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, Kiwibank, Cooperative Bank and HSBC all announced their floating rate changes today. They all also raised fixed rates, although ASB didn't change their 4 or 5 years rates. Only BNZ is yet to declare its new floating rate. WBS also raised their home loan rates.
TERM DEPOSIT RATE CHANGES
BNZ raised term deposit rates late yesterday. And so did ASB, Kiwibank, Cooperative Bank, HSBC and Heartland Bank.
BRACKET CREEP PLUS INFLATION
The Crown accounts for October were released revealing a breakeven situation in October where taxes and revenues nearly equaled outgoings. This was an unusually small deficit for an October of just -$183 mln. But if comes after taxes on individuals rose to be +15% higher than the same month a year ago as bracket creep bites harder. And GST receipts rose to an unusually high $2.6 bln in the month, a massive +56% higher that the same month a year ago. Inflation on top of free-spending consumers is swelling the tax coffers. Governments love bracket-creep-plus-inflation.
TERMS OF TRADE WEAK
Our terms of trade has been going against us as import prices rose very much faster than export prices. A lot of that was due in Q3 to the combination of a weakening exchange rate and rising oil prices. Of course, the situation has changed since September, where now our NZD is appreciating. But that is only half of it - our exports haven't grown much since and our dairy and meat volumes are struggling. Increasing numbers of farms going out of production (so that foreign investors can keep polluting and offset that with a New Zealand forest).
TRADE DEFICIT WORSE
Our trade deficit in the September quarter grew to -$7.5 bln covering both goods and services. The rush to buy EV cars which now includes increasing numbers from China (like Teslas, MGs, Havals, LDVs, etc) , means that the big surpluses we used to run with China have disappeared. It was a deficit of -$102 mln in Q3-2022 with the Middle Kingdom. And with the closure of Marsden Point, the deficit with Singapore is now very significant (-$1.8 bln or a quarter of our total deficit) as that is now our main source of refined fuels.
ANOTHER COMMITTEE
The Government said today: "Some of the country’s most difficult health issues will be tackled by a newly established public health advisory committee, whose members have now been appointed."
AUSSIE HOUSING IN THE DOLDRUMS
In Australia, the number of loans for the construction or purchase of new homes fell further in October, down by almost -1% to its lowest level in over three years. Separately, lending for housing fell -2.7% in dollar terms in October from September to be down -14% year on year. But at least the month-on-month fall is less that the -5% they were expecting.
RESTRAINING PAYDAY LENDING
And staying in Australia, their parliament is about to pass a law that payday loan repayments cannot exceed 10%of a person’s net income. Their new law will also require payday loans to have equal repayment intervals, as well as prohibiting lenders from charging monthly fees for the residual of the loan term if the borrower pays off the balance early. Lenders will also be banned from making unsolicited communications to consumers to enter into a payday loan. Cash Converters is a big Aussie payday lender, but certainly not the only one.
SWAP RATES SLIP
Wholesale swap rates were likely lower today on global trends. The real action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +2 bps at 4.43%. The Australian 10 year bond yield is now at 3.41% and down another -9 bps. The China 10 year bond rate is at 2.92% and little-changed. The NZ Government 10 year bond rate is now at 4.03%, and down -12 bps and the same as the earlier RBNZ fix for the NZGB 10 year which is up +3 bps at 4.03%. The UST 10 year is now at 3.54% and down another -8 bps from this time yesterday. (A week ago it was at 3.68%; a month ago at 4.10%.
EQUITIES FLAT OR LOWER
Wall Street ended its Thursday session little-changed. Tokyo has opened -1.6% lower today. Hong Kong has opened flat as has Shanghai. The ASX200 is down -0.6% in afternoon trade. And the NZX50 is down -0.2% near its close and for the week so far that is a +2.2% gain.
GOLD FIRMER
In early Asian trade, gold is at US$1798/oz and up +US$22 from this time yesterday. It was over US$1800/oz earlier and closed in both London and New York above. The gold price in USD is being boosted by a retreating USD exchange rate.
