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. That means there have been almost no banks adjusting borrowing rates after the last two OCR rate hikes.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either, although NBS increased their savings account rate.
BILLIONS FOR CARBON OFFSETS
New Zealand may have to spend ‘multiple billions’ buying overseas carbon offsets to hit 2030 climate goals, a Treasury report says.
CHALLENGER BANK FUNDING GETS EXPENSIVE
Even though Heartland Bank has an investment grade credit rating, the new bond funding it wants to raise will not get an investment grade rating, says Fitch. It will be seeking up to $125 mln in ten year "unsecured subordinated" bonds. These bonds are the first to be issued by Heartland under the RBNZ's recently revised regulatory capital framework, which prohibits non-viability triggers for capital instruments. At this stage we don't have pricing or margin indications. But they won't be skinny.
TRACKING NEW DWELLINGS
Stats NZ updated their Q1-2023 dwelling estimates today. Obviously this data will be revised when the Census results are available (although that seems to be a struggle again.) The current estimates are that there are 2,040,500 dwellings with 64.5% of these owned by the occupiers, 32% rented, and another 3.5% provided as free accommodation. This means the number of dwellings rose by +46,000 in the year, the most they have ever recorded. (But we reckon this is due for a significant revision unless the numbers of dwellings being destroyed in unusually large.)
CONFIDENCE BOOST
The RBA pause on its rate hiking program has generated a substantial bump in Australian consumer sentiment, according to a recent survey. The biggest jump was by those who have mortgages. But the new improved level is still low, and Westpac says 2023 will still be lackluster.
DEFLATION BECKONS
In China, consumer inflation has disappeared altogether. March prices were +0.7% higher than year ago levels and an 18 month low. But they are almost -4% lower than February on an annualised rate basis. That is the second consecutive month of falls. Deflation beckons.
LOW ORDER BOOKS SQUEEZE OUT INFLATION
Deflation is already here for Chinese factories. Their producer prices fell -2.5% from year-ago levels, the sixth straight month of retreats. In fact, the March fall from February ran at a -5% annualised rate. It will be no fun making stuff in China these days. The more orders they get, the tougher it will be.
TRAVELLER WARNING
Don't use public phone charging stations, says the FBI.
SWAP RATES FIRM
Wholesale swap rates have probably risen by about +5 bps today. 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 up +3 bps at 5.52% and 27 bps above the OCR. The Australian 10 year bond yield is now at 3.22% and up +4 bps from yesterday. The China 10 year bond rate is down -1 bp to 2.86%. And the NZ Government 10 year bond rate is now at 4.02%, and that is up +5 bps from this morning's open, and above the the earlier RBNZ fix at 4.00% which is unchanged. The UST 10 year yield is now at 3.40% and down another -2 bps from this time yesterday.
EQUITIES VARIED
Wall Street spent all of its Monday session lower, except right at the end where it rose to end +0.1% for the day. The NZX50 is up a similar minor +0.1% in later trade here. The ASX200 is up a strong +1.4% in mid afternoon trade. Tokyo has opened up +1.2%. Hong Kong is up % at its open. Shanghai has opened up +%.
GOLD RISES
In early Asian trade, gold is up +US$8 from this this morning's open, now at US$1996/oz. It closed in New York earlier at US$1992/oz and of course didn't trade in London.
NZD STAYS BACK
The Kiwi dollar has held its lower level against the US dollar at 62.3 USc. Against the Aussie we are soft at 93.5 AUc. And against the euro we are still soft at 57.3 euro cents. That means the TWI-5 is down at 70.3 but little-changed from where we opened this morning.
BITCOIN SHOOTS HIGHER
The bitcoin price has risen further and sharply today and is just about to touch US$30,000 again (US$29,997). It got up to US$30,400 in between before retreating. That is up +2.8% from where it opened this morning. This is part of a more than +80% rally since the start of the year. But liquidity in these markets is very constrained and volumes are low (even if transaction numbers are not). That can make price swings look more dramatic. Volatility over the past 24 hours has been high at +/-3.4%. And there's this urgent bailout.
