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
NBS (Nelson Building Society) raised its variable rate by +50 bps to 6.45%. The Police Credit Union raised their by +39 bps to 5.44%. Heretaunga Building Society raised their floating rate to 6.10% along with their fixed rates.
TERM DEPOSIT & SAVINGS RATE CHANGES
Hastings-based Heretaunga Building Society also raised their TD rates by +10 bps.
BETTER THAN REPORTED
This morning's dairy auction was probably stronger than originally reported. The dominant WMP price rose from US$3934/t at the auction two weeks ago to US$4158/t this time, a +5.7% rise and one suggested by the derivatives market. That is a +5.7% rise, and far above the one the GDT people reported of -0.3% which was caused by "a drop-off of index prices in contracts three through five" (in other words, an historical adjustment). The real gain is the +5.7% change. And all this was done with Chinese buyers notable in their absence. When they return, they will add demand into a supply-constrained situation.
LOST ITS WAY?
Fonterra has launched a buy-back offer for their shares as its share price languishes. It will fund up to $50 mln for buying back its own shares to combat a market 'undervaluing' its shares. Companies that do this type of thing are signaling they have lost their way, and have few answers to enhance their value - other than a buy-back.
FARMERS MAKE THEIR RECOMMENDATION
The Primary Sector Climate Action Partnership (HWEN) has sent to the Government their plan to control and reduce agricultural greenhouse gases, backed up by overwhelming farmer support. The dairy industry in New Zealand is in an odd situation compared with all its international rivals; it is a dominant sector here so its emissions are large for us. But those rivals have the same or 'worse' emissions in their dairy industry but that industry is dwarfed by much bigger industrial and population emissions so the dairy 'share' there is tiny and tends to be a second- or third-level issue attracting far less scrutiny. But if NZ can nail it, we could end up with the best of both worlds. The Government now needs to consider these recommendations and will make a final decision in December 2022.
SURPLUS 'COMMITTED'
The Finance Minister says he's 'committed' to achieving a Budget surplus by 2025. He says he is 'confident about the resilience' of our economy, but warns supply chain issues could persist into next year.
ADMITTING FAILURE
The Ports of Auckland says it will write off $65 mln it has spent on an automation plan, a six year effort in its container terminal that has now been judged won't deliver the planned improvements. Meanwhile the world's top ports are automating successfully. The World Bank has been surveying the efficiency of 370 of the world's major container ports, and the results are not good for New Zealand. Among others, Tauranga ranks about 325th and Auckland ranks about 350th. Even just among "Oceania", Auckland is the worst-ranking facility. No New Zealand port looks efficient in this survey, the best being Wellington ranked #151 and still near the bottom half.
CENTRAL BANKS TO REVERSE COURSE IN 2 YEARS?
In an interview with The Australian Financial Review, billionaire Bridgewater founder Ray Dalio and overseer of more than US$1 tln of funds, said stagflation – low growth and high prices – will force central banks to cut rates again in 2024.
SWAP RATES STEEPEN
We don't have today's closing swap rates yet but they have probably firmed. The 90 day bank bill rate is unchanged today at 2.52%. The Australian 10 year bond yield is now at 3.51% and unchanged. The China 10 year bond rate is now at 2.82% and down -1 bp. The NZ Government 10 year bond rate is now at 3.76%, and up another +4 bps from this time yesterday and matching the earlier RBNZ fix for this bond which was up +6 bps and also at 3.76%. The UST 10 year is now at 2.99% and and down -6 bps from this time yesterday, but it has risen from this morning.
EQUITIES RISE
On Wall Street they finished with a flourish, with the S&P500 up +1.0% at the end of their Tuesday trade. Tokyo has opened today also up almost +1.0% and approaching its 2022 highs. Hong Hong is up +2.0% in their early Wednesday trade. Shanghai is up +0.6% in early trade. The ASX200 is up +0.8% in early afternoon trade. The NZX50 is up a lesser +0.3% in late Wednesday trade.
