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
BNZ raised its floating rate by +40 bps, and will apply the new 6.79% rate to existing clients from September 9, 2022. Westpac raised their by +46 bps to 6.85% and existing clients will get the change on September 7, 2022. That completes the floating rate changes by the main banks. Most challenger banks are yet to make theirs. WBS cut their 2-year fixed rate.
TERM DEPOSIT RATE CHANGES
No changes to term deposit rates today. But there are changes to bonus saver rates which we have summarised here.
QUIET AS
It was very quiet in residential auction rooms around the country last week, with exactly a third selling under the hammer among the auctions we monitored.
NO SIGNS OF STRESS YET
Meanwhile, the RBNZ says households are coping, at least for now, with higher mortgage rates. They say there's no sign that higher servicing costs are as yet translating into substantive increases in the level of arrears or stress in commercial bank home lending portfolios.
BILLIONS TO GO
The RBNZ says it expects the FLP (Funding for Lending Program), through which banks have already borrowed $12.7 bln at the OCR rate, will be further utilised before it closes off in December. About $8.5 bln is still available to be borrowed for up to three years under than program, so it could top out at just over $21 bln.
EXPANDING SLOWER, OR NOT AT ALL
The 'flash' Australia manufacturing PMI fell to 54.5 in August 2022 from 55.7 in July, hitting the lowest level in a year but marking the 27th consecutive month of expansion within their factory sector. The same report suggests their services sector is contracting in August..
DITTO, JAPAN
It was the same story in Japan where the same survey found a factory sector still expanding but at a much reduced pace in August - and a services sector that moved down into a small contraction.
SWAP RATES HIGHER YET AGAIN
Wholesale swap rates are probably higher again today, still on those global influences we noted yesterday. There is curve steepening still going on. The 90 day bank bill rate is unchanged however at 3.38%. The Australian 10 year bond yield is now at 3.61% and up +4 bps since this morning. The China 10 year bond rate is at 2.65% and little-changed and still near its lowest since May 2020. The NZ Government 10 year bond rate is now at 3.80% and up another +10 bps from this time yesterday, and now matching the earlier RBNZ fix for this bond which was up +14 bps to 3.80%. The UST 10 year is now at 3.02% and up +4 bps from this time yesterday.
EQUITIES FALLING
On Wall Street, the S&P500 fell -2.1% today, mainly on tech company fall-backs. Tokyo is down -1.2% in Tuesday trade so far. Hong Kong is down -0.9% and Shanghai is down -0.3% in early trade today. The ASX200 is down -0.5%, and the NZX50 is down -1.1% in late trade. We have been updating the NZX50 company profiles that have June balance dates and have issued their financial statements, so our summaries are up to date. About 10 so far.
GOLD SLIPS
In early Asian trade, gold fallen -US$10 to US$1,737/oz.
NZD A TAD FIRMER
The Kiwi dollar is unchanged from this time yesterday at 61.9 USc. Against the AUD we are also unchanged at 89.8 AUc. Against the euro we are up +½c at 62.3 euro cents. That means our TWI-5 is now at 71 and a tad firmer than this morning's open.
BITCOIN IN MINOR SLIP
Bitcoin is virtually unchanged from this time yesterday at US$21,305 and down -0.6%. Volatility over the past 24 hours has been modest at just on +/- 1.5%.
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61 Comments
"The NZ Government 10 year bond rate is now at 3.80% and up another +10 bps from this time yesterday."
This is a significant movement indeed. And we are talking about the rate floor, the benchmark rate associated with the safest option available.
Just traders' reckons on where the OCR (relative to other central bank rates) will end up given yet more reckons on the future state of the economy. This week bond values are down, next week they'll be back up again. It's a ridiculous waste of time and energy.
I don't know anything about bonds. But am I right in thinking that given the return on a bond is higher than the average OCR for the last 10 years, and higher than any current on call savings rate.
Does that imply that the fundamental risk of the NZ govt defaulting is higher than a retail bank?
You can't compare the yield on a 10y govt bond with an on-call savings account.
Very little of the nominal yield on an NZ government bond is credit risk (at least currently). It is more about where real yield requirements and expected inflation, then liquidity premia.
Research out of Aussie shows that the average Aussie has $28,409 in cash savings. Aussie men have $36k in cash savings while the average woman has $21k. "Apparently", the amount of cash savings has increased 75% in the past 6 months (according to the media but what I cannot reconcile with the actual data set).
However, 44% of Aussies say they could only survive off their savings for 1 month or less, with just 23% saying they could last 6 months or more.
So it appears that there is huge variance in the cash held by Aussie individuas and h'holds. I suspect the paycheck to paycheck syndrome is more widespread than people think.
https://www.finder.com.au/savings-account-statistics
If 50% have $56000, and 50% have nothing, average $28000.
Correct. But the sample size is greater than 2.
The Bond market is blowing up in Europe this evening (NZT). The Italian 10 YR is trading like crypto. Brace for contagion across the board.
The German PPI is impressive as well. Not sure how this is going to resolve itself.
https://pbs.twimg.com/media/Fayn7ozXgAAirpl?format=jpg&name=small
Wowsers. That has to be hurting. Their winter could get really bad.
