What happened Tuesday

Business / news

A review of things you need to know before you sign off on Tuesday; a few rate changes, business confidence dives sharply, Cigna slapped, carbon price retreats, swaps soft, NZD firm, & more

17th Jan 23, 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
Kāinga Ora / HNZ announced some small rate increases today, and that included their floating rate.

TERM DEPOSIT RATE CHANGES
ICBC raised their key savings and some term deposit rates today. Their new 6 month rate is now 4.95% and their one year rate is now 5.65%. Christian Savings also increased their savings account rate.

RECORD QSBO WEAKNESS
Latest NZIER Quarterly Survey of Business Opinion recorded that a net 73% of businesses expect deteriorating conditions in coming months - the weakest reading in the survey's history dating back to 1961.

MISLEADING LEADS TO BIG FINE
The Wellington High Court has ordered Cigna Life Insurance New Zealand to pay a final pecuniary penalty of $3,575,000 for making false and/or misleading representations relating to inflation benefits in certain life insurance policies provided by the company.

TRAVELLER
Trade and Agriculture Minister Damien O’Connor is off to Davos, and to the Global Forum for Food and Agriculture in Berlin.

CARBON PRICE RETREATS
We should also note that the carbon price is retreating. It is now at NZ$73.50/NZU spot, at the same point it first reached this level back at the end of 2021. In bdetween it has hit a high of $88/NZU, so this is a retreat of -16.5% since.

FALLING AWAY
Singaporean exports fell sharply in December, down more than -20% from the same month in 2021. That is much tougher than the -14.7% pace they reported for November.

MORE FROM LESS
Australia said that even though it has -5% less land in agricultural production in 2022, it generally produced a lot more from what was in production. Wheat production was up +14%, canola production was up +43%, sheep production was up +3%, and beef production was up +1%.

SURPRISE GROWTH
China said its economy expanded +2.9% in Q4-2022 from the same quarter a year ago. This was nearly double what was expected. For the full year, it claims +3.0% real. At the same time it said industrial production rose just +1.3% in Q4. Retail sales fell, down -1.8% (an -8% fall was expected. And electricity production was up +3.0% they said. All this key data is far more positive than almost any analysts was expecting. One reason was that their rural sector brought in record harvests.

OLDER & FEWER
China also said its population shrank -850,000 to 1.41 bln people by the end of 2022. They recorded 9.4 mln births and 10.6 mln deaths in 2022. Now 20% of their population is over 60 years.

SWAP RATES HOLD
Wholesale swap rates were likely little-changed today. The real action comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 4.82%. The Australian 10 year bond yield is now at 3.60% and down a minor -1 bp from this time yesterday. The China 10 year bond rate is at 2.97% and up +2 bps. The NZ Government 10 year bond rate is now at 4.10% and down -2 bps, and well above the earlier RBNZ fix for the NZGB 10 year which was down -2 bps to 4.07%. The UST 10 year is up +3 bps at 3.53%.

EQUITIES HANG ABOUT
The S&P500 futures suggest Wall Street will open for the week tonight marginally firmer. The NZX50 is up +0.5% in late trade today. The ASX200 is flat in early afternoon trade. Tokyo has opened its Tuesday trade up a strong +1.4%. Hong Kong is down -0.2%. And Shanghai is unchanged at its Tuesday open.

GOLD STABLE
In early Asian trade, gold is just on US$1918/oz and down -US$1 from this time yesterday.

NZD LITTLE-CHANGED
The Kiwi dollar is little-changed from this time yesterday, still at 64 USc. Against the AUD we are firm at 91.8 AUc. Against the euro we are still at 59 euro cents. That all means our TWI-5 is now at 71 and marginally firmer than yesterday.

BITCOIN HOLDS
The bitcoin price is up marginally from this time yesterday at US$21,147 (+0.2%). Volatility over the past 24 hours has been modest at +/- 1.9%.