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86 Comments
Yep.
Robert F. Kennedy Jnr's comments today about FedNow and Bitcoin were note worthy. We NZers should be wary of the RBNZ's CBDC initiatives:
Cryptocurrencies like Bitcoin give the public an escape route from the splatter zone when this bubble invariably bursts. So the White House is colluding with the banksters to keep us all trapped in the bubble of profiteering and control... Nic Carter describes how the White House has organized bankers to participate in a sophisticated, widespread crackdown to destroy the crypto industry. Carter describes 15 incidents where President Biden has weaponized FDIC, OCC + DOJ to force crypto-friendly banks to close their doors to crypto firms since Dec. 3. The recent crackdown on crypto blocks exit ramps, removes alternative rails, and strengthens government control over both the financial and political systems. We should be wary since CBDCs are the ultimate mechanisms for social surveillance and control.
Conspiracy’s today are tomorrow’s reality. The central bank’s will make sure Bitcoin becomes worthless, why would they let anything cut in on their monopoly. After all Bitcoin was worth nothing and will probably go back to nothing at some point. many people have made money and lost money selling a bunch numbers but in one day it will become worthless just make sure you are not the one holding it at this time at least tulips look pretty in a vase.
The value of a dollar bill today is what the government says it is. This arbitrary value is dependent on the actions of the government. There are no limits to how much money a government can put into circulation.
That is because this money isn’t backed by any real value; it is ‘fiat’ currency.
No the value of a dollar bill today is what the people say it’s worth. There are limits on the amount of money in circulation - too much causes inflation and 1st world governments know how bad inflation is.
Dollar bills are just a small component of money. Debt obligations are the lion's share. Global debt now exceeds GDP by a factor of 3-4. Assuming the long-term price of money is 3%, then GDP needs to expand by 9-12% to keep an even keel.
People have no idea what the value of a dollar is.
Robert F. Kennedy Jnr's comments today about FedNow and Bitcoin were note worthy.
DeSantis' lead is far more important IMO. If the Fed and the U.S. govt want a fight, Ron's standing firm and understands the issues. And people are listening. One thing that differentiates Americans and NZers is that the former take their constitutional rights seriously. Kiwis couldn't be bothered and don't understand how docile they are in terms of understanding the relationship between the state and individual.
https://news.yahoo.com/robert-f-kennedy-jr-joins-224947258.html
Nic Carter is on a different level of understanding to Kennedy.
Banks again very slow to pass on the OCR increase (for savers). As it was higher than their experts predicted it can't have been priced in.It was only in the weekend when I read an article from a head of one of the big NZ banks saying that people weren't saving, which had a lot of comments about how out of touch they were with the increased cost of living..
But who is borrowing long? Hardly anyone - as they have been convinced that the OCR MUST fall; the RBNZ MUST pause or reverse course and so everyone is funding short. Ask any mortgage broker, for instance, and they'll tell you to cover for 12–18 months because interest rates HAVE to fall.
Highly dangerous. Because if the RBNZ pushes on with vigour - for whatever reason, then a lot of borrowers who could be borrowing longer term and cheaper now, will miss out, and the implications could be dire.
(This may not be about "Inflation!" as much as many think, but may be more about fixing our economy for a sustainable future).
Its been a good year for me :) I actually celebrating having 3 years of crypto-taxes all finalised and tax all paid to the man by having a bit of champagne up on Mt Eden (together with a very decent boost to my retirement funds). A 7 figure tax bill sent to the man!
But I must take issue on the comment about low volume. Total volume today is 20 billion in BTC alone. Yes some of that is faked but not the on-chain nor larger players like Coinbase. That is more or less average volume over the last year. Yes we hit 90B during the FTX collapse, but nor is it low.
New data gives us badly needed details behind bank shock/crisis. What it means moving forward.
