What happened Friday

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A review of things you need to know before you go home on Friday; more retail rate increases, 'Back my Build' ending, Australia get housing ideas, Japan gets some inflation, swaps stable, NZD firm, & more

18th Mar 22, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
After we published yesterday both Westpac and Cooperative Bank has raised home loan interest rates. Today, Bank of China raised rates.

TERM DEPOSIT RATE CHANGES
Westpac and Cooperative Bank have raised TD rates too - as did Bank of China.

CALLING TIME
ASB is ending its low interest 'Back My Build' lending campaign to FHB borrowers who are building new houses, one that was based on the funding available from the RBNZ's Funding for Lending program. So far, all banks have drawn $9.2 bln under that $28 bln program.

MORE IN BETTER?
The Global Dairy Trade auction platform is moving to weekly auctions on a trial basis at some time this year. The standard bi-weekly events will continue, and between these a new GDT Pulse event will start solely (at first) for WMP product. This will be a short 15 - 30 minute event, providing WMP price discovery on a more frequent basis. The 'trial' will last between six and 12 months, and assessed after that.

'AUSTRALIAN DREAM'
A Parliamentary report on Australia's housing affordability problems has recommended that their States should ditch stamp duty and replace it over time with a broad-based land tax, review the taxes holding back development of the emerging build-to-rent sector and reform surging developer contributions that are not being used to fund crucial local infrastructure. These are just a few of their 16 recommendations to improve long term housing affordability there.

JAPAN GETS SOME INFLATION TOO
Japan's consumer inflation rose by +0.9% in the year to February, and as low as that may seem to us it is the most since April 2019. It comes after a +0.5% January gain. The latest figure marked the 6th straight month of annual inflation, with food prices rising at the fastest pace in 4 years, up +2.8% pa. Japan's central; bank will like the rise, but it is unlikely to be enough for them to shift their policy direction. They are reviewing rates today, with an announcement at 4pm NZT.

BNPL BITES ON BOTH SIDES OF THE TRANSACTION
On February 19, 2021, the share price of buy-now-pay-later firm ZIP hit AU$12.35. Today they are trading at AU$1.65 with downside risk. BNPL is no road to riches, even for their promoters, now complaining of a vicious drop. For their customers they can be a nasty trap too. Regulators are circling. Those regulators with real teeth (in the US) are leading the way. The core issue is to bring this unregulated corner of consumer credit back into normal oversight. When that happens, there may be fewer BNPL exponents.

ROBINHOOD TRUTH & CONSEQUENCES
GameStop, the meme stock that newbie investors used to show the pros how smart they were, has reported a surprising loss after trading closed on Wall Street - and is due to open at a big discount in Friday trading there. Recall it traded at less than US$20/share before the greater-fool bug got it up to US$325 in January 2021. Earlier today it closed at US$87.70 and in off-market trading it has slumped further to under US$80. It might be fun to watch what it does in tomorrow's trade. The music is about to stop, it seems. (Or in Warren Buffet's analogy, the tide is going out.)

STAYING HIGH
Aluminium prices spiked on the invasion of Ukraine. Since, they have stayed high, volatile in the past six weeks, and again this week. But they are ending high.

WAR & ENERGY INNOVATION/ADAPTION
The IEA is warning of "the biggest supply crisis in decades" as war consequences sweep over energy markets. But it also reports sudden important responses in regions hardest it, especially Europe. Measures implemented this year could bring down European gas imports from Russia by over one-third, with additional temporary options to deepen these cuts to well over half - while still lowering emissions. It seems war is bringing sudden innovations in some areas. It is a great shame it takes a war crisis to motivate these adaptions.

GOLD RECOVERS BUT DOWN FOR THE WEEK
In early Asian trading, gold is higher today from this time yesterday, now at US$1944/oz and up another +US$10. A week ago at this time gold was at US$1996/oz, so a -US$52/oz fall since then.

