What happened Tuesday

Business / news

A review of things you need to know before you go home on Tuesday; many retail rate changes, higher milk price, Auckland auction market active, Christchurch to borrow more, swaps flatten, NZD holds, & more

26th Oct 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
Kiwibank raised all its fixed home loan rates today. More here. China Construction Bank also increased rates, as did Bluestone.

WHAT ABOUT THE INCENTIVES?
This the time to note that the non-rate incentive landscape is fractured and offers quite different incentives between banks, currently from nothing to up to $3000 for a 'new' loan. See details here.

TERM DEPOSIT RATE CHANGES
Kiwibank also raised every one of its term deposit rates today too, but none to special levels. CCB and First Credit Union also increased their offers.

MORE RATE INCREASES
ANZ has advised that it has increased some key business loan rates by +25 bps. Its "Business Bank Indicator Rate" is now 8.60%, its "Business Overdraft" is now 10.85%, and its "Agri Current Account" is now 6.80%.

HIGHER MILK PRICE
Fonterra has narrowed its milk price forecast range, giving an implied 'midpoint' price that equals the record payout in 2014 or $8.40/kgMS. More here. It is a mid-point above three of the six analysts' forecasts we follow.

AUCKLAND RESIDENTIAL MARKET ACTIVE
Despite L3 lockdown in Auckland, Barfoot & Thompson's auction numbers now higher than last year with two thirds selling under the hammer.

CCHL BOND ISSUE
Christchurch City Holdings is looking for up to NZ$150 mln of 5 year, unsecured, unsubordinated, fixed rate sustainability bonds. The indicative margin is 0.37% - 0.42% over the five year swap rate which today is about 2.40%, which suggests the holder will yield between 2.74% and 2.82% (depending on the swap rate when it is struck on Thursday, October 28, 2021.

SELF FULFILLING
Kiwibank is suggesting that the fear of higher rates is fueling high loan demand and that in turn is being reflected in a consequent rush by banks to cover their positions in wholesale markets, which is driving up rates - which confirms the fears of homeowners that rates are rising. Kiwibank economists see this imbalance continuing, and even higher rates.

BIG "SUSTAINABILITY" LOAN
Pāmu/Landcorp, is New Zealand’s largest farming business and will borrow $85 mln from Westpac over three years. This loan is incentivised for improved "sustainability performance", where Pāmu will receive a pricing discount from Westpac if it meets material and ambitious performance targets - or pay higher interest costs if it fails to reach them. It is the first Sustainability-Linked Loan in the agricultural sector to include a 1.5-degree Science-Based emissions reduction target that will be validated against global best practice. Pāmu has a nationwide portfolio of 114 farms that produce milk, beef, lamb, wool, venison, wood and other natural products to both large processors and niche markets globally.

PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen to 1510 cases reported there today, and so more improvement again. There are now 24,715 active cases in the state and there were another 4 deaths yesterday. In NSW there were another 284 new community cases reported today with 4,388 active locally acquired cases which is lower, and they also had 4 deaths yesterday. Queensland is reporting no new cases. The ACT has 12 new cases. Overall in Australia, more than 73% of eligible Aussies are fully vaccinated, plus 13% have now had one shot so far. In contrast, there was one new cases in New Zealand at the border, and 79 new community cases. Now 86.6% of Kiwis nationally aged 12 and over have had at lease one vaccination, and the Australian rate is now also at 86.8% of all 16 year olds and older.

GOLD SLIPS
In early Asian trading, gold is down -US$4 from where we opened this morning, now at US$1803/oz.

EQUITIES QUIET AT START OF THE WEEK
The NZX50 is marginally softer late in its session, but only down -0.1%. The ASX200 is flat in Tuesday afternoon trade. The very large Tokyo market has opened today up +1.8% in mid-day trade. Hong Kong has opened down -0.4%, but Shanghai has opened up +0.1% in their opening trade. The S&P500 ended up +0.5%.

