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US deficit shrinks again; IMF's Lagarde in 'graft' charge; Fonterra's move gets attention; bond yields fall further; Russia invades; NZ$1 = US$0.83.7, TWI = 79.0

US deficit shrinks again; IMF's Lagarde in 'graft' charge; Fonterra's move gets attention; bond yields fall further; Russia invades; NZ$1 = US$0.83.7, TWI = 79.0

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of plunging bond yields.

But first, the US Congressional Budget Office has said the American Federal budget deficit will narrow more than forecast this year and fall to -2.9% of GDP, its lowest level since 2007.

They also say the results are very likely to be better again next year.

In Europe, IMF boss Christine Lagarde, one of the world's most powerful women, has been charged with "negligence" over a multi-million-euro graft case relating to her time as French finance minister.

She has dismissed it as a "simple negligence" mistake - apparently that is ok for a banker and regulator.

In China, their agricultural production is growing much faster than they can consume, especially of grains. Its a remarkable story, and the excesses are keeping prices low worldwide. It's also a story of subsidies.

Yesterday's announcement by Fonterra of renewed deep links in China in the baby formula market has also captured international attention and is being regarded as a big deal, a 'game changer' as the company has said.

Euro zone government bond yields fell to record lows overnight and the euro fell to its weakest in a year against the US dollar on expectations the ECB will soon move with a big QE program to counter the low growth and sinking inflation plaguing the region. The active invasion of parts of eastern Ukraine by Russian forces is also behind the drive for safety.

UST 10yr benchmark bond yields fell yet again today and are now at only 2.37%.

New Zealand swap rates have also fallen and flattened and are now at similar levels at the 5 year term to what they were a year ago.

The US oil price remains basically unchanged at just over US$93/barrel. Brent is also basically unchanged at just over US$102/barrel. Gold had a small fall overnight and is now at US$1,282/oz.

We start today on the currency front with some small gains overnight from where we ended yesterday. We are now just above 83.7 USc, 89.7 AUc, and the TWI is at 79.0.

If you want to catch up with all the changes yesterday we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

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13 Comments

Interest rates still trending down. 

So regardless of NZ OCR there will still be sub 6 fixed rates available for some time. 

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here's a good read

 

We all know the market is rigged. We may not like it, but facts is facts. The world’s largest central banks have thoroughly rigged the game. They figured out they could do it and they have QE an instrument of market manipulation, particularly stock market manipulation, since 2009. On the surface, the idea was to promote “Trickle Down.” Only it doesn’t work. The trickle pools at the top.

 

Eventually the lack of trickle forms a bulging bubble and display of wealth disparity becomes so great that even central bankers, who are difficult to shame, become embarrassed enough to stop pumping it to even greater extremes. Only, when you prick a bubble, it doesn’t just gradually drain out. It explodes like the goo spewed on a mirror from a giant pustulous teenaged facial boil when squeezed.

 

http://wallstreetexaminer.com/2014/08/the-bull-market-will-end-when-the…

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While I  agree that the entire system is rigged, it is rigged so it all doesnt fall over.  I however certainly dont accept its to promote the trickle down "theory"  the rich may well be benefitting the most but that is an unfortuante side effect of not allowing a 2nd Great Depression to happen.

Fed to blame for, "we-get-to-pay-for-their-madness", no to my mind. The madness is/was the free market being allowed to run amok for 2 decades under ALan Greenspan and Bush. Once the Fed can no longer hold it together then sure a lot of ppl will be paying, if Kunstler is right so will the likes of Warren Buffet.

regards

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"Bond Yields keep falling " , so if money is getting cheaper, why is the OCR going up ?

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Risk

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Yield curves flatten because short end rates are about to rise or have risen This reality can be clearly observed in the much traded US 2/10 year note spread here and here.

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While Fonterra is off on a spending spree, Westland Milk is cutting payout to $5.40-5.80 before retentions. Sorry can't put link in but it's in the Herald.

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China is one massive rigged casino , and its easy to gamble with other peoples money , virtually no consequences if you lose it , but a huge bonus if it works .

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This is sort of relevant given the Legarde prosecution.

 

In what is believed to be a legal first, Kaipara District Council is taking Audit New Zealand to court for negligence which it claims has cost it and ratepayers millions of dollars.

Meeting in Dargaville today (Tuesday August 26) council commissioners also decided to take action in the Employment Relations Authority against former chief executive Jack McKerchar to recover losses relating to cost overruns on Mangawhai’s Eco-Care sewerage scheme....

 

However, the commissioners will ask Ms Provost to reconsider her earlier decision not to use her statutory powers to hold the councillors to account. “There is now a formal declaration from the High Court confirming a number of previous council failings, which didn’t exist when the Auditor-General made her previous decision,” says Mr Robertson.

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Looks like the HB regional council is going the same way

 

http://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=150346…

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Texas employment is 1.3M jobs above Dec. 2007 level, while ‘US minus Texas’ is down by 1.23M jobs.

http://www.aei-ideas.org/wp-content/uploads/2014/08/texasus.jpg

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