Here's my summary of the key issues from overnight that affect New Zealand, with news of a 'less patient' US Federal Reserve.
A few minutes ago Janet Yellen left their official rates unchanged yet again, but she has signaled that the Fed wants to be "reasonably confident" on inflation before starting to lift rates.
She all but ruled out an April rise, but the door is open after that. However, she said much will depend on wage rise data. Accompanying forecasts show that they don't actually expect inflation to rise to 2% until 2017.
Immediately following the Fed statement the US dollar fell, but the markets gave a big push to the New Zealand dollar across the board. Benchmark bond yields in New York also fell.
Across the Atlantic, Sweden’s central bank cut its main interest rate further into negative territory and will increase bond buys. The move followed a similar cut last month.
In China, of 70 large and medium-sized cities surveyed, new home prices fell in 66 in February from the previous month, the biggest annual fall on record.
In Australia, an American firm co-founded by a former adviser to US Vice President Al Gore is at the centre of a bribery scandal involving two former executives with the Commonwealth Bank of Australia, one of whom is apparently a Kiwi. An ASB account was used to launder some of the funds.
The UST 10yr yields have fallen after the Fed statement to 2.02%.
The crude oil price is holding its very low levels at US$43/barrel and Brent crude fell below $53 a barrel on oversupply concerns as industry data indicated American crude stocks had hit a new record high.
The gold price is basically unchanged at US$1,151/oz although the Fed statement also too a toll here too immediately after the announcement
The New Zealand dollar starts today much firmer and is now at 74.3US¢, it is at 96.4 AU¢, and the TWI is at 79.4.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk is by following our Economic Calendar here »
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12 Comments
Rapid private-debt growth threw Japan into crisis in 1991 and did the same to the United States and Europe in 2008. China may be next.
As I’ve previously written, there is a formula to predicting these crises. A financial meltdown is probably on the horizon if the ratio of private debt to GDP rises by roughly 17 percent or more over the course of five years and exceeds 150 percent. That rise in private debt will likely fuel runaway growth before the crash (think the 1920s, or Japan’s boom in the 1980s). But those gains will be evanescent. Driven by private-debt growth, they’ll eventually give way to a financial crisis.
http://www.democracyjournal.org/36/understanding-the-gulf-states.php
Agreed SH. It has been obvious for a couple of years that Team Obama has been cooking up the numbers to make themselves look clever. Now they have a BIG problem; if they follow through with the "logic" of their lies and raise rates - the (sick) US economy will fall flat on its face.
EP
Low inflation, bond yields and interest rates around the world will push the boundaries of economic and political stability to breaking point if they continue on their downward trajectory, the Bank for International Settlements has warned.
The Swiss-based "bank of central banks" said the "sinking trend" of global rates would push countries further into uncharted territory.
It highlighted that $2.4 trillion (£1.6 trillion) of long-term global sovereign debt was now trading at negative yields, with an increasing number of investors willing to pay governments for the privilege of lending to them.
"As bond markets show us day after day, the boundaries of the unthinkable are exceptionally elastic," said Claudio Borio, head of the Monetary and Economic department at the BIS.
http://www.telegraph.co.uk/finance/economics/11479425/Low-rates-will-tr…
So the BIS is predicting the peasants will take to the streets with their pitchforks demanding ......higher interest rates? Interesting. Bet all those homeless people are incensed at the rates they are currently receiving on their Treasury Bonds. Who can blame them.?
Definitely going long on pitchfork manufacturers. Thanks for the heads-up.
You might find an answer in the reality that over leveraged bond funds give the authorities concern that they cannot be unwound in an orderly manner and that leverage is further encouraged by central bank QE schemes. Read more and more Evidence of overleveraged bond fund hedges being lifted today can be viewed as supportive for such thinking. View 5d tab
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