SWAP & BONDS RATES STEEPEN FURTHER
We don't have today's closing swap rates yet. They probably flattened. The 90 day bank bill rate is unchanged at 0.74% as markets work out the pace of coming OCR rises. The Australian Govt ten year benchmark rate is now at 1.80% and up +4 bps from where we opened today. The China Govt 10yr is now at 3.00% and unchanged. The New Zealand Govt 10 year rate is now at 2.43% and a minor -1 bp slip. That leaves them above the earlier RBNZ fix for that 10yr rate at 2.39% (-4 bps). The US Govt ten year is unchanged at 1.64%.

NZ DOLLAR ON HOLD
The Kiwi dollar is now at 71.7 USc and marginally higher than where we opened this morning. Against the Aussie we are unchanged at 95.6 AUc. Against the euro we are also unchanged at 61.7 euro cents. The TWI-5 is now at 75.1, unchanged but still well above the top of the 72-74 range we have been in for most of the past eleven months.

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BITCOIN BACK TO FRIDAY'S LEVEL
The bitcoin price is now at US$62,807 which is actually very little different from where it was this time on Friday. Volatility in the past 24 hours has been modest at just over +/- 1.7%.

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

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69 Comments

by MortgageBelt | 26th Oct 21, 4:19pm 1635218382

Mandatory vaccination in the (40%) workplace in today’s announcement. New law to be passed urgently.

by youngdumbandbroke | 26th Oct 21, 4:29pm 1635218943

No jab, no job. Never thought I'd live to see govt overreach quite like this in NZ

by JimboJones | 26th Oct 21, 4:44pm 1635219878

Only in customer facing jobs where the customers also need to be vaccinated (businesses open in orange and red levels). Sounds fair to me.

What makes you say this is overreach? Is it because you don't think Covid is dangerous enough, or because you don't think the govt should be able to put health over rights? What if it were a highly transmissible strain of Ebola?

by youngdumbandbroke | 26th Oct 21, 6:28pm 1635226129

I call it overreach because unless you want to be treated like animal stock, it is starting to encroach on people’s right to their own choice and freedom to move around. What confidence does the public have in the government’s ability to do what’s “best”?

by JimboJones | 26th Oct 21, 6:42pm 1635226974

Exactly; I want the right to move around again, the right to public health care that isn’t bursting at the seams. I appreciate peoples rights to not get the vaccine, but when covid is overpowering the health system I think it should be the unvaccinated being locked down, not all of us.

by Macawsley | 26th Oct 21, 6:46pm 1635227219

"people’s right to their own choice and freedom to move around."

Go for it, just don't involve other people while insisting on "your rights"

by youngdumbandbroke | 26th Oct 21, 7:24pm 1635229492

Bit of an oxymoron in your last sentence. Gives the go ahead then proceeds to decide what I should do anyway

by powerdownkiwi | 26th Oct 21, 8:42pm 1635234126

No, they (he?) is quite right. Nobody has the right to impact others negatively, and that is the paramount item.

Within that restriction, you can have any rights you want.

For instance, 3 high-rise houses being built next door would take my sun away, and therefore impacts an 'other' negatively.

by youngdumbandbroke | 26th Oct 21, 9:07pm 1635235645

So what your are saying is that no one has the right to refuse as this is negatively impacted others?

by Rosenstein | 26th Oct 21, 9:26pm 1635236792

And yet they don't ban smoking...

by powerdownkiwi | 26th Oct 21, 9:39pm 1635237549

Perfect example - you can still smoke; but not to the disadvantage of 'others'. The smoke-filled bars of old didn't do that; non smokers were impacted.

This is the same because society has a health system (which they allowed the privateers and the ideologues to trash, but that's another matter) which has not enough capacity - resilience - to withstand the extra load of Covid. Indeed, it was crumbling already. So, on behalf of every person who will need medical attention but would be crowded out by the 'I choose not to' brigade, I suggest that they be left on the footpath outside.....

