Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE RATE CHANGES
ASB raised two short fixed mortgage rates, for 12 and 18 months. More here.
TERM DEPOSIT RATE CHANGES
ASB raised two short term deposit rates too. And SBS Bank raised most TD rates; their new 1 year rate has become 4.30% and the highest of any bank.
A LOOMING INVENTORY PROBLEM?
Some of the final data for the Q2 GDP result which is due out next week was released today. The factory sales data was weak, down -1.5% from Q1 and only above year ago levels because of an exceptionally strong Q4-2021 quarter. One big impact in the June quarter is from the ending of local refining activity at Marsden Point. Raw material stocks were up +5% from the prior quarter, but finished goods stocks were down -19% on the same basis. However wholesale sales were very strong, up +21% from year-ago levels and wholesale inventories up an eye-catching +38%. From Q1, they were up +22%. These clearly are a problem, adding $3.3 bln in just 90 days. But again, the big increase in wholesale inventories probably came from the new Marsden Point status as only an import facility.
FUNDING NO LONGER 'CHEAP'
Westpac NZ's offer of unsecured subordinated notes raised $600 mln in total at an interest rates for the first five years of 6.19% pa. That compares with a Westpac 5 year term deposit interest rate offer of 4.50%. (The term deposit offer would rank above the "unsecured subordinated notes" which could be used to bolster capital if the bank needed that in times of stress.)
RISING YIELDS, STRONG DEMAND FOR RISK-FREE
There were 133 bids for the $400 mln on offer today at the Treasury debt tender. All up they bid $1.132 bln; 46 were successful. The $200 mln May 2026 offer (4 years) went for a yield of 3.87% to the 26 of the 47 bidders. That was up from 3.47% 3 weeks ago. The $150 mln April 2029 offer (7 years) had 56 bidders but only 8 were successful. The yield was 3.90% and up from 3.45% three weeks ago. The final small $50 mln May 2051 (29 years) tender went for 4.25% and up from 3.95% last time.
LOWE THE DOVE
The RBA Governor has been speaking today, and left his audience with a dovish message, implying that their next rise might be just +25 bps. These comments moved both rates and currency markets locally. He was expected to be a bit dovish, but in the end he was more so than expected.
RECORD DROP
Continuing the theme of big numbers being reported today, Australian exports plunged in July from June mainly due to sharp falls in the export of minerals and coal. That tanked their trade balance sharply, in fact the June to July fall was their largest ever, falling almost -AU$11 bln in one month resulting in a surplus of only +AU$8.5 bln (the previous record monthly fall was -AU$6.7 bln in January 2017.) Within this data was the note that Australia's rural exports rose +3.9% on a 'healthy'(?) grain market.
JAPAN DELIVERS SOME 'GOOD NEWS'
The Q2-2022 GDP data for Japan was released today (the second estimate) and economic activity came in better than expected. It was +3.5% higher than a year ago when a +2.9% expansion was expected, boosted by a strong pickup in private consumption and a faster rise in government spending. (Don't forget, this is after inflation has been removed.)
SWAP RATES REVERSE
Wholesale swap rates are probably much lower today across the curve. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 3.53%. That is still near its highest since July 2016. The Australian 10 year bond yield is now at 3.56% and down -19 bps from this time yesterday. The China 10 year bond rate is unchanged at 2.65%. The NZ Government 10 year bond rate is now at 3.96% and down -15 bps from this time yesterday and now below the earlier RBNZ fix for this bond which was down -9 bps at 4.01%. The UST 10 year is now at 3.23% and has dropped -11 bps.
EQUITIES MAKE STRONG RECOVERY
Wall Street ended up +1.8% on the S&P500. Tokyo has opened sharply higher, up +2.1%. Hong Kong is down another -0.4%. And Shanghai is down -0.1% in early trade. The ASX is up +1.5%. And the NZX50 is up +0.9%.
GOLD RECOVERS
In early Asian trade, gold is up +US$18 from this time yesterday to US$1,715/oz.
NZD RECOVERS
The Kiwi dollar is now up +½c and at 60.5 USc recovering from this time yesterday. Against the AUD we are also up almost +½c at 89.9 AUc on the Lowe comments. Against the euro we are at 60.5 euro cents. That all means our TWI-5 is down at 70.3 and up +30 bps from yesterday.
BITCOIN RECOVERS
Bitcoin has recovered some of yesterday's fall, now at US$19,252 and up +2.7% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.2%.
