What happened Thursday

Business / news

A review of things you need to know before you go home on Thursday; no home loan rate changes today, ANZ's profits jump sharply; Auckland rents stall; swaps jump again, NZD holds, & more

28th Oct 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
There were no rate changes to report today.

TERM DEPOSIT RATE CHANGES
Nelson Building Society raised their TD offers for 1-3 years. SBS Bank improved its I-Save savings account rate by +5 bps.

THE LOCKDOWN HAS BEEN GREAT FOR ANZ
ANZ NZ's annual profit pushes above $1.9 bln, up +44%, helped by strong housing lending and lower loan provisions. 70% of total lending now housing lending as it quietly transitions from a full trading bank to essentially a mortgage bank. This tax-paid profit is equivalent to $484 for every adult in the country aged 20yrs and over and $340 of that is from mortgage lending. That is up from $351 in the prior year where $240 was from mortgage lending. ANZ's shares have risen +1.2% so far today.

A SLOW GROWTH HOUSING SECTOR
According to dominant Auckland realtor Barfoot & Thompson, average housing rents in Auckland were up by less than $1 a week in third quarter of this year. They say average rent increases in Auckland have halved in the last six years.

STRONG DEMAND FOR 'SUSTAINABILITY'
There has been very strong interest in the Christchurch City Holdings $150 mln "sustainability bond" offer, with more than $330 mln in bids so far. That has allowed them to trim the indicative margin to +0.35% on top of today's final 5 year swap rate (currently about 2.59%) so this bond may yield something like 2.95% pa. Marketing 'sustainability' motivates investors these days (or more precisely, it motivates investment managers who then sell it to motivated investors.) Update: following a big rise in the swap rates today, it settled at 3.01% pa,

BIG YIELD RISES
There was another set of NZGB auctions today with $500 mln offered over three maturities. $848 mln was bid in 80 bids, 29 of which were successful. The May 2026 $200 mln saw a sharp rise in yield from one month ago, resulting in a 2.32% pa yield, and up from 1.69%. The May 2031 $200 mln went for a 2.58% yield, up from 2.13% last time. And the April 2037 $100 mln offer went for 2.84%, up from 2.49% pa.

FIJIAN PHOENIX
ANZ is pointing out that Fiji is about to rise after a very tough year. "Fiji’s pandemic-induced economic pain is almost over. Now, the gain. A successful vaccination campaign (AZ), internationally recognised COVID-19 safety protocols for travel and in-country tourism operators, plus competitive high value tourism packages have unlocked the pent-up demand for a Fiji holiday." Tourism accounts for about 40% of all economic activity in the country.

MORE UPWARD PRESSURE
Westpac Australia's respected Bill Evans is now saying the RBA will start raising their official policy rate in February 2023, a year earlier than the previously expected 2024 restart indicated by the RBA. Following Westpac, ANZ's analysts have joined him too. This has motivated a general shift higher in Aussie wholesale rates which were already on the firm side. And there is a collateral impact on Kiwi wholesale rates which are getting kicked higher in sympathy. (See below.)

VIRUS RESURGENT IN CHINA
In Beijing, they are locking down as Delta cases start popping up in the capital, spread from northern provinces. This will have a chilling effect on travel in China, and depresses their faltering recovery further.

LOCAL PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen to 1923 cases reported there today, and going backwards. There are now 22,189 active cases in the state and there were another 25 deaths yesterday. In NSW there were another 293 new community cases reported today with 4,058 active locally acquired cases which is lower, and they also had 2 deaths yesterday. Queensland is reporting zero new cases. The ACT has 10 new cases. Overall in Australia, more than 75% of eligible Aussies are fully vaccinated, plus 13% have now had one shot so far. In contrast, there were seven new cases in New Zealand at the border, and 89 new community cases including two in Christchurch. Now 87.2% of Kiwis nationally aged 12+ have had at least one vaccination, while the Australian rate is now at 87.4% of all aged 16+. More here.