I had a friend who chose not to measles-vax his child. Child nearly died of brain-swell, took up a lot of medical space and time. Thought he was wrong then, and still do.

by youngdumbandbroke | 26th Oct 21, 9:48pm 1635238080

I would suggest that each person is treated the same without prejudice, regardless of their choice. Same could be said about those who have children knowing that they will have disabilities that will require ongoing public healthcare. You don’t have to agree with it, but you should respect others choices.

by muzled | 26th Oct 21, 10:01pm 1635238868

You don’t have to agree with it, but you should respect others choices.

I think it's amazing how many people have lost the ability to do that since covid appeared on the planet.

by Rob Reid | 26th Oct 21, 9:00pm 1635235227

"put health over rights"

An example of one dimensional thinking (health > rights = True) used to support a view, in a multidimensional situation.

by Pietro | 26th Oct 21, 5:45pm 1635223514

This is the ‘great reset’ so many were hoping Covid would lead to. A Marxist state where freedom takes a back seat to what statists define as the greater good. I am a firm believer in vaccination, but as the saying goes, ‘You can lead a horse to water, but you can’t make them drink’. Hard core anti vaxers won’t be swayed by today’s draconian announcement, gang members and other low life’s won’t give a toss, and the homeless won’t even know about it.

The few (foolish) people I know who have refused the vaccine reason that they are better of catching it and gaining natural immunity. With a death rate of two so far out of 1500 known cases and probably double that of unknown ones — the ones with mild symptoms who have a very understandable reluctance to enter a hellhole like the Jet Park, they may have a point.

I think that current death rate of 0.15 is similar to that of the flu, probably less? July’s RSV outbreak killed at least six children and put over 1000 into hospital.

by fortunr | 26th Oct 21, 4:34pm 1635219293

GREAT!! It was well overdue. Finally we are getting to the point where the large majority of the population will not held to ransom any longer by a small minority of nutters.

by dumbthoughts | 26th Oct 21, 4:40pm 1635219608

Totally agree that the large majority of the population are being held to ransom by a bunch of nutters.

There's about 120 of them - all crammed into one ugly building in Wellington - who get to hold the rest of us to ransom.

On a side note, when the heck are we finding out the border re-opening?

by JimboJones | 26th Oct 21, 5:01pm 1635220902

The UK is looking like it may need add more restrictions or even a winter lockdown. I don't want continuous lockdowns just so some people can not be vaccinated. I appreciate their right to not be vaccinated, but if they are the cause of lockdowns then they can also be the ones who are locked down.

by dumbthoughts | 26th Oct 21, 7:37pm 1635230248

To borrow from Plato - "only the dead have seen the end of lockdowns".

by youngdumbandbroke | 26th Oct 21, 6:30pm 1635226219

We’re being held to ransom by the government, the nutters are the scapegoat.

by lostinawoods | 27th Oct 21, 4:01am 1635260494

The week before PM comes back from Europe of course.

Do we really think she’ll stay in MIQ?

by Foxglove. | 26th Oct 21, 8:54pm 1635234887

The government has been decisive, and has acted as is required. No other option on the table. The reality is that from day one, 20 months or so ago, the critical factor has been protection of hospital services. That has never diminished and the vaunted 90% vaccination level even if achieved ain’t going to relieve either. Therefore this mandate is simply installing further protection for as/when lockdowns have to reduce. Undoubtedly the legislation will be hasty and contestable and unwelcome in very many quarters but it is simply a decision made on behalf of the majority over the minority. Like it or lump it. It was as predictable as it was inevitable and the government here is being both correct and responsible.

by Brutus Iscariot | 26th Oct 21, 10:11pm 1635239467

Well let's test the theory first. We should move towards the maximum activity/freedom settings that let hospitals run close to capacity. Particularly during summer - they're nowhere near that now. Then we can work backwards and figure out what we need to do.

