Here's our summary of key economic events overnight that affect New Zealand, with news the Trump Administration has been unnerved by the rising yield investors are demanding for their long-dated bonds. Thy have now moved to "provide liquidity support" for the UST 30 year bond, effectively spending deficit dollars to bid the yield down and the price up on secondary markets. They didn't like the free-market signals, so they are using resources to twist them. Bond professionals are sceptical today's move is anything but a short-term salve because they are still raising huge new funds to support their deficit spending, more than US$½ tln in just the past 60 days.
It is a move that has seen the USD fall, gold rise, and pushed up the price of commodities including crude oil. Bitcoin sparked back into life with a sharpish rise too.
Elsewhere today, the minutes of the July Fed meeting were released today, the one where there were three dissenters all who wanted to raise rates to counter inflation threats. And it also revealed many non-voting members supported hiking rates too. But to be fair subsequent data has shown that their labour market is cooling rather faster than they anticipated, and that inflation has dipped slightly. It is still well above their policy target however. Today's Treasury interventions and the related inflation-inducing market reactions will be being watched by the twelve voting members closely.
Meanwhile, US mortgage applications fell slightly last week, staying weak, and back to levels they were at in the first half of 2025.
And US commercial crude oil stocks rose sharply last week taking the rising run to three straight weeks. However, their strategic reserves fell again and is now a levels so low that there are concerns about the physical infrastructure.
The USMCA renegotiation deadline with Canada has been pushed back a few days. The Americans say it is because a deal is close. The Canadians say there is still details to be agreed although a deal is close and one far different to the "50%" threat. It will be interesting to see how the Canadian dairy sector fares in all this.
The exchange rate market reaction to the US Treasury move has taken the pressure right off the Japanese yen.
Japanese machinery orders continued their yo-yo pattern in June, now up +16.9% from a year ago (excluding volatile items). Export orders were particularly strong.
In Australia, Big Tech is raising bond financing to support their global AI rollout ambitions. Google raised more than AU$5 bln yesterday after being flooded with more than AU$18 bln in market offers. This is a honeypot sure to attract more Big Tech borrowers.
The UST 10yr yield is now just on 4.65%, down -6 bps from this time yesterday. The 30 year yield is at 5.20% and down -8 bps. The key 2-10 yield curve is now at +47 bps (down -6 bps). Their 1-5 curve is now at +37 bps (-1 bp) and the 3 mth-10yr curve is at +98 bps (-4 bps). The China 10 year bond rate is up +1 bp to 1.68%. The Japanese 10 year bond yield is now at 2.90%, down -5 bps. The Australian 10 year bond yield starts today at 5.02%, down -3 bps. The NZ Government 10 year bond rate is at 4.74%, down -3 bps.
Wall Street has stopped falling today with the S&P500 now up +0.3% and the Nasdaq also up +0.3%. Overnight, European markets were little-changed between London's +0.1% and Frankfurt's -0.1%. However Tokyo ended its Wednesday session down another very sharp +3.2%. But Hong Kong was flat again (+0.1%). Shanghai fell an outsized 2.4%. Singapore ended down -0.1%. The ASX200 ended its Wednesday session down -0.2%. But the NZX50 rose +0.5% in its session.
The price of gold is up sharply, now at US$4503/oz, up +US$150 from yesterday at this time. Silver has risen +US$2 to just over US$66.
Oil prices are up another +50 USc from yesterday at just over US$85.50/bbl in the US, while the international Brent price is now just over US$91.50/bbl. Hormuz transits have stayed very low although there is a bit more activity with four crude tankers and 5 cargo ship exiting over the past 24 hours (2 dark with transponders off) and six entering for new loads (4 dark), again all Iran-linked. The Red Sea activity is still only about 20 exits at the Yemen chokepoint, little-change.
The Kiwi dollar is up +50 bps from yesterday at just under 59.3 USc. Against the Aussie we have risen +40 bps to 83.3 AUc. Against the euro we are little-changed at 50.8 euro cents. That all means our TWI-5 starts today at just under 62.8, up +50 bps from this time yesterday.
The bitcoin price starts today at US$68,163 and up a sharp +5.4% from yesterday. Volatility over the past 24 hours has also been high at just on +/-3.7%.
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29 Comments
David, a suggestion from me is to report also the 3-2-1 crack spread. This gives a better relation with what New Zealanders have to pay for their Diesel and Petrol (Gasoline). It is currently at a 10yr high!
Great link Peter.
Before we all lose it and accuse the refineries of profiteering, scroll down to read this bit; "Crucially, the spread is set by the market, not by refiners. It is the difference between freely traded crude and product prices. Refiners take what the market gives them; they don't dictate it."
