Here's my summary of the key events from overnight that affect New Zealand, with news of a major bond market realignment underway today.
But first in Washington, which now can't seem to get anything done amid partisan politics, and a Republican Party that seems to be fracturing, progress on revising their debt limit has stopped, and the Congressional Budget Office now says they will run out of funding authority in early October. The same office is projecting sharply wider budget deficits amid static, low growth over the next ten years.
However, the final data for the American first quarter growth is out today and that saw it revised up to +1.4% from +1.2%. That was due largely to a jump in consumer spending, providing a slightly more encouraging outlook for growth this year.
But there are plenty of reasons to believe the current dynamics in the American economy don't bode well for future growth prospects.
There was Chinese balance of payments data out overnight for the March quarter of 2017. Although there were few surprises, they did note that their external liabilities now total US$4.8 tln.
In the EU people and businesses are feeling quite good again. Their economic sentiment indicator has reached its highest level in almost ten years. Consumer sentiment is leading the resurgence.
In Germany, consumer confidence rose in June to its highest level in 16 years. At the same time, data for German inflation showed a quickening pace, and now up to +1.6%.
And it looks like the US is having second thoughts about their TTIP trade deal with Europe. Maybe the TPPA can get resurrected with the US as well.
In Australia, many businesses and households are about to get a painful surprise when their energy bills arrive in July. There are reports that some will face a tripling of prices. There will be an outcry, for sure.
In New York, the UST 10yr yield is sharply higher yet again today and now at 2.27%. Bond prices are falling as investors seem to be resetting their expectations for the end of QE, and are coming to accept that interest rates are in fact going to rise. The reset is also affecting equity prices today.
The price of oil is little changed today, settling at just under US$45 a barrel, while the Brent benchmark is now just over US$47.
The gold price has slipped again and is now at US$1,243/oz.
And the Kiwi dollar has lost ground as well from yesterday's jump, and is now at 72.9 USc. On the cross rates we are lower as well at 95 AU¢, and at 63.7 euro cents. The TWI-5 index has slipped to 76.6.
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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3 Comments
Lets just hope the Bond market adjustment is a soft slow adjustment and does not become a rout .
Its worth remembering that the Bond Market globally is way bigger than the equity market , and there is a ton of 'Gilt ' and corporate debt out there all of which has become far too comfortable with low interest rates .
Bond prices are falling as investors seem to be resetting their expectations for the end of QE, and are coming to accept that interest rates are in fact going to rise. The reset is also affecting equity prices today.
Hmmmmmm.....
If the markets want to believe that they are scaling back QE (ECB), tightening for bubbles (PBOC), or “raising rates” (Federal Reserve) because things are about to get so much better than these various central banks will cringe but not correct. They know better, but given the massive market imbalances they also know better than to say it out loud.
This is why they were perfectly willing to let the collective (media) imagination run wild with 2% CPI’s and HICP’s. The ECB or the Fed wasn’t fooled by the oil price base effect, not for a minute. All their models showed that it was a very temporary “success” and wouldn’t last; but if you or your neighbor wanted to think that was a huge positive, a significant step in the right direction, then so much the better for their shameful task. Read more
Does the RBNZ not forecast a possible annual CPI retracement down towards 1.1%?
The government cost of maintaining the Fed Funds floor at 1.00% has risen given outstanding drain volumes (Reverse repurchase agreements) stand at $504.865 billion. View data, section 2
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