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
Kainga Ora/HNZ raised its floating mortgage rate today by +50 bps to 8.25%. They also raised rates on some short fixed rates, and trimmed them on some long fixed rates. Update: ANZ has trimmed their 6 month and 1 year fixed rates by -4 bps and -9 bps respectively, taking their one year rate down to 6.74%.
TERM DEPOSIT/SAVINGS RATE CHANGES
Unity Money raised its term deposit rates for its TD terms for terms to 5 months and reduced terms for 1 year and longer. (Note this is a correction from an earlier update. We apologize for the wrong earlier summary.).
NO GREEN SHOOTS
Housing sales slumped to a record low last month with prices still falling, REINZ says. April was a disastrous month for the housing market with lowest sales volumes for that month, excluding 2020, in more than 31 years. But it hasn't stopped industry spokespeople repeating "we are at the bottom".
FOOD COSTS HURT
Food prices were up 12.5% in the year to April 2023 - which is the highest annual rate of increase seen since 1987; National's Willis says household budgets have 'nowhere to hide'.
RENTS MIXED
But rents are not up as aggressively. Nationally they rose +3.8% in April, similar to the +3.9% rise in March. That is on a 'stock' basis, or for all rented properties. For new properties (the 'flow' increase) the rise was only 2.8%. So existing renters have the option now to move to win a smaller increase. But that may not work in Auckland where the the 'flow' rise was up +5.4% in the year to April but worse, up at rates well over +10% pa in 2023.
LESS CONCRETE
Ready-mixed concrete poured in the March 2023 quarter was -12.5% lower nationally than the same quarter a year ago. In Auckland it was -18% lower. Some of this decline will have been weather-affected of course. But apart from the pandemic-affected quarters, this was the lowest volume sold since the March 2018 quarter.
HOT DEMAND, HIGHER YIELDS
Bidders fronted up with $1.275 bln in 128 bids for the $400 mln of NZ Government Bonds at tender today. But only 32 of those bids were accepted. The $200 mln for the May 2028 bond was won by 10 bids, averaging a yield of 4.06%. Two weeks ago the same maturity went for a yield of 4.01%. The $150 mln of the April 2033 offering went for 4.14% yield, up from 4.06% two weeks ago and 21 of 53 bids were accepted. But the May 2051 $50 mln was keenly sought by one bidder who took the lot at a yield of 4.39% beating out 31 other bidders who wanted a higher yield. Two weeks ago this maturity went for 4.20%.
CHEAP CAR FUNDING
Toyota Finance raised $100 mln in a three year bond issue today, and for these A+ rated bonds the pricing was good for them, just +85 bps above swap. Given the likely 3 year swap rate today, they probably got this funding at about 5.5% pa., not bad for unsecured, unsubordinated bonds.
HIGHER INFLATION EXPECTATIONS
In Australia, their inflation expectations ticked up slightly to 5.0% in May from 4.6% in April. It is not something the RBA will be pleased about. Some think the federal Budget will be inflationary too, so the tide is challenging the RBA.
NO CONSUMER INFLATION IN CHINA
In China, they don't have an inflation problem. But they might be facing a deflation problem. In April, consumer prices were only +0.1% higher than a year ago, much lower than the minor +0.7% in March and also below the expected +0.4%. That is at a two year low, down to pandemic levels. The annualised rate between March and April was a deflationary -1.2% pa (although that is not a seasonally-adjusted result). Lamb and beef prices are falling but milk prices are rising. However none of these changes are large.
CHINESE PPI DEFLATING
And staying in China, their producer prices are definitely deflating. They were down -3.6% in April from a year ago and falling at an annualised -6.0% rate in April from March. No hiding deflation there.
FRENEMIES?
In Beijing, the Aussie Trade minister is visiting and involved in an odd set of 'negotiations'. He wants the trade sanctions removed on a range of goods they export. But China says there are no trade sanctions to remove, that they never existed in the first place. Sanctioned Aussie exports are starting to move again. And all this is despite Australia joining AUKUS and the new Labor Government recommitting to it, buying nuclear subs, and being part of a concerted effort to challenge China's assertive push in the region. It just looks like Beijing as folded its hand, acknowledging it needs Australia more than Australia needs it. Unexpected.
