Here's our summary of key economic events overnight that affect New Zealand, with news that markets have reacted to the latest US Fed policy review which wasn't dovish enough for them.
All eyes have been on the US Federal Reserve who today unanimously raised rates by +50 bps as expected to 4.5% which is a 15 year high. That increase may be less than the +75 bps in November, but they now say they will keep going to take this policy rate to about 5.1% in 2023, which is higher than previously indicated. They are trying to slow the rate of increase, as inflation slows, but not lose sight of the fact inflation is well embedded in expectations still, and well above its target range still. A soft landing would be 'nice', but inflation is the declared enemy.
They have a friend in a strong US labour market that has stayed resilient. That labour market strength is expected to wane, but neither the markets nor them know how-or-when. This strength has proven many pundits wrong for a long time now.
2023 rate changes may be far less regular than what we got in 2022, and mostly of the +25 bps variety. They are now not only out of their pandemic 'abnormal' zone, they are through 'normalisation' and out the other side into a new abnormal on the high side.
In other news, after a month of steady declines, American mortgage interest rates rose slightly last week, and mortgage applications did too. Perhaps the American housing market has reached a bottom for the year?
Japanese machinery orders rose more in October than September to finally push the year-on-year result to a gain.
On the other hand, Japanese industrial production slipped in October from September to be more modestly ahead on a year-on-year basis.
In China, their thought police are showing more muscle. They are requiring search engines like Google to 'correct' music that is popular among protestors, and they are requiring platforms to give up names of people who 'like' dissenting posts.
In Denmark and in a rare bipartisan agreement, the Danish coalition government said it would cut taxes and cut a public holiday from their calendar, as part of an attempt to invigorate an economy they say is weighed down by their 'welfare society'.
British inflation eased in November from October and by a bit more than expected. Overall prices there are still up +10.7% over the year, but rose less than at an annualised +4% rate from the prior month, so signs of cooling are there.
We should also probably note that yesterday's Half Year Economic & Fiscal Update from the NZ Treasury is forecasting a recession in 2024. The RBNZ's forecasts suggest it will be starting earlier in 2023.
The UST 10yr yield started today at 3.50%, unchanged from this time yesterday and holding yesterday's big drop. After the Fed's release it rose to 3.56%. The UST 2-10 rate curve is less inverted at -68 bps. Their 1-5 curve is also less inverted at -97 bps, while their 30 day-10yr curve is little-changed at -28 bps. The Australian ten year bond is up +5 bps at 3.42%. The China Govt ten year bond is down -4 bps at 2.91%. And the New Zealand Govt ten year will start today down -2 bps at 4.18%.
Wall Street opened its Wednesday session with the S&P500 up another +0.6% in trade prior to the Fed, but then fell sharply giving up those gains to be -0.3% lower now. Overnight, European markets traded about -0.2 lower. Yesterday, Tokyo closed up +0.7%. Hong Kong rose +0.4%. But Shanghai ended little-changed in its Wednesday session. The ASX200 closed up +0.7% while the NZX50 ended its session down -0.1%.
The price of gold will open today at US$1811/oz and up +US$3 from yesterday.
And oil prices start today up +US$1 from this time yesterday at just over US$77/bbl in the US while the international Brent price is just under US$83/bbl.
The Kiwi dollar opened today at 64.6 USc and holding most of yesterday's big gain. But after the Fed, it fell to 64.2 USc as the US dollar gained ground. Against the Australian dollar we are soft at 94 AUc and down another -¼c. Commodity currencies are still in favour today. Against the euro we are at 60.6 euro cents and back down almost -½c. That all means our TWI-5 starts today at 72.4 and down -40 bps.
The bitcoin price is now at US$18,121 and up another +1.2% from this time yesterday. Volatility over the past 24 hours has been modest at just +/- 1.5%. This comes as Binance faces holder pressure on some products with large withdrawals that forced them to limit redemptions.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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116 Comments
Beautifully on track for 10% Interest Rates Next Year , Guaranteed.
A new 'Future' account was guaranteed...
Hi Nifty1
"A new 'Future' account was guaranteed... "
I am not 'Future'. Although I can tell You the future, and believe me you don't want to know.
I am The Disciple for The Prophet, 'Future' has passed to the other side. My job is to keep revealing what is coming.
Hi Zachary Smith.
Why do people upvote these inane comments?
Because 7% Interest Rates This Year, Guaranteed was also "Insane". But also the Truth !