What's driving it?
Whats driving it is sanctioning the regions largest energy exporter and reliance on expensive green energy - when it's working.
a
That just happened this afternoon?
Hard to rely on green energy when everything is set up for gas. Hot water, household heating, almost exclusively gas in EU.
Hard to rely on green energy when it's dark 17 hours in winter and you need wind.
I think they would realise that before investing in it.
Hard to rely on green energy , anywhere - just ask South Australia
TK - No. That is not what is driving it.
http://www.eurodialogue.org/energy-security/Energy-Are-There-Limits-To-…
He's wrong, but read it.
Where did you see that?, declining or rising yields?
https://www.tradingview.com/chart/?symbol=TVC%3AIT10Y
Briefly spiked up to 4.6% then back down again
What causes that?
Hydro lakes are full so energy is cheap, Aucklands storage dams are full, these storms aren't all bad.
But NZs hydro lakes are pretty small in terms of storage. Part of the puzzle is how much snow has fallen in the Southern Alps over winter.
Quite a bit here. More tonight apparently. Will be brilliant tomorrow. Lots of Aussies spending their $28000 here. Most grateful for them.
Heck we think we have got problems. Imagine having to rely on the volatility of bitcoin in Argentina as a hedge as their inflation is at 90% and their currency value continues to drop.
I know. Our 7% inflation per year is almost a daily occurrence in some places.
I wonder if the European inflation will affect us - maybe just the price of Remuera tractors.
Get Fonterra to be the NZ agent for Ladas again. They are producing a non chip model. Proper wind down windows etc.
comes with a full tank of gas , doubling the value
Ah, so far, that is a good contender for the quip of the year. My elderly mother long ago, drove one of those in Wellington. In one grand dramatic downhill sweep she wrote off three other vehicles. It just decided it wanted to go right she said. And sure enough , the steering linkage had sheared. The Lada’s, not hers.
Ha! Downhill in Wellington, too. Double the velocity.
Update on DCA'ing monthly into BTC as of today (USD not peso)
P6M: -0.6%
P1Y: -7.2%;
P2Y: 38%;
P3Y: 157%;
P4Y: 287%;
P5Y: 329%;
P6Y: 973%
Central Banks are going to cause a crash that will make Covid look like the best of times if they don't start to get a grip. You cannot use the cash rate to bludgeon an energy and supply side crisis, we need a purge of the incompetents.
All was good in the hood TK when they were pushing interest rates to zero, while importing deflation, and creating massive asset bubbles -right? Don't recall complaints from you.
What's your issue now that we're importing inflation? That things like a precious housing bubble might burst?
I do recall you in 2020 telling me to keep quiet about the crazy actions of the central banks, because you said to me at the time 'some people are making life changing money right now' - in reference to what appeared to be to me very dangerous asset bubbles that if the popped, could cause widespread damage to society/economy. Your recommendation to me at the time was to not fight the central banks.
The way I figure it, if you were so happy when central banks were pumping asset bubbles that made you life changing money, don't complain when its time to pay the piper. Perhaps you shouldn't fight the central banks and take your advice to me from 2020?
Some people are making life changing money now as well. Will do so in the next few years as well.
If this is correct, then interest rates are going to soar. Here, there and everywhere.
"Markets have [gotten] used to the idea of the Fed riding to the rescue," Michael Hewson of CMC Markets told me. "I just do not see that happening.".......Goldman Sachs told clients on Monday that "downside risks loom,"
https://edition.cnn.com/2022/08/22/investing/premarket-stocks-trading/i…
Show me where I told you to keep quiet as some people were making life changing money.
Yes, you do not fight a central bank, either way. I'm not fighting them, I could care less if house prices fall or rates head up. I'm embarrasingly unlevered to be frank.
I recommend you set your bitterness to one side and consider the implications for the wider economy. Many renting are going to lose their jobs and with that the roof over their head.
I have been considering the wider economy the whole time, including in 2020 when you only appeared to be concerned about those who were making life changing money (with no care for those who were not).
But I'm not going to search through your posts...just a comment you made at the time that I thought was bizarre given the possible future ramifications.
If there is bitterness on my behalf, its was regarding what central banks have done the last 20 years...and not what they are doing now. It would appear to be your comments that have become bitter about the possibility of rising interest rates and falling asset prices.
Not a dig - just a perspective on how events are unfolding and how different positions see the same economy and governance of the economy. I was bitter when central bankers were creating asset bubbles, you appear to be coming bitter as central banks might destroy them.
If there is bitterness on my behalf, its was regarding what central banks have done the last 20 years...and not what they are doing now. It would appear to be your comments that have become bitter about the possibility of rising interest rates and falling asset prices
IMHO, everyone should be bitter in some way or another, not just the young farts. The boomers thinking they have the last laugh is foolish.
Or having the intelligence to use monetary policy that unites, not divides, society. That creates financial stability, not instability. That leads to considered, rational and balanced financial decisions making and behaviour. It does not force people to make decisions out of desperation, complete fear of missing out, or greed where people who already enough want far too much at the expense of other parts of society.
