Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
None today so far.
TERM DEPOSIT RATE CHANGES
So far, HSBC has raised all their rates, and FinanceDirect has both raised some and lowered two rates.
"MORE TIGHTENING NEEDED"
The RBNZ decided it is +25 bps in February, taking the OCR to 1.00%. See this. The key analysts have judged today's settings as hawkish. The currency and interest rates rose.
A SUDDEN FLOOD
There was a huge jump in residence visa approvals in January, with almost 11,000 approved, up from less than 4,000 in December, and an average of just 2700/month in 2021. About half of the residence visas issued in January were issued under the 2021 Residence Visa Scheme.
LITTLEFAIR STEPS UP PERMANENTLY
BNZ has appointed Paul Littlefair as Executive, Technology. He was already acting in the role since October last year, was previously BNZ’s Chief Technology Officer and was "appointed after an extensive international recruitment process".
PAYOUT REVEALED
The Financial Services Council says the health insurance sector paid out nearly $1.5 bln in claims in 2021, an increase of +$121 mln on the previous year (+8.0%), while the number of New Zealanders holding health insurance grew to 1.45 mln - so that is a claims payout averaging about $1000 per member. The information on premium levels earned by the sector are not readily available.
GHG EMISSIONS GENERALLY STABLE
Stats NZ released data today that shows net greenhouse gas emissions rose marginally in 2019 (the latest available). This is about the same as the 2012 levels, and while they are not rising, they aren't falling either. The 2020 and 2021 activity was stunted by the pandemic, and these emissions are unlikely to have risen from 2019.
TRACTOR SALES SLIP
Stats NZ released data today showing that tractor sales are slowing again (on a year-on-year basis), after recent recoveries.
NOT EVERY COMMODITY IS RISING ...
The carbon price has fallen -$5/NZU over the past five days. That is its largest fall in more than two years.
... BUT DAIRY PRICES ARE
Since the last dairy auction a week ago, WMP prices are up +4% in derivatives trading. SMP is up only +2% however. The next GDT auction is on March 2, 2022 (NZT).
UP BUT STILL TAME
In Australia, their wage index was up, up +2.3% year-on-year. But that is not strong enough to make a June rate hike more certain than not.
LOCAL PANDEMIC UPDATE
In NSW, there has been 8,931 new community cases reported yesterday, now with 100,745 active locally-acquired cases, and another 6 daily deaths. There are now 1,246 in hospital there and holding. In Victoria they reported 6,926 more new infections yesterday. There are now 42,016 active cases in that state - and there were also 18 daily deaths there. Queensland is reporting 6,301 new cases and 37 (not a typo) more deaths. In South Australia, new cases have fallen to 1378 yesterday and 3 more deaths. The ACT has 946 new cases and no deaths, and Tasmania 842 new cases and no deaths. Overall in Australia, more than 25,000 new cases have been reported so far today although not all counts are in yet. In New Zealand, there were 8 cases stopped at the border, plus 3297 new cases reported in the community, yet another new record.
GOLD LOWER
In early Asian trading, gold is now at US$1904 and down -US$4 from this time yesterday.
EQUITIES MIXED
The S&P500 ended down -1.0% in its Tuesday session after their long weekend. Tokyo is on holiday. Hong Kong has opened up +0.3%. Shanghai has opened up +0.2%. The ASX200 is up +0.3% in early afternoon trade. The NZX50 is flat late in the session, slipping from earlier gains.
SWAPS RISE TODAY
We don't have today's closing swap rates yet. They are likely to have risen today and by quite a bit, maybe a +10 bps jump. The 90 day bank bill rate is up +1 bp at 1.26%. The Australian Govt ten year benchmark bond rate is up +6 bps from yesterday to 2.26%. The China Govt 10yr is unchanged at 2.85%. The New Zealand Govt 10 year bond rate is now at 2.80% (up +8 bps from this time yesterday) and now just above the earlier RBNZ fix for that 10yr rate at 2.75% (up +4 bps). The US Govt ten year is now at 1.94%, a +8 bps recovery.
