What happened Tuesday

Business / news

A review of things you need to know before you sign off on Tuesday; final minor flurry of rate changes, business sentiment dives, eyes on dairy auction, lifestyle block sales sink, ComCom gets active, swaps hold, NZD slips, & more

20th Dec 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
Unity Money raised its fixed home loan rates.

TERM DEPOSIT RATE CHANGES
TSB raised its term deposit rates, but really only matching main bank levels. Heretaunga Building Society raised its TD rates too.

REACTIVE SHOCK
Business sentiment has dived after the RBNZ said it is trying to engineer a recession in it drive to kill inflation. Firms are looking ahead with trepidation for the general economy, and they are looking at their own prospects much more negatively now too. It's a widespread malaise.

ANOTHER DAIRY AUCTION DUE
There is another dairy auction tomorrow morning. It might be soft. At the last full auction on December 6, the WMP price held at US$3400/tonne. But at the intervening WMP Pulse event, that had fallen to US$3340, a -1.8% slip. Returns in NZD may not be that different to those in USD because there has been little change (so far) in the exchange rate between these auction events.

GREEN INVESTING
The NZ Super Fund has committed $157 mln (US$100 mln) to a fund that will invest in companies developing products and solutions for climate change mitigation and adaptation. The fund is part of the Wellington Management portfolio. Wellington is a US$1 tln investment manager with more than US$1 tln in funds under management.

A SHADOW OF ITS FORMER SELF
The demand of lifestyle blocks is softening as fast as those for urban residential properties. REINZ released its November data for lifestyle block sales transactions an it noted that the latest sales levels are now -75% lower than the equivalent in 2019 pre-pandemic. It now takes 53 days on average to sell an average lifestyle block property, up from 45 days a year ago. The quickest place to sell is in Southland (35 days), the longest time is in Northland (69 days). Banks are much tough now when qualifying a mortgage for a lifestyle property.

HALF A MARKET
Data released today by the REINZ shows there were 145 fewer (-37.3%) farm sales for the three months ended November 2022 than for the three months ended November 2021. Overall, there were 244 farm sales in the three months ended November 2022, compared to 183 farm sales for the three months ended October 2022 (+33.3%) and 389 farm sales for the three months ended November 2021. In the three months to November 2019, pre-pandemic, there were 282 sales, so this market has just about halved.

RECIVIDIST BANNED
Mobile trader Ace Marketing and its director Sandip Kumar have been issued with two banning orders by the Auckland District Court preventing them from operating in the consumer credit industry for five years. In 2016 Ace was fined $150,000 from CCFA breaches. In 2021 Ace was found guilty of a second CCFA offence.

ANTI-COMPETITIVE COVENANT
The Commerce Commission is going after a Mitre10 franchisee (licensee) for buying a Tauranga property, and putting a covenant on it to prevent a Bunnings store from opening there. Such covenants are illegal as they are anti-competitive.

RECORD HIGH
For all the monetary nerds out there, settlement cash balances at the RBNZ have hit a new record high of $57.6 bln, eclipsing the October 15 high of $57.5 bln.

TREAT YOURSELF
For 2023, give yourself a years use of the content on interest.co.nz ad-free. Supporting us at $10/month (or $100 per year) is all that is required to avoid the ads on our service. You can do it here.

SWAP RATES DRIFT UP
Wholesale swap rates were likely marginally firmer today. The real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is up +1 bp at 4.59%. The Australian 10 year bond yield is now at 3.64% and up +13 bp from this time yesterday. The China 10 year bond rate is at 2.91% and little-changed. The NZ Government 10 year bond rate is now at 4.31% and also little-changed, but back above the earlier RBNZ fix for the NZGB 10 year which was down -2 bps to 4.28%. The UST 10 year is on the move up, now at 3.60% and up +9 bps

EQUITIES DUMPED
The S&P500 ended its Monday session down -0.9% earlier today. Tokyo has started its Tuesday afternoon session down -2.1%. Hong Kong is down -1.3% and Shanghai is down -.06%. The ASX200 is down -1.3% and the NZX50 ended down -0.7%. There is definitely no Santa rally this year.

GOLD LOWER
In early Asian trade, gold is just under US$1786/oz and down -US$7 from this time yesterday.

