Commodities to the fore

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news it is a great time to be a commodities producer, hard or soft.</p><p>Firstly, the latest <a href="https://www.usda.gov/oce/commodity/wasde/wasde0222.pdf" target="_blank"><strong>USDA WASDE review</strong></a> continues it’s reporting of lower US milk output and higher prices. Beef prices are unchanged in this February report.</p><p>There was another <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2022/R_20220209_2.pdf" target="_blank"><strong>US Treasury bond tender</strong></a> overnight, for their 10 year bond, and this one was very well supported too. And it brought a much higher median yield, at 1.85% pa, compared to the 1.65% <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2022/R_20220112_2.pdf" target="_blank"><strong>a month ago</strong></a>.</p><p>Markets are waiting for tomorrow's US consumer price index number. They expect a headline January level of 7.3%, up from 7.0% in December (and a 'core' rate of 5.5%, up from 5.0% in December). Outside these expectations, expect some market repricing. Locally, financial markets are awaiting Friday's RBNZ inflation expectations survey results.</p><p>But today is all about commodities.</p><p><a href="https://tradingeconomics.com/commodity/aluminum" target="_blank"><strong>The Aluminium price</strong></a> has raced higher to record levels. It has doubled in price since mid-2020. It is likely to go much higher because China (and others) are shutting capacity to meet environmental standards. Those left are in a prime position because this metal is key to many new technology driven 'green' products (like Tesla cars). Also rising for similar reasons are <a href="https://tradingeconomics.com/commodity/cobalt" target="_blank"><strong>cobalt</strong></a>, <a href="https://tradinge