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
NBS (Nelson Building Society) cut home loan rates today, including its floating rate (by -35 bps). All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
Westpac has trimmed some short TD rates, but raised its 90 day rate by +20 bps to 4.40%. NBS cut both savings and TD rates. All updated rates less than 1 year are here, for 1-5 years, they are here.
FLOODED BY SELLERS
The housing market was swamped with new listings in October, moving further in buyers' favour with the number of homes for sale at a 10-year high.
REAL PRICE DROPS MORE THAN -5%
Meanwhile, median dwelling values dropped another -½% in October to be -2.9% lower in a year (when inflation ran at +2.2%). They have now declined for eight consecutive months, but the rate of decline is slowing.
WEAK & LOW
Residential building permits were little-changed in September from the same month a year ago. Some smell a market bottom because they haven't fallen any more over the past three months. But you have to be brave to 'know' that. New homes being consented are down -17,000 a year compared to two years ago. Weakness in townhouse consents continues to be a drag on overall dwelling consent levels.
NZX EQUITY MARKET UPDATE
Check out our quick update of how the NZX is faring today, as at 3pm. NZX50 slips with Tower, Briscoes and Goodman Property. But Vulcan Steel, the Warehouse and Channel Infrastructure rise
LESS CONSTRUCTION WORK COMING
After a stronger month in August, non-residential consents weakened again in September and in most regions. Office buildings are the sector with the largest retreat.
JUDGE JAILS TAX THIEF
The director of an asbestos removal and labour hire company has been jailed for three years in what a judge has called serious offending and the worst of its kind to come before the Christchurch District Court in the last 20 years. Melanie Jill Tatana, also known as Melanie Jill Smith, was sentenced in the Christchurch District Court on October 30 and jailed for three years for what the Judge described as a case involving the willful diversion of funds rather than business insolvency.
JUDGE IMPOSES HOME DETENTION FOR FRAUD
The Director of ACK Contractors, Colin Fitzgibbon, has been sentenced to nine months home detention and ordered to pay reparation of $83,563.65 by the Christchurch District Court on Thursday 31 October 2024 for falsifying records and dishonestly incurring debts.
FONTERRA GETS ALL IT WANTED
Fonterra ended up raising $300 mln of unsubordinated, unsecured five year fixed rate bonds at a rate of 4.60% ytm.
NEW TRADE DEAL
New Zealand and the six-nation Gulf Cooperation Council (GCC) have concluded negotiations on a trade agreement that is hoped to open up significant opportunities for New Zealand exporters in the Gulf region.
MANY AUCTIONS
We will not have an summary auction report tomorrow - because they are still going on. More than 500 auction events are expected for this week. You can find most of them already recorded in our Auction database - but it is a developing situation.
PROGRESS STALLS
Update: In nine of the past ten weeks, the number of net jobless claims by work-ready JobSeekers has fallen. But last week the fall was very minor, just -36 and far less than the -531 the prior week. But they remain +10,900 more than at the same time a year ago.
MORE SURPRISE VISITS FROM THE IRD
IRD staff are making unannounced visits to hundreds of businesses who they believe aren’t meeting all their tax obligations as employers. The visits are another round in their Hidden Economy work program and follows on from their successful liquor store campaign in the past year.
NOT CONTRACTING
In China, the private Caixin factory PMI confirmed the official version released yesterday - that factory activity has stopped contracting and is now expanding - barely.
SWAP RATES HOLD
Wholesale swap rates are probably little-changed to end the week - again. Our chart below will record the final positions. The 90 day bank bill rate is down -1 bp at 4.51%. The Australian 10 year bond yield is up +2 bps at 4.59%. The China 10 year bond rate is down -1 bps at just under 2.14%. The NZ Government 10 year bond rate is down -3 bps from yesterday, now at 4.53% while the earlier RBNZ fix was at 4.49% and down -1 bp from yesterday. The UST 10yr yield is now at 4.29% and up +5 bps from yesterday. Their 2yr is up +8 bps at 4.17%, so that curve is now less positive, by +12 bps.
