Webbannertest v2

Implications of an Evergrande default

  • Some form of default looks inevitable for debt-laden Chinese property developer Evergrande  
  • We examine why markets don’t hold concerns that a default will put sand in the global financial cogs
  • However, concerns are spreading to other developers which could increase volatility
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Simon Pannett
Simon Pannett | Posted on Sep 17, 2021
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The further consequences of lower interest rates

  • As market interest rates in New Zealand decline further, additional consequences are revealing themselves. The theme of accelerating progression of longer-term trends continues.
  • Wholesale interest rates continue to decline, with the Government’s PREFU announcement being the catalyst this week, due to a $10bln reduction in the size of the Government Stock issuance program for the 2020/21 fiscal year. The five-year New Zealand Government bond now trades at a negative yield, joining the one and two year maturities. 35% of outstanding nominal New Zealand Government Stock is now in the “negative rate” club.
  • This week the Auckland Council issued the longest maturity bond in New Zealand for more than fifty years. The ability of a council to issue 30-year bonds in the domestic market is a notable milestone in the ongoing development of the New Zealand capital market.
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Mark Brown
Mark Brown | Posted on Sep 18, 2020
webbanner1 v2

Bond market takes note of RBNZ dovish shift

  • We think the RBNZ reaction function has become more dovish with lower and flatter yield curves the primary goal in the face of persistent health-related downside economic risks.
  • The Bank expanded its QE programme by more-than-expected last week from $60bn to $100bn and said it is prepared to implement a negative OCR alongside direct lending to retail banks at interest rates close to the OCR, if required.
  • Interest rates have fallen in response, but NZ government bonds now look expensive versus their global peers and a sharp rise in breakeven inflation rates suggest that economic risks may lie in both directions.
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Hamish Pepper web
Hamish Pepper | Posted on Aug 18, 2020