90 seconds at 9 am: Eyes on new macro-pru tools

US jobs signals better; obscene pay for value destroyers; France grows some; UST 10yr yield 1.76%; local swap rates dive again; oil up, gold lower; NZ$1 = 67.5 US¢, TWI-5 = 71

11th May 16, 7:25am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news local wholesale swap rate have dived to new record low levels.

But first, the latest data on job openings in the US showed they increased in March to the highest level in eight months and layoffs continued to decline. Clear signs of skill mis-matching are emerging. The data reinforces the view that their labour markets remain fairly robust despite April's surprise slowdown in employment growth.

One group, the tiniest group at the top of the pyramid, is doing spectacularly well - at the expense of its clients. Hedge funds lost money for their investors last year but the industry's top-paid managers had a banner year, with five men earning more than US$1 bln each in 2015. It is just not clear why investors keep assigning them funds to manage. Despite that conundrum, hedge funds had more money and more sway then ever in 2015.

In France some action on a front that has festered for decades; labour reform. Their socialist French President has used special constitutional powers to force a contested labour bill through their lower house of parliament, exacerbating the divide between the unpopular leader and his party's majority a year out from elections. But France desperately needs this reform.

In New York the benchmark UST 10yr yield is unchanged at 1.76%. But the shift lower we saw yesterday in local wholesale swap rates was enough to put us back at a new all-time record low for every term. Most experts think these rates will go even lower.

The oil price is marginally higher today with the US benchmark now at $44.50/barrel and the Brent benchmark just under US$45.50/barrel.

But the gold price is lower again, down further to just under US$1,260/oz.

And finally today, the NZ dollar will start basically unchanged from this time yesterday at 67.5 US¢, a little lower against the Aussie at 91.9 AU¢, and also unchanged against the euro at 59.4 euro cents. The TWI-5 index is still at 71. Actually, our currency is now sitting at six-week lows.

Today's big news will undoubtedly be the latest Financial Stability Report from our Reserve Bank. They will issue a Statement at 9am and will have a press conference at 11am. Both will be covered here and we will live-stream the press conference. Observers are expecting new or extended housing-related lending restrictions (via 'macro-prudential tools') to be announced.

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 today is by following our Economic Calendar here ».

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15 Comments

by offcut2 | 11th May 16, 8:02am 1462910524

Concord failed because it relied only on the elite for its custom. Even private jets need publicly funded (economy class) airports and other infrastructure. Ferrari's/porsche etc may rule the roads, but Toyotas pay for them!

by The best statu… | 11th May 16, 8:09am 1462910974

Concord failed due to debris on the runway. Airports charge private jets also.
Ferraris/Porsche will pay more in taxes than electric cars and the average Toyota.

by Afewknowthetruth | 11th May 16, 8:39am 1462912768

Cars, planes, airports and roads destroy the habitability of the Earth.

Big fast cars and planes destroy the habitability of the Earth somewhat faster than small slow ones.

Daily CO2

May 9, 2016: 407.66 ppm

May 9, 2015: 403.35 ppm

Up 4.31 ppm (versus 0.7 ppm per annum in the late 1950s and 2.11 ppm over 2005-2014)

https://www.co2.earth/co2-acceleration

Only a few more years left for industrial civilisation, as we hurtle down the road to self-annihilation via rampant consumption of resources and out-of-control CO2 emissions.

Lowest ever and declining very quickly:

https://ads.nipr.ac.jp/vishop/vishop-extent.html

by offcut2 | 11th May 16, 10:32am 1462919522

Ha Concorde failed because it made the biggest sucking sound whenever it flew; thats called massive govt subsidy. The too big to fail Banks have put Concorde to shame as far as welfare goes though - it seems to be never ending until one day...'and it's gone!

by sharetrader | 11th May 16, 8:14am 1462911252

if you have 35% of our houses brought by students and 3% by overseas residents
macro rules are just going to lock locals out to make it easier for them,

by Leverageup | 11th May 16, 8:24am 1462911858

Obscene Pay for value destroyers? Come on David, that kind of headline bollocks is normally reserved for Stuff.co.nz or similar. That list includes some of the best investment stories of our time, the likes of David Tepper and Renaissance Capital. I agree there are a lot of hedge fund managers earning too much money for the value they add, but that list is almost entirely made up of big fund returns in 2015 (one returned 50% which in todays tough rangey markets is pretty impressive). The other thing to remember is that those figures include the money made by the managers own investments in the fund as well, which greatly inflates the "pay" data

by Afewknowthetruth | 11th May 16, 8:54am 1462913646

'I agree there are a lot of hedge fund managers earning too much money for the value they add'

Can you please explain how hedge fund managers add value.