Right now we have a bunch of restrictions and a bunch of modelling, most of which over the last 18 months has just been blown apart the second it has made contact with real world conditions.

by Foxglove. | 27th Oct 21, 6:32am 1635269544

I think too, within your comment, surely by now the capability and efficiency of MoH needs something like an independent audit. There have been too many blow ups and blow outs even before the pandemic. For instance refer to the articles published by Dr Ian Powell over the brutal mismanagement by MoH concerning the Canterbury DHB.

by SimonRo | 26th Oct 21, 4:29pm 1635218971

And, TSLA went bonkers again, to end at $1,024.86. 7 days ago it was around $867.00

Something about a company with hints of profit and a future meeting the meme stocks craze results in eternal growth.

by frazz | 26th Oct 21, 6:41pm 1635226899

Maybe the order from Hertz for 100,000 vehicles had something to do with it?

by Pragmatist | 27th Oct 21, 8:27am 1635276436

$4.2 of low margin sales and the company market cap goes up $100B. Yep, sounds sane.

For a sane perspective on it:

https://wolfstreet.com/2021/10/25/tesla-rental-deal-is-propaganda-coup-…

by sharetrader | 26th Oct 21, 8:38pm 1635233932

or it could have something to do with the profits they now post each quarter

Tesla continued its profitability streak, reporting Wednesday net income of $1.62 billion in the third quarter, a nearly fivefold increase from the $331 million it earned in the same period last year

Tesla TSLA earnings Q3 2021 (cnbc.com)

by Audaxes | 26th Oct 21, 4:54pm 1635220463

Kiwibank is suggesting that the fear of higher rates is fueling high loan demand and that in turn is being reflected in a consequent rush by banks to cover their positions in wholesale markets, which is driving up rates - which confirms the fears of homeowners that rates are rising. Kiwibank economists see this imbalance continuing, and even higher rates.[my emphasis]

New Zealand-incorporated registered banks are also subject to a minimum core funding ratio (CFR). The basic notion underlying the CFR is a comparison between an estimate of the funding of the bank that is stable and can be assumed to stay in place for at least one year (‘core funding'), and the core lending business of the bank that needs to be funded on a continuing basis. Core funding is defined as retail deposits plus wholesale funding with maturity of more than one year.

Any explanation which wholesale rate tenors are being "covered" and what does the term cover entail?

by Cowpat | 26th Oct 21, 4:53pm 1635220388

Are the equities a forecast for this week or have we all been overcome by some unexplained viral malaise.

by Audaxes | 26th Oct 21, 4:59pm 1635220757

LOL

by Audaxes | 26th Oct 21, 4:57pm 1635220678

The 90 day bank bill rate is unchanged at 0.74% as markets work out the pace of coming OCR rises.

Indeed - the one year rate at 1.315%.

by Cowpat | 26th Oct 21, 5:01pm 1635220893

For all the exuberant economist talk of cash rate hikes will the RBNZ be faced with an economy in recession on the 24 November?

by Justa comment | 26th Oct 21, 5:19pm 1635221982

For once its 'look thru' comment will be correct. Onwards and upwards....

by Audaxes | 26th Oct 21, 6:19pm 1635225596

I thought central banks erroneously believed low interest rates below the natural/neutral rate spurred investment and hence economic growth.

Has ANZ not read the memorandum or is this just the cost of recovering return on equity associated with higher capital risk weights required when lending to the sectors below?:

ANZ has advised that it has increased some key business loan rates by +25 bps. Its "Business Bank Indicator Rate" is now 8.60%, its "Business Overdraft" is now 10.85%, and its "Agri Current Account" is now 6.80%.

by Pietro | 26th Oct 21, 5:44pm 1635223459

They’re making up as they along. What a divided society Labour has created.

by Zack Brando | 26th Oct 21, 5:45pm 1635223544

by Brutus Iscariot | 26th Oct 21, 6:05pm 1635224724

Up to 5% of the labour force will be gone with the new vaccine mandates. Expect rampant wage inflation.

What will be truly disgusting, is if they restart the immigration tap with compliant drones to replace Kiwi labour.

