Here are the key things you need to know before you leave work today (or if you work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
ICBC have cut all their fixed home loan rates. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
TSB has cut the interest earned on its Websaver account by -50 bps to 3.45%. All updated rates less than 1 year are here, for 1-5 years, they are here.
HOME LOAN AFFORDABILITY
Our September home loan affordability report reveals where is still affordable for first home buyers with less than a 20% deposit. There are not many affordable options in the upper North Island for aspiring first home buyers.
SMALLER TRADE DEFICIT
Traditionally, September is when we record our largest merchandise trade deficit. This year, it came in at -$2.1 bln, but that is less than in August and -13% less than in September 2023, -16% less than in the same month in 2022.
FAST SHIFTING TRADE PARTNERS
In September we ran substantial trade deficits with all five of our major trading partners, the most with China, Japan and Korea, each a bit over -$350 mln in the month. On an annual basis our long-standing trade surplus with China is shrinking fast, now only +$527 mln. In the same year in 2023 that surplus was +$1.3 bln. We are running growing surpluses with the US and Australia (the US one is now more than +$1 bln for the year). But our largest deficit is with Korea, now over -$4.7 bln for the year and up from -$3.7 bln a year ago. Car imports will be the bulk of that.
BROAD PROGRESS MASKED BY A SPECIFIC EMERGENCY
If it wasn't for emergency electricity generation in the June quarter, our overall emissions would have fallen. In fact, they rose +1.1% with those fossil fuel imports to keep the lights on. Every other sector (other than construction) reported fewer emissions. Looking past what hopefully will be a temporary event, the overall emissions intensity of the New Zealand economy (that is, industry emissions/GDP) is -34% lower in the June 2024 quarter compared with the March 2010 quarter.
NEW CHIEF RISK OFFICER FOR AVANTI
Avanti Finance has appointed Ben Anderson, formerly of ANZ and ASB, as its new Chief Risk Officer. He was most recently Head of Financial Risk, Business and Corporate Bank at ASB. Avanti, whose CEO is now ex-ANZ executive Fred Ohlsson, says Anderson's appointment underscores its "commitment to governance and risk management while fostering innovative growth across all business segments."
CO-CHIEF INVESTMENT OFFICERS FOR THE NZ SUPER FUND
NZ Super Fund manager, the Guardians of New Zealand Superannuation, has named Brad Dunstan and Will Goodwin as joint Chief Investment Officers, effective December 2. This follows a global search to replace former CIO Stephen Gilmore, who left in June. Dunstan and Goodwin are currently the Guardians’ Acting General Manager of Portfolio Completion and Head of Direct Investments respectively.
NZX EQUITY MARKET UPDATE
Check out our quick update of how the NZX is faring today, as at 3pm. Vulcan Steel and two gentailers star on a down day dominated by falls by Kathmandu, a2Milk, Gentrack and SkyTV
ANOTHER BIG CORPORATE BOND OFFER COMING
Fonterra signaled that it is probably going to launch a bond offer, for unsubordinated, unsecured five year fixed rate bonds. There will apparently be a retail component to this offer. No indication at this time of the size of the offer or the pricing.
GIGANTIC BOND DEMAND
Treasury had spectacular demand for its syndicated May 2030 nominal bond issue today. They were hoping for $3 bln and set a cap of raising $5 bln. In fact they got almost $24 bln in offers for this issue (not a typo). The $5 bln issued has a yield to maturity of 4.17% pa. (I wonder where the $19 bln that missed out is now ? And, given that NZ's nominal GDP is $413.3 bln, the offered amount represents almost 6% of annual economic activity. This is a record high demand.)
SWAP RATES HOLD
Wholesale swap rates are probably little-changed today at the shorter end. Our chart below will record the final positions. The 90 day bank bill rate is down -2 bps at 4.57%. The Australian 10 year bond yield is up another +8 bps to 4.42%. The China 10 year bond rate is up +1 bp at 2.13%. The NZ Government 10 year bond rate is up +2 bps from yesterday at 4.51% while the earlier RBNZ fix was at at 4.50% and up +7 bps from yesterday. The UST 10yr yield is now at 4.20% and up +12 bps from yesterday. Their 2yr is up at 4.03%, so that curve is now positive by +17 bps.
