What happened Monday

Business / news

A review of things you need to know before you sign off on Monday; ASB trims fixed home loan rates, more bond issues signaled, Aussie building firms fail faster, swaps sink, NZD holds, & more

20th Mar 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
ASB trimmed some fixed rates today. More here.

TERM DEPOSIT/SAVINGS RATE CHANGES
China Construction Bank raised term deposit rates today. Their new 6 month rate is 5.50% and their new one year rate is 5.85%.

WOBBLE-WATCH
Markets are open on our part of the world and all eyes are on how they are reacting to the UBS-Credit Suisse amalgamation engineered by the Swiss central bank. See data below.

AND MORE BONDS COMING I
Contact Energy says it is likely to seek more bond funding in a 6-year fixed rate, unsecured, unsubordinated 'green' bond. No amount has been disclosed

AND MORE BONDS COMING II
Christchurch City Holdings is signaling it will be issuing a new bond, a 5 year, unsecured, unsubordinated, fixed rate bond. This will be a new one because their next one doesn't expire until November 2023. The amount they are seeking hasn't yet been disclosed.

FAILING FASTER
In Australia, construction company failures are surging. Data published by corporate regulator ASIC (tab C2.2) showed the number of construction-sector insolvencies totaled 1664 as of mid-March, already topping last year’s June total of 1284, with a full quarter still to go.

SWAP RATES TURN DOWN SHARPLY
Wholesale swap rates are probably down today after the weekend's ructions. 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 -1 bp at 5.13% and now only +38 bps above the current OCR. The Australian 10 year bond yield is now at 3.35% and down -3 bps from this morning. The China 10 year bond rate is little-changed at 2.87%. And the NZ Government 10 year bond rate is now at 4.33% and down a hard -10 bps from this morning and just above the earlier RBNZ fix at 4.30% which was down -14 bps from Friday. The UST 10 year yield is higher today from this morning at 3.48% with a +4 bps rise.

EQUITIES START MOSTLY LOWER
The NZX50 is down -1.1% in late trade today. The ASX200 is down -0.7% in early afternoon trade. Tokyo is also down -0.7% in early morning trade. Hong Kong has opened down -1.7%. But Shanghai has opened up +0.4%. Meanwhile, the S&P500 futures is signaling Wall Street will open tomorrow up +1.4% is an indication of optimism. But there are still many hours and the European markets to open before Wall Street is back trading in their Monday morning session.

GOLD EASES
In early Asian trade, gold is down -US$20 from this morning at US$1969/oz.

NZD HOLDS
The Kiwi dollar is unchanged from where we opened this morning at 62.7 USc. Against the Aussie we are a little softer at 93.3 AUc. And against the euro we are unchanged at 58.7 euro cents. That means the TWI-5 is unchanged 70.9 from this morning.

BITCOIN HOLDS HIGH
The bitcoin price has moved sideways today, now at US$27,795 and off a minor -0.6% from where we opened this morning. Volatility has been moderate today at +/-2.9%.

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 bw | 20th Mar 23, 4:10pm 1679281827

A good question I guess we're about to find out the answer to.

Total wipeout for Credit Suisse hybrid holders rattles debt investors. Have Swiss regulators opened a Pandora’s box by wiping out Credit Suisse’s hybrid investors? One of the most significant aspects is the decision by the Swiss regulator to totally wipe out the value of $US17 billion Credit Suisse’s Additional Tier I Hybrid Securities. (AFR)

by Yvil | 20th Mar 23, 4:48pm 1679284121

I suppose "hybrid" investor is meant to describe someone who puts his/her money in a fund that invests across different asset classes?

by bw | 20th Mar 23, 4:46pm 1679284002

https://www.investopedia.com/terms/h/hybridsecurity.asp

by IT GUY | 20th Mar 23, 5:09pm 1679285351

I would keep my eye on the 200 odd banks in the USA, CS is now UBS's problem.....

by Audaxes | 20th Mar 23, 5:10pm 1679285454

Nightmare for CS-AT1-Holders & wider CoCo bond market as holders of $17bn of Credit Suisse bonds wiped out under UBS takeover while CS shareholders are set to receive CHF3bn. The entire CoCo market probably needs to be repriced now from a risk perspective. https://ft.com/content/d1ae9a54-c4a7-4742-8b2d-afff549f4f95 Link

by IT GUY | 20th Mar 23, 5:11pm 1679285507

Annnnnnnnnnnnnnnd its GONE......

by HouseMouse | 20th Mar 23, 4:33pm 1679283227

I’ve posed this question before - what will the surging failure of Aussie building companies mean for NZ employment?

Lots of kiwis work in construction in Aus.

Will they find other work, eg. In the mines?

