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A review of things you need to know before you go home on Wednesday; many retail rate rises, 'advanced manufacturing' is 'in', debt pressures rise, Penlink ok'd, swaps up again, NZD soft, & more

Business / news
A review of things you need to know before you go home on Wednesday; many retail rate rises, 'advanced manufacturing' is 'in', debt pressures rise, Penlink ok'd, swaps up again, NZD soft, & more
[updated]

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
Westpac has raised its floating home loan rate by +40 bps to a level that matches ANZ's new rate. Unity Savings raised their fixed rates. Avanti Finance raise their floating rate by +50 bps. Bluestone also raised its rates. The Cooperative Bank raised its floating rate by +40 bps to 5.85% and its one year fixed rate by +20 bps to 4.49%.

TERM DEPOSIT & SAVINGS RATE CHANGES
Westpac also raised its Bonus Saver by +50 bps as well as its 32-day Notice Saver by the same amount, but its Simple Saver account by only +20 bps. Unity Savings raised its TD rates across the board. The Cooperative Bank increased its Step Saver account by +50 bps to 1.70%, and +10 bps to their one year TD rate to 3.00%. ASB added +20 bps to its Headstart savings account, taking it to 1.25%.

EXPORT DRIVE #72
Ten percent of our annual economic activity is generated by the manufacturing sector. It accounts for almost three quarters of goods exports and just over half of total goods and services exports annually ($44.5 bln). It survives without protection, and prospers in its own way. But there is a sense that "advanced manufacturing" could provide a clear pathway to higher wages through a more highly skilled manufacturing sector, and in turn a pathway to greater prosperity for the country. To get there, industry and the Government are trying to get buy-in from a wider set of local constituencies. Hopefully they succeed, but some of the groups they are trying to get support from probably see it is a potential gravy train. The plan will only succeed with committed and driven industry leaders. The rest (including the Government) are along for the ride.

STRONG DEMAND FOR BNZ BONDS
BNZ will borrow $650 mln through the issue of unsecured, unsubordinated fixed rate bonds it announced on Monday. The margin for the five-year bonds has been set at 1.05%, the low point of the indicative margin range making the yield 4.985% pa (and well above what BNZ offers its TD customers for a 5 year term). The offer is open to local retail investors and certain institutional investors. On Monday BNZ said it was seeking to borrow up to $100 mln with the ability to accept unlimited oversubscriptions at its discretion. The bonds will be issued on June 7, and are expected to be quoted on the NZX Debt Market.

FEELING THE PINCH
Credit reporting agency Centrix is noting that the ongoing inflationary challenges facing Kiwis continues to impact consumer confidence and credit demand, with consumer credit demand was down -9% year-on-year in May 2022, while the demand for new mortgages was down -27% over the same period. And for those successfully applying for mortgages, the lending value was down -38% in April 2022 as confidence falls. Consumer arrears were up +12% year-on-year in April 2022 in tandem with falling credit demand as Kiwis start to feel the financial pinch of rising living costs.

MAJOR ROADING INVESTMENT APPROVED - 40 YRS LATE(R)
The Government has finally pushed 'go' on the $830 mln Penlink project, an arterial connector to unblock the rapidly developing Whangaparoa Peninsula with SH1, north of Auckland. The need for this project was first identified in the 1980s. It wasn't an $830 mln project when it was first identified as a priority.

WE ARE NOT SECOND BEST
A joint report comparing broadband services between Australia and New Zealand shows the performance of New Zealand's Ultra-Fast Broadband compares well to Australia’s National Broadband Network. Page six provides the key comparisons. NZ is faster except for wireless connections where our providers have work to do. We shine in very high speed fibre plans.

HEARTLAND COMPLETES STOCKCO AUSTRALIA ACQUISITION
Heartland Group Holdings says it has completed the acquisition of StockCo Australia, which was announced at the start of April. StockCo provides specialist livestock finance for Australian cattle and sheep farmers. The cost of the deal, including A$1.6 million of deferred consideration payable subject to performance hurdles, is A$154.4 million. Heartland says existing operational funding for StockCo has been refinanced through a new two-year committed securitisation warehouse funded by two major Australian financial institutions with additional capacity available for growth.

A SMALLER STEP FORWARD
In Australia, there were two factory PMI reports out for May today, (here and here) both reporting a slowing of their good expansion back to a more modest expansion.

STILL GROWING
Australia also reported its Q1-2022 economic growth rate today and it came in at +3.3% pa which was better than the +2.9% expected, but a step back from the Q4-2021 rate of +4.2%. Australia's economy reported AU$2.2 tln in annual economic activity in the year to March 2022 in nominal terms, up +12% from the same year in 2021, which in turn actually fell -1% in the same year from 2020. From the pre-pandemic equivalent 2019 year, this 2022 result is now +16% higher in nominal terms. New Zealand doesn't release its Q1-2022 GDP result until June 16, 2022.

