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
Nothing changed today, again. We are unlikely to get many changes until the Reserve Bank releases its November Monetary Policy Statement on Wednesday afternoon. And then, a lot will depend on variation from what the market has priced in.
TERM DEPOSIT RATE CHANGES
Unity Money, and Gold Band Finance both raise TD rates today.
MORE CARD USE, BUT RESTRAINED
Total billings on locally issued credit cards hit $4.545 bln in October, which was a sharp recovery from the pandemicly damaged month a year ago. But it is up +9.3% from October 2019 which when you think about the intervening inflation, isn't actually that impressive. Locally issued credit card billings inside the country are up +11.6% on that same basis, so a bit more of evidence that a real spending recovery is holding.
LOWER CARD BALANCES
Credit card balance growth is however restrained. We now owe $6.0 bln on all our credit cards which is far below the $7.5 bln we owed in December 2019. Back then, 59% was interest-bearing. Now only 53% bears interest costs. This now costs us about $530 mln in interest per year (at 18.6%), but in fact that is far less than the $730 mln per year it cost us in December 2019 at 17.8% pa.
ECON101 PROOF
Although median rents up +$40 a week nationally in the September year, they are virtually unchanged in Auckland as housing supply catches up with demand. The next test will be for housing prices.
NO CHANGE
China reviewed its prime loan rates (LPR) today and left both the 1-year rate unchanged at 3.65% and their five year rate unchanged at 4.30%. Most loans in China are prices of the 1-year LPR, except for mortgages which are usually based on the 5-year LPR.
PP LOG IN SORTED
The log-in issue many readers encountered last week when they tried to access our ad-free service is now sorted. We apologise for the outage. (Let us know if you still have issues.)
SWAP RATES SHIFT FIRMER
Wholesale swap rates may be slightly firmer today, but the real action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +3 bps at 4.23%. The Australian 10 year bond yield is now at 3.61% and down -3 bps from Saturday. The China 10 year bond rate is still at 2.83%. The NZ Government 10 year bond rate is now at 4.25%, and up +3 bps and still above the RBNZ fix for the NZGB 10 year which is up +5 bps at 4.21%. The UST 10 year is now at 3.80% and down -3 bps from where we opened this morning.
EQUITIES LACKLUSTER LOCALLY, DOWN SHARPLY IN CHINA
The NZX50 has started the week up +0.2%. This is after having come off a week where the NZX50 capitalisation rose +1.3% which was unusually good when benchmarked against the usual suspects. It was aided by a +2.6% rise in Energy sector stocks, but hurt by a -3.3% retreat in the Retirement/Rest Home sector. Separately, F&P Healthcare (FPH, #1) rose +2.8% which also helped. Today, the ASX200 is flat (and slipping away) in afternoon trade. Tokyo has opened down a minor -0.1%. But Hong Kong is continuing its wild rise, down -2.3% at its open. Shanghai has opened down -0.9%. If the S&P500 futures are any indication, Wall Street won't open with any gains either.
GOLD SOFT
In early Asian trade, gold is at US$1745/oz and down -US$6 from where we opened this morning.
NZD LITTLE-CHANGED
The Kiwi dollar is marginally softer than this morning's open, now at 61.4 USc. Against the AUD we are still at 92.2 AUc. Against the euro we are still at at 59.6 euro cents. That all means our TWI-5 is now at 70.6 and unchanged from this morning.
BITCOIN SLIPS
Bitcoin is now at US$16,210 and down -2.1% from where we opened this morning. Volatility over the past 24 hours has remained modest at just over +/- 1.8%. Trading volumes are lower than this time last week.
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45 Comments
If the Bank interest rate does not change even after raising the OCR by 0.75% or 0.5% than Mr Orr has no choice but to increase it further by another 0.75% as the purpose of raising OCR is to make borrowing expensive and control demand AND for this very reason Mr Orr should go for shock treatment for once and raise it by more than what market has factored in - 0.75%.
All experts and media are expecting 0.75% rise in OCR
https://www.newshub.co.nz/home/money/2022/11/reserve-bank-tipped-to-hik…
This RBNZ review is one of the most important for us but more so for Mr Orr's creditability.
Banks have upped rates abit since the last OCR increase... now 6%-7% fixed housing rates, pushing on or above recent testing rates with people now feeling the squeeze. Banks are also testing new mortgages at test rates of 8%+. I think Orr would be relatively happy with this...
There's not many out there right now that wouldn't be cautious coming off fixed rates or borrowing extra funds...
Maybe? But he has pals in the government. That brings political calculations into play. For instance, it would be far more expedient to kick the can of the problem down the road. Because, we as a government don’t want the actual hardship of hard pressed citizens to spill out quite yet. Let’s just keep that sort of negative publicity in abeyance for as long as possible. Therefore, good friend Mr Orr, softly, softly does it then, ie 0.50% at the very most.
They will need to see much more evidence of pain to stop their destructive path.
