how much higher US heils are gonna go. We're gonna have to bring Ira Jersey and to answer

that question. But let's say you get the tenure at three Um, you know, I mean what we're almost there when we twelve BIPs away? Right, So I think I think the US tenure. Look if it continues to go, if it goes to three and a quarter, three and a half, I think ginus and four percent. I mean, things can get really bad for emerging markets at that point. Sure, but um, but for now, I think you know, it's gonna be uh, it's gonna be steady sail until the end of the month and we see what redemptions have

in store for us. All right, thanks very much, you're going to us informed. As always, he's got great research. I highly recommend it. Check it out. Yes, that is Damian Sas. He's our fixed income strategists. When it comes to Bloomberg Intelligence, all about a merchant market at approximately on people are diagnosed with colon cancer in the United States, and over fifty thousand people die from it annually. Here to help us understand this disease and ways to combat

it are his Cameron Reynolds. He is the president and the chief executive of Volition r X and he joins us from London. Cameron, thank you very much for being

with us. Tell us about your company and about how you became involved with Volition r X. Yes, I think cancer is something which touches everyone, and at Volition we've developed a range of different tests for different types of cancer, beginning with cole rectal cancer as as you mentioned, and ultimately the way best way to treat cancer, short of a cure, which is unfortunately not not upon us, is

to find it early and get the cancer removed. And if you can do that in stage one or stage two or is a pre cancerous poll up, then your chances are surviving more than five years are very high, well over ninety. So that's what we're developing a range of different blood tests which can detect cancer and in a routine blood test, which means it can be part of your normal blood work at a very low cost. Cameron,

talking about the costs. That's what I wanted to pick up on because a colon ascopy, which is the traditional method of detecting calling cancer, is very challenging and people have to be partially anaesthetized and drink all sorts of stuff and have somebody bring them home. I mean, it's a big complicated or deal. Imagine. It's also pretty expensive. Can you give us a sense of what the price differential would be from the test that you're developing versus

a colonoscopy. Yeah, the colonoscopy is a very good test as far as accuracy goes, but as you say, it's very unpleasant and costly. Depending on what what state you're in, you can range up to three or four or five or six thousand dollars, so you normally don't see that except through the COPAI, but the co pay can be very large as well. So, unfortunately, because of its cost and unpleasantness, there's about thirty million Americans who are not

currently screened for colon cancer. So one of the ways of getting around that is to have a low cost blood test. Ours is on a very simple platform called a lizer, So it's part of your routine blood work and we aim to price around the hundred dollar range,

so it's very affordable for pretty much everyone. And because it's affordable and the decision is really taken out of your hands, if the doctor takes that extra BOXUM, like your cholesterol test, like your PSA, like all the blood tests you currently have, that really should put compliance way higher than it is now. Compliance is not something people talk about a lot, but if you're not doing the test, the accuracy is very easy to work out, which is zero.

So by doing a very routine blood test is the best way of getting the most people screened. And if you do screen you can find the cancer early. Normally, you're in very good shape. Talking about tests, can you give us an update on your diagnostic test? Is that already launched in Europe? UM, We're just in the process now of doing some very large trials in Europe. We'll have about fifteen thousand patient samples run this year. UM

we've made public. We're about to announce this month at the first read out on the first of those trials, which is six eight patients, which we haven't got the data from, but we're very hopeful to announce it soon and we're very hopeful that it will show something very unique, which is ability to detect early stage cancer and pre cancer. Again, that's where you really want to be diagnosed before it's metastasized, before you need chemotherapy and all those things. So we'll

have a read on out on that very soon. And then we have the two big trials in Europe underway this year, which we'll have read outs on both of them this year as well. So we're very hopeful of having a product on the market for next year in Europe which is ce marked, which means we can sell

in twenty eight European country. Is to to anyone clinically, Karen, just preliminary studies, do they show that the accuracy is enough to replace colonoscopies or would this be an additional test that would be done for people who might shy away from the procedure that is more invasive and so in other words, this might be another cost rather than reducing the cost of the colon asky because it wouldn't

be a replacement. Yeah. No, I think ultimately, if you're currently having a colonoscopy, if you can afford it, you are prepared to do it. My advice and the correct advice is to continue taking it. It's a very accurate test and pull ups can be removed straight away. But the tragedy is that thirty Americans of screening age either

not up to date or have never been screened. So the only way to reduce the massive cost not only on the healthcare system, late stage cancer patients cost up to half a million dollars to for the last few years of their life, and it's not a very pleasant few years. The only way to really deal with that to get those people screened is a low cost, easy to run routine blood test. So yes, it's correct if you if you are positive, you need a colonoscopy to

