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 and HSBC both raised fixed home loan rates today. More here. In addition Aussie non-bank lender Resimac launched a 20yr mortgage term for Kiwi professional property investors. More here.
TERM DEPOSIT RATE CHANGES
Both ASB and BNZ raised term deposit rates today, but neither really pushed the boat out much further than their rivals had already done. Still, they are both contributing to an up-trend and over the past week the average one year TD rate has risen by +5 bps for all banks to 4.13%. Details are here and here.
MORE FMP ON OFFER
Fonterra has told its farmer suppliers that it is increasing its Fixed Milk Price program capacity in the 2022/23 season from 75 mln kgMS to 100 mln ksMS. That is an increase of a third. But 100 mln kgMS is less than 7% of the 1478 mln kgMS in the season just ended. Suppliers who used this system in 2021/22 were paid $10.24/kgMS whereas the final general payout price was $9.30/kgMS. The price for the new season has not been set yet and there is no guarantee it will be as high as the June 2022 FMP.
HINDSIGHT GIVES FRIENDLY JUDGMENT
Stats NZ today reported more detail of our international investment position as at March 31, 2022. They said our foreign-currency-denominated external debt was $135.3 bln and almost 98% of that was hedged - which given what has happened since has been a smart strategy. Economic activity (GDP) in the year to March was 354.3 bln, so that net debt represented 38% of it. That is probably less than what most readers might has assumed.
CLIENTS PAID MORE, BROKERS MADE MORE, INSURERS' PROFITS FELL
RBNZ data for general insurers ("non-life") shows that for the year to June 2022 they raised premiums by +9.8%, just a little less than the annual increase in the year to March (+11%). Reinsurance costs only rose +5.9%. But claims rose +11.7%. At the same time investment income dived into negative territory as bond losses grew. They had unusually large write downs too. (Investment results and write downs are for both life and "non-life" insurers in these RBNZ data). The general insurance sector paid brokers and others more than $1.5 bln in "commissions" and other acquisition incentives, and together these rose more than 13% in the year. It is good to be an insurance broker. Those 'distribution' costs accounted for 15.4% of gross premiums charged clients. All up, profits for "non-life" insurers fell by more than -35% in the year to June with a tough bite concentrated in the June quarter.
IT'S TOUGH IN CHINA'S RICE BOWL
In China the major rise growing regions of Jiangxi and Hunan are in an extended and growing drought situation that is getting very serious. They haven't had any rain in more than 70 days. More than 95% of Jiangxi is in a "very severe" situation. This drought will have serious repercussions for China, and global food demand, especially for rise. (And don't forget, India now has export bans for many types of rice too. The Western US can't supply at present due to weather issues. Australia is one source with excellent growing conditions this year.) Also, see this.
SWAP RATES RACE ON UP FURTHER
Wholesale swap rates are probably much firmer today on global forces. At time of writing they were up in a steepening trend by more than +10 bps. But the key action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up another +2 bps at 3.76% which is a new high since January 2015. The Australian 10 year bond yield is now at 3.94% and up +20 bps from this time Wednesday (yesterday they were on holiday). The China 10 year bond rate is up +1 bp at 2.70%. The NZ Government 10 year bond rate is now at 4.20%, up a very sharp +15 bps from this time yesterday and now well above the earlier RBNZ fix for this bond at 4.10% which was up +8 bps. The UST 10 year is now at 3.72% and up a remarkable +16 bps from this time yesterday.