NZ DOLLAR FIRMER
The Kiwi dollar is +40 bps on the OCR news and it was already firmer from this time yesterday, now at 67.7 USc and a net +60 bps rise. Against the Aussie we are up +½c at 93.7 AUc. Against the euro we are firm by almost +½c too, now at 59.3 euro cents. That means the TWI-5 is firmer at 72.1 a +60 bps rise in a day.
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BITCOIN BOUNCES
Bitcoin is higher today, now at US$38,098 and +2.6% higher than this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.
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24 Comments
Jenee asked Adrian Orr in the press conference today how much influence he thought "quantitative tightening" was going to have on prevailing interest rates, as opposed to the influence of movements in the OCR. The answer she received seemed to suggest that the OCR constitutes 99% of it, with the selling of bonds being more or less irrelevant.
Interesting to note, then, this article from July 14th last year, about the RBNZ halting LSAP, but making no movement in the OCR. The article is tagged as an "event" (big black triangle) in the 1 year swap rate chart, and look what happens to that swap rate shortly afterwards.
The bonds were bought by the Reserve Bank at artificially inflated prices in order to push rates down, and are being sold back to treasury at the same price - under duress - in order to keep rates there, despite Hawkesby's insistence at the presser that they're doing as much as they can not to distort the bond market.
But you can only fool markets for so long. If the act of simply stopping LSAP was enough to send swaps rates up, surely reversing it is going to have an even greater effect. I'm not sure how this can't put upward pressure on interest rates.
Jenee asked Adrian Orr in the press conference today how much influence he thought "quantitative tightening" was going to have on prevailing interest rates, as opposed to the influence of movements in the OCR.
Supposed "QT" is the act of RBNZ selling it's government bonds back to the public - market place. Hardly comparable to the Treasury extinguishing them via direct purchase from RBNZ.
Here’s what, oh, the Reserve Bank of New Zealand (RBNZ) has to say about LSAP effectiveness:
When we buy assets, this increases their price and so reduces their yield. That means the interest rate, in this case on government bonds, fall. This has the effect of ‘lowering the tide’ on other interest rates in the economy, particularly longer-term interest rates of two years or more. It also reduces the cost of borrowing for households and businesses…
LSAP programmes have been conducted in the euro area, Japan, Sweden, the United Kingdom and United States.
The evidence shows LSAP proved effective in providing much needed support, lowering long-term interest rates and exchange rates, and underpinning economic growth and inflation.
Studies found the government bond purchases worth 10 percent of GDP have, on average, lowered 10-year government bond yields by around 50 basis points. [emphasis added]
It’s true; many academic studies from around the world focusing on different program types in different places have come to similar conclusions using all kinds of regression analysis. They find that QE programs do correlate with falling interest rates; maybe even “around 50 bps” (the “around” part means rounding up).
Even if we take them at their numbers, and presume correlation equals causation (because, they’ll tell you, they do account for the difference when regressing variables), you should still end up wondering why they even bother with this stuff.
Purchase bonds equivalent to ten percent of GDP, and rates are at most half a percent lower?
BNZ has appointed Paul Littlefair as Executive, Technology. He was already acting in the role since October last year, was previously BNZ’s Chief Technology Officer and was "appointed after an extensive international recruitment process".
So they couldn't find anyone internationally willing or capable for the role. Wonder what kind of person they're looking for. Being a bank, remuneration should not be an issue.
Still a bit confused why the RBNZ would only increase rates by .25% when inflation is well outside their remit and predicted to remain there, yet they can drop rates by 0.5% on a whim. I’m not convinced they are performing their main role of a stable inflation rate of 2%, is the max employment role tainting them? Are they worried about GDP or a crash, because that really shouldn’t concern them.
That’s because they’re not focused on inflation, they’re focused on preventing a debt ponzi from collapsing.
Deflation is their absolute enemy hence why at even the smallest sniff of deflation back in early 2020 it was emergency rate cuts and removal of LVRs etc - yet when you have real, measured inflation consistently quarter after quarter far above the target levels it’s a wait and watch, slowly rise the OCR response.
They care more about protecting the debt ponzi than they do about inflation.
Lucky we probably don't get any oil from Russia. Foreign Minister putting Russia in the naughty room. I wonder from whom the PM and the Foreign Minister minders are getting their instructions. Could it be the five eyes? Need some enlightenment on NZ's foreign policy here or is it that they wait for instructions from some other party.
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