We've completely lost our way.

by JimboJones | 26th Oct 21, 6:31pm 1635226289

Only 40% of jobs are estimated to require vaccination. Most of those people could find work elsewhere if there was a labour shortage

by youngdumbandbroke | 26th Oct 21, 7:27pm 1635229641

Nice to know that are enough open jobs in NZ that most of that 40% has another job in the economy

by Pragmatist | 26th Oct 21, 8:06pm 1635231983

Rampant wage inflation.. Mmm, yes please.

Already had a whopper of a raise this year won't say no to another one next year tho.

by CWBW | 26th Oct 21, 8:55pm 1635234944

Pāmu/Landcorp, is New Zealand’s largest farming business and will borrow $85 mln from Westpac over three years. This loan is incentivised for improved "sustainability performance", where Pāmu will receive a pricing discount from Westpac if it meets material and ambitious performance targets - or pay higher interest costs if it fails to reach them.

A pretty bold move depending on the details of the targets.

by Belle | 27th Oct 21, 4:30am 1635262230

What waffle. They have been in business for eons. They were given the land for nought. They should be able to use funds from profit. My suspicion is they are chasing rainbows with other peoples money as per usual.

by MortgageBelt | 26th Oct 21, 6:15pm 1635225326

The move to the traffic light system is likely to be a backward more restrictive step for most of NZ outside of Auckland- as they are likely to lose their level 2 freedoms for red or orange.

by HouseMouse | 26th Oct 21, 6:29pm 1635226143

And in other news, David Seymour writes a scathing article in the Herald on the Housing Supply Bill.

I agree with him entirely, but his consistency is questionable...

by JimboJones | 26th Oct 21, 6:33pm 1635226407

I don’t pay to read that. What was his point? That we should live in a society where the government tells people what to do with their land?

by HouseMouse | 26th Oct 21, 6:55pm 1635227726

Pretty much what I have said here:

- there's already a huge amount of development capacity in the Unitary plan

- that this will make diddly squat difference to housing supply and affordability

- but that it comes at potentially significant cost

- that infrastructure is by far the biggest issue

I just find it a bit ironic that *he's* saying it. The guy that is always talking about reducing regulation.

Couldn't have anything to do with the electorate he represents could it?

by gnx | 26th Oct 21, 7:06pm 1635228412

His electorate has a new mass transit rail system on its doorstep...... another 150,000 people will add to vibrancy lol

by JimboJones | 26th Oct 21, 7:59pm 1635231555

the free market knows best unless it is building appartments in Epsom.

by Dale Smith | 26th Oct 21, 9:41pm 1635237662

What many find a paradox, I find Seymour's stance totally consistent with libertarian ideals, that is, a group of like-minded ie his Electorate can decide amongst themselves how they will be neighbourly to each other. if they want to retain their houses in their present form, then as a group of individuals that is their choice.

Which is the opposite of what Govt. are doing, that is, they are breaking the social contract you placed with them when you handed over the management of the city/country to them to run for your benefit. The further away power is devolved from you as an individual, the less likely it will represent you.

Communities are more representative of the individuals that live in them than is the city or nation/country.

by HouseMouse | 26th Oct 21, 10:08pm 1635239338

How does that square with the notion of getting rid of the RUB then and freeing up sprawl? Are you saying that if Aucklanders don't want that to happen then it shouldn't be removed?

Many 'libertarians' seem to favour doing this (getting rid of the RUB), if so wouldn't this also be contrary to the democratic notions you describe in the case where the majority were opposed to it?

I think you are painting yourself into a logically inconsistent corner.

by Dale Smith | 26th Oct 21, 11:56pm 1635245807

That's the paradox you need to understand for yourself. Initially, it is counter-intuitive, but it's all there for you to see unfolding in real life and as documented by the likes of Alan Evans.

Auckland is not a community that serves the people that live there anymore. At best it's five cities forced into amalgamation on well-meaning but misguided principles, the result being unaffordable house prices.

Auckland cannot logically keep saying they want housing to be more affordable and yet invoke policies that all the evidence shows are getting less affordable to the point of collapse.