NZD SALIPS
The Kiwi dollar down -½c from this time yesterday at 63.4 USc. Against the AUD we are also -½c lower at 94.8 AUc. Against the euro we -½c lower at 59.8 euro cents. That all means our TWI-5 is now at 71.9 and down -40 bps.

BITCOIN MARGINALLY LOWER
The bitcoin prices is -1.3% lower than this time yesterday at US$16,555. Volatility over the past 24 hours has been modest at +/- 1.6%.

FINAL FOR 2022
This is the final 4pm update for 2022. The interest.co.nz crew are all on their summer holiday break now. The daily mortgage, term deposit, currency and bonds emails have now also ended for 2022. However, we will be continuing with a morning briefing, so you can keep an eye on what is happening in the global economy that may influence New Zealand. Enjoy your break.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

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47 Comments

by rastus1 | 20th Dec 22, 4:29pm 1671506948

Lifestyle blocks. Some food security there, but with the mad max equivalents roaming around security of another sort a looming issue.

In time we will appreciate how the Texan's take care of that little problem.

by j reacher | 20th Dec 22, 4:54pm 1671508450

Yeah Rastus .Reminds me of Yellowstone and the biker gang.

by IT GUY | 20th Dec 22, 6:17pm 1671513454

A single shot rifle and a one eyed dog?

In 2021, Texas enacted dangerous ‘permitless carry’ legislation that, effective September 1, 2021, generally authorizes people to carry concealed or holstered handguns in most public spaces without any license, safety training, or background check required, as long as they are at least 21 years old and not prohibited from possessing firearms under Texas’s weak firearm prohibitions law.¹ A narrow but notable exception is that people who have been convicted of any of four specified violent misdemeanors are not authorized to carry handguns in public for five years after the date that they committed that offense, except when on their own property or when they are inside of or directly en route to a motor vehicle or watercraft that they own or control.²

by JimboJones | 20th Dec 22, 6:42pm 1671514950

What could go wrong! You can’t even erect a tin shed within its own height of the boundary here in case it somehow kills someone.

by IT GUY | 20th Dec 22, 6:52pm 1671515549

Well thats not quite right you can erect a pole barn structure in NZ under 100 sq m without a permit now, it happened about the same time they relaxed rules on building a shed in town up to about 30 sq m.

https://www.building.govt.nz/projects-and-consents/planning-a-successfu…

by JimboJones | 20th Dec 22, 7:11pm 1671516717

However, subclause (1) does not include any building work in connection with a building that is closer than the measure of its own height to any residential building, public road, railway, or legal boundary.

by IT GUY | 20th Dec 22, 7:14pm 1671516896

Yeah I guess if you are stuck in the city on 250sq m this could be an issue (109sq m if recent build).

Play stupid games, win stupid prizes!

by Pa1nter | 20th Dec 22, 7:50pm 1671519045

I believe the rule you're talking about isn't about safety, it's about not casting shade on your neighbours property.

by tis i | 20th Dec 22, 10:11pm 1671527478

With a garden shed?

by arie | 20th Dec 22, 4:13pm 1671506023

You all enjoy your break and Merry Christmas. Thanks for the great reads.

by LouB | 20th Dec 22, 4:17pm 1671506226

Thanks for the service throughout 2022. I very much appreciate Interest and the coverage/analysis/opinions.

A safe, happy Christmas break to all of you who make it happen.

by Justa comment | 20th Dec 22, 4:23pm 1671506584

yes, great up to the minute 'interest', info on interest.co.nz, the go to interest site.

by J.C. | 20th Dec 22, 4:48pm 1671508123

Big move in JPY up 3% against USD. Looks like BoJ serious about relaxing yield curve control. Interesting times.

NZD and AUD punished. Looks like carry trade still exists.

by Jonny.Foe | 20th Dec 22, 4:53pm 1671508412

They are not relaxing their yield curve control, they are just choosing a different target. If inflation is running at 3%, they will be happy for market rates to adjust to the as it looks like being a new normal for a while. BoJ will still use yield curve control to hold the market at their target rate.

by J.C. | 20th Dec 22, 5:08pm 1671509310

They are not relaxing their yield curve control, they are just choosing a different target.

Isn't that just semantics?

The BoJ said it will allow the 10 yr yield to rise from 0.25% to 0.50%.