EQUITIES MOSTLY WEAKER
The NZX50 is down -0.3% in late Friday trade. The ASX200 is down -1.0% in afternoon trade today. Tokyo has opened down -2.0%. Hong Kong is up +0.4% at its open. Shanghai is down -0.1%. Singapore is down -0.4% after its Diwali day off. Wall Street closed its Thursday trade with the S&P500 down -1.9% with a sharpish fall right at the close.
OIL FIRMER
The oil price is up +US$2 from this time yesterday, now just on US$70.50/bbl in the US, and just on US$74/bbl for the international Brent price.
CARBON PRICE UNCHANGED
The carbon price unchanged again today at $63/NZU in still light trade. See our new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.
GOLD RETREATS
In early Asian trade, gold is down -US$36 from this time yesterday, now at US$2748/oz.
NZD EASES FURTHER
The Kiwi dollar is down -10 bps from this time yesterday, now at 59.7 USc. Against the Aussie we are down -20 bps at 90.8 AUc. And against the euro we are also down -20 bps at 54.9 euro cents. This all means the TWI-5 is at 68.5 and doan almost -20 bps.
BITCOIN DROPS HARD
The bitcoin price has dived -4.8% from this time yesterday, now at US$68,918. That's a -US$3,440 dump. Volatility of the past 24 hours has been moderate at just on +/- 2.7%.
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Keep abreast of upcoming events by following our Economic Calendar here ».
66 Comments
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Until the US election season calms down, off-topic comments should be avoided on both on this review, and our morning international roundup stories, which will be heavily moderated to allow sensible debate to take place. Please only make comment on the topics raised in the story. (Hopefully, more open commenting on off-topic matters will return when the partisan pressures recede. Lets hope that is still an option.)
Just dropping this again - if you're getting wound up by certain commenters, just mute them
https://chromewebstore.google.com/detail/interestconz-commenter-bl/kbfa…
My advice is to limit the number of comments by users to each article to something sensible. There are a few people on here that are totally over the top in spouting rubbish. Probably 5 or 6 would be enough to stop them posting the same old crap over and over. Seriously there are at least three seagulls on here that continually just fly in and crap over everything.
It’s all very well limiting numbers of iposts individually and/ or edits but all of that costs the business itself, that is this site, time and money. It seems more than apparent, that the editor & co have determined that the responsibility for the integrity, discipline and relevance of comment lies just as much with those that participate on here and it would seem that they have now had more than enough of those that don’t respect those basic qualities. In other words why waste your time dealing with intemperate and unruly comment when there is better things to do. Restricting the overall number of posts will obviously reduce that workload, and it might just be that the amount of unwanted material posted, reduces more than pro rata as a result.
The BIS has pulled out of Project mBridge, a cross-border payments platform outside the Western nations. This collaboration launched in 2021 between the BIS and the central banks of China, Hong Kong, Thailand and the United Arab Emirates. Joined by the Saudi Arabian central bank in June.
Looks like the Western elite don't want to play in sandpits where they're not in charge and cannot call the shots as they see fit.
https://www.reuters.com/business/finance/bis-leave-cross-border-payment…
"Looks like the Western elite don't want to play in sandpits where they're not in charge and cannot call the shots as they see fit. "
That's quite a leap, J.C.
Perhaps it's just a) harder and more expensive than they thought and b) not enough potential customers could see the value?
Perhaps it's just a) harder and more expensive than they thought and b) not enough potential customers could see the value?
Maybe. But the project hasn't been canned, despite the departure of the BIS. I guess I'm just suggesting that the Western powers would prefer that it doesn't happen in any form.
You may nor may not be aware that the US agency SEC has been tying down their own cross-border payment technology company Ripple with a frivolous lawsuit against their directors and their digital token XRP. The SEC partially won but it demonstrates the extent to which the prevailing rulers don't like innovation and change.
When you say, "Western powers", did you mean the US mega banks? In which case, Yes. I'd agree. Their shareholders love their cozy world.
But let's not pretend these banks represent the will of the people. And to lesser extent (far lesser?) that of their governments.
