90 seconds at 9 am: Yields keep rising

Greece close to deadline; Swiss raid HSBC; US PPI in sharp fall; growing Japanese deal appetite; UST 10yr yields rise again; gold under US$1200; NZ$1 = 75.2 USc, TWI = 78.6

19th Feb 15, 7:26am by David Chaston

Here's my summary of the key issues from overnight that affect New Zealand, with news of the rise and rise of wholesale swap rates.

But first, Greece will submit a request to the euro zone on Thursday to extend a "loan agreement" for up to six months. However EU paymaster Germany says no such deal is on offer and Athens must stick to the terms of its existing international bailout. I suspect we are now getting close to someone blinking.

Staying in Europe, Swiss prosecutors searched HSBC's offices overnight after opening a criminal inquiry into allegations of aggravated money laundering, the second probe to hit the bank this week. This probe completely undermines the bank's claim that such practices were 'in the past'.

Across the Atlantic, producer prices recorded their biggest decline in more than five years in January of -0.8% on plunging energy costs, pointing to very benign inflation in the near term that could argue against raising interest rates.

Also, American manufacturing output rose modestly in January and not at all in December, potentially worrisome signs for their economy given the recent strength of the US dollar and weaker overseas markets.

And continuing the theme of flat news out of the US, housing starts fell in January as ground breaking for single-family homes slipped, but they are still at healthy levels.

This winding back of US growth has the Fed reassessing the speed with which they will start raising interest rates. Today's release of their minutes from their January meeting details their confusion about when to start. The US dollar fell on the news, pushing up the NZ currency.

Closer to home, yesterday's purchase of Australia's Toll Holdings by Japan Post will be at the centre of one of the biggest and important corporate transformation programs in Japan, and which will also have implications for how the country's financial services industry works as Abenomics takes hold. We should expect to see more Japanese buyers in the takeover market in the years ahead, pumped up by Japanese stimulus funding.

The UST 10yr yield has extended it now growing string of rises and is now at 2.12% today. Yesterday local swap rates played catch-up on previous rises with a markedly steeper curve. Given the further rises in New York earlier today more rises locally are likely.

The oil price held its lower prices overnight and is now at US$52/barrel with Brent crude up at US$61/barrel.

The gold price fell further and is now back below US$1,200/oz at US$1,198oz. That puts it back to where it started 2015.

We start today with the New Zealand dollar level-pegging against the US dollar at 75.2 USc, up to 96.7 AUc, and the TWI is at 78.6. These levels jumped ½c on the FOMC minutes.

If you want to catch up with all the changes yesterday we have an update here.

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

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

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.

12 Comments

by MortgageBelt | 19th Feb 15, 8:03am 1424286222

Fed is still pleading patience and admits they can't raise rates.

by Boatman | 19th Feb 15, 8:57am 1424289465

HSBC Raid , why don't the folk at HSBC just behave themsleves ?

Lending to Iran under sanctions ( allegedly funding Hamas terrorism)
Money laundering in South America ( Mexico)
Facilitating tax avoidance in western Europe
Suspicious Russian money
And funding Asian homebuyers in Auckland with loans rasied in China

And all of this is not new . In 2012 , Forbes Magazine highlighted some of this shonky behaviuor

by King of the whiners | 19th Feb 15, 9:17am 1424290637

This may become rather interesting:

http://www.businessinsider.com.au/so-paulo-drought-might-leave-millions…

'''But Brazil’s most populous region is facing the worst drought it has encountered in a century and as the New York Times reports, São Paulo, the largest and richest city in the country, is running out of water.

Some residents say their water is already cut off for more than half of every day, and the drastic situation is getting worse, igniting protests in the city and surrounding region.'''

Just a wee taster of things to come......

The NYT has the detail:

http://www.nytimes.com/2015/02/17/world/americas/drought-pushes-sao-pau…

''As southeast Brazil grapples with its worst drought in nearly a century, a problem worsened by polluted rivers, deforestation and population growth, the largest reservoir system serving São Paulo is near depletion. Many residents are already enduring sporadic water cutoffs, some going days without it. Officials say that drastic rationing may be needed, with water service provided only two days a week.''

Mr Malthus anyone?

by steven | 19th Feb 15, 9:34am 1424291640

Thats ok just like the south island the deniers/do nothings can send thier stock off to be slaughtered, and even claim money off the Govn for over-stocking, (great moral hazard that one btw). Oh wait, no, these are people and not sheep/cattle, bugger, guess that leaves riots as a way to reduce the problem.

“I feel hatred, hatred of the governor and of Sabesp,” said Márcia Oliani, 54, the finance manager of an art gallery who endured six days without water in her apartment. “I’d like to take them out and set fire to them. They completely failed to warn us, and have just continued to lie about this throughout.”

Of course we dont have a problem with over-population, no, human ingenuity with the free market to help will solve it all.

yeah right.

by Stephen L | 19th Feb 15, 10:19am 1424294346

Japan prints trillions, gives it to Japan Inc, who buy foreign assets with it. Depreciates Japanese Yen, making their exporters more competitive, and gets free foreign assets- this time Toll Holdings of Australia.

Japanese printing is very little to do with boosting local demand and beating deflation; it is fairly obviously currency wars.

Add in the Germans and Chinese, and a good number of our assets are being sold off. For free to foreigners.

I remain uneasy that we are not participating, at least by limiting the funds coming in, and limiting asset sales, if not by actively playing on foreign shores as they are.

by tim12 | 19th Feb 15, 10:23am 1424294603

It's easy to blame these things on global warming. But You would need a decent water scheme for a city of 20 million. Global warming is a cop out .I'd be looking at why city officials have allowed this to happen.

by rastus1 | 19th Feb 15, 10:53am 1424296404

Global warming a cop out! Ye av to be joking right? The only cop out going on is denial...and if you take a look out the window, it's on your doorstep.

by steven | 19th Feb 15, 10:59am 1424296777

maybe you have the same argument?

by steven | 19th Feb 15, 11:02am 1424296921

Same as say Kapiti, no one can afford the costs of new dams, followed by growth is good lets have more people (or no population control please same thing).

by Andy Rodgers | 19th Feb 15, 10:53am 1424296425

Interesting article about HSBC and its power over the media:

http://jugglingdynamite.com/2015/02/17/assault-on-democracy-big-banks-c…

by Boatman | 19th Feb 15, 11:39am 1424299149

Does Graham Wheeler have a plan at all ?

Our currency is too strong , and our interest rates are comparatively too high .

Everyone is de-basing thier currency , except us .

And thats fine , but what are we planning to do about the consequences ?

All this money printing is the currency war the world is waging with itself

We know that Japan is printing QE money, some of it will be invested here pushing up the currency and asset values .

The European Central bank plans to print Euro 12, 000, 000, 000, 000.00 ditto , some of it will end up here chasing yield

China is easing monetary policy to prevent a property market collapse ( and the banking crisis that follows such an event )

Chinese laundered money coming here is NZ's worst kept secret , we only get ingidnant when the Chinese Govt buys up our farms .

Whats the plan ?

by J.C. | 19th Feb 15, 12:57pm 1424303862

Japan has always been a source of wholesale funding for Australia and NZ, through the banking system. Borrow cheap, sell high (mortgages). I believe that ultimately a Japanese retail investor always carries the can on exchange rate risk. The banks can sit back, laugh and count the cash.