A review of things you need to know before you sign off on Monday; ASB raises fixed home loan rates, affordability for FHBs worsens, more big bond issues coming, bigger trade deficit, swaps up, NZD stable, & 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/LOAN RATE CHANGES
ASB has raised most of its fixed rates by either 10 bps or +20 bps. More here. SBS Bank has reduced its three year fixed rate by -30 bps to 5.99%.

TERM DEPOSIT/SAVINGS RATE CHANGES
ASB raised its 6, 9 and 12 month term deposit rates up to where its main rivals already were. SBS Bank cut its market-leading one year TD rate from 6.50% to 6.00%. Bank of Baroda raised rates for all terms 3 to 18 months.

DESPITE HIGHER INCOMES & CHEAPER HOUSES, FHBs NO BETTER OFF
Ongoing rises in mortgage interest rates gazumped rising incomes and drooping house prices for first home buyers last month and consequently home loan affordability continued to worsen for FHBs.

CREDIT CARD SPENDING
Spending on credit cards in July was +3.5% higher than year ago levels, clearly less than can be accounted for by inflation. But it was a new record high for a July. Balances owing on credit cards were up a lesser +2.8% over the same period. 52.9% of balances incur interest, about the same level as a year ago. More here.

MORE BOND ISSUES COMING
There is a widespread expectation that the impending Pre Election Economic Forecast (PREFU) will show larger deficits and therefor larger bond issuance requirements. Westpac said the borrowing programme for 2023/24 is likely to be lifted by about +$6 bln, given that the as-yet unpublished deficit for 2022/23 has likely exceeded the Budget forecast. But they will be competing with an uptick in corporate bond issuance as well, and the banks are getting in first. SBS Bank has signaled that it want to raise up to $175 mln soon (by the end of the month). SBS Bank not only needs funding for its banking operations, it needs it for thor FinanceNow operations too, and major profit driver for the bank. These bonds are expected to be assigned a BBB+ credit rating by Fitch. And BNZ said it is making an offer of up to NZ$100 mln (plus unlimited oversubscriptions) of a new series of 5 year unsecured unsubordinated fixed rate notes. They are likely to pay about 6.1% pa in interest, and will be have a credit rating of AA-/A1 from S&P/Moody's.

BIGGER TRADE DEFICIT
Sagging dairy prices have helped fuel a larger than expected monthly trade deficit. There was a -14% month-on-month fall in dairy exports which drive a bigger-than-expected -$1.1 bln merchandise trade deficit in July.

DERISKING FROM CHINA
Meanwhile, our export trade is moving away from China. Merchandise trade with China peaked in November 2021 with 31.8% of our exports going there. That was $20 bln in the year. In the year to July 2023 it is still $20 bln (actually $20.1 bln) but that is only 28.0% of our exports. Over the same period our total merchandise exports rose +14% to $71.8 bln. All that extra went to countries other than China. There is no guarantee it will of course, but if similar 'progress' is made over the next two years, our export exposure to China will be down to 24.4% by late 2025.

ONE OF TWO CUT
In China, they made a modest change to their loan prime rates today. Markets were disappointed at the timid policy action. The August fixing cut the one-year loan prime rate by -10 bps to 3.45% (a record low) in an effort to ease borrowing costs for businesses, but maintained the five-year rate. the home loan benchmark, at 4.2%.

PRIME OFFICE MARKETS WOBBLE
Meanwhile, the commercial office market in both Beijing and Shanghai is tightening significantly, extending the residential property sector's woes into the wider sector. More tenants in Shanghai's Grade A offices terminated leases than signed them during the June 2023 quarter ending, the first time that has happened since 2015. Further Beijing experienced its third consecutive quarter of rising Grade A office vacancies, also the highest level since 2015.

SUDDEN SLOWING
Thailand reported its Q2 GDP growth today and it slowed much faster than anyone saw coming. The Thai economy is far from irrelevant and a big miss like this will have regional ramifications.

SWAPS A TOUCH HIGHER
Wholesale swap rates were probably up again today, but the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged yet again at 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is down -2 bps from this morning at 4.26%. The China 10 year bond rate is also lower at 2.56% and a new three year low and prior to that pandemic dip, nearing a 21 year low. And the NZ Government 10 year bond rate has settled at 5.12% and up +4 bps to a 12 year high, and still higher than the earlier RBNZ fix which was up +1 bp to 5.03%. That is also the RBNZ's series highest since July 2011. The UST 10 year yield is at 4.28% and up +3 bps from this morning.

EQUITIES VERY MIXED
It has been a tough day on the NZX50 with it heading for a -1.3% fall. The ASX200 is down -0.2% in afternoon trade. Tokyo has opened up +1.0% however in its early Monday trade. Hong Kong has opened down -1.0% and Shanghai is -0.5% lower at its market open. The S&P500 futures are currently showing a minor +0.2% gain.

GOLD ON HOLD
In early Asian trade, gold is at US$1892/oz and up +US$2 from the opening.

NZD HOLDING
The Kiwi dollar is still at 59.2 USc where it was when we opened this morning. Against the Aussie we softer at 92.3 AUc. Against the euro we little-changed at 54.4 euro cents. That means the TWI-5 is still at 68.4.

BITCOIN HOLDS
The bitcoin price is little-changed today, now at US$26,092 and down a mere -US$35 from where we opened this morning. Volatility has been low at just over +/- 0.5%.

This soil moisture chart is animated here.

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