Benchmark yields ease on Fed's inflation fighting commitment; US data soft; Canada PPI high; Singapore exports shine; eyes on Bank of Japan; freight rates hold high; UST 10yr at 4.94%; gold rises, oil holds; NZ$1 = 57.3 USc; TWI-5 = 60.8

Espiner this morning (M/R, RNZ) demonstrating the ignorance that is the NZ MSM.

"recovery". 

That's to an exponential growth pathway, within a bounded system. Which is possible temporarily, but not permanently. 

Same foolishness as 'back on track' - and we've seen where that went. 

Economics a social science... this from CNN overnight:

https://www.cnn.com/2026/09/17/business/technology-retail-food-economy?cid=android_app

In the race for technology to add efficiency into retail busines, perhaps a vital element has been overlooked or at least under valued. That is that humans are the activator of a transaction for goods or service. And the actual activation process is shaped by complex and highly variable human functions and emotions. I understand that to be a good marketer, one aims to build an emotional connection for the buyer to the product - functionality and cost efficiency are lower down the priority order. So at that point, the social nature of the transaction is recognised.

In the article the article notes product theft was higher through self checkouts, than through the staffed counter. And i note in supermarkets I use there is always an eagle eyed staffer watching over the self checkout. And on the rare occasion I've shopped at KMart, paid at self checkout, I'm accosted at exit to reconcile the receipt with what's in my bag. Akin to being guilty until I can prove my innocence - hardly a socially enjoyable interaction. 

Perhaps it's because I'm a bit older and can remember mum passing the shopping list to the counter staff and seeing the flour, sugar, etc being weighed out, and hearing the banter, that I still value an interaction or brief conversation with the staff person processing my transaction. I am not a fan of self checkout, and my position is that money only gains value in a social context.

So the U.S. 10-year Treasury yield has slipped back to around 4.94% this morning, while the 30-year is sitting at 5.29%.

Cue the usual temptation to declare that the bond market has calmed down - just me, but I won't be rushing to any new conclusions on this score.

A few basis points of relief following a sharp rise in yields tells us very little about whether the underlying problem has been resolved. In fact, several analysts remain distinctly bearish on the long end. 

ING, for example, is maintaining a bearish stance and identifies 5.25% as its next target for the 10-year, arguing that high inflation, the fiscal deficit and expanding issuance continue to weigh on the back end of the curve - and there is a much more fundamental issue here that deserves far more attention than today's 7 bp decline.

Who is actually going to absorb all this debt?

This is where the changing composition of Treasury buyers becomes crucial.

The U.S. Treasury's own data show that foreign private investors have increasingly replaced official-sector buyers as the source of foreign demand. Between 2023 and 2025, foreign private holdings increased by about $1.3 trillion, while official-sector holdings increased by only around $0.1 trillion. 

By 2025, foreign private investors accounted for roughly 58% of foreign Treasury demand, versus about 42% for official investors - and that changes the economics of the market.

Central banks and other official institutions have historically been relatively price-insensitive buyers. They may buy Treasuries for reserve-management or monetary-policy reasons even when the yield isn't particularly attractive.

Private investors are different - they can simply say - No thanks, not at that price.

Even the Council on Foreign Relations recently spelled it out - "Treasury issuance is increasingly outpacing the appetite of price-insensitive buyers, meaning that more of the debt has to be absorbed by households and investment funds that demand higher returns when fiscal and inflation risks increase."

Once the marginal buyer becomes increasingly price-sensitive, the Treasury has to offer a sufficiently attractive yield to clear the enormous quantity of debt being issued.

And that creates the nasty feedback mechanism...

larger deficits → more Treasury issuance → greater competition for private capital → higher required yields → higher interest expense → larger deficits → still more issuance.

The Fed's Christopher Waller has actually acknowledged part of this problem, saying there is no longer a safety premium for U.S. government debt and that the neutral rate has therefore moved higher. He also said that getting out of a roughly $40 trillion debt load would require structural deficits to move much closer to zero from around 6% of GDP (IOWs pigs would have to fly). As such I'd read this morning's numbers differently.

Once the marginal buyer becomes increasingly price-sensitive, the Treasury has to offer a sufficiently attractive yield to clear the enormous quantity of debt being issued - it is not the Treasury that gets to decide what yield investors will accept - the market does.

Dan Niles has recently argued that the 10-year could ultimately reach 6%. That is not a consensus forecast, but it is useful as an indication of how far some investors think the long-end problem could run. Personally, I see 6% as conservative, but at the same time anything above 5.5% as a meltdown line.

https://247wallst.com/investing/2026/09/16/dan-niles-warns-the-the-10-y…

And if investors begin demanding 5.25%, 5.5% or eventually 6% to absorb the supply, the Treasury cannot simply announce that this is inconvenient and make it disappear.

The recent 20-year Treasury auction is a useful illustration. It required a 5.42% yield to sell $13 billion of bonds - the highest yield on that maturity since it was reintroduced in 2020.

So I wouldn't read much into today's modest decline - my expectation is that it is simply another temporary fluctuation around a much higher structural trend.

Oil prices can fall. A Fed announcement can calm markets. A bout of risk-off buying can temporarily push yields lower, but none of those things changes the underlying arithmetic of enormous deficits, enormous refinancing requirements, geopolitical fragmentation, inflationary supply shocks and an increasingly price-sensitive marginal buyer.

IMO, the critical question isn't whether the 10-year can temporarily fall below 5%, it is whether the Treasury can continue issuing debt on the scale required without continually having to raise the yield required to persuade someone to own it.

A very different question, because if the answer increasingly becomes only at 5.25%, 5.5% or higher, then today's 4.94% isn't evidence that the Treasury crisis has passed.

It may simply be another pause on the road to discovering what the market actually requires to finance America.

we should probably note that Chinese president Xi will be visiting the US next week and there is a frenzy of advanced negotiations underway in preparation so that both he and Trump can announce something 'substantial' and worth the visit

I doubt anything "notable" will be achieved, even though Trump will brashly claim achieving amazing deals, the greatest ever for America, like a 5 year old child, whilst Xi will smartly keep his cards close to his chest.

Most of the 10 year Bond yields in the western countries around 5%, but in China, it's 1.7%.  Do we conclude that the world trusts China more than the west, or is this more a result of capital controls ?

AUD1 will now buy NZD1.24. This is a significant discount to the 10 year average and a long way from near parity back in 2020.

There must be some Aussies out there casting a covetous eye over NZ assets, including residential property given the recent capital tax changes over there