What happened Tuesday

Business / news

A review of things you need to know before you sign off on Tuesday; home loan rates and floor rates up, food prices up, rent inflation eases, ASB bond well supported, swap rates higher, NZD slips, & more

14th Jun 22, 3:59pm by David Chaston

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
BNZ and HSBC both changed fixed home loan rates today. More here.

7.60% IS THE NEW 7.35%
ANZ has raised its mortgage test rate/floor rate (which they call the Servicing Sensitivity Rate). They have increased it from 7.35% to 7.60% as at June 13, 2022.

TERM DEPOSIT & SAVINGS RATE CHANGES
BNZ raised its term deposit rates for terms up to one year.

SELLERS RUSH TO SELL
Trade Me Property has seen its biggest ever monthly drop in average asking prices, with declines in all regions while the number of listings skyrockets.

SHARP FOOD PRICE RISES
Food price inflation surged again in May, up +6.8% in a year. Grocery food items rose 1.1% in May from April, an annualised rise exceeding +13% and mirrored in our our Grocery Price Monitor.

ASB SET TO BORROW MORE THAN $400MLN THROUGH BOND ISSUE
ASB says it has received interest in a five-year issue of unsecured, unsubordinated fixed rate bonds worth more than $400 mln. The bank had said it was looking to borrow at least $100 million, and was open to accepting unlimited oversubscriptions at its own discretion. An indicative margin has been set at 1.05% per annum, with bids due by 10am Wednesday. The ASB issue follows a recent five-year BNZ bond that saw it borrow $650 million at a margin of 1.05%, giving a yield of 4.985%.

RESERVE BANK EXTENDS TIMELINE FOR LIQUIDITY POLICY REVIEW
The Reserve Bank says it has received "broad support" for the review of its liquidity policy for banks. It's aiming to strengthen financial stability by lowering the likelihood of liquidity problems affecting deposit takers, and improve their ability to manage such problems. In response to feedback the Reserve Bank says it has amended one of its review principles, to ensure one of the aims of the review is to promote and facilitate consistent interpretation and implementation of the revised policy. An initial consultation paper was issued in February, and at least three more will follow, with the overall review timeline being extended by several months. It now aims to publish the final liquidity policy between the second and fourth quarters of 2025.

ANZ ACTIONS CATCH INSURERS OUT
OnePath Life NZ and Cigna Life Insurance will jointly pay $180,000 to the Financial Markets Authority after admitting liability for breaching the fair dealing provisions of the Financial Markets Conduct Act 2013 (FMCA). The breaches relate to misleading representations ANZ made when issuing monthly credit card statements to certain ANZ customers who held credit card repayment insurance (CCRI) policies with Cigna and OnePath. Although OnePath and Cigna did not directly make any misleading representations to their customers, they admitted liability for the misleading representations made by ANZ (as their agent) under section 536 of the FMCA, a provision which can deem product and services providers to be liable for the conduct of their agents in certain circumstances. (OnePath no longer exists as an insurer in NZ having been acquired by Cigna in 2020.)

RENTAL INFLATION EASES
According to the Stats NZ rental indexes, rents fell in May for newly rented residences. That was essentially driven by Auckland rentals. But the steam has gone right out of the Wellington increases, although Canterbury rises are ongoing if at a slower rate. For all properties, including that already tenanted, the annual rise though to May has been +3.8%. (Remember , these are very broad indexes covering all types of dwellings and rental arrangements.)

END OF A GREAT HOUSING BOOM?
In Australia, they revealed today that the total value of all residential dwellings was AU$10.174 tln, for an average value of AU$942,000 each. That ranges from an average of AU$509,000 in the NT to $1,222,000 in NSW.. The overall housing stock value rose a startling +21.7% in the year to March. For homeowners and landlords, that is a rise of +AU$1.8 tln, or +AU$168,000 per dwelling on average.

