90 seconds at 9 am

90 seconds at 9 am: US Treasury bond yields sharply higher as US growth signs emerge; Oil up 2%; Gold down as QE III fears recede

19th Mar 12, 8:16am by Bernard Hickey

US Treasury bond yields sharply higher as US growth signs emerge; Oil up 2%; Gold down as QE III fears recede

Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news the oil price has risen 2% to US$125/bbl for brent as expectations grow of stronger demand from the global economy.

See more here at Bloomberg on rising oil prices.

US Treasury yields have also risen sharply over the last week on hopes the US economy may have begun a self-sustaining recovery, which would push up future interest rates and reduce the need for further quantitative easing or money printing to buy bonds.

The US 10 year Treasury bond yield rose by as much as 30 basis points, their biggest rise in 8 months.

See more here at Bloomberg.

Also, the gold price fell sharply as investors looked at the US Federal Reserve's comments about not needing a third round of quantitative easing.

Investors will also be watching New Zealand GDP figures due on Thursday.

They are expected to show growth of 0.6% in the December quarter, due partlyy to the Rugby World Cup and strong production growth in dairying.

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

28 Comments

by Les Rudd | 19th Mar 12, 9:18am 1332101894

Damien Grant is wrong, John Walley is right:

John Walley: Printing money another useful part of economic tool kit

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10792774 Have a great day, Les. www.nzmea.org.nz

by Wolly | 19th Mar 12, 9:21am 1332102119

Les....your tin drum has a hole in it....QE is stupidity!

by Les Rudd | 19th Mar 12, 9:34am 1332102854

Not in the way that has been proposed, in the background to the relevant articles. Ignoring the benefits is stupidity - but does not impact YOUR vested interests, as we managed to surface in previous discussions. For once Wolly why not speak out of something other than pure self-interest? Your'e not such a Randist, so that might be possible, if you can pull yourself away from counting your deposit interest.

Get y'self a Big Mac, Les.

by steven | 19th Mar 12, 11:01am 1332108110

I dont think Wolly is much of a randist...he is an ignoramus.....

regards

by steven | 19th Mar 12, 10:57am 1332107870

No, where is the inflation in the USA? after QE1 and 2? no where, why? becasue we are a credit driven world economy, that means 95% of the money in circulation is credit, 5% is "cash" So printing "cash" is miniscule in comparison to credit....and thats the huge danger....collapse of credit.....when that happens, well Wolly you will be working until you die....it will be Great Depression mk2 and OAP will I suspect be gone. Then printing or QE is a problem because printing will be a decent % of money in circualtion.

regards

by Wolly | 19th Mar 12, 11:25am 1332109550

Jeez steven you need to stop believing in fairies..the printing that has taken place has already destroyed the value of savings for many..go speak to poms with pension investments that provided income...the BoE drove down the return rates below inflation...that was what was intended. Savers are being robbed blind by QE....and here we are with Les and Co demanding the RBNZ imagine up more money....are you telling us that if we all add a zero to our incomes, there will be no inflation...are you serious?

by steven | 19th Mar 12, 12:33pm 1332113639

QEing isnt adding zeros to your income....you clearly do not wish to understand what I am saying....enjoy the coming Depression...you are signing up to it willingly.

regards

by Wolly | 19th Mar 12, 12:45pm 1332114348

Oh right well in that case if bollard 'prints' up a hundred trillion billion dollars we can all be stinking wealthy....right?

by steven | 19th Mar 12, 1:07pm 1332115640

Wolly, we are all about to be stinking poor, (or rather realise we already are) and our children and grandchildrens, grandchildren (if with AGW there are any).

Now if you want to take an extreme and irrational position and use it to justify you point, yeah right is all I can say.

If you look at the original US Obama plan it was 600 to 900million US.....the people who were serious about that working said (and still say) it needed to be double that to work....so too small too late....let alone that even that half was knee capped by porking so it was doomed to fail....Now they didnt say 3 times or 4 times........

regards.

by iconoclast | 19th Mar 12, 1:22pm 1332116543

Gee Whizzz Steven, you are confusing. When you say coming depression do you have an event horizon? Can you give a precise date? What is your time frame? In your second post you then go on to state WE are all already poor. And children, and their children and so on. Thats pretty extravagant language. PS. are you keeping a database of all your predictions?

by powerdownkiwi | 19th Mar 12, 1:35pm 1332117324

iconoclast

http://dieoff.org/page25.htm

2nd graph down. They ran it with 'double resources'; made stuff-all difference. You can work out what happens to finance given that lot.

by skudiv | 19th Mar 12, 3:58pm 1332125888

Easter Island explains it all.

As we try to imagine the decline of Easter’s civilization, we ask ourselves, “Why didn’t they look around, realize what they were doing, and stop before it was too late? What were they thinking when they cut down the last palm tree?”

It's just nature, self organised criticalcality, you can't change that. "It's not the strong that survive, but those most adaptable to change."

by David B | 19th Mar 12, 12:18pm 1332112683

Steven, inflation pressures are now mounting in the US, it's almost about the only thing that people at the coal face in business and the financial markets are talking about when they consider how to position themselves and their businesses for the future. Keep up!

by steven | 19th Mar 12, 12:32pm 1332113524

Keep up no, Im there, I suggest you take off the political and voodoo economic blinkers. While I agree on there being huge pressure for inflation from the effects of Peak oil and demand I/we dont agree it will happen or significantly and overall. eg when the likes of Proctor and Gamble raise their prices by 8% and lose 7% of sales so have to back track...its a clear case of, cant be done.

Even then its at best spotty, when ppl have no more money, or even less that is deflationary.....

