Here's our summary of key events ovenight that affect New Zealand, with news interest rates are falling, but mainly for long durations.
In the US, economic growth slowed less than previously estimated in the fourth quarter, rising at an annual rate of +2.9% and down from +3.2% in the third quarter. They have growth that is fueling imports driven by rises in consumer spending.
In fact, their merchandise trade deficit has remained over -US$75 bln, surprising analysts who thought it would be tracking lower. American consumers are choosing "Chinese" imports in their spending habits. Their exports were up +7.3% in the year to February, but their imports were up +10.4% over the same period with the consumer goods component up +12.6%. Voters/consumers and the Federal Administration are on different pages here. The President's reaction is to threaten Amazon.
In Beijing, the smog alert we reported a few days ago is getting worse, deteriorating because it is now mixed with a dust storm.
And it has been revealed that China's Belt & Road rail network that now stretches from China's Pacific coast all the way into Europe is a financial burden on China. These trains require subsidies of almost 50% to enable the service to operate in competition with sea freight. The reasons the service is expanding is entirely political.
We should also note that while much has been written about the parlous state of the Australian Federal Budget, including by credit ratings agencies warning a downgrade is possible unless they see improvements soon, in actual fact their latest Federal accounts to February show a fast improving situation being built on fast rising tax collections. They are AU$10 bln better off now than they forecast in December. This is the sort of news that is rarely reported, but is a remarkably quick turnaround. If it continues, the heat will go out of their presumed budget woes, and quickly.
The UST 10yr yield has fallen overnight again, back to 2.78%. The Chinese 10yr is down, now at 3.75% (-2 bps) and the New Zealand equivalent fell even further, now at 2.74% (down -8 bps). And we should note that local swap rates have fallen hard, dropping late in yesterday's trade. We are now back to levels not seen since the end of 2017, and since September for longer term rates. The 2-10 curve is now just +84 bps, down from +104 bps about two weeks ago, so that is a fast change. The UST 2-10 curve is under 50 bps, a level not seen since 2007. All the movement in rates down has been at the long end. The short end is holding its levels, and for New Zealand that does not give any room for fixed mortgage rate cuts.
The gold price is down even more, down -US$16 in New York today and now at US$1,327/oz.
Oil prices are down as well by more than -US$1 with the US benchmark now just over US$64/bbl and the Brent benchmark just over US$69/bbl.
The Kiwi dollar will start today ½c lower at 72.3 USc. On the cross rates we are now up at 94.2 AUc and at 58.6 euro cents. That leaves the TWI-5 at 73.5.
Bitcoin is now at US$7,915 and virtually unchanged from this time yesterday.
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The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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