Or will they return to NZ, with potentially limited options here as construction also falters? Does that result in an even higher unemployment rate?

by bw | 20th Mar 23, 4:45pm 1679283910

Are The Mines about to suffer the same fate as construction?

“We suggest selling iron ore into further rallies as steel outlook for this year remains subdued as well as further price rally risks policy intervention,” said Citi."

https://www.marketindex.com.au/news/the-iron-ore-price-rally-looks-unsu…

by J.C. | 20th Mar 23, 4:48pm 1679284133

Iron ore is often used as collateral in China hence stockpiling common.

The combination of declining steel demand in China, its falling iron or prices, and enormous Chinese stockpiles of the raw material there is creating a perfect storm for some of the world's heavyweight industrial firms.

https://www.thestreet.com/investing/china-has-enough-iron-ore-to-build-…

by IT GUY | 20th Mar 23, 5:10pm 1679285424

A double deep recession ie Aussie and NZ would be bad for both, heavy tourism reliance plus major trading partner for NZ, real real bad. On the upside I will be able to buy just south of Noosa on the sunshine coast .....

by HouseMouse | 20th Mar 23, 5:22pm 1679286171

I will turn gay for you IT Guy, haha. Love that neck of the woods

by solardb | 20th Mar 23, 5:28pm 1679286502

Shouldn't you get a photo first ,... of the property ?

by HouseMouse | 20th Mar 23, 5:33pm 1679286803

Lol

by IT GUY | 20th Mar 23, 6:06pm 1679288776

Sorry female partner gets first dibs, she wants horse land inland by maybe 50km

by Jonny_Utah | 20th Mar 23, 6:22pm 1679289734

Long bow to draw in assuming your desirability. Being keen counts for something though I guess.

by Hardly | 20th Mar 23, 5:11pm 1679285514

It’s still early but the government should backstop our residential construction sector. Once labour and material prices come back to earth they can contract 10,000 homes a year and actually do Kiwibuild. Those people from Australia can come and help out.

by HouseMouse | 20th Mar 23, 5:28pm 1679286481

As I have said before, it’s nice in theory and I basically agree in theory. However I don’t think the government can afford it, they are already spending a shitload on the relatively modest level of house building they are already doing. Also their funding model is heavily reliant on private developers building a third of housing in their development areas (like Mt Roskill), the slump in private development is going to whack that model.

by IT GUY | 20th Mar 23, 6:07pm 1679288830

Yep look at Labours record of delivery.... they may like the idea and will setup a working group to report back in 2025

by JimboJones | 20th Mar 23, 8:09pm 1679296141

If the land is almost free does private development in state housing areas stack up?

by HouseMouse | 20th Mar 23, 8:15pm 1679296533

Yes, although even that would be marginal these days.

But that defeats the purpose. Kainga Ora sells land to developers to assist the funding of its own development.

As well as for a bit of good ‘ole social engineering.

by Fossil Lover | 20th Mar 23, 7:34pm 1679294054

The government should stay out of the construction sector. Government is the problem, so how can they be the solution.

by Rumpole | 21st Mar 23, 10:42am 1679348545

Deeply flawed legislation plus obstructionist buareacrats are the primary cause of most problems so will National /ACT in Govt swing a big axe often until the problem goes away - not holding my breath. Went to National party meeting in Selwyn last night that todd muller was supposed to present but he decided to retire and local MP Nicola Griggs stood in and did a good job. Unsure if the bigger attendance than previous meeting was because todd wasn't the presenter!! Some hard hiting but totally valid points raised so interested to see if taken on board and implemented and if not the perception that National is just Labour lite proven.

by WellingtonInvestor | 20th Mar 23, 10:07pm 1679303249

I have noticed developers are pivoting back into building kiwibuild as other buyers dry up. Also helped by the government raising the Kiwibuild prices allowed. Not really all that great for Kiwibuild FHBs as they will pay more. But many of them are not great and suspect some get upsold to better non Kiwibuild versions.

by HouseMouse | 20th Mar 23, 10:24pm 1679304252

Good luck building a 2 beddie in Auckland, selling that for no more than $760k (KB price cap in Auckland), and making any profit. But maybe it will allow some developers to break even, at least.

I am signed up for Kiwibuild releases, it’s been very much a trickle over the past 6 months.

by nz-it-worker | 20th Mar 23, 5:42pm 1679287324

Doesn’t seem to be too much evidence on the job front just yet of construction faltering.

Construction sector job ads climbed 11 percent on January ...

https://www.rnz.co.nz/news/business/486324/hospitality-tourism-and-construction-job-ads-rise

by HouseMouse | 20th Mar 23, 7:23pm 1679293386

Let’s see how things look in 6 months.