Bond future trading on halt in Japan and equities selling off globally.

Gold price surges (but not in JPY).

by Jonny.Foe | 20th Dec 22, 5:12pm 1671509542

Pedantic perhaps! But, yield curve control is the process by which central banks control the short and long-term market rates (using signalling and bond purchases / repos etc). Japan are not giving up or loosening that, they are just adjusting the market rates they set using yield curve control.

by J.C. | 20th Dec 22, 5:38pm 1671511136

Technically, you would get an A. And I might get a C+ for understanding how it has impacted in layman terms.

Anyway, was quite intereting watching BTC/JPY pump before the annoucement and subsequent dump. Calculated play.

by IT GUY | 20th Dec 22, 7:21pm 1671517305

Jesus wept how much has the BoJ tried to get some, any, please please any inflation in Japan......

Not that they have finally go that fire lite they are NOT GOING to put it out in any hurry. Of all the CBs they want inflation, just not too much.

by Poission51 | 20th Dec 22, 7:30pm 1671517802

The move will see commodities imports reduce in value,reducing inputs for Japanese manufacturers.

by JimboJones | 20th Dec 22, 7:37pm 1671518269

40 odd years of low interest rates didn’t do it for them, they needed the rest of the world to go crazy too.

by Poission51 | 20th Dec 22, 7:25pm 1671517531

BOJ statement later this afternoon,the carry trades getting hammered as bonds yields rise across the board,and currencies depreciate (aus 10 yr up 19 points) Lots of money managers getting early morning calls,as Japanese banks sell overseas treasuries.

by IT GUY | 20th Dec 22, 7:39pm 1671518387

This will be fun if the managers are already at the beach bach / or ski chalet

Could be very very big flows if they decide 3% is ok

This is one of those "events" that happen along the way as global interest rates normalise higher.

by Poission51 | 20th Dec 22, 7:54pm 1671519246

Kuroda just said it is a financial stability move,not an economic rate hike ( an anti speculative move) by slowing market volatility.

Gonna be a lot of unwinding from short positions,and interest yields on sovereign bonds increase.

by IT GUY | 20th Dec 22, 8:21pm 1671520885

= yield curve not so inverted.

by J.C. | 20th Dec 22, 8:20pm 1671520823

Plenty of positions rekt today on something seemingly innocuous by Western measures.

by IT GUY | 20th Dec 22, 8:22pm 1671520932

Tail risk, like the All Blacks not winning the 2023 RWC

by Jonny.Foe | 20th Dec 22, 4:51pm 1671508263

I think I am probably a monetary nerd because I am interested in the settlement balances hitting $57.6 billion. That means RBNZ will pay out $6.7 million in interest to the banks TODAY. That is about 2% of total Govt spending per day.

Those that are similarly nerdy will spot that this is a gross figure however. Part of the reason that the settlement balances are so high is that RBNZ have shoved $19 billion of Funding for Lending Programme money out to banks - meaning a third of the interest paid by RBNZ is coming straight back. The other $38.3 billion is mostly the result of QE - when the Crown swapped debt in the form of bonds for debt in the form of settlement balances. The average interest paid on those bonds was around 2.5%, so, again, there is an offset here.

The entanglement of bonds and settlement balances, falling bond prices, and ‘what ifs’ is such that it is very difficult to work out how much the Crown has made or lost as a result of QE. Not that it matters that much - as long as rich people get given money for being rich… that’s what matters.

by bobestm | 20th Dec 22, 5:24pm 1671510271

Thanks for the summary info. Indeed quite a merry go around, pity we don't see this. I am interested in you view on the stabilty of the banks given the support provided by the RBNZ.

by Audaxes | 20th Dec 22, 5:56pm 1671512199

Can your claim be reconciled here?

by Jonny.Foe | 20th Dec 22, 8:24pm 1671521078

Possibly - but there are unknowns aren't there - eg what is the counter factual for QE, or FLP?

by IT GUY | 20th Dec 22, 7:22pm 1671517338

The RBNZ Mark to Market is ugly but they just hold to maturity.

by Slapheid | 20th Dec 22, 4:53pm 1671508407

Thankyou to all the Interest Team and the Comments Gang for entertaining and informing me all year.

Have a safe and enjoyable Summer break!

by kiwikidsnz | 20th Dec 22, 5:00pm 1671508812

Seasons greetings & all the best to both the Interest team & the Comments team.

