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
TSB Bank raised its floating rate from 8.39% to 8.64% today, a +25 bps rise matching the OCR change.
TERM DEPOSIT/SAVINGS RATE CHANGES
BNZ has raised many TD rates. Their new 6 month rate is now 5.55% (matching ANZ) and their new one year rate is 5.75% (matching ASB). SBS Bank and the Co-operative bank have raised rates too. Of note is the Co-op's new one year 5.80% rate. [Although announced a week or so ago, the ANZ's new bonus saver rates became effective today.]
A DEPRECIATING ASSET
CoreLogic reports that the average home values continued to fall in May. The average value of Auckland homes declined by -$333 a day, while the national average declined by -$200 a day.
CLEARER LANGUAGE
A new 'de-jargoning money' guide aims to simplify language used for money matters. The new Retirement Commission (Sorted) guide suggests use of 'debt' instead of 'credit' & 'end date' instead of 'maturity'.
CAT BOND A FIRST FOR NZ
EQC issued a $225 million catastrophe bond in the first such cat bond transaction originated out of New Zealand. This is just a first test to assess appetite, and it was successful. With that, it means that EQC has secured a record level of reinsurance for homeowners of just under $8.2 bln, up from $7.4 bln last year. Reinsurance only kicks in if the EQC scheme needs more than $2 bln to pay claims. Before reinsurance kicks in, any EQCover claims are funded from the Natural Disaster Fund and the Crown Guarantee, which EQC can access once the NDF has been exhausted. The cat bond market opens up resilience because traditional reinsurance has to be renewed each year, while catastrophe bond agreements are typically for three to five years.
A NEW GOVT SPENDING CATEGORY
Meanwhile, the Government said it will fund the buyout of 700 flood risk homes. It is a precedent that will only grow and compete for taxes. Under the scheme, central government will help fund local councils to buy homes in high flood risk areas hit by cyclones and floods. The Insurance Industry likes the support. Combined, the two 2023 events (Auckland Anniversary Weekend floods and Cyclone Gabrielle) have already resulted in more than 100,000 insurance claims with an estimated value to date of over $2.8 bln.
KATE JORGENSEN JOINS KIWIBANK BOARD
Kiwibank says Kate Jorgensen has joined its board as an independent director. Jorgensen also serves on the boards of Chorus and Suncorp NZ, and has held senior positions as CFO of Vodafone NZ, KiwiRail, and Fletcher Building's infrastructure division. She's also an impact coach with the Springboard Trust and was a member of the Sustainable Business Council Advisory Board. Jorgensen's a Chartered Accountant of Australia and New Zealand, and a Chartered Member of the Institute of Directors.
THE WINTER WEATHER OUTLOOK
NIWA says winter is unlikely to be colder than average, but will probably be colder than recent winters which were record-warm. We should expect heavy rainfall, snow, and strong winds through June. Then higher than normal air pressure is forecast to develop in the Tasman Sea during July and/or August, leading to periods of below normal rainfall, particularly in the north and east of both islands.
MILLION DOLLAR FRAUD CHARGE
A former charitable trust employee, Iesha Warren, who is alleged to have stolen more than $1 mln of funds intended for social support services in Porirua, is facing Serious Fraud Office charges. She has pleaded not guilty. The SFO allegation is that while she had access to the Te Roopu Awhina Ki Porirua Trust, she directed $1.17 mln into bank accounts she controlled by creating false supplier invoices or making payments directly from the trust account.
CONDUCT & CULTURE REVIEW TURNS UP 'ERRORS'
The FMA has filed High Court proceedings against Medical Assurance Society (MAS) and its subsidiaries for fair dealing breaches under section 22 of the Financial Markets Conduct Act 2013 (FMC Act). MAS self-reported these issues when it became aware of them. Between 2014 and 2022, they failed to apply the correct inflation adjustments on its customer policies, failed to apply multi-policy discounts and no claims bonuses, and underpaid life and disability claims to eligible clients, the MAS review found.
EV's COME UP AGAINST ABILITY TO PAY RESISTANCE
There were 9568 new cars sold (registered) in May, the lowest for a May in three years and down -10% from the same month last year. But there were 9589 used imports registered, almost a 40% gain in a year, an unusual surge because most of 2022 and 2023 so far these used import sales levels have been sagging badly. The growth in new electric and hybrid car sales didn't rise, probably because the subsidy support was scaled back. At the same time demand for utes and other commercial vehicles rose. The clear-car penalty isn't hurting sales yet. EV's are suffering from sticker shock/affordability.
HIGH DEMAND FOR NZGBs. LOWER YIELDS
There was another Government bond tender today, again three maturities for $400 mln on offer. Eighty nine bids were made with $1.164 blon offered. Yields fell for all tranches from the equivalent tenders for these maturities. An unusual feature is that only one offer was accepted for the $50 mln May 2051 tranche, and at 4.39%. A week ago this maturity went for 4.51%.
