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No, you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Car playing Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

No, you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Car playing Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Remember, they notify the Treasury Department notified lawmakers just yesterday that a China state sponsored actor infiltrated workstations. And what, as you've been saying, the officials are now calling a major incident. We're going to bring in Jamie Tarabay, who covers cybersecurity for Bloomberg. How do you see what happened to the Treasury Department compared to what we've seen in other hacks that were facilitated by Chinese actors, state sponsored actors.

Remember, they notify the Treasury Department notified lawmakers just yesterday that a China state sponsored actor infiltrated workstations. And what, as you've been saying, the officials are now calling a major incident. We're going to bring in Jamie Tarabay, who covers cybersecurity for Bloomberg. How do you see what happened to the Treasury Department compared to what we've seen in other hacks that were facilitated by Chinese actors, state sponsored actors.

It's almost like another day, another hack. Quite frankly, at this point, we have been dealing with years of whites read long running hacking campaigns, whether there's a cyber espionage or prepositioning in the possible events of a conflict with Taiwan. But we have seen just literally years and years and years of attempts and intrusions and compromises of American and international critical infrastructure networks by Chinese state sponsored hacking. So this is something that has been happening for years, and the more obvious and the more we talk about these things, the more the expectation is that we expect minimum cybersecurity standards from not just the private sector, but from government agencies, especially one as critical as US Treasury.

It's almost like another day, another hack. Quite frankly, at this point, we have been dealing with years of whites read long running hacking campaigns, whether there's a cyber espionage or prepositioning in the possible events of a conflict with Taiwan. But we have seen just literally years and years and years of attempts and intrusions and compromises of American and international critical infrastructure networks by Chinese state sponsored hacking. So this is something that has been happening for years, and the more obvious and the more we talk about these things, the more the expectation is that we expect minimum cybersecurity standards from not just the private sector, but from government agencies, especially one as critical as US Treasury.

What's the expectation as to the defenses of some of these government agencies. Is the belief that the US government has decent cybersecurity defenses or not?

What's the expectation as to the defenses of some of these government agencies. Is the belief that the US government has decent cybersecurity defenses or not?

You know, that's a really complicate a question because a lot of the time, a lot of these federal government agencies depend on contract with third party providers where they have devices that often they're called end of life, so they're routers or they're interconnected devices that basically connect networks together, and they haven't been updated or they are obsolete and they need to be changed. And because bureaucracy and the federal government is so large, it's always a challenge, it always costs money, and it always is a big undertaking. So we are seeing more and more and more of these end of life products being compromised. We know more about the fact that these are entry points in a lot of different hacking campaigns, So it's really we want to see more cybersecurity audits. We would love to see more transparency from federal government agencies about what they're doing in terms of shoring up their systems, using the party providers, using incident response, using cybersecurity firms, as well as deploying agencies like CISA, the FBI, and other agencies that are concerned with cybersecurity, particularly as we know and has been said repeatedly by government officials for years now, that there are Chinese attempts and actions to get into our systems to basically have access to inspectual property and you know, as well as intelligence gathering purposes.

You know, that's a really complicate a question because a lot of the time, a lot of these federal government agencies depend on contract with third party providers where they have devices that often they're called end of life, so they're routers or they're interconnected devices that basically connect networks together, and they haven't been updated or they are obsolete and they need to be changed. And because bureaucracy and the federal government is so large, it's always a challenge, it always costs money, and it always is a big undertaking. So we are seeing more and more and more of these end of life products being compromised. We know more about the fact that these are entry points in a lot of different hacking campaigns, So it's really we want to see more cybersecurity audits. We would love to see more transparency from federal government agencies about what they're doing in terms of shoring up their systems, using the party providers, using incident response, using cybersecurity firms, as well as deploying agencies like CISA, the FBI, and other agencies that are concerned with cybersecurity, particularly as we know and has been said repeatedly by government officials for years now, that there are Chinese attempts and actions to get into our systems to basically have access to inspectual property and you know, as well as intelligence gathering purposes.

By the way, the Chinese embassy in Washington says it opposes quote smear attacks against China without any factual basis. They say the US needs to stop using cybersecurity to smear and slander China and stop spreading all kinds of disinformation about the so called Chinese hacking threat.

By the way, the Chinese embassy in Washington says it opposes quote smear attacks against China without any factual basis. They say the US needs to stop using cybersecurity to smear and slander China and stop spreading all kinds of disinformation about the so called Chinese hacking threat.

How sure are we about.

How sure are we about.

This stuff, because I think it's a huge allegation. It could be construed as an act of war. Frankly, hacking the Department of Justice, the Department of defense the Treasury. So is it firmly, you know, evidenced that the Chinese, that Chinese state hackers are behind this stuff.