I suspect J.C. is on the right track, the announcement by the BIS came one week after the BRICS conflab. The BIS will not want to waste their time on the eBridge project - China etc may not be interested anymore anyway. How much traction this gets is another matter.
The Global South-oriented organization BRICS has released plans to transform the international monetary and financial system and challenge the dominance of the U.S. dollar.
As the chair of BRICS for 2024, Russia proposed the creation of a BRICS Cross-Border Payment Initiative (BCBPI), in which members of the organization will use their national currencies to trade.
BRICS will likewise establish an alternative messaging infrastructure to circumvent the SWIFT system of interbank communication, which is overseen by the United States and subject to Western unilateral sanctions.
This “multi-currency system” will include new mechanisms not only to de-dollarize trade, but also to encourage investment in BRICS members and other emerging markets and developing economies, including a BRICS Clear platform, a “new system of securities accounting and settlement”, and financial instruments denominated in national currencies.
I thought the CRE apocalypse was dying down. Appears not. Any news out of Raglan?
Commercial real estate foreclosures are surging across the U.S., with foreclosures climbing 48% in September year-over-year. California's numbers are especially striking, with a massive 238% increase, per ATTOM's recent report, as detailed by Business Insider. This spike points to growing pressures in the sector. This trend is likely influenced by rising interest rates and lingering effects from post-pandemic shifts in demand, particularly for office spaces. States like New York and Florida are also seeing big foreclosure increases, up 48% and 49%, respectively.
https://finance.yahoo.com/news/commercial-real-estate-foreclosures-soar…
Regional banks have high exposure to CRE loans as a percentage of their total loans and assets:
- Bank OZK: 68.6% of total loans in CRE
- Home BancShares: 63%
- Pacific Premier Bancorp: 63%
- New York Community Bancorp: 57%
- Independent Bank Group: 56.1%
- Valley National Bancorp: 54.9%
Among larger banks, Wells Fargo has one of the highest exposures at 21.2% of total loans in CRE. JPM has 12.6% of its loan portfolio in CRE.
And just for fun. 'The Fear & Greed Index' has dipped into 'Fear' for the first time in a while. Not 'Extreme Fear' - yet.
And times must be getting tough across The Tasman:
"Aussie bank slashes interest rates in 'out-of-cycle' cut"
Yes. But not their Lending Rates or Mortgage Rates, but what they pay for Deposits to increase their NIM.
https://nz.finance.yahoo.com/news/aussie-bank-slashes-interest-rates-in…
Not significant. ME Bank is just the Vic division of BOQ. ME Bank isn't that important in Victoria, BOQ an also-ran nationally, unlikely to move the needle in the market. (A tenth the size of CBA.) Probably more of a sign that banking is a volume business. Without volume you find it hard to be relevant to customers. Tiddlers always struggle, and ME is a real tiddler. BOQ is probably struggling too, trying to foot it with the big four.
Meanwhile ... back in the real world of ordinary kiwi battlers ...
More than 450,000 Kiwis behind on debt repayments as festive spending season looms
Methinks the banks aren't being completely honest.
And methinks the RBNZ has a vested interest in allowing that behavior.
What are your thoughts about the RNZ article where ANZ is saying that the interest rate fall will be bottoming out soon and that people should start locking in their mortgage rates long term. Their evidence is that globally interest rate falls have halted... But then where has it halted? can someone please tell me.
A deeply cynical ploy
of course they are right that retail rates have fallen significantly more than the OCR, so far. But retail rates have found ‘a base’? Come on.
They may believe their own BS, including their ‘optimistic’ business confidence survey results. But I’m not. The economy is sick, and getting sicker. The OCR will need to drop to 3%, as an absolute minimum. That will mean retail rates circa 5%, max. And quite possibly mid to late 4’s
Reposting my comment from this morning:
ANZ attempting to lock in higher for longer?
"It is getting closer to the time when locking in a longer-term home loan rate might be worth it, ANZ economists say, with retail rates having dropped further than the official cash rate (OCR) might fall, and global rates pushing up"
https://www.rnz.co.nz/news/business/532531/interest-rate-warning-from-c…
Global interest rates are rising again. A warning from the ANZ bank here
"Wholesale rates are expected to bottom out fairly soon"
I understand that it has something to do with the Trump trade, promises of tax cuts and massive deficit spending to pay for it. Look at what's happening in the UK.
