Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes today.
DEPOSIT RATE CHANGES
F&P Finance (Flexicards) withdrew the rate changes they announced earlier in the week.
THE BUYING CONTINUES
There were 14,430 used imports first registered in July continues a remarkably consistent run of high monthly sales for these cars. In fact, in addition to the red-hot new car market (which actually slipped in July due to an unexpected pullback in sales to rental car companies), the used imports market is now running at an annual rate of additions of 158,600 and very close to the surge in 2004 when it reached a rate of 160,000 in the year.
ANOTHER $1.1 MLN FOR IRRIGATION PLANS
Two new irrigation projects in South Canterbury and Central Otago have won Government support. $340,000 has gone the design phase of the Orari-Temuka-Opihi-Pareora (OTOP) project, which Environment Canterbury is managing. And $815,000 has gone to the Manuherikia Water Project in Central Otago, which will allow a Falls Dam proposal to move forward. Both areas struggle with long dry periods.
INFRASTRUCTURE PORK
The Government and Auckland Council have agreed a $2.6 bln funding injection from Wellington to fast-track five transport infrastructure projects in the Queen City. We have added them to our tally of Auckland projects over $100 mln. Two are for roads ($1.6 bln), two for rail ($230 mln), and one for a busway ($835 mln).
STRUGGLING NEIGHBORHOODS
There is a lot of hand-wringing in the Australian retail sector at present, and special trepidation over the imminent "arrival of Amazon". But overall Aussie retail sales were up +4.1% in June from the same month a year ago. These numbers were close to +5% in NSW, Victoria and South Australia. The annual national gain in the year to June was only +2.9% however. "Household goods" and cafes & restaurants are where the strength is; it is pretty grim in other sectors, including for supermarkets and especially department stores. These last two are the most vulnerable to the "Amazon" challenge. High rents from mall owners like Westfield also have them in a vice-like squeeze.
WHOLESALE RATES FALL AGAIN
Following Wall Street, local rates are lower today and the curve even flatter with the 2 year rate falling -1 bps to 2.36, the five year down -3 bps, and the 10 year rate falling -5 bps. If it holds, this will take the 2-10 curve back to +1.01 bps, the lowest we have had since June. The 90 day bank bill rate is down another -1 bp, now to 1.94%.
NZ DOLLAR INCHES UP
The NZD has recovered somewhat today and now at 74.3 USc. On the cross rates we are stable at 93.4 AUc and at 62.6 euro cents. The TWI-5 is at 76.6. The bitcoin price is up +2.8% on the day at US$2,818.
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15 Comments
Given the RBNZ's OBR policy ethos focuses on depositors undertaking due diligence in respect of the particular institution they save with, is it not the obligation of the regulator to draw back the veil of opacity to allow scrutiny of off-balance derivative exposures and provide some tools to calculate possible hits to the income statement?
Such analysis is more complex than a cursory examination might reveal.
It is all of these calculations designed to predictably manage balance sheet positions (and how they might ultimately affect the income statement) where the trillions in notional derivatives are applied. Therefore, I hope, you can see why during periods of “unusual” uncertainty banks turn to very different behavior, almost at times like they were at risk of bank run during times long past.
Even the idea of “unusual” takes on interesting proportions, such as a small but unexpected rise in volatility that in some conditions could theoretically reduce the expected performance of a hedge such that it might be threatened to be judged ineffective and therefore exposing perhaps an entire portfolio of securities to even just the opening consideration for OTTI when calculating net exposure. Nobody likes uncertainty, but this is a whole other dynamic.
The more predictable the net exposure, the more likely to put on more positions (and the lower the cost in VaR, RWA budgets, and even in some cases capital charges). The less predictable, the less the bank is willing to do more financial things, and in some cases turn to actually doing less financial things – just as if it had been reduced of vault cash in the old ways. Read more
... what a shame , what a let down , that within 48 hours of becoming Labour Party leader Jacinda Ardern has made her first blunder ... given the Metiria Turei debacle , Ardern ought to have torn up the Memorandum Of Understanding with the Greens ... and made it 100 % clear to the electorate that benefit fraud and electoral fraud are not acceptable behavior from parliamentarians ...
Lest we forget ... when John Banks was being investigated for electoral fraud ... Metiria Turei was vociferous , quite outspoken that he should be ejected from the parliament ... she was all over him like a Rottweiler on an old ladies ankle ...
... except ... ahem ! ... John Banks was later acquitted ... unlike Turei ... he was clean ... Oooops !
The Greens need to dump the XX chromosome Homo sapien half of their leadership , and give 100 % leadership of the party to the XY chromosome unit ... the XY Homo sapien does appear to be very hard working , and supremely honest ...
