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
TSB launched a market-leading 4.69% one year fixed home loan rate.
TERM DEPOSIT RATE CHANGES
TSB raised TD rates too.
PERKIER LOCALLY
Our factories bounced back strongly in August, led by higher factory orders, so the PMI index recorded its best month since July 2021. Its a good result, but one that isn't mirrored by international trends, notes BNZ.
SIX FIGURE 'LOSSES', PART OF A WIDESPREAD DECLINE
Median house values dropped in 84% of NZ suburbs between June and September taking property values down by more than $100,000 in some Auckland suburbs over winter.
MORE FLP DRINKING
One (or two?) banks drew down on the Funding for Lending program yesterday (notified today), taking $550 mln for up to three years, all at the OCR cost (currently 3.0%). We don't know who they are, but if you do, please let us know. Now $14.6 bln has been disbursed under this program which will end in December. There is capacity for about another $7 bln to be drawn.
FOREIGN INSTITUTIONS FUNDING IN NZD
The RBNZ reported today that the total value of Kauri bonds on issue as at the end of August is $31.4 bln, its highest ever. Kauri bonds are New Zealand dollar denominated debt securities issued in New Zealand by a foreign issuer. But most are held by local institutions. Only 29% are held by 'non-residents', about as low a proportion as we have ever seen. (D35)
BETTER CHINA DATA
China reported some key data today, and some of it was unexpectedly positive. Retail sales were up +5.4% in August from a year ago, an expansion at twice the July rate. Industrial production was up +4.2% on the same basis, also beating expectations. In fact, electricity production surged in August, up almost +10% from year-ago levels. But this is still a bit of a puzzle because these 'power' rises recently are far more than can be explained by industrial activity or consumer behaviour.
CHINA HOUSE PRICES FALL FASTER
Chinese citizens are as heavily 'invested' in residential real estate as Kiwis, maybe even more so. But data out today shows that in 50 or their 70 largest cities the prices of new housing fell in August from July. More broadly, for housing resales, 56 of these 70 cities posted price retreats. The 'wealth effect' impact on vast numbers of Chinese households will be negative, and for many, disturbingly so. There may be building social disquiet.
EYE-POPPING RATES
The central bank of Argentina raised its policy rate today by +550 bps in their Quixotic quest against local inflation. That takes their new policy rate to .... 75% !! Their inflation rate is running at 78.5% however, so perhaps understandable. This is what happens when you let inflation get away.
SWAP RATES FIRMER
Wholesale swap rates are probably higher again today on global forces. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps to 3.64% which is a new high since April 2015. The Australian 10 year bond yield is now at 3.74% and up +7 bps from this time yesterday. The China 10 year bond rate is up +1 bp at 2.69% and its highest in a month. The NZ Government 10 year bond rate is now at 4.03%, unchanged from yesterday but above the earlier RBNZ fix for this bond at 4.01% which was down -4 bps. The UST 10 year is now at 3.46% and up +4 bps from this time yesterday taking the weekly rise to +13 bps.
EQUITIES STRUGGLE
Wall Street ended down -1.1% with a final Thursday dip. That takes the loss so far this week to -4.0%. Tokyo is also down -1.1% in ongoing trade today and heading for a weekly drop of -3.2%. Hong Kong is down -0.7%. But Shanghai is down -1.2% in their Friday morning trade, heading for a -2.4% weekly fall. The ASX200 is down -1.3% in early afternoon trade and heading for a -2.0% weekly drop. However, even though the NZX50 is is holding its own and little-changed today, it will still post a -1.0% weekly fall.
GOLD DOWN AGAIN
In early Asian trade, gold is down another -US$28 from this time yesterday to US$1,666/oz.
NZD ON DOWNWARD TRACK
The Kiwi dollar has sunk significantly from this time yesterday and is now at 59.6 USc and that is a -2% devaluation over the past week. Against the AUD we are still weak at 88.9 AUc but unchanged from this time yesterday. That is a weekly devaluation of nearly -1%. Against the euro we are a softer at 59.6 euro cents. That all means our TWI-5 is down -40 bps at 69.3. For the week the overall NZD devaluation is -1.6%. As it mounts, our tradable inflation is higher than it would otherwise be.
BITCOIN FALLS YET AGAIN
Bitcoin has fallen again, this time to US$19,785 and down a further -1.5% from this time yesterday. Volatility over the past 24 hours has remained moderate at +/- 2.1%.
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71 Comments
When the accursed Funding For Lending program finally ends in December do we think that mortgage rates are going to pop upwards? I can quite easily see Term deposit rates will be forced higher, but what about mortgage rates (as the banks no longer swill at the RBNZ trough?)
Actually both future and current Chebbo.
I am referring to the future loss discounted back to day which is an unrealised loss. However there is also negative margin already paid out, known as carry/accrual. The former is an unrealised loss, the latter realised. You need to add them together for the full picture.
