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
There are no changes to report today. That means there haven't been any increases following the OCR +50 bps rise last week - so far at least.
TERM DEPOSIT RATE CHANGES
Kiwibank raised its 6 month and 200 day term deposit rate to 5.00%. This is above their other main rivals, but just matches TSB. It is lower than Heartland and China Construction Bank's 5.30% for six months however who both pushed up to this level today. Christian Savings and Liberty Financial also raised rates.
INFLATION BITES THE RETAIL TRADE HARD
Retail sales in the December quarter came in +5.4% ahead of year-ago levels - on a value basis. But on an inflation-adjusted volume basis, they fell. and are down -4.0% on that same year-ago basis. That is a huge difference. Infometrics noted: "The lower spending volumes in the December quarter suggests the Reserve Bank’s tighter monetary settings could be starting to have the desired effect, as higher mortgage servicing costs for some households will see them reduce spending in other areas. Broad-based inflation will also be driving down sales volumes, with fixed or constrained household budgets being eroded in several areas, further softening retail spending volumes." The different trajectories of nominal and 'real' retail sales activity is compounding and have now built to huge levels. Just take a look at this ANZ chart.
GETTING IN BEFORE HIGHER RATES I
Corporate treasurers are now rushing to get bond deals away as they see rising interest rates ahead. The latest is Summerset Group (SUM, #14), who are looking for $175 mln of six year money. The rate will be swap plus 1.85% to 2.0% margin, but not less than 6.45%. The six year swap rate is likely to be about 4.77% today, so the actual rate is likely to be more like 6.63%.
GETTING IN BEFORE HIGHER RATES II
And Meridian Energy (MEL, #5) is looking for $200 mln as well, with a 5½ year unsecured, unsubordinated, fixed rate green bond offer. This one is to pay off an existing bond, plus a bit more. No margin indications here yet however.
NEW NORMAL
Residential auction activity is slow but steady for the time of year. Just over a third are selling under the hammer and this low rate looks like the new normal in residential auction rooms.
RECOVERY GRANTS
If you're a farmer, grower, or whenua Māori owner significantly affected by Cyclone Gabrielle, you can get support to get back on your feet as quickly as possible. Grants include up to $10,000 for pastoral and arable farmers to help with initial recovery, such as repairs to water infrastructure for livestock, and fencing, and up to $2,000 per hectare (up to a maximum of $40,000) to remove silt from trees and vines, support clean-up, and minimise future losses. Applications are now open.
GIVE-A-LITTLE
The government has launched an official 'international' appeal for funds to support the many other efforts to raise money for Cyclone Gabrielle victims. It is modelled on a similar appeal after the Christchurch earthquakes (which raised $94 mln). Big business is behind the efforts, including Westpac, Clemenger BBDO, and Meta. These three garnered a notable thank-you from the prime minister, which might seem odd because Meta is famous for arranging its affairs so it pays minimal taxes here (and good PR might help keep it like that). Clemenger Group also uses similar 'arrangements'. But we should note that Westpac does pay its way fully. If Meta and Clemenger both paid taxes on their New Zealand operations at the rate Westpac does that would give the campaign a good start. It's unlikely however.
SWAP RATES FIRMER
Wholesale swap rates are likely firmer again today. But the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up another +4 bps to 5.14% which is now +39 bps above the OCR. The Australian 10 year bond yield is now at 3.89% and unchanged from this morning. The China 10 year bond rate is little-changed at 2.93%. The NZ Government 10 year bond rate is now at 4.71% and up +2 bps and now well above the earlier RBNZ fix at 4.64% which was down -4 bps. The UST 10 year is down -2 bps at 3.93% in a further slip.
EQUITIES WEAKER
After last week's -2.1% fall on the NZX50, this index is down another -1.1% in late trade today. Rising interest rates are finally pushing a substantial devaluation of equities, and there a a long way to go. The ASX200 is down -1.2% in afternoon trade so far. Tokyo has opened down -0.2%. Hong Kong is also down -0.2%. Shanghai has opened lower as well. The S&P500 futures suggest Wall Street will open tomorrow with just a small retreat after last week's chunky drop.
GOLD HOLDS
In early Asian trade, gold is little-changed from this morning, now at US$1813/oz and up a minor +US$2.
NZD SOFT
The Kiwi dollar is also little-changed from this morning at its new lower level of 61.7 USc. Against the Aussie we are also little-changed at 91.6 AUc. Against the euro we are marginally softer at 58.4 euro cents. That means the TWI-5 is now at just over 69.9 and down -30 bops from this morning.
BITCOIN HOLDS
Bitcoin not really going anywhere today, now at US$23,468 which up a minor +1.1%. Volatility over the past 24 hours has been modest at +/- 1.3%.
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