Here's our summary of key economic events over Matariki that affect New Zealand, with news the Hormuz Strait is effectively shut again with little-prospect of it allowing vessels through, perhaps other than Iranian-linked ones.
Elsewhere, US initial jobless claims rose by +224,500 and about what seasonal factors can account for. There are now 1.767 mln people on these benefits, less than year-ago levels.
After the good May rebound, existing home sales in the US fell back to average levels, and to levels lower than a year ago. The median price is up only +1.8% from a year ago. That modest rise is less than income growth, so overall affordability is getting a chance to recover there.
On Wall Street, South Korean computer chip maker SK Hynix has raised US$26.5 bln in its New York IPO, the largest ever listing by a foreign firm in the US. SK Hynix is a key supplier to AI chip giant Nvidia.
Meanwhile the USDA said that global corn and wheat stocks are falling due to unfavourable weather in many place, and that signals that prices for these basic ag commodities are about to rise. They also reported lower beef production in the US and expect imports to stay elevated. US milk production is rising however.
In Canada, their payrolls rose a minor +18,200 in June, slightly better than the expected +10,000, and holding on to the +88,000 gain in May. The June gain was all about a strong rise in the private sector (+32,000) which consolidated the good May private sector rise (+56,000). But most of the net June gain was from part-time employment. These positive shifts in June may have something to do with hiring for the football World Cup.
Across the Pacific in the fiercely competitive Chinese car market, they reported 2.8 mln vehicle sales in June which was somewhat unexpected because a dip from May was anticipated. But it is a -3% dip from year-ago June sales levels. That pushes their twelve month sales to 33.8 mln units, up from 33.0 mln in the prior equivalent year. Car exports rose above 1 mln units in June, the first time that level has been achieved as it floods global markets.
Japan is reporting that their producer prices rose +7.1% in June from a year ago, accelerating from an upwardly revised +6.6% increase in May and above market expectations of a +6.8% gain. It is the fastest annual increase since March 2023. Higher energy prices following supply chain disruptions linked to the war in Iran are driving this, of course.
And Japan’s finance minister said they want to steer their state pension funds to "substantially" increase investments in domestic assets. This brought a sharp immediate reaction in both their currency and bond markets, due to the expected size of the shift. The yen gained, or at least it halted its fall, and their bond yields fell sharply (see below).
Global container freight rates rose another +2% last week to be +74% higher than year-ago levels, mostly about outbound freight rates from China to the US where demand is still high. Bulk cargo freight rates pushed higher too.
The UST 10yr yield is now just on 4.56%, unchanged from this time Thursday but up +7 bps for the week. The key 2-10 yield curve is now at +36 bps (unchanged). Their 1-5 curve is now at +24 bps (-1 bps) and the 3 mth-10yr curve is at +88 bps (-6 bps). The China 10 year bond rate is unchanged at 1.73%, down -1 bp for the week. The Japanese 10 year bond yield is now at 2.71%, down -17 bps and down -6 bps for the week. The Australian 10 year bond yield starts today at 4.86%, down -8 bps from Thursday but up +4 bps for the week. And the NZ Government 10 year bond rate is at 4.61%, up another +7 bps from Thursday, up +13 bps for the week.
Wall Street has been firmish on the S&P500 to end its week, up +0.4% from yesterday, up +0.9% for the week. The Nasdaq is up +0.3% for a good +1.1% weekly rise. Overnight, European markets were mixed between London's +0.2% and Frankfurt's -0.2%. Yesterday Tokyo ended up +1.2% for a -2.0% weekly retreat. Hong Kong rose +0.6% to cap a +3.3% rise. Meanwhile Shanghai was down -1.0% to end its week down -1.6%. Singapore was up +0.7%. The ASX200 ended its Friday up +0.5% for a weekly -0.1% dip. Of course the NZX50 didn't trade yesterday so it ended its week up +1.5%.
The Fear & Greed index has moved into the middle of the 'neutral' zone from being just in the 'fear' zone a week ago.
The price of gold has risen to US$4100/oz, up +US$33/oz from Thursday, but down -US$74 from a week ago. Silver is now under US$59.50/oz, up +US$1 from Thursday, down -US$3 from a week ago.