SWAP RATES JUMP HIGHER
We don't have today's closing swap rates yet but they have probably jumped sharply yet again. Additional rises of more than +10 bps will likely be recorded taking the two year to its highest since 2015. The 90 day bank bill rate is up at 2.66%, a +9 bps rise. That means it is now an equal chance of a +50 bps or +75 bps rise at the next RBNZ OCR review. The Australian 10 year bond yield is now at 3.98% and up +21 bps from this time yesterday. The China 10 year bond rate is now at 2.83% and up +1 bp. And the NZ Government 10 year bond rate is now at 4.22%, and up another +20 bps from this time yesterday and matching the earlier RBNZ fix for this bond which was also up +20 bps at 4.22%. The UST 10 year is now at 3.36% and up +18 bps since this this time yesterday.

EQUITIES FALL HARDER
On Wall Street the S&P500 ended its Monday session down -3.9% with late weakness. Tokyo has opened down -2.1%. Hong Kong has opened down -0.7%. And Shanghai has opened down -0.6%. The ASX200 has opened its Tuesday session down -4.6% in early afternoon trade (and accounting for their holiday yesterday). The NZX50 is down -3.0% in late trade on top of yesterday's -1.5% drop.

GOLD DOWN
In early Asian trade, gold is down -US$38 from this time yesterday, now at US$1825/oz.

NZD SLIPS FURTHER
The Kiwi dollar is lower again, down -¾c from this time yesterday, now at 62.6 USc and down -20 bps from where we opened this morning. Against the AUD we are unchanged at 90.3 AUc. Against the euro we are marginally softer at 60.2 euro cents. That all means our TWI-5 is lower at 70.7 and -40 bps lower in a day.

BITCOIN WOES WORSEN
Bitcoin is taking another big hit today, now down to US$21,378 and down almost -17% from where we were this time yesterday. Volatility over the past 24 hours has been outlandishly extreme at +/- 13%.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

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.

76 Comments

by Independent_Observer | 14th Jun 22, 4:09pm 1655179752

"And the NZ Government 10 year bond rate is now at 4.22%"

Amazing how quickly this is rising. was 2.5% back in March, 1.5% this time last year.

When you look at bond yields and inflation charts over the long term (25+ years), it looks like we may have just gone through a huge structural turning point in the world economy the last few years....something that happens every 40years or so, or 80 years for the whole cycle (in terms of peak deflation/low interest rates, through to high inflation/high rates).

Aligns with Dalio's long debt cycle and that typically last around 80years. 1945/46 (Bretton Woods) through now is a 75ish year period so timing is about right for the cycle to reset.

by donny11 | 14th Jun 22, 4:16pm 1655180202

That's a significant rise. How long until our PM starts harping on about the "evil bond vigilantes"? 2-3 months maybe....

by Foxglove. | 14th Jun 22, 4:35pm 1655181330

Unless it’s a brand of stockings wouldn’t think this PM knows too much about bonds actually. Still completely absorbed in the 2017 promise of lifting folk out of poverty. All that good work scuttled now of course by such extreme food prices as described on here. Still handy to have something to blame isn’t it.

by blobbles | 14th Jun 22, 4:26pm 1655180772

Yep, look at those swap rates sky rocket. The 10 years back up to where we were 8 years ago! Major changes afoot.

by Tim Depositor | 14th Jun 22, 4:06pm 1655179575

Heartland Direct Call savings to 1.9%.

by blobbles | 14th Jun 22, 4:22pm 1655180566

Still losing about 5% a year to inflation...

by Tim Depositor | 14th Jun 22, 4:25pm 1655180749

Better than a kick in the teeth. Or the house value crashing

by Norm | 14th Jun 22, 7:49pm 1655192961

Better than the majority of asset classes at the moment.

by Foxglove. | 14th Jun 22, 5:40pm 1655185247

Vector today rolling over VCT080 bonds at either 5.5% or 1.8% above the five year swap rate, whichever the higher maybe. Anybody able to fix what the rate is to be accordingly?

edit. oh apologies shud have looked first, 6.23% is the answe

by Justa comment | 14th Jun 22, 7:25pm 1655191540

less than the ocr.............

by Audaxes | 14th Jun 22, 4:10pm 1655179849

The Reserve Bank says it has received "broad support" for the review of its liquidity policy for banks. It's aiming to strengthen financial stability by lowering the likelihood of liquidity problems affecting deposit takers, and improve their ability to manage such problems.