And btw it was a 1% rise in one month - YOY a 13% decline

So a pretty misleading headline

ps. I would have thought job ads normally rise in February over January, many employers don’t advertise in early to mid January. Sloppy reporting / analysis?

by HW2 | 20th Mar 23, 6:44pm 1679291081

Reached the bottom of this downturn, And 15 percent higher than before covid

by IT GUY | 20th Mar 23, 7:27pm 1679293627

Did a prominent commentator tell you this

between hits on the bong?

or was it your waters?

or perhaps even ChatGPT?

remember it's always darkest just before it turns pitch black.

by OldSkoolEconomics | 21st Mar 23, 7:22am 1679336527

I cant think of a single reason to think things have bottomed out. We have barely started the downturn part.

Inflation remains sky high, geopolitics is worse than before, assets are still overvalued, climate events are worsening etc etc and now the banks and financial system are starting to creak due to a lack of planning for inflatio and interest rate changes.

We havent gotton to the corporate failure bit yet, unemployment rise or govt/council issues (auckland council to make mass layoffs ... other indebted councils will surely follow, central govt is only now trying tl balance the books and realising there is no more money so more projects will soon go...).

Hoard cash and wait a couple yeats for good opportunities. In the meantime there is some awesome surf :)

by Fossil Lover | 21st Mar 23, 7:13am 1679335993

The downturn is just getting under way. The roller coaster has slowed to a cruel as it has crested the peak and the terrified passengers see the big abyss on the downhill ride. Should be fun.

by Rumpole | 21st Mar 23, 10:46am 1679348793

Those enjoying the fun will be the onlookers watching the terrified faces and screaming as the roller coaster thunders the big dip and the operator runs for the hills.

by J.C. | 20th Mar 23, 4:45pm 1679283908

In early Asian trade, gold is down -US$20 from this morning at US$1969/oz.

Divergence is wide. For ex, in real time, gold price in AUD down 0.7% but PMGOLD up 2.3%.

by J.C. | 20th Mar 23, 5:18pm 1679285920

Interesting trend emerging.

The Millionaire Next Door? The Millionaire Down The Hall may be a more apt name for a personal finance book written in 2023. A record number of affluent Americans are renting across nearly every major city in the nation.

For some, the decision to rent is based on preference for location and long-term flexibility.
Others may be unable or unwilling to lock down a home in a hot housing market.
The change may signal trouble ahead for others in the rental market.

https://www.fool.com/the-ascent/mortgages/articles/why-some-wealthy-ame…

by bw | 20th Mar 23, 5:35pm 1679286934

The Fed might end up lending as much as $2 trillion to banks. That would spell the end of Quantitative Tightening (QT). Indeed, the BTFP might turn out to be just the latest iteration of Quantitative Easing.....There is a warning from history here for the Powell Fed. In the face of the first sign of financial distress, the Fed and the FDIC have intervened to give implicit coverage to all uninsured depositors and to establish a new and potentially large line of credit for banks carrying losses on their bond portfolios. But what about inflation?

https://tinyurl.com/2p99s8n9

If, like Arthur Burns more than 50 years ago, Powell combines the alleviation of financial distress with a premature pause in monetary tightening, he risks repeating one of the key mistakes of the Fed in the Seventies.

by J.C. | 20th Mar 23, 5:31pm 1679286678

This definition is important IMO:

QE is the process whereby the Fed credits banks with reserves, and in return banks sell the Fed their UST and MBS holdings. Under the BTFP, instead of buying the bonds directly from the banks, the Fed will print money and lend it against the banks’ pledges of UST and MBS collateral. If depositors wanted $4.4 trillion in cash, the banks would just pledge their entire UST and MBS portfolio to the Fed in return for cash, which it then passes to depositors. Whether it’s QE or BTFP, the amount of money created by the Fed and put into circulation grows.

So the Fed printed USD4.189 trillion in response to COVID. Now, the Fed has implicitly printed $4.4 trillion with the implementation of BTFP.

by Rob Reid | 20th Mar 23, 8:11pm 1679296287

All the DGM commentators I follow have been saying for yonks that the FED will pivot the moment something breaks. SVB etc broke despite real rates being way negative. And here we are at bailout time already, even though it was only well paid tech workers and their speculative banks that were directly affected. They spooked like chickens after the first woof.

When the food riots are triggered by the next wave of inflation they are going to need a bigger printer.

It will take a few years to finish off what confidence there still is in Fiat and it's CBDC derivatives, but I'm quite sure that's the way the ship will sink. The central planners have already revealed how little stomach they have to tackle inflation.

