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
ICBC have raised fixed rate for some terms today.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes here.
A FLAT TO 'GENTLY RISING' MARKET
QV says the national housing market likely to stay flat or 'gently rising' 'for the foreseeable future'. RINZ said they will be releasing their September results on Thursday.
A FLAT TO 'GENTLY FALLING' MARKET
New Kiwibank spending data shows the volume of card spend declined -0.7% over the September quarter, while compared with a year earlier, the number of transactions grew by just +0.5%.
BETTER THAN A BANK TD
Kiwibank has launched a new unsecured 5 year bond offer for $100 mln "plus unlimited over-subscriptions". They are expected to be rated A1 (stable) by Moody’s, and AA (stable) by Fitch. The Indicative Margin is 1.10 - 1.15% per annum over the wholesale bank bill rate. The 5 year swap rate was 5.34% the last time we looked, suggesting a rate of about 6.45% pa or so is what these will pay. Much better than bank TDs. Update: these bonds will not be listed. and with full liquidity because they will be listed/traded. (H/T: TJ)
TAKE 2
The Port Waikato by-election will be held on Saturday 25 November. The by-election follows the death of ACT candidate Neil Christensen before the general election. Under the Electoral Act, a by-election is required to be held in these circumstances. This unfortunate event will mean that the new Parliament will have 121 members, according to the same election law.
OUR HOUSES ARE WORTH LESS
The RBNZ updated its value of all dwellings, saying they are now worth $1.56 tln in aggregate (M10) as at June 2023. That is -$10 bln less than in March and -$117.6 bln less than a year ago, and a massive -$200 bln less than the peak in December 2021 (-11.3%). From December 2021, Stats NZ says we have added +69,600 more dwellings, so after adjusting for that, our housing stock is -15% lower in value over that time.
STEADY STATE
In Australia, the NAB business confidence index was marginally positive in September, the same steady level for a third straight month. Meanwhile, business conditions remained resilient (although dipping slightly from August), suggesting their economy remained in reasonable shape through the middle of the year. Forward orders rose after contracting in August. The signs for inflation were positive.
STEADY GLOOMY STATE
Staying in Australia, the Westpac-Melbourne Institute Consumer Sentiment index rose in October from September, hitting the highest level in six months, but it is still in deeply pessimistic territory. And that is consistent with the contraction in per capita spending seen since late 2022 and a worry heading into the pre-Christmas sales season. Rate rise fears have also resurfaced.
SWAPS FALL
Wholesale swap rates are probably little-changed fell today. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is down -2 bps at 5.68% and now +19 bps above the OCR but this rate was set before the OCR. The Australian 10 year bond yield is down -12 bps from this time yesterday to 4.44%. The China 10 year bond rate is up +1 bp at 2.72%. The NZ Government 10 year bond rate is down -7 bps to 5.51%, and still above the earlier RBNZ fixing of 5.44% which was down -5 bps today. After starting the day at 4.80%, the UST 10 year yield is down -10 bps at 4.64% in a risk-aversion move. The UST 2yr is down -13 bps to 4.95%.
WHAT? US WORRY?
The NZX50 is up +0.3% near the end of Tuesday trade. The ASX200 is a stronger +1.2% in afternoon trade. Tokyo has opened up +2.2%. Hong Kong has opened up +2.0% Shanghai is up +0.2% at its open. Earlier on Wall Street, the S&P500 closed up +0.6% in its Monday trade.
OIL UP AGAIN, BUT AGAIN NOT BY MUCH
The crude oil price has risen a further +US$2/bbl today on those Middle-East conflict risks. The US price is now US$85/bbl and the international Brent price US$87.50/bbl. But you might have thought the reaction would have been more severe - these new levels are actually still less than the peaks in the past ten days.
GOLD RISES
In early Asian trade, gold is now at US$1864/oz and up +US$14 on the global uncertainties. It closed earlier in New York at US$1861/oz and earlier still in London at US$1846/oz.
NZD RISES
The Kiwi dollar has risen +½c today to be now at 60.4 USc. Against the Aussie we are holding high at 93.9 AUc and against the euro we are up almost +½c at just over 57 euro cents. That means the TWI-5 is up to 70.4.
BITCOIN SOFTISH
The bitcoin price is softer today, now at US$27,583 and down -1.4% from this time yesterday. Volatility over the past 24 hours has been modest at also just under +/- 1.3%.
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21 Comments
They are available via a brokerage: https://www.jardendirect.co.nz/app/new_issues/kiwibank-limited-bond-off…
They are available through Jarden and from Kiwibank direct. See section 9 & 10 of the Disclosure Document on their website https://www.kiwibank.co.nz/about-us/governance/investor-centre/kiwibank…
Note David - Jarden, and the Disclosure Document, says that these will not be listed on the NZX.
To offset the collapse in the real estate sector, Beijing has managed to surge credit to the manufacturing sector, which has helped prevent a total collapse of domestic credit growth and demand. Commodity prices, particularly those related to the 'green economy', have remained resilient despite China's property collapse.
According to the WSJ, Evergrande had the equivalent of more than $332 billion in liabilities by June. This included money owed to suppliers, unfinished projects and its bond and loan obligations.
For a bit of perspective, this is substantially more than Argentina's external debt.
Have yet found the time to research the extent to which Chinese investors have been robbed in NZ and Aussie markets. In the case of Malaysia, it's already quite clear.
https://www.wsj.com/business/deals/evergrande-investors-warn-of-uncontr…
So not much really in comparison to the debt in the USA or the Trillions they keep wasting or just giving in a single handout. Puts things in perspective doesn't it. Somehow the USA never needs to actually pay that debt back or even start paying it back, quite an impressive monetary system over there, well it is until it isn't.
Indeed. But that's does not make it any less a very real problem. Just like the USAs debt also is a very real problem. Really underpins why being long on leverage asset plays has some just as real risks...
Contagion is not a problem unless it spreads. As such, would money be any different to covid...?
Top 3 best performing assets in 2023 (from NYDIG):
Rat poison - +64%
U.S. large cap growth - +28%
U.S. large cap - +13%
International ex-US value - +9.6%
U.S. mid-cap growth - +8.9%
Precious metals are down -6.1%. However, spot metal price for gold is up 2.1% but silver down 10+%.
Perspective on the near-term fortunes of gold from the evergreen Chris Weston:
While the fed funds rate may be held at current levels until at least March 2024, the next move is becoming more apparent, and the odds certainly favour it to be lower. Gold’s best days are when rates are being cut, but gold traders will not wait around until that happens – on the contrary, we live in the future and we’re pricing that risk now.
The attack on Israel offers tailwinds for gold. Any continued rise in crude above $90 will lift headline inflation, but the gold market will be more influenced by the effect crude has as a tax on the consumer. This will only increase the probability of a recession in early Q124. Among other factors that could see slower demand, rising energy prices could be considered in the Fed easing rates to bring the Fed funds rate closer to a neutral setting.
For now, the gold market has warmed to the idea the Fed is done hiking, but to consider a move to $1981 and all-time highs, we need to increase convictions of a recession and the Fed becoming more urgent on bringing down rates to a neutral setting – that isn’t the case just yet, but it is a growing risk and enough for investors to increase the allocation of gold in portfolios as a multi-faceted hedge.
https://pepperstone.com/en-au/market-analysis/the-gold-market-screams-t…
On inflation: The money supply has really exploded in the last few years - it will take some soaking up and that will take years. A lot of it is sitting in asset prices, which can be slowly realised for years and keep demand up from people who received that gift. I still don't trust that these signs that inflation is dropping away will be sustained.
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