The Federal Reserve's H.8 data on US commercial banks shows just how much of a systemic shock the March seasonal bottleneck had produced. Institutions got hit with historic levels of deposit declines, emergency borrowings like nothing before, and because of it massive fallout followed - and continues to follow.
RBNZ data on loan yields out today. Always a rich source of truth. NZ businesses are now dealing with interest costs of over $1.1 billion per month - twice as much as this time last year. Landlords are not included in these figures (investor mortgage costs are up around $120 million per month).
So, given the general lack of competition in many NZ markets, how do we think businesses are meeting these extra costs? Might they be increasing prices? Is that how you reduce inflation in the 21st century?
by Independent_Observer | 17th May 21, 4:26pm
Its the script for a perfect storm - lock in as many FHB's at extroadinary prices/debt levels then start the squeeze of rising interest rates.
As long as wages rise at the same rate as inflation...no problem...but can all businesses pass on higher wages to staff if all their input costs are rising as well - it could become a very nasty feedback loop. If they do, it will create more inflation, which the RBNZ will then need to battle by raising interest rates, which get passed to mortgages, which means staff need higher wages, which mean businesses put up prices even higher, which raises inflation, which the RBNZ will then need to battle..(and so on and so forth..)
No upvotes 2 years ago.
Once inflation is triggered by some externality (oil/energy shock, monetary and fiscal policy mistake/s) then it becomes a psychological phenomenon. Raising rates by the central bank to counter this psychological phenomenon in itself creates even more measured consumer inflation because it increases the costs/liabilities on the balance sheet of every household and business holding debt (and we were holding a lot of debt heading into the COVID monetary policy insanity/Ukraine War, oil/energy/fertiliser/food price inflation). This triggers even more inflation/it becomes sticky as companies/households need higher incomes to service increased debt costs so they all raise prices/demand wage increases - so the solution becomes part of the problem.
Ultimately our problem (and solution) comes down to debt relative to incomes. Pumping up asset/property/share prices by reducing the cost of capital (equity/debt/WACC) is a very stupid idea - hence my warnings on here for many years of what was unfolding. And dropping interest rates during a period when risk was increasing (debt/income ratios were increasing) is counter intuitive to every theory around risk and risk management (we should have been raising rates to prevent debt/income ratios getting so extreme and reducing risk). But here we are. We can't blame any of this on a black swan, nor on central banks raising rates - it was the dropping rates to zero that did the damage and providing excess debt to companies and households within an economy that wouldn't be able to produce the necessary incomes to service that debt over its lifetime.
We are seeing some input costs falling, but others are going up, e.g., interest payments / cost of revolving credit, insurance premiums and almost everything related to food production is still running at double-digit increases relative to last year. We will see more on this in a couple of weeks when the next set of producer input prices data is out.
There's gold in them there hills. No need to dig deep for it, because no one else is there looking.
That OneRoof article is interesting. Two houses likely making a tidy profit in these troubled times. The renovators did get them for a good price and it seems strangely naïve (or is the word disingenuous?) to say the investors were "pocketing a $225,000 profit on the way" and "made $350,000 in less than four months" when clearly they had to pay for renovations, commissions and lost interest earnings or paid mortgage interest.
We have just been through it, we did the numbers in November and realised we had no choice, we couldn’t afford the new interest rate, even if we put the rent up. We put the house on the market as soon as we could, it took 4 months to sell, in the mean time the new interest rate clicked in and we had to leave it on floating so we could pay the mortgage back, it nearly killed us, the Real estate agent advised us it was worth $1,495,000 in the end the feedback was in the $1.2’s we sold mid $1.2’s and took a hit. This is going to happen more and more as peoples interest rates come off, we believe the market will become flooded shortly with people in the same boat. My advice would be if you can hang on for a few years hang on, if you can’t, get it on the market yesterday.
sorrow street is a great place to put a mine HW2
Didn’t read in detail so yeah could be 60-70k, using cheap tradies and materials. That profit is disappearing up OneRoof’s ass.