This stuff, because I think it's a huge allegation. It could be construed as an act of war. Frankly, hacking the Department of Justice, the Department of defense the Treasury. So is it firmly, you know, evidenced that the Chinese, that Chinese state hackers are behind this stuff.

I think the phrasing of the letter that Treasury is sent to Senator job Brown and sim Scott were basically saying that they had denoted it as a major cyber security incident, which is what they do when they attribute it to a state sponsored actor. And the fact that they said that after the investigations by government agencies, the attribution is crystal clear makes it extremely definitive. They would not be putting that in a letter to Congress if they weren't sure, and it's it would probably it would meet the hahollmarks and trade craft of previous Chinese hacking attempts. So there are indicators of compromise. There are tactics and procedures that these hackers would be using that are about our identifiable to the people.

I think the phrasing of the letter that Treasury is sent to Senator job Brown and sim Scott were basically saying that they had denoted it as a major cyber security incident, which is what they do when they attribute it to a state sponsored actor. And the fact that they said that after the investigations by government agencies, the attribution is crystal clear makes it extremely definitive. They would not be putting that in a letter to Congress if they weren't sure, and it's it would probably it would meet the hahollmarks and trade craft of previous Chinese hacking attempts. So there are indicators of compromise. There are tactics and procedures that these hackers would be using that are about our identifiable to the people.

Who track them.

Who track them.

And there are also companies like Microsoft that have visibility over the Internet and watch certain threat actors as they move across networks, and they're able to recognize their patterns of behavior as well as the places that they're in gering.

And there are also companies like Microsoft that have visibility over the Internet and watch certain threat actors as they move across networks, and they're able to recognize their patterns of behavior as well as the places that they're in gering.

The Treasury Department was notified by on December eighth by a third party provider. They notified Congress on December thirtieth.

The Treasury Department was notified by on December eighth by a third party provider. They notified Congress on December thirtieth.

By the way, ironically called beyond Trust.

By the way, ironically called beyond Trust.

You can say that act right.

You can say that act right.

Yes, yes, yes, that is that. There is an irony to that. But the three week lags is what I want to ask about here. Why do they wait so long to notify law makers for such an important government body.

Yes, yes, yes, that is that. There is an irony to that. But the three week lags is what I want to ask about here. Why do they wait so long to notify law makers for such an important government body.

That's a great question, you know, we would love to know, and right now we're not getting that information from Treasury. A lot of the times, when particularly this past year, you would have heard about Salt Typhoon and Vault Typhoon, which are extensive hacking campaigns, a lot of the communication companies that have been impacted have not disclosed those hacks because they've been getting waivers on a national security basis that they would have agreed on with the intelligence community, with the government. So if they have not been able to declare or disclose those hacks, it's for myriad reasons, including national security, but also they want to be sure that they know what they have. They also want to probably be able to say that they have eradicated the problem, that they've mitigated any kind of compromise and that they're able to sort of say we found it, we've detected it, we're dealing with it. It's over.

That's a great question, you know, we would love to know, and right now we're not getting that information from Treasury. A lot of the times, when particularly this past year, you would have heard about Salt Typhoon and Vault Typhoon, which are extensive hacking campaigns, a lot of the communication companies that have been impacted have not disclosed those hacks because they've been getting waivers on a national security basis that they would have agreed on with the intelligence community, with the government. So if they have not been able to declare or disclose those hacks, it's for myriad reasons, including national security, but also they want to be sure that they know what they have. They also want to probably be able to say that they have eradicated the problem, that they've mitigated any kind of compromise and that they're able to sort of say we found it, we've detected it, we're dealing with it. It's over.

Jamie, thanks so much for joining us, Jamie Terrabay reporting on that incident.

Jamie, thanks so much for joining us, Jamie Terrabay reporting on that incident.

And it is the one that we know about. There are others.

And it is the one that we know about. There are others.

Perhaps that we don't because Beyond Trust said that a limited number of customers Plural were involved in this hack, and they also have contracts with the Department of Defense, with the Department of Justice, with the Department of Veterans Affairs.

Perhaps that we don't because Beyond Trust said that a limited number of customers Plural were involved in this hack, and they also have contracts with the Department of Defense, with the Department of Justice, with the Department of Veterans Affairs.

It could be those.

It could be those.

Other agencies haven't gotten back to us and havn't a learned in Congress as far as we know that they were affected as well. And Paul, as you point out, this really makes you rethink the TikTok issue.

Other agencies haven't gotten back to us and havn't a learned in Congress as far as we know that they were affected as well. And Paul, as you point out, this really makes you rethink the TikTok issue.

