What happened Monday

Business / news

A review of things you need to know before you sign off on Monday; some mortgage rate changes, R/E agent commissions dive, eyes on Fed and RBA, swaps retreat, NZD holds, & more

25th Jul 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
TSB has trimmed -6 bps from its two year home loan rate and -10 bps from its five year rate. It has raised its one year rate to 4.99%, +14 bps. The Cooperative Bank has raised its 3-5 year fixed rates by about +20 bps.

TERM DEPOSIT RATE CHANGES
None advised today.

A BIG DROP
Estimated real estate agency commissions are now at their lowest level since NZ went into its first Covid lockdown in March 2020. In the June 2022 quarter they were $378 mln, down from $590 mln in Q2-2021. The real estate sales industry had to live on -$212 mln less

ZAGGA LAUNCHES SECONDARY MARKET
Peer-to-peer mortgage lender, Zagga, has launched a secondary market, which it says will also enable it to seek wholesale funding to pre-fund loans which individuals can then backfill. It claims it has transacted $130 mln of mortgage loans in New Zealand and over $800 mln in Australia. It also says it is seeing much higher demand now that banks have tightened their lending criteria.

AN UP WEEK/MONTH
Total capitalisation of the NZX50 rose +1.3% last week to cap a month where it was up +4.0% to almost $114.6 bln. This is its best week in nearly two months. The retirement/resthome sector gave it a good push along, up +2.0% in a week. But it is really the energy sector that is driving the monthly rise. Genesis, Arvida and Ryman all were out-performers last week.

BIG CASCADING RATE RISES COMING
On Wednesday, Australia will reveal its June CPI data. It was 5.1% in the March quarter and is forecast to come in at 6.3% for June. The Q-on-Q rate is expected to slip from 2.1% to 1.9%. Any significant variations from these levels will have repercussions in bond, currency and other financial markets, potentially enough to affect New Zealand markets. Currently a full +50 bps is priced in to the next RBA review next Tuesday, August 2. In New Zealand, markets have priced in more with an equal chance of +50 or +75% at the August 17 RBNZ MPS. Before both, the US Fed will have its say and a full +75 bps is priced in there for their Thursday, July 28 meeting (NZT).

SWAP RATES FALL
Wholesale swap rates may have suffered further retreat today, maybe another -10 bps on global "recession fear" forces. The 90 day bank bill rate was down -1 bp to 3.13%. The Australian 10 year bond yield is now at 3.35% and up +3 bps from this morning. The China 10 year bond rate is now at 2.80% and unchanged. The NZ Government 10 year bond rate is down -10 bps at 3.62%, and now above the earlier RBNZ fix for this bond which was down -12 bps to 3.60%. The UST 10 year is now at 2.77% and up +2 bps from where we started the day.

EQUITIES WEAKENING
The NZX50 opened the week stronger but as the day dragged on it has slipped back to now be -0.2% lower than the open. The ASX200 is down -0.1% in its early afternoon trade on mixed earnings reports. Tokyo has opened its week with a -0.9% fall. Hong Kong is down -1.0% and Shanghai has opened down -0.4%. Eyes are now on Wall Street, and later in the week on the US Fed. Tech earnings will be a key focus over the next few days. The S&P500 futures suggest Wall Street will open down -0.3%.

GOLD HOLDS
In early Asian trade, gold has fallen -US$2 from this morning, now at US$1,725/oz.

NZD SOFTISH
The Kiwi dollar has slipped slightly to 62.3 USc from this morning's open. Against the AUD we are holding at 90.2 AUc. Against the euro we are little-changed at 61.1 euro cents. That means our TWI-5 is now just under 71 and a small intra-day slip.

BITCOIN HOLDS
Bitcoin is now at US$22,212 and down -2.5% from where we opened this morning. Volatility over the past 24 hours has been moderate at +/-2.2%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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15 Comments

by J.C. | 25th Jul 22, 4:26pm 1658723216

Peer-to-peer mortgage lender, Zagga, has launched a secondary market, which it says will also enable it to seek wholesale funding to pre-fund loans which individuals can then backfill

Good heavens. No idea this existed. Notice that Peter Goodfellow is a director. Some of the loans are returning 10% p.a. On NZ residential property.

by Hardly | 25th Jul 22, 6:27pm 1658730439

What could go wrong?

by Trickledown | 25th Jul 22, 8:03pm 1658736235

I use squirrel which is a another P2P site but they have investment options in business loans, personal and home loans. They also have a reserve fund that covers a fair wedge of $ for any principal loss. To date it’s never been used. While TDs have been in the 1 or 2s and shares have been shite I’ve been getting a 5-6% return with that reserve fund backing. Last few months have seen my average ROI more like 6-7%.

