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
None to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Investment-grade Liberty Finance (BBB-) has raised its TD offers, and that now includes 7.00% for one year and 6.50% for nine months. Heartland Bank raised most of their TD rates, but didn't change their 6% 12 month rate. They also raised a savings rate; Direct Call is now 4.10%. Bank of India raised rates.
LABOUR MARKET RETAINS IT STRENGTH
The February 'employment indicators' from the IRD's PAYE tax records aren't signaling any recession-signaling yet. Year-on-year employment is growing, and month-on-month it is growing faster than some analysts were assuming. But as they will remind you, employment is a lagging indicator. Interestingly, the extended and deepening real estate funk has not yet caused employment to drop, savings to fall, or even sentiment to fall faster. Those who thought we were linked to the housing market at-the-hip may have to re-think that assumption.
ANOTHER BOND OFFER
Christchurch City Holdings is in the market for up to $150 mln of 5 year, unsecured, unsubordinated, fixed rate bonds. The rate will be the 5 year swap rate on March 30, plus an indicative margin between 0.70% - 0.77%. If today's opening swap rate applied then, the yield would be something like 5% or just below. But swap rates have been falling sharply recently. This bond isn't being marketed with 'green' credentials. They will likely be rated AA. These funds will be used to repay bridging finance CCHL used to repay bonds which matured on December 6, 2022 (and had a yield of 3.58%).
APRA BOSS TALKS UP REGULATION OF BIG AUSTRALASIAN BANKS
John Lonsdale, Chairman of the Australian Prudential Regulation Authority (APRA), is talking up the strength of APRA's prudential regulation of Aussie banks, including the parents of NZ's big four, against the backdrop of the banking ructions in the US and Europe. Among other things Lonsdale says Australia is; "the only jurisdiction in the world that mandates banks carry capital to address the risk of rising interest rates as part of their core (pillar one) capital requirements. The significance of this measure in light of current events is hard to overstate," he says. "The differences between the regulatory requirements for Australian banks and many overseas jurisdictions give us confidence that the banking system here is among the best equipped in the world to handle a crisis."
CER CELEBRATED, BUT WE ARE A LOSER
Today is the 40th anniversary of our free trade agreement with Australia, the CER Agreement. The WTO has called it the world’s most comprehensive, effective and mutually compatible free trade agreement. Unfortunately for us, we now run a large trade deficit with Australia. According to the Stats NZ Trade Dashboard, in 2015 we ran a surplus of +NZ$1.6 bln (exports $13.04 bln, imports $11.42 bln for both goods and services). But by 2022 we were running a deficit if -$1.5 bln (exports $13.85 bln, imports $15.37 bln for both goods and services). For trade officials, it has to be somewhat distressing that our exports have languished over these seven years.
LIFESTYLE BLOCK SALES SLUMP HARDER
REINZ reported that there were 1023 sales of lifestyle properties in the 3 months to February. That is a massive -41% drop from the 1754 in the same period a year ago. It is also a drop from the 1115 in the January period.
FARM SALES SLUMP TOO
REINZ also reported that farm there were only 305 farm sales in the three months ended February 2023, compared to 460 farm sales for the three months ended February 2022. That means overall sales were a third lower. In January, the total was 359 farms sold. This year, grazing property sales levels held their own, but the slump in dairy, finishing and horticulture farms was significant.
RETAIL TRADE COOLS IN AUSTRALIA
Retail sales were up in a marginal way in February in Australia, barely beating the very lame expectations analysts had. Clearly this sector is cooling now.
SWAP RATES STOP FALLING
Wholesale swap rates have probably risen slightly today after the recent falls. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 5.17% and still +42 bps above the current OCR. Markets are pricing in less than a +25 bps rise at the next RBNZ review on Wednesday, April 5, 2023. The Australian 10 year bond yield is now at 3.28% and up +9 bps from yesterday. The China 10 year bond rate is little-changed at 2.88%. And the NZ Government 10 year bond rate is now at 4.12%, up +2 bps and back to being above the earlier RBNZ fix at 4.10% which down -1 bps from yesterday. The UST 10 year yield is now at 3.52% and up a very sharp +14 bps from this time yesterday.
EQUITIES START POSITIVELY, EXCEPT IN CHINA
On Wall Street, the S&P500 ended up +0.2% in Monday trade. Tokyo has opened up +0.1% in early Tuesday trade. Hong Kong is recovering some up yesterdsay's very sharp -1.8% fall, up +0.7% in early trade today. Shanghai is up just +0.1% after their fall yesterday. The ASX200 is up +1.1% today and the NZX50 is up +0.7% in late trade.
