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
None to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either, so far.
FOOD & GROCERY PRICES STILL SURGING HIGHER
Food prices surged at an annual rate of +12% in February with rises across all the broad food categories Statistics NZ measures. That is its highest rate in 34 years. The annualised increase from January to February was +18% (even more on a seasonally adjusted basis). The consumer price index is due to be released on Thursday, April 20. Also today, Infometrics said the prices Foodstuffs paid suppliers in February were up +10.4% from the same month a year ago, up an annualised +12.1% from January.
RENT RISES TURN TAME
After surging in January, the rental index Stats NZ tracks fell in February to be only +2.1% higher than year-ago levels. But the key reason is because Wellington rents are in the doldrums. In most other regions, increases are over +4%, and that included Auckland. It is clear that rents are going to be a drag on Q1-2023 CPI, just as food prices are going to be a boost.
THE CONSENSUS ISN'T VERY ROSY
The NZIER updated its Consensus Forecasts today bringing together the estimates from a wide range of analysts. These revealed that growth should be better than they had previously estimated in the 2022/23 year to March, fall away more than previously expected in the next two years, and then pick up more strongly in the 2025/26 year. Having said that, the pick-up won't be back to 2022/23 levels. These analysts don't thing inflation will be back to under 3% until 2024-25.
SERVICE SECTOR IN HEALTHY SHAPE
Meanwhile, the service sector is going from strength to strength, a positive story. It was healthy in January and lifted again in February. The PSI's improvement comes on top of the factory PMI improvements for February. Both would have been better still if the NI East Coast storm damage hadn't happened. Overall, new orders were strong.
HEARTLAND SAYS EX-CHAIRMAN GEOFF RICKETTS HAS PASSED AWAY
Heartland Group says Geoffrey Ricketts, its chairman from 2013 until last month and still a director, has passed away following a sudden illness. Ricketts was a founding director of Heartland’s board, previously chairing Southern Cross Building Society before it merged with CBS Canterbury and MARAC to become Heartland New Zealand Ltd in 2011. Heartland says Ricketts' strategic leadership, governance experience and wise advice to the board and management will be sorely missed.
FALLING INTO LINE
Rabobank trimmed its 2022/23 milk price forecast from $9.00/kgMS to $8.60/kgMS today, the last of the major analysts to do that. Remember, Fonterra releases its half year results on Thursday morning, and they have already trimmed their indication to a mid-point $8.50/kgMS.
STATE OF EMERGENCY TO END TUESDAY
The remaining state of national emergency over the Tairāwhiti and Hawke’s Bay regions will end on Tuesday 14 March, the Government announced.
SPEEDING UP
We have updated our Bank Leverage resource to the end of 2022 with the recent RBNZ Dashboard data. It reveals many things, by bank. One is that 2022 was a year where total bank after-tax profits almost hit $7 bln. They first hit $3 bln in 2008, $4 bln in 2013 sixty months later, $5 bln in 2017 120 months later, and $6 bln in 2021 50 months later. The final +$1 bln has happened in just 18 months, the largest/fastest pace of growth ever.
US REGULATORS KEEP THEIR HEADS
The local news 'noise' around the SVB failure is getting a bit ridiculous. It is unlikely to have much real impact on New Zealand, or on our trade flows. It is interesting from a car-crash sort of view, but we need to keep a level head here. Certainly the US regulators seem to have things well under control. It is very easy to slip into the-sky-is-falling mode, and nothing about SVB is positive. But no depositor will lose any money for their insured deposits, and the US taxpayer won't be on the hook for a bailout. Regulators are levying all banks to make up what might be lost. Certainly, shareholders and management will lose everything. We should also remember that SVB's failure was caused because it specialised in funding startups, companies who are basically unprofitable. It is a very questionable sector for a bank to be dominantly involved with. It was bad strategy of one bank, not the whole system. Also, see this. (Another tiny bank, Signature Bank, NY, also folded today, unrelated to SVB. It is more akin to Sliverlake because Signature's focus was also on crypto.)
