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
Nelson Building Society (NBS) raised its floating rate by +50 bps today tp 7.475%. It also raised fixed rates. Heartland Bank raised its floating rate by +50 bps to 5.49% Basecorp Finance raised theirs to 7.95%. Update: ANZ has raised its fixed rates sharply. More here.
TERM DEPOSIT RATE CHANGES
Unity Money raised their nine month TD rate to 3.80% and their 18 month rate to 4.30%. Update: ANZ has raised term deposit rates too. More here.
A CONCERNING SIGNAL
Today's dairy auction was a weak one, featuring soft customer demand. Only butter and WMP showed any serious bidding. Overall prices fell -4.6% and that was on top of the prior -3.5% fall two weeks ago. ASB economist Nathaniel Keall, who previously had a market-leading Farmgate Milk Price pick of $10 per kilogram of milk solids for this season has dropped his pick to $9.40 and says of the market, "the demand just isn’t there right now and that weighs heavily on our forecast given prices for a huge chunk of the season’s product are being struck right now". Other analysts are also flagging "downside risks" to the new season farmgate payout prices. If those do fall, the dairy farming industry will be in a very tight squeeze between falling revenues and rising costs. Bankers would then start seeking business changes to protect dairy farm lending viability.
FARM INVESTMENT SOFTENS
September tractor sales of new units fell -20% from year ago levels, and come in -9% lower than the ten year average for a September.
FINTECHS REQUIRED TO KNOW CUSTOMERS IN DETAIL
The FMA has issued a formal warning to InvestNow for failing to comply with anti-money laundering requirements, including conducting customer due diligence, and having adequate and effective processes. The regulator said InvestNow failed to complete standard customer due diligence, including obtaining sufficient information about the nature and purpose of the proposed business relationship from their customers, nor did it take reasonable steps to complete identity verification of customers and beneficial owners. It failed to conduct due diligence on certain customers, including taking reasonable steps to verify source of wealth or funds, or establish, implement and maintain an adequate and effective AML/CFT program.
SHOW ME THE EVIDENCE
The NZIER is calling on policy officials to demand evidence from government officials when evaluating public policy moves. They say the data is there in a safe, internationally-leading way. They want these sort of evaluations to become routine for most policy initiatives.
MARGINAL RATES BENCHMARKED
In the US, the IRD has announced its inflation-adjusted marginal tax rates for individuals for their 2023 tax year. Here is a rough comparison with current New Zealand's IRD marginal rates.
| USD bands | NZD equiv | IRS Rate | NZD bands | eqiv NZ rate | |
| $1 - $11,000 | $1 - $19,375 | 10% | $1 - $14,000 | 10.5% | |
| $11,000 - $44,725 | $19,376 - $78,785 | 12% | $14,001 - $48,000 | 17% | |
| $48,001 - $70,000 | 30% | ||||
| $44,726 - $95,375 | $78,786 - $168,000 | 22% | $70,000 - $180,000 | 33% | |
| $95,376 - $182,100 | $168,001 - $320,750 | 24% | $180,000 and over | 39% | |
| $182,101 - $231,250 | $320,751 - $407,350 | 32% | 39% | ||
| $231,251 - $578,125 | $407,351 - $1,018,350 | 35% | 39% | ||
| $578,126 and over | $1,018,351 and over | 37% | 39% |
INFLOW RUSH
Long term capital flows into the US are strong, according to the authoritative UST TIC data. These flows in hit their second highest net inflow levels in the history of this data, almost +US$200 bln in the single month, and only beaten by the March 2021 data.
'RAIN FOR MONTHS'
A new rain-bearing system will hit Australia's central and eastern states in the coming days, as authorities warn flooding will continue for months. And when it stops, the fire-load will be built for the next drought and fire cycle.
SWAP RATES FIRMER AGAIN
Wholesale swap rates are firmer again today and building on the initial reaction to of the September CPI data yesterday. The key real action comes near the close. Our chart will record the final positions but they will be very much higher, perhaps by +15 bps. The 90 day bank bill rate is up another +6 bps at 4.10%. The Australian 10 year bond yield is now at 3.93% and down -5 bps. The China 10 year bond rate is little-changed at 2.72%. The NZ Government 10 year bond rate is now at 4.63%, and up +2 bps and now above the earlier RBNZ fix for this bond at 4.58% which was down -3 bps from this time yesterday. The UST 10 year is now at 4.01% and up +1 bp from this time yesterday.
EQUITIES RISE, EXCEPT IN PRC
Wall Street rose again today, but lost a little altitude at the end with the S&P500 up +1.1% at the close. Tokyo has opened up +0.7%. Hong Kong is down -0.9% and Shanghai is down -0.4% in their early trade. The ASX200 is up +0.5% in early afternoon trade. The NZX50 is up +0.6% in late trade.
