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/LOAN RATE CHANGES
Nothing to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here today either.
COMMODITY PRICES UNDER PRESSURE
The ANZ World Commodity Price Index fell -2.6% in July from June. It was down -15% from a year ago. Meat, dairy and aluminium prices all fell in July as global demand for these commodities weakened further. In local currency terms the index fell -3.8% in July from June, as the NZD appreciated 1.2% in Trade Weighted Index terms.
"HIGH GROWTH"
ANZ Investments, the largest KiwiSaver scheme, has launched a High Growth Fund. The new fund differs from their existing Growth Fund due to its higher allocation to growth assets such as shares, including listed property and listed infrastructure (95% versus 80% for the Growth Fund). It has a lower exposure to income assets like cash, cash equivalents, and bonds (5% vs 20% for the Growth Fund). Including more :listed property" at this part of the cycle could be "interesting".
STILL INVESTING
In the quarter to June, business loan demand was generally positive with overall business credit applications increasing by +6.3% from the same period a year ago. Business loan applications were up +7.2%, trade credit applications rose by +1.1%, and asset finance applications increased by +13.2%.
EXPENSIVE MONEY
For the first 5½ years of its recently closed $600 mln unsecured subordinated bond issue, Westpac will pay 6.73% pa.
'INLAND PORT' IDEA UP & RUNNING
Hamilton's "inland port", (an intermodal customs rail/road transport hub jointly owned by Tainui Group Holdings and the Port of Tauranga), has started practical commissioning with an initial two container trains per week, starting today. This year will also see the opening of other large-scale businesses at the adjacent Ruakura Superhub. These include the 40,000 m2 Kmart Distribution Centre, and new cold storage facilities operated by Maersk (16,000 m2) and Big Chill (13,000 m2), which will generate freight through the facility.
NZGB BOND TENDERS
There were three tenors in today's NZGB bond tender, totalling $500 mln and they attracted 112 bids worth $1.037 bln. 71 bids won something with the May 2028 bond yield rising +9 bps from 2 weeks ago, the May 2034 yield rising +21 bps from 5 weeks ago, and the May 2051 bond yield rising +13 bps from one week ago.
UNEXPECTED CHINA SERVICES GROWTH
The private Caixin services PMI has delivered a surprise, and a positive one. The official services PMI earlier recorded a fast-slowing sector. But this alternative survey paints the opposite picture. It rose in July back to a moderate expansion from June’s five-month low, beating forecasts of a further slip. It was the seventh straight month of expansion in services activity supported by a small uptick in new orders, and a good expansion in their payroll numbers, the fastest pace in four months. New orders growth accelerated, despite foreign demand expanding at a minimal pace that was the slowest for six months.
ANOTHER FAT TRADE RESULT
Australia's trade surplus had another stellar result in June, although nowhere near its record. It widened to a three-month high of +AU$11.3 bln in the month from a downwardly revised +AU$10.5 bln in May, beating market forecasts of an +AU$11 bln gain, even as exports fell but they fell less than imports.
THEY STILL LIKE THOSE ICE CARS
New Zealand's car sales may have tanked in July, but in Australia they hit a new record for the month. Australian customers took delivery of 96,859 new vehicles. This is an increase of almost +15% on the same month in 2022 and breaks the previous July record of 92,754 in 2017. Over there, full-battery electric vehicles accounted for 7% of total sales. Including hybrid and plug-in hybrid models, the zero- or low-emission segment amounts to 18% of all sales. (For reference, total NEVs account for more than 45% of all car sales.)
SWAPS A TAD FIRMER
Wholesale swap rates are probably slightly firmer again today. 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 unchanged at 5.67% and now +17 bps above the 5.50% OCR. The Australian 10 year bond yield is up +3 bps from this time yesterday at 4.06%. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is up +1 bp from this time yesterday at 4.80%, and still higher than the earlier RBNZ fix which was up another +3 bps bps at 4.76%. The UST 10 year yield is up +8 bps from yesterday at 4.11% on implications of the Fitch ratings cut.
EQUITIES FALL EVERYWHERE AGAIN
The S&P500 ended down -1.4% in Wall Street trade in their Wednesday session as they absorbed the Fitch rating cut. Tokyo has opened its Thursday session down another -1.1%. Hong Kong is down -0.2% in early trade. Shanghai is down -0.2%. The ASX200 is down -0.5% in afternoon trade. The NZX50 is down -0.3% in late Thursday trade.
