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
HSBC raised its floating rate today by +50 bps to 7.29%. The Cooperative Bank raised a set of key fixed rates each by +10 bps.
TERM DEPOSIT RATE CHANGES
HSBC also raised most term deposit rates out to those for a two year term.
EXPANSIONS EXTEND
The local services sector was still expanding at a healthy clip in September, just not as fast as in August. This is according to the BusinessNZ/BNZ PSI. New orders and activity levels were the parts that kept this index up. Employment was flat. There is a wide variation between sectors in this survey and generally it is a lot more positive than either the NZIER's QSBO or StatsNZ's electronic card data. This services expansion more than makes up for the slower expansion in the factory sector.
'SCALE OF CUSTOMER HARM SIGNIFICANT'
The FMA has filed High Court proceedings against Suncorp's Vero Insurance for failing to apply multi-policy discounts, which led to affected customers being overcharged approximately $8.7 mln in premiums. The FMA claims Vero contravened the fair dealing provisions of the Financial Markets Conduct (FMC) Act by incorrectly stating the premiums owed by customers who were entitled to the discounts. The false and/or misleading statements were made in periodic invoices issued to affected customers in relation to house and contents, vehicle and boat insurance. Multi-policy discounts apply when a customer has more than one risk or cover insured under one policy, or under multiple policies. Vero has reimbursed almost $10.3 mln in overcharges to affected policyholders. The issue dates back to 2009 but the FMA’s claim only applies to Vero’s conduct from April 2014 onwards, which is the date the FMC Act came into force.
DOUBLING UP DEBT
Air NZ is making a unsecured, unsubordinated, five year fixed rate bond offer for up to $100 mln. "The proceeds of the Offer will be used for general business purposes including to fund repayment of the AIR020 Bonds on maturity." The AIR020 bond is for $50 mln and matures on October 29, 2022. It had a coupon of 4.25%. It isn't priced yet, but the new bond will probably have a yield of about 6.25% when it is issued on October 27, 2022. Moody's rates it Baa2 (like BBB) and one notch above the lowest investment grade).
BETTING ON MORE UPWARD PRESSURE
Tomorrow, all eyes will be on the NZ CPI data out at 10:45 am and that is likely to confirm high inflation is embedded even if it has fallen a little bit. But as others have noted, those 'falls' are more due to oil prices, a component that is always volatile. Money markets have priced in +59 bps for the next OCR review on November 23, and now expect the OCR to top out at 5.0% in May 2023, staying at that level for most of the period through mid 2024.
SWAP RATES FIRMER AGAIN
Wholesale swap rates are firmer yet again, even though tomorrow's September CPI data is expected to record a fall from the June levels. The key real action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up another +3 bps at 4.01% and back at its highest since January 2009 when it was on its way down from 8.89%. Prior to that is was never as low as 4%. The Australian 10 year bond yield is now at 4.06% and little-changed from this morning. The China 10 year bond rate is little-changed at 2.72%. The NZ Government 10 year bond rate is now at 4.58%, and up +6 bps and now well above the earlier RBNZ fix for this bond at 4.53% which was down -2 bps from this time Friday. The UST 10 year is now at 3.99% and down -3 bps from this morning.
EQUITIES MOSTLY LOWER
The NZX50 is ending its Monday session down about -1.1% and slipping. The ASX200 is down -1.5% in early afternoon trade. Tokyo is also down -1.5% in their early trade. Hong Kong is down -1.0% in very early trade. Shanghai has opened -0.2% lower. The S&P500 futures suggests Wall Street will open tomorrow up +0.7%. But a lot can change before then, and probably will.
GOLD HOLDS
In early Asian trade, gold is at US$1648/oz and up +US$3 from this morning.
NZD FIRMISH
The Kiwi dollar has firmed +¼c from this morning to be just on 55.9 USc. Against the AUD we are little-changed at 89.6 AUc. Against the euro we are also little-changed at 57.3 euro cents. That all means our TWI-5 is at 66.7 and up +20 bps from this morning.
BITCOIN LITTLE-CHANGED
Bitcoin is firmer today, now at US$19,251 and up a mere +0.6% this time morning. Volatility over the past 24 hours has been low at just over +/- 0.8%.
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57 Comments
The inverse relationship between swaps/interest rates and asset prices is quite striking. Swaps bottom late 2020. By Jan 2021 NZX 50 has peaked and has been in decline.