GOLD IN MINOR SLIP
In early Asian trade, gold is down -US$9 from this time yesterday, now at US$1964/oz, although that is up from the New York close earlier in the day.
NZD HOLDS
The Kiwi dollar has risen today, now at 62.2 USc. Against the Aussie we are little-changed at 93.1 AUc. And against the euro we are holding at 57.5 euro cents. That means the TWI-5 is now at 70.1 and little-changed.
BITCOIN DOWN
The bitcoin price has fallen -3.4% from this time yesterday, now at US$26,915. The lawsuit American regulators have hit crypto giant Binance with, alleging "willful" dishonest dealing, money laundering and general bad-faith dealing is no doubt hurting. Binance's has a grip on the US$1+ tln crypto industry that has few parallels in traditional finance. Volatility has been moderate today at +/-2.7%.
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57 Comments
"How dare you DC, you just offended 90% of commenters"
Pointless comment aside, if employment, savings and sentiment has temporarily decoupled from house price misfortunes, the longer interest rates shall stay high and further the debt fueled housing market will fall.
by Audaxes | 18th Nov 22, 7:33pm
This official data shows that employee's share of all economic activity is pretty stable, and has been inching up for many years now. It certainly hasn't been degrading in the way many armchair analysts assume.
The problem is productive GDP growth is poor and non-GDP qualifying bank financed residential property speculation has skyrocketed the price of assets.
Well there’s definitely a big lag effect. And more of the carnage will come from increases in interest rates rather than the house price crash itself. The house price crash is a result of the aggressive interest rate hiking. And reduced spending in hospo, retail etc will also be caused by the interest rate hikes (with slumping house prices providing some kind of drag in terms of economic confidence). A large proportion of mortgages are still to be renewed, over the next 9 months. It’s human nature to live it up a bit before that happens.
The house price crash will only directly hit a relatively small portion of the economy. Real estate and property development.
And of course significant parts of the economy are largely decoupled from all this.
Yeah I think we are underestimating the problem. Subprime defaults were not that big a percentage of total mortgages….I recall reading but not sure in what book. Also jingle mail was overstated I.e. only small number of states actually did non-recourse mortgages. I think it’s going to be certain age groups hammered, so restaurants and cafes may stay busy….with older people. I have also heard about architects losing future jobs through delays, or clients deciding work is not required. This flow on has only just started to impact. And I don’t think the IR rises will slow, unless inflation magically disappears. I personally think NZ is particularly vulnerable as we never had the whack other countries had in 2008.
Christchurch City Holdings seeks placement of $150 mill unsecured bonds to be “marketed” without “green credentials.” Well that is hardly surprising is it. Shareholders the Christchurch City Council and the government proudly and zealously declare climate emergencies and then sanction Christchurch City Holdings to construct a wide bodied international jet airport in Central Otago. How much notice, let alone approval, was afforded to taxpayers and ratepayers alike for the venture and the associated financial debt. How much will they also be levied personally as compensation for the carbon footprint thus being created, eg, concrete,asphalt, iron,steel,aluminium,plastic,chemicals,glass, diesel, you name it, to construct and then operate it. “Green credentials,” my giddy aunt what a load of hypocritical codswallop and about which strangely, there has not been one iota of comment by our self proclaimed champions of the environment, NZ’s very own “Green” Party. Go figure.
Those who thought we were linked to the housing market at-th-hip may have to re-think that assumption.
Astute observation. I've always been more concerned about what happens in the real, productive economy than the asset bubble. This is a great country, we have the fundamental ability to be a very wealthy and productive society but our love of housing bubbles is holding us back from achieving the level of prosperity this country can achieve.
Housing is only part of the problem as we are actually a conservative little nation and right now we seem determined to penalise the productive sector further due to emotion calling the shots instead of facts and science - penalising farmers for livestock emissions and planting pine trees for emission revenue are classic examples but the complete ban on GMO's is another (as is not using gas for energy)
Kiwis from the bottom up to the top are generally eschewing prosperity for their own quality of life. It's how we get to be worse off on many financial indexes, but higher up for things like happiness, low corruption, etc. Even our CEOs would rather bugger off fishing early on a Friday than do work.
There's clearly issues with housing but it's not the thing holding the place back. And frankly, where are we trying to go. More money? Or the same amount distributed more evenly? Less money and living in huts?
