As risk fear rises, bond markets draw attention

Kia ora,

Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with markets are even more skittish today, with key activity moving into bond markets even at higher yields.

First, American mortgage applications fell back last week and by their most since late September. Fears about rising interest rates are getting the blame as it sinks in that highish inflation isn't going away. Refinance activity was the hardest hit. Still, it and purchase application levels remain well above year-ago levels.

There was also official data released overnight, old catchup data for the US trade balance for both goods and services. That came in at the expected -US$50 bln deficit for August, exports flat, imports also flat. That was slightly better than August 2024 but almost identical to August 2023.

And there will be no October jobs report from the US. It has been cancelled, officially because they "couldn't collect some data", but more likely because it would have delivered news the White House didn't want.

Meanwhile reports circulate that the US is not only rolling back tariff-taxes on food imports, it is also close to rolling them back on steel and aluminium, maybe like the food rollback, somewhat selectively.

The latest US Treasury 20 year bond auction raised US$17.8 bln at a median yield of 4.65%, up from 4.46% at the prior equivalent auction a month ago.

The US Fed minutes of their last meeting on October 30 are due to be released at 8AM NZT. There is intense interest in these, more so because Trump as one acolyte in on the meetings pushing for [dangerous] rate cuts. If there is important stuff that emerges, we will update this item here.

In Japan, September machinery orders rose a better-than-expected +11.6% from the same month a year earlier, up an impressive +4.2% from August. (This result is not twisted by large, volatile items like for ships or major infrastructure machinery such as electric power plants. That would have pushed the rise even higher.) Export orders were particularly notable.

And Japan’s 10-year government bond yield rose above 1.77% on Wednesday, a 17-year high. A year ago it was at 1.06%. The recent climb comes ahead of a crucial ¥800 bln debt auction (US$5.1 bln) that could indicate investor appetite signals. That is important because the new Takaichi government plans major debt-financed stimulus which is raising fiscal concerns.

Meanwhile, China has raised US$8.6 bln in USD and EUR bonds. While that is a lot for them, it pales compared to the US$234 bln that was bid

In Malaysia, they are still an export powerhouse with October exports up +15.7% from a year ago and to a record high, imports up +11.2%, also a record high, resulting in a larger positive trade balance than expected. In fact, they haven't run a trade deficit in any month since the pandemic.

As expected, the Indonesian central bank left its policy rate unchanged yesterday at 4.75%.

In Australia, payroll costs rose pretty much as expected in the September quarter. They were up +3.4% year-on-year in Q3 2025, unchanged from the previous quarter. Public sector wages increased +3.8%, slightly above the +3.7% rise in Q2, while private sector wages grew by +3.2%, easing from +3.4% previously. (Overall,