What happened Wednesday

Economy / news

A review of things you need to know before you sign off on Wednesday; no-one has followed ASB up yet, Barfoots flat, CoreLogic says its down, dairy prices lower, Westpac keeps Govt banking, swaps up, NZD up, & more

5th Jul 23, 3:59pm by David Chaston

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 again today. No other bank has followed ASB up yet.

TERM DEPOSIT/SAVINGS RATE CHANGES
NBS raised its 6, 9, and 12 month TD rates today.

LOW & FLAT IN JUNE
Dominant Auckland realtor Barfoot & Thompson reported flat sales volumes, and prices that edged up in June. They said the current housing market cycle 'probably one of the hardest Aucklanders have been through in recent years'.

DROPPING LIKE STONES
Meanwhile CoreLogic reported that nationally, average house values were down -11% year-on-year in June, and in Auckland that fell almost -$40,000 in the month.

LOWER DAIRY PRICES
Dairy prices fell -3.3% in the overnight auction from the prior one two weeks ago, taking the year-on-year fall to -26%. It seems rising milk production worldwide (and that includes in New Zealand) is easing buyer concerns that future prices might be higher. Volumes sold came in under the "minimums" offered

LOWER COMMODITY PRICES
Lower dairy prices will add to a sinking feeling across many of our rural exports. The ANZ World Commodity Price Index fell -2.3% in June from May to be almost -15% lower in a year. Beef and lamb prices fell sharply in June, and forestry prices also retreated, while apple prices improved.

SUCCESSFUL MISSION
The recent top-level trade visit to China looks like it has helped our trade with the Middle Kingdom, shoring it up and distinguishing us from our Western allies. I recommend this independent review of the mission. (Interest.co.nz received no support or subsidy for our coverage, other than being on the PMs airplane.)

DEEPER DEFICIT
Weakening corporate profits are now flowing through to lower tax revenue for the Government, adding $2 billion to the deficit and taking it to -$6.5 bln in the eleven months to May.

VALIDUS STOPPED
The Financial Markets Authority has made a permanent stop order applying to Validus International LLC, a Singaporean company. The Order prohibits Validus and Validus-FZCO and associated persons from taking steps that will result in repeat unlawful behaviour that may cause material financial harm. The stop order was actually issued in February but was not made public because Validus appealed it in the NZ courts. That challenge failed today.

NEW GOVT BANKING CONTRACTS UNVEILED
The Ministry of Business, Innovation and Employment (MBIE) says Westpac New Zealand will continue providing the Government's core Crown transactional banking services for another four years, until the end of June 2027. MBIE also confirmed ANZ NZ and Citibank as government bank service providers for the next four years, and says it expects to conclude contract negotiations over a banking services agreement with ASB soon. Other services the banks will provide include foreign exchange services, payment services and card services.

SWAPS RISE
Wholesale swap rates are probably up today again. 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 another -1 bp to 5.68% and now +18 bps above the 5.50% OCR. The Australian 10 year bond yield is down -2 bps from this time yesterday at 4.00% after the RBA decision. The China 10 year bond rate is unchanged at 2.70%. And the NZ Government 10 year bond rate is now up +7 bps at 4.72%, and still higher than the earlier RBNZ fix which also rose +7 bps to 4.67%. The UST 10 year yield is now at 3.85% and unchanged from this time yesterday.

EQUITIES LOWER
Wall Street was closed today for a public holiday. Tokyo has opened its Wednesday trade down another -0.4%. Hong Kong is down a sharpish -1.1% in early trade, and Shanghai is down -0.4%. The ASX200 is down -0.3% in early afternoon trade. The NZX50 is down -0.1% in late trade.

GOLD LITTLE-CHANGED
In early Asian trade, gold is little-changed at US$1923/oz and up +US$1 from yesterday. There has been no trading in New York and earlier in London it closed at US$1928/oz.

NZD FIRMER
The Kiwi dollar is up +½c from yesterday, now at 62 USc. Against the Aussie we are also up +½c at 92.7 AUc. Against the euro we are +½c firmer at 57 euro cents. That means the TWI-5 is also up about +50 bps, now at 70.5 and a two month high.

