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A review of things you need to know before you go home on Friday; one rate rise, strong linker demand, Aussie mortgage pullback, RBA says rate hikes not justified, swap rates bounce, NZD slips again

A review of things you need to know before you go home on Friday; one rate rise, strong linker demand, Aussie mortgage pullback, RBA says rate hikes not justified, swap rates bounce, NZD slips again

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

MORTGAGE RATE CHANGES
Nelson Building Society raised their 1 and 2 year fixed rates today.

DEPOSIT RATE CHANGES
No changes here today.

SAFE TO START
It has taken two months of remote safety operations to make the site safe for workers, but now excavators have moved on-site on State Highway 1 in Kaikoura. Physical work will begin next week clearing the large slips that have cut off the town from the north.

STILL STRONG DEMAND
The latest tender for 2035 inflation-linked bonds has yielded 2.41% pa (plus inflation), down only marginally from 2.42% last time. Remember, these bonds were bid with a yield of only 1.59% in August last year, so the overall move is quite a way. These bonds are always in heavy demand and today's tender was no different with a 4.5x coverage ratio.

A SHARP PULLBACK
In Australia, 86% of housing finance commitments went to buy an existing home in 2016, 14% to buy a new-built home. But in December the level of finance commitments for housing fell -7.4% from the same month a year ago, led by finance commitments for existing homes which was down -8.3%.

NOT JUSTIFIED?
In Australia, their central bank released its Monetary Policy Statement today. It was largely positive but they did make direct criticism of recent home loan rate hikes by banks, challenging the argument by banks that hikes are justified because of higher wholesale funding costs. If anything, the central bank said, those costs have fallen. See this on page 43 which shows data of steadily falling funding costs. "More recently, overall debt funding costs are estimated to have been stable, despite a little upward pressure from the increasing share and cost of long-term debt and deposit funding," they said. So, its not that costs are actually rising, its just a shift in the type of funding banks are choosing to do.

SELECT GROUP STAYS SMALL.
Fitch Ratings now says the number of countries with 'AAA' ratings is at its lowest level since 2003 and is expected to remain unchanged over the next two years. Eleven countries currently have 'AAA' status, compared with an all-time high of 16 during 2004 to 2009, reflecting the longer term impact of the global financial crisis. Australia is one of them, New Zealand with a AA (Stable) rating is not. Countries with a 'AAA' rating now account for 40% of global government debt at end-2016, down from 48% a decade ago. No country with a AA+ ratings has a 'Positive' outlook, so there seems little chance the group with AAA ratings will grow any time soon.

WHOLESALE RATES RECOVER SOME
Apparently yesterday's slump involved overshoot. Today rates have bounced back +1 to +5 bps putting back some more positive slope into curve. One year rates are up +1 bp, two years are up +2 bps, five years are up +3 bps and ten years up +5 bps. The short end is where were in December; the long end is where we were just three weeks ago. The 90 day bank bill rate is unchanged at 2.02%.

NZ DOLLAR SLIPS AGAIN
Yesterday's big fall has been followed up today with a minor additional slippage. Against the US dollar we are now down to 72 USc. On the cross rates we are at 94.2 AUc, and at 67.5 euro cents. The TWI-5 index has fallen to 77.4. Check our real-time charts here.

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End of day UTC
Source: CoinDesk

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10 Comments

The French election is now Marine Le Pen vs a collapsing French establishment

http://www.spectator.co.uk/2017/02/frances-long-stalemate-is-on-the-ver…

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That's a British (pro-Brexit) view. The first vote is not important; its the runoff vote that decides it. Here is French data. or here. Not even sure it will be that close.

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France reminds me of 1970s Britain. They have had decades of socialist stagnation and rot, while their enarques look after each other, all the time feeding the masses self congratulatory tripe. As Mrs T said:
"The trouble with socialism is that eventually you run out of other people's money to spend", in France's case mainly German money for their "Common Agricultural Policy", which was the polite name for what was effectively war reparations in the form of subsidies for French farmers. The place is a mess, the people by and large delightful (well some are a bit, well, odd).

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People said exactly the same about Trump and Brexit. The article doesnt make much of the first round.. and still says shes an outside chance. More of a low probability event ppl should be aware of

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Low probability? People are getting killed and maimed. Shock turns to anger and the demand for something to be done. All the establishment candidates are guilty of creating the current situation. Incompetence leads to the demand for a strongman who will Get Things Done.
https://fee.org/articles/the-essence-of-the-road-to-serfdom-in-cartoons/
It doesn't have to end badly, Churchill and Mrs. T were elected for exactly the same reasons.

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Churchill elected - when ? Thatcher almost lost the election in the early 80's but was saved by the Falklands War.

https://www.theguardian.com/politics/2013/apr/09/margaret-thatcher-falk…

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"but they did make direct criticism of recent home loan rate hikes by banks, challenging the argument by banks that hikes are justified because of higher wholesale funding costs. If anything, the central bank said, those costs have fallen". ....
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This could also be a commentary on NZ home loan rate hikes.

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The respective Reserve Banks can say what they like - it is the trading banks who set their own respective interest rates based on their own cost of money and other factors they may have to take into account (e.g. bad debts, risk premium etc). It is a commercial decision. The RBA comments are a bit like RBNZ trying to talk down the dollar - an exercise in futility.

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W. R.T. Ms Le Pen ............ the media should be careful of being an echo chamber for their own BS , regurgitating old liberal , even leftist, narratives .

The ordinary French men and women seem mightily pissed off about the littlest things right new , like being told to stop serving Pork in school lunches , and bigger things like their 'way of life' being inflluenced by migrants , refugees and 'etrangers" or what the Flemish call "uitlanders"........ to even bigger things like the almighty cock-up that the EU is fast becoming .

There is evidence to suggest the French , Dutch and Finns would Frexit , Duexit , and Finexit is given the vote to do so , and the Greek are sure to Grexit on a whim , but are too scared to do so

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