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
None here either.
DEAD CAT?
Our economy grew +0.2% in the March quarter (both from the prior quarter and the same quarter the prior year) which means our economy flatlined for a sixth consecutive quarter. This results was after the sharp construction slowdown was partly offset by the record kiwifruit harvest. But on a per capita basis economic activity retreated -3.3% in the year to March 2024. (Australia's perspective is here.)
PAST THE PEAK, SLOWING FAST
About 1700 new dwellings a month are currently being completed in Auckland but that could start to decline considerably later in the year. Residential construction in Auckland probably peaked late in 2023.
BUT DON'T PANIC
Our inflation was more driven by product and labour shortages than other countries were, the RBNZ says. They reckon the resurgent Phillips curve is a confidence booster
DEMAND WEAKER
Today's NZGB auction was a relatively timid affair. "Only" $757 mln was bid for the $500 mln available. But bidding was strong and yields fell quite a bit. The May 2031 $250 mln saw yields down -21 bps to 4.46% from the prior event 3 weeks ago. The $200 mln May 2034 saw yields fall -25 bps in three weeks, to 4.56%. The remnant $50 mln was a new May 2054 issue, and its yield came in at 4.93% p.a. for this 30 year maturity.
RBNZ CHAIRMAN REAPPOINTED
Neil Quigley has been reappointed Reserve Bank Chairman for another two year term, until 30 June 2026, Finance Minister Nicola Willis says. She says Quigley's reappointment retains his leadership and experience in central banking and monetary policy, and ensures the Board is well positioned to take on new members. There are two current vacancies to be filled, and further opportunities to consider a broader board refresh with two board members' terms due to end in June 2025, Willis says.
STUFF YOU SHOULD KNOW
If you use SMS messaging, you should know about RCS. The issue is security. There is a lot to know, and we have an explainer here.
STAYING UP TO DATE
The latest NZX50 company profile to be updated is Mainfreight (MFT, #8). It took both a revenue and profit hit in the year to March 2024, but still made $200 mln+ after tax.
SWAP RATES MAY BE FIRMER
Wholesale swap rates are likely to be a little firmer today on global forces although that may be limited to longer terms. Our chart below will record the final positions. The 90 day bank bill rate is unchanged at 5.61%, a level it has hovered around for 110 days now. The Australian 10 year bond yield is up +6 bps from this this time yesterday at 4.27%. The China 10 year bond rate is staying down at 2.26%. The NZ Government 10 year bond rate is up +5 bps at 4.64% from yesterday and the earlier RBNZ fix was at 4.57% and down -1 bp from yesterday. The UST 10yr yield is up +3 bps from yesterday at 4.25%. Their 2yr is now at 4.74%, so the curve is a bit less inverted at -49 bps.
EQUITIES QUIET WHILE WALL STREET ON HOLIDAY
The NZX50 is up +0.6% today in late trade. The ASX200 is unchanged in afternoon trade. But Tokyo has opened down -0.7%. Hong Kong has consolidated little-changed at its open, Shanghai is also little-changed. Singapore is down -0.3%. Wall Street is on holiday today, which affects most ket financial markets. The S&P500 futures suggests it will open its Thursday trade with a surge, possibly +1.5%.
OIL UP
The oil price is unchanged, still just over US$80.50/bbl in the US, and just over US$84.50/bbl for the international Brent price.
GOLD MARGINALLY FIRMER
In early Asian trade, gold is slightly firmer again, up +US$3 from yesterday at just on US$2334/oz.
NZD LITTLE-CHANGED
The Kiwi dollar is only marginally softer from this time yesterday, at 61.3 USc. There was a +20 bps jump on the GDP release, but that has faded now. Against the Aussie we are -20 bps lower at 91.9 AUc. Against the euro we are down -10 bps at 57.1 euro cents. This all means the TWI-5 is little-changed at 70.4.
BITCOIN UNCHANGED WITH LOW VOLATILITY
The bitcoin price is virtually unchanged from this time yesterday, now at US$65,199 and down by just -US$86. Volatility of the past 24 hours has been low at just on +/- 08%.