GOLD STABLE
In early Asian trading, gold is up +US$2 from where we were this time yesterday, now at US$1795/oz but fractionally lower than either the New York close or the London fix.

EQUITIES MOSTLY LOWER
The NZX50 is down -0.6% late in its session. The ASX200 is down -0.3% in Thursday afternoon trade. The very large Tokyo market has opened today down another -0.9% in morning trade after yesterday's fall. Hong Kong has opened up +0.1%, but Shanghai has opened down -0.5% in their opening trade. The S&P500 fell away in the last hour of trading today and ended -0.5% lower.

SWAP & BONDS RATES RISE FURTHER
We don't have today's closing swap rates yet. They probably rose again, in sympathy with the big Aussie shift higher. The one year is up another +5 bps, the two year up +8 bps and the 3 year up +6 bps. The 90 day bank bill rate is up +3 bps at 0.78%. The Australian Govt ten year benchmark rate is now at 1.87% and up +1 bp from this time yesterday. The China Govt 10yr is now at 3.00% and unchanged. The New Zealand Govt 10 year rate is now at 2.60% and up another sharp +6 bps. That leaves them still well above the earlier RBNZ fix for that 10yr rate at 2.53% (+7 bps). The US Govt ten year is sharply lower at 1.55% and an -8 bps fall.

NZ DOLLAR STILL ON HOLD
The Kiwi dollar is now at 71.6 USc and unchanged from where we were this time yesterday. Against the Aussie we recovered +40 bps to 95.5 AUc. Against the euro we are holding at 61.8 euro cents. The TWI-5 is now at 75.2, little-changed 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 EASES BACK AGAIN
The bitcoin price is now at US$58,841 which is another -3.2% lower than this time yesterday. It is now -10.8% below its high on October 21, 2021. Volatility in the past 24 hours has been moderate at just over +/- 2.9%.

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49 Comments

by J.C. | 28th Oct 21, 4:30pm 1635391838

Interesting point that the ANZ profit works out to $384 per capita (assuming adult sheeple popn). Now, if you combine the total supermarket profits, the profit is closer to $120 per capita.

ANZ's profit is made from nothing really, except debt servicing. Supermarket profit is of course comprises innovation, production, supply chain, sales & marketing, and retail.

by KH | 28th Oct 21, 4:13pm 1635390800

$384 per capita profit for ANZ. Shows how much New Zealanders are 'farmed'. And sucessive clueless governments have enabled it.

Government has not put New Zealanders first.

by J.C. | 28th Oct 21, 4:16pm 1635391007

The ruling elite wouldn't have got away with it if the sheeple actually understood what is going on.

by Te Kooti | 28th Oct 21, 4:30pm 1635391808

Good lord JC, being negative is one thing but being ignorant is inexcusable.

Do you even know where ANZ makes it's profit? Half of of it is from Institutional and Business - financing exporters, facilitating trade, funding other lenders, Kiwi Saver etc. Credit cards, motor vehicle finance. NZ is an open trading economy and ANZ is the largest player in the banking system that is needed to facilitate this. Access to credit is what makes us a developed nation. I don't care for John Key much but for heaven's sake, give it a break.

by J.C. | 28th Oct 21, 4:38pm 1635392322

Meh. Business lending comprises approx 20% of combined bank lending. The banks are primarily mortgage houses. And growth in lending for businesses and agric is declining, not increasing.

by Te Kooti | 28th Oct 21, 4:44pm 1635392671

Less than 50% of ANZ's profits came from personal banking and mortgage revenue is a subset of that. Business lending creates jobs and exports.

https://www.anz.com/content/dam/anzcom/shareholder/2021-FY-new-zealand-…

by J.C. | 28th Oct 21, 4:55pm 1635393313

The lion's share of ANZ's profit comes from home loans. You will be on ignore shortly.

by Te Kooti | 28th Oct 21, 5:07pm 1635394025

You can ignore me if you want, I could not care less. However, the ANZ profit breakdown makes you look an a55hat

by KH | 28th Oct 21, 5:21pm 1635394913

Change your name. The original Te Kooti was a mass murdering fantasist.

