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A review of things you need to know before you sign off on Thursday; many major mortgage rate cuts, a few TD rate rises, Com Com dumps on building supplies industry, job ads past peak, swaps rise, NZD firm, & more

Business / news
A review of things you need to know before you sign off on Thursday; many major mortgage rate cuts, a few TD rate rises, Com Com dumps on building supplies industry, job ads past peak, swaps rise, NZD firm, & 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
ASB cut its fixed rates for terms 3 to 5 years, by a substantial margin. BNZ also cut rates across the board and if ASB hadn't done theirs, BNZ's would have been big cuts too. HSBC cut all their fixed rates, but about -20 bps across all terms. More here. Westpac and TSB have come to the party late in the day with their own matching rate cuts.

TERM DEPOSIT RATE CHANGES
ASB raised TDs for most terms 6 months to 18 months. HSBC raised all their out to 12 months.

'NOT WORKING WELL' FOR CUSTOMERS
The Commerce Commission today issued a huge draft report on the building supplies industry. It says the devotion to ‘tried and tested’ building products is crushing competition and the building supplies market is not ‘not working as well as it could’.

JOB ADS BELOW PEAK NOW
The BNZ-Seek job ads review for July shows that job ads recovered some lost ground last month as they rose +1.3% following June’s -5.3% decline. This sees job ads -4.1% below their record level set back in May. But it is still too early to conclusively conclude that job ads have peaked in this cycle, BNZ says. Job ads can bounce around from month to month, they caution. They also note a pullback in job ads connected to property markets and it is extending now.

SOCIALISING THE LOSSES
Government is now mulling how the country will meet the costs of climate adaptation and invest in resilience. It says it is getting advice on flood insurance, like we have with earthquakes. They are also pointing out that some assets will become uninsurable. (But the whole exercise just looks like another where the losses will be socialised and those who made decisions not to place themselves in harms way will pay for those who ignored the warnings. Those who planned and got ahead of the issue will get no benefit.)

YIELDS FALL & FLATTEN
There was another Government bond tender today. It was well supported with $959 mln bid for the $400 mln on offer. 42 of the 104 bids were successful over the three tranches. The $200 mln May 2026 tranche went for a yield of 3.27% which was much lower than the 3.70% achieved at the prior event two weeks ago. The $150 mln April 2029 bond attracted $473 mln in bids and the resulting average yield was 3.29%, also much lower than the prior 3.73% from two weeks ago. The final $50 mln was also very well supported getting $177 mln in bids. It went for a yield of 3.77% and that was down from 3.98% two weeks ago.

LUCKY COUNTRY TRADE SWELLS
Australia recorded an all-time record high trade surplus in June of +AU$17.7 bln for both goods and services. That takes its annual surplus to +AU$136.4 bln and a rather r4emarkable +6.3% of GDP. Exports rose almost +38% in a year, with the June activity up a stunning +5.1% from May alone.

SWAP RATES RISE
Wholesale swap rates probably rose today on global forces. The 90 day bank bill rate is up +2 bps at 3.21%. The Australian 10 year bond yield is now at 3.16% and up +9 bps from this time yesterday. The China 10 year bond rate is now at 2.74% and little-changed. The NZ Government 10 year bond rate is now at 3.38%, up +5 bps, and now above the earlier RBNZ fix for this bond which was down -1 bps at 3.36%. The UST 10 year is now at 2.72% and unchanged from this time yesterday.

EQUITIES RISE
On Wall Street, the S&P500 ended the day (Wednesday) up +1.6% with growing strength. That puts it up +3.2% from a week ago. Tokyo has opened its Thursday session up +0.5%. Hong Kong is up +1.7% after Taiwan tensions seemed to ease. Shanghai is following the same pattern, up +0.4%. The ASX200 is up +0.2% in afternoon trade. The NZX50 is up +0.6%.

GOLD MEANDERS
In early Asian trade, gold is up +US$5 from this this time yesterday, now at US$1,769/oz. It's been in a tight range for five days now.

