90 seconds at 9 am: New York liquidity pressures rising still

US-Japan trade deal done; US new home sales rise; Fed still scrambling with liquidity pressures; world trade still expanding; ASIC curtailed; UST 10yr yield at 1.72%; oil and gold down; NZ$1 = 62.8 USc; TWI-5 = 68.3

26th Sep 19, 7:16am by David Chaston

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Here's our summary of key events overnight that affect New Zealand, with news the Fed's market liquidity pressures are still rising.

First however, it looks like Japan and the US have reached a deal on a new bilateral trade agreement. It is a modest affair.

Sales on new-built family homes rose in August, and are now a healthy +18% higher than the same month a year ago, building on a rising trend that started in May. This was substantially better than analysts were expecting.

But US mortgage applications took a sharp fall last week even if they are still higher than this time last year.

In New York, their repo operations are being stepped up to provide ever more liquidity. The Fed said it would increase the size of overnight cash loans offered in tonight's trading to US$100 bin from US$75 bn yesterday, while doubling the size of a two-week offering tomorrow to US$60 bln. They are still scrambling to contain the pressures.

The CPB World Trade Monitor shows that volumes rose +1.9% in July, recovering all of the sharp -1.7% fall in June. The big export winners were China, rising +3.6% on this basis and other east Asian nations who were up +4.6%, while Japan was up +1.0%. The US and Europe showed virtually no gains while "other advanced countries" like New Zealand gained +2.6% in exports. US imports fell in this survey, while those from China rose +5.8% and for Japan they rose +4.5%.

Next week's Autumn Festival national holiday in China will see about 800 mln people travelling, the largest holiday relocation ever and a ten percent rise from the record set last year. A small fraction will travel overseas but even so the numbers will be huge. The top 10 countries and regions favoured by Chinese outbound tourists are Japan, Thailand, Italy, Russia, the United States, Turkey, Indonesia, Germany, Australia and the United Kingdom.

In Australia the Government has pushed back against ASIC for being too stringent in enforcing responsible lending rules, warning that this could penalise "hard-working families" trying to get a housing loan, and hurt the economy.

The UST 10yr yield has reclaimed all of yesterday's sharp fall and is back up to 1.72% today, up +8 bps from this time yesterday. Their 2-10 curve is still positive at +4 bps. Their negative 1-5 curve is narrower at -23 bps. Their negative 3m-10yr curve is much narrower at -16 bps. The Aussie Govt 10yr is up +1 bp to 0.97%. The China Govt 10yr is at 3.14% and also up +1 bp. The NZ Govt 10 yr has dipped to 1.14%, a -2 bps shift overnight.

Gold is down -US$22 to US$1504/oz.

US oil prices are lower today at now just under US$56.50/bbl. The Brent benchmark is just under US$62.50.

The Kiwi dollar has fallen back by almost -½c this morning, back down to 62.8 USc. On the cross rates we are still at 93 AUc however. Against the euro we are little-changed at 57.3 euro cents. That puts the TWI-5 back only marginally to just on 68.3.

Bitcoin is now at US$8,345 and a -12% dump from this time yesterday. Remember, this price was over US$10,000 on Monday. The bitcoin rate is charted in the exchange rate set below.

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

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77 Comments

by Gummy Bear Hero | 26th Sep 19, 7:55am 1569441324

Buttcoin is down another $ 10 .. $US 8335 ... the trend is down .... sell Sell SELL .... keep selling until it reverses ... easy peasy , everyone can get rich ...

by printer8 | 26th Sep 19, 8:10am 1569442254

Correct GB
To me, it seems that there is no other rationale in investing in Bitcoin other than guessing/going with the herd mentality.

by Gummy Bear Hero | 26th Sep 19, 8:23am 1569443004

$US 8389 .. she's reversing .. going back up Mr p ... buy Buy BUY !!!!!

by printer8 | 26th Sep 19, 8:36am 1569443775

Yes, yes, yes,

by Gummy Bear Hero | 26th Sep 19, 8:40am 1569444026

$US 8499 .... OMG ...to infinity and beyond ... we're rich Mr p ... the bull is confirmed ... BUY BUY BUY ...

by frazz | 26th Sep 19, 8:37am 1569443867

Gold down USD $22 - no one blinks?

by Voiceofreason | 26th Sep 19, 11:24am 1569453895

It's not a big fluctuation in % terms.

by JediNight | 26th Sep 19, 8:48am 1569444500

Lonewolf? Where art thou?