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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53 Comments

by JRSNZ | 17th Jan 23, 4:15pm 1673925335

Eyes on Japan. The BOJ is battling to keep the 10Y under 0.50%. Popcorn stuff.

by IT GUY | 17th Jan 23, 4:26pm 1673925977

I wonder how many will be in serious trouble with complex Jap Int Rate derivative trades...... can perhaps see a few hedgies blowing up

by J.C. | 17th Jan 23, 4:32pm 1673926348

I'm struggling to keep up with the different scenarios. The consensus is that JPY should be collapsing but why isn't that happening?

F'more, Kuroda is on his way out and one of the new candidates is threatening to "normalize" monetary policy.

And what happens if they start dumping US debt?

by HouseMouse | 17th Jan 23, 4:37pm 1673926663

Intriguing. Seems to me that what happens in Japan this year could be significant.

by J.C. | 17th Jan 23, 4:58pm 1673927929

Intriguing. Seems to me that what happens in Japan this year could be significant.

If capital is repatriated to Japan, could be brutal for foreign asset mkts and send the yen soaring. My view is quite simplistic and other commentators have a better handle on it. Also, the GFC is ancient history (or never really ended) but we saw what happened then in relation to JPY.

by profile | 17th Jan 23, 5:41pm 1673930491

From five shot Japan something doesn't seem to be working like it said on the tin.

"The number of people who died after contracting the coronavirus in Japan is rising at a faster pace in the country's eighth wave of the pandemic.

...This means that almost one in five victims died in the past month and a half."

https://www3.nhk.or.jp/nhkworld/en/news/20230115_16/

by HouseMouse | 17th Jan 23, 5:56pm 1673931416

Perhaps because the latest strain is more contagious?

My sister in law and family in Japan contracted the virus for the first time in December.

by profile | 17th Jan 23, 10:26pm 1673947619

Perhaps the experimental gene therapy is nothing more than get rich quick scheme for the political class. But who knows - I'm just following 1/5 of deaths in last six weeks in at population with 50%+ quin vaxed science.

by Audaxes | 17th Jan 23, 5:40pm 1673930443

Think cross currency basis swaps?

BoJ has YCC issues because Japanese financials can more cheaply borrow in Euro$s to get the hell out of JGBs. Less collateral problems which is why JPY has rebounded. Again the most distinct and solid yet confusing correlation in all finance. Link

by Squishy | 17th Jan 23, 6:09pm 1673932177

If BoJ are playing BoE who is playing George Soros?

by Jonny.Foe | 17th Jan 23, 6:47pm 1673934450

Battling like a professional boxer toying with a pub brawler.

by HouseMouse | 17th Jan 23, 4:39pm 1673926743

NZSX50 had a solid start to the year. Started to think about dipping my toes back in, but I think this is still a suckers rally.

by Yvil | 17th Jan 23, 8:23pm 1673940189

I think that would be a very brave move now. You also think NZ will likely go into recession this year, don't you HM?

Why would you invest in the share market, if you expect an imminent recession?

by Rob Reid | 17th Jan 23, 8:41pm 1673941302

Yes, unless into an Oz commodities/mining ETF or something.

by Mountie | 17th Jan 23, 8:51pm 1673941909

We never got out. The market looks forward. The bad news is already baked in. Still have to pick wisely though.

by HouseMouse | 17th Jan 23, 9:03pm 1673942583

Yes that was along the lines of what I was going to say to Yvil. However…. I think bad stuff is on the way in the first 9 months of this year, So I think the better share buying timing is later in the year.

by HouseMouse | 17th Jan 23, 4:43pm 1673927026

TradeMe townhouse rental listings for Auckland surging higher after the usual Xmas / New Years drop in listings. Plenty of new builds being listed, and there will be heaps more over the next couple of months as a shitload are nearing building completion.

by malamah | 17th Jan 23, 5:10pm 1673928600

You made me look. Over 500 houses listed for sale on TradeMe today so far. More than one every minute.