This smacks of desperation on the part of the buyers of refined product. It is perhaps justified, but also emphasises the refusal or perhaps denial about the research into alternatives, including the acceptance of what they will cost, and really stresses the down stream consequences of Trump's screw up in the ME.
This follows on from a thread yesterday. There is a lot of confusion when energy and price are conflated (reflecting a wider confusion).
Firstly, low-entropy energy is what modernity requires. Secondly, energy cannot be created (or 'generated') so must be tapped into. Thirdly, energy is degraded every time work is done - the result being low-grade heat.
Our digital-proxy system is entirely dependent on the energy-tapping-into, for its underwrite. Our so-called renewable energy-tapping systems (really rebuildable, meaning dams would have to build replacement dams) require the low-entropy of fossil energy to be both built and maintained.
And the fossil energy is finite. And the best is gone, already. And entropy never sleeps (therefore the energy demand from maintenance goes ever up). And Climate Change is accelerating, setting record after record on its way to disrupting modernity on its own.
Being finite, fossil energy should be nearing priceless, the more depleted it becomes. But the reassuring narrative is that 'renewables' are 'getting cheaper' and will take over - just some time in the unclear-but-far-enough-away future that we can continue burning the fossil stocks. Thus Burnham visiting a wildfire site, wittering on about opening up exploration of a couple of unlikely North Sea dregs, while attempting to assert that it is a transitional move (he didn't even sound sincere). Outside of hype politics, the growing understanding is that FF are like-for-like irreplaceable - meaning that modernity, as configured, is doomed (not so our species, maybe, depending on how the cards fall, but modernity is a goner). Yet we're still building FF aircraft, tractors, ships...
Long story short; society as formatted increasingly cannot 'afford' itself - for energy/physics reasons. That is being amplified as the pressure comes on - both population/demand and dreg-bound-ness - and is showing up as increased indebtedness. Which is increasingly unrepayable - dure to reduction of said net energy-input.
So those demanding 'cheaper' energy, are barking up the wrong tree. As for those blaming this or that group/cabal for the 'price'; as a total society we are undervaluing the (finite and irreplaceable) resource-stock. Blaming others misses the point.
Spot on!
The level of denial in the politics is huge as aspiring politicians lust for power and influence. That denial hits crisis when and event like the ME upsets the proverbial apple cart. We should be looking for politicians trying to reset the energy debate. the whole spectrum, but we need to accept that FFs will by necessity be a part of the picture. I also think there is too much emotion involved. Debate and discuss the facts. My view is that there is a need for FFs, hydrogen, electric including all the diverse means of generating it as well as nuclear. Dependence on too few options increases risk and vulnerability, not to mention cost.
Chuckle - generate :) Extracting work from it, is a better description. We don't 'generate', and we don't 'produce' oil. either.
And just below that, we need to differentiate extraction-mechanisms from storage ones; hydro lakes and hydrogen and batteries are vectors; they're storage.
We need to put in place a post-FF, maintainable ex-FF, system (or systems plural). Implied: we need to set up a post-growth financial system.
Your post seems to suggest BAU as a given?
No, not BAU. Rather transition away. It takes time for societies to shift away from old paradigms without wars or cataclysmic events to drive the shift. Peaceful transition provides time for emotional, intellectual, infrastructural and systemic shifts to occur with the least disruption possible. Denial makes that almost impossible as it delays any transition potentially to the point of collapse. Corruption is a part of it too.
For an "intelligent" species it's a shame we are so stupid (greedy).
Russia has had to research alternatives. NZ should pull finger and build a topping plant in Taranaki or ditched the ETS to keep Marsden running.
Aug 17 Reuters - At least one cargo of gasoline from India has entered Russia's domestic market as Moscow seeks to ease fuel shortages caused by Ukrainian drone attacks on refineries, three industry sources told Reuters and LSEG shipping data showed.
"Drop ETS"?
Well OK. Replace it with a simple carbon tax on an upwards sliding scale that pays for storage. I want someone to pay me for storing their treatment of the atmospheric commons as an open sewer. Freeloaders like you included.
TACO, trade, economics, exchange rates, Trump and Xi…if the West engaged in coordinated action with China, could M NZ GA happen? Interesting opinion piece in the Guardian. https://www.theguardian.com/us-news/2026/aug/19/china-trump-trade-weak-…
Bessent, "trying to screw the scrum" ... oh dear... with these metrics.... are the markets really that dumb?
THE US DEBT-DOOM-LOOP
The Refinancing Crisis Facing America
The United States government is trapped in a costly financial cycle. With the national debt pushing past $40 trillion, the cost to keep up with interest payments has nearly tripled.
