Here are the key things you need to know before you leave work today:
MORTGAGE RATE CHANGES
Westpac has cut its two year fixed 'special' rate by -10 bps to 4.55% and matching ANZ, but still higher than BNZ or Kiwibank for that fixed term. Clearly it could not hold the old higher rate, given the competitive positioning of its rivals.
TERM DEPOSIT RATE CHANGES
No changes to report.
HARMONEY RAISES RATES
Peer-to-peer plaform Harmoney is raising interest rates and cutting its Platform Fee. Their interest rate on a loan is both the interest rate paid by Borrowers and the gross interest rate due to Lenders. Their grade A1 rate is unchanged at 6.99%, their B1 rate rises by +90 bps to 13.39%, C1 rises by +241 bps to 18.90%, D1 rates rise by +421 bps to 24.70%, E1 rates rise by +300 bps to 26.99% and their F1 rates rise by +136 bps to 28.99%. The Platform Fee paid by borrowers falls by -$50 to $450 (and is renamed an Establishment Fee). Lenders are charged a Service Fee of 1.25% p.a. of the principal and interest payments collected on each note. This fee is unchanged. Their changes are effective May 8, 2018.
WARNING SIGN
The shift lower in business confidence, and the more recent sagging of consumer confidence is taking its toll on car sales. We have earlier reported a -2% fall in new car sales. Now we have the data for used imports and they are down another -13% April-on-April on top of the -18% fall March-on-March. This may be signaling that the confidence headlines are shifting from 'business' to 'consumers'. Border control of stinkbugs might have something to do with the shift, but it is unlikely to be the key impulse here. Look at the chart, it has been downhill since November and we are now back to import levels we last saw in 2014. In fact, this is the largest 6 month decline since 1991 - it didn't fall this fast even in the GFC.
NAB ADDS CAPITAL TO BNZ
BNZ is about to issue NZ$500 mln of convertible subordinated unsecured notes to their parent National Australia Bank. These Notes are intended to qualify as Tier 2 Capital of BNZ for New Zealand regulatory purposes.
NEW CORPORATE BOND ISSUE
Christchurch International Airport is about to offer of up to $100 mln of 6 year, unsecured, unsubordinated, fixed rate bonds maturing on 24 May 2024. The expected credit rate is BBB+.
HANGING IN THERE
There is a small ray of improvement in the Chinese services sector. The Caixin services PMI expanded slightly faster in May to an index value of 52.9 (50 is neutral. The NZ services PSI is at 58.8.) But a dig deeper into the China components shows an underbelly of weakness still very present. This services sector assessment follows a tame-to-weak factory PMI.
TRUCKING ALONG OK
The RBA issued its May Monetary Policy Statement today. Essentially, it raised its view on the inflation outlook saying inflation "has troughed" and will pick up from here, and lowered its jobless rate forecast on healthy jobs growth as firms tell them they expect wage growth to pick up. The New Zealand MPS from the RBNZ is due on Thursday. It is not expected to be any more exciting than the Aussie one.
EXTRAORDINARY PAY
The CEO's of the large Aussie banks are paid a lot. Figures of over AU$5 mln in salaries and bonuses are usual. But none of this compares with the pay packets at Macquarie Bank, their other very large financial institution. Today they reported that the top ten executives were paid almost AU$120 mln last year. It is easy to see why Macquarie is known as "the millionaires factory". Their dividend was AU$1.65 bln for a bank that has AU$191 bln in assets and reported tax-paid profits of AU$2.5 bln (and far smaller than each of the four pillar banks).
MORE DETAIL
We have updated the price detail for log prices, to include monthly history back to 2014.
BENCHMARK INTEREST RATES FALL
Local swap rates repeat their yo-you swings. Yesterday it was steeper, today it is flatter. The two year is down -1 bp, the five year is down -2 bps, and the ten year is down by -3 bps. The UST 10yr yield is at 2.95%, down -3 bps. The Aussie Govt 10 yr is now at 2.78% (down -3 bps). The China 10 yr is at 3.68%, up +1 bp. The NZ Govt 10 yr is down -4 bps at 2.81%. The 90 day bank bill rate is unchanged at 2.03%.
BITCOIN UP
The bitcoin price is now at US$9,628 which is up +4% from this time yesterday.
NZ DOLLAR UP
The NZD is higher at 70.5 USc. We are also higher on the cross rates where we at 93.3 AUc, and up at 58.8 euro cents. That has the TWI-5 now at 72.8.
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9 Comments
Interesting comment about NZ wages
https://www.msn.com/en-nz/money/business/comment-new-zealand-shows-the-…
Obviously that Aussie overlooked our Quarterly Employment Survey (QES) to March released yesterday whick shows Total Weekly Gross Earnings up +5.6% pa (Table 5), the same increase as recorded in the December 2017 quarter.
The rise is to an average of $1,877.70/week. Maybe +5.6% rise is too low for him?
OK, so that's an average including overtime (what people are actually getting paid). It's not a median. But the average of FTE's straight time only is up +3.8%. That also is not zero, or less than inflation. The point is, wages actually are rising more than inflation. It's only when you strip out all those pesky actual wage increasing items (like overtime), that you can construct low wage rate growth. Or look at stats from a few years ago.
(And paid hours are only now 38.8/week on average. It is not as though the average is over 40.)
Plus you should add (via the Rural Brotherhood) the fact that the Gubmint is seemingly about to throw the GIA under the bus and charge dairy farmer $400m or 40% of an assumed $1B cost, for 'their fair share' of the m.Bovis outbreak. The GIA share should be 12% ish but there is a complex escalation formula.
There are roughly 14K such farmers in NZ so that's the thick end of 30 grand each. Another Modest Fee (no, it ain't a Tax, perish the thought....) imposed with zero negotiation.
Sigh.
Your commentary about Harmoney doesn't discuss the more interesting part of the news.. Harmoney itself will now be lending to borrowers, and therefore competing against it's own lending investors for the better quality loans.
"The Investor Agreement and Disclosure Statement have been updated to reflect a new funding structure that allows Harmoney to invest in loans as another wholesale lender, putting its capital at risk just like you."
What happened on Friday: Harmoney just made some big changes. They've classified themselves as wholesale investors. So how does that work given that Harmoney is the provider of the service, and now a wholesale lender? According to paragraph 35b of the investor agreement the wholesale investors "will not be entitled to select any specific Loans"
If I were Harmoney I'd be itching to break out my machine learning algorithm which generates an enriched pool of non-default borrowers, and keeping that for myself of course. After all, Harmoney may well have access to borrower features that are not disclosed to the other lenders. Alternatively Harmoney could observe the "trailblazers", ie. lenders who's RAR's are in the top 95th percentile, and mirror their trades. That's what I would want to do If I were Harmoney :)
A totally separate issue is that the Harmoney platform itself is now exposed to market risk in a way that it wasn't before.
snap - Pragmatist I just saw you post above mine..
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