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
No changes to report again today.
TERM DEPOSIT/SAVINGS RATE CHANGES
BNZ launched a 6.15% 6 month TD offer. More here. The Co-operative Bank also tweaked two rates.
DAIRY PRICES SLIP
Today's dairy auction brought an overall -0.5% slip in prices although no change on a NZD basis. The event was fairly mixed with WMP down -2.5% and cheddar prices down -1.0%. But butter rose a sharpish +6.2% to a record-high price. Chinese buyers were noted for their relative absence. and relativce lack of influence in the market. Volumes offered and sold were low however.
30% OVER-VALUED? OR 30% UNDER-VALUED?
There was an official quarterly carbon market auction today. But no one participated and no units were traded. The floor price for today’s auction was $64/NZU which is substantially higher than the $49/NZU price units have recently been trading at in the secondary market.
COMCOM FILES PROCEEDINGS AGAINST FOODSTUFFS NORTH ISLAND
The Commerce Commission has filed legal proceedings against Foodstuffs North Island for allegedly using anti-competitive land covenants to block rival supermarkets in the lower North Island. ComCom said in an announcement on Wednesday that a settlement has been reached, and the Wellington High Court would soon make a decision on the case. Despite the historical nature of the issue, Commission Chair John Small said ComCom viewed it as “serious enough to warrant proceedings under the Commerce Act”. The investigation followed a 2022 market study revealing that land covenants by major retailers restricted competition.
IMPROVING BUT STILL NOT SUSTAINABLE
The Q1-2024 annual current account deficit fell $200 mln with goods exports up +$1 bln and service exports shrinking -$900 mln.
STEADY LONG-TERM PROGRESS
At March 2024, New Zealand’s international assets were $385 bln, +$23 bln more than at December 2023. International liabilities were $584 bln, +$12 bln more than at December 2023. That means our net international investment liability position was -$199 bln (48.7% of GDP), $11.2 bn narrower than at December 2023. Since 1987 when this 'modern' series of data started to be collected, if has only been since early 2023 that the net IIP has fallen below -50%. It has steadily improved from its worst position of -84% in March 2009. Progress, even if it is slowish.
CLIMATE PRESSURES RENTS
Median national rents rose $25 a week in the year to April, but the biggest rent increases have come in cyclone-affected Gisborne and Hawke's Bay
'WE ARE NOT FACING STAGFLATION'
RBNZ chief economist Paul Conway says the country is in a 'slow-to-no-to-negative' growth environment, but the outlook is slightly more positive for the future and the outlook is also for continued declines in inflation.
WE'RE OK, YOUSE AREN'T
While the main farmer lobby group (Federated Farmers) is talking down it's industry state, the latest Rabobank survey on farmer sentiment paints a much more optimistic picture. In the June quarter, farmers have improved confidence in the performance of their own operations, even if they are more pessimistic about the prospects for the broader agri economy.
ELECTRICITY/WATER UPDATE
Despite the unusual and painful winter dry in Canterbury, most rainfall is normal nationwide. Last week saw above average hydro inflows in the North Island but below average inflows in the South Island. As a result, North Island storage increased from 63% to 72% of average while South Island storage decreased from 78% to 77% of average. Auckland water supply dams are slightly fuller than 'normal' for this time of year. Total electricity demand increased marginally last week (+1%) but remained lower than this time last year. Demand peaked on Wednesday evening, 12 June and the Tiwai Point aluminium smelter reduced its take after a demand response call from Meridian.
JAPAN'S EXPORTS SHINE
Japanese exports surged in May, up from ¥7290 bln in May 2023 to ¥8277 bln in May 2024, a +13.5% jump. The jump was expected, but it came in better than anticipated. Meanwhile Japanese imports rose too but by less than expected.
'ACCURATE PRICE SIGNALS ALLOW USERS TO MAKE EFFICIENT CHOICES'
In Australia, the RBA has been looking at the Buy-Now-Pay-Later and doesn't like what it sees. Their key concerns are not so much on the unregulated credit side, rather on the fee side. That say BNPL fees average 3.5% of the transaction cost, compared to 0.4% for debit cards, 0.8% for credit cards. BNPL makes Visa and Mastercard lood good (!). A crackdown is coming, allowing retailers to pass on those costs to customers (until now the BNPL industry has prohibited that. But the RBA needs now powers to make that change.