Because -30% Crash In Home Prices by December, its a Certainty, was also "Insane" until South Wairarapa got to -33%. Now Lower hut is already at -26.6% and we have not even got the December report yet.
Come join me in the White Room, it's padded and warm, and very very quiet. The nurses are very friendly to me.
https://www.youtube.com/watch?v=RijB8wnJCN0
"All eight Territorial Authorities (TAs) had negative annual median price movements, with South Wairarapa seeing the greatest decrease, down 33.7%, followed by Carterton, down 26.5%."
Is this really the place to get your multiple personality disorder attended to.
More new accounts for you in 2023, guaranteed.
Its lame, extremely immature and is a massive disservice to this site, Ed can we get rid of this clown please
"I am not Future"... says the clown who has just used the same lame white room "joke" that got Future banned. Brock, get off the internet mate. I feel sad for you.
Hi Albert2020.
I'd prefer that you spread your baseless conspiracy theories and hate speech elsewhere.
Thanks.
Poor Albert's getting his ticks confused.
Lately he has been in hyper attack mode spraying baseless one-liner accusations. Poor fella, maybe he got bit and has the rabies
If you look at the writing style and terms used by the two, they are clearly two different individuals. Maybe you should get yourself checked before jumping into these conspiracy theories involving Brock. Or maybe you just do not like Brock's comments because they annoy you as they are against your preconceptions and/or your vested interests.
I casually mentioned late last year that (in Auckland) "only idiots would be buying now".
Albert2020 then went ahead and did that anyway, then took it personally when I was proved correct.
He has been extremely salty at me ever since - a clear case of shoot the messenger.
The stress of his compounding losses is spiralling into delusion.
You’re giving yourself way too much credit mate if you think a casual internet troll would have any influence on our financial decisions. Hows that build coming along? Must be a downer knowing your still unbuilt house is worth significantly less than you paid for it? Least we locked in super cheap rates, have actually got on with life in our new home for a year and don’t spend hours on this site bitching about leaving this country for the past 2 years yet still hanging out in west Auckland yet to get on a plane.
Oh, that wasn't trolling at all, it was just a well-intentioned a statement of fact, as the passage of time has clearly shown. The last thing I wanted to see was more victims left in Printer8's wake.
The tone of your post above indicates that you are still deeply possessed by animosity, which we first observed in your abusive and emotional outburst back around April, when the magnitude of your error was first revealing itself.
Remember that the "casual internet troll" living rent free in your head was only trying to help you not lose a fortune.
The build is coming along very quickly, thank you, they really don't muck around once they get started. I don't believe it's worth less than I paid... yet. The property bloodbath playing out in Auckland, on the other hand, is going to be one for the history books.
Very sad that you had to borrow money to afford a sub-par house that's cratering in value, but that's a consequence of buying in the wrong place at the wrong time. I don't envy you.
Due to work commitments I spend a bit of time on both sides of the Tasman, but I get to spend time with family in West Auckland. So that's all good for summer.
Try to lighten up and let go of the bitterness. It's only money!
It doesn't take a veterinary scientist to know that he's a serial account holder... Prophet, 2022, Future (bless him) and now Premonition...its all just the same vague dribble intermingled with COVID conspiracy and casual racism.
So what's that got to with Brock Landers? Delusional.
Why do people upvote these inane comments?
I've never been one for blood sports, but I am LOVING seeing landlords get crushed.
That's why I'm up voting ✔
Another 50bp from the FED ... Crush! Crush! Crush! Oi! Oi! Oi!
That seems a strange world view, you might to talk to someone about that angst.
Investors by definition own assets, when they sell those assets they will still be wealthy, not sure that looks like being crushed? I can assure you that in a high inflation environment the people who will be hurt are the poor, inflation is nothing to crow about.
- wants to see landlords crushed
- oblivious to how the current high inflation, high interest rate environment hurts the poor the most
Overinflated housing costs have hurt the poor a lot more and pushed a lot more people into the poor category
While there's no denying increased rents affect the poor, actual poverty levels spike during poor economic times and remain relatively flat when times are good or ok.
High house prices mostly affect middle class aspirational home owners.
More than 30% of income on rent is defined as poverty - we have got to the situation where 60% of income is normal. Add in inflationary increases to essentials like food and fuel is a social disaster.
Can you please reference where it's normal households are spending 60% of their income on rent.
And who exactly defines 30% of income on rent as poverty. I'm quite sure somebody does, but doesn't mean it makes any logical sense or should be paid any attention. Seems like how much you pay on rent would have to be taken into context of the entire rest of the cost of living structure you are living in rather than some silly blanket rule.
