Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
The Co-operative Bank raised its rates by between +16 bps and +46 bps. But their rate card remains competitive.
TERM DEPOSIT RATE CHANGES
There have been no TD rate changes so far today. But BNZ raised its Rapid Save rate by +30 bps to 1.00%.
OFF THE FLOOR?
The ANZ-Roy Morgan consumer confidence survey results for April have risen slightly, but only from the worryingly low March levels. They are still extremely pessimistic. The proportion of people who believe it is a good time to buy a major household item inched 3 points higher to a still-grim -23. Inflation expectations fell back to 5.6%. House price inflation expectations eased from 2.7% to just 1.7%.
THE OVERSEAS BUYER SLIVER GETS EVEN SMALLER
Statistics NZ released its property transfer stats today for the March 2022 quarter. Property transfer statistics are based mainly on land transfer tax statements. They capture property transfers by New Zealanders and overseas people. This includes information on the citizenship, visa status, or tax residency of people and companies involved in property transfers. They say there were 40,476 property transfers, including 32,211 home transfers, in the March 2022 quarter. 117 of home transfers were to people without New Zealand citizenship or resident visas in the March 2022 quarter, compared with 240 in the March 2021 quarter. In the year ended March, the areas with the highest number of home transfers to people without NZ citizenship or a resident visa were Christchurch City (72), Queenstown-Lakes district (63), and central Auckland (57 home transfers). Tax residency is not the same as nationality. For example, an overseas tax resident may be a NZ citizen living overseas. Alternatively, a NZ tax resident could be an overseas citizen who lives in New Zealand, or a company with overseas owners.
HOW INFLATION IS AFFECTING VARIOUS GROUPS
Overall inflation in the year to March was 6.9%. Today, Stats NZ released how this overall shift higher affected many household groups. They say for all households, the rate was lower at 6.6%. For beneficiaries it was 6.0%. For all Māori it was was 6.7%. For superannuitants it was 6.1%. For well-off (highest-expenditure) households it was 6.9%. For households at the other end of the expenditure scale it was 6.0% pa. It seems higher prices for petrol and interest payments affected middle and higher income groups the most.
"ACCEPTED"
The Government says it has accepted the majority of the Three Waters Working Group recommendations, which local council ownership and strengthened local voices were locked in.
LARGER MORTGAGE BALANCES
Things may be tougher in the mortgage market, but overall balances are still rising. They rose +$1.6 bln from February to March, and were up +8.7% from a year ago. But still, the March 2021 rise from February 2021 was +$3.7 bln, so the pressure is certainly lower.
SMALLER PERSONAL LOAN BALANCES
But personal consumer lending (credit cards, personal loans, and similar) is certainly falling fast now. The overall balances are now down to June 2014 levels. They now total $13.4 bln, after peaking at over $17 bln in December 2018. For banks things are grim in this space, with balances falling to $7.4 bln and their lowest since September 2007 and after peaking at $11.4 bln in December 2018. BNPL's attack on their credit card business has been a costly loss for banks.
LESS RURAL DEBT
Farmers are borrowing less from banks and balances are atrophying there too. In fact the March 2022 levels are also now back to May 2018 levels again.
MUCH MORE DEBT FOR OTHER BUSINESSES
But lending to non-ag businesses is still on the rise, up to a record $125.7 bln and growing +$9.4 bln in a year, up +7.7% and that is its fastest annual rise since October 2016.
MONEY IN THE BANK GROWS
Households are regaining their confidence in term deposits, adding almost +$1.5 to these holding in March from February, taking the additions over the past six months to +$4.7 bln and ending a two year period of relentless monthly reductions. And that is not at the expense of savings accounts where households added almost $800 mln in these balances in March from February. Nor is it at the expense of money held in transaction accounts, they went up by almost +$600 mln in the month, up by +$7.2 bln in a year. Overall bank account balances held by households swelled by +$2.8 bln in March, and the third fastest month-on-month expansion ever. They are up +14.5 bln in a year to $219.3 bln and a new all-time record.