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SWAP RATES SOFT
Wholesale swap rates are probably a softer again today on international influences. 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 5.61% and 36 bps above the OCR. The Australian 10 year bond yield is now at 3.42% and down -4 bps from this time yesterday. The China 10 year bond rate is down -5 bps at 2.71% which is a big drop for them and now down -13 bps over the past two weeks. Not sure why. And the NZ Government 10 year bond rate is now at 4.16% which is down -2 bps from yesterday, but still just above the earlier RBNZ fix at 4.12% which down -5 bps from yesterday. The UST 10 year yield is now at 3.43% and down -8 bps from this time yesterday.
EQUITIES LOWER
In New York, Wall Street ended up +0.2% on the S&P500 in its Wednesday trade. Tokyo has opened down -0.2%. Hong Kong is down -0.1% today in early trade. Shanghai has opened unchanged after yesterday's big drop. The ASX200 is down -0.3% in afternoon trade. The NZX50, is down -0.9% in late trade today.
GOLD LITTLE-CHANGED
In early Asian trade, gold is little-changed at US$2032/oz and up just +US$1 from where we were this time yesterday. That is above the earlier New York close of US$2030/oz but below the earlier London close of US$2037/oz.
NZD FIRMER
The Kiwi dollar is up +¼c from this time yesterday at 63.7 USc. Against the Aussie we are nearly +½c firmer at 94.1 AUc. And against the euro we are up a tad at 58 euro cents. That means the TWI-5 is now up above 71.3.
BITCOIN STILL STALLED
The bitcoin price is virtually unchanged from this time yesterday, now at US$27,548 and down a mere -0.5%. Volatility over the past 24 hours has been moderate at +/- 2.7%.
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74 Comments
I'd have a drink with you, if I could still afford to!
It doesn't help I've not long come back from a trip to a country where food is crazy cheap by comparison. Honestly, a highlight of the trip was waddling back from a supermarket, arms tearing out at the sockets with bags full of groceries, and realising I'd spend not much more than one dinner's worth of food in NZ. But then this afternoon I had to pop into the shops and New World was closest; I just about had a heart attack looking at some of the prices.
ComCom should fast-track Aldi into NZ, this would have the biggest impact on those struggling with supermarket costs. When I was back in the UK recently, these are some of the bargains I picked up in Aldi:
- shower gel for 70c
- paracetamol for 38c
- 1kg of yoghurt for $2
- pre-made pizzas for $2
- bananas for 78c/kilo
- pre-made lasagna which fed 4 people for $8
I'm currently in the UK and grocery prices have been rising rapidly.
Bananas are now around NZ$ 2 per kilo and the paracetamol has doubled to around 75c (if you are lucky). Prices are rising by the week and UK interest rates went up again, today.
I am planning to be shocked when I return to NZ and make my first visit to the supermarket.
NO GREEN SHOOTS
Uh, not according to REINZ Chief Executive Jen Baird in today's Monthly Property Report. The headline is literally this:
Holidays add to market slow-down, but green shoots begin to emerge
Not only that, but:
“We won’t know if we are at the bottom of the market until we have passed it, so for those who can get their financial ducks in a row, now is a good time to buy,” suggests Baird.
Be quick!
YES BUT
If you stumble and fall at the bottom of the valley, its normally less servere then at the peak of the mountain.... there is no hurry to pick the bottom of the valley, we will spend a few years croissing it before the valley starts to rise up again.... We are on our descent and I dont think we are even out of the snow line yet. It was a very high peak without oxygen, those stuck up there will not return.
Be so slow you almost look dead!
Oh i see, i cant question poor perfoming women in power but they have questiioned men for ever.
Albert, your wokeness is part of the reason people are ŕetrenching from society and involvement in voting, public discusions... for fear of being gas lit for asking a relevant question.
Labelling a ligit question mysoginistic when it is not, when only your woke sense of skewing everything is the issue, is exactly why NZ is in the pathetic state of numbness it is.
Societal breakdown starts when people cant question anything for fear of cry babies taking offence.
You're confusing species.
While the great white Newstalkus Listenus can present similar characteristics to the common garden Incel, they're less likely to be trying to elevate themselves into an edgelord. Instead of deliberately trying to make offense, they are so lost in the fog as to think their hot takes are well rounded observations of reality.
Average Men are endlessly tolerated - you only have to look at Politics and the NZ stock market to see this. Women are held to a much higher standard, in general. You are apparently part of this problem.