GOLD SOFTER AGAIN
In early Asian trade, gold is at US$1936/oz and down another -US$11 from this time yesterday. It closed earlier in New York at US$1934/oz and earlier still in London at US$1944/oz
NZD FALLS
The Kiwi dollar is down -½c, now at just on 60.8 USc as the USD surges. Against the Aussie we are firm at 92.9 AUc. Against the euro we weaker at 55.5 euro cents. That means the TWI-5 is down to 69.7.
BITCOIN SLIPS SLIGHTLY
The bitcoin price is down -1.8% from this time yesterday, now at US$29,240. Volatility has been modest at just over +/- 1.6%.
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67 Comments
SWAPS A TAD FIRMER......
“The US is going to put trillions worth of new debt up for sale before the end of the year as it tries to rebuild its cash reserves.”
And a rational response would be:
“Billionaire investor William Ackman said his hedge fund Pershing Square Capital Management has placed a bet against U.S. 30-year Treasuries, calling it both a hedge on the impact of higher long-term rates on stocks and a good standalone bet. "We are short in size the 30-year T,". If long-term inflation is 3% not 2%, the 30-year Treasury yield could rise to 5.5%, adding "and it can happen soon." On Wednesday, the yield on the 30-year Treasuries climbed to 4.16%, the highest close of the year.”
So that yield curve might just about to be flattened. But not in the way most expected. Interesting times ahead.
Recession fears could outweigh the US Government going broke, near term. Safety and liquidity are paramount in a collateral dependent banking system. US Government debt is the only acceptable security for margin maintenance calls in a Eurodollar reserve currency system.
Fitch downgraded the US government's broke ass for the same reason gasoline demand has cliff-dived. It's a recession, people. "weaker federal revenues" About a quarter-trillion weaker. https://buff.ly/478MRLM Link
Fitch like the Fed up until the last couple weeks only sees a mild recession this year, too. That was enough to trigger the downgrade especially since they don't see much recovery next year after the contraction. What if the downturn isn't mild? (gasoline) https://buff.ly/478MRLM Link
Are you spruking? A fall to zero is an option.
No. I'm stating that the fiat price has typically fallen 20-30% in these months a year before the halving.
It could fall 50%, 70%. Or even to zero as you suggest.
Nevertheless, even normies are beyond the "it's going to zero" banter now.
BTC has 4 year cycles. This is a pre-halvening year so its year 1 of the new cycle. Compare to 2019 for example. These years tend to be more boring than the other 3 years.
But yes the volatility is near record lows. That historical precedes a bump up, but it really depends on the ETF developments
The four-year cycle is tied to the halving event - which happen approximately every 4 years. A halving event marks a 50% cut in the Bitcoin reward miners receive for mining new blocks and verifying transactions; in effect Bitcoin supply continues to increase, but at a slower rate. The knock-on effect can be a steep increase in price, assuming the demand for Bitcoin remains the same or increases after a halving.
Peak mortgage shock in Aussie? For sensationalism, it doesn't really get any better.
Jarden’s chief economist Carlos Cacho says an estimated $32 billion worth of mortgage loans are expected to be refinanced each month during the September quarter, in what has been described as the “peak of the mortgage shock”.
Meanwhile, some $550 billion worth of fixed-rate loans are slated to roll over to significantly higher variable interest rates over the 15 months to March 2024.
This rollover will increase the average monthly repayment on a $750,000 mortgage from $3,180 to $4,830. This assumes a borrower moves from a fixed rate of 2% to a variable rate of 6%.
https://www.macrobusiness.com.au/2023/08/australia-hits-peak-mortgage-s…
Some AKL apartment owners are not happy with the Council rating authority playing silly bu**ers
Auckland Council rates: Home owners shocked by bill showing $10,000 increase - NZ Herald
Always! (I guess we will see)
There is always the possibility of a repeat of the early 2000's
https://www.macrotrends.net/2557/new-zealand-us-dollar-exchange-rate-hi…
Australian house prices vs capacity to pay....market currently defying gravity (and historical correlation).
https://pbs.twimg.com/media/F2kV63ubgAYMOBe?format=jpg&name=900x900
I’m always wary of medians vs averages but it was based of actual sales data so seemed worth noting.
I know core logic is saying the market as a whole has pulled back 20% in the last 12 months and their data is pulled through to a number of the Banks value estimates.
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