And wages can't keep up with inflation because we have decades of "good times" to unwind, so good luck sitting on debt for years and expecting inflation to whittle it away - it will just be squeezing discretionary spending and making it even harder to cover the debt.

by J.C. | 20th Mar 23, 8:51pm 1679298677

Yes. And amazing that when you point this out, people look at you with wide eyes. They're still living in the 1970s when wage inflation was strong.

by HouseMouse | 20th Mar 23, 5:35pm 1679286919

Ouch, NZX50 down 1.37% today (now officially negative YTD). Will be interesting to see what transpires in the USA on Monday their time, and how the NZX50 might react tomorrow.

by IT GUY | 20th Mar 23, 6:14pm 1679289253

man the ASX 200 puked as well, its a sell now and ask questions later market.... even if bank runs stop recession is baked in.... re that model I think even Classic see to much risk

by HouseMouse | 20th Mar 23, 8:17pm 1679296630

Yet there are still a few shares bulls. One or two here were talking up the ASX200 just a few weeks ago, it’s also now negative YTD.

vested interests blah blah

by HouseMouse | 20th Mar 23, 10:28pm 1679304536

FTSE down sharply this morning. That was another stock market some one was talking up late last year / early this year. Down more than 4% YTD.

And oil has slumped to its lowest level in 2 years. Hopefully will see $2.25 per litre (91) at the trusty servo within next couple of days.

by IT GUY | 20th Mar 23, 6:16pm 1679289392

On a side note, I need a plate compactor to pack down before concrete etc on my stables, was looking before xmas, wow there ARE A LOT on the market now.... just sayin, and lead times for roofing iron is way down, and deals on structural H3.2 ply are out there.

by bw | 20th Mar 23, 6:34pm 1679290498

We put something akin to these down a few years back. Easy on the hoof and easy to keep clean. Mrs. W into dressage.

https://www.agritechimports.co.nz/comfy-equine

by IT GUY | 20th Mar 23, 7:18pm 1679293131

looking at a mix of those and also some crushed lime then that matting or just crushed lime then shavings... but I ned to lay concrete for wash down pads and surrounds hence compactor..... how do you rate comfy horse pads the matts and how do you muck out?

https://www.youtube.com/watch?v=_8Gdz3zbcw0

we have a warmblood that was causing trouble the other day, we put her in a cattle yards and she jumped out....... man she can jump

by bw | 20th Mar 23, 8:17pm 1679296656

To be honest we mucked out that traditional way - sawdust in one corner. It was good bedding for the night before it got soiled. We had the under layer of concrete (like you are doing ) layered slightly angled away from the interior of the stables, so hosing out was easy and there was not flow-back. But the rubber pads? Fantastic.

We used crushed lime for the second layer of the dressage arenas. First layer crushed river stones, then the lime, then a layer of fine gravel that could be harrowed.

The Swedish warm blood we had, was a delight on his feet; got ooh-and ahhs in the arena. But nervous as. And if the slightest unexpected thing caught his eye. He was out of there! So I know what you mean. Our last was by 'Landioso' and was the opposite. Brave and inquisitive.

by Rob Reid | 20th Mar 23, 8:16pm 1679296579

Jesus, what a hassle. How did horses survive for 50,000,000 years before humans turned up yesterday?

by bw | 20th Mar 23, 8:26pm 1679297160

Like cats and dogs, they just did. And then they became part of the family. When you've stood out in the driving rain in the dark, comforting your favourite mare, helping as best you can to help her foal, and you see the newborn staggering about in confusion, you'll understand.

by Noncents | 20th Mar 23, 6:57pm 1679291860

Had a thought today regarding the "Things you need to know"/4pm bulletin.

I wonder if it would be useful for people if a current best rate could be added each day. It is not financial advice just a visual indication of the best rates available to consumers. You never know, something so simple could actually create some competition.

i.e.

X bank has the highest 6 month/12 month TD at y%
X bank has the highest Savings rate at y%
X bank has the lowest Floating Mortgage rate at y%
X bank has the lowest 1/2/5 year fixed rate

by Rumpole | 21st Mar 23, 10:51am 1679349105

Great idea but Banks/MSM/Govt don't like competition so unlikely to happen or Banks will move in lockstep.

by J.C. | 20th Mar 23, 7:52pm 1679295154

Gold on the menu in the Eurozone. The gold price in Euros just crossed the psychological threshold of €60,000 for the second time in history.

by fat pat | 20th Mar 23, 10:53pm 1679305983

What about New Zealand? We crossed the $100,000 / kg psychological barrier for the first time in history last week. Now we've blown through that to $102k/kg.

by J.C. | 20th Mar 23, 11:05pm 1679306721

What about New Zealand? We crossed the $100,000 / kg psychological barrier for the first time in history last week. Now we've blown through that to $102k/kg.

Relatively speaking, NZ doesn't care about the gold price compared to Europe. And particularly compared to Asia.

by HW2 | 24th Mar 23, 6:17pm 1679635066

by HouseMouse | 20th Mar 23, 5:22pm

I will turn gay for you IT Guy, haha. Love that neck of the woods

IT GUY Housemouse wants a friend