Risk aversion grips markets; US personal debt now above 2008 level; world record property price; Aust keeps AAA; Aust bank chiefs gagged; UST 10yr yield down to 2.22%; oil firms, gold jumps; NZ$1 = 69.4 US¢, TWI-5 = 73.7

Here’s my summary of the key events from overnight that affect New Zealand, with news of a new and worrying twist in the Aussie bank tax affair.

But first, US equities and bonds are falling in price today as risk aversion takes hold in a period where the new US president’s legal situation is under scrutiny. The S&P500 is down -1.3% and the NASDAQ is down almost -2%. Bond yields are also tumbling. The gold price has jumped.

New data out on American personal debt shows it reached a record high in the March quarter, exceeding its 2008 peak after years of retrenchment in the face of financial crisis, recession and recovering economic growth. American now owe US12.7 tln, of which mortgages are US$8.6 tln. But much has changed over the past eight plus years. The economy is larger now, lending standards are tighter and much less debt is delinquent. The real growth is away from mortgage debt which is still almost US$1 tln below its 2008 peak.

Overall American household debt level are now at about 68% of GDP, and that is far below the 85%+ level in 2008.

You think our real estate is unaffordable? It is nothing like Hong Kong. The world’s most expensive real estate deal just happened there where one plot of land in downtown Hong Kong has just sold for US$3 bln. Development is extra.

In Australia, all three credit ratings agencies have now affirmed their AAA sovereign rating following the country’s Federal budget. But the last of them, S&P, has retained its ‘negative watch’ status, sceptical that the target to surplus is actually realistic.

And there has been a new twist in the Aussie bank tax affair. Before they can learn details of the new tax on them, bank bosses must sign a gag order, removing their ability to comment publicly about the new arrangements. No matter what you think about the tax, it is an oppressive move by their Government.

Giant cloud enterprise software company Workday has decided to base its Asian regional headquarters in Auckland, a surprise pick over Sydney. It is just one of three worldwide, and is a major coup for New Zealand. It will start with 80 new tech jobs and double quickly. The impact on the local IT sector is likely to be significant and far more than just direct employment. And it is likely to be a trend-setter.

In New York, the UST 10yr yield is sharply lower today at 2.22% and that is now lower than at any time since mid-November last year.

The price of oil is marginally firmer today. The US crude benchmark is now just over US$49 a barrel, while the Brent benchmark is just over US$52.

Gold is up sharply on that risk aversion, up over US$20 to US$1,258/oz.

The US dollar has been hit hard today. It is down nearly a full 1c against the New Zealand dollar which is now at 69.4 USc. On the cross rates the Kiwi is at 93.4 AU¢, and 62.2 euro cents. The TWI-5 index is at 73.7.

If you want to catch up with all the 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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