Totally agree re: lag effects, I have been talking about that for the past few months. But what I see and think and how the RBNZ see and think are poles apart. They clearly want real time evidence that demand is being destroyed. Which they won’t get. They won’t get that until it’s too late…
The OCR is a very crude tool. Less so in a place like Aus where the impacts of hiking it are much more in ‘real time’ given the dominance of floating mortgages there.
Agreed Nifty. Absolutely. The thing is though there is a world of difference from seeing it, talking about as opposed to actually experiencing it. To be honest I express that from a position of advanced years where the approaching difficulties are somewhat academic but I worry nevertheless not only for my younger family but for NZ society at large, the fabric of which is about to to be stretched and tested to an extreme.
You might not be financially struggling but when your life becomes at risk with a ram raid or robbery you might think twice about the impact Orrs/Jacindas decisions are having on people...
Our countries not in great shape - just flick on the news...there's only so far you can squeeze people until they start rioting on the streets...
Judging by the overall passivity of the population, and how bad things really need to get before there's rioting in the streets, we are possibly a ways off.
My gut says continual gradual decline in overall living standards, more of the population as kept wards of state, rather than revolution.
The roots of it go very far back. A decent part of it comes from the dilution of an individual's value as a unit of labour, vs. the increased relative value of capital.
60 years ago, the labour market was mostly domestic males.
Then that got split in two by Women taking a greater role in the workforce
Then it went global.
There's not many ways the individuals' fortunes can go, other than down.
HM I'm not so sure you can call it like that.
We all remember that Bear Stearns moment, and the Deep Squid spending late nights on the Hill.
The sacrifice of depositors to the altar of liquidity, by printing money, and refusing to mark to market, kept solvency in the market a believable myth. And please don't even get me started on the Glass Seagall Act.
I always loved the late David Lange's expression of a steering wheel on a train. It's somehow comforting.
It's a full MPS so "Markets" will be looking at the language of the statement and the forward projections from the RBNZ. Much as the RBNZ are maligned for not seeing the current inflation, The Market, surprisingly, puts more credit on their statements than the projections you read here.
The 3pm webcast can be worth watching as well.
Steady as she goes........
Wall Street won't open with any gains either.
Despite the market losses year-to-date, my view is that prospective 10-12 year returns for a passive investment allocation remain dismal. The recent rally in stock market has driven our estimates of 10-12 year S&P 500 nominal total returns back below zero, while enthusiasm over a small retreat in inflation has brought bond yields down as well. As I noted last month (see the section titled “Far from a Fed pivot” in Estimating Downside Market Risk), the 10-year Treasury bond yield has rarely stood below the weighted average of Treasury bill yields (0.50), core CPI inflation (0.25), and nominal GDP growth (0.25). Presently, that weighted average is above 5%. That may very well come down as inflation abates, or recession takes hold. Still, my impression is that a 3.7% yield on the 10-year bond requires speculation about those outcomes, particularly in a market where one can earn 4% – and likely more shortly – from 3-month Treasury bills.
It’s equally important to recognize that the stock market losses that we’ve observed year-to-date are merely a give-back of the frothiest segment of the recent market bubble. Our most reliable valuation measures still match the extremes we observed in 1929, 2000 and the 2020 pre-pandemic high. A retreat to run-of-the-mill valuation norms would require a further loss of 58% in the S&P 500 – from here. We don’t require that outcome, but we absolutely wouldn’t rule it out. Link
Long-term economic growth is a function of the growth in labor supply and total factor productivity.
In other words: it’s highly influenced by how many people actively contribute to generate economic output, and how productive the labor force and the use of capital are.
Until the mid-80s, the ability to generate organic growth in most Western economies was very solid: a combination of strong working-age population and good productivity trends led to high levels of potential GDP growth.
But things rapidly took a turn for the worse in the late ‘80s.
Xmas canceled in North America and Europe
Ocean carriers are said to be in “panic mode” as bookings from China to North Europe and the US west coast tank, causing FAK rates to plunge to new depths.
Despite aggressive blanking that has reduced weekly capacity on the tradelanes by more than a third, the lines have failed to slow the precipitous fall in short-term rates and, are arguably fuelling the fire by offering sub-economic spot rates via their digital platforms.
https://gcaptain.com/carriers-in-panic-mode-as-china-bookings-plummet/
Its long med/term funding really , cheaper then ASB 5 year tho, still reckon they paid the top
Under the FLP, the Bank will offer 3-year funding to eligible institutions. The funding will be structured as floating rate Repurchase Transactions priced at the Official Cash Rate (OCR), each for a term of three years. Participants may access the funding over a 2-year transaction period. The Bank reserves the right to extend (but not shorten) the transaction period.
I agree with Bank of America - stocks will weaken again across next 6 months or so, but look for a surge second half of 2023 (personally I would say closer to December than July):
https://www.reuters.com/markets/global-markets-bofa-urgent-2022-11-18/
with the upmost respect, the houses that on average hold stocks no longer then 2 seconds, rarely manage to predict whats going to happen tomorrow, and its a different desk that owns the crystal balls to those holding the trading VAR
But if you want to eat forecasts, go ahead.... its a buffet
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