That's kind of the issue I thought about when I was reading the story today, was this has put the TikTok issue, which is Supreme Court Presembly will take a look at soon. Does I put it in a different light for some people? And I suspect it will because who's to say, what's China state versus China private.

That's kind of the issue I thought about when I was reading the story today, was this has put the TikTok issue, which is Supreme Court Presembly will take a look at soon. Does I put it in a different light for some people? And I suspect it will because who's to say, what's China state versus China private.

I don't have a clear understanding of that. And isn't that the same. I think it is for a lot of issues.

I don't have a clear understanding of that. And isn't that the same. I think it is for a lot of issues.

And yeah, ill thing about this too is the Treasury Department around that time December eighth, there was a lot of issue in since then, and there was a lot of remember wrangling around the debt ceiling and the US fiscal situation. You know, what kind of interference was there and can they show that there wasn't a significant enough interference to markets? Was there any It's hard to understand really what the ramifications are from the hack itself.

And yeah, ill thing about this too is the Treasury Department around that time December eighth, there was a lot of issue in since then, and there was a lot of remember wrangling around the debt ceiling and the US fiscal situation. You know, what kind of interference was there and can they show that there wasn't a significant enough interference to markets? Was there any It's hard to understand really what the ramifications are from the hack itself.

Yeah, absolutely, I think there's still a lot to on pack here.

Yeah, absolutely, I think there's still a lot to on pack here.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty.

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Ronica Clark Joints US.

Ronica Clark Joints US.

She's a director of research and the US economists over there at that little bank on the quarter called City Bank Veronica. What's your twenty twenty five message to your city clients about this US economy?

She's a director of research and the US economists over there at that little bank on the quarter called City Bank Veronica. What's your twenty twenty five message to your city clients about this US economy?

Yeah?

Yeah?

Yeah, I liked the previous discussion of the very bifurcated economy. I think that we're experiencing where we're lower income people are certainly struggling higher income consumers or maybe what is supporting you aggregate consumption. But I do think this is a very precarious economy, and that's I think the message for twenty.

Yeah, I liked the previous discussion of the very bifurcated economy. I think that we're experiencing where we're lower income people are certainly struggling higher income consumers or maybe what is supporting you aggregate consumption. But I do think this is a very precarious economy, and that's I think the message for twenty.

Twenty five for our of you.

Twenty five for our of you.

It really does come down, I think, to weakness that we're seeing in the labor market, and I do worry that the FED has maybe gotten a bit complacent on that labor market weakening. And we do think that this is a FED that's going to be cutting rates a lot more than market's currently priced in twenty twenty five.

It really does come down, I think, to weakness that we're seeing in the labor market, and I do worry that the FED has maybe gotten a bit complacent on that labor market weakening. And we do think that this is a FED that's going to be cutting rates a lot more than market's currently priced in twenty twenty five.

The FED is going to cut rates more than is currently priced in twenty twenty five. So you're not worried about policy driven reinflation next year.

The FED is going to cut rates more than is currently priced in twenty twenty five. So you're not worried about policy driven reinflation next year.

Yeah, not particularly.

Yeah, not particularly.

I think a lot of the fundamental drivers that you know, we've seen of inflation over the last couple of years do look a lot better even compared to a year ago. Even just this morning we got case Shiller home price data. Home prices are running at a normal, pre pandemic kind of pace that doesn't seem like a future source of inflation. And that's really where you would see signs of re emerging inflation if rates were too low. We do see the labor market weakening. That means that wage growth has load. The labor market doesn't seem like a source of inflationary pressure anymore. I do think there's a lot of ways that we can see something that looks more like two percent inflation in twenty twenty five.

I think a lot of the fundamental drivers that you know, we've seen of inflation over the last couple of years do look a lot better even compared to a year ago. Even just this morning we got case Shiller home price data. Home prices are running at a normal, pre pandemic kind of pace that doesn't seem like a future source of inflation. And that's really where you would see signs of re emerging inflation if rates were too low. We do see the labor market weakening. That means that wage growth has load. The labor market doesn't seem like a source of inflationary pressure anymore. I do think there's a lot of ways that we can see something that looks more like two percent inflation in twenty twenty five.

So one thing I wonder about a lot, too, is you said that bifurcation in the economy and in your kind of already hinting at potential further pains ahead. There was a great point made earlier today by Danielle di Martino Booth that you might see some of those kind of middle to upper income consumers also start feeling some pain. Some of that pain might be seen as early as the coming days when you look at kind of student loan repayment rates. For example, housing prices are still high, cost of rent is still high. I mean, how do you think about that drift higher in terms of the pain that consumers will be feeling into twenty twenty five.

