Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No rate changes to report today.
DEPOSIT RATE CHANGES
No changes here either.
RESILIENT ENOUGH
Following a special cabinet meeting today, the Prime Minister said the main road and rail route from Picton to Christchurch may need realignment or re-routing in the long term, at huge cost. The Finance Minister has said the Government's finances can handle repair such repair costs. But after that statement, there were two strong aftershocks at 2:30pm today.
PLAN B
The earthquake has severely damaged Statistic NZ's near-new Wellington building and it may be at least a year before it can be used again. While alternate premises are sorted for staff, there will be delays to official data releases. Consequently, there was no retail sales data release for Q3 today, and other releases may also be delayed. Their website seems to be down as well now (although since it was 'updated' response has been pretty slow).
SERVICE SECTOR BOUNCES BACK
New Zealand's services sector experienced a pick-up in expansion during October, according to the BNZ-BusinessNZ Performance of Services Index. The PSI for October was 56.3 s.a. (57.1 actual). This was +2.1 points up from September, and back to levels we saw pre- winter. It is mainly in Auckland and Otago that saw the improvements; Wellington held its high level while Canterbury remains weaker.
NO IMPROVEMENT
With the release of the REINZ house price data yesterday, we have been able to update the New Zealand median multiple - that is, the relationship between household income and house prices. It is now nationally at 5.9x in October, down slightly from 6.0x in September. However, Auckland has risen to a new record high 9.7x city wide, while the Central City is at 11.2x, also a record. The North Shore is at 10.5x, out West it is at 8.9x while south in Manukau it is 9.5x and also a record high. These are outrageously high levels, that have just become normalised. Wellington City is at 6.1x (and a record high), while Christchurch City is at 5.5x (its record high was in September 2015 at 5.7x). You can see levels for all current New Zealand urban centres here.
NO MEANINGFUL PROGRESS
We have also been able to complete our Q2 bank leverage review, now that the last of the bank GDS reports are in. Overall, our retail banks are leveraged 12.4x (that is, bank assets exceed shareholder support by 12.4 times). Put another way, for every $1 of assets in a bank balance sheet - mainly loans to customers - shareholders are backing them with just 8.1c and banks are borrowing the rest (91.9c) from depositors or other wholesale lending sources. The Q2-2015 is a slight improvement over Q1 and Q2-2015, but really, it shows no meaningful progress in deleveraging. Bank assets rose $43.2 bln in a year to $471 bln, while shareholder funds rose $4.0 bln to $37.9 bln. The most leveraged retail bank is Kiwibank; the least leveraged is Rabobank.
SHE'LL BE RIGHT, MATE
The RBA released the minutes of its November 1 meeting today. They were quite upbeat. Interest rates are likely to remain on hold in the foreseeable future they said, flagging that growth remains in line with expectations, and they remain unperturbed by the housing market. They said business investment had fallen further in the June quarter, driven by a decline in mining investment, but this is in line with earlier expectations.
WHOLESALE RATES CHANGE COURSE
Another day, another rise in longer term rates with the curves getting steeper and steeper - until they rapidly changed course. Earlier today they were up +1 bp for 2 years, up +3 for 5 years, and up +4 bps for 10 years. The 1-5 curve rose to +72 bps, its steepest since June 2014. The 2-10 curve rose to +107 bps, its steepest since March 2014. But at about 2:30pm, things turned sharply lower following two strong aftershocks with the 2 year now down -3 bps, the five year now down -4 bps and the 10 year now down -6 bps on the day. The 90-day bank bill is down -1 bp at 2.07%. The UST 10yr yield reached 2.27% at 11 am today, but has since reverted to where we were at 9 am this morning at 2.21%.
NZ DOLLAR UP THEN DOWN
The Kiwi dollar has turned up today and then down and is now at 71.1 USc. On the cross rates, it is trading at 94 AUc, and is at 66.1 euro cents. The TWI-5 is now just under 76. Check our real-time charts here.
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Daily exchange rates
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1 Comments
CHESTERTOWN, Md. -- Federal Reserve Bank of Richmond President Jeffrey Lacker said a possible fiscal stimulus under the incoming administration of President-elect Donald Trump could cause the Fed to raise interest rates faster than anticipated.
"If a more stimulative fiscal stance would materialize that would bolster the case for raising rates," he told reporters ahead of a panel discussion at Washington College. "As a general matter, doing monetary policy with a more stimulative fiscal outlook usually warrants higher policy rates." Read more
How prescient of nature to offer NZ bank depositors relief from incumbent RBNZ interest rate suppression policies.
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