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NZ cracks down on speculators, tightens rules for foreigners; ASIC worries about low rates; US momentum slows; Greek bank run worsens; UST 10yr yields fall; NZ$1 = 74.7 US¢, TWI-5 = 77.2

NZ cracks down on speculators, tightens rules for foreigners; ASIC worries about low rates; US momentum slows; Greek bank run worsens; UST 10yr yields fall; NZ$1 = 74.7 US¢, TWI-5 = 77.2

Here's my summary of the key issues from over the weekend that affect New Zealand, with news of a newly hesitant American economy.

But the big news was on the home front. Yesterday the Government moved to crack down on property speculators who sell houses within two years, and announced that foreign buyers in our property markets will have to register with the IRD and have a New Zealand bank account.

These moves compliment other changes by the Reserve Bank earlier last week, when they took other 'financial stability protection' measures related to frothy housing markets in Auckland.

Across the ditch, an Australian regulator is also warning of bubble problems in their housing markets. They are concerned the low interest rate environment is driving investors to pursue high risk, complex investments in their chase for higher yields. Low interest rates drive a search for yield, satisfied by bringing to market complex and risky products often targeted at people without the skills to understand properly.

In the US, a respected measure of consumer sentiment slumped in May. Confidence fell as consumers became increasingly convinced that there would be no quick rebound following their dismal 1st quarter. The decline was widespread among all age and income groups as well as across all regions of the country.

And their Federal Reserve reported that industrial production was static in April, and up only +1.9% year-on-year. Momentum is leaking out of the US manufacturing sector.

In Greece, data out over the weekend showed the size of the 'quiet' bank runs going on there, something neither side wants to highlight.

In New York, the UST 10yr benchmark yield fell back sharply in Friday's trading, although in after-hours trading it did gain back a little, but is now at only 2.15%.

The US oil price is little changed, still under US$60/barrel, while Brent crude is back under US$67/barrel. Falls in the US rig count have almost stopped, but there is a noticeable reduction of rigs in operation outside the US.

It is the same story with the gold price, still at US$1,225/oz.

The New Zealand dollar starts today a little lower at 74.7 US¢, at 92.8 AU¢, and at 65.3 euro cents. The TWI-5 is at 77.2.

If you want to catch up with all the local changes on Friday, we have an update here.

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

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6 Comments

Across the ditch, an Australian regulator is also warning of bubble problems in their housing markets. They are concerned the low interest rate environment is driving investors to pursue high risk, complex investments in their chase for higher yields. Low interest rates drive a search for yield, satisfied by bringing to market complex and risky products often targeted at people without the skills to understand properly.

The FT had this to say:
The negative yields on nine-year German bonds reached last month could only be justified by belief in a deep depression where monetary policy fails to work, a scenario worse than Japan’s lost decade. But those buying the bonds did not believe in such a bad outcome: they just hoped to sell overpriced bonds on at a profit to a greater fool, one common definition of a bubble. The ultimate greater fool they saw was the European Central Bank, which is buying bonds as part of its quantitative easing.

I made my views clear last week.

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But how do they know (all/most) ppl are buying bonds hoping to sell to the greater fool? Just as a sort of an aside I understand that some big EU companies, Seimens? were (still are?) paying to have the central bank hold their cash for them, so why do that? The Q is if this is the case then those later to exit will lose shed loads? Besides that ppl chasing yield by going into big risks seems, um well stupid or "desperate" So are we talking greed? Why should we care if ppl wish to gamble? So you want to put up interest rates to make them stop, seems to be a recurring theme on your part no matter the damage to the real economy that causes. So gamblers in the financial sector V main street jobs and businesses, simple, I want jobs and businesses to survive and prosper.

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I want jobs and businesses to survive and prosper.

Examples of your wants under ZIRP are near non existant. Low interest rates pull financial gains forward, which undermines those seeking investor interest in real business, since the money finds it's way into speculative trading securities and little else that is productive and provides employment.

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Jolly Kid has introduced the " Claytons Capital Gains Tax " .... it's the CGT you have when you don't have a CGT ...

... and as admirable as it is , that little Johnny & the Gnats have finally woken up to the fact that there are some votes to be gained from appearing to do something about the Auckland house price bubble , this policy will not address the supply problem ...

The Claytons CGT ... or should we call it the Chinese CGT ? .... will not lead to the construction of one more much needed house , apartment , granny flat , out-house , flop-house , doss-house , tin-house or dog-house in Auckland or anywhere else ....

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More like if they are running behind on gst from the lack of new builds then they need to figure out a different avenue by which they can get some tax take from the Auckland house price bubble.

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