NZD RISES FURTHER
The Kiwi dollar is another +½c higher from this time yesterday at 63.7 USc. Against the AUD we are up more than +¾c at 93.6 AUc. Against the euro we are unchanged at 60.6 euro cents. That all means our TWI-5 is now at 72 and up another +40 bps.
BITCOIN SLIPS
Bitcoin is now at US$16,950 and down -1.7% from where we were this time yesterday. The bitcoin price seems to get not boost from a falling USD. Volatility over the past 24 hours has been modest at just over +/- 1.3%.
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84 Comments
I recall not long ago commenters here were saying that the NZD would tank badly. It goes to show that just because something is going down, or up for that matter, it doesn't necessarily keep going that way.
As I've said before - things change.
Mostly perspective.
It's not amazing in NZ, but it's less terribad than most places, so despite everything the NZ peso looks a safer bet, at the moment.
Agreed. The advantage of being a small nation is that we can turn the economy quickly to adapt to global change. This was evident in the previous recession in the 90's when NZ was the first to recover.
I recall not long ago commenters here were saying that the NZD would tank badly.
Look at the yen. Was supposed to be heading to oblivion as the BoJ refuses to increase the OCR.
"I recall not long ago commenters here were saying that the NZD would tank badly. It goes to show that just because something is going down, or up for that matter, it doesn't necessarily keep going that way"
Its highly correlated to the performance of global risk assets. On the next leg down of the US equities market (assuming that what we are witnessing is a bear market rally), the NZD will drop again with those markets. And we've just had 2 months of gains in US equities which is right at its reversal point (if technical analysis is your thing....it isn't always correct!)
Here's a chart:
https://pbs.twimg.com/media/Fi7pSbRXgAENpYT?format=png&name=large
Inflation fighting rise. It all helps
Deflation coming soon.
When I read all the “NZD is collapsing and will only get worse” comments on here a few months back, I laughed to myself and thought “the NZD will definitely shoot up then”.
Thats because Orr kept his bollocks and hiked rates at an appropriate rate.
If it was Markus or Jfoe as governor NZD would be in the 30c region.
Have Kiwibank still not lifted their rates for their savings accounts?
Yep poor effort so far. They had an attractive on call rate for about a month but hard to look past Rabo or Heartland right now. If we don’t switch they don’t listen.
Whoops hold the phone Interest have updated the tables to suggest Kiwibank have increases in the pipeline - on call going up from 2.6 to 3.35.
Heartland's materially lower credit quality needs to be taken into consideration.
Heartland 3%pa OnCall acct no strings
Heartland also offering 4.25 on the 32 day notice saver. Not quite a slick to use as the other banks but no worries switching in and out so far.
Bracket creep. The government’s silent partner. Inflation drives up income tax. Inflation drives up GST. Undoubtedly, with those facts a tenet tucked under the pillow, Finance Minister Robertson nods himself to sleep, quite satisfied.
Yet, heaven forbid (well at least labour and the media) suggesting that brackets should be moved and government waste reduced.
Chris Joye reports that Brissie is Ground zero for the great Aussie housing crash. Dwelling values falling at a 2% per month and accelerating. Worst monthly losses in 40yrs.
And they have a rental crisis. Stone the crows.
https://www.afr.com/wealth/personal-finance/no-evidence-of-a-housing-ma…
Just been to yet another funeral for a person in their 70's. Yet another widow left in a property that is far too big for them to manage. Not sure how many funerals now I've been to for people in this situation the past few years (when covid allowed...).
Big changes are unfolding as boomers are starting to leave this world and with them their large holdings of property.
Also noticing quite a number of widows (in their 60's and 70s) downsizing from the family 3-4 bedroom home on the 800-1000sqm block to a 2 bedroom home on 400sqm.
We have had a series of similar, let’s say, passings. Some rather unexpected, this is in Canterbury. Have to question, that the trauma & dramas of the EQs,fires,terrorism & pandemic have compounded, silently & tellingly.