EQUITIES MOSTLY HAVING A GOOD WEEK
The S&P500 ended its Thursday session up +2.4%. So far this week that is a net +4.9% rise over their four days. Tokyo has opened flat in early trade and heading for a +5.6% weekly rise. Hong Kong has opened down -1.6% today but is headed for a weekly rise of +4.6%. Shanghai has opened flat today and heading for an unusual -1.7% weekly loss. The ASX200 is up +0.2% in afternoon trade on the way to a +2.9% weekly rise. The NZX50 is up +0.7% in late trade today, heading for its own +2.2% weekly gain.

SWAPS STILL ON HOLD
We don't have today's closing swap rates yet. They are likely to have changed little today, maybe even a tough lower. The 90 day bank bill rate is down -2 bps at 1.56%. (A week ago it was 1.48%.) The Australian Govt ten year benchmark bond rate is up +3 bps at 2.55%. The China Govt 10yr is down -1 bp at 2.82%. The New Zealand Govt 10 year bond rate is now at 3.20% (unchanged) and still higher than the earlier RBNZ fix for that 10yr rate at 3.18% (unchanged). The US Govt ten year is now at 2.16% and a minor +1 bp rise from this time yesterday. A week ago it was 1.99%.

NZ DOLLAR FIRM
The Kiwi dollar is now at 68.9 USc and a full +½c higher from this time yesterday. Against the Aussie we are lower at 93.64AUc. Against the euro we are firmer at 62.1 euro cents. That means the TWI-5 is now just under 74 and a small +25 bps gain in a week.

BITCOIN LITTLE-CHANGED
Bitcoin is little-changed today, now at US$40,789 and down just -0.6% from this time yesterday. A week ago at this time it was at US$39,357 so it is now up +3.6% from then. Volatility over the past 24 hours has been modest at just under +/- 1.2%.

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15 Comments

by company of heroes | 18th Mar 22, 4:37pm 1647574646

Interesting to see Japan gets a bit inflation, I'm wondering if this changes people's view on MMT much or not.

by J.C. | 18th Mar 22, 5:30pm 1647577817

The big difference about Japan and price inflation is that FMCG companies usually will focus on keeping shelf prices stable. It is the Japanese business practice on maintaining market share. Companies will reduce their profit margins to maintain market share. Quite different from the West.

Also, Japan has a very developed retail market, from discounters through to premium. This means that the shopper has much more options to stretch the wallet compared to NZ.

by HouseMouse | 18th Mar 22, 6:10pm 1647580223

Well put

by Audaxes | 18th Mar 22, 4:42pm 1647574960

A Parliamentary report on Australia's housing affordability problems has recommended that their States should ditch stamp duty and replace it over time with a broad-based land tax..

Not a moment too soon - as I noted on another thread today.

This is why the United States cannot industrialize as long as the house prices absorb this high a rate of income, and as long as the banking sector is supporting this, and as long as the political parties say we will not tax real estate so that all of the rising land value will be able to be pledged to banks to pay interest instead of to pay taxes. Essentially, it’s the (lack of) taxing of real estate in the United States that has subsidized the increase in housing prices, because housing prices are worth whatever a bank will lend to buy a house. If you have to go to a bank, and if they lend more and more and this money isn’t taxed away, the price is going to go up. So you have the government policy, the bank policy, all trying to promote this high diversion of income into paying land rent. Again, this is the exact opposite of what Adam Smith and John Stuart Mill and classical economics and the whole 19th century had advocated. This has priced American labor and industry out of world markets.

If you have to pay 43 percent of your income for rent, then even if the government were to give you all of your goods and services for nothing, all of your food, all of your clothing, all of your transportation for nothing, you’d still have to pay so much money for rent and for health care that you couldn’t compete with labor in Asia or the Third World or even Europe. And so this is what has essentially excluded the United States from having a successful empire. It’s the greed of the financial sector, basically, and the takeover of the government by the financial sector here as happened under Margaret Thatcher in England and then Tony Blair. You’ve had both countries essentially enter permanent austerity programs, and the only way to cure this is for housing prices to go down. But if the housing prices go down, then the banks will go broke. That’s why Obama said he had to support the banks: because if he’d actually lowered the housing prices to realistic levels, that would enable America to survive, but the banks would go under. Until you’re willing to restructure the banking system, you’re not going to be able to industrialise the American economy. - Link

by agnostium | 18th Mar 22, 8:41pm 1647589318

Interesting post, thanks for sharing

by EdwardD | 18th Mar 22, 4:41pm 1647574864

I'm still bullish on GME.

https://finance.yahoo.com/news/gamestop-reports-fourth-quarter-fiscal-2…

by Audaxes | 18th Mar 22, 4:55pm 1647575711

The US Govt ten year is now at 2.16% and a minor +1 bp rise from this time yesterday. A week ago it was 1.99%.