So one thing I wonder about a lot, too, is you said that bifurcation in the economy and in your kind of already hinting at potential further pains ahead. There was a great point made earlier today by Danielle di Martino Booth that you might see some of those kind of middle to upper income consumers also start feeling some pain. Some of that pain might be seen as early as the coming days when you look at kind of student loan repayment rates. For example, housing prices are still high, cost of rent is still high. I mean, how do you think about that drift higher in terms of the pain that consumers will be feeling into twenty twenty five.

Yeah, I do think that's what we've seen, you know, very gradually happening over the last year or so.

Yeah, I do think that's what we've seen, you know, very gradually happening over the last year or so.

You know, a lot of aggregate.

You know, a lot of aggregate.

You know, measures of consumer health really don't look very comforting. We have the savings rate which is below pre pandemic levels, and falling consumer delinquencies on credit cards, auto.

You know, measures of consumer health really don't look very comforting. We have the savings rate which is below pre pandemic levels, and falling consumer delinquencies on credit cards, auto.

Loans, you know, they're above twenty nineteen levels.

Loans, you know, they're above twenty nineteen levels.

Yes, you know, student loans haven't been counted as defaulted yet, but they will start to be soon.

Yes, you know, student loans haven't been counted as defaulted yet, but they will start to be soon.

Those do have to start being repaid.

Those do have to start being repaid.

I do think the fundamental driver of whether people are going to continue spending is if you have a job or not. And of course the unemployment rate is still at a healthy level, but it's been trending higher and hiring has been very weak. If we do get to that stage where people are starting to lose their jobs, that I think really would get people to cut back on spending.

I do think the fundamental driver of whether people are going to continue spending is if you have a job or not. And of course the unemployment rate is still at a healthy level, but it's been trending higher and hiring has been very weak. If we do get to that stage where people are starting to lose their jobs, that I think really would get people to cut back on spending.

What do you think drive drives that?

What do you think drive drives that?

I mean, what pushes companies to I guess if there's no GDP growth, they're not going to need to keep hiring. If there is lower revenue for these big corporations, they won't need more people.

I mean, what pushes companies to I guess if there's no GDP growth, they're not going to need to keep hiring. If there is lower revenue for these big corporations, they won't need more people.

Yeah, I mean, yeah, absolutely.

Yeah, I mean, yeah, absolutely.

We've had you know, two to three percent GDP growth for a couple of years, and still the unemployment rate has risen by almost a percentage point from from the lows. Hiring is very weak, it's at mid two thousand and eight kind of rates. So we already see that businesses are trying to cut labor costs, and I do think that's a result of maybe trying to offset high borrowing costs. You know, rates are still restrictive if people do start to cut back on spending anymore. You know, if that's less business revenue, and you've already been looking for every way to cut labor costs by not hiring or reducing hours, that might get you to layoffs. We've also seen people are not quitting as much, probably for worry of finding a new job. That might mean that lack of voluntary separations might turn into involuntary separations. So there are definitely ways that you can get to that layoff stage.

We've had you know, two to three percent GDP growth for a couple of years, and still the unemployment rate has risen by almost a percentage point from from the lows. Hiring is very weak, it's at mid two thousand and eight kind of rates. So we already see that businesses are trying to cut labor costs, and I do think that's a result of maybe trying to offset high borrowing costs. You know, rates are still restrictive if people do start to cut back on spending anymore. You know, if that's less business revenue, and you've already been looking for every way to cut labor costs by not hiring or reducing hours, that might get you to layoffs. We've also seen people are not quitting as much, probably for worry of finding a new job. That might mean that lack of voluntary separations might turn into involuntary separations. So there are definitely ways that you can get to that layoff stage.

Given that back job Ronica, how much do you think the FED could cut?

Given that back job Ronica, how much do you think the FED could cut?

How many times in twenty twenty five, we.

How many times in twenty twenty five, we.

Think one hundred and twenty five basis points, so that's five twenty five basis point cuts. Of course, that's much more than what the market is pricing right now.

Think one hundred and twenty five basis points, so that's five twenty five basis point cuts. Of course, that's much more than what the market is pricing right now.

So how much then are you worried about the spillover effects because we've had investors tell us that, Okay, a lot of the assumptions when it comes to stock market predictions for next year are really predicated on sufficient growth. But between what you're saying about potential weaknesses and consumers and also what you might expect from the Trump government in terms of efficiency seeking and bond vigilantes just calming after the bond market, potentially, if the fiscal situation does not improve, all of this put together, does it signal that growth is potentially compromised.

So how much then are you worried about the spillover effects because we've had investors tell us that, Okay, a lot of the assumptions when it comes to stock market predictions for next year are really predicated on sufficient growth. But between what you're saying about potential weaknesses and consumers and also what you might expect from the Trump government in terms of efficiency seeking and bond vigilantes just calming after the bond market, potentially, if the fiscal situation does not improve, all of this put together, does it signal that growth is potentially compromised.