GOLD RECOVERS
In early Asian trade, gold up +US$9 from this time yesterday to US$1849/oz. But it has been higher in between. Gold's cheerleaders weren't so upbeat in May.
NZD HOLDS LOWER
The Kiwi dollar has moved up a little, now at 64.8 USc. Against the AUD we are still at 89.7 AUc after the RBA-induced adjustment. Against the euro we are holding at 60.6 euro cents. That all means our TWI-5 is still lower at 71.8.
BITCOIN BOUNCES
Bitcoin is now at US$31,066 and up +6.2% from where we were this time yesterday. A yo-yoing pattern around US$30,000 is developing. Volatility over the past 24 hours has been high at +/- 3.5%.
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27 Comments
Highly recommended vieiwing if you're interested in an overview of what's happened:
CNBC MacKenzie Sigalos speaks to Swan Bitcoin CEO Cory Klippsten about the newly introduced crypto regulation bill by Senators Cynthia Lummis (R-Wyoming) and Kirsten Gillibrand (D-New York). They discuss how it works, its impact on investors, and what it means for digital assets.
https://www.cnbc.com/video/2022/06/07/bipartisan-crypto-regulation-bill…
Yes. A real win for the crypto industry, shoehorning regulation into the smallish and under-resourced CFTC for a light-handed overview. They avoided Gensler and the more independent SEC who would have brought it into the mainstream of financial regulation.
Yes, I'm a little confused as there is reference to the Howey Test to determine whether or not an asset is a security. This is entirely under the judgement of the SEC.
Interesting to see Dalio thinks it will be as far away as 2024 before central banks change course and start dropping rates again.
2 more years of higher interest rates could do some serious impact to economies/asset prices.
I'm a little surprised that he thinks it is that far away (as opposed to next year).
“We believe that we are in a tightening mode that can cause corrections or downward moves to many financial assets,” Dalio, the founder of Bridgewater Associates LP, said in an interview with the newspaper. “The pain of that will become great and that will force the central banks to ease again probably somewhere close to the next presidential elections in 2024.”
Most American mortgages have a fixed rate for the life of the loan.
Rising rates don't lead to the same kind of instant pain for American homeowner borrowers. They can more easily handle 2 years of higher rates.
And maybe the FED put has expired for the share market after all?
[Ray Dalio] said stagflation – low growth and high prices – will force central banks to cut rates again in 2024.
Quite possible, after all we are basically dealing with the consequences of an excess stimulus event. That said in my layman opinion it appears unlikely the future will be ZIRP again because global demographics and trade imbalances have started to drive inflation.
This much is true. Tends to be why you hire experienced suppliers in the first place, though. Still, Novopay, INCIS etc...not to mention the myriad failures in software projects in the private sector. (I recall the Bank of Queensland lots $10 million on a failed Salesforce trial.)
I think (hope) the banks will avoid ultra low rates for a long time. Its created an asset bubble of nightmare proportions that may result in a long and depressing few years for many people.
Hopefully they will rise the ocr a few points over the next year or so then stablise and remain balanced somewhere between 3 and 5 %. Where it ought to live.
In pushing through the new share structure Fonterra has to convince the govt it is giving the farmers what they want.
However the slide in share price from at one time $6.00 and more recently $4.50 to a recent low of $2.25 is really hurting some farmers balance sheets. With an average of 150,000 shares per farm the average dairy farmer has lost $300,000 in equity since end April..Like any business that affects the banks security ratios and interest risk rates. Farmers are starting to speak up.
Yes, its going to be a really interesting time to see the impact that rate rises have on asset prices in nominal and real terms the next 12-24 months. These are fascinating times in history from a finance/econ perspective (perhaps one in a hundred year event) if you can look beyond the suffering that might be upon us....which of course you would prefer to avoid if possible...but it appears that central banks have backed the world into a tight corner by overstimulating economies the last few years....and have often been encouraged to do so by parts of society when they believe short term self interest is a higher priority than longer term financial and social stability. Hard to tell if one should feel compassion if the pain ahead is going to be as bad as some are predicting, or whether you should just look away with condemnation after the stupidity you have witnessed 2008 to now.
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