by printer8 | 26th Sep 19, 8:54am 1569444863

Jedi . . . Shhh!
;)

by Gummy Bear Hero | 26th Sep 19, 9:02am 1569445340

$US 8515 ... woo hooo .... everyone is rich .. except those frazzled old souls who still believe in that ancient relic gold ...

by murray86 | 26th Sep 19, 7:58am 1569441510

In Aussie the Government v the Watchdog (ASIC) - who will win? This move, for the more thoughtful, tends to make the Government look somewhat corrupt. Who are the real beneficiaries of loose lending criteria - the banks! I really hope the media put this under scrutiny, but it is more likely they will suck up to the power and say nothing of substance.

by NoFax | 26th Sep 19, 8:02am 1569441755

Why do you think ASIC is all-knowing? Also the government has multiple factors to consider where ASIC has one. The government just won an election whereas ASIC has none.

by murray86 | 26th Sep 19, 9:36am 1569447380

See Bad Robots comment below.

by BadRobot | 26th Sep 19, 8:00am 1569441602

"In Australia the Government has pushed back against ASIC for being too stringent in enforcing responsible lending rules, warning that this could penalise "hard-working families" trying to get a housing loan, and hurt the economy."

So if it all goes pear shaped who do we blame - the government ? IMHO this exposes the truth behind what governments want - keep the populous "happy" even if the long term harm is potentially much greater. I thought the governments role was to make the hard clear decisions that have long term benefit for the people they serve. Perhaps that is why I am so disillusioned with the political process in NZ ( and the world for that matter).

by Audaxes | 26th Sep 19, 8:20am 1569442859

The cruel hoax of government sponsored central bank monetary policy is being exposed for what it is.

In March 2017, former Treasury and Federal Reserve (Fed) official, Peter R. Fisher, delivered a speech at the Grant’s Interest Rate Observer Spring Conference entitled Undoing Extraordinary Monetary Policy.

Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.

There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?

There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.

Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.

The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.

When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.

But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.

But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax.

by murray86 | 26th Sep 19, 9:45am 1569447947

Agree that it is a cruel hoax. for years I have argued that everyone with no exception is much better off with cheaper houses, and the cheaper the better. But the biggest criers of FOUL to this are the home owners who cannot see the obvious for the zeros in their own perceived net worth. They don't understand that a paper value means utterly nothing to a private home owner other than pushing up their costs. Translating that paper value into a bank balance is another matter altogether. No this is all about a very few getting very rich while most just get more debt.

by scarfie | 26th Sep 19, 10:18am 1569449895

A bit of a seminal speech, and therefore post Audaxes. Keep posting that one every so often so that everyone gets it. When interest rates get to zero then a bit of selling might be required just to survive.

Think of it it this way. You borrow money so as to buy a house at a greater price than was paid for the same house last time. That is credit expansion, and the very act of expanding credit creation pushes the interest rate down. The outcome is baked in to the system.

by murray86 | 26th Sep 19, 10:30am 1569450616

Just one little perspective on this - my wife spoke to her parents this week. they live in Holland, and the banks now charge them for keeping money in the bank! They are in their 80's and don't have a lot of money, and of course to get the social welfare retirement payments, they have to have a bank account! What an appalling state of affairs! it is only a matter of time until that gets here!

by youngdumbandbroke | 26th Sep 19, 9:16am 1569446164

I am also disillusioned. Politics is based on getting elected no matter what your policies are or whether you actually achieve them. Basically just a popularity contest. Also, its human nature to be resistent to change. We find comfort in what we know and fear what we dont know. But those that can adapt to their environment will always come out on top

by Advisor | 26th Sep 19, 8:01am 1569441672

"other advanced countries" like New Zealand

Ouch - you took a nasty dig there, David. Very hard to disagree with you though.

by Gummy Bear Hero | 26th Sep 19, 8:05am 1569441949

The ACT government has legalised cannabis for personal use in Canberra .. Australias capital city ... but , this new law clashes with the federal government ... who convene in .. Canberra !

by Gummy Bear Hero | 26th Sep 19, 8:35am 1569443722

" Flight Shaming " is the new tool being used by environmental activists and extremists to stop us using air flight .. slow travel is the latest boast to come out of Sweden ... where , sales of train tickets have doubled recently ...

... not content with launching that hysterical screeching 16 y.o. Greta Thunberg at us , now we're being shamed for hopping on an aeroplane...