What do people reckon - misleading journalism? Especially when they say the 225k was their ‘net profit’.
Maybe I will take the plunge with the media council
Borrowing costs too - $40k for $500k for 6 months at 8%. Overall I imagine they made a decent profit if you can find those houses to begin with. I have no issues with people doing this and improving the housing stock, they are hardly speculating when the market is going down.
Not convinced.
It’s part of the whole speculative ponzi that got us in to this mess. And it’s not adding to housing supply, well not really.
Say what you like about developers (and they are certainly a big part of the ponzi) but they add to housing supply and employ lots of people.
I agree. Actually I think the idea that 'small run down houses should be left to the FHB's so they can climb the ladder', is more speculative than a flipper doing it up. Like you said they're improving the quality of housing stock and it sounds like this was an experienced developer who had connections and knew what she was doing, much better than some everyday FHB being forced into it like in past years.
I wonder where the peak will be for BTC this time? Will it break the 60k of last time? And why didn’t I bother to buy some at 16k which I felt was the bottom of that cycle?
Thinking you can time the market movements of ol' ratty is a fool's game. If you had been DCA'ing, then you would probably have the best opportunity of getting the price you want. In fact, those who have been DCA'ing from ATH on a daily / weekly basis will now be ahead.
The stats estimate of new and total dwellings is questionable with no change in methodology since the last census.Extrapolating consents (with a 9 mth lag) and using weighted corrections for non completion,and underweighting demolition for infill etc leaves wide error in the model.CHCH council which includes demolition data ( around 20% for each new build) is a good example.
The RBNZ uses the electrical connection data for net increases of ICP under the assumption that new builds will use electricity,and this will show a net gain above both consents or compliance data.This would mean around 1924329 residential connections as of 28/2/23.The data may exclude common connections on rural land.
https://www.emi.ea.govt.nz/Retail/Reports/2DHMMT?DateFrom=20220101&Date…
The housing price downturn is over for Sydney and Melbourne, according to the key property data analysts, who have called the bottom of the market, saying the record return of migrants would bolster prices.
While some housing economists said prices might still have further to fall – if interest rates continued to rise – even those who aren’t yet calling a bottom said the faster than expected return of immigration after the pandemic would underpin the housing market.
“Immigration is going to be stronger than developers anticipated some 12 to 24 months prior, and we saw in the 2000s how unexpected immigration can be a fillip to prices,” said Challenger chief economist Jonathan Kearns, a former head of financial stability at the Reserve Bank.
We’ll see.
He references immigration in the 2000’s. What was the profile of immigrants then versus now?
I don’t know about Aus but the profile of immigrants from the early-mid 2000s in NZ was very different to the profile of immigrants today.
Lots of British people came to NZ (and I think Aus) in 2000s when house prices were affordable compared to the UK, and one pound equalled $NZ3. Lot of cashed up East Asian immigrants came then too. And don’t forget a stackload of kiwis coming back after 9/11 and London bombings with plenty of pounds saved up.
Wealth profile of immigrants is just as important, if not more important, than the quantum. In terms of impact on housing markets.
Maybe if spruikers spruik en masse they can generate some sort of spruikerish herd mentality
I agree NZ is not aussie, they can process a visa in a few days , here 8-28 weeks hippy only realised he might need to loosen things up due to polling, Labour has no commitment to making immigrants welcome. Our indiginous peoples dont make it past 17% they not interested in massive voting immigration... Hippy still not in control.
Aussie knows success is a young country of hard working taxpayers.... something Labour will never get...
Well, we did manage to attract 14 high-net-worth individuals in 6 months (since Labour made a policy reset). Isn't that a success?
Source: https://www.straitstimes.com/business/rich-foreigners-spurn-new-zealand…
Considering that processing times for Investor 1 Resident Visa is ~ 43 months, that's an outstanding achievement.
Source: https://www.immigration.govt.nz/new-zealand-visas/visas/visa/investor-p…
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