Many hurdles this week that could see US rates pushed around significantly - ANZ

Analysts at ANZ explained that Q3 advanced GDP was stronger than expected at 3.0% saar (mkt: 2.6%; last: 3.1%). 

Key Quotes:

"The economy is running above the Fed’s estimate of trend growth (1.8%) and appears to be accelerating, consistent with a Fed rate hike in December. Private consumption rose 2.4% and equipment investment rose 8.6% saar."

"Spending on personal goods rose 4.2% saar, private domestic investment rose 6.0%, exports rose 2.3%, and non-defence federal spending rose 2.3%. Spending on private services dipped to 1.5%, but that should prove temporary."

"All in all, the US GDP result showed that most sectors of demand are rising in a solid fashion. Above-trend growth when the economy is operating at full employment should help push inflation higher and intuitively that would suggest higher bond yields. Indeed, US 10-year yields have risen from a low of 2.04% in early September to 2.41% today. Some see the 2.4% level as a key one, which if sustainably broken, could see rates move significantly higher (indeed, according to Bill Gross earlier this month, it would signal the end of the 30-year bond rally!).

Whatever your view, there are a number of hurdles this week that could see US rates – and by association, New Zealand rates – pushed around significantly.

The Fed Chair nomination is a key one – rightly or wrongly, Taylor is seen as a hawk, Powell a dove. There’s an FOMC decision – no hike is expected but December signalling will be key. A tax reform bill is due, Treasury funding data is out, and non-farm payrolls and PCE inflation to boot."