Yep so the dream figure of 3x DTI for a mortgage is still also "Living in poverty" as well then ? People are spending a whole lot more than 30% of their income on rent.
Intenational standards are that 28% of income should be spent on the mortgage or 33% including related housing expenses such as rates.
DTI is fairly blunt as it does not adjust for interest rates but it has the benefit of stopping people going nuts during a pandemic then regretting it when inflation blows up.
Whose "International standards" would these be ?
We can debate whether the % is 30%, 40%, whatever or we can debate the issue that housing costs are about double where they should be. The focus should be on the latter
Or you could provide some sort of supporting logic to whatever percentage you choose to fixate on rather than just say "international standards"..
I
Have you considered getting a hobby
Fitz, you should realise that taking pleasure in others "getting crushed" can only come from a feeling of frustration and anger. You might think, "I don't care I'll just enjoy the Schadenfreude", but the issue is that whilst you focus on others misery, you fail to make your own life better.
Says the guy who keeps a motel full of crushed, impoverished people while driving about in a zippy sports car and taking holidays at his villa in Bali. Who gloats at making large profits from property, and likes to give little lectures to people about how they just need to work harder and "get stuff done" and how people on benefits are not worthy of having a roof over their heads.
It is this kind of attitude - the walking all over others, the greed, the delight in being "richer" than others, the feeling of moral superiority and smugness that makes people hate landlords.
Be honest- you have enjoyed watching others be "crushed" for years now. You and your lord-of-the-land ilk. I've been following the comments section on here for years now, and it has been dripping with schadenfreude as property prices rose, and landlords gleefully crushed renters. Don't lecture me about schadenfreude. Look in the mirror.
🔼 This
I have meet to many landlords that think they are doing Gods work. Some of them are about to get there Come to Jesus moment.
Neither Labour or National dare to alienate younger voters who cannot afford to buy yet. Neither are going to try to save the market, or indeed have any ability to save an overpriced mess in an interest rate normalising world.
Landlords have made their own bed, now it's night night time.
Interestingly Duncan Garner has been talking about moteliers on his show this morning,has a friend getting $17k a week guaranteed coming in,made quite a few millionaires apparently...and thats million dollar income,not assets.
It should be clear by now that the Ardern regime, despite all the rhetoric to the contrary, is laser-focused on protecting the rich in this country at the expense of the middle class. Everything from KiwiBuild to MIQ has been engineered for upward transfer of wealth, then wrapped in a veneer of #aroha for sale to the general public.
The results of this strategy are clear in our statistics for inequality, poverty, and homelessness.
Agreed Chebbo. Totally failed the people.
What's National's policy for when they've won the next election?
Probably more of the same, I would imagine.
“It should be clear by now that the Ardern regime, despite all the rhetoric to the contrary, is laser-focused on protecting the rich in this country”
She sure has contributed greatly towards the rent going up to market value in a short period of time.
Fitz, I do NOT enjoy seeing anyone else getting "crushed' or hurt for that matter. I provide emergency accommodation for people who have no roof over their head, I don't see much wrong in that. We get up at 3am to provide a room for women who have been abused by their partners… My wife cooks for the homeless. On the other side, yes I enjoy having money and I do my best to earn money, legal and ethically.
What is it that you do Fitz, since you like to judge what I do?
I hadn't but you bought it to my attention so I did.
Probably because so far they have pretty much stood the test of time, at least in direction if not perfectly correct.
I am upvoting the realist view rather than the denial of the vested interests
Yeah right, just like another drop in house prices from 13.7% in November to 30% in December is "guaranteed", lol.
@premonition, to avoid arguments later please be specific about which interest rate and LVR you are predicting will be 10% during 2023.
You're kidding right? Being woefully vague and non-specific is much easier....
"@premonition, to avoid arguments later please be specific about which interest rate and LVR you are predicting will be 10% during 2023."
Hi DoneBizz.
There really should be no arguments later because 10% Interest Rates Next Year, Guaranteed is self explanatory . The first Mainstream Bank to sell a Mortgage at 10%+ ( Double Digits ) Interest Rate will Fulfil the Prophecy of The Prophet once again. The Prophet never did give details on exactly what bank or term would be first or second or third, so I can only give you some clues.
First Clue - ANZ Floating rates were the first to sell a 7% Mortgage Rate this year.
