What happened Thursday

Business / news

A review of things you need to know before you sign off on Thursday; no floating rate rise announcements yet, commodity prices slip, more real estate agents, swaps firm, NZD holds, and more

[updated]

6th Oct 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
None to report for floating rates so far following the RBNZ's +50 bps hike of the OCR to 3.50% yesterday. ICBC raised some popular fixed rates. Unity Money cut its 1 year mortgage rate to 5.35%.

TERM DEPOSIT RATE CHANGES
ICBC and General Finance raised term deposit rates.

PERSONAL LOAN RATES
Lending Crowd raised its personal loan rates today.

CONDUCT REVIEWS TURNS UP $152 MLN IN REFUNDS
The FMA says our banks have paid $109 mln to 952,000 customers in compensation for 266 problems. That averages $115 per affected customer, and $410,000 in total per issue identified. These banking refunds are on top of the $43 mln of remediation paid to 75,000 customers of life insurers, stemming from 225 issues. Those averaged $575 per customer and $190,000 in total per issue identified.

"ALL ABOUT THE DOLLAR"
Commodity prices fell in September for the sixth month in a row in USD terms, down -0.5% from August and now at about the same level they were a year ago. However, the retrenched NZD means that in local currency overall commodity prices rose +3.3% in September from August to be +14% higher than a year ago. All this is explained by the NZD going from averaging 70.6 USc in September 2021 to averaging 59.5 USc in September 2022, a -15.7% depreciation.

HIGHER YIELDS ATTRACT MANY BIDS
Treasury tendered another $400 mln in three durations today, attracting more than $1.1 bln from 157 bids. The May 2028 $200 mln went for a yield of 4.05%, up sharply from the 3.15% six months ago. The April 2033 $150 mln went for a yield of 4.20% and up from 3.50% three months ago when it was last offered. The May 2051 tranche of $50 mln was three times oversubscribed going for a 4.49% yield and up from the prior 4.37% two weeks ago.

770,000 OF MORE PINE PLANTATION?
The Parliamentary Commissioner for the Environment has commissioned Professor Dave Frame and Dr Nathanael Melia to calculate what area of forest would be required to achieve roughly the same change in temperature as reducing a herd of livestock by one animal. The headline results were that a one-off upfront planting of 0.6 hectares per animal for dairy cattle, 0.4 hectares per animal for beef cattle, 0.2 hectares per animal for deer, and 0.08 hectares per animal for sheep would be needed. These numbers are for pine plantation forest with a 30-year rotation. At the national level, planting around 770,000 hectares of pine plantation forest between now and 2050 achieves a similar change in temperature as reducing methane emissions from the national dairy, sheep, beef and deer herds by 10% over the same time period. There is about 13.5 mln ha being farmed currently. The Government is on a charm offensive talking up more forestry.

RISING FAST AGAIN
From September 2019 to September 2020 the number of licensed real estate agents was stable at about 15,200, a similar level to what they were in 2016. But by Septmer 2021 they had risen by +1300 and by September 2022 by another +425 to now be 16,902 licensed agents. That is the highest level since 2011 when we were coming down after the pre-GFC bubble.

STRONG YEAR FOR MTF FINANCE
MTF Finance says the September year was a record one, with the consumer finance company writing $606m in loans, This was a 10% increase year-on-year. MTF also says it increased receivables 12% to $761m. Meanwhile, personal lending has been growing 23% month-on-month over the last four months.

SWAP RATES RISE
Wholesale swap rates are firmer on global trends. The key real action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +3 bps at 3.86%. The Australian 10 year bond yield is now at 3.80% and up +7 bps from yesterday. The China 10 year bond rate is down -1 bp from Friday at 2.76%. The NZ Government 10 year bond rate is now at 4.13%, and up +8 bps and still below the earlier RBNZ fix for this bond at 4.16% which was up +9 bps from this time yesterday. The UST 10 year is now at 3.76% and up +14 bps from this time yesterday.