BITCOIN SLIPS
The bitcoin price has slipped marginally today and is now at US$30,859 US$31,257 which is down -1.3% from where we were this time yesterday. Volatility has remained modest at just on +/- 1.0%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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53 Comments

by Audaxes | 5th Jul 23, 4:08pm 1688530107

Launch of 14 April 2033 Nominal Bond Syndicated Tap Announced

The Treasury announces the syndicated tap of the 3.50% coupon 14 April 2033 nominal bond. Given the timing of the launch, the Treasury also announces the cancellation of the tender scheduled for 6 July 2023.

The Treasury expects to issue at least NZ$3.0 billion of the 14 April 2033 nominal bond and the transaction will be capped at NZ$5.0 billion. Initial price guidance is 4 to 7 basis points over the 15 May 2032 nominal bond. 

The issue will be priced on Thursday 6 July 2023 NZT, and further issuance of the bond will not occur prior to October 2023.

ANZ Bank New Zealand Limited; Commonwealth Bank of Australia; UBS AG, Australia Branch; and Westpac Banking Corporation, New Zealand are Joint-Lead Managers for the issue.

by bobestm | 5th Jul 23, 4:18pm 1688530700

The yield of 3.5% doesn't seem like much .. any insights?

by Audaxes | 5th Jul 23, 4:26pm 1688531185

The Treasury announces the syndicated tap of the 3.50% coupon 14 April 2033 nominal bond.

by bobestm | 5th Jul 23, 4:48pm 1688532503

Thanks for highlighting tap issue.

by HouseMouse | 5th Jul 23, 4:34pm 1688531641

Wow, 1NZD at 89.55 JPY

by Audaxes | 5th Jul 23, 4:42pm 1688532155

Japan's market is a perfect example of depression economics, or how low rates are NOT stimulus. They are and have always been about tight money/deflation. That's why rates/mkts keep rejecting rate hikes & "inflation" CBs claim to fear. https://buff.ly/46fOvL3 Link

by J.C. | 5th Jul 23, 4:57pm 1688533066

Wow, 1NZD at 89.55 JPY

Yep. Very good for those Japanese trading companies with energy resources and subsidiaries dotted around the world. Have a corporate crypto account with a Japanese exchange (Bitbank) and the only fiat currency is JPY.

by printer8 | 5th Jul 23, 5:15pm 1688534149

Umm . . . HouseMouse

You still thinking this or was it just another of your wild baseless guesses:

by HouseMouse | 20th Jan 23, 5:39pm

Sub 70 yen to the NZD by year’s end me thinks

At least you are consistent (as in wrong).

Cheers :)

by J.C. | 5th Jul 23, 5:20pm 1688534426

You still thinking this or was it just another of your wild baseless guesses:

Be careful P8. Things can get very ugly with the Kiwi peso relatively to JPY when SHTF.

And I'm guessing you don't understand why.

by IT GUY | 6th Jul 23, 12:30am 1688560204

I made 4 big figures short EURJPY one night Nights that are memorable like the night nzd joy went 6ones south

by HouseMouse | 5th Jul 23, 5:37pm 1688535470

I hope that makes you feel better. After all you are probably still hurting at being exposed as being a blatant liar.

pretty sad guy who keeps tabs on what everyone says and does . God complex?

by printer8 | 5th Jul 23, 6:43pm 1688539390

HouseMouse

Don’t get triggered and irrational.

At the time I noted you were calling 70 yen to dollar whereas the weekly bank reports I read were indicating 85.

You are continually slagging-off teams of bank economists, RBNZ, Treasury and most economists as fools and inept, and put yourself as the all knowing and what are really unsubstantiated guesses.

So, it’s quite simple; it’s simply about accountability of you and your ego . . . and despite your often stated comment that you get things right, you don’t.

by Pa1nter | 5th Jul 23, 7:24pm 1688541887

Can we just agree that you're both Muppets, for slightly different reasons

by HouseMouse | 5th Jul 23, 8:21pm 1688545294

Who is it who always start this crap off Painter?

Hint - not me

I guess I should just ignore it

by Pa1nter | 5th Jul 23, 8:41pm 1688546481

You make endless predictions of dubious efficacy and crow about your wins.