Daily exchange rates
Select chart tabs
Daily swap rates
Select chart tabs
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
28 Comments
Truss to ditch the fracking ban in the UK. I can't understand why she doesn't just import some jungle coal to keep the lights on.
https://www.telegraph.co.uk/politics/2022/09/07/liz-truss-vows-never-ex…
She also opened up the North Sea for exploration permits. Worth noting that they are a driving force behind Net Zero and green energy, but the first sign of "trouble at mill" they are back into the ground for fossil fuels. The electorate will not tolerate energy poverty, it's a guaranteed vote loser.
The Q2-2022 GDP data for Japan was released today (the second estimate) and economic activity came in better than expected.
While at the same time, JPY has fallen off a cliff. This is not good and Japan is the largest holder of U.S. securities. Luke Gromen suggests the BOJ may "QT" USTs way faster than the Fed could ever dream. He likens it to sipping from a firehose of forced UST supply from two of the biggest UST holders on the planet (Japan and China) at a time of declining USD liquidity.
Apparently, the BOJ has sold $85 billion of UST since Oct last year.
This is very sad https://www.bbc.com/news/world-asia-62821043
At the current rate of increase in Ethereum (ETH) vs Bitcoin (BTC), ETH just needs a 93% increase from here to flip BTC and become the number 1 crypto by market cap. To put that in perspective, the ETH price has gone up 100% or so since its bottom in June.
Once that happens I propose the bitcoin update is replaced by an ETH update henceforth.
Actually really well. The worst has been bitcoin (though I got some at 18k) but that is only 10% of my holdings (it was 100% at the start). I’ve been DCAing ETH mostly. But I have got into alts and doing defi stuff, with some huge gains and great yield. Doing well from airdrops (have earned around $100k this year just from that). From zero to $255k in just 3 months. I have invested around $100k or back in or so. This week I have multiple holdings up 40-60%.
Not sure what you're referring to Wolfie. For ex, a 93% increase in ETH price for flippening? Wouldn't that assume that the BTC price remain fixed?
The ETH/BTC cross is currently at multi-year highs atm and my target EOY price is within the range USD600-USD10,000.
Crypto. A very stable investment. Quick, sell Bitcoin, buy Ethereum. Next week, quick, sell Ethereum and buy dogecoin, never mind it was created as a joke. Eventually they'll all be a joke, pity about the losses of all the suckers.
I think it's not very smart to stereotype the digital asset space. If someone switches BTC for ETH, I don't see a problem with that at all and how my portfolio is constructed. And if people want to buy altcoins like Doge, all power to them.
There were 133 bids for the $400 mln on offer today at the Treasury debt tender.
Worth noting that every dollar debited from those bond buyers today was deducted from the settlement accounts that commercial banks have at RBNZ. There is a whopping $47.7bn of deposits sat in those RBNZ settlement accounts - costing the Crown $1.43bn per year in interest (RBNZ choose to pay OCR on the balances).
Govt basically now has the choice of holding its debt in the form of settlement balances (with RBNZ paying interest at OCR) or as bonds (where Treasury pay out the coupon rate every 6 months). Bond sales offer the chance for the Crown to convert one form of debt to another, which makes a mockery of the idea that Govts raise money through bond sales!
Obviously, the high demand for bonds suggest that the banks would prefer Govt to convert more of its settlement account debt into bond debt. However, the Crown doesn't need to - spending and taxation are broadly in balance so far in 2022, and there is nearly $30bn sat in the Crown Settlement Account to spend. Meanwhole Grant Robertson trapses around Wellington talking gravely about the fiscal challenge!!!
Worth noting that every dollar debited from those bond buyers today was deducted from the settlement accounts that commercial banks have at RBNZ.
Only because the tender participating banks record in the RBNZ Crown Settlement Account what they owe after purchasing said bonds from Treasury.
Cannot have these banks being in receipt of OCR on their outstanding reserve balances for the same amount while not paying interest to the government until the so called deposits in the Crown Settlement Account are dispersed into the bank accounts of deserving private recipients, while also accruing coupon bond interest from the settlement date.
Banks have to forfeit RBNZ reserves OCR interest payments while in receipt of accruing coupon interest on the new bond issuance amount until the government dispenses what banks owe the government into private bank accounts. Thereafter, the interest on reserves is restored and banks pay interest to the private sector recipient of a transfer payment from government.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.