EQUITIES SETTLE IN
Wall Street shook off earlier losses to end with the S&P500 down just -0.2% in its Wednesday session. (At one point earlier it was down -1.8%.) Tokyo has started its Thursday session up +0.8% in early trade. Hong Kong is down -0.7% but that was after the prior day's sharp gain. Shanghai is still on holiday. The ASX200 is down -0.1% in early afternoon trade. The NZX50 is down -0.6% near the close.

GOLD UNCHANGED
In early Asian trade, gold is at US$1721/oz and unchanged from this time yesterday. It closed in New York earlier at US$1716/oz.

NZD IN MINOR FIRMING
The Kiwi dollar is little-changed from this time yesterday to be just over 57.8 USc as the impact of the OCR review fades quickly. Against the AUD we are also little-changed at 88.7 AUc. Against the euro we are now at 8.30 euro cents and back up +½c. That all means our TWI-5 is at 67.8 and up a net +20 bps from this time yesterday.

BITCOIN HOLDS
Bitcoin is firmer today and is now at US$20,341 and a minor +0.6% rise. Volatility over the past 24 hours was modest at just under +/- 1.6%.

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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40 Comments

by DoneBizz | 6th Oct 22, 4:15pm 1665026109

How many jobs will we lose directly and indirectly by cutting our productive agricultural land by 5.7%? How much worse will climate change be as food supply shifts to less environmentally friendly methods overseas?

by powerdownkiwi | 6th Oct 22, 4:28pm 1665026881

What is a 'job''?

Always ask the bigger question, eliminate the assumption.

The bigger discussion is that the PCE is asking the wrong question; he therefore cannot get anything but the wrong answer.

By 2050, we are off fossil fuels - which were old solar acreage; millions of years thereof. We will be asking real0time solar acreage, to take up the slack, and to simultaneously feed an overshot 6-7 billion (they only got here via fossil energy applied to food production). There are NOT ENOUGH ACRES by several orders of magnitude, to do that. So we can expect all trees to vanish as firewood, very soon after economic collapse or the war/dislocation-caused cessation of globalism (whichever comes first).

Making the PCE's report useful.

As kindling.

by Hans Brink | 6th Oct 22, 10:24pm 1665048283

Man PDK you are one very pessimistic Dude. You may be right but don't give up altogether. There is always some light even in the worst of times.

Putin has a button to press, others around him may see otherwise. Same deal. Stepenwolf, Life is a gamble.

by graintrader | 6th Oct 22, 4:48pm 1665028136

It won't be assisting our record current deficit thats for sure

by Waikatohome | 6th Oct 22, 5:02pm 1665028935

Have you driven over the Kaimais to Tauranga recently? You can see first-hand what the land will look like when all of the 30-year plantations are felled. Zero top-soil, exposed bed rock and zero biodiversity. James Shaw is encouraging environmental vandalism.

Surely building carbon in pasture systems and increasing native plantings in steeper areas is a more sensible long-term option?

by positivelywallstreet | 6th Oct 22, 7:46pm 1665038808

My impression is that east of the kaimai’s is is a sandbank that in due time will be washed away, no need for concern..

by Hans Brink | 6th Oct 22, 9:56pm 1665046602

Waikatohome, Yeah and in 3 yrs time it is not noticeable as the next crop grows.

by RickStrauss | 7th Oct 22, 10:32am 1665091964

Forests, how do they work...

by Hans Brink | 6th Oct 22, 9:48pm 1665046133

There is easily a million hectares of marginal land to plant in NZ, without affecting the rural economy. If every hillcountry farmer planted the worst 20% of their farm, voila! there you go. Then the money will flow to greater efficiency in the use of good land. We are already doing this.

by DoneBizz | 7th Oct 22, 7:47am 1665082047

In theory thats correct except the reality is playing out very differently with the land actually gong into carbon farming. Also much of the marginal land is allready in production forestry as farmers have been long following the obvious strategy you suggest. With resource consent required to increase the land use intensity of the balance of the properties production will certainly drop.

by J.C. | 6th Oct 22, 4:17pm 1665026245

Silver price a bit more sedate past few days. Incidentally, Tues' move was the 5th highest daily price rise in history.

by J.C. | 6th Oct 22, 4:21pm 1665026491

Aldi positioning even better in the UK for the long term as shoppers search for value. If margins and profits are under pressure, you need to drive volume. They're doing it better than most.

