What happened Tuesday

Economy / news

A review of things you need to know before you sign off on Tuesday; a few retail rate rises, housing values decline further, life insurance passes stress tests, swaps up, NZD unchanged, & more

8th Aug 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/LOAN RATE CHANGES
The Co-operative Bank raised its competitive 6 month fixed rate by +10 bps to 6.99%

TERM DEPOSIT/SAVINGS RATE CHANGES
Kiwibank raised some term deposit rates, taking its 6 and 9 month rates to 5.85%, and their two year rate to 5.70%. They did not change their 5.90% one year rate.

LOWER & YO-YOING
Average housing values continued to decline in most places in July, QV said. And they expect housing values to yo-yo while sales numbers remain low.

LIFE INSURANCE CAN WITHSTAND A HARD SHOCK
The five life insurers participating in the first RBNZ stress test of their sector were all able to remain solvent under these tests. the RBNZ describes these results as reassuring.

SEEING SUBSTANTIAL OPPORTUNITY
Local businesses will get access to greater pools of capital to accelerate investment in solar, wind, green hydrogen and battery storage. This is from a new $2 bln Blackrock fund. (Blackrock themselves aren't putting money in.) Given the money is yet to be raised, it is an announcement that has garnered surprising worldwide attention.

PAYPAL LAUNCHING US DOLLAR STABLECOIN
PayPal says it's launching a US dollar-denominated stablecoin, PayPal USD. Eligible US PayPal customers who buy PayPal USD will be able to transfer PayPal USD between PayPal and compatible external wallets, send person-to-person payments, fund purchases and convert any of PayPal's supported cryptocurrencies to and from PayPal USD, PayPal says.

STILL DEEPLY PESSIMISTIC
In Australia, the Westpac-Melbourne Institute consumer sentiment survey index remained in deeply pessimistic territory in August. They found the RBA’s rate hike pause again did little to boost confidence. Inflation still dominating consumer sentiment, driven by recent fuel and energy price rises. Housing sentiment is mixed: deeply negative on purchase, but bullish on prices. (Surging migration, a tight rental market and relatively low supply of homes have combined to send prices flying higher across the country.)

NOT SO DIRE
Meanwhile the NAB business confidence survey for July showed resilience around Australian business conditions and a small rise in business confidence .Both measures are above long-run levels. This survey noted a pickup in retailer confidence, which is surprising given the consumer sentiment levels.

CHINA'S EXPORT PROWESS WANES
China Customs said their exports were down -14.5% from July a year ago, a deeper dip that the -12.4% from a year ago in June. Exports to the US were down more than -18% from a year ago. Exports to New Zealand were down more than -16% (which is a bit surprising given the amount of Tesla's we import from the Shanghai factory). China's imports from us were down -13%. Their imports from Australia were up +9.5%.

SWAPS UP
Wholesale swap rates are probably firmer across all tenors of 2yrs and longer. 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 again at 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is up +2 bps from yesterday at 4.08%. The China 10 year bond rate is little-changed at 2.67%. And the NZ Government 10 year bond rate is up +4 bps from this time yesterday at 4.85%, and still very much higher than the earlier RBNZ fix which was up +2 bps bps at 4.76%. The UST 10 year yield is at 4.06% and unchanged from yesterday - but after reaching 4.12% earlier in the session.

EQUITIES VERY MIXED
Buoyed by Buffett (Berkshire Hathaway's record result), the S&P500 ended its Monday session up +0.9%. Tokyo has opened its Tuesday session up +0.3%. Hong Kong is down -1.2% however. Shanghai is down -0.2% having had its bigger drop yesterday. The ASX200 is up +0.2% in afternoon trade, but the NZX50 is down -0.4% in late trade.

GOLD LOWER
In early Asian trade, gold is at US$1934/oz and down -US$9 from yesterday. It closed earlier in New York at US$1936, and earlier still in London at US$1932/oz.

NZD LITTLE-CHANGED AGAIN
The Kiwi dollar is -¼c softer at just on 60.8 USc. Against the Aussie we are firmish at 92.9 AUc. Against the euro we also holding at 55.4 euro cents. That means the TWI-5 is at 69.5 and little-changed.

BITCOIN STILL ESSENTIALLY ON HOLD
The bitcoin price is very little changed from yesterday, now at US$29,165 and up a mere +US$40 or +0.1%. Volatility has also remained low at just under +/- 1%.

