Here's my summary of the key news overnight in 90 seconds at 9 am, including news it was a star turn for the US economy overnight.
American economic growth was revised higher for Q2 to 2.5% annual rate.
A jump was expected from the initially reported 1.7%, but not this high. Although it was 'only' for the June quarter, data out in the past two months has given every indication that there has probably been a pick-up from there.
However, it seems unlikely the Q3 number will be as impressive and Q3 last year was very strong.
What does this mean for the Fed and its planned tapering of bond purchases? The US economy is growing faster than thought - even absorbing the Federal sequestering pressures - and so it will give them reason to go earlier than otherwise.
Markets seem to be factoring that expectation in and remains wary of tapering. The Dow is falling today, oil is winding back its Syria gains, and gold fell.
The latest initial jobless claims weekly data shows the expected drop.
This growth may be fast-narrowing the US Federal deficit, but that debt is still growing. And yet another debt-limit debate is about to start in Congress as it is projected the US will reach its US$16.7 trillion limit in October.
US Treasury yields rose on the GDP data. The 10 year now yields almost 2.8% and some are predicting 3.1% by years end. But rising Treasury yields won't help that Federal deficit. Each 0.1% rise will cost them US$16.7 billion a year.
Overnight Indonesia raised its main policy rate by a 0.5% to 5.25%, reflecting a growing realisation that defending the rupiah is a more pressing need than maintaining rapid economic growth, which this year may fall below 6%. Inflation in Indonesia is running at over 9%.
The Indonesian move follows Brazil; it wasn't that long ago Brazil was complaining its currency was too high - now its made policy moves to raise it.
Today we get important building consent data updates. And we get a look at the July growth in the credit markets, especially the housing market.
The NZ dollar ends the month down 2.7% from a month ago at 77.7 USc, 87.1 AUc, and the TWI is 73.7.
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US Treasury yields rose on the GDP data. The 10 year now yields almost 2.8% and some are predicting 3.1% by years end. But rising Treasury yields won't help that Federal deficit. Each 0.1% rise will cost them US$16.7 billion a year.
Yes, but think of the collapse of the NPV of $trillions of projected US government liabilities. I also believe under invested US pension funds have enjoyed a larger fall in net present values of liabilities than losses in bond portfolios - recent flatteneing of the US government curve (~25 bps in respect of T10 vs T30) is attributed to those same pension providers locking up the 30 year yield.
Unfortunately in our own realm higher US interest rates have seen a previously so-called foreign investor sacrified on the altar of foreclosure. It would seem Westpac is the damaged party or naked bather, using Warren Buffet's tide analogy. Impressions of wealth need to be checked I guess - esteemed financial reputations often represent undisclosed accumulated debt. Read more
Speaking of debt ceilings - not sure whether anyone has already linked this re such on the local front;
Great to see our A-G coming out on the side of 'let's get real', Where their earlier 'audit' of first generation LTPs was concerned - it seemed to me that all manner of creative accounting got the tick.
Just hold the phone on that one Kate....I agree it would be nice to see if consistency is applied by the A-G, on a borrow less basis anyway but....,
Council finance group manager Warwick Read said other councils had been revaluing land under their public roads for some time without attracting adverse comment from their auditors or the Auditor-General's Office.
A. how does he know that...? B. if so then , is it signaling a change/ tightening in audit style from the A-G office.C. would in that case, it not have been under direction due to a developing credit crisis...?
Pure speculation on my part but;
A. Easy - if he says its standard practice, you can bet it likely is.
B. Yes.
C. Yes.
The council's own pre-election report said without the revaluation the council would have little flexibility to undertake any extra capital works till 2020.
If the next round of asset revaluations does not reach forecast levels then the council could have to cut capital works to stay under the debt to asset limit, it said.
So it seems it is not just an issue of no additional spending, but rather a we can't do what we had already forecast/budgeted to do. And it could even turn into a we can't pay for what we've already done (without significant rates increases to compensate) - for not only KCDC potentially but a whole lot of other TLAs perhaps.
Kumbel would likely have a better idea of how much other TLAs rely on this land under roads revaluation process. The small in population but large in geographic area districts will be the most affected, I assume. KCDC's revaluation was going to add $300m worth of "breathing space". KCDCs rates revenue is around $42m pa - so the value of the revaluation isn't insignificant.
Asked about concerns some ratepayers would have about such a big increase in debt, Butcher said the value of the Council's assets was forecast to rise by significantly more than its borrowing. Auckland Council's about NZ$36 billion worth of assets are forecast to increase in value to about NZ$58 billion in 10 years.
"So debt increases by NZ$7.5 billion, assets increase by NZ$22.5 billion. So therefore equity from a ratepayers point of view increases from about NZ$29 billion to NZ$42 billion. That increase occurs because obviously we’ve got government contributions in terms of transport and capital expenditure, we’ve got inflation in terms of assets increasing in value, you’ve also got the private sector coming in as well too."
Surely a release of equity back to ratepayers would allay concerns about the inexorable rise of rates bills, then asset and liabilities would match? Or is this asset revaluation formula a fervent wish rather than a realisable reality?
How vunerable is asia (indonesia)?
http://krugman.blogs.nytimes.com/2013/08/29/asian-vulnerability-then-an…
Mmmm..... maybe some , fund managers had a gutsfull ngakonui G...?
Heartland Bank sees growth in key products and falling funding costs leading it away from troubled legacy property. Heartland Bank is touting strong growth from its "hero products" and falling funding costs as it aims for an about fivefold increase in annual profit.Heartland, as expected, yesterday posted a 71% fall in annual profit to $6.9 million, after its bottom line was savaged by pre-tax write-downs stemming from its non-core property holdings. It also reiterated June's forecast for June 2014 year net profit after tax of between $34 million and $37 million... Read more
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