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
HSBC has raised the rate on its only fixed home loan offer by +10 bps to 7.19%.
TERM DEPOSIT/SAVINGS RATE CHANGES
HSB also raised its few very short term deposit rates by between +15 bps and +20 bps.
MORE HOMES SELL AT A LOSS
CoreLogic says the proportion of residential properties being sold at a loss is on the rise. They say more than one-in-10 of the residential properties being sold in Auckland and Hamilton are being sold at a loss.
HARD PAIN IN THE MILKING SHED
ANZ is the latest to cut its farmgate milk payout forecast for the new 2023/24 season. And this is the second cut in less than a month. ANZ now says farmers should plan on a $7.15/kgMS return. This comes just a day after Westpac cut theirs for a second time in three weeks as well, to $7.50/kgMS. Rabobank is preparing their updated forecast and it will undoubtedly be a hard trim too (they are currently at $8.20). All this is very painful because for the average dairy farmer, breakeven is probably at about $8.25. It is all very fluid right now. You can compare all analyst forecasts, including the NZX-Dairy one, here. But lets not forget that Fonterra farmers will be getting a sizable Capital Return payout from the Co-ops divestment program next week. In the short term, the cash will be flowing in.
GRUMPIER ON THE FARM
A recent survey by Federated Farmers of over 1000 dairy, sheep, beef, and arable farmer-members has found that confidence in the sector was at historic lows in July. And because this survey occurred before Westpac and ANZ cut their new season dairy milk payout forecasts to about -$1 below average break-even, it is certain to have fallen since.
ADAPTION & MITIGATION
But it isn't all bad news in the sector (although this 'good news' will cost adopting farmers), the Environmental Protection Authority has approved a DSM feed additive to reduce methane emissions in ruminant animals (including cows, sheep and goats) by -30%. More here.
IT'S POURING IN THE REGIONS
Ready-mixed concrete poured in Q2-2023 totaled 1,073,000 m3. But that was down -10% from Q2 a year ago, and now down -4% for the year to June from the same period a year ago. A year ago the pour was the second highest of all time. Of more concern is the almost -20% fall in metropolitan Auckland Q2-2023 vs Q2-2022. Interestingly, ready-mixed concrete poured in metropolitan Christchurch actually rose on that same basis by almost +14%. But Auckland only accounts for a quarter of the read-mixed concrete market, Wellington only 5% and Christchurch 10%. The other 60% is outside these three major urban centers.
RISING YIELDS
There were 124 bids totalling $1.376 bln in today's NZGB Treasury tender for the $500 mln available in 3 tranches. Yields rose in each, up +10 bps for the May 2026 offer to 5.06%, up +24 bps to 4.80% for the May 2032 offer, and up +25 bps to 4.94% for the May 2037 offer.
EYES ON US INFLATION
Analysts are expecting the US CPI inflation rate to rise to 3.3% for July, up from 3.0% in June. Core inflation is expected to hold at 4.4%. Any variances from these expectations are likely be market moving.
PRODUCER PRICES UP SLOWER IN JAPAN
In Japan, producer prices are still rising, but at a slower rate. They rose 3.6% year-on-year in July, the least since March 2021, after an upwardly revised 4.3% rise in June and compared with market expectations of 3.5%. The latest result also marked the 7th straight month of a slowdown in producer inflation, amid the easing global cost pressures. (Japanese consumer price inflation ran at 3.3% in June and their July CPI data will be released on August 17, 2023.)
EASING SLOWLY
In Australia, inflation expectations fell to 4.9% in August, from 5.2% in July.
SWAPS LITTLE-CHANGED
Wholesale swap rates are probably little-changed at the short end and up modestly for longer tenors. 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 little-changed yet again at 5.63% and now +13 bps above the 5.50% OCR. The Australian 10 year bond yield is up +2 bps from yesterday at 4.03%. The China 10 year bond rate is little-changed at 2.67%. And the NZ Government 10 year bond rate is up +7 bps from this time yesterday at 4.88%, and still very much higher than the earlier RBNZ fix which was up +4 bps bps at 4.78%. The UST 10 year yield is at 4.03% and up a mere +1 bp from yesterday.