EQUITIES MOSTLY LOWER
The NZX50 is now down just -0.6% in late Tuesday trade. But the ASX200 is down -1.3% in afternoon trade. Tokyo is down -1.3% at its Tuesday open. Hong Kong is up +0.4% at its open. Shanghai started up a minor +0.1% at its open. Singapore is trading down -0.3%. Wall Street was down -0.3% on the S&P500 in Monday.
OIL LITTLE-CHANGED
The oil price is little-changed from this time yesterday at just under US$70/bbl in the US, and just on US$74/bbl for the international Brent price.
CARBON PRICE HOLDS
The carbon price has suck up today at $62.80/NZU. But volumes traded were normal. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.
GOLD HOLDS
In early Asian trade, gold is up +US$1 from this time yesterday, now at US$2727/oz.
NZD SLIPS
The Kiwi dollar is down -40 bps from this morning, now at 60.4 USc. Against the Aussie we are up +20 bps at 90.6 AUc. And against the euro we are also down -20 bps at 55.8 euro cents. This all means the TWI-5 is down to just over 68.9.
BITCOIN SLIPS BACK
The bitcoin price is down -2.5% from this time yesterday, now at US$67,490. Volatility of the past 24 hours has been moderate at just on +/- 2.0%.
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64 Comments
The primary dealers for those bonds are currently sat on up to $40bn of deposits in RBNZ settlement accounts - earning 4.75% interest (OCR). I know it isn't as simple as this, but locking in 4.1% return for the long-term must look pretty attractive given OCR will be at 4 or 4.25 shortly.
Came across some fascinating facts combined to illustrate just how different things are in 2024. Weaving a narrative out of this is only for the independent of mind.
1. S&P 500 up 22% YTD - best performance in 27 years and hitting 47 all-time highs this year.
2. Gold up 32% and on track for the best year in 45 years.
3. Silver has rallied 42% to its highest level in 12 yrs.
4. Oil price crashing like a global recession is imminent.
5. Utilities stocks are having one of the best years this century.
6. Global central banks are cutting rates as if a global recession is already here.
7. US public debt is skyrocketing. Like we have a financial crisis or war.
Points 1 - 5: Your point was that money, currency, devalues when compared to things in fixed or limited supply?
Point 6: They are. Because 'some writing' is on the wall. To be clear - the central banks that are cutting still have contractionary rates.
Point 7: A tad overstated when lower i-rates will result in governments collecting more tax perhaps?
Our monthly trade deficit is running 1.5-2x worse than the same months back in 2017. NZ clocked a service surplus of NZ$3.6b in calendar year 2017 and a deficit of 20.6b in 2023.
Not a peep about these issues from any economists who are busy predicting how house prices will track over the next 12 months.
Perhaps because the sheeple of this country don't understand that our export performance plays a much bigger role in our economic prosperity than housing valuations.
Hell yes (to the first point)
https://www.nzherald.co.nz/nz/politics/inside-treasurys-fight-to-keep-2…
Yes, cheaper oil products helping, but not as much as 1992 and 2009 when plummeting prices supported our recovery (also missing Marsden here).
We balance our deficit by exporting financial assets - and the interest / dividend payments on those assets then add more to the current account deficit. Presumably things will get interesting for the nzd if RBNZ decide they have to cut harder than in other markets.
GDP is a measure of output (total sales / income) minus intermediate consumption (purchasing / operating costs). The 'surplus' that GDP calculates is then split between labour costs and profits. Now, how can all the companies in NZ all make a profit at the same time as other kiwis are saving money? Easy, we add money into the economy using bank loans and Govt deficit spending. GDP in our little housing ponzi economy is predominantly a measure of how much credit banks have pumped in.
Possibly P but I don't think you really understand. Countries with strong real GDP growth are typically those experiencing significant economic expansion, often driven by various factors such as industrialization, investment in infrastructure, and favorable government policies. Not overweight credit creation for non-productive purposes.
Key points between Japan and Aotearoa:
J: Achieved industrialization and arguably the best infrastructure on the planet. Government policies keep the cost of goods and services low for Japanese citizens.