Yeah, yeah, I think it does.

Yeah, yeah, I think it does.

I mean, we're expecting something like one percent average growth for next year. I do think you'll fundamentally if we look back at the last couple of years, you.

I mean, we're expecting something like one percent average growth for next year. I do think you'll fundamentally if we look back at the last couple of years, you.

Know, I do think rates are restrictive.

Know, I do think rates are restrictive.

We've had such substantial fiscal support post pandemic, and that was the immediate post pandemic, you know, policies, but also in Placial Reduction Act and infrastructure, and that is going to be fading. You know, in twenty twenty five. We'll see if we do get further cuts to government spending. But that fiscal impulse is flat to maybe negative for next year and rates are still restrictive, This could be the time that it finally catches up with us.

We've had such substantial fiscal support post pandemic, and that was the immediate post pandemic, you know, policies, but also in Placial Reduction Act and infrastructure, and that is going to be fading. You know, in twenty twenty five. We'll see if we do get further cuts to government spending. But that fiscal impulse is flat to maybe negative for next year and rates are still restrictive, This could be the time that it finally catches up with us.

Well, if they cut down one hundred and twenty five basis points, we're at three percent even on the lower bound, and that should be I would say pretty stimulative. Victoria or Veronica, Sorry, thanks so much for joining us. Veronica Clark there is the city director of Research and US Economists, talking to us about her expectations for twenty twenty five. Happy New Year to all of you.

Well, if they cut down one hundred and twenty five basis points, we're at three percent even on the lower bound, and that should be I would say pretty stimulative. Victoria or Veronica, Sorry, thanks so much for joining us. Veronica Clark there is the city director of Research and US Economists, talking to us about her expectations for twenty twenty five. Happy New Year to all of you.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Playing androud Otto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

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I want to turn to the big take story on the Bloomberg terminal this morning. As the US debt we've been talking about balloons in the direction of fifty trillion dollars. Treasury bond dealers are warning of the risk of growing market pressures. Joining us now is Bloomberg's Alex Harris, who has more on this story. And Alex, some of the numbers here were shocking even to me and I cover you know this market every day, But treasury issuances one nat West executive told you has tripled over the past decade. Meanwhile, the balance sheets of these banks aren't catching up. So being a primary dealer an easy these days.

I want to turn to the big take story on the Bloomberg terminal this morning. As the US debt we've been talking about balloons in the direction of fifty trillion dollars. Treasury bond dealers are warning of the risk of growing market pressures. Joining us now is Bloomberg's Alex Harris, who has more on this story. And Alex, some of the numbers here were shocking even to me and I cover you know this market every day, But treasury issuances one nat West executive told you has tripled over the past decade. Meanwhile, the balance sheets of these banks aren't catching up. So being a primary dealer an easy these days.

No, And you know, you look at Citadel in this case, and they had been buying to become a primary dealer for years and finally in September said, you know what, thanks, but no thanks. This is just a losing proposition. And I think that's how people are feeling about it now and why you're not seeing the primary dealer community even grow to keep up with the amount of supply and the amount of debt that the government is issuing. And that's a problem because you need those primary dealers. You need them to facilitate these you know, in these markets from the auctions to secondary market. And remember their balance sheets for these dealers isn't just treasuries. It's a lot of other things. It's equities, it's mortgage backed securities, it's asset back secures. So you're playing with all these things. And as you can see what happened if you look back to March twenty twenty, I mean, that's a really good example of what happened when the treasury market ceased to function and dealer balance sheets just could not handle what it needed to do across all asset classes, and that's the very thing that it's a regular returns.

No, And you know, you look at Citadel in this case, and they had been buying to become a primary dealer for years and finally in September said, you know what, thanks, but no thanks. This is just a losing proposition. And I think that's how people are feeling about it now and why you're not seeing the primary dealer community even grow to keep up with the amount of supply and the amount of debt that the government is issuing. And that's a problem because you need those primary dealers. You need them to facilitate these you know, in these markets from the auctions to secondary market. And remember their balance sheets for these dealers isn't just treasuries. It's a lot of other things. It's equities, it's mortgage backed securities, it's asset back secures. So you're playing with all these things. And as you can see what happened if you look back to March twenty twenty, I mean, that's a really good example of what happened when the treasury market ceased to function and dealer balance sheets just could not handle what it needed to do across all asset classes, and that's the very thing that it's a regular returns.