Aldi has revealed a steep drop in UK profits but said that customers were switching to the discount supermarket chain “in their droves” from higher-cost rivals as the cost of living crisis bites and shoppers look for lower prices.

The German-owned retailer said that 1.5 million extra customers had visited its UK stores over the past 12 weeks, even as it revealed annual pre-tax profits for 2021 slumped to £36m, compared with £265m in 2020 – an 86% decline

https://www.theguardian.com/business/2022/sep/26/aldi-uk-profits-fall-b…

by powerdownkiwi | 6th Oct 22, 4:35pm 1665027312

Nope.

They are running a non-resilient, just-in-time model, based on heroic assumptions about energy. It's a bit like saying the wet-vac people are doing a roaring trade on the Titanic.

by J.C. | 6th Oct 22, 8:00pm 1665039650

They are running a non-resilient, just-in-time model, based on heroic assumptions about energy. It's a bit like saying the wet-vac people are doing a roaring trade on the Titanic.

This is true Power. However, I will eat my hat if the supermarket business is not with us in the near future and medium term. Even in deveoping countries where modern trade only comprises 20% of sales transactions, energy is still consumed and supply chains still exist. I don't believe civilization is to end any time soon.

by Hans Brink | 6th Oct 22, 10:03pm 1665046997

I am no expert in the gocery trade but it would seem that super markets are very cost effective. I doubt small supply models would compare.

by Palmtree08 | 6th Oct 22, 11:04pm 1665050675

The "supermarket" model is entirely built around the internal combustion engine. The privately owned motor vehicle, the acres of car park, the 1000km supply chain, the mega suppliers with highly mechanised production lines. All falls over with expensive/non existent energy inputs.

by Wrong John | 6th Oct 22, 4:36pm 1665027411

These guys run on very very slim margins. The good news is that they're still profitable. Just.

by J.C. | 6th Oct 22, 4:48pm 1665028088

Probably not as slim as Japan. But they're definitely profitable, despite low margins.

Aldi Ireland's profits rose 46 per cent last year to €71.2 million, as the discount supermarket chain revealed to The Irish Times its Irish financial performance for the first time since it entered the market 22 years ago.

The German-owned chain has also disclosed that its 149-strong Irish store network was 71 per cent more profitable in 2020 than its British stores, when measured as a proportion of sales. Aldi’s Irish stores posted a profit before tax margin of 3.6 per cent on revenues “just shy” of €2 billion last year, while its margin in Britain was 2.1 per cent, according to Aldi Ireland’s group managing director, Niall O’Connor.

https://www.irishtimes.com/business/retail-and-services/aldi-saw-pandem…

by Palmtree08 | 6th Oct 22, 11:07pm 1665050870

So size is the only thing that keeps these businesses afloat. What a cleverly thought out plan.

by Yvil | 6th Oct 22, 4:53pm 1665028396

by Septemer 2021 they (real estate agents) had risen by +1300 and by September 2022 by another +425 to now be 16,902 licensed agents

Hard to understand why there are more agents now than a year ago, when there are so much fewer sales today. Old established agents with a good reputation are fine but many newbies will be really struggling.

by realterms | 6th Oct 22, 5:03pm 1665029035

Lagging indicator I imagine. Stupid prices in late '21 tempted some in.

by Justa comment | 6th Oct 22, 4:59pm 1665028798

I see the banks have increased (not!) their savings accounts rates today following yesterdays OCR rise. Will be watching to see who is first and who is last to do this. They can move the floating mortgage rate within 24 hrs....

by realterms | 6th Oct 22, 5:04pm 1665029089

The floating rate rises will be along shortly from all of them. The big question is if they moved the fixed rates too. Personally I think yes.

by keithwoodford | 6th Oct 22, 6:17pm 1665033479

The floating lending rates for all the big banks already have a margin of >3% above the OCR. That seems rather a strong margin.