SWAP RATES HOLD
Wholesale swap rates are likely to be a little-changed today. Our chart below will record the final positions. The 90 day bank bill rate is up +1 bp at 5.61%, a level it has hovered around for 110 days now. The Australian 10 year bond yield is up +5 bps from this this time yesterday at 4.21%. The China 10 year bond rate is staying down at 2.27%. The NZ Government 10 year bond rate is down -8 bps at 4.59% from yesterday (an interesting reaction after the Conway speech) and the earlier RBNZ fix was at 4.58% and down -5 bps from yesterday. The UST 10yr yield is down -5 bps from yesterday at 4.22%. Their 2yr is now at 4.72%, so the curve is a bit more inverted at -50 bps.
EQUITIES MOSTLY HIGHER, EXCEPT THE NZX50
The NZX50 fallen -0.7% today. The ASX200 is unchanged in afternoon trade. Tokyo has opened up +0.6%. Hong Kong has taken off, up +2.1% at its open, Shanghai is down -0.2%. Singapore is up +0.3%. The S&P500 ended up +0.3% in its Tuesday trade on Wall Street.
OIL UP
The oil price is up +US$1 from this time yesterday, now just over US$80.50/bbl in the US, and now just over US$84.50/bbl for the international Brent price.
GOLD FIRMER
In early Asian trade, gold is slightly firmer again, up +US$7 from yesterday at just on US$2331/oz.
NZD SLIPS ON AUD SURGE
The Kiwi dollar is only marginally firmer from this time yesterday, at 61.4 USc. Against the Aussie we are more than -½c lower at 92.1 AUc. Against the euro we are up +10 bps at 57.2 euro cents. This all means the TWI-5 has slipped to 70.5.
BITCOIN HOLDS
The bitcoin price is up +0.7% today from this time yesterday, now at US$65,285. Volatility of the past 24 hours has been modest at just on +/- 1.4%.
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63 Comments
Our Prime Minister is looking more and more like a fool.
And he was starting from a back marker.
Ihttps://thespinoff.co.nz/the-bulletin/19-06-2024/luxon-defends-c-list-f…
Depends how far you want to go back. One mission led by Mike Moore to the Middle East had a fair presence of fools and horses. One upset the locals by waving a crucifix around and looked like getting lynched. Another drank illegal beverage with a lady of the night, who happened to be illegal too, and paid a whack of US$’s to find freedom and another almost missed the plane which had to taxi back when he was spotted running around the airport perimeter wire fence. Mike Moore was a special guy, from shop floor to the boardroom, one of the few politicians I can admire, but I can vouch he was let down more than he should have been on this one, and not without similarity to Mr Luxon’s thoughts here.
Cant be worse than Jacinda Ardern that personally met with the US President during their infant formula crisis and still managed to leave without getting an infant formula supply deal for NZ Manufacturers, while Australian IF makers scored multi-million dollar deals out of it thanks to an ex-pollie working as a Washington lobbyist. We really did send complete idiots over there.
You sure about that? From Jan 2023
A2 Milk's access to the United States infant formula market offers a lifeline to the company's efforts to turn a profit in North America.
The company, along with several other big international competitors, wasrecently granted permission to sell infant formula in the US, to help offset a short supply in the domestic market, following a recall of products produced by Michigan-based Abbott Laboratories
A2 was granted entry after the crisis was actually over (Nov 22), and 5 months after Ardern's sojourn there (1st Jun 22). By the time A2 received permission it was too late, and they ended up never shipping any infant formula under Operation Fly Formula as it ended in September 22.
You sure about that?
A2M did nothing in terms of gaining a foothold in the market. The UK's Kendamil was a success. They were already in the market and on shelves by July 2022 and now there for good.
https://corporate.target.com/press/fact-sheet/2022/06/target-partners-w…
Considering Jacinda was supposedly there on a trade mission, and yet didnt manage to score any trade deals, really highlights just how incompetent she was. Literally the DAY AFTER she met with the President ....