follow it up. But it's a way of driving people who have a much higher chance of having cancer because they're positive in our test from actually having a colonoscopy. So ultimately being a very low cost test, it would it would save a lot of money from the healthcare system because it's apart from the human toil, it's extremely expensive treating late stage cancer patents. So we think it's the only way of really dealing with that of people

who just refused to take a colonoscopy. Well, I want to push back a little bit because there are other biod tests that you know, for example, are really not very accurate one for say, varying cancer. Uh. And you know, one one concern with blood tests that have limited accuracy is that they lead to a lot more unnecessary testing um and it might end up adding to costs just by virtue of uh you know, extra perhaps I needed surveillance, uh and and and false alarms. I mean, how do

you how do you respond to that? That's absolutely grect. You've got to be very careful. You're not just diagnosing a small number of late stage cancers, which many routine blood tests do do. So when you're looking at our data which is coming up very soon, looked, if you can find the cancer early and and a good percentage of them, you've got to be in the sevent or more or range of getting those numbers of cancers. If you can do that at the low cost, then you

are saving the system a lot of money. You're very correct, though. If you look at a lot of screening modalities, mommography, the p s A for prostate, they're very widely carried out, but there are under a lot of criticism because if

they can add more burden to the healthcare system. But if if you do what we're aiming to do, and we'll get a good read out on that in in this month, is if you can do it in a very low cost routine test, you then drive the people who are positive towards colonoscopies and then you save them at an early stage to have the treatment, which then are not only save the healthcare system the half a million dollars ODD in the treatment, but also gives that

person another ten or twenty years or thirty years of productive life. So there is a lot of concern out there and very well dodge concern that you don't want to over diagnose. And the p s A for prostate is probably the ultimate example. But if if our test is as accurate as we think it's hoping has been in the previous trials, then we'd be in a very rare category of an accurate blood test that's routine, that

is also low cost. And one thing which is also important is there's also a small amount of blood, so it's not a separate blood draw it so it can be done in your normal lab. You don't have to send it off somewhere else. Um. I think if we can show all of that which we're hopeful of. Then I think we'll be very unique and add a tremendous amount of the healthcare system and save an awful lot of suffering. Cameron Reynolds, thank you so much for being

with us. Cameron Reynolds as president and chief executive officer of Volition our X, which is based in London and is currently testing a blood test to detect colon cancer and avoid call it well non avoid call it ask perhaps direct a greater number of people to get them should they test past it is. I want to turn our attention to infrastructure. The President did release a plan for how to unleash one point five trillion dollars of

investments in the US infrastructure. Here to talk about that with us, as Christina Swallow, president of the American Society of Civil Engineers, coming to us from Washington, d C. Christina, I think that there was one really big question right now, which is how to spend this money. I mean, aside from the fact that this isn't going to necessarily uh get done in the form that he's proposing, but what needs to happen right now? So from your perspective, let's

start there. So from our perspective, we look at all categories sixteen categories of infrastructure, and we recognize that there's two trillion dollar investment gap. So when we're starting to look at that, we need to make sure that we prioritize any funding that we put towards, that we prioritize it and put it towards projects that will have the most substantial economic and public benefit. We need to really make sure that we're prioritizing our projects and spending the

money where it will have the most long term benefit. Okay, I mean that seems reasonable. Maybe we could go through some of the states that specifically need this kind of infrastructure spending if we can. Let's start with Massachusetts. Massachusetts, by many measures, has an issue with its water system. Their estimates that it needs about a seven and a half billion dollar flow of money in order to fix

the water infrastructure. Is that something that you see as being, uh, as you just described, you know, like the biggest bang for the buck. So definitely, as Americans, every single American should be able to have access to quality drinking water as we need it. So that is definitely something It's a public health and a safety issue right having proper treatment and availability of water, so that is definitely something

that should be a priority on a national level. We know that our surface transportation system is the largest piece of that infrastructure investment gap, so that's also a place where you can see the need to invest um as a priority because it drives so much of our economy. Christina, if you were designing the infrastructure plan, what would be your first location and first project. That's a good question. I really I don't know that I have a first

location of first project. I would want to look probably first at our transportation system. Like I mentioned, it's half of the gap, and it drives I mean, it really does drive our economy. Infrastructure, the sort of transportation system in urban settings or in rural settings. Urban settings have the most impact on us as people, as well as

on safety. When you consider that hundred on average a hundred and eighty eight million trips are made over structurally deficient bridges each day, that's something that's definitely an area that we want to make sure we focus on to improve safety and also reduce congestion so our our freight bottlenecks don't continue to exist. So that's a focus, but we can't ignore our rural areas because the freight travels across the nation, and so we need to make sure

rural areas are also maintained. But definitely urban areas needs to be a focus. There is more of a focus, it seems from the President's plan on the rural areas and sort of fortifying the rural grade. Do you think that is a bad approach. I think the President is looking at the fact that our gut instinct often is to fund the urban areas, and just recognizing the fact that if we ignore the rural areas, we will be um short changing ourselves. I think about so many of