Yes it's been a pretty stressful few years - one today was heart condition, others mostly cancer related.
Deaths in last couple of quarters have been 7x typical age adjusted increases. Usually 1.4% growth but last two quarters running at 10% growth compared to last decade. No one cares though because we are fully vaxxed and death doesn't matter anymore to the team of $55 million.
"The increase in deaths in the June 2022 year (9.7 percent) was higher than the average annual increase over the previous decade (1.4 percent). "
https://www.stats.govt.nz/information-releases/births-and-deaths-year-e…
https://www.stats.govt.nz/information-releases/births-and-deaths-year-e…
Right so try explaining that. The Vax has killed or maimed quite a few people and lets be honest, it didn't really work did it. How else would you put the increase down to ? Nothing else changed in the last few years. Nice spin by the government but you cannot hide actual deaths, numbers don't lie.
The Labour PR hacks will be messaging Lanthanide et al to provide an answer.
If the VAX is the issue would we not see higher deaths across all age groups Carlos? We have 2 in our family plus 75 with cancer and vaxed to the hilt, going strong and covid free. So YER nah to your theory.
You should put a trigger warning on that link.
The headline reads
Contrary to the “hopeium” out there, there is currently zero evidence that the great Aussie housing crash is bottoming out. The most constructive thing we can say is that house prices are falling incredibly quickly, albeit at a slightly slower pace than what was recorded a few months ago. In 40 years of data collected by CoreLogic, the consecutive 2 per cent monthly draw-downs in October and November were the worst months ever witnessed.
This is actually bad news for NZ, as many nurses and midwives move to Brissie. They have brand new hospital buildings and cheaper (opps cheaper again) housing then NZ.
Also better weather and much more stuff to do.
Oh my. This makes FTX look like chump change.
....Christopher Whalen, the chairman of Whalen Global Advisers, who makes the bold case that banks were short over $1 trillion in capital at the end of the second quarter, and that it’s only going to get worse as the Fed keeps hiking interest rates.
That claim may surprise those who think the U.S. banking industry has some $2.2 trillion in capital. But he whittles that figure in several ways. First, he notes, there’s a difference between book equity and tangible equity, the latter of which is used by banking regulators to evaluate solvency. It’s a narrower definition, excluding items like goodwill and deferred tax assets, that brings the total down to $1.49 trillion from $2.22 trillion.
Then, drawing on Federal Deposit Insurance Corp. data, he subtracts what’s called accumulated other comprehensive income. “Thanks to QE and now QT, all sorts of assets have become negative return propositions for banks and nonbanks alike. If the coupon pays less than the funding costs, you’re losing money,” he says. That takes capital down to $1.23 trillion.
https://www.marketwatch.com/story/banks-are-short-more-than-1-trillion-…
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They (US banks) have $3.0057 trillion bank reserve balances lodged at the Fed - Interest Rate on Reserve Balances
Chances are the Federal Reserve is insolvent.
Thanks Audaxes. What do you make of the analyst's suggestion re assets when marked to market?
Are Central Banks Going Bankrupt? Morgan Stanley Makes A Striking Observation
As a sidenote, based on average Treasury yields at the various points that the Fed has expanded its balance sheet, we estimate that the Federal Reserve’s $9 trillion balance sheet is now underwater. If the Fed was an actual bank, and if banks marked their assets to market value, the Fed would be insolvent. Of course, the Fed doesn’t mark to market, nor have banks done so since the early-2009 market low, when the Financial Accounting Standards Board relaxed FAS Rule 157 (which is actually what ended the global financial crisis – by making bank insolvency opaque). In effect, the Fed has created liabilities for which there is now no corresponding asset, and now finds itself wandering into fiscal policy, which is the sole domain of Congress. Needless to say, nobody cares.