Biden held a virtual roundtable overnight that invited infant formula manufacturers from around the world – including ASX-listed Bubs’ boss Kristy Carr – to provide updates on ‘Operation Fly Formula’, which fast-tracks formula shipments to the US amid their current shortage.
The Bubs delivery marks the fourth mission of ‘Operation Fly Formula’.
US President Joe Biden has thanked Australian infant formula maker Bubs Australia at a meeting, as the first batch of Bubs’ product gets ready to land into the hands of desperate American parents late next week.
“This flight would bring 4.6 million bottles of infant formula and pave the way for up to 27.5 million total bottles of Bubs infant formula to be supplied to American families in the weeks ahead,” Biden said. “I thank the folks from Down Under.”
Sorry, but it was always going to play out this way.
A false narrative - held by most of our society, currently - gets into 'exposed' territory. As false narratives ALWAYS do.
In attempting to justify/continue, said societies ALWAYS throw up false figureheads. They spout the tripe that is being looked for.
It takes a certain degree of inability, to want to go there - hence a lot of them are religious (inability to self-ascertain; offloaded, those types sometimes end up in the military - same reason). They are susceptible to mantra - both chanting and believing.
One exception was Key, who had the antennae - played pragmatically - and won't be caught holding any empty parcels. Luxon is a country mile from that, intellectually. A clod-hopper at best. A spin-doctor's worst nightmare; wind them up, give them easily-remembered 2-3 word couplets to repeat ad nauseum - then they spout off, off script. And always end up looking stupid/ devious/downright incorrect.
Which he was. All of. Unsureffingprisingly.
Secured a gold standard free trade agreement with the UK, which will increase New Zealand’s GDP by up to $1 billion per year
How? Why?
What does NZ produce that the Brits don't already have or can't access?
F'more, how does shipping food from one end of the world to the other check some woke agenda box?
Some of us are old enough to remember the ruckus when Britain decided to get into the Common Market.
Where was our lamb and our butter mountain to go?
Step back one pace - for perspective - and we were a resource-suck to Britain. Called the Commonwealth but it was a one-way suck. We fought her hegemony wars too. But the Britain of today, is unsustainable; North Sea 80% depleted, totally reliant on the Chunnel for food...
Not the most reliable of trading partners, one would have thought.
Indeed, in those days, well remember the export bills of lading were captioned “Homeward Bound.” NZ was a dominion but dominated. There was in place the Commonwealth Trading Preference scheme that ensured that NZ motorists would be bound to drive, Hillmans, Austins, Vauxhalls, Vanguards and Morris whatever the plural of that is. NZ was an off season farm for meat, wool dairy and anything else handy to keep the hoi polloi fed clothed and working. In exchange we got assorted crockery, various grades of manchester, the above crap vehicles, and not much else of substance. Therefore the UK into the EEC was tantamount to betrayal to all of that, but the first government to either acknowledge or address that in depth was that of Lange & Co, who admittedly went at it headlong, rushed things including mistakes, but at least they had a go. Agree with it or not, hasn’t been a lot of dynamism since, has there.
It was so bad that it was said that for the so called wool barons of North Canterbury, one bale of the best fine wool was worth a new 3.8 Jaguar and that’s even after all those along the way had clipped the ticket. From memory there were in Christchurch near to 30 wool brokers and exporters each making a healthy living. Make hay while the sun shines certainly, why not, but it don’t shine quite the same anymore, does it.
Air New Zealand was also "encouraged" to select Rolls Royce engines for the 747-200 fleet over General Electric to keep dairy access;
https://e8e62e492b4a1a43cd16-77325458036aa340f9e5dfc158bde804.ssl.cf2.r…
My mother bought one of those. On a downhill run in Wellington she and it, managed to write off three parked cars. It just decided to go right all of a sudden she told the attending officer. And sure enough the steering arm had sheered. Oh p, and the Lada was no more dented than my mother’s confidence.
