A review of things you need to know before you sign off on Monday; few retail rate changes, services expand faster, IAG profits from sharp premium hikes, many Auckland houses completed, swaps up again, NZD stable, & more

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
No changes to report today.

TERM DEPOSIT RATE CHANGES
Kiwibank raised many of its short rates by about +50 bps today. That makes its five month rate 4.00%, but just matching its main rivals. 

A HEALTHY SERVICE SECTOR
Our services sector is trading with a solid expansion underway. At lease that is what the BNZ-BusinessNZ PSI reports for January today. There is no real evidence we are entering a recession in this data, even though the recent positivity in new orders lost steam, with January’s 54.5 the lowest reading in six months. However, 54.5 is a good expansionary level. Employment is strong. BusinessNZ as a lobby group will have a hard time making the case that the RBNZ's rate rises are hurting. Clearly they are not yet. Auckland is the weak region, but it improves the further south you go.

IMPERCEPTIBLE CREDIT STRESS
Bankruptcies remain very low, according to Insolvency Services data to December. NAPs also remain very low, remarkably so. Very high employment levels are keeping credit stress minimal. However there is one metric that is rising (even if it isn't significant yet), and that is ITS corporate liquidations. The 30 in December was the most for any month since mid 2014.

DOMINANCE HAS BIG ADVANTAGES
Obviously, severe storms raise remediation costs and to the extent they are insured, insurance companies pay those bills. And with reinsurers wary of taking on more risk, the insurers themselves face higher risk. Premiums are rising. By just how much was revealed by IAG in some public filings today. In New Zealand they raised premiums by +10.1% last year and said that was "largely due to rate increases" rather than winning new clients. As a consequence, they report their "insurance margin rose to 15.2%, up from 11.4%", although to be fair that was before these latest rise in 'perils'. They used the general 'climate change' narrative to bolster margins significantly, and from a dominant market position. Given that front-running, it is their turn to absorb the current spike in claims costs in 2023. They will do that, however they will undoubtedly use these events to hike premiums aggressively again. Front-running is a wonderful position for a dominant insurer. Oh, and by the way, IAG said its after tax profits rose +170% from the first half of 2021 to the first half of 2022.

BETTER THAN A BANK?
Wellington International Airport (WIA) announced today that it is offering up to $75 mln of 5½ year unsecured, unsubordinated, fixed rate bonds to retail and institutional investors. The Indicative Issue Margin Range for the Bonds is 1.30% to 1.40%. With five year swap rates at about 4.45%, they should return investors a yield of about 5.8%. WIA has a credit rating of BBB, so perhaps a yield like that is on the low side?

A FLOOD OF NEW HOUSES
With dwelling completion data now released, it is clear that more were built and delivered in Auckland in a very long time in 2022, and up a third since the pre-covid 2019 year. That is more in one year in Auckland than all the houses in the whole of the Wairarapa (for example).

A RECORD 4.7 MLN CUBIC METERS
Supporting this is other data out today revealing Q4 ready-mixed concrete production. The 2022 Auckland levels are all-time records and +9.3% higher than 2021 and 36% of national concrete poured was in the Auckland region. Wellington was weak with production down -10%. In Christchurch it was up just +1.5% in 2022.

SWAP RATE RISES PUSH ON INTO NEW WEEK
Wholesale swap rates likely rose again today across the curve in yet another strong push higher. Markets have back-tracked their earlier assumption that the RBNZ would only raise the OCR +50 bps. Now they are 50/50 at +50 bps or +75 bps again. The real action in swap rates comes near the close however. Our chart will record the final positions. The 90 day bank bill rate is up a very sharp +7 bps at 5.07%. (The last time they were at 5% was on December 31, 2008.) The Australian 10 year bond yield is now at 3.81% and up another +1 bp from this morning. The China 10 year bond rate is down -1 bp at 2.91%. The NZ Government 10 year bond rate is now at 4.31% and up +9 bps, and still above the earlier RBNZ fix at 4.24% which was up +4 bps. The UST 10 year is now up at 3.74% and unchanged from this morning.

EQUITIES STRUGGLE
The NZX50 has started the week in a glum mood, down -1.1% near the close with a big drop by Fletcher Building (FBU, #10) of -6.8% today. Precinct Properties (PCT, #18), EBOS (EBO, #4) and F&P Healthcare (FPH, #1) are all also down each about -1.9%. The ASX200 is down -0.3% in early afternoon trade. Tokyo is down -1.3% in morning trade so far. Hong Kong is down -0.7% at its open. But Shanghai is up +0.3%. The S&P500 futures suggest Wall Street will open marginally lower. All are learning you can't beat the Fed, and as interest rates go higher, valuations must be adjusted lower.

GOLD LOWER
In early Asian trade, gold is now at US$1860/oz, and down -US$6 from this morning's open.

NZD HOLDS
The Kiwi dollar is at 62.9 USc and down -20 bps from this morning. Against the Aussie we are marginally firmer at 91.3 AUc. Against the euro we are soft at 59 euro cents. The TWI is now at 70.5 and little-changed from where we opened today.

BITCOIN SLIPS
The bitcoin price has slipped again today and by -1.4% from where we opened this morning to US$21,723. Volatility has been modest at +/- 1.0%.

This soil moisture chart is animated here.

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