Kia ora,

Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news the global bond rout is gathering pace. 

The US 10-year Treasury yield, the benchmark for borrowing costs worldwide, has risen to 4.11%, the highest since October 2008, with investors fretting about the prospects of a recession from aggressive central bank actions to tame inflation. Minneapolis Fed President Neel Kashkari was the latest policymaker to warn that the American central bank might need to lift its policy rate above 4.75% if underlying inflation continues to accelerate.

In the US, the widely-watched Beige Book review of the US economy by the Federal Reserve regional members paints a picture of a "modestly expanding" economy, with some wide regional variations. Retail activity is flat they noted, but factory activity is expanding. Employment continued to rise at a modest to moderate pace they noted, and although price growth remained elevated, some easing is showing up in a number of regions.

American new housing starts came in lower in September than for August, but remained at around the 1.5 mln annual rate level they have been since April. Residential building consents rose slightly, and completions remained stable as they have for the past five years.

US mortgage applications however dipped yet again last week, extending the long string of declines that basically stretch back to the start of 2021 with only occasional gains. But what is rising relentlessly are their mortgage interest rates, now up to 6.94% plus points. American residential housing has lost its 'investment' status. It is back to fulfilling its primary function of just being 'shelter'.

Today's UST 20yr bond tender was a well-supported event for the US$12 bln on offer despite no Fed involvement. The median yield was 4.32% today, up a sharp +57 bps from the 3.75% at the prior equivalent event a month ago.

Canada's September CPI inflation rate came in at 6.9%, and sticking close to the 7% level recorded for August. But it is down from the recent peak of 8.1% recorded in June. Their producer prices are rising faster at +9.0% in the year to September although this is lower than the August +10.2% rise. Raw material prices are falling quite quickly there now and that will increasingly flow through to future PPI results.

China data and economic news is still locked-up so as not to distract from the Party's big meetings. Investors in Hong Kong and Shanghai don't seem impressed however - not that Beijing really cares.

The overall EU inflation rate for September was released overnight coming in at +10.9% with the frontline states facing Russia being hit the hardest, and France, Spain and Italy keeping the overall rate restrained.

The UK also reported its September inflation rates and it was sticky at +10.1%.

Adding to global inflation pressure, we should note that the price of lithium is rising again, even if other non-precious metals slip away.

The UST 10yr yield starts today sharply higher at 4.11%, up +9 bps from this time yesterday.

The price of gold will open today at US$1630/oz. This is down -US$20 from this time yesterday.

And oil prices start today up +US$1.50 from this time yesterday at just over US$83.50/bbl in the US while the international Brent price is just on US$90.50/bbl. 

The Kiwi dollar will open today at 56.6 USc and -20 bps softer than this time yesterday. Against the Australian dollar we are up at 90.4 AUc and another small rise. Against the euro we are also firm at 57.9 euro cents. That all means our TWI-5 starts today at 67.5, and marginally up from yesterday.

The bitcoin price is now at US$19,179 and down -1.3% from this time yesterday. Volatility over the past 24 hours has however been low at just +/- 0.9%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.