Banks don't take deposits and they never lend money. They are in the business of purchasing securities. When one gets a bank loan, the loan contract is a promissory note. The bank purchases that contract from the borrower. Now the bank owes the borrower money and it creates a record of the money it owes, which we call deposits - source.

by chebbo | 14th Jun 22, 4:16pm 1655180188

Volatility over the past 24 hours has been outlandishly extreme at +/- 13%

How is "volatility" defined here? From what I can see it has been quite a smooth, consistent (albeit steep) fall.

by Baywatch | 14th Jun 22, 4:18pm 1655180305

NZD or BTC?

by chebbo | 14th Jun 22, 4:29pm 1655180990

The quote was referencing BTC.

by Whatwillhappen | 14th Jun 22, 4:24pm 1655180674

From memory, a 5% daily change is high volatility. 13 = outlandishly extreme is a fair call (my crypto trading platform marks a 17% swing in the last 24 hours). Imagine if a share price changed that much in 24 hours outside of a black swan event? Markets would freak out.

Crypto is in a weird place. Having bought my crypto at the peak ($50 worth, they say don't risk more than you can afford to lose, lol) I can say I'm looking at minimising my losses at the moment by setting auto buy and sell when predetermined prices are set. I sold half when the price dropped to $35k NZ, and it's since dropped to $31k and come back up to over $35k, which means I've diluted my stake. I wonder if a lot of the fluctuation we're seeing is due to a lot of automated trades like this from people with a lot more to lose than I have trying to hedge their losses.

by lonewolfnz | 14th Jun 22, 4:29pm 1655180945

Some shares like paypal have had daily falls like that!

I've been dollar cost averaging in since the Luna crash to $31k. I got a buy in at $21.3k today, just missed buying sub $21k.

More pain to come possibly, we'll see.

Fear and greed is at 8%, record low!

by Whatwillhappen | 14th Jun 22, 4:34pm 1655181240

How many falls like are because the veil was lifted and markets saw the emperor had no clothes, versus the main customer of a company went into liquidation owing $$$? I see crypto like that - there's been a lot of hype, now it's reverting to a more realistic price.

by JimboJones | 14th Jun 22, 4:40pm 1655181654

That being 0?

by J.C. | 14th Jun 22, 4:42pm 1655181731

The emperor (Celsius) has clothes. I think current redemption for BTC is being talked about at USD17K. What is happening with Celsius is not setting the price. We've been in a bear market for quite some time.

by J.C. | 14th Jun 22, 4:36pm 1655181377

Spooky that JPM announces this while the BTC and altcoin asset markets are in turmoil.

JPMorgan on its crypto plans: ‘The overall goal is to bring these trillions of dollars of assets into DeFi

“Over time, we think tokenizing U.S. Treasuries or money market fund shares, for example, means these could all potentially be used as collateral in DeFi pools,” Lobban said. “The overall goal is to bring these trillions of dollars of assets into DeFi, so that we can use these new mechanisms for trading, borrowing [and] lending, but with the scale of institutional assets.”

Conspiracy?

https://fortune.com/2022/06/12/jpmorgan-on-its-crypto-plans-the-overall…

by Audaxes | 14th Jun 22, 5:34pm 1655184875

J P Morgan is talking about employing blockchain record methodology for trading and settling existing collateral instruments such bonds and MM Funds. Correct and enlighten me if I am wrong.

by J.C. | 14th Jun 22, 6:08pm 1655186926

Yes. It's unclear why blockchain is fit for their purposes.

by EdwardD | 14th Jun 22, 8:08pm 1655194088

I'm a huge fan of blockchain - it would make total sense to use it for this purpose. It ensures the authenticity of digital record.

by DTRH | 14th Jun 22, 4:16pm 1655180188

NZD falling off the chart and will just make inflation higher

by fortunr | 14th Jun 22, 4:23pm 1655180630

There must be an emergency OCR increase by at least 75 bps, and right now. The RBNZ is simply too slow in raising interest rates, and this will force them to raise more aggressively later on. An OCR peak of 5% is now becoming a distinct possibility, and the RBNZ tardiness is actually making the problem worse.

