Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
We have been advised that HSBC, TSB and China Construction Bank have all raised fixed home loan rates and some of these rises are sharp at the long end.
TERM DEPOSIT RATE CHANGES
ASB has raised term deposit rates pretty much across the board. Of note is their new three year offer of 3.50%, the highest for that term of any major bank. Only China Construction Bank's 3.60% is higher. But for terms where most savers want to be, the new ASB rates are not notable.
A WORRYING PORTENT
Retail sales data for March is worryingly weak. Not only was the amount recorded using card payments for -1.2% lower than the same month a year ago for "core retail", in the same period inflation rose by probably [much] more than the 5.9% in the last December Stats NZ survey. We will get the March quarter CPI data just after the Easter break and it won't be a surprise it it is near +8%. That's a guess of course, but it is almost certainly going to well exceed that December level. In that context, core retail sales being down -1.2% in value terms points to distressingly weak retail volumes. (If it wasn't for petrol inflation, the overall March data would have been negative too.)
'GREEN' TDs ?
There has been an interesting launch in Australia by MUFG Bank, a very large Japanese bank which also has a branch here. They have launched an ESG term deposit set. Their 'Green Deposits' allow customers to place term deposits with the Bank, which are in turn used to fund qualifying Green Loans for projects such as clean transportation, green buildings, energy efficiency and sustainable water/wastewater management projects, among others. A key target is corporate term deposits.
CRONE JOINS ASB BOARD WITH KINGI ON FUTURE DIRECTOR PROGRAM
ASB says former Auckland mayoral candidate Victoria Crone joins its board effective Tuesday. Additionally ASB says it'll host Merewaakana Kingi as an observer on its board under the Institute of Directors’ Future Director program. ASB notes Crone has executive leadership experience in the telecommunication, fintech, and innovation industries. Kingi has worked in the corporate and Māori sectors for financial services and corporate organisations, is a chartered accountant and a former NZ women’s and touch rugby rep. ASB also says Robyn Worthington, its Executive General Manager of People, is leaving to return to Australia. She will, however, stay while a decision is made on her replacement.
EX-ANZ EXECUTIVE JOINS AMPLIFI
Former ANZ executive Fred Ohlsson is joining Amplifi Group as managing director. Amplifi is a joint venture between Mint Asset Management and Auckland-based private equity firm, Ascentro Capital Partners. Amplifi plans to acquire "a suite of high-quality NZ financial services businesses across the advisory and asset management sectors." Amplifi was launched in November 2021, and is 70% owned by Mint Asset Management and 30% by Ascentro.
MOODY'S RETAINS 'STABLE' RATING ON NZ BANKING SYSTEM
Credit ratings agency Moody's is retaining its "stable" rating on the NZ banking system. Supported by recovering economic conditions and a resilient labour market, Moody's sees banks' asset quality remaining very strong. Although high house prices remain a risk, banks' loss-absorbing buffers are strong and will improve further as regulatory capital requirements increase through July 2028. Banks will face some pressure on profitability as they're unlikely to write-back substantial amounts of loan-loss provisions as they did in 2021. Also Moody's sees funding costs increasing as deposit inflows slow amid a recovery in spending by consumers and businesses, leading banks to return to wholesale funding markets as interest rates rise. Moody's has A1 ratings on eight NZ banks including the four Aussie owned ones, the three Chinese owned ones and Kiwibank.
UP & DOWN, BUT NET DOWN
The NZX50 capitalisation fell -0.4% last week. Apart from the AirNZ rights confusion, Pushpay (PPH, #29) was down -5.2% and F&P Healthcare (FPH, #1) was down -2.5%. Going the other way, Serko (SKO, #42) was up almost +7.0%, and Spark (SPK, #3) went up 5.2%.
LOW INFLATION POINTS TO WEAKNESS
China is apparently getting a bit more inflation now. Their official data says overall prices were up +1.5% in the year to March, but because there was no change from February what we are seeing are base effects moving the annual number up. Food prices are rising as part of that (+2.0% year-on-year), but prices for beef (0.0%) and lamb (-4.6%) are not part of that. Milk prices are rising slightly (+0.4%). The easing of high producer price inflation did happen in March, but not be as much as was expected. It is now running at +8.3% year-on-year.
