A review of things you need to know before you sign off on Wednesday; house prices drop, current account deficit widens, foreigners invest more, foreign debt lower, swaps up yet again, NZD soft, & more

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
Unity Money (ex NZCU Baywide) raised home loan rates for 6 and 12 months.

TERM DEPOSIT & SAVINGS RATE CHANGES
The Cooperative Bank has raised most of its TD rates. Unity Money also raised their TD rates. TSB also raised its Websaver rate from 0.70% to 1.10%.

HOUSE PRICES DOWN, VOLUMES DOWN SHARPLY
The REINZ is reporting significant house price declines in most parts of the country in May. In fact, Median prices in Auckland now lower than they were a year ago, with the median price on the North Shore down by -$145,000 in May. Sales volumes dived to be -28% lower than for May 2021, and -30% lower than the average of the five May months prior to the pandemic.

WIDENING C/A DEFICIT DOESN'T MATTER - UNTIL IT DOES
The Q1-2022 current account deficit widened in data released today to -$8.5 bln. That was $1.9 bln worse than the previous quarter, mainly due to an $871 mln rise in the value of goods imports and an $831 mln fall in the value of services exports. For the year, the C/A deficit has topped -$23.3 bln or -6.5% of GDP which is up markedly from -5.8% of GDP for the year to December 2021. But for all that, this is about what markets expected. (For perspective, the US current account deficit is -3.1% of GDP.)

MAERSK LAUNCHING NZ COASTAL SHIPPING SERVICE
Global shipping line Maersk says it's launching a dedicated New Zealand coastal service, Maersk Coastal Connect, for the first time in its 25 years of operating in New Zealand. Maersk will use two 2,500 TEU container vessels on a weekly basis sailing between Timaru, Lyttelton, Nelson, Auckland and Tauranga. It says the combined North to South and South to North capacity will reach 250,000 TEUs annually with the service to start on July 12 to be operated by NZ crew.

FOREIGNERS INVESTING HERE
Reassuringly, foreigners still like investing here. Foreign investment recorded a net inflow of $4.5 bln (which increased liabilities) in the March 2022 quarter. This was mainly driven by portfolio investment net inflow of $4.8 bln and direct investment net inflow of $2.5 bln.

LOWER FOREIGN DEBT
At 31 March 2022, New Zealand’s international assets were $342.1 bln, $4.8 bln less than at 31 December 2021. International liabilities were $502.3 bln, down $7.0 bln over the same period. This resulted in a net liability position of $160.2 bln, $2.2 bln narrower than at 31 December 2021 and 46% of annual economic activity. In 2019 before the pandemic it was 57% of GDP.

FILLING ITS BOOTS
We recently noted that ASB was looking for $100 mln in an unsecured five-year bond issue plus the ability to accept unlimited oversubscriptions. In the end they accepted $750 mln from investors, and are paying 5.52% for these funds. For comparison, ASB offers term deposit investors 4.0% for a five year term.

TRIGGERED
There was a carbon market auction today. Demand was sufficient to trigger release of remaining 1.6 mln units units from the cost containment reserve in addition to the regular 4.8 mln units scheduled. NZUs traded at $76.00 today, above the trigger price of $70, so that is why the reserve additions were released. The recent history of the NZU carbon price is displayed in the RH sidebar of the desktop version of our rural section.

SIGNS OF TOUGHER TRADING FOR SMEs & COMPANIES
Credit rating agency Equifax is noting that consumer delinquency volumes remain flat for 30 and 90 days past due bands, with mixed experience by product; Telco & utilities delinquencies have increased month-over-month for April 2022 across both delinquency bands, with some rise in 30 days past due for vehicle loans. They also see more commercial debt delinquencies, led by construction industry delinquencies.

MAERSK LAUNCHING NZ COASTAL SHIPPING SERVICE
Global shipping line Maersk says it's launching a dedicated New Zealand coastal service, Maersk Coastal Connect, for the first time in its 25 years of operating in New Zealand. Maersk will use two 2,500 TEU container vessels on a weekly basis sailing between Timaru, Lyttelton, Nelson, Auckland and Tauranga. It says the combined North to South and South to North capacity will reach 250,000 TEUs annually with the service to start on July 12 to be operated by NZ crew.

SHARP JUMPS
Yesterday there were some very unusual jumps in wholesale and benchmark interest rates. They continued today although not by quite as much (see below). These sharp rises in local wholesale swap rates, followed by an 11 year high for the main US Treasury benchmark, are putting mortgage borrowers on notice that they face even higher rates in the very near future

SWAP RATES UP FURTHER
We don't have today's closing swap rates yet but they have probably jumped yet again. Additional rises of more than +5 bps will likely be recorded. The 90 day bank bill rate is up at 2.75%, a second consecutive day it has risen by +9 bps. That means it is now a better than equal chance of a +75 bps rise at the next RBNZ OCR review. The Australian 10 year bond yield is now at 4.10% and up another +12 bps from this time yesterday. The China 10 year bond rate is now at 2.84% and up +1 bp. And the NZ Government 10 year bond rate is now at 4.30%, and up another +8 bps from this time yesterday and just higher than the earlier RBNZ fix for this bond which was also up +7 bps at 4.29%. The UST 10 year is now at 3.42% and up +6 bps since this this time yesterday (although it did hit 3.50% earlier).

EQUITIES FALL HARDER
On Wall Street the S&P500 ended its Tuesday session down -0.4%. Tokyo has opened down -0.7%. Hong Kong has opened up +1.3%, with Shanghai up +1.2%. The ASX200 has opened its Wednesday session down -0.3% in early afternoon trade. The NZX50 is flat in late trade today.

GOLD DOWN
In early Asian trade, gold is down -US$9 from this time yesterday, now at US$1816/oz. But that is higher than the US$1811/oz it closed at in New York.

NZD SLIPS FURTHER
The Kiwi dollar is lower again, but only marginally from this time yesterday, now at 62.4 USc. Against the AUD we are little-changed at 90.2 AUc. Against the euro we are -½c softer at 59.7 euro cents. That all means our TWI-5 is lower at 70.5 and -20 bps lower in a day.

BITCOIN STOPS FALLING
Bitcoin is holding at its new lower level, now at US$21,869 and up 2.3% from where we were this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.5%.

This soil moisture chart is animated here.

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