Interest rate nirvana? Believe it or not, there are hard-headed investors in Australia and offshore who aren’t worried by the prospects of interest rate rises in the United States in the next few months and beyond. After all they have just agreed to lend (by the March 31 settlement date) $4.25 billion for 20 years to the Australian government. So they are prepared to ignore any nascent future fears about inflation here, and the prospects of rate rises by the Federal Reserve. The KSP (key selling point) for yield-hungry investors was the coupon rate of 2.865%. The Australian Office of Financial Management had been looking to raise between $3 and $5 billion, so at $4.25 billion, demand was quite strong. The most astonishing thing about this raising is the 20-year duration. The cash rate is 2.25% (and could go lower). Inflation is currently 1.7% and is not expected to be a concern for the next year or more (despite the weaker dollar). Last October the government sold a $7 billion, 22-year bond at 3.945%, when the cash rate was 2.50%. The latest raising means the Abbott government has raised a net $94 billion in debt. The Office of Financial Management says total Australian government debt on issue at the moment is just under $363 billion, and will rise to more than $367 billion once the latest securities are issued after settlement next week. — Glenn Dyer
Not so golden dairy anymore. While the Kiwis bask in the reflected glory of a World Cricket Cup final (and a great game last night), for another Kiwi success story — dairying — the golden, winning glow has well and truly gone. This morning, Fonterra, the country’s dairy monopoly, cut its distribution/dividend guidance after net first half profit fell 16% to NZ$183 million (it was NZ$459 million for the first half of 2012-13). Revenue dropped 14% to NZ$9.7 thanks to a slump in global dairy prices up to the end of December, when they hit a five-year low. Prices rose from January onwards until that anonymous poisoning scare earlier this month caused prices in last week’s auction to drop 8.8%. Fonterra held its forecast farmgate return for the current season at NZ$4.70 per kilogram of milk solids, but cut its forecast dividend to 20-30 NZ cents a share. — Glenn Dyer
Streaming is getting sporty. Even though the NFL in the United States has US$27 billion worth of broadcast deals with CBS, NBC, Fox and ESPN, that still hasn’t stopped it from deciding to test the live streaming market. The league announced this week that it would take one game in the coming season and put it on a national digital platform, but not on national free-to-air or cable TV (but it will be broadcast on TV in the two teams home markets). The game on October 25 between the Buffalo Bills and Jacksonville Jaguars — two weak teams last season — will be put up for bidding among national digital platforms in the US. The NFL says the game will be free for fans to watch online and wants to hear from tech companies about pricing models. Netflix has ruled out any interest because the game will be ad-supported and Netflix doesn’t do ads. But it’s a trial and it’s the start of a huge change in sports broadcasting and an enormous challenge to the sports and their broadcast partners. — Glenn Dyer
Nirvana denied? European sharemarkets are soaring, despite Greece’s woes, the euro is falling, boosting exports, interest rates are falling to record lows, thanks to the European Central Bank’s (ECB) quantitative easing, and growth is starting to stir. Deflation no longer is such a concern, but what about unemployment? Overnight the latest survey of eurozone manufacturing and services hit a three-year high, so shares again jumped. But the reality is very different for millions of people out of work, especially young people in countries like Greece, Spain and Italy. Politics across the eurozone is fractured (not to mention in the UK) and its easy to see what one of the drivers is — high unemployment. And the outlook for jobs in the eurozone is bad, unremittingly bad. According to forecasts from the ECB unemployment in the eurozone, currently 11.2%, won’t change much between now and 2017, when the jobless rate will be 9.9%, or an estimated one in 10 workers. Some economists dispute that forecast saying its too gloomy (but when has the eurozone surprised on the upside in recent years?). The previous recent low for the eurozone’s jobless rate was 7.2% back in early 2008, as the GFC was gathering pace. The US rate is 5.5% (and forecast by the Fed to fall to at least 5% by the end of this year or lower). Australia’s is 6.3% and forecast to drift higher.
Greece’s day of reckoning nears. The pointy end for the latest euro drama involving Greece is rapidly nearing. Media reports across Europe overnight, including from Reuters, say the country has only three weeks cash left before it runs out — and the European Central Bank overnight further tightened rules on what the country’s banks can borrow, reducing the banks’ ability to raise fresh money. The Financial Times reported the government has raided the bank accounts of the public health system and Athens commuter train system looking for surplus cash (bugger creditors). The government needs to raise 1.7 billion euros for its monthly wages and pension bill next week, and a further 450 million euros to repay an IMF loan on April 9. But there’s not enough cash left for the government to cover both. Reuters reported a government official saying the country will run out of cash by April 20. Greece is putting together a wish list of reforms it hopes will convince eurozone finance ministers to allow the return of 1.9 billion euros in profits made by the ECB on Greek bonds, and the return of a further 1.2 billion euros left over from the Greek bank bailout fund, which the eurozone took back last month. Greece was supposed to lodge its new list of policy changes by Monday night, but media reports say there’s no sign of any discussion of them with eurozone officials. The big question remains whether Greece will meet its latest wishlist, or whether it will continue to try and avoid meeting them. If that bailout cash is returned, it will have to be used to help the banks, not the government, further complicating the government’s cash problems. — Glenn Dyer
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