We are a little earlier today, because if you are sensible, you will get a bit of a jump on the long weekend. Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report today.
DEPOSIT RATE CHANGES
NZCU South's Success Saver account now pays 1.60%, reduced from 1.90%.
PHANTOM STRENGTH IN THE REAL ESTATE ECONOMY
Median house prices rebounded strongly in March, although the REINZ's new House Price Index suggests prices could actually be declining in Auckland on a like-for-like basis. But the number of transactions are going down. National sales volumes are -10.7% lower than the month a year ago (and for Auckland the fall was greater and came on top of a -12% drop in 2016 from 2015). Only the top end of the market is 'healthy'. One analyst expects the housing market to decline even as interest rates rise and migration keeps on growing.
REAL STRENGTH IN THE REAL ECONOMY
New Zealand factories are humming. And better than that, th elevel of new orders being received is rising strongly too. Today's PMI has the 'actual' index level over 60, a relatively rare height. Even the seasonally adjusted level is at its third highest level since August 2013. And those new order levels have only been bettered three times in over a decade. good orders mean the production index will stay strong for a while yet. And it is generating manufacturing jobs; that index is back in positive territory. Canterbury is where it is especially strong.
FOOD PRICES NOT CAUSING BUDGET STRESS
Food prices increased +1.3% in the year to March 2017, led by grocery food which was up +2.2% pa. This is a slower overall pace of increase than we saw in February 2017. Among the grocery category, fresh milk prices increased +6.5%, the largest annual increase since November 2014. Cheese and butter prices also increased, up +11% and +27%, respectively. Meat, poultry, and fish decreased -1.5% mainly due to lower prices for chicken. Chicken prices decreased -6.5% for the year, and have been falling annually since June 2015. (This is in sharp contrast to international movements.)
THEY WANT OUR BONDS
Today's tender of $100 mln in 2035 NZGB inflation indexed bonds brought slightly lower demand with a cover ratio of 2.34x, it lowest level in eight months, but still quite strong. However those bidders priced it strongly, with the sans-inflation net yield down to 2.14% p - which interestingly is idential to the same tender exactly one yrear ago.
AN IMPROVEMENT ACROSS THE DITCH
Australia's employment surged more than expected in March, led by a rebound in full-time jobs. But a rise in the participation rate kept the unemployment rate steady at 5.9%. The total number of people with jobs rose by 60,900 in March, much more than the market forecasts of a gain of 20,000. There was a big rise of 74,500 full-time jobs, and the number of part-time jobs fell by 13,600. Their participation rate was up slightly to 64.8%. For comparison, New Zealand has a jobless rate of 5.2% and a participation rate of 70.5%.
UPTON RETURNING
Simon Upton is returning to New Zealand to be the Parliamentary Commissioner for the Environment. He is currently the head of the OECD's Environment Directorate, and is a former National Party minister. It is a move that has bipartisan support - only NZ First objected.
LAMERS MOVES
Flexi Cards, the company that has taken over the F&P Finance business, has appointed sales, marketing and loyalty expert Chris Lamers from Sovereign as its new chief executive in New Zealand.
WHOLESALE RATES FLATTEN
Swap rates are slightly lower today, down -1 bp for to years, down -1 bp for five years and -2 bps for ten years. The 90 day bank bill is also unchanged today, still at 1.96%
NZ DOLLAR FIRMS
The NZD is back up to 70 USc. Against the AUD, the NZD has held on at 92.4 AUc. Against the EUR we are trading at 65.6 euro cents level. The TWI-5 is at 74.9.
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4 Comments
The house sales at the high end aren't very interesting. The drop off at the low end is no doubt a credit tightening with banks being picky about who they are lending money to. I've noticed a lot more bottom end of the market mortgagee sales. A couple of the ones on trademe are townhouses in areas of Wellington where you wouldn't think people would struggle with the current low interest rates and the reasonable price that they were likely purchased for, but here we are.
Australia’s central bank signaled deeper concern amid “heightened risks” from rising household debt and escalating property prices in Sydney and Melbourne.
The Reserve Bank of Australia, in its semiannual Financial Stability Review Thursday, said interest-only loans are rising and now account for almost a quarter of owner-occupier mortgages. It also noted about one-third of mortgage holders have either no buffer or less than one month’s repayments.
“In Australia, vulnerabilities related to household debt and the housing market more generally have increased,” the central bank said. “Some riskier types of borrowing, such as interest-only lending, remain prevalent.” Read more
THEY WANT OUR BONDS
A certain higher liquidity preference signal.
In terms of this data set, what we are seeing are systemic as well as tactical liquidity preferences being expressed by those directly inside of the wholesale (shadow) world.
In the pre-crisis period with volumes, essentially the real money creation, always rising and rising rapidly that meant there was always someone willing to buy risk (and usually pay serious premiums for the privilege). That was, in fact, the mandate for all these various entities including the GSE’s. From the standpoint of a liquidity provider, that meant limits could always be tested because if there was ever difficulty it wasn’t hard to find some other counterparty to lay off risk (in a whole lot of different ways). There was no need to hoard UST inventory because there was huge demand for it in collateral lending (and fat enough spreads to make it handsomely profitable) but more so because if a repo trade went sideways there were any number of ways to replace the funding avenue. Read more
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