Oil prices are down -US$2 from Thursday at just on US$71.50/bbl in the US, while the international Brent price is now just over US$76/bbl. A week ago these prices were US$68.50 and US$72/bbl. Hormuz transits have dived sharply as the hot conflict explodes again with just 10 crude or product tankers exiting over the past 24 hours and 5 of those tied to Iran (5 dark with transponders off) but only 12 entering for new loads, again mostly Iran-linked (3 dark).
The Kiwi dollar is up +60 bps from this time Thursday at just over 57.6 USc, up +50 bps from a week ago. Against the Aussie we are up +60 bps at 82.9 AUc. Against the euro we are up +60 bps at just on 50.5 euro cents. That all means our TWI-5 starts today at just on 61.5 which is up +60 bps from this time Thursday, up +60 bps for the week.
The bitcoin price starts today at US$63,736 and up +2.7% from this time Thursday, up +2.6% from a week ago. Volatility over the past 24 hours has been modest at just under +/- 1.3%.
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20 Comments
So Hormuz trade is blockaded once again. Hardly unexpected and nor is it that President Trump apparently has a bounty on his head, courtesy of Iran, about which, one would think, he is neither surprised nor alarmed. After all, in ancient or biblical terms, an eye for an eye and a tooth for a tooth has quite some footing in this region. Given the assassination of first General Soleimani then Ayatollah Khameni, the rules of engagement are by now, pretty well solidified.
So why is there no price response to the Straight of Hurmuz being effectively shut again? Is the global economy in a much worse shape than official media portray? Demand destruction, increased output elsewhere, rerouting, syphoning reserves, China not buying, aggressive selling of futures to game the market, less dependency on oil as primary resource? All playing a part no doubt.
The reserve releases are nearing the end of the runway and China will have to return to the market at some point, although they appear to be the main beneficiary of any trickle of oil through the straight over the last few days.
https://www.stuff.co.nz/business/361004930/new-zealand-wage-growth-wors…
why we feel we are not moving forward
Trump’s comments regarding Iran’s nuclear situation and capability continue to be confusing and contradictory.
In February when Trump went to war, he cited an ‘imminent nuclear threat’ as justification. That was contrary to his assertion over the previous eight months that the program had already been ‘obliterated’ in June’s attack. (If true, it does raise the question; “What was the justification for the war?”)
Now again, in the past day, Trump is now again claiming that Iran has already been ‘denuclearized.’
However, CNN’s video evidence indicates Iran is repairing at least one of its nuclear sites despite the MOU.
https://edition.cnn.com/2026/07/10/world/video/investigates-polglase-iran-nuclear-sat-imagery
Trump’s current narrative seems simply to extradite himself from a war that he has definitely lost; achieving nothing but rather destabilising shipping through the Strait and at considerable financial and wider economic costs.
Of course Trump will never admit to this, and the consequences are not likely to be going away soon.
The mighty Chris Joye on CBA's stock price:
Some important maths on inflated bank valuations got trimmed out of my AFR column. One reason the banks trade at globally anomalous multiples is the interaction between compulsory super flows and APRA's performance test. With the superannuation guarantee climbing to 12 per cent in July 2025, the system's $4.5 trillion in assets now dwarfs the ASX's $3.3 trillion capitalisation, and solid nominal wage growth has turbocharged inflows. Treasury itself concedes the Your Future Your Super test creates powerful incentives for funds to hug their benchmarks, converting rivers of new member money into price-insensitive, index-weight purchases of the banks that dominate the ASX 200.
Accordingly, the banks' pricing premium reflects regulatory plumbing and flow dynamics, not fundamentals. That breeds vulnerabilities if and when investors refocus on intrinsic worth. A record housing slump coinciding with a default cycle and policy changes that hammer capital gains could usher in an enduring stretch of sub-par returns.
It makes, for example, zero sense for CBA to be trading at 3.5 times book value. With the cash rate at 4.35 per cent and the 10-year Commonwealth bond yield around 4.5 per cent, a conventional CAPM cost of equity for CBA (with a beta of about 0.9 and an equity risk premium of 5-6 per cent) lands at roughly 9.5-10.5 per cent. Against a 13.6 per cent return on equity, CBA genuinely earns a spread of only 3.5-4 percentage points over its cost of capital.
