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
The Cooperative Bank, Heartland Bank, ICBC and Kookmin Bank all raised home loan rates. See this. (Note that Coop Bank have subsequently "adjusted" their 2 and 3 year fixed rates back down.) Update: ANZ has pushed through some new chunky increases. More here.
TERM DEPOSIT RATE CHANGES
Kiwibank raised its term deposit rates for all terms one year and shorter by between +10 bps and +15 bps. Update: ANZ also raised their TD offers sharply too.
HARDER AND EARLIER
An Official Cash Rate of 3.0% before end of August is now seen as increasingly likely by the ANZ economists who have changed their call and now see the Reserve Bank making another two double-jumps in the OCR at the next two reviews. They are not ruling out a +75 bps hike in July.
ALL IS NOT LOST
Last week we noted the factory PMI rose, somewhat unexpectedly and not convincingly (because new orders slipped). Today, the services PSI rose much more convincingly based on very strong new order levels. And BNZ economists said today that Q2-2022 will expand to put the Q1 contraction behind it.
WITHERING CAPITAL
As we noted over the weekend, the NZX50 had a tough week last week, down -4.8% and it was across the board. The listed property sector fell a similar -4.3% to extend a losing run. Everyone fell in that sector. The largest falls were from Stride (SPG, #30, -6.4%), Argosy (ARG, #29, -6.1%) and Investore (IPL, #40, -5.1%). Of course, it makes sense these valuations are falling as interest rates rise. Property equities are valued on a yield basis, and no matter how 'good' their portfolio is, share prices will fall as benchmark interest rates rise. Pray for dividends.
MORE LISTINGS, FEWER SALES
After another weekend where the number of houses auctioned in Australia rose sharply, unfortunately for sellers, the clearance rate there slipped further. Still at 57% is is far above the equivalent New Zealand clearance rates we are seeing.
UNCHANGED
Chinese authorities reviewed their Prime Loan rates today, and left them unchanged. (In late May, their Premier released a 33-point rescue package to avoid an economic contraction in Q2-2022.)
SWAP RATES SOFT
We don't have today's closing swap rates yet but they may well be falling. The 90 day bank bill rate is down -1 bp at 2.79% today. The Australian 10 year bond yield is now at 4.04% and down -5 bps from where we opened today. The China 10 year bond rate is now at 2.80% and dipping -3 bps in early trade. And the NZ Government 10 year bond rate is now at 4.22%, and down -7 bps from this morning and now lower than the earlier RBNZ fix for this bond which was up +3 bps at 4.26%. The UST 10 year is now at 3.23% and unchanged.
EQUITY MARKETS OPEN 'LOST' FOR DIRECTION
The week has opened on the NZX with the NZX50 little-changed in late trade from where we left it on Friday. However, the ASX200 is down -0.6% in mid-day trade there. Tokyo has opened down -1.7%. Hong Kong also opened lower but is back even in their early trade. Shanghai has opened flat as well. The S&P500 futures suggest Wall Street will open tomorrow flat too.
GOLD HOLDS
In early Asian trade, gold is up +US$3 from the morning open, now at US$1843/oz.
NZD HOLDS
The Kiwi dollar is recovering some of its weekend weakness and now at 63.3 USc. Against the AUD we are firmer at 91 AUc. Against the euro we are holding at 60.2 euro cents. That all means our TWI-5 is firmsih at 71.2 but really little net change since Friday.
BITCOIN BELOW US$20,000
Bitcoin started today below US$20,000 but has attempted to push back up above that level and had done so for a few hours. But now the softness has returned and it is currently below again, now at US$19,846. Still, that is higher than where we opened this morning at US$19,403. In between it rose to US$20,783 but has been as low as US$17,935 in the past 24 hours. Volatility over the past 24 hours has been unstably extreme at +/- 7.9%.
Daily exchange rates
Select chart tabs
Daily swap rates
Select chart tabs
This soil moisture chart is animated here.
Keep ahead of upcoming events by following our Economic Calendar here ».
51 Comments
Was talking to the local cafe owner yesterday. Says that she's noticed a significant drop off in revenues the last 2-3 weeks.....noticeably outside normal trading trends for this time of year.
Says that she is still selling an ok number of coffees, but people who would usually stop and have lunch aren't buying food anymore.
Apparently this is common among the local cafes she had been talking to (not just an anomaly for the one store).
Sounds like the the higher cost of living is starting to creep into discretionary spending.
I do feel for hospo and know that they are just passing on costs and dealing with staff and other shortages, but I've definitely noticed that costs are going up, portions are much smaller (incl. Protein, but also cakes etc), and service is suffering cause of staff levels. Which will lead to less custom which makes the problem worse. sorry I don't have any answers. I do try to support my locals anyway and still buy an expensive and small sweet with my coffee, which is probably better for my waistline.
The ANZ economists might still be a bit optimistic. While a double OCR jump of 50 bps each is almost a certainty, I would rate a good chance of a double OCR jump of 75 bps each. This is what is necessary anyway; the only question is whether Orr has the honesty and courage to acknowledge reality and just go for it - the OCR should be at the 3.5% level right now, and the longer it takes to reach that level the harder it is going to control inflation later on. Even the Fed has recently increased by 75 bps, and these aggressive steps are urgently necessary in the current situation.
Why hike at 75 bp increments? The RBNZ should be showing their might, power and dominance over the property and equities market and go at 100-150 bp each month!!! That would show everyone who's the real boss in town. No one dares take on the RBNZ when they're on a killing spree.
The difference between the NZX and houses is that most people who own shares haven’t leveraged up 5-9x. It’s not a prediction, but if property prices drop beyond a certain point it could trigger mortgagee sales (especially if combined with rising unemployment) and if those start up things could get out of control.
Also, if I lose 10% on stocks, I’ve lost 10% of my equity. If I’m leveraged 5x on a house and I lose 10% then I’ve lost 50% of my equity.
diyman - in a rising ponzi, that is averagely impossible. No bubble grows exponentially from cashed-up investment. It grows from borrow-and-jump-in greed.
The compounding factor here is that the planet is about to go backwards, permanently. So no repeat of the 70s.
The difference between the NZX and houses is that most people who own shares haven’t leveraged up 5-9x.
I think that misses the point a little. The NZX is undeniably influenced by the leverage of the financial system globally. The little people can run but they cannot hide.
"This is what is necessary anyway" - is it though? Looking at the comments above people might already be putting their wallets away. Its hard to put up prices when that happens.
The RBNZ has to set a mood by saying they will increase rates, but they don't necessarily have to do it to the extent that they say.
Maybe the great reset is the Fed and other CBs allowing super hot inflation for say 2 years (only jawboning about raising rates), burning out with a deep recession. The carnage would be extreme, but at least US debt to GDP would come down significantly. Would also provide a ripe environment to force adopt CBDCs and UBI. Can’t really see any other reason for them appearing to be so reckless…other than total incompetence.
https://www.stuff.co.nz/business/129022581/inland-revenue-applies-to-pu…
I'll just leave this here.
Stand back one, and ask what IR are after.
And it's a slice of fiat-issued proxy, currently sliding in 'value' owing to there being shitloads too much in circulation (compared to the little ball we all live on). By the time they get their slice - if - it will be worth less, on the way to being worthless.
This is the discussion we need to be having - beyond speculation/betting, what actually constitute wealth? And how do you account it, properly?
Because we are sure as hell well wide of that mark, currently....
Some of the financial illiteracy on that FB page is worrying. Lots of posts along the lines of “I’m topping up a IP mortgage and now rates are going up I’m topping up even more and rents are dropping what shall I do?” Its crazy that people have gone into property investing completely uneducated and completely blind!
If you didn't think the country was in trouble with people loading up with debt to speculate on house prices (while having no idea regarding risks), then going through the comments section of that FB page will be quite the experience for you....
Its been somewhat beyond belief for me for a number of years now at who our banks have been giving massive amounts of leverage to.
IRD applies to put Propeller Property into liquidation. Is this the same Propeller Property company that people on here talk about with the incessant radio ads?
Propellor Property founder Nikki Connors said the application was part of a “heavy-handed approach” by IR and that an arrangement had been come to.
I mean, I'm sure the IRD don't apply to put firms into liquidation on a whim but okay.
https://www.stuff.co.nz/business/129022581/inland-revenue-applies-to-pu…
Interesting. The following excerpt is illuminating:
Connors has a high profile herself. She was a top advertising creative in the 1980s, working for Saatchi & Saatchi, before moving into property investment. In her 2016 book, Connors said that by the age of 27 she was earning more than the prime minister of New Zealand.
Connors, who refers to herself as the queen of New Zealand property, dismissed the application.
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.