If you are going to rate people then you need to show how you rate them. This is so unprofessional. He is our PM, he needs to do better. What defines an A delegate compared to a C delegate. What are the objective measures? If you want to run a country you need to win a popularity contest but that is not how you run a good system. I'm not convinced being a CEO means you know what you are doing at this point.
Is this it? The hammer has not dropped but this is massive. Definitely not a black swan because the Norinchukin situation has been public for some time.
The water cooler crew yawned and said 'nothing to do with us.' JPYUSD up slightly. Odds on that the Fed and BOJ are going to have to come up with a solution.
Norinchukin is Japan's 5th largest bank with $840 billion in assets) today the proverbial canary stepped on a neutron bomb inside the Japanese coalmine, because according to Nikkei, Norinchukin Bank "will sell more than 10 trillion yen ($63 billion) of its holdings of U.S. and European government bonds during the year ending March 2025 as it aims to stem its losses from bets on low-yield foreign bonds, a main cause of its deteriorating balance sheet, and lower the risks associated with holding foreign government bonds."
See, what's happened in Japan is not that different from what is happening in the US, where as the FDIC keeps reminding us quarter after quarter, US banks are still sitting on over half a trillion dollars in unrealized losses, as a result of the huge jump in interest rates which has blown up the banks' long-duration fixed income holdings, sending them trading far below par and forcing banks (and the Fed, see BTFP) to come up with creative ways of shoving these massive losses under the rug.
https://www.zerohedge.com/markets/music-just-stopped-banking-giant-nori…
"the Fed and BOJ are going to have to come up with a solution."
Wrong tense - "the Fed and BOJ ....have to come up with a solution" it's just that we don't know exactly what it is yet. Things like this don't happen, unannounced and unplanned for, in the dark world of Central Banking.
Collusion is already happening - Japan is a swap nation. People are not aware (and not interested).
"Quietly, on December 1, the New York Fed published the following statement on its website: “The Norinchukin Bank, New York Branch, has been added to the list of Standing Repo Facility Counterparties, effective December 1, 2023.”"
https://wallstreetonparade.com/2023/12/the-new-york-fed-has-extended-it…
No worries you reckon. That's what I've been told too.
Just so you are aware, Japan Post Bank, Norinchukin and the Shinkins collectively hold about $1 trillion in foreign bonds (guess which denominations) against liabilities that are mostly deposits. The bulk of those bonds are now underwater (they are in hold to maturity portfolios, so the loss hasn't been realized).
The Jap banks are pretty well funded they can absorb losses, but the pension funds and the hedge funds are screwed
If the Japanese pension funds are screwed, what does that say about every other country? You know that if all their assets were repatriated, we would see wholesale collapse.
This is true they (Japanese) have massively invested offshore to seek yield for a long time, that said the BoJ are in the pocket of the FED.... everyone is screwed here in some way if big funds sell.... I would suffer collateral damage but suspect that hedges would more then cover that... Doomers hedge well. Gold is the ultimate insurance, lost in a boating accident .....
Why? Interest rate differential expectations? If all hell breaks loose in NZ, this has a huge impact on Aussie banks.
Incidentally,
Hedge fund Regal has taken a short position in shares of Australia’s biggest lender, Commonwealth Bank, citing that it is one of the world’s most expensive valuations, Bloomberg has reported.
https://www.capitalbrief.com/briefing/regal-takes-short-position-in-exp…
The rents in Gisborne and Hawkes Bay are rocketing up because more people are working in those areas now and there are more households with money to spend on rents. You can see this in the benefits data too - they are basically the only areas not entering a spiral of doom. Why? Simple. If you can hold a shovel you can get a job and make some money.
In almost all of our urban areas, rentals are in such short supply that rent just rises to whatever the cohort of people seeking a rental can afford to pay. So, when wages go up, rent goes up.
Updated chart on Twitter/X comparing NZ housing price drops relative to US GFC crash - after 20 months trending the same way/rate.
https://x.com/avidcommentator/status/1803239822208933893?s=46&t=MUwQeKa…
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