TAKE YOUR PICK
In a bit of a surprise, the private Caixin factory PMI actually expanded in May, in contract to the official version which said the sector contracted further. No analysts picked the Caixin OPMI reversal. Certainly, the Beijing stats masters aren't gilding anything this month.
BIG, BIG UNEXPECTED CUT
The central bank of Sri Lanka caught markets off guard by cutting its key rates by -250 basis points earlier today (Thursday). It said inflation is falling much faster than expected and the price outlook turning more benign. They cut their two benchmark rates to 13% and 14% respectively.
DEBT DEAL COMPROMISE OK'D
In Washington DC, the House of Congress has approved the Biden-McCarthy debt deal compromise. It is unlikely to fail in a Senate vote soon. The Biden Budget is largely unaffected in the end. All eyes will now turn to the bond markets as the US Treasury races to raise the necessary funds to avoid default. They will come at a higher cost than it these theatrics hadn't played out.
SWAP RATES UNCHANGED
Wholesale swap rates are likely little-changed 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 down -1 bp at 5.68%. The Australian 10 year bond yield is now at 3.62% and down -1 bp from this time yesterday. The China 10 year bond rate is down -2 bps at 2.72%. And the NZ Government 10 year bond rate is at 4.32% and down -1 bp, and that is still higher than the earlier RBNZ fix which by +1 bp to 4.28%. The UST 10 year yield is now at 3.65% and another -3 bps lower from this time yesterday.
EQUITIES STOP FALLING
Wall Street closed with the S&P500 down -0.6% in its Wednesday session. Tokyo has opened up +0.3% after yesterday's retreat. Hong Kong has opened with a +0.7% bounce after yesterday's large drop. Shanghai has opened up +0.4% also after their prior day fall. The ASX200 is up +0.4% in afternoon trade today, while the NZX50 is up +0.6% in late trade.
GOLD FIRM AGAIN
In early Asian trade, gold is at US$1965/oz and up +US$9 from this time yesterday. Earlier in New York it closed at US$1962/oz and London closed at US$1964/oz.
NZD UNCHANGED BUT LOW
The Kiwi dollar has held since this time yesterday at it low level of 60.1 USc. Against the Aussie we are also holding at 92.5 AUc. And against the euro we are little-changed at 56.3 euro cents. That means the TWI-5 is still at 69.1 unchanged.
BITCOIN SETTLES LOWER
The bitcoin price is softer again today, now at US$27,072 and down -2.2% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.5%. Binance says the Ontario Securities Exchange served them with an investigation order on May 10, 2023.
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56 Comments
"We're from the Govt & we're here to help" Another dead cat thrown on the table to distract the sheeple
Govt acts to protect NZers from harmful content | Beehive.govt.nz
Consultation opens on proposals to make online spaces safer | RNZ News
Media regulation in New Zealand is set to have one high-powered Government regulator proposed to oversee the content on news media and social media platforms.
So, no need to even fund the PIJF in future because every web comment will be regulated by the Govt. What could possibly go wrong ?
Might have to dust off my "Make Orwell Fiction Again" hat.
We already have processes in place for the most egregiously offensive content (see the steps the censor took following the Christchurch terrorist attack).
You might get some token buy in from the platforms, a few platitudes tossed out here and there, but realistically the likes of Twitter and Tik Tok aren't going to adjust their algorithms or moderation processes because the small fry NZ government is stomping its feet. They already barely enforce the rules that are in place, such as minimum user ages.
The most likely outcome is that local media outlets which more easily face legal penalties and ramifications (due to proximity and more limited legal budgets/means) will have to police their digital communities and spaces more aggressively as they are most at risk. So we see a weakening of media diversity and independence in NZ, yay.
Stopping access to harmful content online is like the biggest ever game of whack-a-mole. Short of going down the Chinese firewall route (please don't give the government any ideas) I can't see how this would make any positive difference.
I'm genuinely surprised about how optimistic many RE outlets are with the current data going through the news today - saying with high confidence that the bottom is months away because interest rates have peaked.
The global and domestic macro economic data is about as bad as I've seen in recent decades (thinking inverted yield curves, money supply contractions, overstimulated economies/jobs markets, inflation level, recession risk, government debt to GDP ratios (eg. USA), NZ housing debt to GDP ratio, our current account deficit) so to say that this is the bottom and that FHB's can buy with high confidence that they aren't buying into a falling market is a very risky view in my personal assessment - especially with the still very low level of mortgagee sales (this should be much higher if this really is the bottom).
Look they could be right, but equally I think they could be terribly wrong and really should caveat their positions with something along the lines of "but there are still significant risks/headwinds in the wider NZ and global economies and the bottom of the market could still be further away yet"
It is quite possible that we have just reached the end of the beginning. Recession comes next and prices fall further is just as probable as prices have bottomed in my opinion.
There are dozens of eager FHB sitting on the sidelines, DOZENS!