A STEP BACK
The private Caixin PMI reported that China's factories contracted at a slower pace in May than April, essentially mirroring the official version.

SWAP RATES RISE AGAIN
We don't have today's closing swap rates yet but they have probably firmed yet again. (Update: actually they stepped down in the end, by a very small amount.) Our 1  2-5 swap curve is quite inverted. The 90 day bank bill rate is down -1 bp today at 2.46% and ending a string of quite big moves up. The Australian 10 year bond yield is now at 3.43% and up another +9 bps on global moves. The China 10 year bond rate is now at 2.81% and up +2 bps. The NZ Government 10 year bond rate is now at 3.64%, and up +4 bps from the same global pressures and the same as the earlier RBNZ fix for this bond which was up +5 bps, now also at 3.64%. The UST 10 year is now at 2.87% and up +3 bps in a continuing rise. That puts it back up to where it was two weeks ago.

EQUITIES MOSTLY UP
Although it made a few runs trying to extract a gain, in the end the S&P500 ended down -0.6% on Wall Street today in their first session back after their holiday break. Tokyo has opened up +0.6% today. Hong Kong has opened down -0.5% and Shanghai has opened down -0.3%, both following good Monday and Tuesday gains. The ASX200 is up +0.2% in early afternoon trade after yesterday's fall. The NZX50 is up another +0.2% in late trade today following yesterday's surprising gain that was helped by A2 Milk's rise on its US prospects.

GOLD DOWN
In early Asian trade, gold has fallen -US$14 from this time yesterday to US$1835/oz.

NZD SLIPS FURTHER
The Kiwi dollar is moving down marginally, now at 65.2 USc. Against the AUD we are softer at 90.8 AUc. Against the euro we are holding at 60.8 euro cents. That all means our TWI-5 has stayed just under 72.

BITCOIN RISES AGAIN
Bitcoin is now at US$31,890 and up another +1.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.8%.

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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41 Comments

The Kiwi dollar is moving down marginally, now at 65.2 USc. Against the AUD we are softer at 90.8 AUc. Against the euro we are holding at 60.8 euro cents.

Oh God. It's making getting out of here even more costly. At least the quid is weak too.

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Apologies for Auckland centric comment but why do they think that charging people to use Penlink will help with traffic? The main issue seems to stem from where Greville Road joins....

It is like installing another tap and turning it on when the sink is already overflowing from the existing tap

Also the people that would benefit the most would be the other users of Silverdale onramp, but they wouldn't be the ones paying

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Agree, I live Wainui,   if they do not do the link then Silverdale will die due to traffic, needs to be free....  not sure who had the stupid idea to charge for the link.....   traffic will improve once they bring the extra lans online....

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Yeah I am in Whangaparoa, but not inclined to pay $3-4 each way.

If Whangaparoa buses are routed down there though that would be a plus

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MidNZ hard to complain, surely this will make Whangaparoa a way more desirable place to live. I thought about living there before but I could never get my head around the travel involved into CBD etc...

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Its going to be a waste of time, your just going to join the end of the que faster. Traffic was horrendous in Auckland, in the end I couldn't even get to work that was only 10 minutes away when it was the weekend. Simply not enough lanes on the motorway into the CBD, now needs 5 lanes and a far better bus service, multilevel bus park and go carparks and keep busses off the motorway all the way to Silverdale now.

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Sounds like the Auckland Council is successful in that it is impossible to drive anywhere. Christchurch is not far behind. We simply stay at home or only go as far as the local supermarket etc. Council wonders why CBD is a dead hole of nothing.

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All car friendly cities have crap CBDs and severe traffic issues, look at LA. I laugh every time people say the reason the CBD is dead is because it doesn’t have enough cars. The real reason is because they cut it off from anyone within walking or cycling distance via a ring of motorways, demolishing thousands of houses that were nearby, and then made the place awful by prioritising the small number of cars over the thousands of pedestrians. 

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And New York? Worked around College Point and White City and over the river in Union a bit, but to me Manhattan is the CBD. Haven’t been there since covid but understand Manhattan is not now a dead hole. Far from it. The people live with the traffic. It’s part of life it’s part of the blood. 

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Pretty much all taxis though isn’t it? They don’t  waste loads of valuable real estate on car parks. Also while I like Manhattan, I doubt it would fail without all those cars, would probably be better. They took cars out of Times Square recently. 

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wd. can’t be bothered.

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Holy moly, I agree with Carlos!

This is 100% accurate. Adding more lanes to a road network just makes congestion worse. It's proven time and time again.  The business case doesn't stack up so they have had to fund it in a different way, it's a vote grab, nothing more nothing less. 

https://youtu.be/pCzCJzwrB_c

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One minute the government say we have a climate emergency and need to significantly decrease driving, the next minute they spend $800 mil plus on a road.
Its like going on a diet one day then stocking up on KFC the next. 