SWAP RATES RETREAT AGAIN
Wholesale swap rates are likely sharply lower again today across the curve. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is down -3 bps at 5.19% which is +44 bps above the current OCR. The Australian 10 year bond yield is now at 3.52% and up +5 bps from this morning. The China 10 year bond rate is down -1 bp to 2.89%. And the NZ Government 10 year bond rate is now at 4.43% and another -8 bps from this morning but still above the earlier RBNZ fix at 4.32% which was down -18 bps from Friday. The UST 10 year is at 3.74% after falling to 3.68% at the end of last week.
EQUITIES MIXED
In its Monday session, the NZX50 is down almost -1.0% to start the week. The ASX200 is down -0.4% in early afternoon trade. Tokyo has opened down -1.6% in early trade. Hong Kong is actually up +0.9% in their early trade after a grim week last week. Shanghai is up +0.2% after a similar drubbing last week. The S&P500 futures are up +2.0% from the Friday close, suggesting financial markets are satisfied with how US regulators (Yellen/Powell/Grantham leading the Treasury/Fed/FDIC) are handling the SVB failure.
GOLD RISES SLIGHTLY
In early Asian trade, gold is up another +US$4 from this morning at US$1872/oz.
NZD A LITTLE FIRMER
The Kiwi dollar is slightly stronger than where we opened this morning, now at 61.5 USc. Against the Aussie we are also firmer at just touching 93 AUc, the highest of the year. And against the euro we are holding at 57.6 euro cents. That means the TWI-5 is marginally firmer overall.
BITCOIN MOVES BACK UP SHARPLY
The bitcoin crowd are paddling fast to keep their music playing. The bitcoin price has moved up to US$22,546, probably on the meme that the sky-is-falling for fiat currencies and the banking system. This latest price is up +9.3% from where we started this morning. Volatility is extreme today at +/-5.6%.
This soil moisture chart is animated here.
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56 Comments
But no depositor will lose any money for their insured deposits, and the US taxpayer won't be on the hook for a bailout.
Sorry? No free lunch. The bailout will be financed by money creation (brrrrrrrrrrrr). Money creation will tax everyone via inflation. Let's be honest here.
1) Raise interest rates to curb inflation.
2) Bonds get wrecked but that’s the point.
3) Banks holding those bonds start to fail.
4) Buy those bonds back at face value, causing inflation.
5) Raise interest rates to curb inflation.
Talk about kicking the can down the road AGAIN.
Trumps decision to move the tier 2 limit from 50B to 250B and thus avoid tier 1 scrutiny comes back to bite. I wonder how some of the tier 2s in NZ will fare this year, particularly the ones that picked up housing loan customers the banks had declined. Will be an interesting 18 months in this space as house prices decline further and incomes become squeezed.
Thats ok I will just put the rent up.... wait a minute
I suspect we will soon go into a period of high rental inflation caused by demand exceeding supply. People will find a way to pay if they don't want to be homeless.
Normally rents going up leads to higher house prices...maybe not this time tho.
"Slap Him Down" /sarc
nah he is right rental yields will head to 1%, because who needs cashflow... /sarc
Glut of rentals, put the rent down .... hold on a minute
"The bitcoin price has moved up to US$22,546, probably on the meme that the sky-is-falling for fiat currencies and the banking system. "
I think its more than that:
1) Risk-on behaviour is being protected with Government guarantees / insurance;
2) The system is breaking so that likely means lower terminal interest rates;
3) USDC re-pegged and is now "safe" in terms of the funds that back it
In other news I made a nice gain on the USDC bought this morning. Entry price 95c, Current price: 99.8c
Respect re USDC....
You would have done better punting on the ol' rat poison Wolfie. And arguably safer.
Ah yes indeed! But this was (in my mind) a guaranteed win. Not common in crypto.
Because de-pegged stablecoins always return to their peg? I'd consider this moderately risky
Tether is the dodgiest stable coin around, and that has depegged several times. If remember correctly, back in 2019 it got down into the 80c range as well.