In 2020, the government paid $345 billion in net interest. By 2024, that number soared to $881 billion, and it is now climbing past the $1 trillion mark.
America is facing a massive maturity wall. It must refinance trillions of dollars in old debt at today's much higher interest rates.
The Trillion-Dollar Refinancing Wall
By the end of this calendar year, the U.S. Treasury must roll over an estimated $3.5 trillion to $4 trillion in maturing debt. This represents the final stretch of a colossal $9 trillion maturity wave.
Because the U.S. relied heavily on short-term borrowing during the plandemic, a quarter of its entire national debt expires and must be re-issued within months.
The problem is the rate shock - debt issued a few years ago carried interest rates between 0.5% and 2.5%. Today, the Treasury must refinance this debt at current market rates.
Short-Term Bills: Refinancing at 4.50% to 5.00%, adding up to $49 million more per year for every $1 billion rolled over.
10-Year Notes: Refinancing at roughly 4.70%, adding up to $40 million more per year per billion.
30-Year Bonds: Refinancing near 5.33%, forcing a steep penalty on long-term borrowing.
Every $1 trillion rolled over from a 1.5% rate to a 4.5% rate adds a permanent $30 billion per year to the government's interest bill.
The Retreat of Foreign Central Banks
Historically, the U.S. counted on foreign governments to buy its debt. Today, America's biggest buyers are backing away.
Japan: Defending the Yen
Japan remains the largest foreign holder of U.S. debt, but its appetite has gone. The Japanese yen has faced severe weakness against the U.S. dollar. To protect its currency, the Bank of Japan has been forced to sell off U.S. Treasuries to buy back its own yen.
China: Strategic Diversification
China has steadily reduced its stockpile of U.S. debt to the lowest levels seen in over a decade. Driven by geopolitical tensions and the freezing of Russian reserves, Beijing is shifting its wealth out of U.S. dollars and into tangible assets like gold.
The Auction Shortfall
With foreign central banks buying less, U.S. Treasury auctions are seeing weaker demand. This forces the U.S. to offer even higher interest rates to attract domestic buyers, like banks and hedge funds, spinning the interest wheel even faster.
Treasury Buybacks: An Emergency Escape Valve?
To keep the bond market from locking up under this immense pressure, Treasury Secretaries enact emergency intervention. The government increases its long-dated buyback program.
How a Treasury Buyback Works
A buyback is when the U.S. Treasury acts like a corporation buying its own stock. The government uses cash from short-term borrowing to buy back older, hard-to-sell, long-term bonds from Wall Street banks.
Why the Government Does This - IOWs, to try pull the wool over the market's eyes
Injecting Liquidity: It ensures banks have the cash to keep trading bonds smoothly.
Stabilising Prices: Buying back bonds keeps their prices from crashing, which prevents interest yields from spiking even higher.
How This Influences Everyday Interest Rates
The U.S. Treasury market has been the foundation of the global financial system. When the government has to pay higher interest rates to borrow money, it triggers a domino effect across the economy.
Mortgages: The 30-year fixed mortgage rate tracks the 10-year Treasury note. As refinancing costs push Treasury yields up, home loans remain stubbornly expensive.
Credit Cards and Auto Loans: Higher government yields force banks to raise their Prime Rate, driving up the cost of carrying consumer debt.
Corporate Borrowing: Companies, especially those borrowing heavily to build AI data centers and infrastructure, must compete with the government for capital, raising costs for businesses and consumers alike....
And the beat goes on... good luck with this "strategy", blathering Mr Bessent - you are firmly strapped into the hot seat for the duration of this debacle.
To me you appear exponentially more incompetent that any previous SOT... even compared to Janet.
Whether we want to admit it or not, the US is bankrupt and unless it does a massive U-turn on its fiscal deficit spending, is going to lose reserve currency status at some point in the future.
Could be a few years from now, could be a few decades - but it would appear the writing is on the wall - too many variables to determine when this may happen (ie the speed of its demise) - but the trend and symptoms are obvious.
I read Ray Dalio's book 'The Changing World Order' which outlines how other reserve currencies (and nations) have failed in the past - and what you describe above are the exact conditions of a reserve currency that is heading towards collapse. ie what they are doing is completely unsustainable and the only thing they could do to save themselves is to do what DOGE was recommending - but failed to implement (if people were willing to remove their hatred for Elon Musk and actually just look at the economic/financial reality of what is happening they would be able to see the truth).
Those conditions are generally driven by the very wealthy who think they're smart due to the size of their bank balance, but in reality they cannot see the way everything is connected, cannot resolve it for themselves because all they know is how to play their own economic and political system. Many, perhaps all, act as they don't believe the laws of man, or the universe, don't apply to them because they've spent so long ignoring, distorting or manipulating them and getting away with it. Crunch time is coming....