He's a Muppet for caring enough to police your misses.

by J.C. | 5th Jul 23, 7:27pm 1688542045

You are continually slagging-off teams of bank economists, RBNZ, Treasury and most economists as fools and inept, and put yourself as the all knowing and what are really unsubstantiated guesses.

I don't think it's wrong to suggest that experts related to Forex make 'unsubstantiated guesses' as much of their work is based on assumptions. You know as well as me that if their foresight were infallible, they wouldn't even need to hedge their bets. And remember that JPY is a strange beast for most people to understand.

by HouseMouse | 5th Jul 23, 8:20pm 1688545206

Who is to say it won’t be circa 70 by year’s end?

You had a go at me for being bearish on shares in early 2023. Actually, I have been right - NZX50 and NZX200 both mediocre performers in first half of the year. Lol

And your love for bank economists is suspicious. I reckon you were a regional bank manager for ANZ or something.

by J.C. | 5th Jul 23, 9:11pm 1688548302

Who is to say it won’t be circa 70 by year’s end?

Indeed. Would never count that out.

I used to play the Nikkei index + Sumitomo Metal Mining hedged 50:50 with JPY. Strong inverse correlation between JPY and Nikkei 225.

by Flying high | 5th Jul 23, 9:37pm 1688549840

I am sure you dont mean the ASX200 do you lol

by J.C. | 5th Jul 23, 10:30pm 1688553005

No. Nikkei 225. I had a trading account there. Sumitomo Metal was difficult as you could only buy in minimum of 1000 shares. Fantastic company.

by Yvil | 5th Jul 23, 4:40pm 1688532014

Congrats Interest for being on the PM's plane to China !

Also $2 billion more deficit for the government is really bad news.

(Lastly pretty cool being able to read Interest from 38,000 feet)

by Retired-Poppy | 5th Jul 23, 6:09pm 1688537360

🤣

by Uninterested | 5th Jul 23, 7:09pm 1688540960

It is also great that the plane didn't break down.

by Yvil | 5th Jul 23, 7:31pm 1688542274

I haven't landed yet 😳

by Sluggy | 6th Jul 23, 5:59am 1688579946

I've been reading interest on my starlink from Suwarrow (northern cooks). On my yacht...

by Justa comment | 5th Jul 23, 4:49pm 1688532589

No other bank has followed ASB up yet. Depends on 20% deposit or not. In the 'standard' over 80% LVR, ASB is lower in many terms than ANZ, KB, and WPC. ANZ had moved in advance a few weeks back. KBs 'standard' rates are the highest?, looks like they arent keen on low deposit loans right now.

by J.C. | 5th Jul 23, 4:53pm 1688532824

MBIE also confirmed ANZ NZ and Citibank as government bank service providers for the next four years

Citibank? WTF? Why?

by nguturoa | 5th Jul 23, 6:23pm 1688538202

Part of 5 eyes. Got to pay the big boss. CITI got a big bailout back in 2008 crisis from the big boss. It has to be earned from some where.

Nothing comes free. There is a fee to be paid for being part of the old boys club.

by Advisor | 5th Jul 23, 6:27pm 1688538454

I want to say it is driven by a well-intentioned plan to introduce more competition into the NZ banking landscape.

Why is a gradually shift over multiple years to Kiwibank never the solution? Even MBIE bureaucrats don't think retaining some of the basic bank fees in NZ is a good idea.

by Uninterested | 5th Jul 23, 7:11pm 1688541072

Happens often with dumping claims being denied. Yawn.

by J.C. | 5th Jul 23, 4:59pm 1688533175

Commsec reports Aussie luxury vehicle sales hit record highs in June 2023.

New vehicle sales for June 2023 is the biggest number of monthly sales since June 2018. Sales increased by 25% on a year ago and 8.2% in the first half of 2023.