I should've jumped on your advice this morning!
His antiBitcoin bias really shines through rather regularly doesn't it 😆
Trading stable coins. This is a new low for crypto.
When it becomes serious, you have to lie. - Jean-Claude Juncker
Don't you mean the FIAT crowd are paddling fast to keep their music playing?
Wow the focus groups have hipkins by the balls
- out goes speed reductioon except worst 1% of roads....
- light rail now in phases - do the benefits anaylsis on light rail from CBD to nowhere..... its so dead
- clash for clunkers dead _ did not even know it was alive
- hate speach now just be nice speach
- The Government will increase main benefits, including pensions, and student allowances by 7.22% to keep up with inflation from April 1.
- Superannuation will increase by more than $100 a fortnight for a couple, or $66.86 for a person living alone. peddling hard not even standing still here...
- Social car leasing scheme for poor people ditched - this must have been the brain fart of some severly retarded leftie. What could possibly go wrong with this idea? Whats the time Mr Wolf.
- Plastic container return idea ditched..... sad but greenie ideas rarely make economic sense.
What i did not see was no
- How does Labour fix the health crisis
- How does Labour fix the crime crisis - 270 retail thefts a day in NZ....
- How does Labour fix education.....
- How does Labour fix somewhere between three and six waters.... (large pools of water sitting from flooding)
- How does Labour fix our roads, so obvious a reminder of failure to anyone who moves around NZ
Seems to me they are trying to remove things that National will club them with during the election campaign......
bring it ON Moar focus groups.
Wow @ the super... not even means tested, bit of a disgraceful benefit scheme to be completely honest. Kids are living in the back seat of unwarrented cars, best give an extra $100pw to many who don't need it at all. I argue it is necessary for a large portion of elderly, but all 65+ citizens regardless of tax paid in this country during working life? You could leave at 18 and return at 65, live 50% of your time in NZ and the tax payer will come to your aid regardless of your situation or super paid from other countries.
Here's some fun math, $66pw is the tax on the first $28k you earn.
Make sure the rest you make is capital gain and you lead a great life then......
Every working kiwi is paying $100 on average per week towards super.
Not sure National will be able to cancel the "tenant tax" even if they wanted to, too many beneficiaries over the age of 65.
I assume that the govt has used an old CPI figure. Not the one to the end of Q1. Why????
Not quite. You also have to be here for 5 years after age 50.
The left = National wont release any policies
The right = We would have stopped/removed all the looney left stuff.
The left =ha, now neither of us have anything..,
Me = "Clowns to the left of me, Jokers to the right, "
Me - trying to work out if Willie Jackon is more Clown or joker......
"Plastic container return idea ditched..... sad but greenie ideas rarely make economic sense." What's really sad, is economic purity doesn't make survival sense, but weirdly it's pursued anyhow. Inconvenient externalities.
Some money spent on remedial spelling skills might have been useful....
There IS no FIX from here on. This tells us we have well and truly crested the wave, and are heading down the other side.
Despite David's soothing words and the tea-leaf prognostications of 'analysts'. Here's a real one:
https://www.classicfm.com/discover-music/latest/composers-mothers/liszt…
The surge in food and grocery prices is neither new nor easing. Family everyday budgets are being more than pinched, they are being thieved outright by inflation. Winter approaches. I would wager there are going to be stressed, stretched and very sorry looking households, amply on the rise from hereon.
Required: protein, fibre and carbohydrates
Discretionary: a whole bunch of employees' outputs
We should also remember that SVB's failure was caused because it specialised in funding Properties, Properties who are basically unprofitable. It is a very questionable sector for a bank to be dominantly involved with. It was bad strategy of one bank, not the whole system.
I just replace startups by properties, now it works very well for AUS NZ banks.
"We should also remember that SVB's failure was caused because it specialised in funding startups, companies who are basically unprofitable. It is a very questionable sector for a bank to be dominantly involved with. It was bad strategy of one bank, not the whole system."