But goes to show the equation Price = Cash Flow / Discount rate is true. So unless you can increase your cash flow faster than the increase in the discount rate/cost of capital, the value of your asset is going to fall.
Good morning saar.
You should stick to commenting on things you know something about and interested in
US shares rebounded Monday, overnight our time. I did tell you there has been a change
by HW2 | 14th Oct 22, 12:49pm
Not really. The market is expected to head higher, and will oscillate as it does.
Not likely. They mostly don't contain English anymore, so they can't really be that concerned about safety if they make woke videos that no one understands. Some of them in the past used to be slightly amusing, but now they are just a bunch of woke nonsense. People just zone out how and don't listen. I would wager if it was nationalized the woke content would be pushed even further.
Vero. I am not surprised. Once had a claim and they flatly denied it for no apparent reason. After a long and hard battle on my own they said "OK, we accept it but the other party couldn't do anything about it. " I told them that he could have killed me and if that was their reason to deny they were in the wrong business. And when I asked if the other party was their uncle they even got angry.
I believe May onwards will be very good for risk assets and especially crypto.
May seems to be the main consensus point for a likely end to rate hiking in most countries - so hopefully down hill from there.
Also enough time for a resolution in the Ukraine war.
And for Bitcoin fans it will strike the 1 year mark before the next halving which I imagine will get priced in quickly (last halving it went from $8.7k to $65k over 12 months). There is also a litecoin halvening soon in 2022 which could be interesting.
And for Bitcoin fans it will strike the 1 year mark before the next halving which I imagine will get priced in quickly (last halving it went from $8.7k to $65k over 12 months). There is also a litecoin halvening soon in 2022 which could be interesting
Could be epic Wolfie. Not sure why LTC would light your fire. DIdn't even know it still existed.
Seems dumb to me, everyone jumps in because there is a halving and hence everyone else will jump in and the price will go up. But nothing has actually changed, the halving was always going to happen, it should be priced in to the current price.
If it was guaranteed that the NZD inflation rate was going to halve on a certain date next year, on that actual date nothing would happen as it would be well and truely baked in already.
I used to sit next to someone in an office who used to buy hyperinflationary currency on the belief they were going to be redecimalised. So their 1 trillion note would be worth 100x as much.
I tried explaining twice how it's value couldn't change like that.
This crypto halving stuff seems in the same boat.
It will have an effect, but that effect should already be priced in. Likewise if the was a doubling every 4 years, no one would wait for the date before selling it off. Or if everyone knew a stock was going under next year, that would be reflected in the price as soon as it was known not when it actually went under.
Sounds like the efficient markets hypothesis.
https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp
A bit like that, except the NZD has a value based around trade, as opposed to crypto, which has a value based solely around what exactly?
I'm not a smart person by any means, your use of Amway suggests you may even be older than me, which is kinda scary. Actually no, that would line up pretty well.
It's an incredible rise - I thought the 1-2 year had peaked at 4% mid-year and that was going to be the general channel they stayed at. But who knows now...it could go anywhere. So much for financial stability from our central bankers. Swap markets behaving like this as a result of their actions - they are the financial instability in the system (but they would never admit that).
So much for financial stability from our central bankers. Swap markets behaving like this as a result of their actions - they are the financial instability in the system (but they would never admit that).
Gotta love the market talking, Not the central bankers and the talking heads in the media.
I hate that I have to post again about politics but seriously all that matters is that someone else is in charge.
Flush the dunny and move on.
https://www.newshub.co.nz/home/politics/2022/10/gang-numbers-number-of-…
https://www.newshub.co.nz/home/politics/2022/10/coronavirus-government-…
I don’t know really how much the gang thing can be attributed to the current government. Yes it’s 50% in 5 years but that might have happened regardless of Labour coming to power. Maybe the 501 thing was quite influential, as well as a general worsening of inequality which would have happened regardless of who was in power.
Just a reminder that if prices had been unchanged this quarter, tomorrow's CPI would still be around 5.5%. Add on rent, food, insurance and local govt rates (which get added this quarter), then take away a fall in petrol prices, and you are in the mid to late 6s. I don't think we will breach 7%. What will make the difference between 6.6 and 7 is house building costs. If they come in high, then expect a number at the high end of the range.
Now go through the main contributors to CPI increases and ask yourself how many of the key drivers will subside if the OCR is pushed up. Will council rates come down, petrol prices change, insurance costs reduce? Will China pay less for dairy? Will imported fertiliser and plastic costs come down?
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