A: Massive infrastructure deficits and govt policies that do not enable infrastructure to develop nor to promote a competitive business environment to enable affordable costs for citizens.
I'm not sure you understand.
Japan's growth since 2020 is largely off the back of a boom in demand for the sorts of physical goods Japan makes.
NZs growth since 2020 has been deeply hampered by the inability for humans to move around.
Japan also has the opposite problem of an infrastructure deficit, they over capitalized in this area. China in a similar boat.
As for the government keeping prices low in Japan, prices in NZ are 69% more than Japan's. Which sounds bad, except the average wage in NZ, is 67% more than Japan's.
As for the government keeping prices low in Japan, prices in NZ are 69% more than Japan's. Which sounds bad, except the average wage in NZ, is 67% more than Japan's.
Looks similar to a Big Mac comparison P.
But as I pointed out, Japan has an infrastructure surplus, which means their basic costs like transport are far better than in Aotearoa. They can even travel between cities for <NZD10 every 20 mins or so.
They also have a population to support it (imagine how little passengers you'd get on a bullet train from Nelson to Christchurch), the density to support it (you can be on a train in Tokyo for an hr and still not touch quarter acre suburbia), and decades of very high growth to help initially fund it (and as I suggested, over fund it).
If you're into super dense metro living, it's a better place to be.
Looks similar to a Big Mac comparison P.
A Big Mac is 40% more expensive in NZ than Japan.
The person making your Big Mac gets paid 125% more in NZ than in Japan.
Density and population are not the only factor.
Cities with smaller population and similar densities than Auckland's (Ottawa, Calgary) have had light rail systems for decades and also run better bus transit systems. We have championed NIMBYism in this country like very few other places and make all kinds of excuses for not getting anything built.
Liquidity management: Principles for liquidity provision and the end of an abundant era By Karen Silk, Reserve Bank Assistant Governor (Just because I'm nerdy and have it open ;-)
If it fails to break USD$70 and just floats around in the 6's for years its gone burger. People only buy into it for the volatility.
I'll take 1,000 of your $70 BTC Z. P2P work?
Historically, Q4 has been a strong period for Bitcoin, averaging returns of 23.3%. During halving years, these returns have been even more pronounced, with averages reaching 113%. And in 2020, 171%.
Despite selling 90% of my BTC (at 70k I should add) I'm still happy with what I have left.
Regarding your "doesn't provide any income". Anything can provide income thanks to defi.
I wrapped my Bitcoin into CBBTC via Coinbase (a bitcoin derivative ERC20 on the base ethereum L2) and liquidity pooled it via Aerodrome for an average yield of around 130% APR compounding. Plus I have 40% extra Bitcoin because the liquidity pools increased in value.
Is it hard? Sort off. It is worth while? Absolutely.
Also the bitcoin ETFs added another 2billion last week, with another 335m today.
I wrapped my Bitcoin into CBBTC via Coinbase (a bitcoin derivative ERC20 on the base ethereum L2) and liquidity pooled it via Aerodrome for an average yield of around 130% APR compounding. Plus I have 40% extra Bitcoin because the liquidity pools increased in value.
Is it hard? Sort off. It is worth while? Absolutely.
Next level Wolfie. But need to know what you're doing. Not like a monkey in a cockpit trying to fly the plane.
It's still pretty ugly out there in places. Retail & hospitality obviously, but globally speaking, things are getting tighter by the day - and this is with all that debt. Might be time to get the garden going again. You never quite know just how things will pan out.
PS: Am I the only one missing Keith Woodford or is he not too well?
GIGANTIC BOND DEMAND ... Why would this surprise anyone? Like I've said, the RBNZ should have been cutting yonks ago. (Actually, it's a bit more complex than that but the RBNZ & voter's preference for 'debt freaks' makes the demand inevitable. But hey - you'll all need to pay the interest on this debt - actually, it'll be your children. Feels good, right?)
Lord Orr has decreed that it's time to add AI capabilities to their stack.
https://businessdesk.co.nz/article/economy/rbnz-creates-first-ai-role-t…
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