Wednesday, May 25, 2022

𝗨𝗦 𝗱𝗮𝘁𝗮 𝗺𝗮𝗿𝗴𝗶𝗻𝗮𝗹𝗹𝘆 𝘀𝗼𝗳𝘁𝗲𝗿; 𝗨𝗦 𝗙𝗲𝗱 𝘁𝗮𝗹𝗸𝘀 𝘁𝗼𝘂𝗴𝗵 𝗯𝘂𝘁 𝗹𝗲𝗮𝘃𝗲𝘀 𝗮𝗻 𝗼𝘂𝘁; 𝗖𝗵𝗶𝗻𝗮 𝗮𝘁 𝗿𝗶𝘀𝗸 𝗼𝗳 '𝘀𝗹𝗶𝗱𝗶𝗻𝗴 𝗼𝘂𝘁'; 𝗔𝘂𝘀𝘁𝗿𝗮𝗹𝗶𝗮 𝘄𝗮𝗿𝗻𝘀 𝗼𝗳 𝘁𝗼𝘂𝗴𝗵 𝗯𝘂𝗱𝗴𝗲𝘁 𝘀𝗶𝘁𝘂𝗮𝘁𝗶𝗼𝗻; 𝗨𝗦𝗧 𝟭𝟬𝘆𝗿 𝟮.𝟳𝟱%

Even though the slip was small last week, American mortgage applications fell again week-on-week taking this downward trend to nine of the past twelve weeks. Benchmark mortgage interest rates fell for a second straight week.

April data for American durable goods orders came in marginally softer than expected. They rose +0.4% month-on-month to US$265 bln in April, following a downwardly revised +0.6% rise in March.

They are now +10.5% higher than a year ago. This is a sign business spending moderated somewhat. In a good positive sign, orders for capital goods rose more than +14% year-on-year in a rising trend.

The release of the May US Fed minutes revealed that most of their policymakers judged that +50 bps increases in the fed funds rate would be appropriate at the next couple of meetings. They also recorded that a twist to a restrictive stance of policy may well become appropriate, and the timing of that shift will depend on the evolving American economic outlook.

There is an urgency here that they want to recover lost ground as inflation has burst on them faster than they expected. But markets seem unconvinced of their commitment, especially as those minutes hinted a late 2022 pause may be needed.

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There was another large US Treasury bond auction a few hours ago, this one for their 5yr bond, and this one very well supported too. Like yesterday's, median yields are slipping. Today's came in at 2.66% compared to the prior equivalent event a month ago at 2.72%.

The American federal budget situation is being repaired fast. This year's deficit is expected to be under US$1 tln, a sharp improvement from the -US$2.8 tln last year.

Recall it hit -15% of GDP at the end of the Trump presidency. This year it may have recovered to -5% of GDP. Still, surpluses don't seem to be on the horizon any time soon.

China seems to be going the other way, worried things are slipping into dangerous territory. In a huge teleconference attended by 100,000 local officials, Premier I warned China's economy is facing the risk of "sliding out of a reasonable range"... "for an economy as large as China, once the economic operations fall out of a reasonable zone, it will take a long time and huge costs to bring it back," he is reported to have said.

Meanwhile, President Xi is nowhere to be seen dealing with the growing economic crisis. He is meeting with security officials.

In Australia, the incoming administration is warning that their federal financial situation is worse than they expected, and with the RBA about to raise interest rates as inflation zooms, they are additionally constrained on spending plans over and above their election promises.

They are saying economic pain could be with them for some time to come.

The UST 10yr yield will start today at 2.75% and little-changed. The UST 2-10 rate curve has flattened slightly to +25 bps and their 1-5 curve is little-changed at +74 bps. Their 30 day-10yr curve is also marginally flatter at +220 bps.

The Australian ten year bond is now at 3.23% and down a mere -1 bp. The China Govt ten year bond is marginally softer again at just under 2.80%. But the New Zealand Govt ten year is up +6 bps at 3.55%.

Wall Street has marked time today with the S&P500 up +0.3% in late Wednesday trade. The NASDAQ has recovered some of yesterday's dump. Overnight, European markets were all up about +0.7%. Yesterday, Tokyo ended down -0.3%, Hong Kong recovered +1.2%. Shanghai closed up +0.7% with a late surge.

The ASX200 ended its Wednesday session up +0.4%, while the NZX50 fell -0.7% on the day.

The price of gold is lower today, down -US$14 since this time yesterday at US$1851/oz.

And oil prices are virtually unchanged today and still just on US$109.50/bbl in the US, while the international Brent price is still just at US$111.50/bbl.

The Kiwi dollar will open today little-changed against the US dollar, now at 64.6 USc. Against the Australian dollar we are firmer at 91.4 AUc. Against the euro we are also firmer at 60.6 euro cents. That all means our TWI-5 starts today at 71.5 which is up +20 bps from this time yesterday.

The bitcoin price has risen +1.7% from this time yesterday and is now at US$29,788. Volatility over the past 24 hours has been modest at +/- 1.9%.

Source: Interest .co .nz


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