Since Auckland's actions result in unaffordable prices, then then they need to have the balls to say that is what they want, otherwise, stop doing it.

The removable of the RUB stops land banking and allows land to be purchased at affordable prices and the community that develops to be in agreement with a common goal as defined in the covenants, totally logically consistent with free-market libertarian principles.

And as all pricing is set on the fringe, then all land, relatively, going in becomes more affordable.

by HouseMouse | 27th Oct 21, 8:38am 1635277124

Your position is totally inconsistent!

So you are saying Epsom can forego intensification if that is it's wish, but the people of Pukekohe and its surrounds cannot forego urban sprawl if that is their wish?

Totally inconsistent.

by Albert2020 | 26th Oct 21, 6:41pm 1635226887

Its good old opportunism now that WInnie isn't there. He was always going to take that position given both national and labour are in partnership with this new legislation.

by Nifty1 | 26th Oct 21, 7:07pm 1635228471

Lol FOMO has come full circle in interest rates... kiwis just keep screwing themselves over by being sheep.

by bw | 26th Oct 21, 7:55pm 1635231315

I know, I know.....

But it just goes to show:

"It's not about the price of debt (the % rate) it's about access to it"

by Pragmatist | 26th Oct 21, 8:15pm 1635232539

It will be amusing if this mad rush to lock in rates dies away and the 1yr rate never exceeds what people are locking in for 3 or 4 years..

by HouseMouse | 26th Oct 21, 8:48pm 1635234488

Could be something close to that.

I see all the conventional 'wisdom' of the bank economists now is that the OCR will be 2% this time next year.

I don't buy it. Anything above 1.5% will nuke the one trick pony that is the NZ economy. And the RBNZ / govt won't let that happen.

by gnx | 26th Oct 21, 7:13pm 1635228815

Funny how the rbnz are concerned about climate change now but happy with interest only loans on investment properties that don’t make a profit?

please.... what am I missing??

by powerdownkiwi | 26th Oct 21, 7:26pm 1635229605

An Economics degree?

by Hummy | 26th Oct 21, 8:15pm 1635232557

Sustainability loan, science numbers are still all over the show. Did read Dutch research about air washer was not as effective as first thought. Probably just believe what they want you to believe.

by jerry_NZ | 26th Oct 21, 8:37pm 1635233847

UNBELIEVABLE!

Time to leave Aotearoa.

Hopefully will return on day - not with this Prime Minister. She must go!

by powerdownkiwi | 26th Oct 21, 8:47pm 1635234444

Great. One more house we don't need to build.

Can you take some more with you? Go somewhere uninhabitable by century's end; how about Australia?

by northman46 | 27th Oct 21, 7:50am 1635274222

Eh. Doesn't really help.

by northman46 | 26th Oct 21, 8:52pm 1635234779

Where would you go, Jerry?

by jerry_NZ | 26th Oct 21, 10:02pm 1635238965

Good question! Definitely not Australia. I came here several years ago from Europe and decided to stay. Obviously had no idea what is coming!

Probably not Europe. North America likely...

by northman46 | 27th Oct 21, 7:47am 1635274077

Good luck! Looking to leave myself next year. There's a post every other day on various NZ based Reddits about people planning to leave. It's a shame it's come to this, but Wellington has become unliveable for us.

eg - https://www.reddit.com/r/PersonalFinanceNZ/comments/qfxrwb/low_wage_sca…

by Fluffybunny | 27th Oct 21, 7:46am 1635273960

Her socialist tenancies are really starting to shine now.

Im not sure they will get through at the next election. She's maintained popularity by media saturation. 1pm daily sermon etc.

Take that away and underneath it there are a lot of pissed off people. You can't keep changing things and implementing rules like this forever. Little by little she will be creating resentment.

by Squishy | 26th Oct 21, 10:35pm 1635240940

I would suggest that more inflation pain is incoming due to cuts to commodity production in China to preserve electricity (anything that needs and arc furnace so think magnesium, aluminium etc.) There is a real pinch coming down the line here that will crimp production and inflate prices.