Plugging that into the standard residual-income identity, P/B = (ROE − g)/(COE − g), with long-run growth of 3 per cent justifies a multiple of (13.6 − 3)/(9.5 − 3), or 1.6 times book — roughly where NAB and Westpac sit, and less than half CBA's actual rating.
So what does 3.5 times book imply? Inverting the same identity, the market is pricing one of two things. Either CBA's cost of equity is (13.6 − 3)/3.5 + 3, or 6 per cent — an absurdly skinny equity risk premium of 1.5 percentage points over the risk-free rate for an 18 times leveraged institution with a return on assets of just 0.77 per cent. Or, holding the cost of equity at a sane 9.5-10 per cent, investors are implying a sustainable ROE of 3.5 × (9.5 − 3) + 3, or 26-27 per cent — double what CBA has ever delivered and about triple the system's capacity in a mature, APRA-capitalised, low-credit-growth economy. Hold on to your hats...
Yes he is calling for a 40-50% drop
credit rationing here we come
Markets ignore the resumption of conflict, yet Trump posts “Iran are begging for a Peace deal” at 1am and markets soar, go figure!
Happens every week. The manipulation is outrageous. All we can take away from it is that someone is making out like a bandit.
Agree. Unfortunately I feel we are all going to pay a heavy price at some point in the future
Not too far into the future, either.
Like watching a kid's top wobbling - you know it hasn't got far to go.
Not too far into the future, either.
Like watching a kid's top wobbling - you know it hasn't got far to go.
And we will discover how disconnected the markets are from the real economy.....it will be bad, but not as bad as imagined.
If kiwi savers fall enough it could have a chilling impact on domestic spending, add in a Labour/Greens win
shaken not stirred
Make of it what you will
It's official, we have the worst wage growth rate in the OECD. Read on for the usual apologist economists trying use a different metric to make it look better.
https://www.rnz.co.nz/news/personal-finance/700162/new-zealand-wage-gro…
Noting their choice of the 2021 benchmark, the time when businesses & incomes were overflowing with govt support, negligible interest rates etc
...any different from OECD economists choosing the measure that supports their agenda? as they do with their other virtue signaling eg. CGT, Pensions, Child poverty...
The measure used for the report is the same for each country, so it's all relative. Anyone can change the measure to make it look better.
NZ is not the only country with widespread NIMBY councils restrictions on housing supply
https://www.abc.net.au/news/2026-07-12/melbourne-the-easiest-city-to-bu…
"Research suggests that the typical worker's pay has not kept pace with productivity growth in Australia for 30 years."
https://www.abc.net.au/news/2026-07-10/workers-pay-not-keeping-pace-wit…
THE $40 TRILLION DOLLAR QUESTION - what does unsustainable look like when you see it?
And when will a lethal case of US-based Fiscal Dominance, coinciding with a global financial reset imposed by the East, expose the entire Western fiat currency debacle?
IMO, this is not a matter of if, but when, and the below highlighted statement in the opening paragraph of this weekend's briefing, prompts me to ask some pertinent questions...
- " US real economy data mixed".
Also, what US REAL economy data? - since, the US economy is so excessively a financial model, and within the real economy, both jobs and inflation metrics are largely fictional anyway.
IOWs they are based on contrived numbers designed to give the markets, the RoW, and in particular the buyers of US debt, the hopium that Rome II is going to rule forever... and a day... much like the British Empire was supposed to....... until it didn't.
As such, China faces a dilemma. It still needs to maintain operational US dollar liquidity via European clearing houses in order to fund its current global trade machine on a week-to-week basis.
Simultaneously, it is aggressively draining the West of physical, tangible assets, primarily of gold and silver, to ensure that when the writing on the wall becomes a reality, Beijing will already own the vast majority of the physical collateral ready for the inevitable global financial rest.
Meanwhile, China is methodically building the plumbing required to bypass the Western financial system entirely:
The Shanghai Gold Exchange (SGE):
China has successfully scaled RMB-denominated gold benchmarks to pull pricing power away from the London (LBMA), and New York (COMEX), paper futures markets - ie, instead of entities who don't own physical gold, selling paper to entities that don't want to own gold, an organic market pricing model will be the new order of the day - blimey, what a novel idea.
