What happened Tuesday

Business / news

A review of things you need to know before you go home on Tuesday; ASB cuts a key rate, retail spending up, RBNZ stress tests revealed, eyes on dairy prices, swaps rise, NZD holds, & more

7th Dec 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
ASB dropped its 2 year fixed rate by -20 bps to 4.15%, undercutting all its rivals. More here.

TERM DEPOSIT RATE CHANGES
General Finance raised all its rates from 6 months to 5 years. Mutual Credit Finance raise all theirs from 1-5 years.

CONSUMER SPENDING RISES
Worldline/Paymark says that while the latest core retail did not surpass the Black Friday sales rush of the previous weekend, overall pre-Christmas spending across the nation continued on a strong track, exceeding pre-Christmas spending in recent years.

DAIRY PRICES FIRM
Dairy prices are expected to rise at tomorrow's GDT auction - but the derivatives market is walking back some earlier enthusiastic pricing. Now the futures pricing sees WMP up by +5% and SMP up by +3% over the past three weeks.

STRESSFUL STRESS TESTING
The RBNZ revealed the results of the two banking system stress tests today. The updated Solvency Stress Test was passed by all banks, despite them not knowing the Stage two scenarios when they were tested with the first stresses. But the RBNZ notes some banks might have struggled with meeting the higher Capital requirements that are kicking in now. The Liquidity Stress Test was a struggle for all banks, with only one meeting the toughest Very Severe scenario of relentless cash outflows. The big banks performed worse than the smaller ones at that extreme. More here.

NOT INTERESTED ANYMORE
In Australia, the number of people wanting to buy a home plummeted nearly -30% in November amid worsening affordability, the CBA home buying intention index shows.

EYES ON RBA
The RBA rate decision at 4:30pm today is not expected to bring any change from their 0.1 % OCR/CRT level. But it might help us understand if they still see Aussie inflation as a temporary phenomena, when they will start tapering their bond purchases, and how long before they will wait before 'normalising' rates.

LOCAL PANDEMIC UPDATE
In Australia, pandemic cases in Victoria were 1185 reported today. There are now 13,050 active cases in the state - and there were another 7 deaths today. In NSW there were another 260 new community cases reported today, a jump, with 3,060 active locally acquired cases, and two deaths. Queensland is reporting one new case. The ACT has 3 new cases. Overall in Australia, just over 88% of eligible Aussies are fully vaccinated, plus a bit under 5% have now had one shot so far. In contrast, there were zero cases in New Zealand at the border again, and 98 new community cases today. Now 87.6% are double vaxxed, 93.4% of Kiwis nationally aged 12+ have had at least one vaccination, and the equivalent Australian rate is now at 92.9% of all aged 16+ (92.0% ages 12+).

GOLD SOFT
In early Asian trading, gold is at US$1779/oz and -US$5 lower than this time yesterday.

EQUITIES ALL RISING
On Wall Street, the S&P500 ended up +1.2% in their Monday trading. Tokyo has opened up +1.2% as well, as has Hong Kong. But Shanghai is only up +0.5% in their early trade. The ASX200 is up +0.7% in their early afternoon trade today, while the NZX50 is flat in late trade.

SWAP & BONDS RATES FALL & FLATTEN
We don't have today's closing swap rates yet. They may have all recovered sharply today. The 90 day bank bill rate is unchanged at 0.88%. The Australian Govt ten year benchmark rate is now at 1.62% and up +4 bps from this time yesterday. The China Govt 10yr is at 2.85% and recovering only +1 bp. The New Zealand Govt 10 year rate is now at 2.40% and up a strong +10 bps, but still below the earlier RBNZ fix for that 10yr rate at 2.41% (+6 bps). The US Govt ten year is up +7 bps from this time yesterday at 1.45% in a straight line up.

NZ DOLLAR LITTLE-CHANGED
The Kiwi dollar is now at 67.5 USc and unchanged from this time yesterday. Against the Aussie we are -½c softer at 95.7 AUc. Against the euro we are unchanged at 59.8 euro cents. The TWI-5 is slightly softer at 72.3.