The other day I said Auckland shouldn't build rail out to the airport and that the future was autonomous quadcopters. Seems I could be right:
Japan is the graveyard of economic theories. The country has had ultralow interest rates and run huge government deficits for decades, with no sign of the inflation that many economists assume would be the natural result. Now, after years of trying almost every trick in the book to reflate the economy, the Bank of Japan is finally bowing to the inevitable. The BOJ’s “dot plot” shows that almost none of the central bank’s nine board members believe that the country will reach its 2 percent inflation target:
Accordingly, the bank has pushed back the date at which it expects to hit its 2 percent target. That’s a little comical, since by now it should be fairly obvious that the date will only get pushed back again and again. If some outside force intervenes to raise inflation to 2 percent, the BOJ will declare that it hit the target, but it’s pretty clear it has absolutely no idea how to engineer a deliberate rise in inflation. The bank will probably keep interest rates at zero indefinitely, but if decades of that policy haven’t produced any inflation, what reason is there to think that decades more will do the trick? Read more
Further to todays interest.co 90 @ 9
Today Investors are dumping CommBank shares after a government regulator took legal action for alleged breaches of AML laws, sparking predictions a royal commission into the financial sector was now more likely
The untouchables, the Big-4-Banks, and the ruling Liberal party have been steadfast in refusing to have a Royal Commission into the Banks after their 9 year trail of scandals keep erupting - they can't help themselves
http://www.smh.com.au/business/banking-and-finance/cba-shares-slump-as-…
Beef market turmoil, a world of pain.
https://www.beefcentral.com/trade/domestic-wholesale-beef-market-in-a-w…
Australia Slams the Brakes on Property Investment
https://www.bloomberg.com//news/articles/2017-08-03/australia-slams-bra…
Sydney quarterly house-price growth slows to 2.2%, data show.
That's still pretty high growth.
...forecasting median Sydney house prices will decline 5 percent by the end of mid-2019 as investors retreat
That's just the last six months gain. What about the expected gains between then and now?
Yeah the Sydney market isn't the only one that's a grotesque credit bubble. Unfortunately most Kiwi's and residents Investors/home owners that have tried to compete in recent years with the huge influx of buying power from China are also going to feel credit bubble pain. I'm so glad that I sold up when I did, although we still own our main home here in Auckland.
Lets play a little game of spot the difference. I very much recommend that you read this article so you understand how things got so out over inflated. And why we need a Foreign Buyers Tax to stop this from happening again (Although I doubt that China will relax it's capital flight restrictions for quite a few years to come. Even Iceland had their capital flight restrictions in place for over seven years).
Article: A Brief History of Foreign Buying of Vancouver Real Estate
https://betterdwelling.com/city/vancouver/a-brief-history-of-foreign-bu…
Quote: In January 2017, China and the PBoC decided to implement a new round of capital controls. The controls targeted smurfing, and now requires the approval of the use of funds. Real estate buying and mortgage payments in other countries is not an approved use.
Foreign sales immediately started plunging in Vancouver, as well as a number of other hubs where Mainland Chinese investors became popular – like New Zealand, and Australia.
@Andrewj: I love this quote from your Bloomberg article: "In other signs the market is cooling, property auction clearance rates in Sydney have held below 70 percent in seven of the past eight weeks, compared to as high as 81 percent in March before the curbs were imposed".
Now compare the auction sales that we've been experiencing since the start of the year with 30% to 40% clearance rates and tiny sales volumes. Yet all the Auckland RE's keep telling us that everything is fine.
Yeah right....
Q. Where is all the money going in NZ
A. NZ doesnt allow illegal importation of drugs across its borders so there are no drug-mules, no drug-lords, no drug-syndicates and no drug-users so there is no need to extract the cash out of New Zealand to pay the overseas suppliers and never has been
If you have followed the news articles about Money-Laundering and Smurfing via Commonwealth Bank the Australian Parent of ASB you will know the activities are related to extracting the cash proceeds from drug smuggling out of the country. So far eleven are already jailed over CBA money laundering syndicates
Austrac is the AU regulator responsible for administering prudential controls over the banking system - it has just initiated a huge multi-billion legal action against CommBank for failing to maintain mandated controls over bank transactions.
The bloke in the gun at CBA is kiwi Ian Narev
Ian Mark Narev is the Managing Director and Chief Executive Officer of the Commonwealth Bank Group commenced these roles on 1 December 2011
The smurfing program has been going on since 2011
RBNZ is the prudential regulator of banks in New Zealand
What has the RBNZ been doing? Anything?
http://www.smh.com.au/business/banking-and-finance/eleven-already-jaile…
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