GOLD HOLDS
In early Asian trade, gold is at US$1653/oz and up +US$2 from this time yesterday.
NZD FIRMS
The Kiwi dollar has firmed +½c from this time yesterday to be just on 57 USc. Against the AUD we are up at 90.1 AUc. Against the euro we are also firmish at 57.8 euro cents. That all means our TWI-5 is at 67.6 and up +40 bps from this time yesterday.
BITCOIN SOFTENS WITH LOW VOLATILITY
Bitcoin is firmer today, now at US$19,320 and down -1.2% this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.5%.
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20 Comments
Bankers would then start seeking business changes to protect dairy farm lending viability. I have a friend ,recently retired senior Fonterra on farm consultant. I asked him about defaults. He talked to a Rabo banker,and said that practically ,they never had any ,as close to zero as Zero,in his report. Of course situations might change,but it has not been a risky business for Rabo bank in NZ. As near to zero ,as Zero.
Bank lending growth to the agriculture sector has been a little less than As near to zero ,as Zero, over the last year.
Listening to Paul Tudor Jones' take on the recession and how he was approaching things was interesting. I watched it all via YouTube and what I found interesting was PTJ's only real positiveness was related to ol' ratty and Ethereum. Definitely not spruiking. This is PTJ after all.
Jones said that he thought central banks had engaged in “massive experimentation” in the years since the Global Financial Crisis, arguing that suppressed yields and pandemic relief packages were products of monetary and fiscal experimentation.
Reflecting on the digital assets space, Jones pointed to high inflation rates as a potential catalyst for a crypto surge. “In a time when there’s too much money, which is why we have inflation, and too much fiscal spending, something like crypto—specifically Bitcoin and Ethereum—where there’s a finite amount of that, that will have value at some point,” he said.
https://cryptobriefing.com/bitcoin-ethereum-will-go-much-higher-post-re…
Long term capital flows into the US are strong, according to the authoritative UST TIC data
This has happened a lot and not just recently; LT USTs are bought heavily in overseas trading, early mornings (Asia & Europe), but then sold once US opens. American sellers might want to pay more attention to their foreign counterparts and less to the Fed. Link
Foreigners (private) are betting hundreds of billions that the Fed stops hiking rates whether they want to or not; whether the US CPI comes down or not. Why? They can see what the Fed can't, all the major $ problems going on around the world. They're shown really good timing, too Link
Japan's yen like China's yuan is being pummeled by the dollar. Most people are led to believe the dollar is rising because of the Fed and its rate hikes. No sir. In fact, in just three charts we can easily show both why JPY is crashing and also how the Fed has nothing to do with it. And that's actually the most frightening part. Link
NZ Government 2yr vs 10yr spread slightly negative today.
"And when it stops, the fire-load will be built for the next drought and fire cycle." There is an app for that DC - prescribed burns. Long practiced but banned under green ideology. Don't let greens anywhere near forest management.
"California’s wildfires in 2020 wiped out nearly two decades of efforts by the state to curb greenhouse gas emissions. Golden State’s most disastrous wildfire year on record was equal to twice the total amount of carbon emissions cut between 2003 and 2019, according to researchers with the University of California, Los Angeles, Fielding School of Public Health."
"Many ecosystems in California are adapted to regular, low- to moderate-severity fires but have not burned for decades because of the criminalization of Indigenous burning and aggressive fire suppression."
https://www.bloomberg.com/news/articles/2022-10-17/california-fires-wip…
"You’re saying that central banks are powerless?
They’re impotent. This is a shift of power that cannot be underestimated. Our whole economic system of the past 40 years was built on the assumption that the growth of credit and therefore broad money in the economy was controlled through the level of interest rates – and that central banks controlled interest rates. But now, when governments take control of private credit creation through the banking system by guaranteeing loans, central banks are pushed out of their role.
...Just to give you some statistics on bank loans to corporates within the European Union since February 2020: Out of all the new loans in Germany, 40% are guaranteed by the government. In France, it’s 70% of all new loans, and in Italy it’s over 100%, because they migrate old maturing credit to new, government-guaranteed schemes. Just recently, Germany has come up with a huge new guarantee scheme to cover the effects of the energy crisis. This is the new normal. For the government, credit guarantees are like the magic money tree: the closest thing to free money. They don’t have to issue more government debt, they don’t need to raise taxes, they just issue credit guarantees to the commercial banks."
https://themarket.ch/interview/russell-napier-the-world-will-experience…
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