Party on.

https://twitter.com/CommSec/status/1676426978172481536

by Rob Reid | 5th Jul 23, 9:37pm 1688549844

Must be awful for them to have to force their way through the Food Bank queues snaking past the showroom entrances.

by Audaxes | 5th Jul 23, 5:41pm 1688535683

The recent top-level trade visit to China looks like it has helped our trade with the Middle Kingdom, shoring it up and distinguishing us from our Western allies. Indeed:

Beijing cancels visit by EU's Borrell next week. No explanation given. This follows European Council conclusions on China (below) - EU harmonising with US on Indo-Pacific, dashing Beijing’s hopes of Europeans maintaining independent foreign policy. https://consilium.europa.eu/en/press/press-releases/2023/06/30/european-council-conclusions-on-china-30-june-2023/? Link

by Hummy | 5th Jul 23, 5:51pm 1688536301

EV going to pay 77$ per 1000km from next april.

by Officebound | 5th Jul 23, 6:21pm 1688538106

If they don't kick the can down the road again (I think they should) am very interested to see what charging system they create for PHEV's.

by realterms | 5th Jul 23, 6:48pm 1688539693

The current extension has always been scheduled to end in April 2024. Today's "news" is just that it still is?

EVs in NZ still only about 2% of fleet. Personally I predict that they will kick the can and extend it again, but equally running both the EV and PHEV will still be cheap even when RUCs do (eventually) come for them.

by JimboJones | 5th Jul 23, 6:52pm 1688539951

But you would pay both petrol excise and RUCs on your PHEV. That won’t work.

by realterms | 5th Jul 23, 8:05pm 1688544339

We run our phev about 80% electric so not a big deal for us personally. But yes they do need to fix that somehow (and I don't see an obvious answer tbh).

by sit23 | 6th Jul 23, 12:34am 1688560499

I thought that the whole point of PHEV was that they only generated electricity from the petrol they burned, so they paid their road tax on the petrol they bought. Please tell me how the government have changed this.

by realterms | 6th Jul 23, 12:42pm 1688604174

PHEV = plug in hybrid, can charge from the wall. You're thinking of a traditional hybrid, which indeed should just pay the petrol taxes.

Save the snark re: govt for when you know what you're talking about, maybe?

by JimboJones | 5th Jul 23, 6:53pm 1688539997

Good point! The only option would be RUCs with a fuel excise duty refund wouldn’t it? Although you would somehow also need to prove you used that fuel in your PHEV not elsewhere. Any other thoughts? Move everyone to RUCs? I think you are right they will kick it.

by realterms | 5th Jul 23, 8:09pm 1688544598

Everyone to RUCs is the only tidy solution but completely impractical. So it'll be some kind of fudge. I'd predict a lower RUC rate for phevs based on some kind of fleet average usage, which will be imperfect but perhaps the least bad option.

by JimboJones | 5th Jul 23, 8:47pm 1688546864

It would suck if a PHEV with a 30km electric range pays the same RUC as one with a 100km range though. And would the rate be lower than a fully electric car to offset your fuel tax? Meaning a PHEV is cheaper than a full electric if you only drive short distances (buy an additional petrol engine just to save tax!).

by nguturoa | 5th Jul 23, 6:25pm 1688538337

Common Tesla where are your consultants?? . Get them into the Beehive.

by Pragmatist | 5th Jul 23, 7:18pm 1688541491

This isn't news, it's very much 'olds'.

by Flying high | 5th Jul 23, 9:18pm 1688548711

Its less viable for the EVz owner when theyre paying road tax like the rest of us.

by Sluggy | 6th Jul 23, 6:04am 1688580294

Start charging now. This is just more trickle up virtue signaling BS. If you can pay 80k for a tesla, why should I in my gas guzzling monster subsidise your road usage ?

by Squishy | 5th Jul 23, 7:36pm 1688542565

Meanwhile CoreLogic reported that nationally, average house values were down -11% year-on-year in June...

Would never have happened while Jacinda Ardern was PM, she'd have found some way to boost our #1 "industry".

by sammnz | 5th Jul 23, 8:36pm 1688546166

cap

by Flying high | 5th Jul 23, 9:17pm 1688548624

by Rob Reid | 5th Jul 23, 9:24pm 1688549092

Dairy prices down again.

Perhaps we should become a banana economy instead?

by Flying high | 5th Jul 23, 9:40pm 1688550016

The land of milk and money is going down the plughole.

by IT GUY | 6th Jul 23, 12:41am 1688560881

We are more leveraged compared to others , our pain may be higher then others