Even without capital losses (which can be recovered by holding the bonds to maturity), the Fed will also go underwater if the interest it pays on reserve balances exceeds the interest it earns on the bonds it purchased. In this case, the Fed can be expected to book any loss as a “deferred asset.” As Ben Bernanke explained before Congress years ago, when the Fed books a loss as an asset, “it is an asset in the sense that embodies a future economic benefit that will be realized as a reduction of future cash outflows.”
What Bernanke meant with that hand-waving gibberish is this: Fed normally returns the interest received on its asset holdings back to the Treasury, for the benefit of the public. If the Fed’s bond purchases lose money, that interest will instead be used to cover losses. See, “it is an asset in the sense that it embodies a future economic benefit [to the Fed] that will be realized as a reduction of future cash outflows [to the public].” Yay. Link
Your presence on this site is invaluable
Fed’s Balance Sheet Drops by $381 Billion from Peak: December Update on QT.
https://wolfstreet.com/2022/12/01/feds-balance-sheet-drops-by-381-billi…
(which can be recovered by holding the bonds to maturity) - this is not the case if the bonds were purchased above par., which they generally were. Witness RBNZ government indemnity.
What are the points either of you are making here? Yes, the RBNZ would have been insolvent looong ago from the LSAP. It has $2.25b of equity and >$10b of LSAP losses. They are required to mark the LSAP to market and take it to the Balance Sheet which is then offest by the Crown indemnity.
This has nothing to do with QT or holdings, which they are slowly moving to Treasury/DMO.
Not in the US, and I have highlighted what you claim in respect of the NZ government indemnity, as has this site, numerous times.
But nonetheless, the US financial sector is basically insolvent.
Yes, but the Fed is literally insoluble. They don't have to play by the rules that others have to play by.
They (US) changed the law to accommodate such insouciance. I am sure their international creditors and enemies are not so indifferent.
History has shown that they are not (yet) in a position to remonstrate.
Looks like Jacinda and friends have got the ability to instantly censor anything on social media that they don't like.
https://twitter.com/justin_hart/status/1598211584341733377
I bet we don't hear a peep about this from the team of 55 million. What a time to be alive.
Jacinda probably gave the login details to Mahuta to manage.
It just gets betterer and betterer for Labours re-election chances.
Its well known in political circles that parties often know a few scandals and hold onto them for election year. Given the self inflicted damage Labour is going through next year is going to be crazy.
Personally I don’t trust any social media so are not involved but out of curiosity, if an individual did have a post taken down is any explanation provided as to why and who initiated the request to do so?
You would think that this is to remove terrorism links from extremists (perhaps even dgm extremists). ie like the CHCH guy. You would think that via OIA you could get a list of whats been removed
Like Luxon etc are likely to return the keys to the fun park.
But really, Facebook twitter YouTube are broadcasters like TVNZ TV3 mediaworks sky tv. Should they not play under the same rules?
Maybe the keys to Facebook etc should be handed to the chief censor and left there?
What does this mean exactly in terms of censorship?
Has this power been used, when and how
Mahutu probably has the password.
Generally any Govt shutting down free speech is worrying. Well beyond that, Facebook portal shutdown access, is very disturbing.
Just part of Five Eyes capacity which Snowden exposed.
I don't agree with it, but in all fairness, NZ won't be the only country that has access to the takedown portal by a long shot.
If Facebook are offering this access to all Governments, then wouldn't it make sense that our Government apply for access?
Bit of a cheap shot to put the spot light on Cindy's zoo when you'll probably find even the likes of Hage Geingob could probably censor your posts if he decided he didn't like you.
Bracket Creep. OK, but in a tight labour market, the more the govt takes the more we ask from employers.
Ok true but correct me if I’m wrong, if the employee is successful in asking for more, then the IRD will get more PAYE off said employee. In other words the dreaded spiral but nonetheless a government looking at looming deficits tends to look for revenue at any cost doesn’t it.
the big surpluses we used to run with China have disappeared. It was a deficit of -$102 mln in Q3-2022 with the Middle Kingdom. And with the closure of Marsden Point, the deficit with Singapore is now very significant (-$1.8 bln or a quarter of our total deficit) as that is now our main source of refined fuels.