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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45 Comments

by Retail shop | 8th Aug 23, 4:03pm 1691467411

Kiwi dollar at .668 would not be softer.

by Averageman | 8th Aug 23, 4:20pm 1691468415

Mr Orr needs to step up on the 16th and do his job or it could have a 5 at the front of it. Great for inflation.

by Palmtree08 | 8th Aug 23, 5:00pm 1691470826

Yeah! He needs to put the OCR up immediately and threaten President Xi about not purchasing enough milk powder.

by David Chaston | 8th Aug 23, 4:29pm 1691468993

gulp! s/b 60.8 USc. Sorry

by Zack Brando | 8th Aug 23, 4:38pm 1691469502

Was a generous rounding while it lasted :)

by Independent_Observer | 8th Aug 23, 4:14pm 1691468090

"The US government has spent an alarming $6.7 trillion over the last 12 months. This is up 14% since last year and just shy of the $7.6 trillion record during 2020. We are now spending just $900 billion less than a period when $4 trillion was handed out. The worst part? Over the last 12 months, the US deficit is at $1.4 trillion. This is up $1 TRILLION compared to last year. Simply put, this is unsustainable.

In the case that the US faces a recession or another banking crisis, the deficit will rise faster. Current base case assumptions showing $50 trillion of US debt by 2030 can easily be surpassed. We need a solution."

https://twitter.com/KobeissiLetter/status/1688343901193576448?s=20

by bloodymigrant | 8th Aug 23, 4:19pm 1691468348

This is just Government debit. If you add up public and private sector business debit then it is nearly $100 Trillion!

by Independent_Observer | 8th Aug 23, 4:20pm 1691468408

Just creating more of the problem (too much debt relative to productivity/incomes/GDP). Living beyond our means. It never works.

by Te Kooti | 8th Aug 23, 5:03pm 1691471038

https://www.usdebtclock.org/

The last 15 years we have collectively debased our currency's and sold future generations down the river. There should be trials for leaders that accumulated these eye-watering debts, the billions handed out to companies to pay for wages who ended up having record years. Probably the greatest wealth transfer since we privatised infrastructure in the 80's and at least there we got great music and movies.

by Independent_Observer | 8th Aug 23, 5:41pm 1691473274

We can make the rich richer and oppress the poor, but their will be consequences of this. i.e. what central bankers have orchestrated post GFC.

Financial, social, political are/will be the consequences.

We see this on a daily basis now and may get worse as we try to work our way to resolutions to the underlying problems (that central banks and governments have been trying to sweep under the carpet).

by Te Kooti | 8th Aug 23, 5:45pm 1691473503

What consequences? Show me a single example, many senior politicians are welcomed onto Boards with open arms as gratitude for jobs well done. We need a root and branch overhaul of what it means to be in public office and life after.

by Independent_Observer | 8th Aug 23, 5:50pm 1691473837

Watch the 6pm news tonight and you'll see the consequences.

Just because the lot at the top are doing well (which you appear to be referring to as the only thing that is happening within our society), it doesn't mean that there aren't consequence for these benefits for those few.

by bw | 8th Aug 23, 4:23pm 1691468609

Ratings agency Moody's downgraded the credit ratings of several U.S. banks on Monday and warned it was reviewing the status of some of the nation's biggest lenders.

by Audaxes | 8th Aug 23, 4:31pm 1691469109

Four months almost five months later, and the emergency borrowings remain. That's why the credit crunch has stuck around and threatens to get worse. Another leg down in the economy, another small uptick in "deposit migration"... https://buff.ly/3Ou4dKq Link

by Independent_Observer | 8th Aug 23, 4:19pm 1691468352

"The US is now spending 44% of GDP per year, the same levels as World War 2. In 2020, the US spent a record breaking 54% of GDP in one year. This is what Fitch meant by “fiscal deterioration” when they downgraded the US credit rating. Current government spending is unsustainable. We are now spending a higher percentage of GDP than what was seen in 2008. What’s the game plan here?

Since the debt ceiling crisis, the US has already added nearly $1.5 trillion in debt. Meanwhile, tax receipts are down sharply this year. We are spending more and making less, a recipe for disaster."

https://twitter.com/KobeissiLetter/status/1688274196839743488?s=20

by Von Metternich | 8th Aug 23, 4:55pm 1691470527

Expect them to inflate that away. The solution to the debt crisis is always inflate the debt away.

by Independent_Observer | 8th Aug 23, 5:01pm 1691470918

Not sure I buy into this theory of inflating the debt away. We are creating more debt at each debt crisis - and this only works if the central bank buys more and more of the governments debt (called QE).

