A review of things you need to know before you sign off on Wednesday; business sentiment less downbeat, mortgage market very quiet, savers rush TDs, milk payouts ease, swaps ease, NZD weaker, & more

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
Heartland Bank raised its floating rate by +26 bps taking it to 7.75% (and well below the main bank levels of 8.64%).

TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank raised its Step Saver, Online, and Business Online savings account rates by +25 bps. The new potential Step Saver rate is 4.75%.

PATCHY, SURE, BUT MUCH LESS DOWNBEAT
ANZ's latest Business Outlook survey shows improved business confidence and expected activity levels, while inflation indicators have eased, even if only slowly. The lifts were not trivial. This has prompted the ANZ economists to note: 'The RBNZ perceives widespread sogginess across the economy...We aren't so sure'.

ELEVEN YEAR LOW
The collective mortgage books are now growing very slowly. They rose only +$577 in April from March, an extension of the low level in all months of 2023. In April 2022 they rose +$1.4 bln. In April 2021 they rose +$3.0 bln, and in April 2019 they rose +$1.2 bln. Apart from the pandemic April, April 2023 is the lowest since 2012. More here.

HOUSEHOLDS RUSH TERM DEPOSITS AGAIN
Households have been shifting funds out of transaction accounts and savings accounts and the April shift has kept up the pace. Household transaction balances fell -$900 mln from March, and savings accounts fell -$330 mln. But term deposits rose by +$2.1 bln in the same month, taking the full year rise in term deposit balances to +$26 bln. In the year to April $2022 the rise was only +$2.8 bln. In the year to April $2021 it was a sharp fall of -$18 bln. And in the year to April 2020 it was a -$1 bln retreat.

KIWISAVER RESULTS WEAK
KiwiSaver assets have now probably hit $100 bln. As at March they were just above $97 bln, having risen at about +$1.8 bln per month in the March quarter. At that rate, the May balances could have exceeded $100 bln. But don't forget, these increases are not all investment gains. Much of the rise is due to member and employer contributions. IRD data for the March quarter shows members were credited with +$2.4 bln in the period. The RBNZ data shows fund values rising +$5.4 bln, so investment returns (after tax) must have been about +$3 bln. That implies positive investment earnings returned in Q1-2023. But for the past twelve months, contributions were +$9.6 bln but the value of all KiwiSaver has only risen from $92.3 bln a year ago to $97.2 bln and a rise of only +$4.8 bln. So half the 2022/23 contributions were lost over the past year. Only Q1-2023 performance limited the loss.

GENEVA FINANCE PROFIT FALLS
Geneva Finance says its March-year pre-tax profit fell -42% to $4.8 mln. Reduced lending, higher funding costs, claims costs stemming from the Auckland floods and increased investment in group governance were blamed for the profit drop by Geneva, which offers personal loans, vehicle loans and insurance.

ME TOO
Synlait has revealed it is reducing its current season milk price, and its nex season indication will be even lower. But these changes mirrow Fonterra exactly, as it has done since the 2020/21 since it has done since the 2020/21 season.

LATE SEASON CATCHUP
Milk flows in April, as the season is well into winding down mode, were strong according to Fonterra, more than +8% higher in the month than the same month a year ago. That narrows the total season milk flows to be only -0.2% behind the prior season.

AUSSIES START WITH MORE BUT FACE CUTS TOO
In Australia, Lactalis (previously Parmalat) has cut their milk price paid to farmers in Queensland and NSW, taking it down by -5.7% from AU0.87/l to AU$0.82/l. Dairy companies there are required to review their annual milk supply agreement price by June 1, and competitors Norco and Bega have yet to announce their stance. Farmers are disappointed because weather-induced lower production should have led to higher prices, not lower, they say. For the past year Fonterra Australia offered AU$9.57/kgMS (which is a different basis to the c/l basis of Lactalis), and they too have yet to declare their price. But AU$9.57/kgMS is NZ$10.30/kgMS which in turn is far above Fonterra's NZ indication of $8.20/kgMS to Kiwi farmers for the current season and $8.00/kgMS indication for the next season.

INFLATION TICKS HIGHER ACROSS THE DITCH
Australia's monthly inflation rate rose to 6.8% in the twelve months to April, which is a rise from the monthly indication of 6.3% in the March month.

NOT POSITIVE
China's official factory PMI contracted more in May than April and more than expected, reinforcing the lackluster - even failing - recovery there. Ectect the yuan to come under pressure. But tomorrow's services PMI is unlikely to be as negative.

SWAP RATES SOFT
Wholesale swap rates are likely lower today with modest falls. 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 -2 bps at 5.69%. The Australian 10 year bond yield is now at 3.63% and down -3 bps from this time yesterday. The China 10 year bond rate is unchanged at 2.74%. And the NZ Government 10 year bond rate is at 4.33% and down -4 bps, and that is still higher than the earlier RBNZ fix which fell by another -6 bps to 4.27%. The UST 10 year yield is now at 3.68% and another -8 bps lower from this time yesterday.

EQUITIES ALL LOWER
Wall Street closed with the S&P500 unchanged today. Tokyo has opened down a sharp -1.1% after a long run up. Hong Kong has opened very weak, down -2.3% so far and compounding their recent losses. Since Monday, May 8, they are down more than -10%. Shanghai has opened down -0.8% and falling. The ASX200 is down -1.3% in afternoon trade today, while the NZX50 is down only -0.2% in late trade.

GOLD FIRM
In early Asian trade, gold is at US$1956/oz and up +US$10 from this time yesterday. Earlier in New York it closed at US$1959/oz and London closed at US$1952/oz.

NZD DROPS
The USD got a boost this afternoon when a House vote cleared a hurdle to their debt-limit deal. The Kiwi dollar fell more than -¼c from this time yesterday, now at just 60.1 USc. Against the Aussie we are holding at 92.5 AUc. And against the euro we are down at 56.2 euro cents. That means the TWI-5 is down at 69.1 with a -30 bps drop.

BITCOIN SETTLES IN
The bitcoin price is marginally softer today, now at US$27,682 and down a mere -0.3% from this time yesterday. Volatility over the past 24 hours has been low however at just over +/- 0.8%.

This soil moisture chart is animated here.

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