The floating savings rates are always well below the OCR. There is no real incentive for the banks to make strong offers to current account depositors..

KeithW

by solardb | 6th Oct 22, 5:32pm 1665030737

Its daylight robbery. Preying on reverse mortgages , and people needing bridging finance , or uncertain futures , who cannot go fixed . Where is the risk to the bank that would maybe justify such a large margin?

by WellingtonInvestor | 6th Oct 22, 5:22pm 1665030135

Shouldn't the on call accounts be moved up immediately. They are still very low. I do wonder if things will change when the FLP ends, and that cheap money supply ends for them.

by EdwardD | 6th Oct 22, 6:05pm 1665032749

With the FLP money still available to the banks from the Reserve Bank, they don't need saver's $s.

by Justa comment | 6th Oct 22, 7:38pm 1665038317

Yes they used to have to have a certain percentage of NZ term deposits to get some of their funds at OCR. They cant believe their luck with the FLP. The luck runs ot dec, and they will be paying 4% for what they have. Roll on dec.

by Baywatch | 6th Oct 22, 5:19pm 1665029968

US National Debt just surpasses 31 Trillion...USD - (note does in include unfunded liabilities of $172 Trillion)

by Justa comment | 6th Oct 22, 7:40pm 1665038434

I remember when it hit 9 trillion and we thought they were in big trouble.............

by Audaxes | 6th Oct 22, 6:15pm 1665033328

One more collateral deterioration at the end of last month. Tbills, SOFR, Fed securities lending, swap spreads, and FRBNY custody of foreign-owned USTs. Indication of offshore collateral/actual tightening that correlates really well w/US$. Like everything else, bad September. Link

USD shortages: A million tonnes of wheat blocked in Egypt's seaports

by Audaxes | 6th Oct 22, 6:25pm 1665033956

More shortages, more US threats:

Its time for some realism in our policy towards Saudi Arabia. Our Saudi colleagues do not share our values or security and economic interests. So let's just be transactional & stop pretending there is anything special about this relationship. & no more presidential visits. Link

by Audaxes | 6th Oct 22, 6:26pm 1665034014

Wooow ! Saudi Energy energy minister hits back on Reuters at OPEC+ press conference. Link

by Justa comment | 6th Oct 22, 7:42pm 1665038570

To be fair, they are affected by inflation the same as anyone else. I suppose $90 a barrel is just the new $80 a barrel.

by Squishy | 6th Oct 22, 6:35pm 1665034555

NZD falling by 15.7% p.a. brings home the poor performance of many Kiwisaver schemes as well.

by Audaxes | 6th Oct 22, 7:31pm 1665037874

Treasury tendered another $400 mln in three durations today, The May 2051 tranche of $50 mln was three times oversubscribed going for a 4.49% yield and up from the prior 4.37% two weeks ago.

Liquidity means a market maker commitment to engage balance sheet capacity to execute the price making function. If balance sheet capacity (the real money in the system, therefore liquidity) is systemically impaired, as in a crisis, or a crisis that doesn’t really end, then to get dealers to give up their precious balance sheet capacity and engage on the other side of a swap someone would have to pay a hefty premium to make it worth it (risk-adjusted) for the dealer to do so.

Hence the interpolated mid IR swap is minus 11.95bps with respect to the successful 2.75% 15/05/51 4.49 % tender yield.

by Baywatch | 6th Oct 22, 10:46pm 1665049583

Gobblygook

by Averageman | 6th Oct 22, 7:29pm 1665037784

More agents at a time of no sales. One seems at odds with the other.

by Justa comment | 6th Oct 22, 7:44pm 1665038659

And plenty of real jobs available. Do these people not want to do real work lol

by Hans Brink | 6th Oct 22, 10:11pm 1665047500

Thing is Averageman, sometimes people arrive late to the party, thinking it's still in full swing.