Second Clue - Have a good hard look at how many banks are selling Interest rates starting with a 7.
Third Clue - Look at what length the terms are now. And that will most likely be the same for next year.
https://www.interest.co.nz/borrowing
And Remember , The Scroll says when the first bank sells an interest rate at 10% then the Seal to the 3rd Scroll will break.
Watch out for those who claim 10% means nothing and anyone could of guessed that. It means they secretly believe The Prophet and are Terrified of his Prophecies.
THERE IS A THIRD SCROLL?!
Higher for long time as inflation is hard to put back in the bottle , but 10% probably not the economy would struggle to handle an ocr at 6.5
Debt will ensure it, we are far, far too gone in regards to the amount of debt (public and private) to allow that. We might stay at these levels for some time though that will be important to reduce inflation again.
So inflation rates are dropping and Central Banks know that their interest rate raising has a lag time on its reduction of inflation. And they also say they don't want to over correct. Aren't they in real danger of over correcting now?
The "Real" bit is what they have to correct. The 'overcorrecting' was dropping them so low in the first place. Until, in our case, the OCR is above the CPI print, 'they' shouldn't drop interest rates.
Not saying they should drop them, but 50 point raises at this point maybe too much. Hold them steady or go up in smaller increments.
Be real careful, core us inflation
The annual core inflation rate is 6% for the 12 months ending November 2022 as compared to 6.3% previously, according to the U.S. Labor Department reported Dec. 13, 2022. The high water mark for the year was in September at 6.6%, which was the largest core rate since August 1982.
It has peaked, but it needs to be wrestled to the ground and put to the sword.
Absolutely Blobbles, and I have long predicted that, by the end of 2023, interest rates will reduce again
Probably going to arrive here soon, if it hasn't already. And that will put some welcomed downward pressure on wages bills.
Thousands of early retirees who gave up work during the pandemic are returning to the labour market as inflation eats into their savings.
https://www.telegraph.co.uk/business/2022/12/14/great-unretirement-acce…
Our labour market isn't the same as the UK's.
The bulk of unfilled jobs adding to wage pressures in NZ require a degree of physical effort (construction, farming, tourism, retail, hospitality, meat processing, etc.). How many 65+ will be keen to do this kind of work?
US Fed takes their policy rate to 4.5%, confirms inflation is still enemy #1
While the Fed (jackasses) is still debating inflation, services prices are already *falling* - yes, falling. CPI service ex fake rent down for 2d month in a row. That's not an economy that's normalizing into a soft landing, this is '20 & '09 territory. https://youtube.com/watch?v=XU3ELt_2Jf8
Orr today repeated to FEC the outright spin (or worse) claim that if the Bank had raised the OCR earlier we'd still have inflation in excess of 6% because of energy/food price shocks. Core inflation (ex food & energy) accounts for most of NZ's inflation Link
We need to focus on what's important:
On Treasury forecasts even by 2027 real exports haven't regained their pre-Covid path, absolutely or relative to the forecast path for real GDP. Link
Not surprising given that most permanent migrants we acquire participate either wholly in the domestic economy or low-value exports.
The resulting current account gap is to be met with more private debt owed to foreign lenders. Brilliant plan!
So when we finally have an inflation rate that is acceptable the current account deficit will become the obvious problem - and our offshore lenders will see better returns elsewhere
Looks like a long slog - if I was inclined to start another business I would not do it here
Even the mindset at the top appears to have changed - Fonterra as an example selling overseas investments to focus on little ol NZ instead of getting better at running their global operation. I wouldnt imagine MARS or Nestle would adopt such a strategy
As I recall their offshore businesses were lackluster for years. Their core business has always been here so I think its a bit of a different story. The big offshore players have too much of a stronghold on International markets. Its BAU during tough times to strip away your experimental growth to focus CAPEX on your core.
So the USA remains buoyant, possibly better than that? Not long after 2008 GFC I asked a younger relative in extended family who works in derivatives, London based, given the great fall of Lehmans & others, before that Enron did this mean finally the debt mountain was being addressed. Not really he said, just a bit of a hair cut here and there. So I asked him, now back in NZ, again what now about debt given the explosion of governmental money printing globally pandemic wise. Oh he said we’ve worked out it doesn’t matter. Blimey, I can’t work that out anymore than how the USA remains seemingly unassailable financially, regardless of anything else.
Reserve currency plus just the shear size of their internal economy Foxy. Even if they didn't export their economy is large enough for them to be reasonably wealthy, especially due to their constitution which protects freedom.
