US rates fall, China risks rise

<p>Kia ora,</p><p>Welcome to Tuesday’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>And today we lead with news of falling wholesale rates in the US and rising equity risks in China.</p><p>First in the US, the one corner of there housing market that has been expanding - the sales of new homes - dipped in October. <a href="https://www.census.gov/construction/nrs/pdf/newressales.pdf" target="_blank"><strong>Sales of new single-family houses fell</strong></a> by 5.6% to an annualised rate of 679,000, well below expectations of a 723,000 rate. This is a sizable miss but in the context of the past eight months, it is just part of a developing yo-yo pattern. It will only be important if November doesn't bounce in that pattern.</p><p>There were two US Treasury bond auctions today. The <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20231127_2.pdf" target="_blank"><strong>two year</strong></a> was well supported with bids worth US$138 bln for the US$55 bln available. The median yield fell to 4.83% from the <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20231024_2.pdf" target="_blank"><strong>prior</strong></a> equivalent auction at 5.01% five weeks ago. The <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20231127_3.pdf" target="_blank"><strong>five year</strong></a> was also well supported with bids worth US$136 bln for the US$56 bln available. In this case the median yield fell to 4.37% from 4.82% at the <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20231025_3.pdf" target="_blank"><strong>prior</strong></a> equivalent event four weeks ago. The large and growing US budget deficits are not finding funding stress as demand is strong and yields are falling (prices bid up).</p><p>Perhaps driving these lower yields, 20 months after the US Fed began a campaign a