The big news overnight was the US Treasury Department intervening in the bond markets. Bond Yields have been reaching record highs globally, so the Treasury decided it was time to intervene, announcing a plan to more than double its ‘buy-back’ of long dated Treasury debt. US Bond Yields tumbled, on the news, but this is admission of a very serious problem, which may well metastasise down the road. The Fed minutes revealed inflation is a growing problem and intervention may be necessary. The US Dollar crumbled on the news, with the EUR jumping above 1.1650, while the GBP surged to 1.3600.The crash in the reserve was reflected in commodity currencies, with the AUD breaking back above 0.7100, while the NZD reached 0.5930. Earlier in domestic trading, NZ PPI surprised markets, more than doubling (to 2.9%), reflecting the highly inflationary economic environment. The RBNZ will be pressured to raise interest rates further, which will add support to the KIWI, if only short-term. This is not a good development.