EQUITIES SELL OFF FURTHER
Wall Street ended lower today with the S&P500 shedding -0.8% to take its weekly drop so far to -3.0%. Tokyo is on holiday today (Autumnal Equinox) so it ended its very short week down -1.5%. Hong Kong is down-0.7% in morning trade and heading for a -3.6% weekly retreat. Shanghai is down -0.9% today and heading for a -1.3% weekly fall. The ASX200 is back trading today (although I am sure many there have made it a 4-day weekend). It is down -1.8% in afternoon trade today, heading for a -3.8% weekly dump. The NZX50 is down -0.9% today and heading for a -1.4% weekly fall. Investors will want to see the back of this week asap, I am sure. Today's NZX50 losses are led by A2 Milk (ATM, #9), down -4.1%, and Fisher & Paykel Healthcare (FPH, #1), down -2.8%. There are other majors down about -2% today. Keeping the fall from being a rout are a wide range of smaller companies.
GOLD RECOVERS
In early Asian trade, gold is up +US$11 from this time yesterday to US$1,670/oz.
NZD STAYS VERY LOW
The Kiwi dollar has held at its new lower level and is now at 58.4 USc. This time last week we were at 59.6 USc, so its been -2% weekly devaluation. Against the AUD we are down at 88.1 AUc. Against the euro we also little-changed at 59.4 euro cents. That all means our TWI-5 is at 68.4 and unchanged from this time yesterday but still its lowest since October 2020.
BITCOIN RISES
Bitcoin has risen today and is now at US$19,256 and up +2.3% from where we were this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.
MONDAY HOLIDAY
Remember it is a (pointless) holiday in New Zealand on Monday. Apparently we are 'celebrating' the death of a foreign monarch. But we will have limited service operating including a morning briefing. Financial markets, auction rooms, and banks will be closed.
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75 Comments
Some craziness in the cryptosphere raising a few eyebrows. Legal battle between Ripple and the SEC took an amazing turn this week with Ripple getting somewhat of the upper hand and both parties potentially heading to out-of-court settlement, despite people thinking this could go on for years.
Ripple's token XRP has been removed from exchanges in the U.S. but a purchase of USD500 miliion was made last week. Not sure the details of the transaction. Very strange considering the token is the center of the legal battle (case based around whether XRP is a security or not).
Anyway, price has gone nuts last few days and up 47% this week, after being down and relaively dormant in these bear times. Something stinks and institutional corruption cannot be ruled out. Unfortunately, fingers are obviously pointing at the SEC. All quite speculative at this point but it would seem very strange that a private individual would have punted such a large amount without prior information.
Offensive and just comes across as stupid. Queen Elizabeth II was clearly not a "foreign monarch".
https://en.wikipedia.org/wiki/Monarchy_of_New_Zealand
I think the last paragraph from DC is a personal opinion he holds and one he should have kept to himself. He opens himself to accusations of bias in favour of the business community and disregarding everyone else. I find his opinion offensive in that many in our country including me are pleased that employees around the country have the opportunity to commemorate the life of Queen Elizabeth 2 and that our country deem her passing significant enough to give the workers a day off.
Without a public holiday, no one is stopping people from taking a day off. Or a bereavement day. I mean really if its that significant to people
Going to cost me over 1000 in lost billable hours.
For what? I don't think the monarch is a reasonable form of govt. Constitutional or not. To me the queen represents traditions of entitlement, brutal repression of colonial rights, exploitation, avoidable wars. Thier relevance today is little more than tabloid news. No place is a modern government.
I suspect most people don't really care so much about the Queen anyway, so much as they dislike working... I personally would rather work.
Agree with David. Pointless.
History cannot be erased… ‘brutality and repression is in the eye of the ‘so-called repressed’ and human nature cannot be changed.
As for entitlement, I see you hold a entitled position to charge billable hours’ but for not the social cohesion and law endowed from lineage (mainly British) you would not be entitled at all!
P.S. I am no monarchist nor saw the need for this holiday.
NZD/JPY down 3.3% for the week. Of course the BOJ intervened in the market but it says something about the differential and the carry trade for NZD as well.
On a positive note, kiwifruit sales were good last season. But quality has been crap in 2022. If a Japanese person's first experience with a Kiwifruit is sour, they're unlikely to ever buy again.