the states that have these major freight networks. You know, when you think about I forty and I and I tend that crossed these significant areas of just rule. If we don't make sure that those are maintained, are the frame won't be able to get to where it's going. So we need to make sure that we also focus on that. And I think that was the intent, was

just to make sure we don't ignore it. Okay, Now, the American Society of Civil Engineers, you're based in Reston, Virginia, so maybe just even close to Virginia, we can talk about in Maryland, because if you live anywhere near the nation's capital, you know that you faced daily disruptions. Right there was this big steam pipe explosion last June. What about the deficient bridges there, there's some estimates that six of them are deficient. The average commute to work is

over thirty two minute. What kind of money and what specific roads or infrastructure would you recommend that we've focus on. We've talked about bridges, and we definitely know in the DC area they're working on improving the Frederick Douglas Bridge. That's one that's been talked about for really a long time, and they're finally at the point where they're going to be investing in that. I think we also need to look when you look at that whole DC Metro area,

how do we increase investment in transit. Metro has been doing a really good job recently at focusing on that, but they could still use some additional investment and that would help alleviate some of the congestion on the roads if people went back to trusting the transit system. So there's opportunities there not just to invest in the roads and the bridges, but also to invest in transit On a national level, Transit received our lowest grade at a

D minus. Christina, you probably have a lot of discussions with some of the workers who would be trying to design and make these infrastructure projects happen. Are there enough people in this country at this point to fill the jobs that would be required with some kind of substantial infrastructure plan. The people are there. Um, If the funding

came through, it wouldn't come through all tomorrow. It would come out in a phase phase manner, in which case, um, the people that are already in the industries would be able to ramp up and do additional work and capacity as we continue to develop new entry entry level workers

into the broad spectrum of the industry. So the money would come, the current workforce would step up, and additional workers would enter, and we would start to see changes in our infrastructure within the next three to five years. But overall, to bring the grades from a D plus to everyone at a B, it's going to take us decades. We didn't get here in a matter of a short time frames, and we're not going to get out of it in a short time frame either. It's going to

take time. What's the position of the American Society of Civil Engineers on increasing the the federal gasoline tax in order to add more money to the Highway Trust Fund. We've supported increasing the federal gas tax for years. It hasn't been in increase since n It's buying power is significantly decreased as a result. Additionally, we know Carls cards have become more fuel efficient, so we need to find

a way to increase investment today. And we're excited about the fact that the US Chamber and even I heard yesterday the President support the concept of or increase in the gas tax that will help us meet the needs today but also modernize and improve our system for the twenty one century. Christina, I'm just wondering. You said that this problem has taken decades to happen, and we will take probably decades to fix, even with some substantial appropriations

in the near term. Whose fault was it that there wasn't more real time investment made? I think that that we're we all share a little bit of that. I think there's the concept that when the infrastructure was built, there wasn't a lot of thought about the long term ongoing maintenance. It was we built it, and it was

a great success. You think about the major construction of of the early twentieth century and how successful those were, but then but nobody was really thinking about the long term maintenance of those projects, or even though a project that was built in the early d with would would be expected to be still functioning today a century later. I visited a lock system in Seattle that celebrated its centennial last summer. So there's a lot of pieces of this.

We weren't thinking about the long term maintenance. We weren't expecting the projects to have to last as long as they were, and so we've underinvested for a full generation. And now it's time that we all at all levels of government and private step up and start increasing that investment and modernize our system. Um. One of the things we we've been focused on is also the combination of

spending but also the goals. In other words, whether there is a specific economic goal other than saying all right, yes we want better roads, we want better bridges. But for example, in the Mississippi, the idea that you would have a specific goal that would either cut weight times for soybean farmers and exporters in order to be able

to get their products to market. Is there any specific economic goal that you can point to that we would then focus on so that we would know whether we're spending the money on the right kinds of infrastructure projects. Each project is going to have to have its own its own goals, but on a national level, we know that if we don't invest the additional two trillion dollars needed between now and our economy will suffer three point nine trillion dollar loss in our GDP. So there is

definitely an economic impact to this. It's not just a public health and safety issue, which we talk about a lot in terms of the water systems and the bridges, but it also impacts our economy and we need to invest. I mean that's not it's not just the GP that will be impacted. Seven trillion dollars in lost business sales, two and a half million million jobs lost in alone. There are economic impacts to under investing in our infrastructure. I want to thank you very much for joining us.

