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
None today so far.
TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank raised its 1 year rate offer to 6.20% today.
TOUGH TO BE OPTIMISTIC
The housing market's green shoots of recovery looked a bit stunted in October, REINZ figures suggest, with fewer homes sold in October than September and prices basically flat. If the market is in fact recovering, it is far slower now than many professional observers suggested earlier that it would be by this time of the year. There are still some optimistic holdouts, but the tone of some economist reviews suggest doubt is building among them that a full 'recovery' is actually coming.
STAMPEDE !
There was a veritable stampede for NZ Government bonds at today's $500 mln tender. More than $2 bln was bid for the $500 mln available, most of it for the $200 mln April 2029 bond. It attracted 55 bids worth $1.2 bln. Only 9 or the 55 bids were successful, and mainly because they low-bid the yield. The winners accepted 4.84%, down from 5.23% at the prior equivalent tender seven weeks ago. The May 2031 $200 mln offered attracted $641 mln in bids from 48 bidders. Eleven of those won something at 4.97%, little changed from the same offer one week ago. The May 2051 $100 mln went for a yield of 5.16%, down sharply from the 5.46% seven weeks ago. You do have to wonder where the unsuccessful $1.5 bln will go now. The pressure is on to accept lower yields for pristine credit offers.
SHELTERING BEHIND TRUSTS
The IRD released new details today about the number of trusts in New Zealand and the value of the assets they control. These are both large numbers. Total assets reported by all trusts & estates totaled $470 bln for 150,000 entities. In 2022 the main trust investment categories were $91 bln in shares and $191 bln in real estate. 16,000 trusts reported $14 bln untaxed realised gains. The disclosures also provided new insight for 5,000 trusts which reported $4 bln untaxed realised gains. The new disclosure rules drew out 52,000 trusts providing settlor/appointer details for the first time.
SLOW REACTION
Financial Advice New Zealand announced Tony Dench will be interim Chief Executive Officer. Katrina Shanks announced on September 29 she would be leaving mid-November, so it is clear they are having issues finding a replacement. FANZ have only now appointed a search agency.
IT WILL COME AT SOME POINT
Although most reports treated it sceptically, Mayor Brown's call for congestion charging on key Auckland roads as found support in the business community. The Employers and Manufacturers Association says "the introduction of congestion charging on the Auckland roading network would deliver significant economic and social benefits and should be progressed with urgency by the incoming government and Auckland Council".
RURAL SECTOR SLOWDOWN HURTS NATIONAL ECONOMY
Infometrics research suggests economic growth is waning at the back end of 2023. They say momentum has slowed as various economic pressures hit. Continued jobs and population growth have supported growth, but high inflation and higher interest rates have moderated the strength seen in the economy. Rising pressures on the primary sector are also beginning to hit provincial economies. Infometrics’ September 2023 Quarterly Economic Monitor points to provisional economic growth of +0.5% pa in the September 2023 quarter, a slowdown from growth earlier in the year, and has contributed to annual average growth slowing back to just +1.7% pa.
RUSSIAN OLIGARCH ASSOCIATED WITH HELENA BAY LODGE FEATURES IN ICIJ'S 'CYPRUS CONFIDENTIAL'
Alexander Abramov, the Russian oligarch associated with Northland's Helena Bay Lodge, features in the latest investigation by the International Consortium of Investigative Journalists (ICIJ), Cyprus Confidential. Abramov and Alexander Frolov, PwC clients and leaders of steelmaker Evraz PLC, urgently sought to transfer US$100 million between two shell companies they controlled shortly after Russia's invasion of Ukraine, ICIJ says. "The oligarchs’ holdings were routed through legal entities set up in jurisdictions known for attracting the ultra-rich by hiding their fortunes and helping them avoid taxes," ICIJ says. Both Australia and the UK imposed financial sanctions on Abramov following Russia's invasion of Ukraine but NZ hasn't. Earlier this year Targa Capital, the company which funds the company that owns and operates Helena Bay Lodge, went to court to unsuccessfully challenge Westpac NZ's decision to withdraw banking services. The judge noted the Overseas Investment Office had described Targa as “ultimately controlled” by Abramov, and a Swiss banker with "significant control" in respect of several UK entities linked to Mr Abramov, was "protector" of a key trust in the Targa ownership structure. The ICIJ says neither Abramov nor Frolov responded to requests for comment, while a Cypriot lawyer who has worked for them also declined to comment.
A 4% HEADCOUNT CUTBACK UNDERWAY
Statistics NZ is cutting 39 positions to save $2.4 mln in costs, a restructure set in motion by the Minister of Statistics, Deborah Russell and the Associate Minister of Statistics, Willow-Jean Prime. Stats NZ is a government department with over 1,000 employees. They staff at offices in Auckland, Wellington, and Christchurch, and in the field across the country.
A 70 YEAR HIGH - DUNEDIN DUPLICATED
Meanwhile, Stats NZ said our provisional population rose to 5,269,200 as at September, a +2.7% increase over the past year (+138,100 or the equivalent of another Dunedin in one year ). A +2.7% increase in one year is very fast. It is probably the fastest since 1952.
