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US deficits and debt grows; IMF sees productivity the main problem; Japan scandal; London house prices fall; EU to 'stand up to bullies'; UST 10yr at 2.87%; oil and gold drop; NZ$1 = 72.9 USc; TWI-5 = 73.9

US deficits and debt grows; IMF sees productivity the main problem; Japan scandal; London house prices fall; EU to 'stand up to bullies'; UST 10yr at 2.87%; oil and gold drop; NZ$1 = 72.9 USc; TWI-5 = 73.9

Here's our summary of key events overnight that affect New Zealand, with news the US budget deficit is swelling quickly and new debt issuance is building up.

But first we need to advise that there will be no video version today.

First in the US the February budget outcome is usually the largest monthly deficit of the year - and February 2018 was no exception, coming in+12% higher than for 2017. This was however about what markets were expecting. But it is big, a massive -US$215.2 bln in one single month.

Meanwhile, the supply of US government bonds hitting the market has been increasing this year as these deficits rise in the wake of their tax cuts. Today and tomorrow the US Treasury auctions another US$21 bln in 10-year notes and US$13 bln in 30-year bonds and eyes will be on the rates offered.

The IMF is saying that low wage growth has more to do with high unemployment and weak productivity than automation or falling union membership.

In Japan, a document fraud scandal has blown up around Prime Minister Abe and his administration.

In England, London house prices are falling at the fastest pace since the depths of the GFC almost a decade ago, with the capital’s most expensive areas seeing the biggest declines.

And the chief EU trade negotiator said overnight they will "will stand up to the bullies" over protectionism as tensions continue over American tariffs on steel and aluminium.

In Australia, their royal commission into 'financial services' (read: the banks) will begin hearings into mortgage fraud today in Melbourne and the fist one under the microscope is NAB, BNZ's owner.

And back in the trenches, Westpac has upped the ante in Australia with a new set of rate and fee discounts aimed at residential property market investors and first home buyers. They are also targeting a new type of investor, one who rents in one area while investing for a capital gain in another in the hope that the profit will allow them to buy in their desired area, the 'rentvestor'. Even with chunky capital gains taxes, this type of capital-gain-chasing is on the move in Australia again.

In New York, the UST 10 yr yield is down -5 bps at 2.87 %.

The gold price has fallen back today, down -US$6 and now at US$1,318/oz.

Oil prices are lower too with the US benchmark down to just over US$61/bbl and the Brent benchmark now just over US$64.50/bbl.

The Kiwi dollar will start today a little lower as well at 72.9 USc. On the cross rates we are at 92.7 AUc and 59.2 euro cents. That puts the TWI-5 at 73.9.

Bitcoin is now at US$9,200, down -3.8%.

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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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26 Comments

All fingers must be crossed in the Whitehouse that the tax take will catch up to the govt spending spree.

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Why on earth would they care?

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one for all those who detest the foreign buyer ban..

https://www.bloomberg.com/news/articles/2018-03-12/the-rich-aren-t-happ…

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I wonder if they could get some insight from the middle class, too?
Seems to be that we are only hearing about the plight of the super rich and business in the media.
Funny that.

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Of course they are not happy, Labour is taking their cheese away.

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I don’t understand. I thought the foreign buyer ban was on existing residential property. What does that have to do with tourist lodges and vineyards?

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Selective reporting? London house prices down, but most of the rest of the country was up - producing a net gain (monthly and yearly) in nominal national average house price.

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Yep, I just clicked on the link, you are definitely right

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Usually London leads on the way up and leads on the way back down. Just like Auckland does here. Bank lending flows there first, as salaries rise there first.

My rough and ready sense when I was over there in July, was that their prices are about equal to ours, but they earn twice as much. In the places where their earnings are about the same as ours, then their houses are half the price of ours. Our weather is twice as good as theirs, of course. So maybe that's the reason our houses prices are so mad.

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Selective reporting? London house prices down, but most of the rest of the country was up - producing a net gain (monthly and yearly) in nominal national average house price.

While real household incomes are declining and Brits are as relying on the credit card to survive. I would not be surprised to see the vast majority of NZ households are as bad as the Britis having less than

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"US deficits and debt grows"
How does that reconcile with rising Fed rates?

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Easy.
In case you didn't realise...
Federal Reserve Federal Government.

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What? London house prices are falling... but London, like Auckland is an international city, and international cities only ever go up in price right?... so confused right now.

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Auckland has nowhere near the status London has. It's laughable to suggest that they could be in the same category. London is in the handful of cities that almost the entire planet has heard of. Auckland is a (much) nicer Leeds.

ETA: oooh you're joking, Whoops..

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Ye of little faith! It's all about being an economic gateway and easy access to other markets or something, something, something, mumble, mumble, houses aren't over-priced because stuff and stuff.

From London I can fly to Paris, Frankfurt, Rome, Berlin, Amsterdam, Madrid, Dublin in around 2 hours, we can almost get to the Chatham Islands in that time! That's right the economic powerhouse of the Chatham Islands practically on our doorstep, in your face London!

Auckland isn't even a Dublin, and for what it's worth Leeds is great fun.

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Don't forget you can only fly to the Chathams from Auckland on a Thursday.

I meant no disrespect to Leeds, I'm sure it's lovely..

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Transport is much better in Leeds, major rail and bus networks which are in frequent use by locals and visitors alike. No way near as road dependent.

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London & surrounds, house prices can certainly dip & dip a lot. Not uncommon at all for house owners to find themselves with a mortgage greater than their house value. Mid nineties, was that the last time from memory?Don’t think that has happened anywhere in NZ, except for a few offs, on a broad scale.

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chief EU trade negotiator said overnight they will "will stand up to the bullies" over protectionism

They are the bullies, right up there with the US and China, that's why they set it up in the first place.

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"Meanwhile, the supply of US government bonds hitting the market has been increasing this year as these deficits rise in the wake of their tax cuts. Today and tomorrow the US Treasury auctions another US$21 bln in 10-year notes and US$13 bln in 30-year bonds and eyes will be on the rates offered."

I don't think you can attribute the sell-off of Govt Bonds as being due to the increase in deficit from tax cuts but rather see it as more a measure against the path of tarrifs.........

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A sell off would collapse the price, and cause havoc amongst pensions schemes around the world. Havoc in pensions schemes means less buying power and consumerism, which will hurt those countries doing the selling.

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