Canadian household credit growth is slowest since 2001 with Household credit (Annualized 3-month growth rate) growing at 2.98% and Household Mortgage credit (Annualized 3-month growth rate) growing at 2.85%.
Interest Rates globally are changing (in both directions) at the fastest pace ever in the history of the modern central banking system. Nearly half of the countries in the world have cut interest rates while the other half have hiked them in the past 6 months. The average change for countries with a change in interest rate has been +0.22% in the past 6 months. Take Argentina and Turkey out and the average (global) interest rate has actually fallen.
Since the financial crisis of 2008-2009 the difference between bank deposit growth and bank loan growth in the U.S. diverged in a big way, graph below,
Here are the base interest rates for Central Banks as of June 8, 2018 for each country (in increasing order of interest rate),
Are interest rates rising or falling globally? Well, if the past three months are anything to go by then the world is moving in different directions with regards to interest rates. So much for synchronized increases or decreases in interest rates …
Here is a map of changes,
Here are the base interest rates for countries in the European Union plus additionally those in the European Economic Area and Switzerland (as of June 5, 2018),
Personal interest payments for households in the United States have hit an all-time high with annualized interest payments now $321 billion, this despite low interest rates currently.
Investors seek safety
What a difference a week makes, just last week everyone was talking about soaring bond yields. Investors are now seeking safety with developed economies bond yields falling significantly during the week.
Here are some 10-year bond yields, figures in brackets indicate change during the week.
US 2.93% (-15 bps)
UK 1.32% (-21 bps)
Germany 0.41% (-17 bps)
Canada 2.35% (-14 bps)
Switzerland 0.00% (-13 bps)
Netherlands 0.59%% (-15 bps)
Australia 2.79% (-13 bps) Continue reading “Weekly Overview: Investors seek safety as bond yields fall; Crude Oil down 5%; Baltic Dry Index down 15%; Bank of England Governor prepared to cut or freeze interest rates; US E-Commerce Retail sales soaring”
We recently wrote about the impact of rising interest rates for UK households, read more about it here. We also wrote about the impact of higher bond yields for the US government, read more about it here.
Impact of higher interest rates for the UK Government
The UK government has around £1.72 trillion in debt and pays around £36 billion in interest payments a year (an effective interest rate of 2%).
The UK tax revenues are around £800 billion a year, which would mean 4.5% of all tax revenues are paid as interest. The UK has paid £540 billion in interest since it last ran a surplus in 2001.
UK interest rate hike expectations
The Monetary Policy Committee of the Bank of England meets on Thursday, May 10 to decide the direction of interest rates.
Following a weak UK Q1 2018 GDP growth of only 0.1%, the slowest since Q4 2012 (read here) and inflation falling from 2.7% in February to 2.5% in March (against a Bank of England target of 2%), the market is now pricing in a 17% of a rate rise in May. The market had factored in a 100% chance of a hike just a few weeks ago.
UK 10-year bond yields fell 5bps during the week. The 10-year bond now yields 1.4% (up 0.32% over the past year)
Continue reading “Weekly Overview: UK interest rate hike expectations; Argentina hikes interest rate to 40%; LIBOR OIS; US Money Supply growth accelerating again; Bank of Canada and Bank of England speeches”