A review of things you need to know before you sign off on Friday; more big home loan rate hikes, FMP offer grows, most fx liabilities hedged, general insurers struggle as premiums rise, swaps race higher, NZD holds low, & 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 and HSBC both raised fixed home loan rates today. More here. In addition Aussie non-bank lender Resimac launched a 20yr mortgage term for Kiwi professional property investors. More here.

TERM DEPOSIT RATE CHANGES
Both ASB and BNZ raised term deposit rates today, but neither really pushed the boat out much further than their rivals had already done. Still, they are both contributing to an up-trend and over the past week the average one year TD rate has risen by +5 bps for all banks to 4.13%. Details are here and here.

MORE FMP ON OFFER
Fonterra has told its farmer suppliers that it is increasing its Fixed Milk Price program capacity in the 2022/23 season from 75 mln kgMS to 100 mln ksMS. That is an increase of a third. But 100 mln kgMS is less than 7% of the 1478 mln kgMS in the season just ended. Suppliers who used this system in 2021/22 were paid $10.24/kgMS whereas the final general payout price was $9.30/kgMS. The price for the new season has not been set yet and there is no guarantee it will be as high as the June 2022 FMP.

HINDSIGHT GIVES FRIENDLY JUDGMENT
Stats NZ today reported more detail of our international investment position as at March 31, 2022. They said our foreign-currency-denominated external debt was $135.3 bln and almost 98% of that was hedged - which given what has happened since has been a smart strategy. Economic activity (GDP) in the year to March was 354.3 bln, so that net debt represented 38% of it. That is probably less than what most readers might has assumed.

CLIENTS PAID MORE, BROKERS MADE MORE, INSURERS' PROFITS FELL
RBNZ data for general insurers ("non-life") shows that for the year to June 2022 they raised premiums by +9.8%, just a little less than the annual increase in the year to March (+11%). Reinsurance costs only rose +5.9%. But claims rose +11.7%. At the same time investment income dived into negative territory as bond losses grew. They had unusually large write downs too. (Investment results and write downs are for both life and "non-life" insurers in these RBNZ data). The general insurance sector paid brokers and others more than $1.5 bln in "commissions" and other acquisition incentives, and together these rose more than 13% in the year. It is good to be an insurance broker. Those 'distribution' costs accounted for 15.4% of gross premiums charged clients. All up, profits for "non-life" insurers fell by more than -35% in the year to June with a tough bite concentrated in the June quarter.

IT'S TOUGH IN CHINA'S RICE BOWL
In China the major rise growing regions of Jiangxi and Hunan are in an extended and growing drought situation that is getting very serious. They haven't had any rain in more than 70 days. More than 95% of Jiangxi is in a "very severe" situation. This drought will have serious repercussions for China, and global food demand, especially for rise. (And don't forget, India now has export bans for many types of rice too. The Western US can't supply at present due to weather issues. Australia is one source with excellent growing conditions this year.) Also, see this.

SWAP RATES RACE ON UP FURTHER
Wholesale swap rates are probably much firmer today on global forces. At time of writing they were up in a steepening trend by more than +10 bps. But the key action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up another +2 bps at 3.76% which is a new high since January 2015. The Australian 10 year bond yield is now at 3.94% and up +20 bps from this time Wednesday (yesterday they were on holiday). The China 10 year bond rate is up +1 bp at 2.70%. The NZ Government 10 year bond rate is now at 4.20%, up a very sharp +15 bps from this time yesterday and now well above the earlier RBNZ fix for this bond at 4.10% which was up +8 bps. The UST 10 year is now at 3.72% and up a remarkable +16 bps from this time yesterday.

EQUITIES SELL OFF FURTHER
Wall Street ended lower today with the S&P500 shedding -0.8% to take its weekly drop so far to -3.0%. Tokyo is on holiday today (Autumnal Equinox) so it ended its very short week down -1.5%. Hong Kong is down-0.7% in morning trade and heading for a -3.6% weekly retreat. Shanghai is down -0.9% today and heading for a -1.3% weekly fall. The ASX200 is back trading today (although I am sure many there have made it a 4-day weekend). It is down -1.8% in afternoon trade today, heading for a -3.8% weekly dump. The NZX50 is down -0.9% today and heading for a -1.4% weekly fall. Investors will want to see the back of this week asap, I am sure. Today's NZX50 losses are led by A2 Milk (ATM, #9), down -4.1%, and Fisher & Paykel Healthcare (FPH, #1), down -2.8%. There are other majors down about -2% today. Keeping the fall from being a rout are a wide range of smaller companies.

GOLD RECOVERS
In early Asian trade, gold is up +US$11 from this time yesterday to US$1,670/oz.

NZD STAYS VERY LOW
The Kiwi dollar has held at its new lower level and is now at 58.4 USc. This time last week we were at 59.6 USc, so its been -2% weekly devaluation. Against the AUD we are down at 88.1 AUc. Against the euro we also little-changed at 59.4 euro cents. That all means our TWI-5 is at 68.4 and unchanged from this time yesterday but still its lowest since October 2020.

BITCOIN RISES
Bitcoin has risen today and is now at US$19,256 and up +2.3% from where we were this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.

MONDAY HOLIDAY
Remember it is a (pointless) holiday in New Zealand on Monday. Apparently we are 'celebrating' the death of a foreign monarch. But we will have limited service operating including a morning briefing. Financial markets, auction rooms, and banks will be closed.

This soil moisture chart is animated here.

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