Makes me wonder how she got to New York from Stockholm , to unleash her tirade upon the U.N. ...

by Solidname | 26th Sep 19, 8:40am 1569444019

Um she took a zero emissions yacht, it was in the news and everything.... looks like someone’s jelly’s been triggered.

by youngdumbandbroke | 26th Sep 19, 9:19am 1569446380

Whats the yacht made out of?

by frazz | 26th Sep 19, 9:45am 1569447918

Carbon fiber is made from organic polymers, which consist of long strings of molecules held together by carbon atoms. Most carbon fibers (about 90 percent) are made from the polyacrylonitrile (PAN) process. A small amount (about 10 percent) are manufactured from rayon or the petroleum pitch process.

by theglc | 26th Sep 19, 10:06am 1569449181

everything has an organic origin, its just how you pitch it that makes the difference

by youngdumbandbroke | 26th Sep 19, 10:55am 1569452131

Are the offcuts recyclable?

by nymad | 26th Sep 19, 9:35am 1569447355

So. How is she getting back?
Or to her next token appearance at an equally token UN hui?
I hope that is detailed with just as much specter so as we can properly evaluate the respective carbon efficiencies.

by Solidname | 26th Sep 19, 9:53am 1569448422

I would imagine the same way.... Or do yachts only go in one direction?

by nymad | 26th Sep 19, 9:55am 1569448554

Please confirm this.
There is already too much 'imagining' going on.

by nymad | 26th Sep 19, 9:57am 1569448633

"Greta has said she does not yet know how she will return to Europe."

https://www.theguardian.com/environment/2019/aug/28/greta-thunberg-arri…

by Solidname | 26th Sep 19, 10:11am 1569449510

Well why don’t you wait until she returns? And then you can vent your righteous spleen dependent on the choice of travel...

by nymad | 26th Sep 19, 10:21am 1569450112

Calm down, petal

by Solidname | 26th Sep 19, 11:26am 1569453968

Perfectly calm thanks cupcake, I'm not the one being butthurt by a child with a passionate view.

by nymad | 26th Sep 19, 11:52am 1569455545

I didn't know making you backup your imaginative ideas constituted that.
Passionate view? You mean righteous? Ironic that you used that term in a derogatory manner above.

by Solidname | 26th Sep 19, 12:04pm 1569456269

No I said "passionate", "passionate" ≠ "righteous" please don't misrepresent me to try and make a point, you're a smart person and don't need to do that. Neither you nor I know for definite how she is going to return, I inferred (which may be incorrect) that you are waiting to pounce on any possible way it isn't ecologically sound.

My point was also wider and beyond our little jousting; I find it pretty disgusting that predominantly older people believe it to be acceptable to cast aspersions on a child with a different view to theirs - actively looking for any element of hypocrisy, determined to link her beliefs with outside influences, any possible way to denigrate - when maybe, you know, just maybe, she genuinely believes in what she's doing and is brave enough to make a stand.

by youngdumbandbroke | 26th Sep 19, 12:44pm 1569458665

It was a stroke of genius to use a child as the messenger. Anyone who questions the speech in anyway is automatically dismissed as a bully, tyrant, immature or otherwise.

by GGP | 26th Sep 19, 1:17pm 1569460625

I don't see anyone questioning the content of the speech. Please point out to me a single comment here that is actually about what she said in the speech. Everyone is just talking about her.

You would think, with it being so obvious that attacking a teenage girl would make you look like an asshole, people would focus on the speech. Since it's so obviously wrong, it should be easy to pick it apart, right? And yet, nobody seems to be doing that.

by Solidname | 26th Sep 19, 1:19pm 1569460783

Or.... she made a stand because she wanted to, Occam's razor in action.

I have two daughters of a similar age and they are incredibly socially aware, much more so than I was at their age, and not afraid to speak their minds. Yes our parenting has had an influence on that, however, they have made stands based on their beliefs, that we advised them that it may not be best for them to make. They still did.

by denver | 26th Sep 19, 2:31pm 1569465062

Have you even considered she might actually be passionate about the topic?

So quick to assume everything but.

by nymad | 26th Sep 19, 2:09pm 1569463768

How was her impassioned appearance(s) about anything other than moral superiority?
That is the definition of righteousness - the moral highroad.

by Solidname | 26th Sep 19, 2:09pm 1569463798

You’re aware she has Asperger’s?

by nymad | 26th Sep 19, 2:22pm 1569464530

"My message is that we'll be watching you.
This is all wrong. I shouldn't be up here. I should be back in school on the other side of the ocean. Yet you all come to us young people for hope. How dare you!"

etc, etc

"We will not let you get away with this. Right here, right now is where we draw the line. The world is waking up. And change is coming, whether you like it or not."

