US Federal budget plans growing deficits; China new lending leaps; Spring Festival travel underway; AU Banking Commission 'lawyers picnic' underway; UST 10yr at 2.87%; oil and gold up; NZ$1 = 72.4 USc; TWI-5 = 73.8

Here's our summary of key events overnight that affect New Zealand, with news of vast new increases in debt at the two largest global economies.

Firstly, the new proposed 2019 US Budget is to spend US$4.4 tln with boosts for the military, infrastructure, and border security. The same budget envisages tax collections of US$3.4 tln. (see pg 121). That involves an annual deficit +48% higher than in 2017 and +13% higher than in the current year. Total US Federal debt is growing very fast indeed. The Americans have abandoned the concept of a balanced budget.

And in China, new yuan loans have come in sharply higher in January than the same month a year ago and blowing past analysts estimates. Overall, they are +41% higher than the same month a year ago. New loans to companies in January totaled ¥1.8 tln, an increase of +43%, central bank data showed. New long-term loans taken out by households, basically for housing, totaled almost ¥600 bln, an increase of +10% from a year ago.

But the really big global event is happening in China, one that gets plenty of attention: the Chinese Spring Festival and its huge migration. More than 390 mln people will travel by train domestically over the next two weeks.

In our region, the big event is the start of the Australian banking Royal Commission. It is widely expected to be a 'lawyers picnic' with estimates of the cost now up to AU$1 bln. There is zero incentive to bring anything to a conclusion. Expect it to run for many years. The latest beat-up is over missing unrealistic and arbitrary timelines. It's going to get messy, and partisan.

The UST 10yr yield is still pushing higher and is now at 2.87%, up just +1 bp from this time yesterday although at one point earlier it did touch 2.90%. Local New Zealand swap rates are getting steeper with the 2-10 curve up to +115 bps, a one year high.

Measures of market volatility are easing today however.

Gold is making a small move higher. This morning it is at US$1,324, up +US$8.

Oil prices are up slightly with the US benchmark now just under US$60/bbl and the Brent benchmark over US$63/bbl. Opec has raised its oil consumption forecast based on the broad economic expansion underway globally.

This morning, the Kiwi dollar opens little changed at 72.4 USc. On the cross rates we at 92.4 AUc and 59 euro cents. That leaves the TWI-5 at just on 73.8 and still within its 2018 narrow range.

Bitcoin is at US$8,760, a +5.2 rise from this time yesterday.

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