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 again today.
TERM DEPOSIT/SAVINGS RATE CHANGES
BNZ raised its term deposit rate offers marginally, but basically to match their main rivals. Their new six month TD rate is now 5.00%, matching Kiwibank but higher than their other main rivals. Their new 1 year TD rate is now 5.50%, matching Westpac, but higher than their other main rivals. For both terms challenger banks have higher offers.
"DISASTROUS SUMMER"
The housing market is having a disastrous summer, with sales down, prices down, listings down, and stock levels up, as more properties sit on the market unsold. And that is according to the February 2023 REINZ data.
PEAK MARGINALITY
Real estate market activity metrics are always "at the margins". A house that actually sells sets the market benchmark for all similar houses in the same neighborhood. But the number of houses that actually sell are only one of the other 80 that are not on the market (or don't sell). That's the average over the past 30 years. But 2023 is starting with it being far more marginal than that. In fact, (apart from the 2020 lockdown quarter), we are now at 'peak marginality'. In 2023, the number selling is one in 156, the most marginal relationship since Stats NZ dwelling records started in 1992.
"NO MORE FEES"
BNZ is claiming a NZ banking first by ending international payment fees and overseas bank charges for online transactions. It says it will save its customers $6 mln annually. No word however on whether it has changed its fx spread for these online transactions, or whether this spread is still competitive. As an indication, testing this for USD from their website TT rates, BNZ and Westpac have a spread of 239 bps between BUY and SELL, ASB has the largest at 242 bps. And ANZ has the smallest at 233 bps. Most non-bank currency exchanges offer much narrower spreads than these. Spreads are where the real money transfer savings (or costs) are, not fees.
RISING BUT STILL ONLY A THIRD OF THE PRE-PANDEMIC SURGE
Stats NZ reports that in the year to January 2023, there was a provisional net migration gain of +33,158, made up of a net loss of 16,400 New Zealand citizens, which was more than offset by a net gain of 49,500 non-New Zealand citizens. Pre-pandemic in the year to March 2020, the net migration gain peaked at +91,680.
TOURIST ARRIVALS WAVER IN JANUARY
January 2023 was the first month to see over 1 mln border crossings since the pandemic-related border and travel restrictions were introduced in March 2020. There were 514,100 arrivals and 497,000 departures in January 2023. Of those arrivals, 265,400 were tourists (visitors) and less than in December. Total overseas visitor arrivals is still only two-thirds of January 2020 pre-pandemic. Arrivals may be backing off but Kiwi departures are now running at 78% of equivalent pre-pandemic levels.
NEW LEGISLATION TO STREAMLINE CYCLONE RECOVERY
The Government has introduced the Severe Weather Emergency Legislation Bill to streamline recovery from Cyclone Gabrielle. The Bill contains various amendments but primarily gives businesses more time to meet regulatory requirements, makes emergency powers available when needed, and makes some changes to local authority decision-making. Some timeframes in the resource management act will be extended for emergency work, as will registrations and verification requirements for food businesses, and changes to the Local Government Act will enable local authorities to adjust water infrastructure plans.
MORE 'GREEN BONDS'
Kiwi Property is the next corporate to tap the bond market. They are looking for $125 mln 6½ year funding which will be "senior, secured" and rated BBB+. The minimum interest rate will be 6% pa or swap plus about 1.8% in a price that will be set on March 17. But at today's expected swap rate they may be paying about 6.20%.
SWAP RATES RETREAT SHARPLY
Wholesale swap rates are likely sharply lower yet 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 -18 bps at 5.01% and now only +26 bps above the current OCR. The Australian 10 year bond yield is now at 3.36% and down -16 bps from this morning. The China 10 year bond rate is unchanged at 2.89%. And the NZ Government 10 year bond rate is now at 4.28% and another large -15 bps fall from this this time yesterday but still above the earlier RBNZ fix at 4.23% which was down -9 bps from yesterday. The UST 10 year is at 3.57% with a +7 bps intra-day recovery underway, But were are lower than this time yesterday.
EQUITIES ALL IN THE RED
In its Monday session, the S&P500 was whippy and volatile. But it ended down less than -0.2% at the end of trading. The NZX50 is down -0.8% in late trade today. The ASX200 is down -1.8% in early afternoon trade. Tokyo has opened down even more, down -2.3%. Hong Kong is down -0.8% in early trade and Shanghai is down -0.6% at their open.
GOLD RISES
In early Asian trade, gold is up another +US$34 from this time yesterday at US$1904/oz but that is lower than where we started today at US$1911/oz.
NZD FIRMER STILL
The Kiwi dollar is stronger than where we were this time yesterday, now at 62.1 USc with a +½c gain. But that is down from where we opened this morning. Against the Aussie we are also firmer at 93.4 AUc, and a new high for the year. And against the euro we are up at 58 euro cents. That means the TWI-5 is firmer again.