Will this turn out to be a repeat of the 70s?
While retail deposits make up the majority of CBA's funding base, wholesale funding still plays a significant role. According to the RBA, Australian banks in general obtain around 40% of their funding from wholesale markets.
https://www.bdo.com.au/en-au/insights/business-restructuring/why-does-w…
IRDs "Hidden Economy" tax review is simply virtue signalling low hanging fruitpips, on the basis of dobbing in.
Oz IRD name & shame: checkout the searchable database in this link showing companies profit vs taxable profit.
More than 1,200 large companies paid no tax, ATO reveals, as it vows to fight profit shifting
https://www.abc.net.au/news/2024-11-01/companies-that-paid-no-tax-in-20…
My son's been a Commercial Office Bldg Manager in Chicago & Minneapolis for 20 years since he left Uni.
He said it is a sector that has never had losses--only stalls-until 2022. Last year when the 5 yr note for the Minneapolis Class Be purchased in 2018 for $18 mil came due they handed back the keys to the Hedge Fund. Major employer Target Corp with 2500 employees still working only 2 days a wk at office. Its killing the CBD. Last month a $75 million double owned by major Commercial Group let it go for $6 million. 13th Largest Metro area in US. Hundreds of Billions are being lost and it will only get worse if people don't go back to the office.. A class buildings seem to be a different story though.
"Compared to here where you could convert bad commercial real estate to appartments."
I won't be around to see it but I can envisage a time in the not-to-distant future when all the commercial towers on Queen St and surrounds will be converted into slummy apartments owned by rack-renters.
Queen St will become a pedestrian-only street-market tightly packed with street-sellers' trestles stacked with the likes of taro, coconuts, tacky souvenirs and candy-floss.
Auckland will be just another Pacific tourist-stop-over on the cruise-ship circuit.
Its already happened. The previous Labour Govt packed emergency housing tenants into the CBDs of Wellington and Auckland. And then used prime commercial land to build even more social housing ghettos - see the monstrosity on Greys Ave. This has turned both CBDs into dangerous no-go areas for both residents and office workers.
https://www.rnz.co.nz/news/national/517365/statistics-nz-leaving-auckla…
Since we can’t rely on local economists and journos to tell us how wrong the RBNZ got things, and how much damage it is causing, we can head across the ditch to good ole Maccy B:
https://www.macrobusiness.com.au/2024/11/reserve-bank-tightening-delive…
Link. TA covered the margin expectations in more detail in this weeks newsletter
https://www.tonyalexander.nz/wp-content/uploads/Tonys-View-31-October-2…
Tony the Comb occasionally writes an excellent piece. This is one of them:
https://www.oneroof.co.nz/news/tony-alexander-why-nz-is-likely-to-see-f…
This is the reason why it never made sense to force investors to buy expensive brand new builds to rent to low income tenants - pushing up rents astronomically in the process. FHB and other owner occupiers should have been encouraged to build new homes, leaving the existing, much cheaper properties as rentals. Owner occupiers are 70% of the market - targeting them would have encouraged greater supply of new housing than targeting investors, who simply couldnt get yields or cashflow to stack up on brand new builds.
The end result was not just a housing affordability problem but a rental crisis to boot which saw a 500% increase in the number of families on the public housing waiting list, and record numbers requiring emergency housing in motels.
Can market prices fall below construction cost?
Many developers / builders focus on market price relative to construction cost due to profitability.
However here is something that manufacturers may forget: buyers (i.e customers) don't care about the cost to manufacture a product or whether the manufacturer makes a profit from the product. Think about the last purchase of any product or service (home, car, car, motor home, holiday, dining experience, etc) - did you care about the cost to the manufacturer / service provider or their profitability in your purchase decision? What did the customer / buyer care about in their purchase decision?
Construction costs above market price will make it economically unfeasible and unattractive for developers and builders to build new.
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