NZ GOVERNMENT BOND REPURCHASES
LSAP Repurchase History Data
Published: 16th September 2022
Published by New Zealand Debt Management at https://debtmanagement.treasury.govt.nz/investor-resources/data
Deal Date Settlement Date Maturity Date Type Volume accepted ($m) Accepted Yield %
15-Sep- 2022 19-Sep- 2022 15-May- 2041 Nominal $415 4.310
15-Aug- 2022 17-Aug- 2022 15-May- 2041 Nominal $415 3.853
15-Jul- 2022 19-Jul- 2022 15-May- 2041 Nominal $415 3.950
Swiss National Bank posts record H1 loss, says no policy impact | Reuters
SNB has reported a loss of NZ$167b in the first half of 2022. The Swiss economy is 3x ours but their central bank is carrying a loss 20x the size of RBNZ's.
Perhaps its time for the Swiss authorities to tax the foreign incomes of their sheltered companies to cover these losses.
US mortgage rates have hit 6% for the first time since 2008 (source).
The Fed is raising in 0.75% increments (and maybe a whole 1% next time?).
Given our falling currency, is our next OCR raise likely to be only 0.5%??
And does anyone really think our OCR will top out at 4.5%?
I think NZ are in a wage price spiral and with our ‘fundamentals’ being so shite, the nzd will continue to be hit hard importing high prices if not inflating ones.
I also think until NZ has a recession with some businesses going to the wall, then we will continue along this surreal path - see the only way an addict stops is by taking away the drug.
Argentina is on the verge of yet another total financial collapse, sure great place to buy a house bud. Taking a holiday there and living there are two different things.Inflation there currently running at 60-70%, yep defiantly the place to buy a house, go for it.
Good heavens
(Bloomberg) -- Prime Minister Justin Trudeau announced a package of measures to help Canadians cope with steeply rising prices, with a major bank and his main rival warning the new spending will only make the problem worse.
Economists had already begun to warn Trudeau against measures that could worsen inflationary pressures. Since last week, three of the country’s largest commercial lenders -- Canadian Imperial Bank of Commerce, Bank of Montreal and Bank of Nova Scotia -- have released reports expressing concern over using revenue windfalls for additional spending.
Scotia doubled down on its criticism Tuesday. “It seems sensible to assume that this will add to pressures on measures of core inflation,” economist Derek Holt said in a report to investors. “Any belief that it will ease inflationary pressures must have studied different economics textbooks.”
https://ca.finance.yahoo.com/news/trudeau-says-cost-living-spending-163…
Trudeau is like Ardern’s twin. A true phoney leftist.
Remember when she was promising affordable housing whilst maintaining house prices?
It simply didn't make any sense. Many of the sheeple lapped it up. Hook, line, sinker.
All I could see was the political equivalence of the Pied Piper.
Simply wow. The mighty Chris Joye across the Tassie.
While our projection for a 15 to 25 per cent decline in prices explicitly allowed for a range of cash rate increases beyond the first 100 basis points, it did not countenance a much higher, circa 4 per cent cash rate.
In June, we published internal modelling that showed that if the RBA did raise its cash rate to, say, 4.25 per cent, the expected peak-to-trough loss in house prices would be greater, at 30 to 40 per cent. This is not, however, our central case, which remains a still remarkable 15 to 25 per cent retrenchment
These are big numbers. The maximum loss suffered by US housing over the course of the sub-prime crisis was 27 per cent, according to the Case-Shiller Index. The draw-down in the UK over the same period was 24 per cent, based on the UK Land Registry Index.
https://www.afr.com/wealth/personal-finance/rate-rises-are-crushing-bot…
ANZ (Zollner) now raising peak OCR forecast to 4.75%. A 0.75 jump in a month.
https://twitter.com/sharon_zollner/status/1570613777061777409?s=46&t=-8…
This is the sort of thing the government should be doing, x 10,000, per annum:
https://i.stuff.co.nz/life-style/homed/housing-affordability/129904732/…
It's cute. But it can be done cheaper/better (and I bet they're not counting pre-assembly).
But that's not the problem. We probably have 2 million houses in NZ? On the basis of Queensland's recent discussion, probably1:5 is empty. So 400,000 empty. And a whole lot with one or two aging Boomers who are busy shuffling off in droves. And a need to seriously reduce our population.
We probably have enough already....
OK - there's quicker and I'd suggest cheaper - and an example is up the road at Pisa Moorings.
135 sq/m, 130k walk-in, 2 people 4 weeks, 5 years ago.
Built the same way myself 17 years ago - 135 sq/m for 50k ex labour, walls and roof 2 days 2 adults 2 teenagers (the family).
Not many people think outside the square....
We need to weed out those who cannot think...
That's both major Party leaders gone.... you cannot solve child poverty without addressing population (granted, you have to address inequality as well) and you cannot solve the world's problems with 'more of the same'.
So they're both out...
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