BITCOIN UP SHARPLY AGAIN
The bitcoin price has moved up again, now at US$24,394 and +8.2% higher than this time yesterday. Volatility is extreme again today at +/-6.1%.
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52 Comments
BNZ waives more fees. We don’t bank with them but it was pointed out to us recently by a staff member of our bank that our banking service is cheap. And when we sat back and had a look at it we realised that we hadn’t been paying any fees at all for yonks. No current a/c charges, AP charges, no transaction fees. Have to admit, on that basis, it’s a pretty economical way to have your money taken care of and secured.
Well there is some interest being earned but what else is on offer that beats it for safe storage, as far as that can be? Property apart from our own home, has never interested us. And what else is on offer competitively and for ease, of bill payments and other financial transactions as per day by day necessities?
The UST 10 year is at 3.57% with a +7 bps intra-day recovery underway, But were are lower than this time yesterday.
The Treasury curve just went into the "bad" steepening. Bond market pros call it "bull" steepening if only because of how bullish it is for bonds...but absolutely nobody else. https://youtube.com/watch?v=bPlaLs
MSM still peddling the migration "recovery" stats as a good news story with claims such as "net brain gain" despite more Kiwis leaving than arriving in the country.
I guess much of this will be pent-up family reunification and tourism and hospitality-driven demand for manual labour.
On the critical shortage front: reported that in the six months to February 10, 219 nurses applied under the Green List, but just one has arrived here. There have been 624 nurses arrive here under other visa categories, but about half require training.
Tiny gains in critical staff [plus] the added demand for healthcare from the 33k net arrivals [minus] all the nurses who have left or about to leave NZ [equals] the system has been switched to self-destruct mode.
Black Monday in the bond market points to pain ahead. The biggest fall in short-term bond yields since the 1987 crash is sending investors and central bankers a clear message about what’s to come in the wake of the SVB collapse. The extraordinary price action on global markets is proof the collapse of Silicon Valley Bank is likely to reverberate for months to come, as investors find themselves caught between the need for central banks to continue their year-long battle against inflation, and growing worries that an overly leveraged financial system has become unstable. (AFR)
And if Inflation control is abandoned, we are in for a world of pain down the track. In fact, we probably are anyway. So, Black Monday is about right.
The venerable Chis Joye on the complete removal of bank risk stateside. One of the smartest pencils in the case but got a little salty re SVB and its relationship with the crypto industry. As an honorable and thoughtful guy, he backtracked.
Anyway,
I think the US move to explicitly guarantee all bank deposits irrespective of size unambiguously and fairly permanently reduces US bank credit risk, and, in particular, the possibility of defaults on their bonds. It will all but eliminate future bank runs, which in turn eliminates most bank insolvency risks. While it is very positive for bank deposits and bank bonds, it is probably negative for bank equities because US banks will face much tougher regulatory requirements going forward, and by held to far higher liquidity, stress-testing, and capital standards in many instances. At the margin, this will reduce US bank returns on equity. Across the capital structure, this is therefore positive for bank creditors and negative for bank shareholders. But it will take investors time to figure all of this out, so expect some volatility---and attractive entry points---in the interim.
https://www.livewiremarkets.com/wires/central-banks-hike-until-they-bre…
A good point you make there. With the US Govt safeguarding all depositors in SVB, not just the 5% with up to $250k, changes the game measurably for the future. Certainly settles all the nerves of the depositors who are running a business. There are several references online from these very grateful business owners/depositors who made a quick appeal to the Govt which was listened to over the weekend. Now if only our Govt will do the same for Kiwi depositors. Protecting the depositors is the most important thing for financial stability methinks. They keep the whole system functioning. Don’t give them a haircut along with the investors.
The issue with these American banks is that they were not banks for the rich - they were commercial banks catering to businesses. When you look at the balance sheet of the thrid bank to go under, it looked very sound. In NZ we often lose sight of the fact that a small US company might have an annual turnover of $50 - 100m due to the economies of scale. These were the primary customer base of these three banks.
The consequences of otherwise profitable companies going out of business due to a bank failure would be a huge multiplier on the impact of the collapse, and makes it a necessity to protect the customers from the impacts of this situation. This could easily turn into a cascade of corporate failures The narative in the media has been the govt is bailing out the fat cats at the expense of joe public, but the picture is not as clear cut when you look under the hood.
In time, the bailout may recoup 90 cents on the dollar. That timeframe is not viable for the companies who have lost the ability to pay staff, pay for inventory, pay taxes, so someone has to step in and provide the liquidity necessary to prevent the situation from spiraling out of control.
"The narrative in the media has been the govt is bailing out the fat cats..."