450 listed for rent so far today.

by IT GUY | 17th Jan 23, 7:08pm 1673935732

green shoots mate!

by lonewolfnz | 17th Jan 23, 4:43pm 1673927037

I'm putting a fairly large chunk of my liquid net worth into term deposits at 5.2%. I'll put about a third as much into managed funds, and a third less again into US equitites. And some into crypto. Thoughts?

by Justa comment | 17th Jan 23, 4:46pm 1673927208

lonewolf, I placed a chunk of mine in dec on the 5 yr at 5.3%. Time will tell.........

by JohnfromtheTron | 17th Jan 23, 4:58pm 1673927939

Same here.

by Harvey W | 17th Jan 23, 5:46pm 1673930766

Earn 5%, less tax, while your money is devaluing at 7%. Hmm...is there any better options?

by chebbo | 17th Jan 23, 5:52pm 1673931146

Except your money isn't devaluing at 7%, because that's not what the CPI means.

by J.C. | 17th Jan 23, 5:55pm 1673931310

Except your money isn't devaluing at 7%, because that's not what the CPI means.

Like the way you said that Chebs, even if I don't entirely agree.

by Audaxes | 17th Jan 23, 6:38pm 1673933906

As interest rates rise the amount of spot capital required to earn $10,000 per ann @ 5.65% for one year at ICBC, for instance, is dramatically reduced when their year ago rate was 2.4%. $176.99k vs $416.67k, respectively.

by chebbo | 17th Jan 23, 6:26pm 1673933160

I think your maths might be a bit off there.

by Audaxes | 17th Jan 23, 6:51pm 1673934710

Thanks, m replaced with k. I am old enough to inadvertently equate roman numeral M with 1000.

by JohnfromtheTron | 17th Jan 23, 8:24pm 1673940281

Yep, there's better and there's worse. Just don't put all your eggs in the same basket.

by Yvil | 17th Jan 23, 8:27pm 1673940467

5 years is a very long time in the current environment JC

by Carlos67 | 17th Jan 23, 6:27pm 1673933224

I'm 100% all in on a new TD at the current rates. Current one ends end of Feb so fully expecting 6% 12 month TD rates now on 1st March.

by J.C. | 17th Jan 23, 6:58pm 1673935103

I'm 100% all in on a new TD at the current rates

Living the dream

by Yvil | 17th Jan 23, 8:31pm 1673940683

Lonewolf, firstly I like that you have the courage to state where you invest your money, well done.

I expect a worldwide recession in 2023, so personally, I would not touch shares until after they have properly crashed.

by Justa comment | 17th Jan 23, 5:08pm 1673928503

The inevitable TD curve inversion has begun, Kiwibank started with a small one, ICBC next to move with a larger one. This year we could see a 5.75% 0r 6% 1 year with a 5.0% (or less) 5 year.

by Carlos67 | 17th Jan 23, 6:24pm 1673933078

Said a month or so ago we could be close to 6% come 1st March. Still got the RBNZ rates rise end of Feb and its already at 5.25% at ASB.

by Audaxes | 17th Jan 23, 6:26pm 1673933161

Sale of New Zealand Government Securities to NZDM

Description Details Details

Sale date 16 Jan 2023 16 Jan 2023

Settlement date 18 Jan 2023 18 Jan 2023

NZGBs sold Sep-40 Apr-37

Amount sold ($m)190 225

History

by Pragmatist | 17th Jan 23, 6:08pm 1673932091

>Sale of New Zealand Government Securities to RBNZ

To RBNZ? or by RBNZ to the market?