So we're not inflating the debt away at all. We're just creating more of it, and moving more of it onto the central banks balance sheet. At some point, that doesn't work and the whole system collapses.

by Independent_Observer | 8th Aug 23, 5:25pm 1691472311

It was even worse in 2020, when the Fed resorted to buying junk bonds and other financial products to bail out zombie companies and shareholders! So we haven't resolved anything, we've just made the problems worse when the next recession hits.

https://www.cnbc.com/2020/08/10/the-fed-bought-more-blue-chip-and-junk-…

by J.C. | 8th Aug 23, 6:04pm 1691474672

The idea of 'inflating the debt away' only holds for the hoi polloi if incomes are rising more than the price of goods and services and asset prices (housing primarily). It's been an urban myth for quite some time.

by Audaxes | 8th Aug 23, 5:20pm 1691472059

The two faces of Janet Yellen 1-Public: we will not have inflation 2-Congress: we will use inflation to avoid default (Take it to 10%, @federalreserve) Link

by Independent_Observer | 8th Aug 23, 5:37pm 1691473078

I think Yellen might be completely incompetent but has managed to trick everyone around her her entire life into the appearance of competence.

The things she says always appear to be at odds with what is happening - so she is either crazy, a liar, or a psychopath (i.e. perfectly suited to modern public office where the truth and accountability don't count for anything - remember her saying there won't be another financial crisis in her lifetime....nek minut).

by Yvil | 8th Aug 23, 5:49pm 1691473781

Well, she could be right, no one knows how long she will live for.

by Independent_Observer | 8th Aug 23, 5:53pm 1691474025

Yellen said this in 2017...three years later the Fed were buying junk bonds to bailout zombie companies.

If a central bank is buying bad debt from corporates, its because you're in a crisis.

So she was right for less than 3 years!

by Yvil | 8th Aug 23, 9:07pm 1691485678

There hasn't been a financial crisis since 2017, so, so far she's right!

by Hans Brink | 8th Aug 23, 7:57pm 1691481467

I agree von, just look at the Ottoman Empire, they were doing just that 500 yrs ago. And not only once but several times.

All is not lost , yet.

by Audaxes | 8th Aug 23, 4:29pm 1691468990

China Customs said their exports were down -14.5% from July a year ago, a deeper dip that the -12.4% from a year ago in June. Exports to the US were down more than -18% from a year ago.

Maersk not surprisingly specifically cited the US and Europe. Both really struggling, just Europe's recession is further developed (even if Eurostat erased the previous "technical recession" by a whisker). Maersk though is looking forward not backward. https://buff.ly/3Ou4dKq Link

by Audaxes | 8th Aug 23, 4:54pm 1691470476

China is no 1990s Japan - but it could have been

Talk of deflation for China is well wide of the mark, and obsessing over historical growth rates misses the point that 5% growth is sustainable and about the right pace of growth for an economy of China's stage of development

by Grattaway | 8th Aug 23, 7:06pm 1691478361

Yes and they have a 23 Trillion debt problem as well

by Audaxes | 8th Aug 23, 5:04pm 1691471052

Local businesses will get access to greater pools of capital to accelerate investment in solar, wind, green hydrogen and battery storage. This is from a new $2 bln Blackrock fund. (Blackrock themselves aren't putting money in.) Given the money is yet to be raised, it is an announcement that has garnered surprising worldwide attention.

Let's hope we get access to economies of scale input cost suppliers rather than local crony capitalist mark it up pass through ripoffs.

China is adding more renewables each year than the EU , US and India combined

by sit23 | 8th Aug 23, 6:28pm 1691476100

Apparently the Chinese solar panels, wind generators, and EVs are all made in Aussie coal fired factories.

by Audaxes | 8th Aug 23, 6:33pm 1691476413

Time to cancel Blackrock and buy directly from the neighbour?

by J.C. | 8th Aug 23, 5:09pm 1691471367

Local businesses will get access to greater pools of capital to accelerate investment in solar, wind, green hydrogen and battery storage. This is from a new $2 bln Blackrock fund.

For comparative purposes, I crudely estimate initial flows into the Blackrock Bitcoin ETF as USD50 billion (approx USD5 billion flowed into the Canadian BTC ETF x a popn size that is 10 times larger).