Maybe let's take a large step back for a moment here, because there are a lot of confusing dynamics that are happening in the treasury market. One is the size of the US DOT load alone. Then there comes the plumbing questions why overnight funding seems to hit pockets of stress every so often, the dealer balance sheets being constrained as they are, as you say, and then hedge funds trading with a lot of leverage in this system. What is actually the problem here and the risk in the way the plumbing is working.

Maybe let's take a large step back for a moment here, because there are a lot of confusing dynamics that are happening in the treasury market. One is the size of the US DOT load alone. Then there comes the plumbing questions why overnight funding seems to hit pockets of stress every so often, the dealer balance sheets being constrained as they are, as you say, and then hedge funds trading with a lot of leverage in this system. What is actually the problem here and the risk in the way the plumbing is working.

So right now, what's happening and where the primary dealers are having problems is when you're asked to facilitate and intermediate in this market, but you don't have the balance sheet to do it. You have to charge higher funding costs. So that means if you are looking to borrow treasuries, say in the rebo market, and you're a hedge fund or an asset manager and you need to borrow to finance securities, you're going to have to pay more. And there might be a point where they are not to pay as much as the dealers are asking them, and so that's when you get backstops and you get you know, stopping out of positions, and all of that has to make its way back onto the dealer balance sheets, and so that's where they get clogged. And right now there's four hundred billion in aggregate treasuries alone sitting on dealer balance sheets. And then every time you get a treasury settlement cycle, so the middle of the month and the end of the month, you're getting a backup in repo rates. It's becoming a regular occurrence and we're seeing it quite often.

So right now, what's happening and where the primary dealers are having problems is when you're asked to facilitate and intermediate in this market, but you don't have the balance sheet to do it. You have to charge higher funding costs. So that means if you are looking to borrow treasuries, say in the rebo market, and you're a hedge fund or an asset manager and you need to borrow to finance securities, you're going to have to pay more. And there might be a point where they are not to pay as much as the dealers are asking them, and so that's when you get backstops and you get you know, stopping out of positions, and all of that has to make its way back onto the dealer balance sheets, and so that's where they get clogged. And right now there's four hundred billion in aggregate treasuries alone sitting on dealer balance sheets. And then every time you get a treasury settlement cycle, so the middle of the month and the end of the month, you're getting a backup in repo rates. It's becoming a regular occurrence and we're seeing it quite often.

This year.

This year.

July, dealer balance sheets were stuck. End of September was a very volatile quarter end that nobody expected. Your end has thankfully been really today it's very mild. Repo is under control. But it's because the minute the calendar turned to October, everybody said, wait a minute, we have to be better prepared for this. And so you saw repo rates actually back up to five and a half percent in the middle of November because people said, I want to get caught. I got to do this now.

July, dealer balance sheets were stuck. End of September was a very volatile quarter end that nobody expected. Your end has thankfully been really today it's very mild. Repo is under control. But it's because the minute the calendar turned to October, everybody said, wait a minute, we have to be better prepared for this. And so you saw repo rates actually back up to five and a half percent in the middle of November because people said, I want to get caught. I got to do this now.

And so Alex, another question about this too. We're talking about the treasury market here. It's not only the deepest most liquid market in the world, it's one of the largest, and it also underpins the cost of every other type of borrowing. And if you're talking about the need to kind of back up rates as you're talking about in certain parts of the market, At what point does this become a larger issue, even a tax payer issue.

And so Alex, another question about this too. We're talking about the treasury market here. It's not only the deepest most liquid market in the world, it's one of the largest, and it also underpins the cost of every other type of borrowing. And if you're talking about the need to kind of back up rates as you're talking about in certain parts of the market, At what point does this become a larger issue, even a tax payer issue.

Oh, I mean, well, you can see in some in some cases it already is. I mean, you guys were just talking about interest in the cost of interest in the last segment. You know, that's that's what it's going to look like to the taxpayer, is that, you know, the auctions are just going to get more expensive because it's just going to get harder and harder for these dealers to continue taking down this supply. And what's interesting is remember not the dealer balance sheets are not created equals, so you know, dealers have the autonomy to decide where their priorities are. And you know, during the treasury refunding one year, I think it was last May, you know, they were doing something called loose and they were just kind of kicking around ideas and what they could do to help improve treasury market function, and one of the things they proposed is almost doing a table to see who the biggest dealers were in the treasury auctions as a way to sort of light a fire under the rest of the dealer community to say, hey, if you're not doing your part and you're not pulling your weight, you have to because there's just too much supply to leave it to a handful of dealers to be taken down. There's only twenty four of them. We're down from the peak that we saw in terms of the number of dealers that we saw in nineteen eighty eight. So this is so critical that everybody is playing their partner here, and if they're not, there are serious consequences in the terms of costs the economy. It's the taxpayer and to those just trying to finance their transactions in the financial system.