Edit, Sold by the RBNZ to the NZDMO (Treasury)

by Audaxes | 17th Jan 23, 6:33pm 1673933616

Thanks, corrected. These particular issues are being extinguished.

by Pragmatist | 17th Jan 23, 6:01pm 1673931679

I hadn't checked the swap rate graphs for a while, quite the plummet at the long end since the start of the year. 10yr from 4.85 to 4.28% in a fortnight, even the 1 yr is dribbling downwards. The market has no faith in the RBNZ interest rate projections, not even in the short term.

by Justa comment | 17th Jan 23, 7:26pm 1673936788

Yeah big drop in the 5 yr swap the last 2 weeks. I still think its not going to be easy to get inflation down in NZ. Will be an interesting year.

by Squishy | 17th Jan 23, 6:12pm 1673932342

Australia said that even though it has -5% less land in agricultural production in 2022, it generally produced a lot more from what was in production. Wheat production was up +14%, canola production was up +43%, sheep production was up +3%, and beef production was up +1%.

Without looking into it at all I imagine Australian agricultural output correlates with rainfall. Australia has plenty of land but not enough water.

by False economies | 17th Jan 23, 6:23pm 1673933027

The key question for me is why has that land reduced by 5%? In a year!

by Squishy | 18th Jan 23, 1:09am 1673957364

I looked into it, appears to be a decline in cattle on marginal land.

by nigelh | 17th Jan 23, 6:30pm 1673933433

I wonder what the climate change alarmists have to say about this. All I seem to read in MSM its either severe drought or severe flood over there. Something doesn't stack up.

by Pragmatist | 17th Jan 23, 7:05pm 1673935539

Media doesn't report on the boring average weather non-events? Well, what a bloody surprise...

by Palmtree08 | 17th Jan 23, 7:10pm 1673935830

Not that difficult to comprehend, I wouldn't have thought.

by Gummy Bear Hero | 17th Jan 23, 7:41pm 1673937683

China's population fell slightly last year : they recorded 10 million deaths , and 9 million births ...

... the great demographic uncoupling of the PRC has begun ... ... fantastic idea , that one child policy !

by rolande | 17th Jan 23, 8:09pm 1673939342

It might even be 100 million less than previously thought.

India might have caught up by now.

https://www.reuters.com/world/china/researcher-questions-chinas-populat…

by Rob Reid | 17th Jan 23, 8:55pm 1673942142

It's happened everywhere as people move from rural to city and battle for expensive space - way fewer (expensive) kids. One Child just pushed it along, but it's been gone for years and the cost of living issue continues to kill the birth rate.

For a DGM like me, Peter Zeihan, is a nice depressing listen. An interesting point he makes is that once the demographic slump runs long enough so you have the bulk of your population over 40, it's too late to recover.

Next stop, robot doctors, nurses and care home staff to farewell the last big population bulge.

by profile | 17th Jan 23, 10:32pm 1673947971

Erhlich got the population bomb so, so wrong. Yet he kept tenure as India became a rice exporter.

by rolande | 18th Jan 23, 7:23am 1673979820

Agree, gloomy predictions can be attractive, but often don't play out.

Zeihan worked for Stratfor for 12 years, and his work reminds me of George Friedman, who ran Stratfor and famously authored "The Coming War with Japan".

Spoiler alert, that US-Japan war didn't happen. Sold a lot of books though.

by OnceInaWhileIamRight | 18th Jan 23, 6:31am 1673976710

For a DGM like me, Peter Zeihan, is a nice depressing listen. An interesting point he makes is that once the demographic slump runs long enough so you have the bulk of your population over 40, it's too late to recover.

I find the idea of a stronger United States more appealing than the alternatives.

by singautim | 18th Jan 23, 7:59am 1673981986

It truly is a fantastic idea. China is the first country to tackle population. It leads the way in the concept of balancing people and resources. 150 years ago when NZ settlers had families with a dozen children there were a dozen opportunities for them and they could all end up with a better quality of life than their parents. Now try the same idea with a moderately poor family in an over-crowded 3rd world city - and end up with a dozen desperate slum dwellers.

The Malthusian trap inevitably will snap shut; it has been delayed by technological advances for the last 200 years but only delayed. China seems to be the only nation on earth that thinks long term.

Comparing GDP per capita then China is about five times higher than India but in 1948 it was way behind.