NZD FIRMS ON TWI BASIS
The Kiwi dollar has retreated today to 62.8 USc and down more than -½c from this time yesterday. Against the AUD we are firmer at 90.4 AUc. Against the euro we are up +½c at 61.8 euro cents. That means our TWI-5 is now at just on 71.3.

BITCOIN FIRM
Bitcoin is now at US$23,127 and up +1.4% from where we were this time yesterday. Volatility over the past 24 hours has been modest at just under +/-2.0%.

Daily exchange rates

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End of day UTC
Source: CoinDesk

Daily swap rates

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This soil moisture chart is animated here.

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47 Comments

Just an opinion, of course:

The UK’s annual inflation could go as high as 15% by the start of 2023 as further sharp increases in energy prices push up the cost of living.

https://www.thetimes.co.uk/article/prepare-for-15-inflation-next-year-b…

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Not surprised. The Truflation Index for U.S. inflation is as high as 11.4%. Given that demand is falling off a cliff in China and in the U.S. (also with high inventory and stock levels), I think the deflationary pressures are high. The UK has all kinds of other issues related to integration with Europe that won't help. 

https://app.truflation.com/  

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25% of UK debt on issue is inflation linked and their debt/GDP is now >100%. Their debt servicing cost has exploded, add Brexit into the mix and they are actually in a lot of bother. Enormous unfunded state pension black hole as well.

They seem to be very fixated on Ukraine at great personal cost. The average household heating bill is tipped to hit $8k per annum, riots by January apparently.

The performance of GBP reflects the above.

 

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Yikes that is a big heating bill. I see they are talking about subsidies, maybe they should have invested in renewables instead. It makes our energy that is produced by water falling down a hill look really cheap! 
I wonder how long the world can subsidise fossil fuels. I really couldn’t think of a more stupid thing to do. 

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Fossil fuels are the answer.

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The UK has probably invested more in renewable energy than any other country.

86GW of offshore wind in the pipeline.

Plus nuclear including Rolls Royce SMR.

A lot of domestic heating infrastructure is unfortunately run on natural gas and replacing all that will take time and effort.

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The pension hole; well said. From a forward-energy POV, pensions were always non-underwritten.  They were a heroic bet, made blind.

Not just the UK - everyone including NZ has that problem.

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Yikes! An inflation pandemic. Close the border.

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There was another Government bond tender today. The final $50 mln [2.75% 15/05/51] was also very well supported getting $177 mln in bids. It went for a yield of 3.77%..

Notable since the recent introduction of 25yr and 30yr IR swap quotes the interpolated mid swap yield priced 22.48 bps below the 3.766% tender yield at 3.5412%.

IR swap market maker balance sheet capacity comes at a cost.

Does this reflect a dire prognosis from the US? - U.S. Gov’t. Predicts Boom for 2023, Gloom for Next 30 Years

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The building industry is hampered by "devotion to tried and tested materials", presented as a negative.

 

Last time we deregulated and lost that devotion, it went terribly.

 

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It’s more the devotion to tried brands. Wood is wood, plasterboard is plasterboard, brick is brick, fibre cement is fibre cement, none of those things should need special certification. Sure if you want a whole new type of product then that is different. 
or just force people to have eves instead of disincentivising them due to boundary restrictions. 

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My son asked me today about buying shares, he noted the NZX50 is up 8% over the past month or so. I reckon it’s a sucker’s rally. What do others think?

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I would go off shore. Outfits that are versed in manufacture & supply of military hardware, munitions. There’s a lot being expended right now. Inventories of ordnance etc looking for replenishment.  But just give me time to get under the table before the salvos from PDK & Audaxes, are incoming!

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Not that I care a jot about stock market capitalisation levels but, I would have thought US military ordinance etc company stock prices reflect your observation plus some and have done so for a few months.

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That didn’t take long, but fair enough.

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It's interesting, Raytheon shares have basically broke even over the last 12 months.

They make a decent chunk of the munitions being expended in Ukraine that the west will need to re-stock. You would expect their sales and profits to be considerable over the next 5 years, or more.

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There you go - I said I take no interest in stock valuations.

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I'm only interested when shares get really frothy.