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86 Comments
Today's NZGB auction was a relatively timid affair....The remnant $50 mln was a new May 2054 issue, and its yield came in at 4.93% p.a. for this 30 year maturity.
The associated ~30yr interpolated mid IR swap yield priced at 4.687%. Minus 24.22 bps.
Liquidity means a market maker commitment to engage balance sheet capacity to execute the price making function. If balance sheet capacity (the real money in the system, therefore liquidity) is systemically impaired, as in a crisis, or a crisis that doesn’t really end, then to get dealers to give up their precious balance sheet capacity and engage on the other side of a swap someone would have to pay a hefty premium to make it worth it (risk-adjusted) for the dealer to do so.
People are making Norinchukin's bond sales about paper losses on those bonds. Those losses are irrelevant as only a byproduct. If it wasn't for dollar swap costs they'd just hold them to maturity. https://youtu.be/3qPqbAOxJRA Link
As NZ seems to be hovering around a few marginal points either side of categorising whether inside or outside of a “technical” recession, would it be a fair guess that the powers that be at the RBNZ continue to hover too, in so much that the OCR is stashed safely on the shelf and not worth even a glance as to see how it’s going.
It is interesting all the talk of a per Capita recession.
Does the RBNZ (or even our Government) have any remit at all to provide the individual with personal consistent or even increasing fiscal worth?
This is all the individual cares about, but it seems like our central authorities are mostly fixated on the size and stability of the overall system. Hence they're willing to sacrifice many of us in the name of taming inflation.
They'll know more than most of us the ramifications of what they're doing. I spose coming out and stating "now we're going to tame inflation, but the way we're doing it means some of y'awl will lose your jobs, and many of the rest are really going to feel the squeeze" wouldn't be too popular.
Yep, they'll use any way they can to tinker figures and metrics to obfuscate problems.
Ireland managed this by becoming a tax haven for multinationals. On paper, their GDP growth looks amazing, really wealthy country now. But the average Irish, doesn't see those benefits.
Fickle business, this restauranting. One minute, you own the places to be seen in. The next....
"The Voluntary Administrators of Good Group Australia and its subsidiaries, Duncan Clubb and Andrew Sallway of BDO in Australia, advise that the Botswana Butchery Sydney, Canberra, and Melbourne venues will cease to trade (14/5/24)"
And all started/accumulated by Al Spary out of Queenstown.
https://www.bdo.com.au/en-au/news/media-releases/bdo-update-on-good-gro…
I think they were also behind White and Wongs and a couple of other brands that've gone tits up.
Funnily enough it's often the Australian arm that goes bust, and the NZ operations stay open. Not sure what the added issue is in straya'.
Food businesses are very fickle beasts.
Was listening to Luke Gromen talking about the revaluation of gold to sort out the US debt spiral. Using back of envelopes, Gromen suggested USD20,000 per oz to manage the debt. The water cooler crew scoffed and said no way that it could happen and could ever be done. So I did my own research and looked up the Financial Accounting Manual for Federal Reserve Banks. It's all there--2.10.
Astounding.
https://www.federalreserve.gov/aboutthefed/files/BSTfinaccountingmanual…
That's nuts. How many rules and tweaks have been added to the rulebooks over the last 70 years to fiddle the books in order to get us out of our own self-constructed financial crises. It's bad enough that each time, central banks have reached out to push deregulation as a means of solution.
Nikkei reports on the rich people exodus from China. US, Canada, S'pore as target destinations all mentioned. And Japan is now a hotspot--value for money I guess. No mention of Nu Zillun or Aussie. The dreams of busloads of Chinese with suitcases of cash willing to pay a king's ransom for your suburban abode might be fading.
China last year saw 13,800 high-net-worth individuals depart, mostly to the U.S., Canada and Singapore, the firm found. Such individuals, abbreviated as HNWIs, are defined as those with at least $1 million in assets.