By the way - very few will argue that Women are better and therefore should be allowed into positions of power. It has however been shown that a diverse leadership performs better. The standard NZX company board and management of ~80% old men is not diverse.
You have nothing to fear unless you are average yourself (or worse), and are worried about above average women displacing you.
Look Hemi you have been doing some great work..... don't blow it and get banned again.
Maybe he just meant to think it , not say it out loud.
Next you will be saying that a Black Lesbian Torres Strait Island Poet board member appointed on merit could provide better governance than some treaty mandated Iwi guy. Don't go there , its a pandoras box.
For new properties (the 'flow' increase) the rise was only 2.8%
Annual net migration at 51k in the year to February 2023 and early indication of record-breaking net influx (~10k) in March.
Where are we putting all these people if rental inflation says demand is low and houses aren't selling? Could it be that we overbuilt our housing stock by so much during the lockdown?
Could be - but also these statistics are fairly preliminary and or guesses based on intentions if they're recorded from StatsNZ. Disclaimer on their statistical data:
To classify a border crossing as a migrant movement, we need to observe up to 16 months of travel history, and it takes 17 months before final migration estimates are available, using the 12/16-month rule.
As some on here have suggested, a back of a napkin exercise can help figure out movement by looking at customs arrivals/departures. So far this year there's a net ~2000 arrivals when I last checked a couple weeks ago. Verify?
TL:DR; who knows.
But it hasn't stopped industry spokespeople repeating "we are at the bottom".
Ashley said the market turned in Jan. And Granny Herald did an interview with another journo Rebecca Howard who talks about splashing out on property for her 22-yr-old son in Wellington in 2020. Now under water. All kinds of reckons on where we're heading.
Thank sweet Jesus for the smart content and commentary at interest dot co.
https://www.iheart.com/podcast/1049-the-front-page-30038501/episode/wha…
Hang on! That's called Inflation, isn't it? And in that question lies the problem. Inflation has been with us all along, and we conveniently ignored it.
Well guess what? The RBNZ has set about taming Inflation, and if it's in our Property Prices, then it's about to be shaken out. The alternative is for Wages to charge off after those prices, and we know what that will lead to. What the definition of insanity, again?
JC I struggle to understand how a proxy for gold (mining etc etc) can be worth only 27k ish when there is only 21 mil of them ever. i see it as more a proxy for compute power vs energy...
Rough estimates (Chainalysis / Glassnode) suggest 3-4 million BTC have been lost forever. If that is the case, USD27K might appear even worse.
Doubling every 10 years means 7% growth p.a. The average since 1990 has been 6.3%:
https://www.ceicdata.com/en/indicator/new-zealand/house-prices-growth
Before 1990 it was even less, so anyone claiming house prices double every 7 years is a liar, and anyone claiming they double every 10 years is way off.
Hence the problem with proclaiming urban myths. No disrespect to Ashley Church but I think people need to be careful if they're considered experts or influencers. As for Granny Herald, perhaps they need a disclaimer somewhere. Something along the lines of 'Quotes are the opinion of the columnist. For entertainment purposes only. Please contact your financial advisor.'
Can I make a point that NONE of these industry experts that can SEE the market turning in the near future had such good vision in Nov 21 as we where at the top...... thats right they are full of Sh&t!
HW2 is running out of Sh&t... he only has enough Sh&t in the tank to spruik on here every 2nd or 3rd day now....
Its really cold weather and the poor troll is living under a bridge.
I am a kind soul I do not like to see others suffer, HW2 will eventually see the light after a come to Jesus moment. this may occur as the council moves his CVs back to 2016 levels late next year.
In Beijing, the Aussie Trade minister is visiting and involved in an odd set of 'negotiations'. He wants the trade sanctions removed on a range of goods they export... And all this is despite Australia joining AUKUS and the new Labor Government recommitting to it, buying nuclear subs, and being part of a concerted effort to challenge China's assertive push in the region. It just looks like Beijing as folded its hand, acknowledging it needs Australia more than Australia needs it. Unexpected.
The real purpose of the fake 'China threat' narrative in Australia
Big move today is China's 10Y rate, down again. Now -13bps in 2 weeks. They're finally having to adjust their expectations for their new reality - and it's not up. They need us more than we need them as the Aussies are finding out as well. And they still can't fully feed themselves.