As far as I can see they simply extract digital fiat currency from the system and for every transaction which is favourable for one person there is another transaction somewhere else in the system which is unfavourable for another (or negative for a group), i.e. no value is added, it's just redistributed.

by bender | 11th May 16, 9:11am 1462914706

An income of one billion per year is $500,000 per hour (assuming a 40 hour week)! What can any person do that is worth that much? Not to mention the inflated ego of those who believe they are worth that income.

by Leverageup | 11th May 16, 9:40am 1462916433

Most of those managers would have salaries that are a tiny fraction of that amount, the $1billion is a result of increases in there own capital in the fund plus the performance fees charged (generally around 20% of any return above a benchmark). I dont know about you.. but if my fund manager returns 15-30% consistantly year on year (as many of these have), im pretty happy to give them 20% of that outperformance.

by Henry_Tull | 11th May 16, 1:23pm 1462929831

Up to a point. News from the lab

Sometimes the state of innovation in products and finance is misaligned, leading to missed opportunities in entrepreneurship and business. Product innovation has more often proved transformative to the economy than financial innovation “financialization”— being the process by which an economy becomes overly focused on finance and thereby suffers from slower growth and widening income disparity.
Financial innovation in the absence of product innovation has often been quite harmful.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2770517

http://www.theatlantic.com/business/archive/2016/05/charismatic-finance…

by Andrewj | 11th May 16, 8:53am 1462913627

How many times have you heard experts say that the US economy is consumer driven? It’s true; almost 70% of our GDP is attributable to consumer spending.

However, the latest Census Bureau numbers show that retail sales fell 0.2% in March following a contraction in both February and January. In other words, retail sales fell over the entire first quarter.

Of course, the people who know how consumers are really doing are the people who sell to them, such as Sally Smith, the CEO of Buffalo Wild Wings, which just reported an awful quarter:

“The macro environment for casual dining has had a rough quarter and a rough couple of quarters. I just don’t think there is a robust consumer out there.”

If Smith and the Census Bureau are right, our economy is headed for a recession. EVERY time the yearly growth rate of retail sales has fallen below 3%, the US economy has gone into recession.
Tony Sagami

by Afewknowthetruth | 11th May 16, 9:14am 1462914892

'You see, dear American consumers, it's all your fault. Not soaring, record rents, not spiking health insurance premiums that are eating away at your last disposable dollar, not that the so many of the "jobs created" in recent years have been part-time or minimum wage, not the fact that under ZIRP you can't generate any interest income and are forced to save even more for retirement, not that as a result of central bank policy pension and retirement funds are unveiling cuts to retiree benefits, not that real disposable incomes have gone nowhere in the past decade, not even that a third of US households can no longer even afford the basics of food, rent and transportation...

It's your unwillingness to spend; it is - in the words of the WaPo author - "the surge in saving that is the real drag on the economy."

http://www.zerohedge.com/news/2016-05-10/washington-post-accuses-stingy…

by Stephen Hulme | 11th May 16, 12:34pm 1462926845

Tough at the top for the publisher? I think not.

Amazon Stock Jumps To New High, Makes Jeff Bezos $1 Billion Richer

by positivelywallstreet | 11th May 16, 9:12am 1462914753

The french GDP per hour worked is nearly twice ours.
They must be doing something right.
I say their politicians are ineffective and need a good reforming.

by Mike B | 11th May 16, 1:25pm 1462929907

In France some action on a front that has festered for decades; labour reform.
But France desperately needs this reform.

Yes, to keep up with a "Wages race to the bottom"