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BITCOIN RISES AGAIN
The bitcoin price has risen to US$51,004 and +4.4% above the level at this time yesterday. Volatility since this time yesterday has been very high at just on +/- 4.4%. The FMA has fingered cryptos as "high risk" money-laundering tools. They are going to get close regulatory attention now.

This soil moisture chart is animated here.

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

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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37 Comments

by Wilco | 7th Dec 21, 5:01pm 1638849703

Our interest rates are high (relatively speaking) Our biggest exports - milk, beef and lamb are at or near record highs. Unemployment is low. Inflation is coming. So why the low NZD?

Its like the overseas punters know something we can't see. What major flaw in our economy is about to be exposed? Or were we living in a fools paradise when the borders were locked.

As a farmer I'm not complaining but if our exchange rate is a proxy for our economic health then we aren't doing too well.

by HouseMouse | 7th Dec 21, 5:07pm 1638850027

Very good question.

Any good answers?

I mean I think our construction sector is going to face major headwinds, and real estate to a lesser extent, but I doubt they will be playing on the minds of overseas punters.

Do they think our ultra cautious approach to covid will create issues? Is it ongoing issues with tourism?

by J.C. | 7th Dec 21, 5:07pm 1638850040

Our biggest exports - milk, beef and lamb

These are just side gigs these days

by nz-it-worker | 7th Dec 21, 5:35pm 1638851716

What major flaw in our economy is about to be exposed?

You mean some of the most expensive housing in the world relative to incomes reacquainting itself with rising interest rates?

by Sam B | 7th Dec 21, 5:53pm 1638852797

I think the big markets are still in a risk-off mood. That's the biggest factor in NZD strength. What we actually do as a nation is pretty irrelevant outside of policy extremes.

If the US Fed were to announce another round of QE, say, putting investors back in a betting mood, we'd see the NZD gather strength. If they tighten, the NZD will continue to weaken.

by HouseMouse | 7th Dec 21, 7:24pm 1638858246

Yep, risk-off mode.

by Albert2020 | 7th Dec 21, 6:00pm 1638853223

Is it really that low? Its been moving horizontal above and below the 70c mark for the past 5 years. Granted its lost 5% in a month but hasn't really deviated from long term trend

by gnx | 7th Dec 21, 6:07pm 1638853631

doing better than $.39 in 1998

by J.C. | 7th Dec 21, 6:31pm 1638855077

doing better than $.39 in 1998

Got down to 45 yen in Jan 2009. Fell from a peak of 96 yen in June 2007.

by Ngrrk | 7th Dec 21, 8:11pm 1638861074

Exactly, I remember the GBP/NZD being £0.29 in the late 90's. If there is a real 'risk off' move there is a long way to go. Try purchasing anything not produced in NZ (i.e almost nothing) then.

by Avocado | 7th Dec 21, 9:24pm 1638865455

Americas massive QE is driving up the US Dollar.

Most people think its money printing but it far from it. It basically traps US dollars in the commercial banking system. This drives up the bid for USDs.

by KH | 7th Dec 21, 9:32pm 1638865970

The issue is reduction of the private economy and the growth in the government share.

But that's ok. Everything can be fixed by turning it into a government expenditure

by MortgageBelt | 7th Dec 21, 5:03pm 1638849786

RBA unconcerned about inflation or house prices. Stays at 0.1%

by Waikatohome | 7th Dec 21, 5:04pm 1638849879

Surprised there is no mention of the low sales rate at the B&T auctions in Auckland today. I feel sorry for the buyers who had placed pre-auction bids, with no further bids placed and so many lots passed in, they must be regretting their early offers.

by Uninterested | 7th Dec 21, 5:19pm 1638850780

Depends on how high their offers were.

by Waikatohome | 7th Dec 21, 5:53pm 1638852803

Higher than anyone else was prepared to pay. Under 20% sale rate in some sessions. Looks like a lot of investors are trying to off load.

by muzled | 7th Dec 21, 5:56pm 1638853004

Sold our place a month or so ago (north shore), agent just called in and said it's definitely softened in that time.