Jokes aside, border crossings still seem to be falling, and there is a fair amount of stirring out there. "Bottom is in" apparently. I guess we'll wait and see. -$200 per day is quite the negative wealth effect.
Intuitively I agree. But tell that to Granny Herald, the bubble cheerleaders, and the authors of the bank commentaries.
Tony Alexander seems to think he's an expert on human behavior and psychology and how this plays out in markets. Taleb warned about people like this. Even as a 'evidence-based commentator', he can't even attribute sample sizes to his research. For all we know, he's working off quite small sample sizes and extrapolating that into some kind of picture of reality. In the research industry, that's akin to fraud.
Tones the Comb interviews and bunch of starving and snarling Real Estate Agents and their coven all agree during the market lifting séance, that greenshoots are sprouting out of every crevice now.....
This is the line the Comb and REAs been talking for years (despite our current crash that is just 1/3 in) - otherwise these toerags wouldn't eat.
This an account from a Western expat colleague who's a recognized expert on China ecommerce:
While I was in China earlier this month the country seemed to be on “mute.” Once bustling shopping centers were nearly empty (case in point Taikoohui NJXL.) Restaurants and bars that used to be hotspots had only a few patrons.
I’ve heard there’s been some improvement since the May holidays, but Shanghai and Beijing seemed to be shadows of their former selves.
On top of that, there seems to be a distinct lack of tourists and foreigners in China’s larger cities.
When I originally returned to China on a permanent basis ten years ago, the thriving expat community helped me settle in and became like a second family.
On my last trip, I was sad to see that the majority of folks from that community had left the country over the past few years (and honestly, I can’t blame them.)
While it was great to see my team again and FINALLY be back in the country I’ve dedicated over half of my life to, the trip left me with a very strange feeling.
I know a full recovery will take time… but I’m hoping it comes sooner rather than later.
Great post/insight as always J.C. You're definitely a treasure round these parts.
Thank you for the compliment. I tend to find gems of insight here that widen my perspective about many things. Also, good to note that interest dot co has occasional posts from Mark Tanner of China Skinny, a Kiwi who knows his stuff about Chinese business. The comment I posted is from someone who is indirectly a competitor of Mark.
And to be honest, I wonder about what value we get from the likes of the govt depts, China Council, etc about China.
Although I don’t agree with everything they write, I agree with much of what Macrobusiness publish, and how they call bullshit on so many things deserving of being called out on. Not much of that on this side of the ditch.
Here’s a great piece on the supply vs demand elasticity issue:
https://www.macrobusiness.com.au/2023/05/mb-reader-schools-rba-egghead-…
Meanwhile the new Health Authority is planning massive firings as they refuse to still attract and protect our healthcare system by actually lifting the salaries. Our Senior daughter Nurse had a $2000 increase in the last round. As the Senior Nurses look to contract work in Australia who is going to fill their roles and experience and knowledge.
That's the last thing you want to hear alongside the news story that provisionally 100k net migrants will be entering NZ. The last time we checked there weren't even 80 nurses who had come through the channels from overseas after 4 months of the green list opening up.
I stand corrected, the number was 59 nurses arriving in NZ in the 7 months to March 2023. Link
Labour and National can tinker with migration settings all that they want but evidently migration is adding more to demand for healthcare and other critical workers than supply.
“While the OCR is at a relatively high level of 5.5 per cent following a total increase of 525 basis points over the last 20 months, this expected ceiling for interest rates reinforces our view that a possible floor in prices is approaching,” Goodall said.
Latest data suggests ‘possible floor approaching’ in plummeting house prices (newstalkzb.co.nz)
I take it he assumes that there is no recession inbound. Even though yield curves and money supply contraction and an over stimulated jobs market indicate that a recession is a high possibility/probability?
Is his argument that recessions are good for preventing asset prices from falling?
Doesn't make any sense from my perspective. Last time I checked history, deflationary recessions (where interest rates end up falling) are very bad for asset prices - they don't provide a floor for prices, they are a potential cliff for prices to fall further from. Of course this time could be different - I just wouldn't gamble a 10-20% deposit on it (yet).
I never thought I would see Mr Hickey as a spruiker;
https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audi…
Economic experts are predicting an increase in house prices if National and ACT take over in October.
Commentator Bernard Hickey says house prices could rise by 10-20 percent under a National-ACT Government after some key policy changes are implemented.
Bernard Hickey reckons both parties will likely make changes to interest deductibility, bright-line property rules and introduce a tighter fiscal policy around spending and borrowing.
"You'd likely see in the weeks after an election win, very busy auction houses, very busy open homes."
"The new Retirement Commission (Sorted) guide suggests use of 'debt' instead of 'credit' & 'end date' instead of 'maturity'."
Good suggestions.
Let's keep going. Rob suggests use of 'printer' instead of 'central bank', 'Ponzi' instead of 'market', and 'catch 22' instead of 'election'.
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