by Te Kooti | 28th Oct 21, 5:24pm 1635395097

I'll do that when all signs of colonialism are expunged from Aotearoa. He killed those, and those that assisted, his imprisonment on the Chatham's. It was utu, a custom of the time.

by Lapun | 28th Oct 21, 5:38pm 1635395935

Isn't one sign of colonialism writing in English? However, thumbs up for not judging the past by today's conventional standards.

by Te Kooti | 28th Oct 21, 5:43pm 1635396182

Pakeha virtually wiped out te reo, it wasn't taught in schools, used in media etc (in fact you could be, and were, disciplined for speaking it at school). You will no doubt have noticed it is rapidly proliferating now though Lapun..... I am more than happy to reply to you in te reo if that's what you want..

by Lapun | 28th Oct 21, 8:21pm 1635405685

Sorry but I studied French for 7 years, married a French woman, have a son who is French and living in France but I cannot speak or understand a sentence in French. You either have an ear for languages or you don't and I don't. My second wife is fluent in five and picks up Te Reo easily since it is similar to Motu. I meant the act of writing is a colonial artifact irrespective of specific language.

Note the attitude to languages in schools for Te Reo in NZ was similar to Scottish Gaelic in Scotland when I was young. Even today a child has to be careful not to be cheeky in a language (say hindi or mandarin) that is not understood by their teacher. At least now no child is hit whatever they say or do. In the past missionary schools preferred teaching in the indigenous language but it was the parents who insisted on their children learning English.

You are welcome to reply in Te Reo - there are websites that will translate for me. BTW you are to be congratulated for not sprinkling words I cannot understand into a pseudo-language; an Anglo-Maori version of spanglish or franglais. Language is used to communicate and much of the media uses Te Reo in much the way Victorians used to use Latin; that is an elite communicating that they look down on the less educated.

by imhenry | 29th Oct 21, 6:41am 1635442896

Your last sentence sums it up nicely

by Computer | 28th Oct 21, 7:27pm 1635402426

So you're for winding the clock back to a time when NZ was inhabited only by Maori (but presumably with the colonial trappings like refrigerators and medicine and stuff), and kicking out people of other races, and that violence is justifiable. Thanks for coming out and saying it TK, I was about to ask what success looked like to you.

You know, maybe 'colonialism' was the best thing to happen upon these shores TK, could have been far worse people turn up, and from what I read of it pre-European NZ was anything but the enlightened paradise you seem to imagine.

Cue the outrage and name calling - "white man bad" is the new religion.

by mfd | 28th Oct 21, 8:20pm 1635405600

Japan stands as a glaring example that a pre-industrial culture can absorb outside technology and ideas without being replaced, suffering genocide, or having their language beaten out of them. I don't think us white men are as special as some of us think we are - just a quirk of history that we got the break-through technology.

by Lapun | 28th Oct 21, 8:39pm 1635406794

Agreed. However genocide implies intent. Surely far more deaths were caused by epidemics than gunfire. Deaths from epidemics disproportionately killed more Maori. The Spanish flu killed Maori at a tenfold rate compared to Pakeha and some diseases such as measles barely kill Asians and Europeans but wipe out other ethnicities. It is a lesson we may relearn when Covid-19 hits all the inhabitants of NZ. Already there is scattered evidence that Melanesians in PNG are more susceptible than say Han Chinese in Asia. And in NZ Pacifica and Māori are over-represented in hospital cases during the current outbreak. Both our Pakeha and Maori leaders ought to be giving Maori and Pacifica priority for vaccinations, testing and treatment. [My knowledge of NZ history is weak so apologies in advance if I have ignored any deliberate plans to exterminate all Maori as per the killing of indigenous Tasmanians.]

by mfd | 28th Oct 21, 9:27pm 1635409626

I'm not aware of any such widespread extermination either, as far as I'm aware the vast majority of deaths were from disease as you say so a fair point that genocide may be inappropriate in the NZ context.