But perhaps the damage has already been done....and only widespread pain across economies will bring about governance of society that is wise.....not but not necessarily popular in the short term.
There's an element of competetiveness thats necessary to drive capitalism. That's inherently going to create losers as well as winners.
So you'd either need to revert back to some sort of communal tribal lifestyle (the reverse is actually happening), or engage some sort of UBI style minimum lifestyle scenario and assume that the people with less would be content with less.
We have a social welfare system now because the overall system inherently creates have nots, since day dot. So none of this is really new.
What’s your point?
You're wanting some sort of monetary system that unites society.
I'm not sure that'd be a monetary system change you'd be advocating for, it'd be something like socialism or a mostly managed economy.
Continually bailing out asset owners who hold too much debt is why we now find ourselves up a bad smelling creek with no paddle. We’ve already socialised the losses…and it’s been asset holders taking the profits.
If history is right (have you read any of Dalio’s research/books on debt cycles/changing world order), what we are currently doing will cause riots in the streets and will destroy the wealth of people who are promoting the status quo by suppressing the poor into even worse conditions in order to protect their assets. So it’s a lose lose strategy - even if you want to think you have no role to play in what is evolving.
A range of tributaries got us to this creek.
Dalio is a pretty smart man, but who is also used for headlines. I see riots in bankrupt nations, but the more common experience I think will be diminished personal prosperity with increased levels of mediocre state support to try and make up the difference.
Could it be the money printing has been used to try and prop up an entire system, and asset owners are consequential benefactors, rather than the sole focus of things? It certainly seems to have been the main tool to try and spur growth in stalling advanced economies, and not just in house prices.
The supply of labour almost doubled when women eschewed being housewives in favour of careers, then shot through the roof when the labour market globalised.
So the question begs, if you really want to address inequality, how far do you really need to go? It sounds like capitalism cannot do this.
There's an element of competetiveness thats necessary to drive capitalism. That's inherently going to create losers as well as winners
Sorry but this is a stupid comment. Credit creation for speculating on asset prices is not the root of capitalism. Production for the market place is.
Saying "sorry young people but the economy is rigged this way and you're just going to have to fit in as best you can" is all very well. This is why young people are more attuned to the idea of sound money that the old farts.
What we are witnessing isn’t capitalism as Painter is trying to say. We have state entities (central banks and treasuries/finance ministers) making a mess by interfering with the free market, picking sides, creating distortions and boom/bust cycles.
TK (and Painter perhaps..) was happy when those state entities took their side…that is they choose to pump asset prices and they hold assets…and now are unhappy because they are losing control of the ability to continue to back that side. But ultimately that choosing of sides was foolish policy…which is my point…state entities shouldn’t be picking sides because that would be the road to a divided society and the rise of corrupt governments and instability. Which I think we’ve been seeing the start of recently.
You have always had state entities ‘interfering’. The ‘free market’ is an illusion. The policies that create this illusion are driven by vested interests and their ideologies. When people moan about distortions in the free market or capitalism, what they mean is that they’re unhappy that now they are on the losing side.
Have or remove credit creation, same diff, an inherent trait of capitalism is wealth usually consolidates.
The problem is we are now expecting a 100% fair or meritocratic capitalism, which is a little oxymoronic.
Who is?
The common voice seems to be that if we just address one hot topic that's all we need to make capitalism good for all.
Bitterness is utterly unrewarding as a state of mind. It's an anchor that prevents someone from making the most of their very short time here on this planet.
If you genuinely want to make the world a better place, start or join a movement. Or even just put 10% more effort into being a more considerate or charitable person in your day to day life.
Lol or patronise people on an online forum…or is that a bit close to home 😉
It's not my intent to patronise, if people's views can't stand a moderate level of robust debate then maybe they need viewing from additional angles.
There's a pretty logical causal link of how we got from a to z over the last 150 or so years. Whiles there's certainly vested interests that want and have exerted influence, it's a lot more complex than finding a baddie and being bitter at them.
We are seeing capitalism play out in a roughly uniform way across the world, with obvious variations influenced by regional differences and histories. Many in the developed world are experiencing declining qualities of life, but due to far more factors than the over represented "housing crisis".
Do you have an issue with the rising inequality and disharmony? Or is it working in your personal financial favour - and that is more important to you in your life span that social stability of the system as a whole?
I guess I just accept it as a reality of this timeline. The bad with the good. Why would we expect everything to always be the same or better?
Not really interested in being a political animal, all I can really do is try and insulate myself from externalities, and attempt to have a positive impact with the people I live around.
Bitterness and anger has led to many of history’s greatest triumphs. And tragedies.
At best the triumph is revenge, short lived.
Usually it's a good way to have your "enemy" (real or imagined) to keep getting the better of you.
Natural gas spiking again but can't really see a reason why today...?
House prices aren't factored into CPI directly so any slowdown should not be read as economic weakness. Without back to back quarter of decreasing inflation rates I'd be very cautious of making any forecast other than "rates will continue to gradually rise".
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