Given that ol' ratty now has the backing of the likes of KPMG for an ESG tick, you'd might be better off with the ETF if you want to feel good about your investments saving us from certain destruction.

by J.C. | 8th Aug 23, 5:15pm 1691471726

China export volumes look horrendous. Down 20% yoy to the EU and 23% yoy to the U.S.

https://twitter.com/ChrisWeston_PS/status/1688767901028003840

by Independent_Observer | 8th Aug 23, 5:35pm 1691472908

And the Fed now forecasting no recession!

Secret code (prepare for a hard landing....)

by HouseMouse | 8th Aug 23, 6:11pm 1691475080

No wonder they are trying to grease up to the West again.

Shameless.

by Audaxes | 8th Aug 23, 6:42pm 1691476949

Well, today’s just two years since America was driven out of Afghanistan and we’re seeing a repeat of the defeat in Ukraine. So the U.S. and NATO have lost Ukraine, but they want to keep the fighting going because Biden said this is a fight against China that’s going to take two decades, maybe three decades.

So it looks like the Pacific and even the Arctic may become the new U.S. disruption zone.

Now, especially since Russia and China are working with North Korea to develop ports for the new trade from the Pacific via the Arctic to Northern Europe. So the United States is losing militarily, but it looks like it’s going to lose Europe in a few years.

And the American strategic plan since the 1990s was to absorb the Warsaw Pact into NATO. And it’s done that, but now it looks like it’s overplaying its hand. And the cost ultimately may be to lose Western Europe, headed by Germany, France and Italy.

And we’re already seeing in the last few days, just since our last broadcast, we’re seeing riots throughout Europe as the economy and unemployment are declining.

And there’s discussion as to where the German chemical industry led by the BASF company going to go? They’ve announced they are not going to make any further capital investments in Germany. They say that they’re being pressured to move their facilities to the United States. And they already have facilities in China. Link

by Audaxes | 8th Aug 23, 6:51pm 1691477484

The U.S. can keep England as a dependency. And England’s fate is, I think, going to be a warning to what happens to countries that adopt U.S. style finance capitalism instead of socialist industrialization and public services as a human right.

Britain is now a poor nation. This is the number one issue we face – yet our leaders ignore it

Our average living standards are lower than those in the least affluent US state. Slovenes are overtaking us and Poles are not far behind

by Audaxes | 8th Aug 23, 7:43pm 1691480619

(“Why are benefits so stingy when we’re the fifth biggest economy in the world?”)

Whoa, back up.

World bank PPP rankings

by bw | 8th Aug 23, 5:50pm 1691473828

Australia’s big banks are leaning on new borrowers to keep profits rolling as they prepare for more of their existing customers to succumb to rising borrowing costs. Mortgage rate analysis shows lenders are lifting rates for new borrowers at a faster pace than official cash rate increases. Fixed rates are also leaping higher. Banks were preparing their mortgage books for increasing bad debts, as rising rates affected households....lenders might be able to assist customers by restructuring loans, offering interest-only payments, extending the term of a loan or offering payment deferrals.

by Audaxes | 8th Aug 23, 6:28pm 1691476085

Buoyed by Buffett (Berkshire Hathaway's record result), the S&P500 ended its Monday session up +0.9%.

Hmmmm...

by lonewolfnz | 8th Aug 23, 6:44pm 1691477072

Paypal launching a new stable coin onto Ethereum. Probably nothing right guys?

https://www.reuters.com/technology/paypal-launches-stablecoin-crypto-pu…

by EdwardD | 8th Aug 23, 7:02pm 1691478177

Ethereum is fast becoming a global settlement layer.

by JimboJones | 8th Aug 23, 7:52pm 1691481123

Probably. They wouldn’t be the first to launch a failed coin. These days AI is the tech buzz not crypto, so last year.

by Independent_Observer | 8th Aug 23, 7:45pm 1691480737

ANZ Research (Aus)

"Price indicators lifted sharply in NAB’s July Business Survey. There was a strong rise in selling costs and retail prices, suggesting businesses are continuing to pass on higher costs to households."

Big jump in the surveys price measures:

https://pbs.twimg.com/media/F2-m5p1akAE-EaE?format=jpg&name=small

by HouseMouse | 8th Aug 23, 9:32pm 1691487176

Australasian shares still pretty mediocre. 7 months of 2023 gone, NZX50 only up 2.5% ytd. ASX200 significantly better at around 5%, but far from strong.