The initial spread of those diseases by colonisers and visitors would truly put covid into perspective - over half of some native populations being lost to disease. Unfathomable to our society and gives some context to the colonial military contests against broken populations.

by meh | 29th Oct 21, 12:40am 1635421238

I've heard stories, that in some cases infected blankets were deliberately given to Maori. Similar stories abound during the invasion and confiscation of the "Americas".

by Computer | 28th Oct 21, 11:39pm 1635417587

Agree - I'm not making any claim to being special, I'm just punting a different narrative out there that doesn't cast 'white' as somehow 'bad'.

by KH | 28th Oct 21, 9:45pm 1635410728

Yep. In the Tikanga wars after 1815 one half of Maori exterminated the other half.

Colonisation changed that, but Te Kooti was a slow learner and kept it up for a few years. People died brutally.

by Audaxes | 28th Oct 21, 5:27pm 1635395226

RE; Your link to the ANZ PDF profit report.

Check out the New Zealand Division profit reported at $1.607 billion versus the Personal segment reported at $0.978 billion.

by Te Kooti | 28th Oct 21, 5:26pm 1635395193

You need to add in the Institutional revenue earned in NZ but reported in Australia, probably markets. It's very clearly itemised and that takes total NPAT to $1.95b

by Audaxes | 28th Oct 21, 5:35pm 1635395717

Still Aussie prop trader profits for bonus purposes?

My NZ Government bond trading was booked out of Melbourne. I still have the email tickets/confos.

by Te Kooti | 28th Oct 21, 5:45pm 1635396304

They're not aussie traders, they are based in NZ but their revenue sits in Australia due to reporting lines as it's a global business.

That's why it is added back in to the NZ revenue.

by Audaxes | 28th Oct 21, 6:28pm 1635398907

I had the distinct impression I was dealing with Melbourne via NZ phone intermediaries for order purposes only - all formal limit diktats etc came out of Melbourne. No decision making was enacted in NZ. Window dressing the accounts doesn't change the fact ANZ NZ is primarily a building society with a one trick pony product - namely residential property credit creation - witnessed by the fact that 70% of lending was dedicated to that sector.

by J.C. | 28th Oct 21, 5:22pm 1635394952

Nope. The ANZ report makes you an a55hat, not me. But if they reported incorrectly, feel free to point out.

by lowercase capitalist | 28th Oct 21, 5:23pm 1635394986

Pretty sure they let you say asshat around here.

by Audaxes | 28th Oct 21, 4:55pm 1635393321

Housing lending reaches 70% of total lending

The bank grew home lending by $9.3 billion, or 10%, to $99 billion over its September year. According to figures from Aussie parent the ANZ Banking Group, housing lending reached 70% of ANZ NZ's total lending at September 30. That's up from 67% a year earlier, and 63% in 2019. - Link

by fortunr | 28th Oct 21, 4:50pm 1635393037

I do not mind that ANZ is making record profits, as the biggest banking institution in NZ. Not a single bit. Actually, I do not mind having the NZ banking system showing financial resilience. Would you rather have the banking system with profits being crippled ?

What I would prefer is to see the majority of banking institutions fully owned by NZ entities, but I guess that this is a different story.

Also note that the NZ housing Ponzi is in a fragile state, given how inflated it is, so all banks will need all the resilience and margins they can get if the whole thing turns into custard.

by J.C. | 28th Oct 21, 6:14pm 1635398096

Whoever replaces Elliott will face some significant challenges, not the least of which is the promise to cut expenses to $8 billion by 2023. Expenses in the year to September 2021 were $9 billion.

The plan is to run the bank at a cost of $7 billion and spend $1 billion a year on investment. The cost of running the bank is now $7.4 billion.

https://www.afr.com/chanticleer/anz-s-stunning-home-loan-fail-20211027-…

by David Chaston | 28th Oct 21, 4:21pm 1635391298

No, it is not assuming 5.2 mln. Those averages are based on the 20+yr adult population, 3.965 mln as at June 2021 (3.806 mln at June 2020). It would be less if you assume 5.2 mln total population.

by J.C. | 28th Oct 21, 4:30pm 1635391806

Thanks David. Will correct.

by mfd | 28th Oct 21, 4:45pm 1635392727

Yep, it's crazy. North of $1k each over the big 4 Aussie banks.

