90 seconds at 9 am: China's AIIB wins key support

US debt limit brinkmanship resurfaces; China opens up, gets more support for AIIB; GE Money sells consumer arm; UST 10yr yields up; oil down; NZ$1 = 73.3 USc, TWI = 79

16th Mar 15, 6:59am by David Chaston

Here's my summary of the key issues from over the weekend that affect New Zealand, with news of more countries joining the China-funded AIIB.

But first, the US debt limit battle may be about to resurface. Their debt ceiling of US$18.1 tln needs to be extended by Congress, and now that both houses are controlled by the Republicans that may be tricky.

For the past year, their debt cap has been suspended, but the Federal Government is still running deficits of about $500 bln/year and the cap suspension expires tomorrow. Deja vu - although financial markets are currently all but ignoring the politics of the issue.

China has announced that it is opening up more of its economy to foreign investors. The announcements significantly reduce the restricted sectors, and although overlooked in the reporting, "modern agriculture" is likely to be one due for opening up.

Also over the weekend, both Britain and Australia signaled they will join China's Asia Infrastructure Investment Bank, being late arrivals but in time to be called 'founding members'. The US has been pressuring its allies to boycott this new institution and competitor to the US-led World Bank. New Zealand signaled late last year it would be joining.

In Australia, it was announced that the local consumer finance division of GE Money has been sold to a group of investors including the giant American private equity firm KKR and another giant American investor Varde Partners. GE Money got more than NZ$8.5 bln for this division. Harvey Norman "interest free" deals are part of their products, for example.

The UST 10yr yields popped back up on Friday and are now at 2.12%.

The crude oil price fell on Friday and is now at US$45/barrel while the Brent crude price is down to US$55/barrel. The IEA warned of a supply glut.

In addition in 2014 and for the first time in 40 years carbon dioxide emissions did not grow, according to the IEA. They say economic growth and energy use may be decoupling.

The gold price rose a little bit to US$1,153/oz.

The New Zealand dollar starts the week at 73.3 US¢, it is at 96 AU¢, and the TWI is at 79.

For a world economy coming to terms with a rising US dollar and falling oil prices, this week will be all about the US Federal Reserve's policy meeting and its intentions on interest rates. We will know their decisions on Thursday.

If you want to catch up with all the local changes on Friday, we have an update here.

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

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6 Comments

by Stephen Hulme | 16th Mar 15, 8:13am 1426446782

Those that sell first, sell best..

APRA’s new mortgage standards focused on quality, not quantity of lending In its letter to the banks, APRA indicated that it will increase the level of supervisory oversight on mortgages given recent developments in the housing and mortgage markets. That said it does not propose to introduce across the board increases in capital requirements or caps on particular types of loans.

It's a total shock that maniacs who borrow nearly 100% on interest only terms to lose rental money to speculate on housing capital gains would love low interest rates. And with the lowest mortgage rates in Australian history, coinciding with the sloppiest lending standards in Australian history, combining with the highest property prices in Australian history, added to the highest household debt to income ratio in Australian history, what would you expect the biggest idiot of a treasurer in Australian history to do?

Start talking about letting first home buyers raid their retirement accounts, so they can get over the angst of missing out on this lunacy and ensure they'll blow their retirement savings and push the housing market up even further.

...such changes may include using superannuation savings for things that Australians do not use them for now, he said, including using super to buy first homes. "I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home, on their first home," Mr Hockey said. "I am concerned about rising house prices and the accessibility to homes and homeownership for younger Australians, but we've got a limited pool of savings. We need to have these conversations." Read more

by Roger Witherspoon | 16th Mar 15, 11:08am 1426457302

Crikey, APRA have sent a letter to the banks! They had better watch out or they might find themselves getting taken out to lunch next. Jeez, anyone would think that the value of any future income stream tends to infinity as expected interest rates tend to zero.

by OnwardsUpwards | 16th Mar 15, 9:54am 1426452888

They say economic growth and energy use may be decoupling.

Hah! Another score for human ingenuity. Take that broken clock peak oil shills.

by skudiv | 16th Mar 15, 3:41pm 1426473687

LOL both you and DC misrepresent the facts. Energy use increased. What changed is the mix of coal, less coal more gas was responsible for most of the change. I'll leave the fighting of strawman arguments, by making up data to prove a point, to the morans.

by Mike B | 16th Mar 15, 10:58am 1426456680

Where is Putin?

by Roger Witherspoon | 16th Mar 15, 11:13am 1426457580

On holiday.

Kidnapped by the CIA.

In house arrest while the princelings divide up the spoils, as happened to Gorbachov.

In China plotting the demise of the dollar.

In hospital due to food poisoning by one of his lieutenants.