by kiwikidsnz | 14th Jun 22, 4:28pm 1655180922

The Fed may increase 0.75% this week, if so then RBNZ needs to go up 1% to stop the NZD falling off a cliff & driving tradeables inflation

by Carlos67 | 14th Jun 22, 5:54pm 1655186051

Funny I said 1% last rise and everyone laughed at me here.

by Baywatch | 14th Jun 22, 6:41pm 1655188873

We will stop laughing if they have the balls to do it, me thinks they cannot.

by kpnuts | 14th Jun 22, 6:54pm 1655189676

not at the concept -- most people here agree we need to go higher faster - we laughed at teh concept that Orr would actually do it !

by Jonny.Foe | 14th Jun 22, 9:37pm 1655199459

In NZ, we have outstanding mortgages of around $330bn (about 100% of GDP?) and most mortgagors (thx adx!) are on short-term fixes that are expiring in the next year or so. In the US they have comparable levels of mortgage debt per head, but most mortgages are 30-year fixed rates. Hence, in NZ, a 1% increase in rates becomes a 1% to 3% reduction in overall consumer spending within 6 months to a year - whereas this would take ten years or more in the US.

So, if we try and keep OCR 100 pts or so above the US Fed rate to protect the value of the NZD (by attracting overseas buyers of NZD denominated financial assets), we will destroy the economy in 2022. My view, which I have repeated for the last couple of months, is that the leading indicators already show the start of our 2022 Q3 and Q4 recession.

Maybe we need to find an alternative to cutting real wages and throwing people on the dole everytime we get an economic shock - the next few years do not exactly look like smooth sailing.

by lowercase capitalist | 14th Jun 22, 6:02pm 1655186549

Maybe we need to find an alternative to cutting real wages and throwing people on the dole everytime we get an economic shock - the next few years do not exactly look like smooth sailing.

Suppose you were in charge, what would be your preferred alternative?

by Audaxes | 14th Jun 22, 6:03pm 1655186637

In NZ, we have outstanding mortgages of around $330bn (about 100% of GDP?) and most mortgagees are on short-term fixes that are expiring in the next year or so.

I think you mean mortgagors.

by Jonny.Foe | 14th Jun 22, 9:36pm 1655199391

Indeed I do.

by Independent_Observer | 14th Jun 22, 6:31pm 1655188273

"Maybe we need to find an alternative to cutting real wages and throwing people on the dole everytime we get an economic shock - the next few years do not exactly look like smooth sailing"

Maybe we need lower house prices and hold smaller mortgages.

by Norm | 14th Jun 22, 8:54pm 1655196894

Interest rates are still low, historically, though. Surely you'd agree they need to increase further. I don't know what the new normal will be but it has to be higher than they are now.

by Fitzgerald | 14th Jun 22, 8:56pm 1655196984

The economy was destroyed when house prices rose 30% in a year.

The damage has already been done.

by Sluggy | 14th Jun 22, 9:26pm 1655198802

I am expecting a massive downturn coming up. I have no idea of what is currently happening, my business is running at 50% ahead of last years sales, we don't sell necessities, is this the last hurrah ?

by Squishy | 15th Jun 22, 1:54am 1655214841

We know how to deal with unemployment, stop issuing visas and residence permits. The number of jobs created within our economy exceeds demand anyway.

by Audaxes | 14th Jun 22, 4:19pm 1655180395

The 90 day bank bill rate is up at 2.66%, a +9 bps rise. That means it is now an equal chance of a +50 bps or +75 bps rise at the next RBNZ OCR review.

Given the importance in the transmission mechanism, it is not surprising that the presence of a fairly strong link between real interest rates and real macroeconomic activity appears to be strongly imbued in the underlying beliefs of many economists and policy makers. …the weak empirical evidence for this link underscores the need for research…(p. 110). Link

by Audaxes | 14th Jun 22, 4:24pm 1655180643

“There’s nothing to suggest a recession is in the works,” Ms. Yellen said.