Immigration consultants and analysts have also observed a sharp increase in inquiries from Chinese people, both rich and middle class, looking to move to Japan. "The lifestyle in Japan is very appealing with beautiful public gardens and golf courses, plus it's ranked among the safest countries on earth according to the Global Peace Index," Amoils said.
https://asia.nikkei.com/Business/Markets/Wealth-Management/China-to-see…
Despite the typically misleading $tuff headline clickbait, at their link provided NZ isn't in the top 10 destinations.
https://www.stuff.co.nz/travel/350315897/new-zealand-named-among-worlds…
https://www.henleyglobal.com/publications/henley-private-wealth-migrati…
Australia is number 5 on the list. https://www.cnbc.com/2024/06/19/the-uae-is-set-to-be-the-no-1-wealth-ma…
Here are the top 10 countries expecting to see the highest net inflows of millionaires in 2024, according to Henley and Partners.
- United Arab Emirates: +6,700
- United States of America: +3,800
- Singapore: +3,500
- Canada: +3,200
- Australia: +2,500
- Italy: +2,200
- Switzerland: +1,500
- Greece: +1,200
- Portugal: +800
- Japan: +400
What about people with useful skills?
You know; nurses, doctors, engineers, people who know what a tool is...
The higher the net worth, usually, the less use to society.
Jeez we stuffed up when we started to use money as a yardstick - so many problems can be traced to that directly.
It has a closer association to productivity than having less money.
Not a hard and fast rule though, you could earn jack all, and work your land to provide all the things a higher salary might afford.
It's just that a $ amount is people's easiest way to ascribe value or worth. Any other way is far less quantifiable.
Agreed, so obvious and easy what you'd do to secure residency. Government bonds can easily be borrowed against. Should be direct investment only.
I remember back in the 90's we were sold the story that we were bringing in entrepreneurs as migrants that would create jobs and develop value add markets yet little evidence of that. Instead we're now told we need to make room for migrants within the economy a lot of whom are economic refugees.
Many people have long forgotten/never knew that a few decades ago there were a number of disastrous private "investment" schemes developed that were then "qualified" for residency investment by the govt bureaucrats.
I knew someone who got caught up in this one, just a few thousand. Some lost much more.
https://flatrock.org.nz/forest_related/origins_of_flat_rock_trust.htm
Despite all the damnations the USA still holds up as a desirable place to live and that’s not counting the hordes of illegals crawling over broken glass to get there. Lived there ourselves twenty or so years ago and it was outstandingly good, a great experience, amongst great good people. Went back to the neighbourhood last year and it was not so any more, we were not comfortable. Societal division now stark and crime always bad, but now crazy, fentanyl fuelled. Imagine obviously still great places to find and inhabit where you are safe and sound but now, outside of that, say on the motorway for example, that can change at the drop of a hand gun. Wolfe was I suggest totally precognitive, when he penned the crucial scene in Bonfires of the Vanities.
It’s an extraordinary country with extraordinary tragedies. I mean where else in the world could 21 people lose their lives on the street, drowned in molasses. But the upswell of violence in society is moving like a massive peat fire and nothing looks likely to extinguish it, not presently anyway.
America, land of the free. Free for companies and corporations to exert their influence on the political systems in order to sell debt and misery products to the masses legally. Such is what has caused the opioid epidemic there. Free to pay exorbitant prices for the most basic human necessities Education and health, to the point that many cannot afford medical treatment or a reasonable education and get sicker by the year, by the generation. Free to have low regulation so sugar can be put into everything, last I was over there I could hardly stomach the bread as it was too sweet. Freedom, something many fought and died for, now embodied by a broken system too proud to make necessary changes for the betterment of it's people. I love the cultural diversity and geographical and climactic variety of America, but as above, more so for a visit these days that a consideration to live.
Over in Aussie, ASX-listed fund manager and landlord Mirvac is set to sell a 34-storey office tower in Melbourne’s CBD and an 11-storey building in North Sydney for a combined $485 million, at steep 20 per cent-plus discounts to their peak values.