Rex Pat,
My guess this is clearing the decks of some leftover Zespri Green in Europe with new season Northern Hemisphere Green about to become available over there.
To say that this has been a challenging season for Zespri is to put it very politely. Big quality problems.
KeithW
Certainly the NZ "system" (borrowings ploughed into bidding up house prices) won't take it because we have short term or floating mortgages. Rising rates won't kill as many US home owners as soon, or the US Govt (which can print a while longer to cover the interest). And it's the US who set the rates, not NZ.
Poor us - what was that Arnie movie; "Collateral Damage"?
A bit of a worry having money tied up in the system looking for yield and our investment company trying to find yield with the dark clouds on the horizon. Maybe better to invest directly into a business venture. At least we have some control over outcomes for our money.
Remember it is a (pointless) holiday in New Zealand on Monday. Apparently we are 'celebrating' the death of a foreign monarch.
We are celebrating the long and dutiful reign of our head of state and mourning her passing.
I don't understand why the person(s) who writes for this website never misses an opportunity to express their disdain for the UK.
Perhaps waking up on Monday and singing the official national anthem of New Zealand "God Save the King" will help restore some pride and remind ourselves that we are part of the Commonwealth realms.
I agree. On that note, it is evident that the media themselves are creating the spin of NZ becoming a republic. I have yet to hear the positives or negatives. At a time when NZ should be curtailing excessive spending, I think the idea is crazy. Our talent pool of politicians has no presidential material. Imagine the extra layer of Govt, removing our Privy Council, no more Commonwealth Games, preference for OE visas. I don't see too many positives.
Two words, President Mallard, will ensure a republic is not declared in my lifetime. The current situation is not broken. Leave well alone. I struggle to think of a GG I have not respected. It’s bad enough that Mallard is likely to get a Knighthood let alone have someone so ‘Primaire’ beck r President.
Sub: Self-inflicted pains getting worse.
Added to the gross incompetence from our media & political classes of recent times & the ''save us if you can'' response from their friends in central banking circles, we now bring you the recession we have to have, sponsored by [yes, you guessed it] the same above mentioned lunatics at control central.
Whilst we don't have this virus to ourselves, this particularly unworkable version has a global flavour, which, when combined with our general inability to all get along with one another, is heading everything & everyone in completely the wrong direction to that which all of the said above, hoped & wished for, proving beyond any doubt, of their total lack of fitness for their roles in leadership.
If we ever get governed this poorly again, then the case for a new constitution is totally on the table & I can only hope that the people who turn up to that particular conference have more sense & vision than this lot do [which is zero] otherwise we will only see a further increase in all the current areas of our culture/society that are currently collapsing, sadly, beyond repair in many cases.
I think we all need a long weekend at the seaside don't we?
One year swap up to 4.5%....back to 2008 levels. It could in theory go above 5% before xmas.
And if the inversion in bonds/swaps continues, it must make for some interesting conversations at the banks as they try to balance their mortgage book and set lending rates.
Yet Kiwibank has gone into the long weekend with their 4.95% 1 year fixed rate still advertised. That doesn't leave much margin at all, and two trading sessions in overseas markets before we reopen which could push Tuesdays local opening swap rates higher again. Watch for an interest.co.nz article on a hefty Kiwibank rate increase early next week.
Roubini - be light on equities and have plenty of cash:
https://www.ndtv.com/world-news/he-predicted-2008-financial-crash-now-w…
Market still isn’t priced for recession:
https://www.wsj.com/articles/the-market-still-isnt-priced-for-a-proper-…
Lol, I've been a General Insurance Broker and it's not all Jam. First you have you find clients which is very expensive.Then you have to provide regulated advice, which is very expensive, then you actually have to produce all the paperwork, so much paperwork, which is crazy expensive (admin staff) then you have to handle claims which are frequent. Then you actually have to get people to pay, which can be like getting blood out of a stone and pass the money on to the insurers. Not much left out of that 15% I can tell you, if anything.
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