IMF rebuked on bailout processes; fewer China zombies; China floods disrupt food and steel; Britain faces gloom; NZ sovereign CDS spreads hit new low; UST 10yr yield at 1.51%; oil lower and gold higher; NZ$1 = 70.7 US¢, TWI-5 = 74.6

Here’s my summary of the key events overnight that affect New Zealand, with news Chinese floods are distorting many markets.

But first, there was a report released overnight of a review of how the IMF dealt with the 2010/11 bailouts of Ireland, Greece and Portugal. The reviewers rebuked the Fund for being “overly optimistic” in its assessments about how these countries would recover, and it says the way the Fund handled issues of transparency and accountability during the crisis raises issues. But it did acknowledge the very tough pressures policy makers were in at the time. And given the recovery in Ireland which seems to be pretty “exceptional“, the critique there seems slightly off the mark.

A new survey in China, claims that there are now only 7.5% of SOEs that can be called “zombie companies”, and that is down from 30% five years earlier.

And staying in China, food prices there may be about to take off higher as rampant floods there take their toll on the rural sector. Pork prices may be the first to show hikes.

Those same floods are disrupting iron ore supplies and there seems to be a bit of a scramble for supplies. Iron ore prices are finding strong support as Chinese steel plants hit record rates of production in the past week. Some analysts say the trend may last as long as a full year. All this boosts the Aussie mining industry.

In Britain, gloom is descending over their economy as the optimism that there would be little post-Brexit cost fades.

In New York, UST 10yr yields are lower yet again at 1.51% in late session trading today. Equities, which started the day lower on a poor profit report from Ford, are now back in positive territory.

Also positive is the strength of CDS spreads for New Zealand sovereign debt. They have fallen to under 29 bps, levels we have not benefited from since before the GFC.

The US benchmark oil price keeps on slipping, today by a bit less than $1 and is now just over US$41/barrel and the Brent benchmark is just under US$43/barrel.

But the gold price is slightly higher yet again, up to US$1,332/oz.

The NZ dollar will start today a little higher from this time yesterday. It is now just on 70.7 US¢, at 94.2 AU¢, and at 63.8 euro cents. The TWI-5 index is now at 74.6.

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

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

Daily exchange rates

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for(i=0;i

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