EQUITIES GENERALLY LOWER ON EXTENDED RISK-OFF MOOD
The S&P500 ended its Wednesday session on Wall Street down -0.7%. Tokyo has opened its Thursday session up +0.4%. Hong Kong is down -0.4% but Shanghai is up +0.2%. The ASX200 is unchanged in afternoon trade, but the NZX50 is down -0.2% in late trade.
GOLD LOWER AGAIN
In early Asian trade, gold is at US$1917/oz and down a further -US$12 from yesterday. It closed earlier in New York at US$1913, and earlier still in London at US$1923/oz.
NZD STALLED
The Kiwi dollar is only marginally firmer from this time yesterday is just on 60.7 USc. Against the Aussie we are also marginally firmer at 92.7 AUc. Against the euro we holding at 55.3 euro cents. That means the TWI-5 is at 69.3 and little-changed.
BITCOIN NOT GOING ANYWHERE
The bitcoin price has slipped slightly from yesterday, now at US$29,601 and down a minor -0.5%. Volatility has been modest at just under +/- 1.3%.
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74 Comments
"Total credit card debt in the US jumped by $45 billion in 3 months to a record $1 trillion. Since 2021, total credit card debt is up nearly $250 BILLION. We went from handing out record levels of stimulus to borrowing record levels of debt. What does it mean when there's a V-Shaped recovery in credit card debt?"
https://twitter.com/KobeissiLetter/status/1689260691658518530?s=20
The financial system is going to blow up again (in my opinion...)
The financial system is going to blow up again (in my opinion...)
Nope
US cpi inflation running lower than expected at 3.2 pct. Leading to less interest rate pressure, less pressure on borrowers. Lets not make "emotive" claims
Lower than expected but still higher than before due to higher residential rents. All I can say is those dirty LL are at it again!
"When Japan hit current US level demographics, real estate prices fell for 28 years straight. In 1995, the median aged Japanese person was the same median age as the US today"
https://twitter.com/GRomePow/status/1689319925419270144?s=20
Which is why China has spent decades preparing - and has world leading AI, green energy, hi tech engineering sectors for the economy of tomorrow. Aligned to a powerful military and food and raw material security via their African colonisation.
The West? Luxon, Trump, Boris et al aren’t going to save us
"Warning: Risk of a 2024 recession is extremely high, comparable to the 1980s"
https://pbs.twimg.com/media/F3HCxsxaMAIdkRA?format=jpg&name=medium
Schiller CAPE indicates we are at a high valuation level as well: https://www.multpl.com/shiller-pe
Let's just hope everyone buys their childs dog an iPhone for Christmas.
Yip and cash now yields more than owning stocks. So why buy the risky asset when the return on the non-risky asset is higher?
https://pbs.twimg.com/media/F3Fz6l5bwAAvOzl?format=png&name=large
We have created the conditions for a crash - whether that eventuates, time will tell.
This now means the estimated 12 year return on stocks is negative (again).
Why buy the risky asset when you (on a probability basis) will get a better return from the non-risky asset?
https://pbs.twimg.com/media/F2yrnU0WYAAvFJH?format=jpg&name=900x900
One of my favourite charts is S&P500 returns back to the good old days (1870):
https://www.advisorperspectives.com/dshort/updates/2023/07/03/regressio…
We've had a good time for a long time.
US housing market:
"Cost to own vs rent has not been this out of whack in most people's lifetimes. 1980 was numerically worse, but it's still crazy how it went from a good time to buy, to a horrible time in 2 years"
https://pbs.twimg.com/media/F3GOfJvXYAAHcwS?format=jpg&name=medium
There is still risk (and not just a small risk, but reasonable risk) of a significant further fall in house prices globally.
It'll be a scattergun affair. Many US home loans are fixed at 2-3% for 30 years. So while borrowers in places like NZ or the UK are going to be under severe stress, in the US, people will just stay put. Instead, the lack of households moving there will dampen the consumer side of their economy (when people move, they often buy new appliances and the like).