Doesn't make much difference if you're buying and selling in the same market though.

by realterms | 7th Dec 21, 6:04pm 1638853465

It's changed so fast that some people will get caught out. If you bought first in Nov I'd be getting a little nervous about the sell part.

by Notgreedykiwi | 7th Dec 21, 5:04pm 1638849893

It's not the interest rates which are the problem. It's the people who give advice to others on how much debt they should keep on taking and the banks who don't care about lending them stupid amount of money. The advice given by advisors is that no matter what, just take on debt and buy more. They will say that someone will pay your rent and you will get a house to yourself to sell later at a huge margin with no taxes to pay.

This is the way we are making new money these days. I want to ask a question is this is the right way and are we fooling ourselves.

This just results in things being expensive for the next generation and do my add any value is my opinion.

by RickStrauss | 7th Dec 21, 5:10pm 1638850226

Well, yeah...we call it "the wealth effect", the ability to live up large off debts the next generations must pay instead of off wealth we create by adding value.

by J.C. | 7th Dec 21, 5:10pm 1638850220

The ol' rat poison getting up off the mat. Been a rough 7 days. But here's the skinny. On-chain analytics shows that many buyers over USD60K got the fear and started selling. This ratcheted into the leveraged long positions and all hell broke loose. All the open interest positions seem to be exhausted. You gotta love how these markets clear themselves.

by VTHO | 7th Dec 21, 7:09pm 1638857382

That dump was a beauty! Welcome to any new comers lol, hope you didn't panic sell. Wasn't online when it was happening or would have opened some lovely shorts. Onwards and sideways for a while zzzz.

by J.C. | 7th Dec 21, 7:19pm 1638857953

Wasn't online when it was happening or would have opened some lovely shorts

Do what you gotta do. Probability suggests many traders of crypto are usually washed onto the rocks easily.

by VTHO | 7th Dec 21, 9:04pm 1638864260

It's called risk management. Majority have no clue.

by Sam B | 7th Dec 21, 7:11pm 1638857461

It's the exchanges. They can see exactly what positions everyone is holding. They can profit while the market tanks, wait til the longs have been forced out, then pump in a bunch of Tether funny-money and send it shooting back up again to liquidate the shorts. You can't beat the house; only try and guess what they want and try to stay on the right side of it.

by J.C. | 7th Dec 21, 7:17pm 1638857841

You can't beat the house

Correct. The trading monkeys are on a hiding to nothing. Can't stop the accumulators though.

by VTHO | 7th Dec 21, 7:07pm 1638857235

Mr Luxon failed to impress at question time. If that was him prepared, I'd hate to see him unprepared. Nothing John Key ish about that performance, looked more like Todd Muller. Looking forward to round 2.

by HouseMouse | 7th Dec 21, 7:25pm 1638858346

Yeah average.

He and Willis - Mr and Mrs Average.

by Sam B | 7th Dec 21, 7:38pm 1638859110

'Millionaire who's really good at seeming average' has worked for them before.

by frazz | 7th Dec 21, 7:51pm 1638859913

Smile and pray...

by Albert2020 | 7th Dec 21, 8:47pm 1638863264

Yeah I scanned through looking for him and came across Seymour asking more robust questions than him

by Zack Brando | 7th Dec 21, 9:21pm 1638865261

I actually thought National did really, really well in Question Time today.

by Nifty1 | 7th Dec 21, 9:40pm 1638866445

It was weak, Luxon was stumbling all over his questions & looked nervous as hell.

by Pa1nter | 7th Dec 21, 11:16pm 1638872202

It's a tough spot.

Super easy to find fault in some of what the current government is doing.

Super hard to present any sort of compelling, attractive alternative.

by HouseMouse | 7th Dec 21, 11:25pm 1638872744

Number of public servants earning more than 400k doubles in a year, disgraceful.

National should be returning to their roots and promoting taking an axe through the hugely bloated Wellington bureaucracy, cutting it by at least a third.

by WellingtonInvestor | 8th Dec 21, 1:24am 1638879869

They need to to pay for houses. But the high wages could be one reason Wellington house prices are nearly up to Auckland levels.

by wisky | 8th Dec 21, 7:19am 1638901143

Can someone explain why the banks aren’t drawing more heavily, or seen to have stopped drawing altogether, on the FLP? Are there more catches to it than cheap funding? I’m no economist so looking for a genuine answer.