If that isn't righteous verbose, I have no idea what is. Regardless of whether she suffers from autism or not.
But hey, if there was anything I missed about her saying how we can actually achieve climate action - do let me know.

by denver | 26th Sep 19, 2:34pm 1569465251

Is that all you took out of what she said?

*Slow Clap*

by Solidname | 26th Sep 19, 2:46pm 1569465968

She's already done that. https://www.theguardian.com/environment/2019/sep/19/greta-thunberg-we-a… Cue the tree hugger jibes...

And also it actually is important to recognise that someone is on the spectrum as their communication style can be different - it may appear direct, aloof etc etc.. In this case it's needed, candied flowery words have done absolutely bugger all.

by youngdumbandbroke | 26th Sep 19, 2:43pm 1569465798

Did you seriously just use Asperger's to argue a point?

by Solidname | 26th Sep 19, 2:51pm 1569466298

When someone is talking about how someone has delivered a speech and how it came across, it's a relevant consideration. It would appear you disagree.

by nymad | 26th Sep 19, 2:57pm 1569466635

I was primarily talking about the content. Not the delivery.
It was emotive and verbose.

by youngdumbandbroke | 26th Sep 19, 3:22pm 1569468139

Seems to me you tried to use aspergers to explain away nymad's point. Stooped pretty low there champ

by Solidname | 26th Sep 19, 5:08pm 1569474524

That would be your miscomprehension “champ”

by youngdumbandbroke | 26th Sep 19, 10:05pm 1569492307

Ironic. Just a post ago you miscomprehended nymads comment. Pot calling the kettle black? Fail again champ

by youngdumbandbroke | 26th Sep 19, 2:42pm 1569465722

When you make very bold statements and call out very influential people on a world stage, scrutiny and analysis of what you said but also of your own endeavours comes with the territory. This includes outside influences whether they be financial, political etc. The society we live in allows that we are free to discuss and argue each others points. This is the basis of democracy.

by frazz | 26th Sep 19, 10:34am 1569450883

Have you ever sailed from one country to another - beats air travel any day - and no jet lag!

by frazz | 26th Sep 19, 8:42am 1569444141

She Sailed there you moron, and please don't quote Hosking on this site - some off us avoid him and the NZ Herald like the plague.

by youngdumbandbroke | 26th Sep 19, 10:59am 1569452391

Could we also add referencing Stuff to the banned list ? Another tabloid gossip site posing as a news outfit

by Noncents | 26th Sep 19, 11:42am 1569454931

Yes (as per a previous post I have made) she sailed in a wooden yacht made from sustainable forestry, organically grown natural fibre sails, and no electron....

Oh wait, it was a high technology monohull made from entirely man-made materials (Fully oil based), with nylon sails, and advanced electronics, all paid for in currency earned/based on debt and consumption of energy.

She went to the UN to talk to all these people - who all flew in just for the occasion (and by all reports she is flying home)

Can someone please explain how much carbon was actually involved in her completely hypocritical speech?

Could they not just have undertaken a video conference. Is it too much to ask that if anyone is going to protest "Climate change" and carbon footprints. At least fully comprehend what they are talking about.

by nymad | 26th Sep 19, 11:55am 1569455731

Exactly.
Just ridiculous to trumpet her token appearance as a stand against climate change based on the fact she sailed there, while completely ignoring how she is getting home.

by Noncents | 26th Sep 19, 12:29pm 1569457773

What she fails to understand is that she is part of the problem.

It is not government regulation that will save us.

It is our own personal consumption that needs to decrease.

by James007 | 26th Sep 19, 12:56pm 1569459390

Meanwhile, all the world leaders travel on their OWN aircraft. Not even scheduled flights in economy class.

Where are you all living - how do you build video conferencing facilities - with FOSSIL FUELS. Almost everything in our modern world has fossil fuels associated with it.

Greta took 2 weeks to get across the Atlantic instead of 6 hrs - figure the difference in fossil fuel consumption.

by RickStrauss | 26th Sep 19, 7:36pm 1569483400

In fairness, there's no way for a person such as Thunberg (or any other person trying to effect pollution reduction or environmental protection) to win with detractors.

