Eyes on Victoria and a new lockdown

<p>Kia ora,</p><p>Welcome to Thursday's Economy Watch where we follow the economic events and trends that affect 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 the bumpy road to recovery is getting stressed in Australia.</p><p>In Melbourne, health authorities and Victoria’s cabinet were in crisis meetings last night regarding whether to impose a new lockdown as they raced to contain a ballooning coronavirus outbreak. They are making a decision today, but if they get this wrong, these past two days could be the time a wider spread takes hold. A lot is riding on this delay. A new full lockdown is the likely result, throwing the pandemic recovery there into reverse.</p><p>In the US <a href="https://www.mba.org/2021-press-releases/may/mortgage-applications-decrease-in-latest-mba-weekly-survey-x280264" target="_blank"><strong>mortgage applications fell</strong></a> again last week, a decrease that was larger than the usual small gains and drops over the past few months.</p><p>Bond yields slipped slightly in the US as investors piled in to a big <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20210526_3.pdf" target="_blank"><strong>US$72.8 bln 5 year UST bond auction</strong></a>, offering US$152 bln for the US$61 bln that the US Fed didn't take. The median yield was 0.74% which was lower than the 0.80% achieved at the <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20210426_4.pdf" target="_blank"><strong>prior equivalent event</strong></a>. </p><p>In China, Beijing seems to be digging in on its effort to clean up their debt market exposures. Defaults of Chinese onshore bonds reached ¥61 bln in the March quarter, up +18% from the same period last year. And now earlier signals that it will allow defaults among China’s heavily indebted local government financing vehicles (LGFVs) for the first time is <a href="https://www.scmp.com/economy/china-economy/article/3134917/chinas-debt-c