ATM TRANSITION
At today's A2 Milk AGM, management described a Chinese infant formula market in steep decline due to powerful demographic forces. Still, they managed to grow sales and share in that market. It is transitioning from English-label product to Chinese-label product. In September it cancelled its exclusive manufacturing and supply deal for most of its infant formula made by Synlait, as it transfers more manufacturing to its own Mataura Valley plant which is 75%-owned by a2 Milk and 25% by the China Animal Husbandry Group. A2 Milk owns nearly 20% of Synlait. (See ATM.)
PART-TIME SHIFT EXTENDS
In Australia, their jobless rate rose to 3.72% in October and its highest since May 2022. Employment rose by +54,900 but +37,900 of those were part-time roles. Part time workers now make up 30.7% of their employed workforce, the highest proportion since March 2022.
SWAPS HOLD
Wholesale swap rates have probably changed little today. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is up +1 bp at 5.63% and now just +13 bps above the OCR. The Australian 10 year bond yield is up +3 bps from yesterday to 4.58%. The China 10 year bond rate is unchanged at 2.68%. And the NZ Government 10 year bond rate is down -1 bp from yesterday at 5.11%, and the earlier RBNZ fixing was at 5.18% which was also up +1 bp today. The UST 10 year yield is now at 4.52% and a +7 bps rise from this time yesterday. The UST 2yr is now at 4.90% so that key curve inversion is a little less at -38 bps.
EQUITIES RETRACE RECENT GAINS
The NZX50 is down -0.7% in late trade today. The ASX200 is down -0.3% in afternoon trade. Tokyo has opened down 0.3%. Hong Kong has opened -0.8% lower and Shanghai has opened down -0.3%. Singapore has also opened -0.7% lower. The S&P500 ended up +0.2% in Wednesday trade, essentially hold the gains from earlier in the week.
GOLD LITTLE-CHANGED
In early Asian trade, gold is now at US$1957/oz and down -US$4 from where we were this time yesterday. Earlier in New York it was at US$1959/oz and earlier still in London at US$1958/oz.
NZD ON HOLD
The Kiwi dollar still at just on 60 USc with no net move from yesterday. Against the Aussie we are -10 bps lower at 92.4 AUc. Against the euro we are a little firmer at 55.4 euro cents. That means the TWI-5 is up +20 bps at 69.5.
BITCOIN RISES
The bitcoin price is much stronger today, now at US$37,619 and up an impressive +5.9% from where we were this time yesterday. Volatility over the past 24 hours has been high at just over +/- 3.6%.
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25 Comments
The Employers and Manufacturers Association says "the introduction of congestion charging on the Auckland roading network would deliver significant economic and social benefits and should be progressed with urgency by the incoming government and Auckland Council".
More tax on the far-flung working classes to avoid raising rates?
Interesting that EMA is pro it, though. Perhaps little overlap with commercial landlords who might be affected by greater Work-from-Home pressure, or with road transport companies?
"The avoidance of taxes is the only intellectual pursuit that still carries any reward."
John Maynard Keynes
“I don’t know anybody that doesn’t minimise their tax … Of course I’m minimising my tax. If anybody in this country doesn’t minimise their tax they want their head read. As a government I can tell you you’re not spending it that well that we should be donating extra”.
Kerry Packer
https://youtu.be/DBg7DnQjjcY?feature=shared
haw haw ...an absolutely spiffing show ol' boy, as one must protect one's assets from those lefty types, that seem to permeate thine hallowed halls of Parliament, who have never run a business in their life, let alone had a position in the "rough & tumble" haw haw Corporate world of backslapping, shady deals, telling porkys and "don't let the right hand know what the left hand is doing" etc etc at the higher echelons of said organisations.
Anyway, must dash as an appointment with my old pal, Hoorah Henry in the Billiards room - Glengoyne 50 year old single malt anyone ? haw haw
Yes - that's quite a shift lower. Things might well be about to fall of an over-leveraged cliff. Apparently house prices are going to keep rising in the face of rising unemployment and debt stress. Sales turnover doesn't look healthy enough to make a sustainable recovery convincing. Some here are clutching onto some remarkable and rearward focused expectations indeed.
“TOUGH TO BE OPTIMISTIC
The housing market's green shoots of recovery looked a bit stunted in October, REINZ figures suggest, with fewer homes sold in October than September and prices basically flat. If the market is in fact recovering, it is far slower now than many professional observers suggested earlier that it would be by this time of the year. There are still some optimistic holdouts, but the tone of some economist reviews suggest doubt is building among them that a full 'recovery' is actually coming.”
I mean it isn’t like anything changed that enables people to be able to afford to buy property with 7% mortgage rates. Those expecting buyers to simply rush in without lower interest rates were deluding themselves.
The usual suspect looking for extremely safe places to park money, often for regulatory reasons, e.g. banks, insurance companies, super funds, overseas governments, etc. This time, with rates likely to fall further in the next 6 months, might have seen some smaller players bidding to pocket a quick buck by selling within 12 months. (Buying long bonds at the top of the interest rate cycle means they'll increase in value as in value as interest rates fall. A sharp fall, as we've seen in the last week or so from the preceding 4 weeks, means holders are already in the money.)
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