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 advised so far today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Kiwibank raised some of its term deposit rates today, from 3 to 9 months. Their new rate for each term 6 through 9 months is now 5.65%.
DAIRY PRICES LOWER
Dairy prices fell -0.9% at the auction earlier today. That was after WMP prices retreated another -3.0%, and cheddar cheese prices rose +7.4%. (But the NZD fell even more, so in local currency, prices actually rose +1.7% this time.) Also, see this.
FARMGATE MILK PRICE CUT
Westpac, an outlier, has brought its generous $10/kgMS payout forecast for 2023/24 back in line with others, changing it to $8.90/kgMS in a substantial reversal. Market recovery, especially in China, isn't working out like they had forecast. See all forecasts here.
MORE 'GREEN' FUNDING
Mercury Energy has launched an offer of up to $150 mln of 5 year unsecured, unsubordinated, fixed rate "green bonds". They will pay the five year swap rate (about 4.50%) plus a margin of at least 1.05% but no less than 5.4% pa. Given that banks offer 5.00% for five year deposits (and get very few takers, because savers almost always go very short), it is curious that they will no doubt get strong support. All bonds have price risk, unless you hold them to maturity. (Fund managers push their clients into these. Brokerage might be the reason.)
ONE SHAREHOLDER FOR ONE NZ
Infratil said it will buy Brookfield’s 49.95% stake in One New Zealand (Vodafone) for $1.8 bln, increasing Infratil’s ownership from 49.95% to 99.9%. Infratil will fund the buyout with a $850 mln equity raising, and the rest from cash reserves and debt facilities.
OFFSHORE OIL REGION ASSESSED FOR OFF SHORE WIND FARMS
In case you wanted to know, the NZSF/CIP wind farm project has installing monitoring equipment in Taranaki a part of their feasibility analysis.
CENSUS UPDATE
Census Day was March 7, 2023. But a form will still be accepted up to and including June 30. So far 4,538,397 people had returned an Individual Form in the 2023 Census.
OPENING UP BY CLAMPING DOWN
In the name of 'modernising', Australia is moving to clamp down and more tightly regulate its payments system. They are looking to make sure the RBA can regulate new and emerging payments systems, such as digital wallet providers, and introduce a new powers that would allow any new payments services or platforms "that present risks of national significance" to be subject to additional oversight by regulators. This will include Buy Now Pay Later systems and crypto platforms.
HO HUM RESULT
The Aussies released their Q1-2023 GDP data today and it wasn't too special. They expanded +0.2% in Q1-2023 from Q4-2022, below market forecasts of a +0.3% increase, and after an upwardly revised +0.6% rise in Q4-2022. This was the sixth consecutive period of economic growth but the softest pace in the sequence, as household consumption rose the least in six quarters due to persistent cost pressures and elevated interest rates. As the RBA feared, productivity slumped. The household savings ratio fell to 3.7%, the lowest since Q2-2008, from the prior 4.5%. Year-on-year, Q4-2023 was +2.3% higher. New Zealand's GDP result which will be released next week on June 15, 2023 and the Massey GDP Live tracking suggests we might deliver better results.
SHARP CHINA TRADE REVERSAL
China's exports grew +8.5% in April from a year ago. But they slumped -7.5% in May on the same basis. Imports fell -4.5%. As a result China's trade surplus shrank sharply.
SWAP RATES STABLE
Wholesale swap rates are likely firmer today but only by a small amount. 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 unchanged at 5.69% and only +19 bps above the 5.50% OCR. The Australian 10 year bond yield is now at 3.83% and up +8 bps from yesterday. The China 10 year bond rate is little-changed at 2.72%. And the NZ Government 10 year bond rate is at 4.47% and down -2 bps, but that is still higher than the earlier RBNZ fix which is down just -1 bps to 4.43%. The UST 10 year yield is now at 3.66% and down -4 bps from this time yesterday.
EQUITIES VERY MIXED
Wall Street closed with the S&P500 up +0.2% in its Tuesday session. Tokyo has opened is having second thoughts about its recent fast run-up, and is back down -1.4% in morning trade today. Hong Kong has had another strong start, up +1.2%. Shanghai has opened up a minor +0.2% after yesterday's dump. The ASX200 is little-changed in afternoon trade today after yesterday's fall after the RBA rate hike. The NZX50 is down -0.9% in late trade today, probably a catchup because we were closed when the RBA decision came through.
GOLD STILL ON HOLD
In early Asian trade, gold is at US$1964/oz and up a marginal +US$1 from yesterday. Earlier in New York it closed at US$1964/oz and London closed at US$1957/oz.