Vote with your feet.

by Audaxes | 28th Oct 21, 4:24pm 1635391482

Westpac Australia's respected Bill Evans is now saying the RBA will start raising their official policy rate in February 2023, a year earlier than the previously expected 2024 restart indicated by the RBA.

Dislocation at the short end of the Australian government bond market.

The Taper Tantrum Has Begun: Australia's 2Y Bond Just Blew Up After The Central Bank Unexpectedly Refused To Buy It

by Galloleous | 29th Oct 21, 10:55am 1635458144

This^^

now extrapolate what happens when they stop buying the longer term bonds.

From Greg Foss (30 year bond trader)

The yield on the two year increases by 25bps means prices of existing 2yr bonds fell by about one half a point. (100 points in par). Not a catastrophe, but if the same happens in 10s and 30s the price drops are 4% and 12%, meaning years of coupon returns are destroyed.

by Justa comment | 28th Oct 21, 5:46pm 1635396393

I have been waiting to see the number that might be used for DTIs. We know its 4.5 in the UK, but we also know we have gone way past that, in some cases 8.

Well done BNZ, this will strengthen NZ banks which is a good thing, but I dont like the 6, 5.5 should be the max I think.

by fortunr | 28th Oct 21, 4:39pm 1635392370

The May 2026 yield jumping to a 2.32% pa from 1.69% pa in only 4 weeks is quite a massive movement, as are the massive and sudden jumps in many swap rates in the last couple of weeks. Strange that this has not been given much attention, as the repercussions of such big movements will be felt in all retail rates pretty soon.

by donny11 | 28th Oct 21, 7:43pm 1635403395

Don't worry I am sure the RBNZ & govt finance people are running around behind the scenes trying to find a "legal justification" to justify restarting the LSAP. To drive down yields.

Don't expect the mainstream media to cover this as there existence basically depends on govt support.

by solardb | 28th Oct 21, 4:42pm 1635392563

If anz is making that profit off mortgages , then why aren' kiwibank , and other Nz banks coming in with lower rates ?t

by lowercase capitalist | 28th Oct 21, 5:22pm 1635394925

Because banking in this country is an oglypogly or whatever They don't need to compete - their competitors aren't so why should they.

by Snow | 28th Oct 21, 6:18pm 1635398292

https://youtu.be/DyaitC91hEM

Clarke and Dawe explain it well, 11 years on.

by lowercase capitalist | 28th Oct 21, 6:23pm 1635398615

So good.

by CWBW | 28th Oct 21, 4:58pm 1635393535

I won't be too concern about slowing rental rises. The bulk of country's tenancy renewals are only due next 2 quarters.

by Wrong John | 28th Oct 21, 5:14pm 1635394450

Plan A: Interest rates head north. Home prices to head south? My money is on house prices stablising, with a little (5-15%) shrinkage. Yes, I know, I'm hopeful.

Plan B: The govts tell the big corps/banks to start forgiving them their dues. It'll be better than television. [Mind you, anything's better than television these days.]

by custard | 28th Oct 21, 5:53pm 1635396829

“BIG YIELD RISES”

Finally – a hint of sanity in some of those longer duration yields.

I wonder if there’s any blood being spilled yet by some of the earlier bullish players.

by donny11 | 28th Oct 21, 7:44pm 1635403484

Who is the bullish buyer? The RBNZ.

by Bones | 28th Oct 21, 9:05pm 1635408308

Why is the US 10 year falling sharply when others are rising, I thought inflation usually leads to increased bond yeilds?

by HouseMouse | 28th Oct 21, 9:54pm 1635411254

Weird new planning rules in China limitting building height and threats to those who don't abide by them