An angle I heard on Woke Wave (BBC) yesterday, is that the bailout protects the rich because the people who run and work for Silicon Valley businesses are well paid tech nerds.
Can kind of see this from the point of view of Californian natives who have been priced out of the state by skinny guys with pocket protectors, tape reinforced glasses and Star Wars models in their bedrooms. "Those fricken' nerds can take their laptops and git !".
FFS . . . Immigration is way down by 60+% on pre Covid 2020.
It's just up on the las two very low years.
Immigration is rooted thanks to Chippy and Cindy.
Low immigration means low house sales in Auckland means low sales in NZ.. 😊 yay!... More pressure on house sales!
And that's the problem.
Changes in Consumer Asset Prices (houses are a consumption item - we use them) used to be part of the Inflation calculation, but they've been progressively stripped out.
Put them back and let's get a better picture of the CPI.
(NB: In NZ we don't even include Implied Rent in the CPI - the rent that a homeowner would pay to themselves. If we did, then as property prices rose, so would the Implied Rent. All we include is changes in actual rent paid, and as anyone can see, that's far below the economic value, or why else do we have Negative Gearing?)
RBNZ adjusts the OCR to control inflation, not asset prices.
by Audaxes | 8th Apr 22, 5:04pm
The RBNZ has updated its record of the value of all residential property in New Zealand (M10) as at the end of 2021, which booked a rise of +$100 bln (not a typo) in the three months from September to December 2021. While that may seem like a lot, it isn't a record. The record is +$127 bln in the three months to March 2021. For the 2021 full year, the rise was +$377 bln. All these dwellings are now valued at $1.76 tln.
Reserve Bank governor Adrian Orr is not doing himself any favours with his revisionist approach to the house price issue. Not so long ago, he was saying increasing asset prices, including house prices, were a feature and not a bug in the bank's policy response to the pandemic because they make consumers feel wealthier and spend more. This week he suggested his bank's policy settings have only a minor impact on house prices.
He actually has quite a bit to answer for. The bank has been consistently under-forecasting increases in inflation and house prices, and overforecasting unemployment. While no one is expecting perfection in these times, the ongoing nature of the forecasting issues is concerning. Link
The way I see it, inflation is money losing its value too fast. Central banks force the value back into money by rewarding holding onto money and punishing debt (borrowing someone elses money).
Which is an issue because (i think) there are a lot of people out there with a lot of debt.
I do wonder why they don't increase the minimum Kiwisaver amount people must pay in instead of increasingthe OCR. Then make it compulsory if need be. That has the same effect of getting people to reduce their spending, but means people will have more in retirement. But guessing the NZ dollar could tank if NZs interest rates were far lower than other country's.
Anyone still using a bank to make international payments needs their head read - as you say, the cost is in the FX spread, and those costs are significant. I remember transferring money over from Australia to settle a house purchase, and if I used my bank it would have cost me $16,000 more than using OFX. The banks prey on the financially illiterate and rely on them not understanding that they can shop around for better deals outside the banking system
Ha - go back further and you could send money-orders via the Post Office - they altered their exchange rate once a month. The banks were a bit more floaty - so you took the best and sent it home (from Aus to NZ) where someone put it into a bank at near 20% for you, and the exchange rate was around 1: 1.30. And in 10 months, two of us working ordinary jobs (factory night-shift, waitress) put enough together to buy our house and add to it, outright.
Those were the days....
I remember transferring money over from Australia to settle a house purchase, and if I used my bank it would have cost me $16,000 more than using OFX.
With AML regns, you would think that would be difficult nowadays. Mind you, doesn't seem to be an issue for people from the Middle Kingdom.
Yeah, I remember a BBQ conversation about 3 years ago. I was ranting that, based on history, we can expect all sorts of markets to start surging up and down at this stage in the debt cycle. I suppose it reflects oscillating desperation for yield or safety, and high frequency fluctuations between greed, hope and fear.
All this will pass (for a while) as this crop of fiat currencies slowly die.
Trouble is, I don't think it will be slowly.
I think it will cascade, blink, gone.
In the West, at least; more autocratic outfits might be able to order the lights to stay on.
But hours later, supermarkets are raided and empty, supply-chains are history, and any city north of 1 million is in anarchy. There must be people who realise this? But there's just a deafening silence, followed by 'growth will resume...')
Has to happen; can't not.
"BNZ saving customers $6mio per annum"....yes great point on FX spreads....NZD1bio turnover via this channel annually (very very low estimate) with a 1% spread = $10mio - banks have been widening these spreads progressively without respite since the 80s. We don't need a banking enquiry....we need a Royal Commission. That way there is no time limit on uncovering what has been going on for decades. Watch bank profits really melt when they are exposed to the Royal Commission spotlight.
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