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A review of things you need to know before you go home Thursday; RaboDirect raises a rate, FMA prevails, trucks show the way, DTI details, yields fall, BEPS progress, swaps firm, NZD rises

A review of things you need to know before you go home Thursday; RaboDirect raises a rate, FMA prevails, trucks show the way, DTI details, yields fall, BEPS progress, swaps firm, NZD rises

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

MORTGAGE RATE CHANGES
Nothing to report today.

DEPOSIT RATE CHANGES
RaboDirect increased its 3 month rate to 3.35%, the highest of any bank for this term.

HIGH COURT VINDICATION FOR FMA OVER PROBLEMATIC FSPR
The High Court has dismissed an appeal by Innovative Securities Ltd to overturn the Financial Markets Authority's move to have it deregistered from the troublesome Financial Service Providers Register (FSPR). It's the third court success for the FMA in such a case following ultimately unsuccessful appeals by Excelsior Markets Ltd and Vivier & Company Ltd. The FMA says since July 2014 it has considered 198 FSPR registrations. 110 were existing registrations and 88 were new registrations. In that time, the FMA has directed 68 company deregistrations, with a further 21 companies voluntarily deregistering. The FMA also issued 30 directions to prevent registration on the FSPR, with another 38 applications either voluntarily withdrawn or allowed to expire. Just 18 entities were allowed to register on the FSPR.

'PULLING AWAY IN MAY'
Both ANZ Truckometer indexes lifted in May. The Heavy Traffic Index is up a very impressive +11.4% from May 2016, more than reversing a fall in April, while the Light Traffic Index is +4.1% higher than in the same month a year ago. The Heavy Traffic Index continues to trend solidly upward, which bodes well for Q2 GDP figures. The upward trend in the Light Traffic Index seems to have recovered from its recent wobbles, suggesting good activity in the back half of the year. NZ bears need to make sure they are hibernating.

FEWER BIDDERS BID LOWER, MORE WIN
Moderate demand returned for the NZ$100 mln 2035 NZ Government infation-indexed bonds tendered today. The coverage ratio dropped to 2.1 times from 4.7 times at the previous tender. The weighted average yield was a substantial -24 bps lower at 1.91% (plus CPI inflation). Today, 22 bidders won a share, much higher than the seven who won in the May event.

UNDERSTAND WHAT YOU SIGN
The Banking Ombudsman has a case of a banking customer paying his home loan early and found himself owing $11,000. The Ombudsman is urging customers to realise than signing contracts with a bank create obligations to get benefits like cash incentives and low rates. Contracts can't just be walked away from (by either the customer or the bank), even when the law says banks can't profit from changes. But they can recover costs.

RBNZ RELEASES DTI CONSULTATION PAPER
The Reserve Bank has published its consultation paper on adding a debt to income limiting tool to its macro-prudential toolkit. The Reserve Bank wants feedback by August 18 on: the risks posed by high DTI lending and the potential for a DTI limit or similar policy to ameliorate; alternative policies under the Reserve Bank’s control and how they would compare to a DTI limit; and desirable design features for any DTI policy and the potential costs and benefits.

QUCKER BEPS ACTION
New Zealand has signed up to the multi-lateral treaty process out of the OECD to combat tax avoidance by multinational companies. It is a significant step forward in the fight against base erosion and profit shifting (BEPS). It will avoid having to do all this work on a direct basis, country-by-country. The agreement covers “permanent establishment” avoidance, treaty abuse, dispute resolution and hybrid mismatches. These are the key treaty-related BEPS issues.

WHERE WE STAND
One type of international university ranking was published today, MIT was ranked #1, and Stanford #2. The top four are all private institutions. The top Aussie university, ANU, was ranked #20. The 2018 rankings for the New Zealand universities are: University of Auckland (82=), down 1 place from last year, University of Otago (151), up 18 places on last year, University of Canterbury (214), unchanged from last year, Victoria University of Wellington (219), up 9 places from last year, University of Waikato (292), up 32 places from last year, Massey University (316=), up 24 places from last year Lincoln University (319=) up 24 places from last year, and Auckland University of Technology (441-450), unchanged from last year. No New Zealand institution is anywhere near world-ranking; no New Zealand institution has faculty capable of winning a Nobel Prize. We have set our sights modestly. But we need such goals.

THEY ARE DOING SOMETHING RIGHT
Across the ditch, the Aussies recorded yet another trade surplus in goods and services in April. That makes six consecutive months of monthly surpluses and you have to go back to 2010 for another such run. More impressively, in the year to April, the overall balance is a surplus of +AU$7.2 bln, a five year high, and that is in stark contrast to the -AU$37.8 bln deficit in the year to April 2016.

WHOLESALE RATES FIRM
Despite expectations of a further fall today, local swaps have actually risen today by about +2 bps across the curve. The 90 day bank bill rate slipped however, by -1 bp and is now at 1.94%.

NZ DOLLAR RISES FURTHER
NZD is up again from this time yesterday at 72.1 USc. On the cross rates, against the Aussie we are at 95.6 AUc, and we are at 64 euro cents. The TWI-5 is now at 76.1. A year ago we were at 72.9, so that makes it a +4.5% gain over the year. And bitcoin hit US$2,957 two days ago, a new record, although it is back slightly now to US$2,724. One year ago today, it was US$576. That is a +370% rise.

You can now see an animation of this chart. Click on it, or click here.

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Source: CoinDesk

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6 Comments

The upward trend in the Light Traffic Index seems to have recovered from its recent wobbles, suggesting good activity in the back half of the year. NZ bears need to make sure they are hibernating.

Bond vigilantes are certainly hibernating and have been all year. View 1Y tab data

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China’s overseas shipments accelerated in May from a year earlier, as global demand shows signs of picking up.

Exports rose 8.7 percent in May in dollar terms, the customs administration said Thursday. Imports increased 14.8 percent, leaving a trade surplus of $40.81 billion dollars. In yuan terms, exports rose 15.5 percent and imports surged 22.1 percent, bringing the trade balance to 281.6 billion yuan. Read more

China nurturing the neighbour across the ditch?

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On 8 June, Auckland Council (AA/Aa2) mandated banks to increase its September 2027 Kangaroo bond for a minimum A$50 million (US$37.7 million). The forthcoming deal has a price guidance of 72 basis points over semi-quarterly swap and 86 basis points over Australian Commonwealth government bond, and is expected to price the same day as launch via joint lead managers ANZ, Daiwa Capital Markets and Deutsche Bank. Read more

Cheap swapped NZD funding for Auckland?

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I'm going to suggest a crazy idea. How about Auckland Council actually collects enough rates to pay off their debts in a short amount of time rather than accumulating more. I know that being financially responsible is a outrageous but it's worth considering.

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Regarding DTIs:

"If they were deployed, they could stop 2000 owner-occupiers and 9000 investors a year from purchasing properties."

And it's revealed who will be disadvantaged by this change and why there is such resistance.

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Yes, and the flip side is that there will be 11000 other households who will be able to purchase those same properties when otherwise they would have been shut out by those reckless borrowers.

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