Sure, to a former Fed-blind person, the ENTIRE bond market pricing for recession equals "nothing."https://t.co/D9ts2sgLCR

— Jeffrey P. Snider (@JeffSnider_AIP) June 13, 2022

by lonewolfnz | 14th Jun 22, 4:29pm 1655180996

What do the clever people on here think about term deposit rates and terms? I'm thinking of 2.4% for a 6 month lock. I figure by the unlock perhaps it will be closer to 4% PA?

by Carlos67 | 14th Jun 22, 6:00pm 1655186447

I fixed for 12 months at 2.3% back in Feb. Looks low now but obviously it was not worth waiting for a better rate. Looks like my prediction of 4.8% in Feb 23 is guaranteed now may even be in the 5's when Orr goes 100bp next rise. Go 6 months mate it will be double when it comes out.

by Antz | 14th Jun 22, 6:29pm 1655188163

I've been getting 2.6% on 6-months TDs for two months now. This month's 6-month TD will be at either 2.9% or 3.0% (Rabo or Heartland).

by Galloleous | 14th Jun 22, 7:10pm 1655190659

Heartland compounds quarterly, so can swindle a tad bit more with them. Both good banks that I have used multiple times in the past.

by Justa comment | 14th Jun 22, 7:29pm 1655191793

better with 2.2% Rabo 60 days notice saver which will be about 2.6% in 30 days time at next OCR rise June 13. So 2.4% for 6 month TD - no.

by Norm | 14th Jun 22, 8:12pm 1655194332

July 13th and yes

by JamesM | 14th Jun 22, 11:11pm 1655205096

What about 4% on 12 months with SBS?

by JimboJones | 14th Jun 22, 4:45pm 1655181935

Its a funny world when buying a few bytes of nothingness seems cheap at US$21,378.

Any theories on the bottom of this cycle? Or is this the last cycle, the one where it goes to 0?

by Normac | 14th Jun 22, 8:06pm 1655193991

Nothings changed with regards to BTC, only what people are prepared to pay for one. If it was going to 0 it would already be there.

by rastus1 | 14th Jun 22, 8:30pm 1655195405

Just ask Peter Schiff.

by Poppyc | 14th Jun 22, 9:25pm 1655198731

But don't ask his son - who went all in on BTC

by Fairlyfrank | 14th Jun 22, 4:48pm 1655182094

Meanwhile in batman's cave the RBNZ extends the liquidity review out to 2025 . Acted like lightning to lower interest rates and remove DTI , which rocketed realestate and vastly increased bank lending now due to the exposure of said banks and concerns for depositors it is considering the banks liquidity status !!!!! No depositors guarantee has released banks to offshore their profits all this as we enter the danger zone of the repercussions of their actions.

by J.C. | 14th Jun 22, 6:16pm 1655187385

Even after this huge crash, bitcoin still beats all pretenders for long-term saving

If you spent the last 5 years saving $100 a month, here's what you would have today if you put it in:

Bitcoin: $29,212

S&P500: $7,743

Dow Jones: $7,654

Gold: $7,089

PIMCO Active Bond ETF: $5,387

by chebbo | 14th Jun 22, 6:53pm 1655189606

Saving is about looking forwards, not backwards.

by J.C. | 14th Jun 22, 7:21pm 1655191262

Saving is about looking forwards, not backwards.

Agreed. What I posted was to show how people perceive things. If I had asked you which of the asset classes had performed better without showing you the returns, then I don't suspect you would have chosen Bitcoin. System 1 thinking.

by JimboJones | 14th Jun 22, 9:28pm 1655198905

I reckon most people know Bitcoin has done well. But surely there was a much bigger level of risk in what seems to be a very speculative asset, so it’s hard to compare to those other relatively safe options. If I put money on red at the Casino and it came up red, does that make the Casino a better investment than the S&P 500?