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It's more like locking yourself and your kids into a KFC subscription at a premium price for the next 50 years

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Tastes good at the time but you’ll regret it after. 

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It is the sort of climate emergency where the government owns an airline - and gets the the PM to beg on talkshows to get more long haul Yank tourists here.

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Surely you know by now, Jimbo, that the government are phoney hypocrites?

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But there is a sense that "advanced manufacturing" could provide a clear pathway to higher wages through a more highly skilled manufacturing sector, and in turn a pathway to greater prosperity for the country. To get there, industry and the Government are trying to get buy-in from a wider set of local constituencies.

China already buying very cheap crude oil from Iraq & russia , without cheap engery no one compete with them. Link

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Same with fertiliser.

Ravensdown Pricing Notification:

Revised Price List:

Superphosphate – from $367.00 to $490.00
Cropmaster DAP – from $1410.00 to $1792.00
Urea – from $1270.00 to $1432.00
N-Protect – from $1319.00 to $1481.00
Granular Potassium Chloride – from $1065.00 to $1318.00
Granular Ammonium Sulphate – from $725.00 to $955.00

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Time to go organic?

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You'll see compost and manure costs going up too - fewer animals = less manure. Demand for compost = higher price. No escaping it.

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Always said compost interest would grow exponentially

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Nah you’re talking shit

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What if it hits the Fan?

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Possibly the most important podcast you will listen to this year

https://natehagens.substack.com/p/the-great-simplification-19-simon?s=r

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I got the same message this morning Audaxes, this will have a big downward effect on ag production. Some don't seem to realize the importance of fert to our economy.

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If farmers can't afford the fertilizer, they will just use less. The resultant drop in production will mean the land value drops. Those high equity farmers will be okay, and will be in a position to buy out the low equity farmers as they go broke. Owner operated farms have always been able to operate with lower outgoings than corporate farmers, so that will be another source of the new lower worth farms to buy. New Zealand will then be selling less produce to a world with a ridiculously high shortage of what we sell. I just watched a hunting program in some real steep North Island farming country where the deer and goats seem to share the hills with the sheep. Great fun. Anyway, don't listen to the vegans  and their religious irrational outpourings. The world is, and will be for a long time to come, crying out for real meat, grown properly, just the way we do it.

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NZ doing its bit for the Russo-Ukrainian War.

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That will be an interesting conundrum for the West, we don't want to buy oil/gas from Russia but will we still buy the cheap goods that are made from it by intermediaries?

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Hopefully yes.

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Undoubtedly Russia & China are well demonstrating the attraction of keeping it simple and keeping things big. Economies of scale, sort of. Other let’s say, more refined, nationalities broadcast and expound all sorts of sophisticated and popular themes and actions but the aforementioned two,  well understand that when push comes to shove those that play along  with pretty little pebbles will not foot it, in the end, with those practiced with handling boulders. Reminiscent of an old wrestling coach, and the same old axiom, that a good big bloke will always beat a good small bloke.

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> Our 1-5 swap curve is quite inverted.

Huh? I see 1 year 3.53, 5 year 3.89. Flat to very slight inversion from 2 years onward. 

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2/5 swap curve is flat at 3.90, soon to go heavily inverted. You heard it here first.

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You may well be right. But the 1-5 certainly isn't strongly inverted now!

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You are right. My typo. Should have written 2-5.

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-2 bps in the 2/5. Not sure that's strongly inverted either.

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yes the 1yr TD could be higher than the 5 Yr TD in 6 months. Banks seem convinced now OCR is up to 3.5 then in 18 months back down to about 2.5

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$360 million of forced selling for passive funds of RYM on the nzx the last 24 hours, out of the MSCI  index May 31. Now 35% below fair value, any property writedowns fully factored in, expecting good rise in NPAT next year. And ex div tomorrow! I see a German fund is gobbling them up, rated a buy by McQuarrie, Morningstar and others. Grabbed a couple today.....

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"The Government has finally pushed 'go' on the $830 mln Penlink project, an arterial connector to unblock the rapidly developing Whangaparoa Peninsula with SH1, north of Auckland. The need for this project was first identified in the 1980s. It wasn't an $830 mln project when it was first identified as a priority."

Complete and utter waste of money, they couldn't even get the business case to stack up so they had to do a RONS and fund it because reasons.  Locking in future ratepayers to massive maintenance costs when car use will be trending down going forward.  Put a toll on it now and watch all the "essential" trips evaporate. Government chucking good money after bad again

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I wonder how the 10% return development loans to developers that were advertised everywhere are working out?

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Townhouses for rent in Auckland definitely lifting significantly, as more new townhouses are completed.

480 now on TradeMe:

 https://www.trademe.co.nz/a/property/residential/rent/auckland/search?p…

 

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