NZD SOFTER
The Kiwi dollar is unchanged from this time yesterday at 60.8 USc although it has been volatile. Against the Aussie we have sunk sharply after the RBA rate hike to 91.1 AUc and down -¾c. Against the euro we are little-changed at 56.8 euro cents. That means the TWI-5 is now at 69.1 and slightly softer.
BITCOIN BOUNCES BACK
The bitcoin price has risen today despite US SEC action against Binance, and Coinbase. It is now at US$26,947 and up +4.9% from where it was this time yesterday. Volatility has been high at +/- 3.9%.
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42 Comments
Here's Buffett on interest rates - noting that we are creating a very heavy gravity for asset prices currently with huge increases in funds rates.
https://th.bing.com/th/id/OIP.Ub7nupbE5wfEB92n4qsimwEsCN?pid=ImgDet&rs=1
Yeah maybe I am fixated because people told me at the start of the year that my bearishness on shares was rubbish. And in March after a mini boom someone reminded me of that. Well, annualised the growth is less than 5%, so less than term deposits.
Yes it’s been going gangbusters in the USA off the back of a minority of shares.
Aus isn’t much better than the NZX50.
Another bad day for the NZX50. It’s now only about 1.6% up for the year to date
Had a good run for the decade up to Covid. Nikkei 225 up 24.5% YTD. You wouldn't have read why in Granny Herald though.
People need to think outside the box. Buy low, sell high. Not buy high and hope it goes even higher.
"The NASDAQ to Russell 2000 ratio is the most stretched we've seen since the Dot Com bubble"
https://pbs.twimg.com/media/Fxnaf8LXgAM4CVI?format=jpg&name=medium
HouseMouse makes the mistake of looking at annual returns. Play the long game. You are in this for 20, 30, 40 years. I’m currently running 5% net after 15 years of solid investment. The last 2 have been crap. But when I adjust for inflation I’m ahead by 3%. Enough to live on without sacrificing the principal
Good for you, my numbers are very similar, im planning on 3.3% withdrawal rate rather than the old 4% rule and 3.3 is v close to covering current expenses without, as you say, reducing principal...pretty sure you can't sell 3.3% of a house every year without the house dissappearing...this is investing in the real world rather than residential property and being smart by bypassing capital gains tax...what a waste when real investment has the potential to improve our collective well being in a way property can not.
I am not just looking at annual returns.
I had shares from 2013 to 2020. I sold in late 2020 and did very well.
I am monitoring annual returns because I remain bearish and am looking for trends. I will buy shares again, but I suspect it won’t be until 2024 or 2025. But again, I will monitor and be flexible in approach.
BTW the NZX50 is still significantly below its peak which is close to when I sold.
House Mouse, depends what stocks you own. We took $100K off TD in Jan and spread it across seven NZX companies. Up 6% overall (plus dividends with imputation credits) since Jan. All seven stocks are up, stand-outs are IFT up 13% and MCY up 10%. We have been direct investing in the NZX and ASX for more than 20 years, so reasonably comfortable picking stocks to hold long term. TDs just seem to have no upside. Not investment advice.
One proxy measure is that Auckland makes up 38% of NZ economy but contributing to about 19% of total exports. Same goes for Wellington city (8% GDP and 4% exports).
I am sure exports attributed to Auckland at least in part include cutting meat and drying milk sourced from the regions.
So it's our 2 largest urban economies that have to be put under the microscope for piggybacking off the regions on export earnings.
Aussies released their Q1-2023 GDP data today and it wasn't too special. They expanded +0.2% in Q1-2023 from Q4-2022, below market forecasts of a +0.3% increase...
Labour productivity is slumping across many countries. Employers are still churning employees and unable to get a grip on working-from-home practices etc.
Unless companies can step up management it will probably take a recession to get people back into offices before we see some rise again.
The numbers look a lot more worrisome when adjusting for record inflows of migrants. GDP per capita in Aussie has remained stagnant over the last 3 quarters, clocking an aggregate of only 0.45% in the last 5 quarters.
Importing workers on its way to poverty I see. Sound familiar?
Aussie GDP per capita comes in negative for Q1 and GDP per hour worked experiences its largest fall on record.
https://twitter.com/IFM_Economist/status/1666265296804679681
Population growth outpaced economic growth, so GDP per capita - which measures the amount of economic activity per person - fell by 0.2 per cent in the March quarter.
https://www.abc.net.au/news/2023-06-07/gdp-march-quarter-0-2-per-cent-australia/102444792
Half-way to that GDP per capita recession.
SEC Chair Gary Gensler on Squawk Box:
“We don’t need more digital currency. We already have digital currency, it’s called the US Dollar, it’s called the Euro, it’s called the Yen. They’re all digital right now.”
Public officials still talking to American people like they can't think for themselves. Similar to how we are treated. Thankfully Princess Xindy is not around to patronize and condescend us anymore.
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