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A review of things you need to know before you go home on Friday; strong trade surplus, commercial building pipeline struggles, credit card debt stops falling, sheep under threat, swaps lower, NZD higher, & more

Business / news
A review of things you need to know before you go home on Friday; strong trade surplus, commercial building pipeline struggles, credit card debt stops falling, sheep under threat, swaps lower, NZD higher, & more

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

MORTGAGE RATE CHANGES
Our records show an update to FMT's rates today, but they actually went up a while ago.

TERM DEPOSIT RATE CHANGES
Westpac has raised most of its TD rates, mainly just to match its rivals. But they become the first main bank to offer 4% for a five year term in this rising rate cycle. Kookmin Bank has also raised TD rates. As did the Police Credit Union.

GOOD TRADE RESULT, & NOT FROM CHINA
After a string of nine consecutive deficits, the April trade balance recorded a decent surplus for a change. The monthly merchandise surplus was +$584 mln, well above the year-ago level of +$397 mln. Our exports to Japan starred in April; our exports to China slipped which is a rare thing. In fact, overall exports were up +17% to $6.3 bln in the month. Imports were up +15% to $5.7 bln.

WARNING BELLS
The first signs of a downturn in commercial building work may be starting to appear. New commercial building consents dropped to an almost 30 year low.

BUDGET SUMMARIES RELEASED
Our analysts have summarised the 2022/23 Budget in a more digestible manner, allowing you to compare the 2022/23 spending and taxes across a five year view. You can see the Spending plan here, and the Tax plan here. We will be releasing the ability to drill into the major items over the next few days.

ONE VERY AGGRESSIVE BIDDER
The Treasury offered $200 mln in two tranches of Government debt today, and got $748 mln in bids. It was their April 2027 $100 mln that was the most popular - but 30 of the 31 bidders missed out. The single winner drove the yield down to 3.32%, well below the 3.61% at the prior equivalent tender two weeks ago. The other $100 mln was for the May 2051 bond, and 28 of 38 bidders won some of that. The average yield was 3.92%, little different to the 3.94% two weeks ago.

$300M RMBS ISSUE FOR BASECORP
Hamilton based non-bank mortgage lender Basecorp Finance is borrowing $300 million through an issue of residential mortgage backed securities.

PLATEAUING
Although they are down on a year-ago basis, there is the faintest suggestion that credit card debt balances have stopped falling. They may have reached a plateau. $5.9 bln is owed on this unsecured debt, similar to what it was back in mid-2013. It has been at this level now for each month in 2022. About half these balances (by value) incur interest. That proportion had been falling (from over 70%), but it isn't falling anymore in 2022. Transactions being run through credit cards never fell like the balances did, but they haven't risen either in any significant way.

NON-MARKET FORCES OVERWHELM HIGH-DEMAND PRODUCT
The world may want it, prices may be high and demand strong, but public policy decisions out of Wellington could well mean the future of sheep farming may be dark - to be replaced by pine trees. See this.

FINALLY, JAPAN GETS WHAT IT HAS BEEN SEEKING
Japan is in the news again with another rare data item - they got inflation in April of +2.5%. It wasn't unexpected and the actual level came in at about the forecasted level. They haven't had price inflation at this level in more than seven years. In the prior seven month they have also recorded CPI inflation, but usually at tiny year-on-year levels. Now is its significant from a policy perspective. Food prices rose +4.0%. It could be worth watching how the Bank of Japan reacts now.

SWAP RATES LOWER
We don't have today's closing swap rates yet but they are probably lower again following global trends. The 90 day bank bill rate is up +1 bp at 2.23%. The Australian 10 year bond yield is now at 3.31% and down another -6 bps from this time yesterday. The China 10 year bond rate is now at 2.83% and up +1 bp. The NZ Government 10 year bond rate is now at 3.56%, down -3 bps from this time yesterday and now the same as the earlier RBNZ fix for this bond which was up a minor +1 bp, now also at 3.56%. The UST 10 year is now at 2.87%, and down a further -3 bps from this time yesterday.

EQUITIES ALL DEPEND ON FRIDAY'S MOOD
Wall Street ended its Thursday session with the S&P -0.6% lower. That is a -3.1% retreat in the first four days of this week. Tokyo has opened its session up +1.0% and limiting its weekly decline to just -0.3% so far. Hong Kong has opened up +2.1% and if the week ended here this would be its five-day change too. Shanghai has opened up +1.0% and heading for a +0.8% weekly rise. The ASX200 is up +1.1% in Friday afternoon trade heading for a weekly gain of +1.0%. The NZX50 is up +0.7% in late trade heading for a +1.0% weekly gain.

GOLD UP
In early Asian trade, gold has risen to US$1838/oz, up +US$22 from where we were this time yesterday.

NZD FIRM
The Kiwi dollar has risen +60 bps to 63.9 USc from this time yesterday. We are up +½c at 90.8 AUc. And we are little-changed at 60.4 euro cents. That all means out TWI-5 is now just on 71 and +30 bps higher from this time yesterday.

BITCOIN GAINS
Bitcoin is now at US$30,371 and up +5.7% from where we were this time yesterday. Volatility over the past 24 hours has been high at +/- 3.6%.