The markets got us into this mess and didnt see it coming...so what you suggest is do a lemming and listen to them and run off a cliff, no thanks I will plot my own course. Great thing about these bozoes "positioning" themselves is there is a contarian and probably asymetrical trade brewing.....

Lets see who's right in keeping up old chap.

regards

by skudiv | 19th Mar 12, 1:07pm 1332115623

11% is now cash, at least for the big five Central Banks.

by steven | 19th Mar 12, 1:14pm 1332116047

Central as in Reserve banks? or big commercial banks?

URL?

If its the central RB's well that is the point of why QE isnt having much effect good (recovery), bad (inflation). The comments that credit is being destroyed ie a big part of the money on circulation is NET disappearing hold true compared to money printing trying to replace that credit, its simply too small as incredible the amount of money that it is....hence no inflation and a preponderence of deflatioanry forces.

Which comes back to, this is incredibly involved...interlinked and dynamic in nature.....ouch.

Anyone who puts on a preconceived or set of politiclal blinkers on is really doing themselves a dis-service....

regards

by skudiv | 19th Mar 12, 2:39pm 1332121187

"Anyone who puts on a preconceived or set of politiclal blinkers on is really doing themselves a dis-service...."

by steven | 19th Mar 12, 11:56am 1332111392

Both wrong, almost as mis-guided and ignorant as Damien IMHO....except Damien smears anything that isnt from his economics school, either that or is ignorant on Keynes and doesnt care. Austerity will send us dounble quick into a recession/depression....the worst ever seen.

QEing is money printing is a liquidity trap, to try and avoid a hard landing....and its a sound economic theory with real results ie Great depression with ww2 spendup....and which could get us out of the poo....except we wont have the energy to do it...JW makes up other reasons why to do it....ho hum.

Our economy and way of life needs re-designing from the ground up....and we will do it....nature wont allow us an alternative.

regards

by Ralph | 19th Mar 12, 12:43pm 1332114226

Mr Walley's argument seems overly simple. The exchange rate is a problem - printing money lowers the exchange rate (all things being equal). Therefore printing money is a good idea.

There are at least two problems with this view.

One, all things are rarely equal. Sure, if you print money it's worth less than the other guys money - but only if he doesn't also print money. If we all jump into a printing war where does it end?

In a currency war (we all start printing as fast as we can) the dollar with a strategic advantage is the USD, against which we cannot 'win' any money printing fight.

Two, although he identifies a problem (the high exchange rate) he brings no intellectual vigour to the solution. Of all the things that could be done he mentions one. Without any comparison of other possibilities how can a proposal of one be recommended as 'right'?

In his defence maybe he simply wrote as a rebuttal to Mr Grant. Still, at the least, it is lazy.

by steven | 19th Mar 12, 12:48pm 1332114526

"one", yep, the other guys are already printing...the problem is for our exchange rate is we are not....its a game of relative. What he doesnt get is what is driving this, which in the short term is massive debt and longer term expensive and scarce energy.....What he doenst get a or refuses to aknowldege is, the latter isnt a transient event.

"two" yes....I agree...

by powerdownkiwi | 19th Mar 12, 9:18am 1332101918

Oil will be interesting. Obama is trying to tell folk to move off 'last century's fossil fuels', but Joe Blow won't get the nuance, and the lobby forces will keep winning. It's too easy to believe what you want to believe; that your way of life will be exactly as you want it, onlt better, cheaper and less inconvenient.

http://www.theoildrum.com/node/9034#more

There are some thoughtful thoughts in the comment thread too. The moment economic activity puts its head above the parapet from now on, oil supply (sometimes reflected in cost) will shoot it down.

by Wolly | 19th Mar 12, 9:26am 1332102406

And along with the oil price shots will be the rising cost of credit bomb.

Don't be shocked to see the swine move to maintain the recession conditions....more of the same for a decade at least...The debt Elephant cannot survive a rise in the return on bonds.

by powerdownkiwi | 19th Mar 12, 9:30am 1332102657

No Wolly - use your brain. They all do better when there is no recession. This is a growth limit, the king of them all; a limit to the grunt available.

by skudiv | 19th Mar 12, 1:12pm 1332115932

Where is the limit?

by steven | 19th Mar 12, 1:19pm 1332116381

I would say 95% certain the limit will be hard and within 5 years, 100% within this decade.

We are on a finite planet, so there has to be a limit...from what I can see in the 1950s they knew of it....but did nothing. So they can kicked for 50 years...each succesful generation of Pollies and populace...then in the last 10 or so they did it with IOUs - debt....until here and now....when we are getting close to the end of the kicking.....

So the good thing is the debt will be defaulted on or written off, sooner the better....the bad thing is all the cotton wool around us for the last 60 odd years will go really fast, what is left will be tough.

regards

by skudiv | 19th Mar 12, 1:36pm 1332117379

Heaps of time then.

by steven | 19th Mar 12, 1:47pm 1332118073

For what? running around like headless chickens?

LOL....

regards

by steven | 19th Mar 12, 10:21am 1332105715

No, Wolly on several grounds/point.

1) To pay the debt off they have to have growth of 4% minimum....whats of real concern is the Pollies now need 5%+ to do that they have to stoke the economy and that will cause inflation....however they will fail 100% guarannteed, there isnt the energy.

2) Keeping us in recession is dangerous because that would or could tip us into a second great depression.....close to zero growth is very unstable economicially and also socially...if ppl doent have jobs or the hope of them they riot...

3) Bonds dont matter as long as there is growth....inflation cancels the bonds %

4) A recession kills the Govn's income.....the pollies wnat to give us "more" porking so they get re-elected, they cant do that if income is collapsing....At which point taxes have to go up.....they wont get re-elected.

regards