Oh, I mean, well, you can see in some in some cases it already is. I mean, you guys were just talking about interest in the cost of interest in the last segment. You know, that's that's what it's going to look like to the taxpayer, is that, you know, the auctions are just going to get more expensive because it's just going to get harder and harder for these dealers to continue taking down this supply. And what's interesting is remember not the dealer balance sheets are not created equals, so you know, dealers have the autonomy to decide where their priorities are. And you know, during the treasury refunding one year, I think it was last May, you know, they were doing something called loose and they were just kind of kicking around ideas and what they could do to help improve treasury market function, and one of the things they proposed is almost doing a table to see who the biggest dealers were in the treasury auctions as a way to sort of light a fire under the rest of the dealer community to say, hey, if you're not doing your part and you're not pulling your weight, you have to because there's just too much supply to leave it to a handful of dealers to be taken down. There's only twenty four of them. We're down from the peak that we saw in terms of the number of dealers that we saw in nineteen eighty eight. So this is so critical that everybody is playing their partner here, and if they're not, there are serious consequences in the terms of costs the economy. It's the taxpayer and to those just trying to finance their transactions in the financial system.

Alex it's a great story. I recommend everybody check it out. Treasuries fifty trillion dollar dayl usual test strained dealer pipes and I think that was one of the coolest quotes in the story, Casey Spizzano saying, you're trying to put more treasuries the same pipes, but those pipes aren't getting any bigger.

Alex it's a great story. I recommend everybody check it out. Treasuries fifty trillion dollar dayl usual test strained dealer pipes and I think that was one of the coolest quotes in the story, Casey Spizzano saying, you're trying to put more treasuries the same pipes, but those pipes aren't getting any bigger.

It's a it's a pretty great way to paint the picture.

It's a it's a pretty great way to paint the picture.

Als Harris there with the story on primary dealers, it's our big take.

Als Harris there with the story on primary dealers, it's our big take.

Check it out when Wall Street being a primary dealer was a really good business, the bombable business.

Check it out when Wall Street being a primary dealer was a really good business, the bombable business.

Yeah.

Yeah.

I mean when I came on the street in the trading desk, the government bomb desk was the bomb.

I mean when I came on the street in the trading desk, the government bomb desk was the bomb.

They had so much capital, they could swing it around. They dealt with.

They had so much capital, they could swing it around. They dealt with.

The They could do a whole show on things that have changed since yes started on Wall Street.

The They could do a whole show on things that have changed since yes started on Wall Street.

The City l Securities really wanted to be in it. They kind of just shelved the plan. That was a huge story.

The City l Securities really wanted to be in it. They kind of just shelved the plan. That was a huge story.

This isn't there.

This isn't there.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, card Playing and broyd Outo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, card Playing and broyd Outo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

We're going to talk about the food business here because the restaurant business never easy. Inflation, labor costs and more budget conscious cons are taking a bite out of the industry's profits. Joining us now to talk about how to navigate these challenges and what's ahead for twenty twenty five. Danny Grant. He's a two Michelin star chef and partner at Maple Hospitality Group, the company behind Maple and Ash restaurants. You think about some of the challenges that the industry has faced, Let's start with inflation, because of course, the cost of certain goods coffee, coco have just been skyrocketing eggs. How do you get around that at a restaurant.

We're going to talk about the food business here because the restaurant business never easy. Inflation, labor costs and more budget conscious cons are taking a bite out of the industry's profits. Joining us now to talk about how to navigate these challenges and what's ahead for twenty twenty five. Danny Grant. He's a two Michelin star chef and partner at Maple Hospitality Group, the company behind Maple and Ash restaurants. You think about some of the challenges that the industry has faced, Let's start with inflation, because of course, the cost of certain goods coffee, coco have just been skyrocketing eggs. How do you get around that at a restaurant.

Yeah, well, thank you so much, and happy New year to you guys. Thanks for having me on. You know, twenty twenty four has been an incredible year for us and really had.

Yeah, well, thank you so much, and happy New year to you guys. Thanks for having me on. You know, twenty twenty four has been an incredible year for us and really had.

A lot of wins for us and growth and.

A lot of wins for us and growth and.

Being able to navigate through inflation, and just like probably a lot of parts of the country, we're incredibly excited for what's to come in twenty twenty five. We're having the fortunate for a lot of expansion and we're opening new restaurants in Miami and other parts of the country. So this is a part of our restaurants that we excel the best at is celebrate celebrating. So it's one of our favorite days of the year to welcome everybody into the restaurants and celebrate. Yeah, and to talk about, you know, how we navigate some of the inflation, it's really you know, we have we take a lot of the hit on us as far as we look at being able to cover costs and you know, whether it's coffee to steaks the King Crab, and we pass some of that onto the customers, but we also look at very creative ways that we're able to mitigate some of those things by different cooking techniques, different style of service. But one thing that we never sacrifice is the quality of the ingredients. So as you know, the restaurant business is an ever changing, difficult operating business, but we kind of relish in those moments and have been seeing a lot of success with it.