Current Chinese workforce now working in Vietnam is 1.3 million & counting.
Stop focusing on the Housing market.
There are green shoots, but not where you are looking. The proliferation of the deep value companies on the NZX and ASX are showing their weight. Steel & Tube, which had positive books by year end in 2020 (a sign of a well managed company IMO), trades at a P/E of 6. Genesis Energy trades at a P/E of 10.
They are low PE, divvy stocks which you can just sit on for more than a savings account pays right now. Even if you are putting away pennies at a time, it is still a decent return if you are holding for 30-40 years.
One of the worst examples my friends:
My food bag now has a price to earnings of 2.8.
Alas, look at the share price graph!
https://www.nzx.com/instruments/MFB
Steel & Tube definitely worth a nibble. I have exposure to Genesis through NZ Div (DIV), which is weighted 35% towards the utilities. If you're feeling a bit more frisky (as I think is kind of necessary right now), I would look at gold and silver related miners. Gold juniors are woefully underperforming relative to gold price so GDXJ will give you broad exposure. In my quiver (all ASX):
Evolution Mining (EVN)
Northern Star Resources Ltd (NST)
Silver Lake Resources Limited (SLR)
Silver Mines Limited (SVL)
The issue with Steel & Tube is that their products are largely used in the construction industry. Construction activity is slowing at pace and it could be 3-5 years before we see meaningful recovery. I would fully expect their earnings to nose-dive in the next 12 months.
The UST 5s10s had been steadily inverted since last June until last week. The un-inverting wasn't the good one, however. First Republic, swap turmoil, collateral shortage, you name it. This crisis has gone too far now and there's no getting out of it now. https://youtu.be/YSfT9ELi2s0 Link
But it hasn't stopped industry spokespeople repeating "we are at the bottom".
Spoke to a work colleague the other day, he said a friend of his who is a RE agent has advised him that the housing market has bottomed out and interest rates peaked so he is looking at buying an investment property. I just smiled.
Those Auckland rent rises are *huge* - biggest ever increase on a quarterly basis (nearly 19% annualised!!) Perhaps this was always coming - drop in supply after the floods, big increase in inward migration, chunky increases in costs for many landlords (deductibility / interest rates / insurance ticking up).
The market cannot provide affordable rentals in Auckland - supply will never catch-up given the current development / construction bandwidth.
FACTORS THAT COULD INFLUENCE THE HOUSING MARKET
1. Booming net migration
2. Ending of rising mortgage rates and falls
being predicted.
3. A queue of buyers built up over a year and
half of price declines and probably two years
if we include those who weren’t prepared to
buy when prices were exceedingly high.
4. Listings already falling from their cyclical
peaks and set to go lower.
5. Easing LVRs but new debt to income rules
appearing next year.
6. A surprisingly strong jobs market.
7. The rental market tightening up again making
more people think about buying.
8. Falling house construction soon of only
guessable magnitude.
Good work.
But Interest rates relative to debt levels are still way too high, and this is the key factor. Either House prices need to fall another 5-10% or mortgage rates need to fall 1%+ before the bottom is reached. Either are probably a year away from happening.
The biggest one will be if National get elected. I imagine there are a ton of “investors” who want to buy another rental but can’t make it stack up without pretending their interest bill is some kind of business expense.
If National look like they will win I may even consider buying something pre election to then sell on (probably without brightline too!).
Really unsure about the booming migration talk but at any rate, the numbers are quite far from working and the rate cuts needed to turn this thing around would really just be a symptom of a much larger economic downturn, one which would put more downward pressure on house prices. We have a central bank trying to contract the economy, that means less money. As a nation we have been pretending like money doesn’t matter and we can use unrealised equity as a deposit for much larger debt. At some point, this thing fails. Whether it’s this time or next time round, who knows. At some point we need real money to support the market and we are so far away from that point and it’s quite detrimental to the rest of the economy.
https://www.theguardian.com/world/2023/may/09/mind-boggling-methane-emi…
Methane leaks alone from Turkmenistan’s two main fossil fuel fields caused more global heating in 2022 than the entire carbon emissions of the UK, satellite data has revealed.
interesting reading as I put another log on the fire and scoff a massive piece of eye fillet with peppercorn sauce and mash
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