GETTING IN BEFORE RATES GO EVEN HIGHER
Precinct Properties has raised $175 mln for its six year secured, fixed rate green bond offer. They will pay 5.25% for these funds.
GOLD UP
In early Asian trading, gold is up a sharp +US$22 from this time yesterday at just over US$1903/oz.
SWAPS FIRM
We don't have today's closing swap rates yet. They are likely to be firm again. But the 90 day bank bill rate gave up yesterday's rise and is down -2 bps today at 1.97%. The Australian Govt ten year benchmark bond rate is up +9 bps from this time yesterday, now at 3.18%. The China Govt 10yr is unchanged at 2.86%. And the New Zealand Govt 10 year bond rate has slipped back -4 bps to 3.72% but still above the earlier RBNZ fix for that 10yr rate at 3.64% (down -7 bps). The US Govt ten year is now at 2.82% and holding most of yesterday's rise.
RECOVERING
Wall Street ended up a strong +2.5% today on some good earnings reports and less risk aversion. Tokyo is closed for Showa Day. Hong Kong has opened down -0.7%. Shanghai has opened flat. The ASX200 is up +0.8% in mid-day Friday trade which would limit its weekly loss to -2.3%. And the NZX50 is up +0.2% in late Friday trade and limit its weekly loss to -0.5%.
NZ DOLLAR SOFTER
The Kiwi dollar is now at 64.9 USc and -40 bps lower than this time yesterday and now a two year low. Against the Aussie we are -½c lower at 91.2 AUc. Against the euro we are down at 61.7 euro cents. That means the TWI-5 is now only down at 72.3 after gains against the GBP and YEN.
BITCOIN FIRMER
Bitcoin is marginally firmer than this time yesterday, now at US$39,773 and up +1.2%. Volatility in the past 24 hours has been modest at just under +/-1.9%.
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34 Comments
Got to say I'm still amazed at how quickly swap rates are rising...Its pretty relentless stuff.
Daily swap rates | interest.co.nz
Any guesses how high say the 3 or 5 year get before the market/s break? We've had people guessing where the OCR might get to, but what about swaps?
If assuming inflation holds around 7-8%, then we're about halfway through this rate hiking cycle? So we could expect mortgage rates to continue to climb for another 15 months or so at a similar rate as what we've seen recently in response to the rise in swaps? (we might be at 10% mortgage rates by then...)
Inflation isn't going to hold around 7-8%. The existing rate rises in the pipe are already looking like crushing economic activity. Take the Precinct bond issue in the article above. They raised debt at 5.25% which is roughly similar to what the equity is yielding. Who would want to own the equity at current prices? There is a whole lot of economic activity that has already become unprofitable/unviable and that will lead to capital destruction and a decline in economic activity.
It seems higher prices for petrol and interest payments affected middle and higher income groups the most.
Indeed - so living costs went up 2.26% in the first quarter of 2022 for 'All Households'. The categories below accounted for almost all of this increase - with interest payments leading the charge. Good job we have the the perfect tool to tackle this cost of living crisis - errrrm, increasing interest rates.
- Interest payments: 0.576
- Private transport supplies and services (mainly fuel): 0.480
- Fruit and vegetables: 0.264
- Grocery food: 0.184
- Actual rentals for housing: 0.168
- Cigarettes and tobacco: 0.134
- Meat, poultry and fish: 0.104
- Purchase of vehicles: 0.090
A policy for next time!
The marginal change in OCR and the change in mood has already crashed demand. Unemployment increases are coming and Russia is still in Ukraine and oil prices are still high (thus fertiliser and food prices are high etc). The challenge now is that further OCR hikes will cause more pain to households and workers than they relieve. So, the central bank is trapped and impotent - unable to do anything about prices, but being pushed to increase the OCR to look like it is taking action.