Can someone explain how we benefitted here?
Like, if fuels now cheaper because we're not refining it, but we run a greater trade deficit to get it, are we better or worse off?
Wasn't closing Marsden point supposed to improve efficiency meaning cheaper fuels, is there any analysis on this, considering the importance?
The deficit must also be offset by a surplus somewhere due to not having to import crude, surely?
If we were buying and refining russian crude like China and India (who we happily trade with) would petrol be 50c/L
and what price do we put in loosing the capacity to refine our own fuel? more dependent on trade/ shipping / middle eastern oil producers --- what is the environmental cost of shipping it half way around the world to us the emplyment cost of the many skilled jobs the plant provided in a rural economy
Good question. We've certainly lost the value-add component with associated NZ labour and taxes. All-in-all I believe a poor strategic decision for New Zealand to allow the dismantling Marsden Point.
Our trade deficit [in Sept] grew to $7.5 Billion. We are slap bang in December so we are all looking backwards, and though the majority of commentors here anst about the fall of asset values of housing and commerical property; in the productive sector we are seeing a rapid slowing of manufacturing, and a exports of a primary industries facing some real headwinds.
This time Cindi and crowd are not going to be bailed out by the farmers.
“Farmers! What farmers?” Excerpt from the script, daily podium Punch & Judy Show, in the halcyon days days of “The Great Control,” that is the pandemic.
The annual trade deficit was $11.9 billion. In the year ended September 2021 the deficit was $4.1 billion.
wd
Good price at the pump today!
$2.13 for 91 in the Tron yesterday
Diesel 2.35 at gull fifth ave the other day
Less than $2.30 at NPD in Auckland for 91
The gold price in USD is being boosted by a retreating USD exchange rate.
More and more you can clearly see the only thing which was pushing rates up was the Fed. That was it. Not inflation expectations. Now that the Fed is about done, rates go back to where "should" be. This was never going to be the 70s. Link
Michael Boulgaris is saying how the market is quite good and improving at the moment.
Boulgaris, or Bullgaris ?
evidence for his call?
Did you not read the question. Go to the bottom of the class
Worth a good look at that trade data released today (RBNZ M8). It shows that import prices in Sept 2022 were a massive 28% higher than in September 2021. Now tell me again how RBNZ fiddling with interest rates will reduce prices in NZ...
By destroying aggregate demand (and with it, the economy)
I am just a simple engineer with a talent for maths - but I cannot calculate how any country of 5 million people could reduce demand enough to cause international prices to drop by 30%. Thankfully they are falling anyway, but I am not sure I can handle watching RBNZ claim that they made it happen (whilst crashing the economy)!
Watch and learn from Master Orr at the helm
Looks like Blackstone has liquidity problems:
https://www.bloomberg.com/news/articles/2022-11-03/blackstone-investors…
Confused capital value with wealth.
Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.
Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag. Link
sounds like nz property
Exactly
Love this
Fascinating article. They have been making some moves in NZ recently. The way I see it all the REIT’s, Syndicators and Property Funds have the same issue- rising interest rates.
Rising rates decreases the value of all of their assets at a time when their debt costs increase.
Most of the listed REIT’s are down 20-25% this year. The speed and scale of the increases has caught everyone by surprise.
The US 10year T bill has been falling for some time in a down trend. Down 17 percent.
It looks to be a continuing trend
Chirp
Who’s over the NZD? Wondering what’s driving the appreciation? Surely not interest rate increase…
Global risk appetite. If US equities turn south again (which if technical analysis is correct) it will start heading south again in the next few weeks.
No guarantees of course but if global risk assets fall, people don't want NZD, they want USD.
Auckland rental townhouses up to 511 listings, the expected surge in new builds is really arriving:
https://www.trademe.co.nz/a/property/residential/rent/auckland/search?p…
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