There's the old Jordan Peterson advice that "Rather than protesting now and asking others to change, work yourself up into a of power and influence and then work to achieve change". Which is great, but then people who do that then get hit with the "Oooooh, but you're such a hypocrite flying to that meeting of leaders!"

Then if they don't fly, they get the comments above.

Then they get the presumption of not having made any lifestyle sacrifices in support of what they stand for, a perfectly unreasonable assumption.

One might be excused for getting the impression that most opposition boils down to little more than "Harrumph! Just shut up and don't ask anything that might inconvenience me!"

by youngdumbandbroke | 26th Sep 19, 10:06pm 1569492388

You mean others like Prince Harry?

by JediNight | 26th Sep 19, 8:49am 1569444546

Ban tourism

by RickStrauss | 26th Sep 19, 7:31pm 1569483072

In fairness, it's normally the grumpy ranters ranting at folk who dare to take an aeroplane to a meeting of leaders to try to effect change, looking to shame them for hopping on an aeroplane...

by theglc | 26th Sep 19, 9:02am 1569445362

Classic Trump derangement syndrome as CNN salivates over a transcript which pretty much clears Trump

https://edition.cnn.com/2019/09/25/politics/ukraine-transcript-donald-t…

Looks like the Dems are shooting themselves in the foot and now the unthinkable could happen in 2020, Trump gets re-elected. Who would have thought that could have even be a possibility....

by Pragmatist | 26th Sep 19, 9:31am 1569447113

When was the last time the US failed to re-elect a sitting president?

by murray86 | 26th Sep 19, 9:40am 1569447617

George H Bush was a single term president. I don't know if he didn't stand again or lost in the election.

by Pragmatist | 26th Sep 19, 12:48pm 1569458909

Three sitting presidents have failed to get re-elected since the great depression.
Bush,
Carter,
Ford (Who never got elected in the first place, inherited the job when Tricky Dicky ran for cover rather than be impeached)

by murray86 | 26th Sep 19, 10:01am 1569448877

It is clear that Trump asks Ukraine to investigate Biden's son, and effectively tried to strong arm them. He should be impeached. Americans should be ashamed of him.

by youngdumbandbroke | 26th Sep 19, 12:46pm 1569458783

Not so sure. If the investigation does find Biden to be guilty of corruption, doesn't that vindicate Trump?

by Pragmatist | 26th Sep 19, 12:49pm 1569458964

Yeah, thats not how it works. One wrong doesn't cancel another

by youngdumbandbroke | 26th Sep 19, 1:08pm 1569460086

It does actually. Trump is accusing Biden of corruption. It that turns out to be the case, win for Trump. If Trump impeachment is unsuccessful, it makes me double correct

by theglc | 26th Sep 19, 12:57pm 1569459467

"and effectively tried to strong arm them" Using a bit of a creative licence there, even the Ukraine President said he wasn't pressured in the call.

by ShoreThing | 26th Sep 19, 9:27am 1569446851

So the Fed really can't get the money markets under control. I wonder what effects this will have.

by Audaxes | 26th Sep 19, 9:34am 1569447254

Germany’s Lautenschläger Resigns From ECB Board

FRANKFURT—The most senior German official at the European Central Bank unexpectedly resigned before the end of her term amid a conflict over a move this month to restart the bank’s giant bond-buying program.

Sabine Lautenschläger, who sits on the bank’s six-member executive board in Frankfurt, will leave the bank on Oct. 31, more than two years before her eight-year term had been due to end, the ECB said Wednesday.

She is the third German-born official to resign from the ECB in just over eight years following policy disputes.

by theglc | 26th Sep 19, 10:04am 1569449054

Im sure its because she wants to spend more time with family... or some peddled BS like that

by Boatman | 26th Sep 19, 9:34am 1569447260

Fonterra posts $605,000,000.00 loss ............. compare this to the eye watering loss by Fletcher group of $190m last year .......... makes the Fletcher mess look like chicken shit

What a spectacular cock -up , this is on top of Fonterras $180,000,000 loss last year ......AND......

Sales of really good assets of $1,000,000,000 ( $1,0 BILLION ) , so the some of the best assets that really made money are gone

Ask any economist .....this could push us into a serious mess if not handled properly ........... If Fonterra stops spendingin the economy , or starts austerity , or retrenches workers , its going to push the provinces into recession as people go onto welfare , and more welfare means a budget blowout.

We need to ask ........... is Fonterra even solvent ?

by James007 | 26th Sep 19, 1:00pm 1569459643

Boatman,
We are going into recession anyway - only question is when?