My view is the central bank should fix at 1.5 (or 1.75 if it must) and say it will take any necessary action to hold there. Swap rates will then come down a bit and households will be spared from further cost of living increases. This should be done alongside a hard mandatory affordability test on mortgages (based on 10% rates and no leveraging for second homes etc).
Raising rates increases the cost of things that matter - mortgages, rents, investing in development of the energy systems we need to insulate ourselves from global madness. If we want to stop people using cheap credit for speculation / inflating bubbles, then let's do that directly.
I agree that we could be a lot more targeted in encouraging/discouraging different classes of investment. One of the questions I have for example is whether the billions of printed money could have been directed towards things like building more electrical charging stations, wind farms etc, converting diary to green fuel production (rather than just cash hand outs).
Not having massive tax benefits for kiwisaver, or start up businesses for example.
I just think we need a little reset right now before any fundemental thinking can be meaningfully applied. I'd really hate right now for the recent speculation to be inflated via a current system, then protected by making structual system changes, rather than letting the mess reset via normal market adjustments.
Noting that I view the occasional recession as both normal & neccessary under our current version of capitalism.
I disagree with you a lot on here, but yes, this is the answer.
It's the answer that apparently no government, or political party, or prominent economist has suggested. Why? Too complicated, too socialist? I don't know. But if we could have differential rates that incentivise useful activity and disincentivise speculation rather than the reverse, that would be grand.
Tony has been consistently arguing for at least a couple of years that NZ employers need to face up to their responsibilities in the labour market & not rely on historically excessive imports at all levels to keep labour costs low. He also states that uncompetitive zombie businesses failing is a natural and essential part of a healthy economy.
He still is a property commentator... Let me play devils advocate :
Isn't the better solution for current housing to be more affordable so we don't need social housing?
There are not 40,000 people living in tents in need of a roof. There are however 40,000 families however struggling to make huge rents and locked out of house ownership due to CrAzY house price inflation.
His comments are like saying the solution to the housing bubble... is to increase the weekly accommodation supplement benefit.
I suppose Tony expects we'd just print more money at emergency rates in order to fund these houses, which of course would be sold to the govt at current (insane) prices?
So perhaps he's not so much promoting responsible social welfare... so much as trying to encourage the govt to buy the piles of new build inventory now building up...
Also.
Absolutely no one (ok say 99.99%) has got, or will get, wage increases (same job, inflation adjusted) that matches house price over the past 10 year. Its just not happening.
The Monastry of Health have released their guidelines as to who can apply for a Passport giving them an exemption to wearing a mask during the Covid pandemic : asthmatics ... allergics ... short of breathness ... fainting prone folk ... people with glasses due to fogging up ... biliousness from rebreathing your own air ... sufferers of poplar rust , hayfever , dutch elm disease & anxiety disorders ...
... which leaves ... hmmmm , lemmee check here ...
Gareth ! ... Mr Vaughan , sorry buddy , the weight of a nation is upon you ... you're the sole person in NZ who qualifies to wear a mask ... stay safe , man ...
Was at an intersection today, I look to my left and there's a man, alone in his car and all masked up.
Perhaps he forgot to take it off, but I just think to myself, "there's another one, totally brainwashed". I've seen people here in Christchurch driving wearing both masks and rubber-gloves before.
My favorite is when the MSM roll out the supposed "immune compromised" that are 100% believers in masks, HOWEVER they also believe their masks only work if everybody is wearing one.
I have empathy for the brainwashed but no time for them. Deprogramming is a very long process so unfortunately a large chunk of society are now mentally damaged drones at best - written off at worse.
Selling masks with political messages on them would be a great cash-cow :)
That's the thing - masks only really work if everyone wears them (or everyone who is sick), because the mask stops airborne aerosols/droplets containing the virus from making it past their face. So wearing a mask alone doesn't actually help you that much - the droplets can sit on your mask and the virus can pass through from there.
I don’t wear masks, haven’t even owned one.
It’s just a training exercise for the mentally challenged !
https://brownstone.org/articles/more-evidence-from-the-uk-that-masks-do…
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