I’m not too heavily invested in it portfolio wise but could see the risks if you had good chunks in there.

by sit23 | 26th Jul 22, 12:21am 1658751708

It sounds as if Zagga is wholesale borrowing, and then retail lending. This smells like exactly what all the other lenders do. I thought peer to peer lending meant that each lender was specifically linked with each borrower. Am I wrong?

by Foxglove. | 25th Jul 22, 4:34pm 1658723687

So just over three weeks before NZ’s powers that be are required to review & adjust the OCR. Not only is the elephant in the room, there is a herd of them in like domains overseas. UK for instance inflation now plus 9%. The printing presses may have finally clattered to a stop, or have they actually in NZ, but what has been rolled out is still rolling, and being charged after by those elephants. Once in NZ a 0.5% OCR raise was seen as bold and striking, by the powers that be that is, but now that looks somewhat dwarfed, conservative in comparison. Here come the elephants. What is to be done next time then? Strong lingering thought that the OCR went down too fast and low and has been raised too late and slow.

by Carlos67 | 25th Jul 22, 4:52pm 1658724772

Is that 1% rise finally a possibility? If the FED goes .75% it must now be a possibility.

by Baywatch | 25th Jul 22, 5:24pm 1658726646

Inflation has peaked...long live inflation

by sit23 | 26th Jul 22, 12:23am 1658751786

Don't worry. it's only temporary, or if not, only transient.

by Trickledown | 25th Jul 22, 7:59pm 1658735997

God knows what USD/NZD will look like if it’s only .25 or .50

by Markus | 26th Jul 22, 2:15am 1658758553

You are saying our currency is falling because our OCR hikes have not been significant enough. I say our currency is falling because our OCR hikes have been too aggressive. We had the steepest OCR increases in history. OCR has gone up tenfold in a matter of months. This is triggering an economic disaster in New Zealand of which our currency is a reflection. Credit has dried up and this will soon be followed by mass insolvencies. To counteract this, the OCR should be lowered, not raised.

by JimboJones | 25th Jul 22, 6:57pm 1658732275

I got a surprise at the gas station the other day, I don’t fill up often but I think it was about 35c lower than last time I did. I wouldn’t be surprised if we had deflation this month, kind of hard to justify a rate hike unless they are still battling a previous war.

by theglc | 25th Jul 22, 7:36pm 1658734604

Yes the last week or 2 has seen significant drops, dont forget that we are still being "treated" to a 25c per litre discount.

There is a lot of fiddling in the oil markets at present and the US is still extracting oil from its reserves. Also northern winter could bring another energy shock with prices to follow.

IMO there is still a few legs left in this story yet...

by Markus | 26th Jul 22, 2:09am 1658758148

Yes, I am surprised by the retreating petrol prices, too. They have certainly not fallen because of OCR hikes but it is a sign of hope.

I agree, another OCR raise would not be good, unless economic crash is their game.

by Markus | 26th Jul 22, 2:04am 1658757862

Yes, the OCR went down too fast and too hard. Now, the OCR is being raised too fast and too hard, leading to a 1929-style economic crash.

Naturally, after a bout of money printing, you get high inflation. This has to be accepted now, it cannot be fought with OCR raises, unless they want to crash the entire economy.

by OldSkoolEconomics | 26th Jul 22, 7:23am 1658777021

The problem is societal now. We have to raise the ocr and tame inflation or we will have serious structural and crime issues.

Whilst inflation might follow money printing. We printed money, handed it to the rich who inflated their asset prices increasing accomodation costs for the poor, rising crime and driving the next geneŕation of key professionals out of the country. Healthcare cant hire, gangs are growing etc.

If we now say we accept inflation and want more rising asset values and tax breaks for rich.. then the path will simply continie until society actually breaks.

The ocr needs to rise until employment levels drop along with house prices and productive innovative businesses start to flourish and key professionals and businesses are attracted here.. and the poor can see light.

Labour is now on the right path, perhaps with erronous policies but at least trying to steer investment toward start ups, optimise immigration (value of immigrants vs infrastructure amd housing costs ) and reducing accomodation costs. Whilst accepting the need for ocr increases to tame inflation.

Downturns in economies are cyclical and this one is needed badly.