Tesla for instance, valued more than Toyota, when it's pretty clear their market share is only going to go south over time as the rest of the market makes better products.

We are kind of lucky that so much froth investment has gone into crypto, means companies are a little more insulated when things go tits up.

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War is good...  Sick

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Given that the human population is 6-7 billion over the long term carry capacity of the planet, war is one way to resolve the predicament. It would have more effect on population-reduction if the soldiers were all female, of course.....

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Urbanisation is doing a far greater job at population reduction than any war.

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Has he purchased shares before? 

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nope

 

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In terms of ideas, you can look around the house, see what products and services you use. Ask your son to look at his bank statement, does he have any subscriptions, or regular purchases. What places do you visit. He may feel more involved or interested if he's holding a stock that's he familiar with, rather than buying an ETF or index fund. He may prefer a more passive approach, who knows : ) But I think it's a great idea to get into investing asap.

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Our daughter is 12 and we have the popular online share investing platform for her and we put in a few $ a week.

Key to getting some interest has been what was said prior about picking stocks she is interested in. Lol... hard with a 12 yo but not impossible.

But it makes for better education than most school classes i reckon.

 

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It’s a trap. I’m watching crypto right now and fighting the urge to fomo but the logical side of my brain is telling me it’s a trap. 
 

im definitely bullish on crypto in the long run but i think it’ll go down in the short term. My buy orders currently hover around previous cycle lows even though I think BTC will bottom out at 14-15k. I’ll slowly accumulate blue chip coins incase I’m wrong but I don’t think we’re done yet with the falls. 

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If a premise was the ability of crypto to avoid the pitfalls of fiat devaluation via money printing, but the values plummet in a time if high inflation, that should be sending some fairly clear signals.

There's going to be a portion of a whole generation who are going to waste a decade or so of their earning and investing potential on crypto. I guess if there's enough of them they can trade amoung themselves. Like digital beanie babies or Pokemon cards.

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And yet I'm still up 1400% in the middle of a crash. Go figure.

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Gib shortage over. Building costs - yet another area where peak inflation has passed: https://i.stuff.co.nz/business/129468354/gib-shortage-over-due-to-const…

 

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And note comments about residential construction slowing rapidly. Right on cue with my second half of 2022 slow down prediction.

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CPI to 3% by May 2023.

‘May Day’ HouseMouse

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Annual? Might still be a bit too much of this year’s inflation in it for that. I would agree that quarterly inflation will be running at about that by then (3% / 4)

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Annual

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Will fuel be much higher in May 2023? Will rents? Will build costs? Will wages? Will food costs? I say most of those things will be between 2-4% annual by May 2023. Caveat - Ukraine and Taiwan not worsening

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Quarterly at 3%? Wow, that's still really high

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The tone of the criticism about using tried and tested materials sends a shiver up my spine.

Untreated timber/ monolithic cladding leaky homes all over again........ 

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gee yen versus NZD is all over the place, NZD strengthened again last 48 hours - Taiwan? 

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I feel like I'd read a few months ago the Japanese govt were actively devaluing the yen to ramp exports.

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They've been doing that for years now. There's an insane amount of movement in the JPY/NZD pair for what the actual underlying trade represents. Volatility is how people make money on Forex and it's all over the place. 

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The Big News with no mention on this website is the Auckland Council's decision today to endorse public notification of huge changes to the Auckland Unitary Plan:

https://www.nzherald.co.nz/nz/sewage-overflows-disrupt-government-edict…

 

 

 

 

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Same racist mindset as Labours law change yesterday to make ECAN antidemocratic.

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China are behaving like imbeciles:

https://www.bbc.com/news/live/world-asia-62404233

 

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China is still contending with being militarily embarassed in the 19th century.

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Yeah.

they are just behaving like little wannabes

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I don't see relevant chat about it at the moment (which is all about creating angry splashes with missiles) but my expectation is still that China will ramp things up by planting military assets on islands around Taiwan (presumably with defensive pretexts) and dare Taiwan/US to do something about it.

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Create artificial islands just outside the EEZ of Taiwan (to the East) and load it up with military assets? Freedom of the high seas and all that.

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