Nonsense. SVB had large exposure to mortgage backed securities. It's not a mortgage lending house like any of the Aussie banks.
This is so not true and is classic of the crap that gets spread around online, this is worse then the bodies in the silt.....
SVB collapsed as they put way to much into US treasuries and hold to maturity MBS, they had no interest risk hedging and very poor liquidity management.... They are not a big startup lender, rather they keep startup deposits.
Are you comfortable with the level of exposure the big 4 have in mortgage lending?
So ignoring the fact you were massively wrong and changing subject?
Can you explain how was i wrong?
What is the subject?
My point is when you put all your eggs in the same backet you know what to expect.
Where they went wrong is clearly documented, they parked money in the wrong place (long term treasuries), NOT lent it badly. Well, maybe they did that too, but that wasn't what broke the camels back.
Your entire first post suggests their failure was because they lent it badly. Wrong.
Any other questions? :)
They chased yield, did no interest rate risk management and ignored duration risk.
Your entire first post suggests their failure was because they lent it badly.
Wrong assumption.
They parked money in the wrong place (long term treasuries)
That is correct to much invested at the wrong place.
I hope you understand now, otherwise sorry if you do not have the brain capacity to process my reasoning :)
I also don't have the brain capacity to process your reasoning as you try to wriggle out of your second post, suggest you try Lanthanide.
The Vampire Squid believes the Fed won't raise rates, regardless of what the CPI print shows.
Massive test of FED Credibility coming right up
Salvaging any credibility they have left
Vampire Squid obviously also 'talking their book', they don't want the party to end either.
In other news, Watercare in Auckland is storing 103% as much water as it has capacity for....
We have CC to thank for that. One moment wasn't the previous CEO of Watercare "fired" because Akl just about ran out of water 2 or 3 years ago. Hang on that was also due to CC. So now Akl doesn't have to increase overall storage capacity because we are back to floods. It's a win win for CC. You can have a bob each way and your sure to win, flood or drought.
Collars on the upturn
A nod towards the winter (DD SMASH)
Gold price in Kiwi pesos flirting with taking out its all-time highs (back in Aug 2020). Interesting times.
Certainly the US regulators seem to have things well under control. Yeah, right!!!!
SVB is suffering the same fate as the Fed, which is costing the taxpayer dearly.
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
The Treasury, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) made two major policy announcements intended to stabilize the banking system in response to recent bank failures and the risk of continued deposit outflows. We expect these measures to provide substantial liquidity to banks facing deposit outflows and to improve confidence among depositors. (Goldman Sachs)
Good luck with that. Didn't we learn anything from Bear Sterns?
The Bear Stearns Bailout Didn’t Avert the Financial Crisis, It Caused the Crisis.... the Bear rescue turned out to be only a temporary measure and did not prevent the financial crisis that occurred six months later. But rather than an unsuccessful effort to avert a crisis, the Bear Stearns bailout was actually a principal cause of the disastrous panic that hit the markets six months later.
But I know, I know - it's different this time. And almost to the day as well.
On March 14, 2008, the Federal Reserve Bank of New York agreed to provide a $25 billion loan to Bear Stearns collateralized by unencumbered assets from Bear Stearns in order to provide Bear Stearns liquidity.
Yeah, uncanny timing. Just in case this is another Big One, maybe we should try to get in first and give it a name?
We've had:
- "The Asian Financial Crisis"
- "The Dot-com bubble""
- "The Global Financial Crisis"
This time perhaps?:
- "The Mark-to-Market Bond Crash"
I'm throwing the "Yield free Risk Crisis" in the ring.
Or maybe the "ZIRP a Derp Crisis"
Now we are cooking. If it actually gets called the "Yield free Risk Crisis" I will come back, find this post and give credit, to myself
Someting you all missed. Silcon Valley Bank chief administrator officer, Joseph Gentile was previously the CFO of Lehman Brother's which collapsed in 2008.
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