Latest / Best of Business / Shane Solly: Harbour Asset Management expert on whether bond markets are positioned for more interest rate hikes

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Shane Solly: Harbour Asset Management expert on whether bond markets are positioned for more interest rate hikes · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: Shane Solley, Harbour Asset Management's with us. Hello, Shane.
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  Speaker 3: Hi, Heather.
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  Speaker 2: All right, what are the bond markets picking for more
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  Speaker 2: interest rate hikes?
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  Speaker 3: Yeah, look, I think bond markets are actually priced in
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  Speaker 3: enough for now. We saw the US 10-year bond yields
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  Speaker 3: hit 5% on Friday. Today here in New Zealand, we're
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  Speaker 3: seeing the US 10-year government bond yields, sorry, 10-year New
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  Speaker 3: Zealand government bond yields hit 495. So we're back up again.
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  Speaker 3: Oil and economic data are going to be the main
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  Speaker 3: things that push the foreign news around this week. Last week,
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  Speaker 3: the market really liked the fact that the Fed actually
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  Speaker 3: was serious and showed some independence. But the question is,
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  Speaker 3: is there one hike, two hikes, or a longer hike cycle?
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  Speaker 3: So we're looking for data again this week. Oil prices
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  Speaker 3: bring oil back around 103 is helpful. We need a
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  Speaker 3: bit more of that. That's one key direction. There's quite
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  Speaker 3: a lot of Fed speak this week. So quite a
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  Speaker 3: few of the Fed board members are out talking about
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  Speaker 3: And we've got this global purchasing manager industry out on
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  Speaker 3: Wednesday that'll show whether this energy price is pushing input
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  Speaker 3: prices or crowding out demand or both. So, yeah, quite
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  Speaker 3: a lot on this week.
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  Speaker 2: Yeah, and we've got the China-US trade talks as well.
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  Speaker 2: Have they started yet?
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  Speaker 3: Yeah, so started overnight and hit the full-on Trump-Z summit
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  Speaker 3: later in the week. Quite interesting, right? U.S. trade envoy
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  Speaker 3: Scott Bassini, he's come out and said, look, successful engagement
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  Speaker 3: with Chinese trade envoy Li Qinggang. In contrast, Li Qinggang's
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  Speaker 3: come out and said, well, trade talks, they're not bad.
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  Speaker 3: So we've got a little bit of a year-and-a-half moment
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  Speaker 3: going on there between the two of them. So let's
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  Speaker 3: see what that really means later in the week. Yeah.
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  Speaker 2: And of course, we had the U.S. share markets ending
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  Speaker 2: up slightly on Friday, but it didn't really seem all
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  Speaker 2: that convincing. So what do you think is going on
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  Speaker 2: under the surface here?
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  Speaker 3: Yeah, really good point. What we're seeing is the cinnamon
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  Speaker 3: has recovered from the feed rate hike and that earlier
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  Speaker 3: in the week, the AI safety concerns as they've been digested.
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  Speaker 3: But this is quite wary about what the lifting interest
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  Speaker 3: rates actually means to interest rates instead of safety. So Friday,
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  Speaker 3: the US market was up, but it was all about AI.
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  Speaker 3: Increasing investment in safety lifts demand for memory, semiconductors, cybersecurity.
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  Speaker 3: In contrast, some of the more, you know, the sectors
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  Speaker 3: that are sensitive to higher central bank rates, things like
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  Speaker 3: consumer industrial banks, they were weak. So a bit of
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  Speaker 3: a change there. Not unusual for share markets to see
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  Speaker 3: a bit of a wobble around the start of the
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  Speaker 3: Fed rate hiking cycle. And so that's the point about
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  Speaker 3: is it one or two hikes and we're done or
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  Speaker 3: is there more? Normally over six to 12 months, we
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  Speaker 3: see the market up. So yeah, look, Asia Pacific markets
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  Speaker 3: today were up. China, sorry, Japan is closed for Golden Week.
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  Speaker 3: New Zealand share market up about 0.6%, a bit of
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  Speaker 3: strength in A2, Fisher & Paykel, and contact and US
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  Speaker 3: futures looking like they'll be up tonight between 0.4% and 0.5%.
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  Speaker 3: So we're getting through the wobbles.
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  Speaker 2: Good to talk to you, Shane. Look after yourself.
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  Speaker 3: Thanks, mate.
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  Speaker 2: Shane Solly, Harbour Asset Management.
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