Being the reserve currency means that the US$ is also in demand internationally too. But that in itself must create problems for them as well. Not only does the US Government need to ensure that there is enough currency available for their internal economy to function, but there must be enough to meet the external demand. With the problematic unlimited growth mantra that the world clearly believes, the external demand has got to be significant.
This would be a good discussion subject to get a good understanding of it. I'd love to hear from other readers on this?
Specifically, a Eurodollar bond is a debt security that pays interest and principal in US Dollars but is issued outside of the United States.
The Fed does not have a mandate to specifically care about that market.
It must however influence their thinking re global growth. We have never had a reservce curency before where so muchoffshore debt has been structured this way. How a massive financial crash will play out is pretty theorectical. In the GFC everyone acted together, now not so much. In many ways perhaps the USA wants Chinese Eurobond debt to be priced higher than it needs to be, have they weaponsied this market here? It could put a lot of strain on Chinese FX reserves, and have currency implications, a much weaker yuan would see input prices explode to the upside.
Ta IT. Much of what you mention is politics as opposed to currency. But no mistake, politics certainly does and must influence a currency's value. Any Government must have an interest to ensure that there is sufficient currency for their economy to function efficiently. In theory too much reduces it's value excessively, and too little makes it too scarce and expensive. But there is much more that impacts any currency's value. For the US$ the external demand must have a significant impact.
But here's a question; the Fed has been creating additional currency significantly for years. is this due to external or internal demand? Note that the government's had $trillion or near $trillon deficits as well. Plus I would suggest that a portion of their budgets do not have a significant economic impact. That's another discussion; what kind of Government spending supports an economy and what kind is wasteful? It would be good for us Kiwi's to have an understanding of that too.
You are 100% correct but also need to take into account on how the US is using the reserve currency power as a weapon against other countries.
This is a slippery slope to losing reserve currency status.
Why would you trade in a currency in which you can be frozen or blacklisted from, time to move to something that can't be managed by one big entity.
Gold perhaps, or something decentralized and digital.
Yes that is a very big risk, but all the signatories to the Bretton Woods agreement in 1971 refused to accept the Bancor as the international reserve currency and wanted the US$. I guess in 1971 no one thought US, or for that matter the rest of the world's, politics would degenerate to the point that the sovereign owner of the world's reserve currency would manipulate it to the detriment of other countries.
But are they actually doing that? What is an example? I think the Fed is too far behind the curve to be effective in managing the currency's value?
Nothing matters to someone who works in derivatives anyway. They are making their own money out of thin air.
Without being disloyal, tend to agree. Did notice too though, that now had thin hair. Might have been some worry time I suspect.
If you are the reserve currency (US $) inflation helps, as you pay back debt with inflated dollars. That is why it is important for small countries to keep their currency strong so they can handle the payback when it arrives.
Having the world currency helps, and well done Denmark..we should follow and get rid of Queens Birthday holiday pronto
How about people who feel this way just donate the day's income to a worthy charity?
Yer right..let's like asking Rex Pat to pay back the Cost of Living supplement, never going to happen.
How does that work if you're an employer?
Last on, first off.
and I thought post covid people just went to work when they wanted to anyway
I agree, it is too close to Matariki. Here's an idea: how about ditch Queens birthday and make it a flexible public holiday where people can take it whenever they want or cash it in if they want. In fact I think have max 4 public holidays (1 per quarter) and the rest (max 6) can be flexi. If we don't do this soon we'll end up with public holiday overload as surely the pressure will be on to make Diwali, Ramadan, CNY etc public holidays too.
Keep New Year's, Waitangi Day, ANZAC Day, Matariki, Labour Day and the provincial anniversary days. Make the other 6 flexi, or just can them and up annual leave to 5 weeks/year to compensate.
So we'd lose six days but gain five annual leave days? Nah, I think we'll keep the public holidays as holidays thanks.
The Holidays Act is broken enough as it is, the solution isn't just to unwind the public holidays we do have so employers can burn out their employees quicker and then act shocked when they leave for greener pastures. You've got over 300 other days to make your business profitable throughout the year.
It's the King's Birthday holiday. Just like our national anthem is God Save the King!
Honestly the most useless public holiday in New Zealand has to be Jacinda's pandering brainfart Matariki idiocy.
It should be immediately revoked or moved to the warmer months.
A day off when the weather is at peak awful and the skifields aren't open yet is just dumb.
A complete waste of everybody's time and money.