Good on the people that have made crap loads in Bitcoin, I wish I had done the same. But that doesn’t mean it will keep on going up. Maybe it will, maybe it won’t.

by Carlos67 | 14th Jun 22, 10:34pm 1655202865

Yeah but that's like saying I bought my house for cash less than 2 years ago and paid nothing extra and made $150k. All good in hindsight but where is everything going now ?

by HolbornDairies | 14th Jun 22, 6:22pm 1655187769

NZX 2022/23 Milk Price Futures are trading at all-time highs today ... $10.44 , so there is some good news out there for the NZ economy. Fonterra's payout to farmers in the next 12 months will all likely be a new record ( possibly up to 10% higher than this year's huge number )

by Justa comment | 14th Jun 22, 7:32pm 1655191945

Thats good news. Target some of that FLP to the dairy industry...........

by chebbo | 14th Jun 22, 6:57pm 1655189867

Additional rises of more than +10 bps will likely be recorded taking the two year [swap rate] to its highest since 2015

Turns out it was more than that. The two year swap is now at levels last seen in 2010.

by Vivid | 14th Jun 22, 7:04pm 1655190292

Try the same with the 1 year swap and it takes you back to 2008 levels

by Independent_Observer | 14th Jun 22, 7:10pm 1655190604

Wow...yes just looked at that....I thought the 1 year might take out 4% in July at some point....not today!!

Looking at how vertical those swaps are going.....its giving me a sinking feeling that we might be in far more trouble structurally across the financial markets than I initially thought.

by realterms | 14th Jun 22, 7:29pm 1655191792

Today's jumps are so big it almost makes me question the data. 40bps across the board!?

by Independent_Observer | 14th Jun 22, 7:39pm 1655192365

Pricing in another 50bps OCR rise - perhaps a flow on from the US CPI data?

Might be another indication OCR is behind and should be up closer to 3% already.

by realterms | 14th Jun 22, 8:00pm 1655193645

Pretty much following treasuries so not NZ specific I think.

by Trickledown | 14th Jun 22, 8:07pm 1655194078

I genuinely had to double take at the jumps. I’ve checked them daily for a long time and after yesterday and today’s news and developments I expected 10-15bps as a large jump. The angle of these increases is getting too close to near vertical for my liking.

Cue the massive reductions in disposable income of those good 50% who are re-fixing this year. Good luck to the economy.

by Independent_Observer | 14th Jun 22, 7:13pm 1655190786

Even the 3-10y swaps that had flattened out are now head north again.

by Independent_Observer | 14th Jun 22, 7:07pm 1655190461

Yes crazy jumps higher....may not take long to surpass the 2010 levels and be back to the steep drop down from the GFC response.

by Independent_Observer | 14th Jun 22, 7:21pm 1655191299

Looking at swaps, anyone else get the feeling that central banks are now going to have to accelerate the rate of cash rate rises?

(and it might be like chasing one's own tail?...raising rates, initially increases inflation as costs rise and they are passed through to consumers via higher goods/services costs...until something breaks...)

by Squishy | 14th Jun 22, 7:43pm 1655192605

The Kiwi (NZD) is falling like a stone again! If it keeps going we'll need some measures aimed at currency stabilisation soon. We can't control inflation with a weakening currency.

by Independent_Observer | 14th Jun 22, 7:48pm 1655192922

Yes looks like we might be heading below 0.60 in the coming weeks.

by Norm | 14th Jun 22, 8:52pm 1655196771

Isn't a better description, the US$ is strengthening, as many currencies, including the AU$ are falling relative to the US$.

by HouseMouse | 14th Jun 22, 10:30pm 1655202631

Stress testing at 7.6% - ouch!

In a couple of months that will be 8%, and the crash will really start to gain momentum.

by Averageman | 15th Jun 22, 8:40am 1655239243

Indeed. If the dollar continues to tank rates have to go up. Let's not get deluded that we are in control. Song quote time...

Pressure pushing down on me

Pressing down on you no man ask for

Under pressure

That burns a building down

by HouseMouse | 14th Jun 22, 10:34pm 1655202843

Dear old Liam at the Herald calling the sharemarket officially a bear market.

A way to fall yet...

by kazadi | 14th Jun 22, 11:00pm 1655204426

Righto you clever blokes. Say yes if you know what unsubordinated means without googling it ?

And, while I'm here, Jacinda is the new robin hood... feel free to have a think about that for a minute..

I would love to find out what she was doing at blackrock recently