Being able to navigate through inflation, and just like probably a lot of parts of the country, we're incredibly excited for what's to come in twenty twenty five. We're having the fortunate for a lot of expansion and we're opening new restaurants in Miami and other parts of the country. So this is a part of our restaurants that we excel the best at is celebrate celebrating. So it's one of our favorite days of the year to welcome everybody into the restaurants and celebrate. Yeah, and to talk about, you know, how we navigate some of the inflation, it's really you know, we have we take a lot of the hit on us as far as we look at being able to cover costs and you know, whether it's coffee to steaks the King Crab, and we pass some of that onto the customers, but we also look at very creative ways that we're able to mitigate some of those things by different cooking techniques, different style of service. But one thing that we never sacrifice is the quality of the ingredients. So as you know, the restaurant business is an ever changing, difficult operating business, but we kind of relish in those moments and have been seeing a lot of success with it.

Talk to us about your consumer. Who is your typical consumer your restaurants, What are you targeting?

Talk to us about your consumer. Who is your typical consumer your restaurants, What are you targeting?

Who are you targeting?

Who are you targeting?

Yeah, you know, for us, we like to target a broad span of we're in neighborhoods and locations. That is, anything from someone that's looking to come in to have a simple piece of fish and have a beautiful night out to the much more extravagant celebratory moments of they just closed a big deal and we're the most obvious place to go to to to celebrate and to blow off all the that goes into closing a deal. So you know, those are some of our target people. We target foodies. We love people that want to eat and drink like the same way we do, because that makes me happy and makes me kind of makes what we do all worth it.

Yeah, you know, for us, we like to target a broad span of we're in neighborhoods and locations. That is, anything from someone that's looking to come in to have a simple piece of fish and have a beautiful night out to the much more extravagant celebratory moments of they just closed a big deal and we're the most obvious place to go to to to celebrate and to blow off all the that goes into closing a deal. So you know, those are some of our target people. We target foodies. We love people that want to eat and drink like the same way we do, because that makes me happy and makes me kind of makes what we do all worth it.

Danny, how have the How has the restaurant staff held up in this post pandemic world? We continue to see inflation a problem for customers, for diners and for owners and operators. But what about you know, servers, bartenders, bus boys have wages kept up with inflation? How is that part of your family doing?

Danny, how have the How has the restaurant staff held up in this post pandemic world? We continue to see inflation a problem for customers, for diners and for owners and operators. But what about you know, servers, bartenders, bus boys have wages kept up with inflation? How is that part of your family doing?

Yeah, I think that's a great question and great topic because you know, without our team, we are not a restaurant. We can't open the doors, and that's one of our most important assets of running restaurants. Some of the things that we've done to keep that in place is first of all, being we have very high grossing restaurants. You know, Chicago Maple Nash is one of the top grossing restaurants in the country. That gives us a little bit of extra flexibility to look at ways to be creative and take care of our team, so you know that we're always looking at upping our wages, healthcare and then other things that you know, we have food packages that we bring to our team, We do family meals, we do parties, and you know other things that just really help keep the morale the team and everybody feeling together like the tight knit family that we are.

Yeah, I think that's a great question and great topic because you know, without our team, we are not a restaurant. We can't open the doors, and that's one of our most important assets of running restaurants. Some of the things that we've done to keep that in place is first of all, being we have very high grossing restaurants. You know, Chicago Maple Nash is one of the top grossing restaurants in the country. That gives us a little bit of extra flexibility to look at ways to be creative and take care of our team, so you know that we're always looking at upping our wages, healthcare and then other things that you know, we have food packages that we bring to our team, We do family meals, we do parties, and you know other things that just really help keep the morale the team and everybody feeling together like the tight knit family that we are.

Great to have you on the program, Danny, thanks so much for joining us, and we wish you a happy New Year and a successful new year as well. Danny Grant, there is to Michelin, star chef and a partner in Maple Hospitality Group.

Great to have you on the program, Danny, thanks so much for joining us, and we wish you a happy New Year and a successful new year as well. Danny Grant, there is to Michelin, star chef and a partner in Maple Hospitality Group.

This is the Bloomberg Intelligence Podcast, available on apples, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal

This is the Bloomberg Intelligence Podcast, available on apples, Spotify, and anywhere else you get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal