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
ANZ has pushed through some new chunky increases. More here. Bank of China has raised rates too, as did NBS (Nelson Building Society).
TERM DEPOSIT RATE CHANGES
ANZ also raised their TD offers sharply too. Am analysis is here. Wairarapa Building Society (WBS) raised its 3 month rate to 1.20%. HSBC raised their term deposit rates
LOSING CONFIDENCE
Consumer confidence has dived as the cost of living squeeze goes on, The Westpac McDermott Miller Confidence survey is now at its lowest-level ever as pessimism bites.
ANOTHER WORKING GROUP
The Government is to convene a taskforce to solve the plasterboard shortage problem. They will be tasked to investigate ways to increase plasterboard supplies. They have appointed Fletcher Building critics to this group.
ANOTHER WAY TO RAISE BOND FUNDS
ANZ New Zealand said it is looking to raise up to $250 mln of perpetual preference shares. It is also keeping the option to accept unlimited oversubscriptions at ANZ’s discretion. These preference shares are expected to constitute Additional Tier 1 Capital for their regulatory capital requirements. The share will not have a fixed term and will remain on issue indefinitely if not redeemed by ANZ. Similar bond issues from other main banks have been heavily oversubscribed. No other details, like the expected return, have been released yet. Preference shares are junior to bonds but senior to regular shares. They don't outrank depositors.
MIXED AUCTION AHEAD
There is another dairy auction tomorrow morning and prospects are quite mixed. The two big commodities are giving separate signals in the derivatives markets. WMP may hold, or even gain a little. But SMP looks set for a -3% fall.
"IT WORKED, BUT WE WON'T DO IT AGAIN"
As part of their pandemic response, the Australian central bank decided in March 2020 to target the yield on the three-year Australian Government bond as one way to keep interest rates low and encourage investment. The target was discontinued in November 2021. They have now been 'forced' to review its effectiveness and that hindsight review found the policy 'effective' but blunt, and they concede they wouldn't use it again.
MORE HIKES COMING
The RBA also released the minutes of its June meeting today, saying more rate hikes are coming to deal with their inflation problem. They said its huge monetary support is no longer needed given the strength of their economy and the current inflation pressures. In addition, their labour market is strong, as employment has grown and the jobless rate was at its lowest in near 50 years. They warned that further tightening is in the pipeline, with its size and timing being guided by the incoming data and the board's view of the outlook for inflation and the labour market. Financial markets yawned on this release.
GOVT EYES POWERS FOR COMCOM TO GET INFO ON LAND COVENANTS FROM SUPERMARKETS
Commerce and Consumer Affairs Minister David Clark says the Commerce Commission is to get new powers letting it require supermarkets to hand over information regarding contracts, arrangements and land covenants which make it difficult for competing retailers to set up shop. A Government committee has considered the Commerce (Grocery Sector Covenants) Amendment Bill, and proposed changes to boost the Commerce Commission’s information gathering powers. This will be included in the debate when Parliament considers the Bill this week, Clark says. He says the proposal means the Commission has legal mandate, and can access documents relating to contracts, arrangements and covenants to ensure compliance. Famously Foodstuffs opened a Pak'nSave on Wairau Road on Auckland's North Shore in 2009 after 18 years of trying, and legal battles with rival Progressive Enterprises. The Resource Management Act was blamed for that elongated battle.
REAL DEFICIT, FANTASY PROJECTIONS
Meanwhile, the NSW State Budget has revealed a very sharp escalation in its deficit. It has blown out to more than -AU$11 bln, far exceeding the AU$3.6 bln deficit forecasted in the 2021-22 half-yearly review just six months ago. The claims that it will return to surplus in just two years have the aura of fantasy. NSW forecasts rarely work out.
SWAP RATES RISE
We don't have today's closing swap rates yet but they probably rose sharply again today. Update: They fell away at the end and closed lower. The 90 day bank bill rate is up +1 bp at 2.80% today. The Australian 10 year bond yield is now at 4.13% and dup +9 bps from where we were yesterday. The China 10 year bond rate is now at 2.81% and little-changed. And the NZ Government 10 year bond rate is now at 4.28%, and up +6 bps from this time yesterday and now much higher than the earlier RBNZ fix for this bond which was down -4 bps at 4.22%. The UST 10 year is now at 3.30% and up +7 bps.
EQUITY PRICES FIRM
The NZX50 is up +0.6% in late trade today. The ASX200 is up +1.2% but that makes back yesterday's decline, so is up a similar amount to the NZX50 over two days. Tokyo has opened up +1.8%. Hong Kong has opened up +1.0% in early trade. Shanghai is down -0.4% in early Tuesday trade. All eyes are now on Wall Street and its weekly open tomorrow after today's holiday.
GOLD HOLDS
In early Asian trade, gold is down -US$2 from this time yesterday at US$1841/oz.
NZD HOLDS
The Kiwi dollar is marginally higher than this time yesterday, now at 63.4 USc. Against the AUD we are holding at 91 AUc. Against the euro we are softish at 60.1 euro cents. That all means our TWI-5 is still at 71.2.
BITCOIN JUST ABOVE US$20,000
Bitcoin started today below US$20,000 but has attempted to push back up above that level and is now at US$20,528 and +3.4% above the level at this time yesterday. Volatility over the past 24 hours has been high at +/- 3.6%.
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51 Comments
If NZD is holding but the US raised by .75 does that mean that we don't necessarily need to raise the OCR to keep the NZD stable?
Or is it more that the OCR is a bit irrelevant? (referencing ANZ raising mortgage rates based on swap rate increase which NZ has little to no control over?)
If share markets start falling significantly once more and people seek safe-haven currencies, you may see the NZD start dropping again regardless of interest rate parity theory and OCR moves.
If share markets start falling significantly once more and people seek safe-haven currencies, you may see the NZD start dropping again regardless of interest rate parity theory and OCR moves.
So during the GFC, JPY repatriation was seen as one of the reasons behind the strength of the yen relative to 'risk on' currencies like NZD or AUD.
It's becoming increasingly problematic with USD as the sole safe haven. I'm a little behind on CHF and its relevance at the moment.
And gold is also problematic as a safe haven because of the interference of the likes of JP Morgan and institutional inteference.
Yes it always becomes problematic when the holders of the worlds reserve currency have to start printing money in order to sustain their deficit spending....which they must do in order to pay for their excessive expenses required to maintain their global dominance....if they stop spending, they lose their reserve currency status because the lose the ability to maintain global influence/power.
Every time this has happened it is the beginning of the end for the holder of that currency in terms of being the world power and more often that not, results in geopolitical instability/war. People don't like uncertainty, especially not knowing who is in charge.
its quite possible we see a number of countries need to be bailed out by the IMF in the next 12-24 months...Sri Lanka might just be the tip of the iceberg.
"results in geopolitical instability/war"
I agree to a point but it is quite often a war which leads to debasement of the coin of the realm.
https://www.businessinsider.com/how-currency-debasement-contributed-to-….
Denarius into deny_are_us.
https://www.scoop.co.nz/stories/PO0807/S00263/ocr-irrelevant-to-inflati…
This seems familiar....
“High interest rates over recent years have seen our economic boom wasted on a ‘feel good’ housing bubble, rather than the development of the real economy."
Easy just slowly drop rates to zero for the next 14 years 2008 to now and make the so called 'feel good' housing bubble 2-3 times as big as it was back then....no problem!
Now that's how you use monetary policy effectively (sarc).
The real economy like manufacturing companies, tourism business, hospitality or maybe you mean international education. JA does not give a damn. She cares about control of the electorate and freebies that the 'real economy will fund ... increase in benefits, helicopter cash and extra public hols. This admin does not even take care of nurses or hospitals but Little Andrew insists they do and the faults lie with the previous national admin. Now if you work really hard and do really well you are allowed to fund even more freebies by paying a bit extra. Hey let's not invest in the feel good housing bubble anymore
"High interest rates over recent years have seen our economic boom wasted on a ‘feel good’ housing bubble, rather than the development of the real economy. This has simply served to generate a massive increase in our trade deficit.”
Not sure why he's referring to "high interest rates." I guess that means commercial lending.
Watched a very interesting interview with Jeremy Allaire from Circle last night. Circle is behind the 'stablecoin' USDC. Fascinating insights and Jeremy made a strong case for USDC being more secure than bank deposits. Also, interesting to note that Circle has frequent dialogues with the SEC and the Fed Reserve.
Here's a snippet and why a bank run is almost impossible with USDC. Approx USD108 bio of redemptions in P12M.
https://www.youtube.com/watch?v=HsH9xrHokBI
LOL that's funny you mean somebody just presses a button to hault all trading so a bank run is not possible.
Did you bother to watch it? Or are you saying that being backed 1:1 by USD and short-dated U.S. government obligations is a scam? If so, then everything is a scam.
The US dollar has no value. When it collapses (and all fiat currencies eventually do), it will make good toilet paper. US government obligations are not paid for by taxes anymore it is purely printed money. All these crypto currencies are just ever more fiat get rich quick Ponzi schemes. Even Bitcoin.
How does anyone make money out of it?
You don't. Unless you lend it. Circle has a lending facility but not for average punters.
People in countries such as Venezuela, Argentina, Lebanon, and Turkey prefer the relative store of value of USD over their own currencies.
It’s still possible to have a run on funds, like the recent Luna/Terra crash. That was a stable coin linked 1:1 also. People lost billions believing videos like this. The thing with these algorithms is that once they start spiralling down it’s a circle of death - so to me it’s funny that they call their lending arm circle. I like the idea and notion of these stable coins but their still just somebody’s idea and are not regulated. Crikey they are giving money to senators now in the US to try and get them defined as a commodity NOT a security, so saying they are secure, linked to SEC is a bit of link to far imho.
Must be time to print some more money and stimulate the housing market a bit more and get the wealth effect going again...
We can all have $2,000,000 houses while a good proportion of our kids go to school with dirty clothes and no food.
Obviously this is 100% sarcasm....but given that we're experiencing 1920's style inequality, it must be clear that by now we have figured our what not to do? That is, putting all of our capital/wealth into housing is a completely stupid concept. Now I'm no socialist, far from it, but even I can see that it makes no sense for our houses to be worth $1,000,000 while so many people are on struggle street. This system is completely broken and the sooner it dies the better. A couple of years of depression in order to have decades of improved equity is certainly worthwhile in my opinion. Of course those with everything to lose will disagree, but then again, its almost impossible to have an ethical conversion with people who in my opinion have lost their minds, and whose morals have been blinded by the prospect of capital gains (or the risk of losing 'wealth/paper money')
Indeed. Worth noting though that the inequality is a symptom of our broken economic system, which is geared to create extreme wealth and extreme poverty. If you upped benefits by $50 per week, for example, what would happen? Poor people would eat slightly better food and be slightly less stressed (all good), but that extra cash would soon accumulate in the pockets of the wealthy (landlords, pak n save owners, corporate shareholders etc). We need to change the gearing in the economy - and that means taxing excess, unearned wealth, so that our resources are more equally shared. Try getting that across the line in NZ!
Completely agree....more of the same, is only going to make things worse....then again I get the feeling we might be quite close to a tipping point where society really starts breaking down....see the violent crime and robbery of recent times. Things are getting quite desperate out there for some people.
Central banks are to me at the core of our problem. And the weightings they have towards risk and residential property lending are one of the big issues we need to address. Extending more and more credit to the already wealthy is insane when all it is doing is creating larger and larger divides between the haves and the have nots.
You have to ask yourself if you throw millions of people into a cauldron whether the very notion of "equality" can be anything but manufactured. Historically this hasn't rung true, and any attempts at central wealth redistribution have also shown to ultimately become folly.
That's not to say I know the answer, but it seems really apparent that maintaining some level of universal quality of life once you grow a population above a few hundred is incredibly difficult.
There will always be haves and have nots - but the increased gap between them is a product of the economic, policy and tax system.
For example, Govt subsidises companies with in work benefits to their employees, and props up landlords with rent topups. Company and property owners and shareholders then get rich. The whole thing needs tearing up
I think you'll find companies and landlords get rich with or without subsidies.
The subsidies exist because the government is trying to balance equity in the system. Maybe if you removed them rents will be cheaper, but then also more people will struggle to afford rent.
Now I'm no socialist, far from it, but even I can see that it makes no sense for our houses to be worth $1,000,000 while so many people are on struggle street. This system is completely broken and the sooner it dies the better.
The 'invisible hand' (which seems be operated by the Fed and our own Father of Dragons) might have already broken the broken system IO.
The bigger problem is the crazy speculation that has happened with Chinese real estate speculation. Where more families have invested in property than bonds and stocks. They are in serious trouble , all the money has gone gone gone. Now the worlds most ferocious savers have lost it all. Now comes a domestic Chinese recession with all its geopolitical insecurities and families who have lost everything .......
Inflation makes asset holders richer by stealing from the poor (renters, wage earners). Excessive government spending and low interest rates set by central bankers are to blame. But all you kiwis loved the wage subsidy, the Covid handouts to big business and the huge debts accumulated to speculate in the housing and stock markets created by low interest rates.
Inflation in NZ will not stop until the government stops deficit spending, interest goes above the inflation rate (10-12% at least) and you let tourists, freedom campers, hippies, skiers back into the country to buy our dollars. I don't see any of that happening. Enjoy the ride.
who was saying here a few days ago that China couldn't access Russian oil...? seems like they're finding buyers ok
Nice headline about the Father of Dragons
Former central banker slams Adrian Orr's 'dancing with forest fairies'
https://businessdesk.co.nz/article/finance/former-central-banker-slams-…
A "Working Group" to look at Fletchers. And a look only it would be.
The problem is that these are set up by the public service, on a public service ethos. Which means that nothing much happens in the end. But all the courtesies will be observed, at endless length and expense. Everybody is to be included. We will have a few buzzwords that sound dynamic, like "this workstream will inform that workstream"
But really what we need is Rambo.
That is true. We might see meaningful change, such as occurred during the breakup of Telecom, but the mighty Labour Party seems to be in a parallel world. Not holding my breath.
Of course in shutting down numerous small food retailers, many of which collectively provided some competition, it was a golden ticket for the duopoly.
Forget about the small guys who had to suffer 1000's of dollars of rotten food, let's change the game and shaft them. Opps. Unintended consequences.
And now we are told the beaurecrats are gonna get serious, lol!
Incidentally, after two months of shut down in which our business heamorraged cash, I suggested to some elderly lovelies they should take a small pension cut in solidarity to the nailed businesses. Naturally they laughed at me! It gives me no delight to remind them that inadvertently the sky high inflation is doing just that as we speak, lol. The true disciples of Labour of course blame Putin. And complain about supermarket bills! Scratched records....
Break up of Telecom, the last time the Commerce Commission did something meaningful. Because moving away from 10 gigabyte data caps on $60 per month residential broadband connections is a much more serious issue than duopolies and monopolies occupying the industries that provide necessities of life.
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