Hong Kong Central Gold Clearing System:
Hong Kong launched a brand new central gold clearing system to solidify the region as a primary physical bullion trading hub. This creates an alternative un-sanctionable financial architecture. They are putting their money where their gob is - increasing their physical vaulting facility 1000% - up from 200 up to 2000 tons - yes, bricks and mortar - the kind of capital investment that is not needed for storing digital promises.
Gold-Backed International Settlement:
By settling bilateral trade in yuan that is directly convertible into physical gold on the Shanghai or Hong Kong exchanges, China will allow trade partners (like Saudi Arabia, Russia, or Iran) to trade with them securely. Partners can hold yuan with the absolute guarantee that they can immediately convert it into a hard asset that carries zero third-party or counterparty risk.
The one thing China is yet to do is to fix the yuan/gold rate.
This would remove the vast majority of the paper speculation so that the system then worked on arbitrage of your physical asset holding and you went to an alternative gold substitute currency if there was an attractive enough margin to go to that bother.
Once Russia puts the ruble onto the gold standard, which would be a no brainer following China's lead, interest rates could fall very rapidly, leading to a huge revival of global economic activity within an inherently non-inflationary system
AND SO HOW MUCH SMOKE AND MIRRORS IS THERE WITHIN THE HEADLINE UST 10YR AT IT'S PRESENT 4.56%?
The vast majority of US Treasuries listed as held by Belgium and Luxembourg are not owned by those nations. Instead, they are held in custodial accounts for third-party investors, including foreign nations (even China), global hedge funds, multinational corporations, and international banks.
Why are these countries even on the list? - ANSWER... Official US Treasury data measures foreign holdings of US securities by the country of legal residence of the custodian, rather than the ultimate beneficial owner. This, in turn, creates a huge "custodial bias" in the data. How very convenient for the lands of casinos, smoke, and mirrors.
NB...Belgium is home to Euroclear, one of the world's largest central securities depositories, and Luxembourg hosts Clearstream, another massive international clearing house.
Investors around the world route their US debt holdings through these financial hubs for easy settlement, making it appear as though Belgium and Luxembourg are buying all that debt.
And so who are the "defacto" owners?
A Foreign Governments & Central Banks:
Countries whose central banks or state-backed entities want to quietly accumulate or shift US dollar reserves. For instance, when nations like China or Russia reduce their direct holdings, their indirect holdings via European custodians often spike.
B Multinational Corporations:
Large global companies, including many US-based tech and pharmaceutical firms, use tax-minimisation strategies that involve parking corporate cash in offshore subsidiaries.
C Global Wealth & Institutional Funds:
Private investors, wealth funds, and banks domiciled all over the globe (including the Middle East and Asia) use these hubs as a digital safety deposit box.
MY THESIS
It is important to understand the true scale of global divestment out of USTs and also the volume that are bought by de facto buyers that disguises the alarming drop in offshore UST buyers globally.
The share of US federal debt held by foreign investors has steadily declined from nearly 50% in the early 2010s down to roughly 30%. Official Treasury International Capital (TIC) data confirms that global sovereign buyers are systematically divesting. However, total nominal foreign holdings have actually increased over the past few years.
This creates the paradox: direct sovereign demand is drying up, yet total foreign numbers are being heavily propped up by "de facto" allocations hidden inside major custodial hubs and corporate structures.
Why then the paradox? - (remember too the nominal versus the real crash in purchasing power of the fiat-based instruments)
Total Foreign Debt Holdings & Structural Breakdown:
There is a major shift in ownership. The total pool of foreign-held (USTs) is roughly $9.3 trillion. The internal breakdown reveals a sharp divergence between sovereign governments and the private sector.
Foreign Private Investors (58.1% - ~$5.4 Trillion):
This category represents the true source of recent growth. It includes international hedge funds, foreign commercial banks, insurance conglomerates, and multinational corporate subsidiaries.
Foreign Official Institutions (41.9% - ~$3.9 Trillion):
This pool has shrunk significantly in percentage terms, confirming a structural pivot away from the US dollar as a pure sovereign reserve.
Geographic Breakdown & The Custodial Illusion
The official US Treasury Major Foreign Holders List ranks nations by the physical location of the custodian holding the paper, completely masking the end buyer.
Japan $1,209.9 Billion
The 2nd highest overall holder (when you lump the Cayman Islands in with the UK). Largely driven by domestic institutional pension funds and insurance companies seeking yield differentials. Watch this space!