I like it personally, non commercial and time to gather the whanu over a meal and remember those that have passed.
"Not my King"
You can do that on Saturday. Or even better we can have a day off during the ski season or summer.
His Majesty is your King, unless you advocate tearing up the treaty?
Why would you want to be on the slopes during a public holiday in the middle of winter? It'd be nuts.
It's sadly true that New Zealand has comically underbuilt ski infrastructure.
We should deffo get more lifts built and terrain opened up and build much more proper accomodation.
It's a tragedy.
Any proper accomodation would be a start. The apartments at cardy are great but there's so few as to practically not exist.
Having worked with plenty of snow bunnies over the years I must say I get a little concerned over people who get excited about something that is cold, wet, white and sticky!
Ski infrastructure is a matter for private business which profits from their use. As a nation we need to stop socialising the risk while privatising the profits.
There are public money issues at RAL for sure. But it most cases it's about things like resource consent (see remarks and cardy expansion plans) rather than funding.
The RC issue is definitely something to be concerned about. Keeps too many bureaucrats employed!
Good snow is dry and slippery.
As a nation we seem to really like forbidding anything to be built anywhere. We should resolve that.
I repeat as you a bit slow on the uptake.."Not my King"...
Who the hell skis anymore unless you live in the South Island?
Read the first page of your passport where it mentions the representative of His Majesty for the realm of New Zealand... close to your name.
That's your King.
Don't burn it though. You'll need it in order to leave as you promised when Winston is re-elected.
😂
Still not my King...and yes if Winnie does become King Maker..(sorry what), I will be in sunny Spain for a bit.
What citizenship do you hold now that you have renounced New Zealand?
Edit: Spain is lovely. Could probably get a gig doing grievance blogging in some of the regions.
We could do it together Brook, and you would always get the last word in 😂
Let's start with your New Zealand ones.
Hi Brock,what part of Oz are you residing in?
The Eastern part.
Big country..just genuinely asking as I have 2 boys heading to Sydney soon.
SE Queensland.
Sydney is alright in small doses.
Behave yourself over there Brocky...you don't want to be 501'd home lol.
As a person of impeccable character and the holder of an Australian passport, that's an impossibility. "lol".
But thanks for the kindly advice.
Snap Brocky...best thing my kids inherited from me Australian citizenship...always have a plan 'B' lol.
Brock on full truth mode today, stand back.
Having said that i think Matariki is a true NZ holiday. The regional (Auckland, Wellington) etc holidays are the ones to sacrifice if any. Let's not get too carried away by Denmark's moves, it is a very different country to us. While they are roughly the same size as us (5.8m) they have been taking in Refugees at the rate of about 2.3% per annum (36,000/yr) since 2019. They have big issues with integration and they have essentially doubled the number of beneficiaries they have in the last 3 years. The bravery of taking in people in need extends for years and years.
Saying "Not my King" is like saying, "Jacinda Ardern is not my Prime Minister".
Seems like I have triggered the royalists this morning, very thin skins.
She's not, I don't own her.. if I did I'd trade her in for a model with better functionality ;)
Not my king either.
It wont remain non-commericial for long, you think Briscoes, the warehouse and others are going to let you have a day off not to send money their way?
Looks like a bit of gapping in the US markets this morning. -90 to -10; back to -50 and then -19, and nothing in between. Signs of an unsettled market.
I was just noticing the same in the 1 and 2 year treasuries. Strange reaction.
Consider this little data point from JPMorgan in which after revealing their Emerging Market client base fully expects Fed funds to eventually top out between 6-7% over a longer time frame made this bone-chilling comment:
"Conversations with our EM client base reveal views that Fed Funds likely needs to reach the 6 – 7% range. Why? For DM countries that see CPI exceed 5%, it takes ~10 years for CPI to fall back to 2%."
In fact a higher terminal rate than 5% had been mentioned in recent Fedspeak by Evans and Williams last week.
Higher for longer? That ship sailed with the CPI, China's PPI, US layoffs, unprecedented inversion in Germany, epic distortions in USTs...Link
10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity
As the weight of debt increases, the wings of speculation cease to generate lift. Yield will be spelt in capital letters and be the major arbiter of price again....finally.
Off topic I know but... "only in NZ..."
https://www.rnz.co.nz/news/political/480823/ardern-seymour-to-auction-a…
https://www.trademe.co.nz/3909337579
Certainly a cleverly exploited headline opportunity. Guess any publicity can be considered good publicity but it’s run it’s race now, time to lay off.
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