S&P Global has dropped ESG scores from its debt ratings. S&P later clarified that their ESG credit indicators were not meant to be sustainability ratings or independent assessments of a company's ESG performance. Instead, they were designed to highlight ESG credit factors on their rating analysis.
They won't openly admit to it, but this is political.
https://www.barrons.com/articles/sp-esg-credit-scores-5290338f
Actually, accounting in money is rubbish - because it avoids stocks (real ones).
Why believe a lie?
There need to be restructions on economic activity, commensurate with, say, the seventh generation hence being able to exist. And, I'll give you the tip, that would be orders of magnitude harsher....
"Banks have continued to tighten lending standards Big rise in banks' tightening has systematically led to a recession since 1990"
https://pbs.twimg.com/media/F3F9uzeaMAIEhJG?format=jpg&name=large
(last one for today...but just to highlight that there is a lot of bad economic data out there right now so if the brown stuff really hits the fan in the next 12 months, there shouldn't be any surprises)
Moody's was motivated to downgrade some banks and put others on a negative watch over what its models forecast as a "mild recession." That's one possibility as is the CRE meltdown a recession can trigger in an "uncertain" funding environment. https://buff.ly/447xws6 Link
When you look at the historical view of farm gate prices for milk farmers have had an amazing run: https://www.clal.it/en/?section=latte_new_zealand
I'm glad my car runs on petrol and not milk.
It has always been orders-of-magnitude too cheap.
One reason we went down the growth rabbit-hole.
Every litre burned on your/my behalf, can NEVER be burned by any member of any subsequent generation, ever. What should that litre really have been valued at, in that light? Not the cost of extraction, for sure.
Yeah, I do. Strangely fossil fuel consumption is right down their list of life issues.
I'm not sure using your line of thinking who should be using them; us, our kids, our great grandkids, or no one (in which case the value is actually zero)? What if I need to drive one of my kids to the hospital to deliver a grandkid?
And besides, it's only a theory that oil is non-renewable. No one actually really knows. Hydrocarbons have been detected on extraterrestrial bodies.
Using it all up could be good also as it would drive us to seek better alternatives like the time we used all the whale oil.
"And besides, it's only a theory that oil is non-renewable. No one actually really knows. Hydrocarbons have been detected on extraterrestrial bodies."
'Grandad Zachary, what did you do when your generation was destroying the planet's ecosystem?'
"Oh, I did my bit darling, I used to post on a finance website pointing out that aliens might save us.'
There were 124 bids totalling $1.376 bln in today's NZGB Treasury tender for the $500 mln available in 3 tranches.
We can add one more headwind for LT Treasuries. On top of QT, rate hikes (fake), there's downgrade, debt deluge, record # of speculators short futures and now oil prices. Highest for WTI in months, yet nearly off-the-charts demand for today's 10s auction. Link
Things are just going from not good to way not good for NZ..... Diary is bad, China looks very weak. Maybe after the election we get a bounce but the vibe is not good right now.... On a positive Mt Ruapehu as a lot of snow, talk of an iwi bid with the experienced manager as a stakeholder.... I really hope that they make enough this winter to be able to see a way forward....
Roughly what % of China’s woes do people think are self inflicted? I reckon very high:
- allowing an environment that fostered a pandemic ( massive local and international impact), and then being poor in shutting it down
- allowing a speculative housing bubble of epic proportions
- deterring international investment in a range of ways
- deterring local productive, private sector investment in a range of ways
- being naughty on IP and bearing the brunt of that
- pissing off most of the world’s wealthy nations with its stance on a range of issues
The Bitcoin bible now mandates self custody, because the alternative is high risk.
You can put fiat under your mattress if you really want, but remind me again how many people have lost their bank deposit in recent times in NZ? Remembering too that millions of people use money every day.
We seem to be quickly affirming Bitcoin isn't a competitor for existing currency/money, and more of a collectible.
Video: COVID Lockdown Destabilized National Economies, Destroyed People’s Lives. Prof. Michel Chossudovsky
https://www.globalresearch.ca/video-covid-lockdown-weakened-national-ec…
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