US housing starts jump; US inflation over 2%; Canada factories buzzing; ECB sees no inflation; Aussie consumers spending large; UST 10yr yield at 2.48%; oil and gold down; NZ$1 = 71.6 US¢, TWI-5 = 77.5

US housing starts jump; US inflation over 2%; Canada factories buzzing; ECB sees no inflation; Aussie consumers spending large; UST 10yr yield at 2.48%; oil and gold down; NZ$1 = 71.6 US¢, TWI-5 = 77.5

Here's my summary of the key events overnight that affect New Zealand, with news of further sharp rises in US benchmark bond yields.

But first, in the US both building permits and housing starts together rose strongly in December as a firming economy boosted demand for rental housing, while an unexpected drop in the number of Americans filing for jobless benefits last week to a 43 year low pointed to a further tightening in their labour markets. The new Administration is inheriting a relatively strong economy.

American inflation has risen to its highest level in 30 months in data out Wednesday. It is up +2.1% from December a year ago.

And across the northern border, Canada's factories are firing on all cylinders and capping nine months of rising strength.

Across the Atlantic, the ECB reviewed its policy settings today and made no changes. But in remarks, Mario Draghi dismissed ideas that inflation is picking up in the eurozone.

In Australia, the first measure of consumer spending in December shows Australian businesses had their best holiday shopping periods since 2006. But those good outcomes didn't take place in the traditional retail sector of large department stores and supermarkets. The strongest gains were strongest for business and consumer service providers, car sales, and hospitality. But sales in retail stores, by mail order or for telephone orders, things were tough and in decline. This December data is from analysing transactions at Australia's largest bank.

And staying in Australia, Moody's is reporting that house prices there have grown so well that investors in mortgage-backed securities now have an extra 14% equity cushion underpinning their holdings.

In New York, the UST 10yr yield has taken off today and is now up 2.48%. Bond prices are being thrashed again. We had steep rises in local wholesale swap rates yesterday and more moves in the same direction could well be on the cards today as a result of this Wall Street move in benchmark rates.

Oil prices are lower than when we looked at them, now down to just over US$51 for the US benchmark, while the Brent benchmark is now just on US$54 a barrel.

The gold price is also lower, down US$11 and is now just on US$1,200/oz.

The New Zealand dollar is still within its recent range but with a touch of strength today, now at 71.6 US¢. On the cross rates it is at 95 AU¢, and against the euro at 67.4 euro cents. The NZ TWI-5 index is at 77.5.

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 today is by following our Economic Calendar here ».

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Mario draghi is like a drug dealer hooked on his own product, the germans are losing patience with him, and will soon bring pressure for him to move on if he does not slow down his QE

https://www.ft.com/content/495d4a2e-7e2b-38ef-aca9-7f7a09e1975a

Paywalled.

The ECB is a good example of how not to run a central bank. The dodgy deals around all the bad debts being kept on the individual bank's books are concealing how bad the problems are.

...Mario Draghi dismissed ideas that inflation is picking up in the eurozone.

Yes he did.

Mario Draghi called on Germany to be calm as the European Central Bank keeps pumping stimulus into the euro area, saying rising inflation will eventually bring higher interest rates for savers.

Draghi noted that the rise in consumer prices in Germany, as with the euro area, is so far largely driven by oil prices, and officials will ignore gains that they see as transient..

“There are no convincing signs yet of an upward trend in underlying inflation,” he said. “The Governing Council will continue to look through changes in inflation if judged to have no implications for the medium-term outlook for price stability.” Read more

German sovereign bond prices have as yet not given investors any evidence that they are being over rewarded for missed growth opportunities they underwrite.

Moreover, Euro area pension companies have no patience or evidence to accept Draghi's hollow and grossly failing claim that ..rising inflation will eventually bring higher interest rates for savers. If that were the case mutiple QE extensions and rate cuts would not have been necessary.

Bonds backed by certain risky single-family mortgages topped $1 trillion for the first time in November, crossing that threshold amid rising warnings for one corner of the housing market.

These mortgages are insured by the Federal Housing Administration and typically go to borrowers with small down payments and lower credit scores. Banks have pulled back from issuing those loans and from packaging them into bonds sold to investors.

The result: In the first three quarters of 2016, banks accounted for 9% of mortgage dollars originated by the FHA’s top 50 lenders, versus 62% for all of 2010, according to Inside Mortgage Finance. Nonbank lenders accounted for 80% of mortgage bonds backed by single-family FHA loans in July 2016, versus 9% the same month in 2010.

That is worrying the Government National Mortgage Association, or Ginnie Mae, the government-owned corporation that guarantees the bonds backed by FHA loans. Ginnie Mae head Ted Tozer, who is leaving his position Friday, has said nonbank lenders may lack the financial wherewithal to withstand future stress in housing. In the worst-case scenario, problems could saddle taxpayers with losses.

“This is the biggest shift in mortgage lending since the savings-and-loans debacle in the 1980s,” Mr. Tozer said in a recent interview with The Wall Street Journal. The biggest nonbank FHA lenders include companies such as Quicken Loans Inc., Freedom Mortgage Corp. and Guild Mortgage Co. Read more

Tell me a tale when taxpayers are not liable for crony capitalism escapades.

Even if they don't get bailed out the people end up suffering.

I think every comparison of the fraud in a finance sector with drug abuse and addiction is fair. Alan Greenspan, the most crooked central banker of our time, believed that the free market would correct criminal conduct therefore he endorsed fraud. This is the mentality of junkie. Junkies steal from anyone and don't care about the harm they do or the consequences for society.

As if the savings and loans crisis wasn't bad enough, now they are creating another one.

Even if they don't get bailed out the people end up suffering.

Always - the best way to relieve an area of poverty is to kick out the poor people who live there. Or, as they call it, creating “mixed and balanced communities”. Read more

How Deutsche Bank Made a $462 Million Loss Disappear

A dubious trade leads to a criminal trial for Europe’s most important bank. Read more

Where Do We Begin? Define What It Means To Be A Bank

Further illustrating the incestuousness of the deal, Paschi would need to buy the bonds and hand them over to Deutsche as collateral. Deutsche, for the sake of its own accounting, would need to sell the bonds to come up with cash that it then would give right back to Paschi to pay off the Santorini loss. And Paschi would buy the bonds in the first place from a third bank that had bought them from Deutsche. Read more