United Kingdom $937.5 Billion
Home to the London financial markets. This volume represents international asset managers and Middle Eastern/Asian petrodollars routing purchases through London banks.
China $651.1 Billion
Historically peaked above $1.3 trillion. The structural drop to $651 billion represents aggressive, intentional weaponisation, shielding and diversification.
Cayman Islands $471.6 Billion - NB - it's UK Territory too - ie, lump this in with the $937.5 billion above
The de facto global capital for offshore hedge funds. This massive volume reflects private speculative money and leveraged long positions.
De Facto Buyers Disguising Sovereign Divestment
Direct "visible" buying by foreign states is falling, but the deficit is quietly absorbed through three primary alternative channels:
Sovereign Stealth Accumulation via Euroclear/Clearstream:
When China or Middle Eastern central banks want to buy or hold USTs without alerting the markets or appearing to expand their US footprint, they purchase the debt via intermediaries in Belgium, Luxembourg, or Switzerland. The paper sits under the European custodian's name, shielding the sovereign entity from political and market scrutiny.
US Corporate Offshore Cash Recycling:
US tech and big-pharma giants park hundreds of billions in cash within corporate entities domiciled in low-tax jurisdictions (like Ireland or the Caribbean). These offshore corporate treasuries buy massive amounts of US Treasuries, which are then logged as "foreign demand," despite the capital ultimately belonging to US parent entities.
The Cayman Leveraged Basis Trade:
Global hedge funds operating out of the Caribbean frequently buy massive quantities of physical US Treasuries while simultaneously shorting the futures market to capture tiny interest rate arbitrage spreads. This adds hundreds of billions in artificial "foreign" demand to the TIC data, completely detached from traditional long-term global investment demand.
And what else could go wrong?
Well how about the hedge fund basis trade that relies on the overnight Repo (Repurchase Agreement) market for continuous, low-cost cash funding. Given that this trade is leveraged up to 20-to-1, even a tiny increase in borrowing costs completely wipes out the arbitrage profit margin, triggering a forced unwind.
Collateral Velocity:
Hedge funds pledge their purchased US Treasuries (USTs) to prime brokers to borrow cash overnight.
The Re-hypothecation Loop:
Brokers reuse that exact same collateral to borrow cash elsewhere in the financial system.
The Leverage Trap:
The cash borrowed from the previous step is immediately used to buy more USTs.
The Resulting Fragility:
This chain creates a massive pyramid of debt backed by a single underlying asset.
The Margin Call:
When repo rates jump, the cost to hold the leveraged UST position instantly exceeds the yield earned from it.
The Forced Sale:
Prime brokers demand more cash margin or immediately liquidate the hedge fund's physical Treasury holdings.
The Liquidity Black Hole:
This sparks a cascading wave of forced selling into an already illiquid Treasury market.
ANYTHING ELSE?
Well, apart from the fact that the US has bet the farm on winning the global AI race, which they will lose, the CapEx they are throwing at this bet is the only thing creating the illusion that the economy has not already tanked.
Plus, the export of physical gold is the main revenue used to try to mitigate the GDP Dunkirk - whilst the RoW gold-stackers laugh all the way to their central banks.
The US financial system has engineered a closed-loop liquidity circuit. Traditional offshore sovereign buyers are systematically backing away from funding the US deficit. Meanwhile, the structural void they leave behind is papered over by offshore hedge funds utilising massive private market leverage.
Because this private leverage is inherently unstable and prone to violent repo market spikes, the Federal Reserve has built permanent printing backstops (SRF, FIMA) and structural netting clearinghouses (FICC). The Fed is effectively underwriting the very private leverage that disguises the global divestment out of US Treasuries.
History tells us that policy-makers in technically insolvent economies always choose to sacrifice the currency to try to preserve their bond markets. This guarantees that if you hold UST's to long maturity dates, you will have a massive loss on your originally invested capital.
Also, whilst share market indexes remain exceptionally strong when priced in local currency, if you evaluate those same assets against physical gold, it shows that the perceived gains are largely an illusionary phenomenon driven by monetary devaluation.
The fiat experiment is already on life support, and the BRICS+ bloc have their trade currency lined up - its called GOLD.
Meanwhile the $40 trillion dollar question remains... when will the new Eastern-based financial power centre action the reset?
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