%20+ may qualify as 'CRE apocalypse' in my books.
Question is do they have any buyers at these prices?
https://www.afr.com/property/commercial/mirvac-set-to-sell-two-office-t…
"The $340 million deal was made at the latest December 2023 book value" so no writedown required.
GOZ just updated their valuations, with a 4.5% decline in valuations. Most of the AREITS are already trading at 40%-60% discounts to book value, so there's plenty of headroom.
You can all thank us here in Northland for doing our bit to bring inflation down.
Our retail and hospitality businesses tanking daily.
No decent road to rest of New Zealand.
No decent rail to rest of New Zealand.
Some of the poorest internet connectivity in the country.
And now no electricity because it's either broken down or fallen over.
from TA https://www.tonyalexander.nz/wp-content/uploads/Tonys-View-20-June-2024…
So now the kicker. Despite all of this woe the Reserve Bank are not riding to the rescue. We know they want to because they are cut from the same woke cloth as the previous government. But they can’t because inflation is 4% and forward measures of where inflation is going remain much too high for even us RB-bashing private sector economics to demand they cut rates now. I wouldn’t. My view is that by the December quarter of this year the extent of weakness in the economy will be great enough that the Reserve Bank’s anticipation of extra lagged decline in inflation because of that will overwhelm potentially still worrying forward pricing measures to encourage policy easing. But before we get there the pain is going to get a lot worse. The media will be filled with many more stories of woe across a lot of sectors and especially the three I’ve been highlighting for a long time. They are retailing, residential construction (the cream is rising to the top in that sector), and hospitality. So, what do I mean by the title of this article – when the tide goes out? It is a reference to the very well known comment made by Warren Buffett. “Only when the tide goes out do you learn who has been swimming naked.”
Well this is what a few of us have been predicting all along, because we have been through recessions before, 1988 etc... IMHO the biggest threat is the IRD getting tough on unpaid/unpayable debt..... perhaps they need to flush out things, but its also going cause a ripple effect which will solidify losses and take down even more
I am not a DGM, I just understand how connected things are and current state of play.
If you wait around long enough I will call the bottom.... (by then TA should have called it a few times.....)
We've had a remarkable impact on physically changing the environment around us. We destroy mountains for highways, rip all the trees out for bare land, dig out hills for houses, then have this idea that building a house on a bare piece of land and playing designer makes us fancy and modern. I'd love to see more trees in public places, along roads, at schools, make everything blend with nature, not wreck it, then try and redesign it too look naturalistic.
Well PDK that same thing that started, and ended the Younger Dryers period, is probably due about now.... lets hope its not Apophis in 2029.
What causes Ice Ages
even Elon Musk is down this rabbit hole
Stateside
The oldest members of Generation X are turning 59 1/2 this month, the earliest age when workers can start withdrawing retirement assets without a penalty. But many Gen Xers are far from prepared for their golden years, with almost half saying it would take a "miracle" for them to be able to retire, according to a new Natixis study.
https://finance.yahoo.com/news/gen-xers-nearing-retirement-half-0401173…
Just saw this, unsure if their loan book will be sold to another 2nd tier bank or 1st tier. As with HSBC, 1st tier probably won’t look, not interested in taking on the low equity portion. Would suit mortgagors better if picked up by another 2nd tier so they don’t risk being told to sell up
Are we not going to talk about Ubers $365 million dollar revenue but only paid $1.21m in tax? A large chunk of their revenue is shifted to the US therefore minimising their tax obligations in NZ... hopefully the government can stamp that behaviour out asap and hopefully kiwis realise just how badly we are being ripped off by these US based companies
Try looking at what Amazon does around the world. Their EU branch Amazon EU S.A.R.L based in Luxembourg for tax purposes, they then have mass warehouses of stock in Poland to fly to the UK on their own x2 767 planes just to get the free shipping items they sell to the public in a reasonable timeframe as it was cheaper to do this, including airport fees etc etc than hold them in the UK warehouses where they can focus on their prime delivery goods. The scale of it all boggles the mind.
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