Stay safe out there.

"It is better to debate a question without settling it than to settle a question without debating it."

Joseph Joubert

by False economies | 20th Dec 22, 6:04pm 1671512694

A SHOW OF ITS FORMER SELF

?? A shadow of its former self?

by HouseMouse | 20th Dec 22, 6:25pm 1671513900

Pretty average couple of weeks for the NZSX50.

by IT GUY | 20th Dec 22, 7:10pm 1671516611

Bachman Turner Overdrive - You Ain't Seen Nothing Yet 1974 Video Sound HQ

https://youtu.be/4cia_v4vxfE

NZX is a dividend driven market, as EPS get revised lower its going to get .... pegged.

HW2 where is the Santa Rally?

by Pragmatist | 21st Dec 22, 9:37am 1671568672

Santa was put into MIQ, might show up in a fortnight or so.

by kamo | 20th Dec 22, 7:20pm 1671517219

I was talking with my bank over an issue . I mentioned that it would be nice to have a personal banker apparently my bank doesn't do this anymore. It can take up to an hour to talk to someone from the bank on the phone. 20 years ago the banks worked on a 1 percent mark up from what they borrowed to what they lent it for. Now we get 3.45% the floating rate is 7% . This is wrong and as interest rates have gone so have the margins. I wondered if any one knows a bank that has personal managers and is not taking all our money

by IT GUY | 20th Dec 22, 7:31pm 1671517893

You can get this level of service if you have enough money.

Most banks are giving 5.1 - 5.2 % Term Deposit 1 year now? more if you happy with Rabo etc

During the entire Property Ponzi I never saw a bank make a customer take a property loan....

by Halfway To Paradise | 20th Dec 22, 8:36pm 1671521770

I lost my personal manager at ANZ really annoying considering the amount of business I give them. Whenever I have to ring the online service I make sure I remind them how long I have been waiting and how I am unhappy with the changes to the service. I also make sure they promise to document my concerns. I am not going to make it easy for them.

by IT GUY | 20th Dec 22, 8:46pm 1671522372

Credit is a commodity, always purchase the cheapest.

by Zachary Smith | 21st Dec 22, 7:38am 1671561536

I had the same thing happen to me. Now I have to queue up . The only good thing about it is I now have less reluctance to change banks.

by whakahokia mai | 20th Dec 22, 9:21pm 1671524503

I wonder how the latest COP 15 deal will affect global GDP over the next decade as we move to prevent the extinction of what is left of our wild critters.

by nzphoenix | 20th Dec 22, 9:44pm 1671525857

Enjoy the summer break Interest team and to all commenters. Love the discussion each day - always something useful that makes you think somewhere on here!

by IT GUY | 20th Dec 22, 9:56pm 1671526561

This will not be an Xmas Gift to many interest rate trading desks....

“Tighter BoJ policy would remove one of the last global anchors that’s helped to keep borrowing costs at low levels more broadly,” Deutsche Bank analysts told clients, noting the BOJ move had come as markets were “already reeling” from the ECB and Fed’s hawkishness last week.

“It does suggest that change is afoot and speculation on a formal change of policy next year will intensify,” said Ray Attrill, head of FX strategy at NAB. “The very fact they’ve done it when the governor just a month or two ago was saying that they had no intention of doing it is clearly significant.”

by Poission51 | 20th Dec 22, 10:17pm 1671527845

Japan is the worlds creditor,the Japanese Insurance companies alone own around 3.5t of global treasuries and bonds.In Australia,Uk and France they own 20% of the debt.

With markets being constrained towards year end,there will be problems for speculators,and illiquid funds.Real money moves markets.

by IT GUY | 20th Dec 22, 10:47pm 1671529655

Maybe a Santa Crash then? EURJPY has puked 5 big figs, 3,5 big figs in the first minute, feels as big as the first QE news flash

JPY chart must target 110 over next year

I wonder if BoJ gave the Fed a courtesy call, I would not be surprised if this does not force a few big players into collapse. so many where borrowing cheap in JPY for all sorts of carry shite.

Once again Mrs Watanabe gets ........ like when the CHF gapped none of the margin houses would honour stops, once agains it warns that options are a safer trade protection then stops.