Not Born Yesterday

When even Bloomberg can’t help but notice, not just notice but then write about it, that’s significant. Normally a staunch water carrier for the official Federal Reserve position, these curves getting bent so far out of what would be better shapes aren’t so easy to just dismiss and ignore any longer. Jay Powell says household and business finances are holding up well, and that the labor market is good to great, a more rapid series of rate hikes (compared to 2015-18) therefore appropriate.

These curves, on the other hand, flat out disagree. So much so, the usual palace mouthpiece imagines some partial horror:

“The market is pricing in a higher recession risk and you can see that with the inversion between five- and 10-year yields,” said Andrzej Skiba, head of U.S. fixed income at RBC Global Asset Management. “The Fed is sending a strong commitment to fighting inflation.”

Is it, though?

We’ve had bad and worsening global money (collateral; see: today’s 4-week T-bill compared to the raised RRP), a drag on global growth (including US; see: services) which late last year became a total “growth scare”, but now weakness and potential recession is all about the rate hikes the same media believes is capable of stopping the CPI?

by HouseMouse | 18th Mar 22, 5:06pm 1647576361

Interesting article on the Govt's shared equity scheme.

Unsurprisingly, the number of approvals is a small subset of the number of applications.

https://www.oneroof.co.nz/news/41102

by Palmtree08 | 18th Mar 22, 5:43pm 1647578624

"These are just a few of their 16 recommendations to improve long term housing affordability there." No mention of deliberate population growths roll in making peoples lives unaffordable?

by Palmtree08 | 18th Mar 22, 5:48pm 1647578881

"It is a great shame it takes a war crisis to motivate these adaptions.It is a great shame it takes a war crisis to motivate these adaptions." Motivate? Like our own government, as soon as the crisis is over, they'll be looking for new ways to burn their way to climate disaster.

by waymad | 18th Mar 22, 10:18pm 1647595095

Or just maybe Da Gubmint will see the hot glow of nuclear carbon zero, following Europe, which has executed a 3 point turn and declared it 'sustainable', now that ESG and 3 decades of Green Hopium have proved their exquisite vulnerability to unfriendly third parties...

by Squishy | 18th Mar 22, 11:12pm 1647598348

I can't help but notice the Chinese are gradually losing their battle with Covid-19. We might be about to get a whole lot more supply chain disruption over the next few months.

by Carlos67 | 19th Mar 22, 6:16am 1647623787

Omicron is unstoppable they are slow learners. Even if you could defeat it once, the ongoing cost of trying to keep it out would kill you anyway. They just need to let it rip. There is talk that we are already over the peak and Labour are already talking about dropping all the mandates.

by Tee | 19th Mar 22, 6:34am 1647624846

Joe talks with Xi

Prelude

Blinken warns China that there are consequences for aiding Russia. China FM spokesperson talks a lot but nothing new.

It appears that the US is not giving any room for China to play the "double speak" game.

Will China trade with Russia- yes. Oil is not sanctioned.

Will China support Russia in other ways- don't know.

by Tee | 19th Mar 22, 9:02am 1647633759

From the news

Canberra has asked China to be transparent. Military aid to Russia ...an "abomination". Unequivocal sanctions. So Canberra is ready to do what China did to them last year. China even refused to unload Aussie coal then.

Was AUKUS a result of economic coercion, maybe. Some call it bullying. Russia does it too. And the China FM spokesperson will say that the US does it the most.

What will Xi say to Joe. Yes.....no......maybe....

Yesterday, Joe called Putin a "murderous dictator". Can't imagine Trump saying so, er....genius. Blood already splilt, someone has blood on his hands.

A few days ago the PMs of Poland, Czech and Slovenia visited Kyiv. They had to travel by train, war zone. A brave show of solidarity.