While writing this I recalled a common complaint from a number of westerners, contractors and US military during the 1991 Gulf War, about wealthy Kuwaiti's and other Arabs partying up large in the Gulf states while US servicemen and other allies defended their homelands, not being prepared to put their own lives on the line for their own. When the US does finally collapse in on itself we'll likely see that there too.
Independent - I believe you are right about the systemic risk.
As you state the symptoms match exactly what Ray Dalio warned about regarding historical reserve currency declines (The US DEBT-DOOM-LOOP).
However, I believe that your faith in DOGE as a structural cure is mathematically impossible - the core issue being, that DOGE was designed to cut the wrong things:
The Deficit is $1.9 Trillion: The gap between what the U.S. spends and collects is vast.
Non-Defense Agency Budgets are only ~$900 Billion (going on $1.5 trillion and not even including all the peripheral agency spending) - and so even if you completely abolished the FBI, EPA, Department of Education, and every other domestic federal agency, you wouldn't cover half of the annual deficit.
The real drivers are untouched - the true drivers of the $40 trillion debt are Mandatory Entitlements (Social Security/Medicare) and the $1 trillion interest bill itself (The US DEBT-DOOM-LOOP). DOGE had zero legal authority to touch either.
As the recent GAO report confirmed, the actual verified savings from the efficiency commission were minor drops in a massive fiscal bucket.
Flipping the script on a $40 trillion debt wall requires restructuring entitlement programs or raising massive revenue - neither of which can be fixed by an advisory board cutting corporate leases or trimming administrative staff.
This is a massive structural maths problem, not an operational efficiency problem.
If the Musk venture into cutting government spending was serious, he could have just returned the cash taxpayers spent on SpaceX?
It took 205 years for the US to accumulate its first $1 trillion in public debt.
Meanwhile, the Trump Admin can achieve an additional $1trillion of debt in as little as 48 days.
Good summary, although your use of "plandemic" exposes your nutty streak.
UST 10yr at 4.71%; gold down; oil prices up again
Gold is UP, significantly so.
Yes, spot gold is up over $500 USD per ounce in less than three weeks for August.
And so for August so far, it is up 11.4% and the strongest surge since January, but still 19% below the all-time high of $5,608 set earlier this year.
Have you considered what metric you are using and does that tell you something?
Yes, Frank, absolutely - fiat tokens are the metric, and given that the entire fiat debacle is about to go up in smoke, this makes the potential consequences of a looming global financial reset even more spectacular.
This from yesterday:
by Averageman | 19th Aug 26, 12:34pm
Looks like interest rates are not going to be dropping.
by Yvil | 19th Aug 26, 2:17pm
The US simply cannot afford higher interest rates, it is far, far too indebted.
Beware who you listern to
Yesterday Luxon tried to reignite the culture wars by winging about Wellington local government and cycle lanes, says it made it very difficult for him to get to parliament. Stuff puts that claim to the test. spoiler: Luxon is full of bull s#!t
https://www.stuff.co.nz/politics/361022356/it-very-difficult-cross-mole…
TBF. He wasn't even in Wellington when he said he was, bit like being a crusaders fan before they even existed.
Possibly feeling a low right atm.
It's pretty obvious he'd be hopeless on a bike, but you'd think he would have mastered crossing a road by his age. Probably he was trying to cross the road in the crown limo.
I crossed that road twice on Tuesday, the cycle lanes aren't the real problem in crossing - no cyclists !, its a 1 way motorway & Thorndon / Karori access route with a large supermarket in the middle so very busy with erratic traffic flows.
The cycle lanes along with over the top bus lane restrictions have completely stuffed many small businesses throughout wgtn removed ~ half of wgtn cbd carparks since covid.
Further, suburban homeowners have had their property values & marketability significantly reduced by having cycle lanes installed that remove street parking: in many cases older homes without offstreet parks.
Doesn't look particularly busy in the last decade, perhaps google streetview travels offpeak. Just the lone cyclist to navigate https://www.google.co.nz/maps/place/Molesworth+Street,+Wellington+6011/…
I think today's news by Bessent to increase QE and print more money (let's call it what it is), is not fully appreciated. He is basically saying:
"IN THE THOUGH BATTLE BETWEEN CONTROLLING INFLATION OR CONTROLLING INTEREST RATES (THE BOND YIELDS), THE USA WILL SACRIFICE THE USD (VIA HIGHER INFLATION) TO SAVE THE BOND MARKET"
This has immense repercussions on many asset prices, one of which being that precious metals are about to resume their uptrend to the moon.
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