GOLD SOFT
In early Asian trading, gold is down -US$3 from where we opened this morning at just on US$1944/oz.
EQUITIES MOSTLY DOWN
The NZX50 is down another -0.6% near its Monday close. The ASX200 is up a minor +0.1%. Tokyo has opened the week down -0.4%. Hong Kong is down a sharp -2.2% as they get the frighteners on what new Beijing rules will do to them. Shanghai has opened down -1.2% as their pandemic situation drags on. The S&P500 futures suggests WAll Street will open -0.4% lower.
SWAPS EDGE HIGHER AGAIN
We don't have today's closing swap rates yet. They are likely to be a little firmer yet again from Friday, another +3 bps or more on top of last weeks big rises. The 90 day bank bill rate is up +2 bps at 1.70%. The Australian Govt ten year benchmark bond rate is up +1 bp from this morning, now at 3.00% and the first time in eight years it has been above 3%. The China Govt 10yr is little-changed at 2.81%. And the New Zealand Govt 10 year bond rate is up +2 bps at 3.51% and above the earlier RBNZ fix for that 10yr rate at 3.47% (up another +2 bps). The US Govt ten year is now at 2.73% and up +3 bps since this morning, above its Saturday high and rising again.
NZ DOLLAR SOFTER
The Kiwi dollar is now at 68.2 USc and -20 bps lower today. Against the Aussie we are a tad lower as well, now at 91.8 AUc. Against the euro we are little-changed at 62.6 euro cents and down -40 bps. That means the TWI-5 is now at 74, softer by -20 bps from where we opened this morning.
BITCOIN LOWER
Bitcoin is lower from where we opened this morning, now at US$42,176 and down -2.1% over these eight hours. Volatility in the past 24 hours is modest at over +/-1.9%
This soil moisture chart is animated here.
Keep ahead of upcoming events by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
23 Comments
The ASB three year offer of 3.50% might be the highest for that term of any major bank, but it is still way too low for such a long duration, in an environment where interest rates have still a long way to go up. The average three year term will be 5% p.a., at the least, by end of the year.
Calling it for just 25 basis points with OCR this meeting and for next meeting then it will stop - fixed rates may still increase with swaps.
Regardless of what swaps are doing, consumer spending is dropping like a stone and with all the mortgage refixing starting to happen with up to 60% of the mortgage book, the demand inflation is reducing by the day and once supply chain issues reduce, unless there is something special - a recession is almost certain.
Pay down debt, have a plan if you do with a 5% rate and hope your employment remains constant
"Retail sales data for March is worryingly weak"
The slump has been clear in the trend data for at least a month - we are either turning or already on the way down the curve on a range of demand indicators. It is worth saying that the electronic card spending has never wobbled like this - and with mortgage rate rises still ramping up we are heading for a car crash.
For me, all this crystal ball gazing around OCR movements is kind of moot anyway. People don't care about the OCR, they care about retail rates - mortgage rates in particular - and these are influenced by much more than just the OCR. As Adrian Orr put it at November's FSR:
New Zealand is a ‘price taker’ when it comes to determining the level of long-term interest rates. We are a small economy, and must accept the fact that saving and investment decisions in the rest of the world determine the bulk of our interest rate levels.
Whatever the RBNZ does on Wednesday, retail rates are heading up. If the OCR falls too far behind the interest rate curve, they will end up having to play catch up. They cannot for very long defend a rate of interest which is too much lower than what the market is demanding.
I agree in broad terms - but I think you underestimate the control that RBNZ can have over market interest rates and the degree to which we can sustain different rates (eg to Fed) given how well our bonds are rated.
Look at the ASB economist comments today (Jarod?) He was very clear that hiking rates by 50bps will push market and mortgage rates up. Conversely, if RBNZ signalled a less hawkish view, market rates would be pulled back down (although that might require RBNZ to show some muscle in the market)
HM why should people who save money get very small returns so pushed into gambling in stocks Bitcoin or buying a rental to make a reasonable return. The over valued housing market is going to hit a wall not much RBNZ can do as inflation is high and the FED has already directed interest rates higher you just haven’t got message yet.
https://www.rbnz.govt.nz/statistics/s33-banks-assets-loans-fully-secure…
I make it around $200 billion?
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.