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A review of things you need to know before you go home on Thursday; Fonterra cagey on dividend, big surpluses coming, Wheeler sends signals, more debt now, less later, swaps fall, flatten, NZD higher

A review of things you need to know before you go home on Thursday; Fonterra cagey on dividend, big surpluses coming, Wheeler sends signals, more debt now, less later, swaps fall, flatten, NZD higher

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
There are no changes to report today.

DEPOSIT RATE CHANGES
No changes here either.

'DELIVERING THE STRATEGY'
Dairy co-operative Fonterra held its annual shareholders' meeting today and indicated that the dividend for the year may be unchanged from last year at 40c, from a total potential payout of 50-60c. If the dividend was kept the same, this would point to a total payout of $6.40 before retentions - however, following strong global dairy auctions the expectation is that Fonterra will revise upward again its current $6 per kilogram of milk solids for farmers forecast.

THE HALF YEAR UPDATE
The Government delivered its half year economic and fiscal update today. Treasury sees surpluses rising to NZ$8.5 bln by 2021. Finance minister English increased capital spending by NZ$5.4 bln over 4 years and their borrowing program was increased. Debt repayment and quake rebuild is to priority over tax cuts.

NO MORE RATE CUTS?
RBNZ governor Wheeler today said the 'trend' of lower interest rates, and its associated asset price appreciation with a high NZ dollar 'may finally be turning'. He also warned that housing market 'soft landings' after a boom are rare.

RECORD ANNUAL PROFIT FOR UDC
ANZ's on-the-block finance company UDC has posted a +3% rise in annual net profit after tax to a fresh record high of $58.5 mln. ANZ says expenses were cut -2% and UDC's cost-to-income ratio came in at just 26.3%. Loan provisions fell -29% to $7.4 million. Revenue was down -1% and the net interest margin also fell, although ANZ says the margin is now stabilising. "Good" lending growth has UDC well positioned heading into the new year, says ANZ.

MORE FOREIGNERS, LESS INDIVIDUALS
According to JB Were analysis, foreign ownership of the New Zealand equity market increased to 36.3% in 2016 from 32.6% in 2015. This is the highest level since 2011. However 'retail participation' (that is ownership levels of listed companies by individual New Zealanders' fell sharply to 23% from 27%. Portfolio-style investment also fell. All this happened as market capitalisation of locally listed equities rose to 40% of GDP, a level not seen here since 2000.

'HEIGHTENED VOLATILITY IN 2017'
S&P has been assessing global credit market risks starting in 2017. They say: "In our view, geopolitical factors will have the greatest impact on global credit markets in 2017, as the Trump Administration's currently unclear economic and trade policies, as well as the eventual implementation of Brexit, create uncertainties. These issues have a direct effect on the two largest economies (the U.S. and the EU), with ripple effects expected to be felt globally. Because of the relatively unexpected results of Brexit and the Trump victory, the future courses of these events could present a wider range of both upside and downside risks to our credit market measures."

MORE DEBT NOW, LESS LATER
The 2016/17 Government domestic bond program was increased today to $8 bln, $1 bln higher than that announced at the 2016 Budget. Further out, the forecast domestic bond program for 2019/20 was decreased by $1 bln to $6 bln, leaving overall bond program unchanged from the 2016 Budget over a comparable period.

AUSSIE BLOWOUT
The Australian trade deficit rose by more than -20% in October from September. This was much more than analysts were expecting. It came in at more than a -AU$1.5 bln deficit whereas analysts were expecting a deficit of only -AU$600 mln. This result has had virtually zero impact on the AUD, and no impact on the cross rate with the NZD.

MORTGAGE STRESS
According to S&P, Australian mortgage arrears are up by +25% in the September quarter (from very low levels). The jump was mainly due to rising housing stress in Western Australia and Queensland, two key states that have seen mining activity cutbacks.

WHOLESALE RATES FALL & FLATTEN
Swap rates have fallen and flattened today, following the moves on Wall Street earlier today. The two year is down -1 bp, the 5 year is down -4 bps, and 10 year is down -6 bps. The 90-day bank bill is unchanged at 2.04%. NZGB bond yields fell another -1 bp today as well.

NZ DOLLAR RISES
The Kiwi dollar has moved higher today following the HYEFU release and the RBNZ comments, and is now at 72.1 USc, up by one whole cent. On the cross rates it is at 96.3 AUc, and is up at over 67 euro cents. The TWI-5 now at 77.6. Check our real-time charts here.

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End of day UTC
Source: CoinDesk

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2 Comments

Fonterra cagey?

No.......... really ?

One of the underlying problems for Fonterra , is that the milk solid price , its payment to members and its profit are dont work in sync .

The less it pays to farmers , the more it makes in profit , particularly in the local market where the retail price of milk remains stubbornly high in relation to the 12cents per litre the farmer receives .

The NZ retail price of a litre of milk borders on extortion .

No civilized country in the world would allow such unfair trade practices by a price fixing cartel , such as we see in our dairy industry

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But what about the "world price"?

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