Here's my summary of the key news overnight in 90 seconds at 9 am, including news that bank leverage ratios are on regulator minds.
Proposed Basel 3 rules will require banks to hold at least 3% of their assets as capital, a foolishly low level. That is, for every dollar shareholders have at risk, banks risk $32 of depositor or other liabilities. That new 'tighter' requirement won't come in until 2015 - if Bank for International Settlements members vote for it.
US regulators are horrified, and are proposing a rate double the Basel proposal - 6%. Bank of England officials don't want to wait until 2015 and want the new standard applying from now.
From our local point of view, our banks are all well above that standard. On average, for every $1 shareholders have at risk, depositors and other liabilities are at risk for $11 here.
But the whole issue highlights two important points; how risky the big international banks on which world trade depends are, and how effectively their lobbying has captured policy making at the BIS, which is supposed to be the central banks' bank.
Back to the real world, US car sales in the June quarter picked up significantly and were the best in more than five years. This sign of the American economic improvement is also being seen by key Fed members who now think the fiscal drag of tax increases in Q1 are behind them.
However, bond investors are suffering as the prospect of higher interest rates is generating capital losses in their portfolios. American investors withdrew US$80 billion from bond funds last month, $10 billion out of a big Pimco fund alone. Rising rates are bad for bond investors. The money flows to equities, although in late trade today the Dow has shed early gains and is now well below the 15,000 level. The oil price is much higher, but gold is sinking again.
Prices in the latest Fonterra auction are stable, up just 0.7% from the previous auction and holding their US$ levels. In NZ$, we are recording a larger +3% rise.
The NZ dollar starts today at 77.5 USc, 84.8 AUc, and the TWI is at 73.8.
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4 Comments
Lol - that's because there are few with the money and fewer with a professional interest. - my attempts to query the DMO about the previous TBIll failure in the 6 month slot drew a muted response - I didn't bother this time - I guess it's a matter of "Hear Nothing See Nothing Say Nothing".
"Christchurch tenants are now paying an average of $400 a week in rent - $107 or 36 per cent more than they did before the September 2010 quake".
http://www.stuff.co.nz/the-press/business/your-property/8870586/Christchurch-rents-leap-100-a-week"
Official Inflation running at less than 2%............yeah sure
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