Daily exchange rates

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Source: CoinDesk

Daily swap rates

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This soil moisture chart is animated here.

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33 Comments

The chill winds of winter , squalls and snow showers are ripping across New Zealand today  ...

... but , we can warm ourselves in the glow of all the goodies Robbo bestowed upon us in yesterday's budget ...

... having taken extra thousands of dollars off us annually in PAYE & GST , he'll let us have $ 350 back ... Joy ! ... what a guy ...

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Labour love a good handout, the more of their voters that depend on the state the better.

If you are so productive as to earn over $70k, there is nothing in the fat man's sack for you, except a lump of coal.

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They're slowing turning everyone into beneficiaries and needing to rely on the state...

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81 % of New Zealanders are beneficiaries.... and its keeping the IRD busy   , taking the money off us , then dishing small amounts back to us ...

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But  but...that awesome Green Lady in the weather ads promised us that if we took care of Mother Nature, she would see us right.  

Clearly, someone's telling porkies....

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... not sure about telling porkies , but between her  & Robbo , I think they've eaten all the porky pies ... 

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You only get your $350 if you havent already been given extra to keep the two bar heater on while you watch the revamped socialist TV channel

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... $ 327 000 000 to revamp that TV channel ... and you'll still be swamped by adverts  !

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Turn the sound off for those. Matter of fact, may as well leave it turned off.

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Well moans and groans from those at the top and bottom, maybe the budget was balanced......

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So what's everyone going to be spending their Robbo-bucks on? (if you qualify) 

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Wife says new shoes.

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... tell Imelda that unless she's got 4 hoofs  , she only needs one pair of shoes ...

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Tell her she’ll have to laybuy them for 3 months.

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So what's everyone going to be spending their Robbo-bucks on? (if you qualify) 

The ol' rat poison? 

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Cheese !   ... from what I've heard in the media , you're supposed to buy a kilo block of cheese for $ 21 ( one per week ) , then bitch to everyone that you got ripped off ...

... persimmonly speaking , avocados are 69 cents ... I'd rather get 30 of them for the $ 21 , and have a smashing thyme with some toast  ... 

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Don't qualify. But thankfully inflation isn't affecting anybody earning over $70,000.01...

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 Food prices rose +4.0%. It could be worth watching how the Bank of Japan reacts now.

Not sure where this comes from because Japan CPI data excludes 'fresh food.' Nevertheless, it is very interesting. Anyone familar with the Japan FMCG and food markets will know that companies are loathe to increase shelf prices because market share is everything to Jpanese companies. 

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DP

 

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I have received two emails today from developers spruiking their developments to FHBs on the back of the budget. 
good luck with that!!!

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Example:

a 850k townhouse.

with a 5% deposit, and at a mortgage rate of 5.5%, over a 30 year loan that is more than $1100 per week. Add $100 for rates, body corporate, insurance.

stress tested at 7.5% the payments are over $1400.

only a very small number of FHBs will be able to take this up.

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How much will rent be in 20 years? 40 years?

Just spit-balling. Sounds like an awful proposition, but if I had surplus money I was fine banking over 30 years....

Australia is probably going to catch fire before then, so there will be plenty of extra demand.

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That very agressive bidder for the 5y treasury must be a friend of the government by driving that yield down well below the swap level.

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Bloomberg revised it's China FY GDP target down to 2% (from 3.6%.)

Last time Bloomberg crossed the CCP one of their journalists, Haze Fan, was disappeared. A quick Google suggests she's still disappeared actually. Could get some company at the reeducation camp.

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Experts are now blamming reserve bank governor, where were they earlier when the Transitory Inflation nonsense was been played by all including our Mr errORR

https://fortune.com/2022/05/18/recession-stagflation-unavoidable-mohame…

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I think recession is almost a certainty.

 Maybe an outside chance that a quarter of deeply negative growth will prompt central banks to stop hiking interest rates. That’s the only way I see two consecutive quarters of negative growth *potentially* being avoided.

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So RBNZ could miss it's inflation targets for a second year running? There is virtually no chance pausing rates rises will save housing from revaluation, the die is cast.

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I have been listening to this guy lately. Entertaining and informative, I reckon we could learn a thing or two from him regarding investing in the share market. Sounds a bit like the robot from Futurama:

The Maverick of Wall Street

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Bush’s slip is just incredible. So funny. And what he said is true! Brutal and unjustified invasion of Iraq. 
so good

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Great watch!!! Thanks

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Macrobusiness once again calling BS on the markets’ views on the trajectory of interest rates:

https://www.macrobusiness.com.au/2022/05/highest-interest-rates-in-gala…

With a good graph showing markets consistently overestimate interest rate rises.

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The author overlooks the fact that Australia's mineral commodities are absolutely on a tear. China is gearing up for another multi-year infrastructure binge to bulldoze it's Covid-19 GDP decline and get President Xi that third term, all fueled by debt and coal.

New Zealand may have a real problem here because the wage differential between countries will climb a wall on current trajectories. If you're a working stiff who has missed the housing bonanza in here wouldn't you take the easy money?

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That graph doesn’t show that. It just shows The RBA has a higher forecast from all the other soothsayers.

We won’t know the future until we get to it.

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