Christina Swallow, president of the American Society of a Civil Engineers. They are based in Rest in Virginia. We want to visit now with Robert Langrity as our senior healthcare reporter for Bloomberg and Robert just to set out a little bit about Amazon and the healthcare industry. Amazon does about a hundred and seventies seven billion dollars worth of business a year, and on its most recent inference call, the earnings call, one of the executives spoke about the Amazon

business offering. This was in October, and they were saying that the one of the institutions, one of the areas that they are targeting with this offering, along with schools, laboratories, government agencies, is the healthcare industry for dentists, doctors, hospitals. We're talking about gloves, syringes, other kind of healthcare items. What is Amazon doing and who is going to feel

the heat? Well, so, like you know, there's been a lot of buzz about what is Anmazon at last several months about what is Amazon going to do in healthcare? Are there has been uh talk uh And they've I guess been quietly looking at, you know, for years what to do in the in the drug sector. Uh, and certainly that's affected lots of drug related stocks. But what they appeared to already be doing and they have been kind of working on for a couple of years, is

in their Amazon business. They want to expand it b to be and this is a way. Of course, there's a huge market for health care supply, so they are kind of starting in healthcare and I guess a small way on kind of basic supplies. And what our sources has said is you're one way to start to penetrate the supply market is UH for you know, medical good.

UH is before you get to the high tech, highly regulated stuff like medical devices and drugs, which are complicated sometimes of special delivery requirements, lots of regulations, you can start with the simple stuff, you know, grov's bandages, stutors stuff that, and and and you can start with doctors offices and and that is a market that is from sources we talked to say are underserved compared to UH.

You know that the the more and more acute hospital market and hospitals and buying up lots of doctors offices and now they have lots lots of far flung offices and the distribution isn't as efficient because you know they're distribut and systems are built for the central hospital. So Amazon is trying to you know, get into this sector

in a big way, establish a foothold. Uh, you know, in the big medical supplies market, and it's I've been talking to hospitals or with the focus on our patient clinics and uh and that could potentially threaten you know, medical supply companies. There's a company, Henry Shine that has calls on doctors off his veterinarians, dentist. There's another company owns and minor. Uh and they acknowledge in a conference

call yesterday, Hey, I was talking to our customers. Uh and so far, you know, Amazon is more in the doctor office, but they're talking to our big hospital customers. Uh. So this is a way for Amazon to start to get into the medical supply market. But uh and if this works, I would imagine they would ramp up two more expensive, higher tech stuff eventually, Robert, is this stuff mostly those sort of gloves and the sutures and the band aids? And are these things low profit margin types

of goods? In other words, are they starting Is this an experiment for them or is this lucrative in its own right? Well, I mean it's just looking you know, Henry Shine itself, that's one company with supplies and stuff. They they alone of a few billion dollars in sales, and you know, medical supply and several more billion dollars in dental supply. So they're like, I think around I

probably you know, somewhere around ten billion dollars in revenue company. Uh, and you're not just one company, so I'm sure it's nowhere near as the Other thing about Amazon is that it's been about revenue growth, and investors have wanted to see you know, uh sterling a revenue growth kind of profits come later and they've been rewarded for the revenue growth and new markets, and they're looking for new markets

to get into. And you know, healthcare is one of the big, big big markets there not in now and in much of a way, rob You know, the the issue of Amazon taking over other businesses is not brand new. Where have all these I mean, Robert, where have all these businesses been? Are they waiting for Amazon to come in and give them competition? Because doesn't this apply to just about any kind of product and service that's delivered

to your door? Um? Yeah, potentially does. But and the one reason that that you know, doctor's offices, didental clinics, outpatient surgery clinics. Uh uh, these types of clinics and smaller operations were because you know, they also have to order office supplies and basic stuff too, and so they can. It works very well because some of them may already

be lading to office supply supplies from Amazon business. And if you throw advantage and sutures and other basic medical supplies that don't have to refrigerator, it aren't being implanted in the patients. There's not complicated the regulation there. They can combine order. It fits very well. And this stuff, you know, it's businesses. Basic stuff can be stored in the warehouse with refrigeration. It's not not the high tech stuff you have, and they can build up to the

higher tech stuff. So it's a good starting point, uh for Amazon. The one thing and they've been you know talking to some major hospital systems, uh, you know over about you know, what they can do in health over the past several months to a year. We talked to one that's been talking to Amazon for a year, another one that's been talking to Amazon for you know, three

or six months. Uh. And Amazon would be a big change from the way things are done because they would have ordered the hospitals and health systems because a lot of the supplies are in a contract basis. Now it's kind of fixed price at my last or six months a year. Amazon really built up that relationship with hospitals. Thank you so much. Unfortunately have to leave it there. Robert Langworth, health care reporter, Senior health reporter for Bloomberg News.

Thanks for listening to the Bloomberg P and L podcast. You can some scribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox, I'm on Twitter at pim Fox. I'm on Twitter at Lisa abramowits one before the podcast. You can always catch us worldwide on Bluebirg Radio