Retail sales were up in a marginal way in February in Australia, barely beating the very lame expectations analysts had. Clearly this sector is cooling now.
Retail sales have been roaring (volume and value)...to now. This is quite fascinating.
"Per capita retail sales values are still at pretty astonishing levels, the downside risk to this is clear given the impacts of rising interest rates on discretionary spend in particular"
https://twitter.com/IFM_Economist/status/1640513434843316224
Regarding the CER trade data with Australia, you are neglecting that this includes services, which with Australia includes tourism right? (Feel free to correct me if I have that wrong). Presuming that tourism is included (Spending done by Australians coming to NZ for holidays etc) then of course it makes sense that there was a large drop off in NZ exports to Australia for 2020, 2021 & 2022 when travel between Aus/NZ was severely throttled. The “services” exported to Australia in the data linked to confirms that steep drop, while “goods” exported remained buoyant over the same timeframe.
I think the thing that we're really the loser in terms of CER is the net immigration deficit to Australia - usually immigrants are more motivated and we tend to lose our most skilled and talented to bigger, more exciting markets. CER just makes it easier - and we get the 501's back now also.
Off Topic, delete/remove if inappropriate.
Petition for Marama Davidson to resign for her remarks.
https://www.change.org/p/remove-marama-davidson-as-minister-for-the-pre…
2020, some time ago, the first term government but don’t think that will save him unless Hipkins tries to claim he meant future indiscretions which recall is the sort of post comment, what I really meant to say excuse, he has been wont to resort to on previous occasions. Seems to be this government’s modus operandi, adopted by the Green’s co leader too, is that you can say what you like so long as you say you didn’t mean it. The facade of the charade is definitely cracking.
Don’t think he will. He is a stalwart Labour member and the name Nash is revered in those circles, as a cabinet minister of the first Labour government and Prime Minister of the second. Imagine that these transgressions in parliamentary history are not at all individually unique. However collectively, they have comfortably crossed the line. This final nail though has taken quite a while to be hit home hasn’t it. Obviously Nash himself had completely forgotten it or he would have revealed it, when asked by Hipkins about other “indiscretions.” That in turn raises the question as to what party or parties kept the hammer at bay until now and why they did now choose to swing it, in terms of the timing.
It's a pity - the first Nash wasn't very cranially endowed. The (early) rest - J.T.Paul, McMillan, Lee - were far better thinkers. Paul's Humanism in Politics is a humdinger.
Yes - they will have known for some time - this smacks of picking off, one by one. The onslaught against Jacinda - which included a few commentators hereabouts - was round one but an own-goal. One wonders if they have any more - and what skeletons they have in their own closets (at those numbers, averages say they will be roughly equal).
My take is that Nash hasn't much to offer, much like most politicians at most levels. Every now and then one stands out; Upton in his day, Swarbrick this echelon, Moore in Chch, Cullen at times; but too few. Far too few. Mostly the higher the opinion of self, the lower the capability; it's a funny old thing. Others are on agendas or headed down rabbit-holes - those tend to self-destruct.
It's a little bit more than "casual talk" in a private setting. She unveiled her true inner self while grandstanding with that posse she was walking with.
Imagine if Chris Luxon made a comment about how much violence "cis" Maori are responsible for.
It also wouldn't surprise me if Marama believes that misgendering someone is an act of violence.
Does that apply to white men or only to the special people. She is a government employee ffs. Free speech when it suits aye. She should be sacked and issuing a public apology. Not only that, but iwis should come out and condemn her. Shows the true feeling among Māori though doesn’t it
APRA BOSS TALKS UP REGULATION OF BIG AUSTRALASIAN BANKS
Someone needs to address the concentration risk inherent in the RBNZ RWA regime pushing our local Aussie bank subs exposure to real estate (housing) lending.
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages owed by one third of already wealthy households
Yes we know thats why they have ditched insurance, wealth management etc etc and increased the size of the resi book. I believe it's now 3k of a banks money into every 100k lent in resi, the rest comes in from offshore. Modelling has serious limits, I model who should win each super rugby game using a linear regression model..... upsets occur. The resi book used to make about the same as an institutional markets area , now its 4-5 times bigger..... this is not the banks fault, its the settings of the regulator.
Transpower issues customer advice notice for tomorrow AM 0730-900 limited reserves due to cold event and low wind across Manawatu.Models running now suggest tight in the North Island.
https://tpow-corp-production.s3.ap-southeast-2.amazonaws.com/public/int…
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