A review of things you need to know before you sign off on Wednesday; big changes to mortgage and TD rates, retail spending shrinks, but credit stress less, swaps sharply lower, NZD up, & 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
ANZ followed ASB by raising all their fixed rates, and by more than ASB. More here.

TERM DEPOSIT/SAVINGS RATE CHANGES
ANZ raised term deposit rates too, mostly minor except they now offer 6% for an 18 month term. More here.

HOUSEHOLDS REACT TO TIGHTER FINANCIAL CONDITIONS
Spending volumes are dropping sharply as rising prices squeeze households' finances. Stats NZ figures show that retail sales volumes have fallen for a third quarter in a row, with figures only propped up somewhat by a surge in motor vehicle sales to beat changes to the Clean Car Discount Scheme. The pressure is coming from higher home loan rates. With around $15 bln of fixed mortgages repricing at higher interest rates each month, the pressure on households’ finances will continue to build. Remember, there are $360 bln in mortgages outstanding and $315 bln are fixed. So at $15 bln per month this will be a growing pressure over at least the next 20 months (until April 2025).

CLIMATE AS A BUSINESS RISK FOR LENDERS
In an updated survey, most financial institutions said they were ‘somewhat vulnerable’ to climate change risks although 3 were ‘unsure’ of their vulnerability. All thought that climate change was already compounding a range of business risks and expect this will increase in the future. All are discussing these risks internally and those assessments are influencing day-to-day business decisions. However, only 3 out of the 29 entities surveyed stated they have ‘fully embedded’ different aspects of climate-related risk management in the manner they already do for other business risks.

TO SO TOUGH FOR SOME?
Credit bureau Equifax isn't reporting higher stress levels for consumers anymore. Its July review says enquiry strength building across most consumer products, average weekly consumer demand for 2023 to-date has nudged slightly above 2022 levels. They said while the number of car loan accounts in arrears continues to increase above pre-pandemic volumes, both June and July saw month-over month reductions in home loan consumers missing payments. But they are noting a rise in commercial arrears, some quite chunky even if they are off a low base.

SCOOPING UP 5 YEAR FUNDING
BNZ's offer to bond investors for at least $100 mln in 5 year of "unsecured unsubordinated fixed rate bonds" has been met with offers of $625 mln and they indicated they would take the lot. They will pay 1% above the five year swap rate on August 24. Currently the five year swap rate is about 5.1% and rising. (Interestingly, these sort of big bank bond issues are larger than the NZ Government Treasury offers (usually $500 mln each), although the NZGB offers do come more frequently. And the Treasury pays a lot less for theirs.)

MORE TEACHERS RECRUITED
A multi-million investment package in teacher supply announced in September last year has already exceeded its goal of 1,000 new teachers. But no word on healthcare recruitment goals.

SPEED IS FOR TRADERS, NOT ANALYSTS
Tiger Brokers said it is using (and offering) an AI tool to review company reports and earnings updates. It is going to be hard to tell whether 'analyst reports' are the result of human analysis, just churned out of company-released 'information'. 'Fast' may not be quality.

MIXED PMIs. JAPAN UP, AUSTRALIA CONTRACTS
Early August PMIs are starting to be released. In Japan, their factory PMI erased the July contraction, almost. And their services expansion gathered pace. In Australia, declining new order levels saw both their factory and services PMIs contract in August.

COUNTDOWN DRAGS THE CHAIN
Australian supermarket giant Woolworths (owner of Countdown in New Zealand), reported a +13.7% jump in profits overall. But within that Countdown (the NZ food group) chipped in with a -21% EBIT fall which their bosses wouldn't be happy with. Their return on funds invested fell from 7.0% to 5.2%. They said wages in their New Zealand stores will increase +7% on July 1, after a 1+12% rise in the prior year.. The pressure will be on the re-branded New Zealand business to cover this while improving their profit trajectory. It is hard to see this dominant supermarket channel restraining grocery inflation in the coming year.

SWAPS LITTLE-CHANGED
Wholesale swap rates were probably either unchanged or slightly lower today, but the real reaction will come at the close. [In fact, they closed sharply lower.] 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 sharply lower, down -12 bps from this time yesterday to 4.24%. The China 10 year bond rate is holding low at 2.57%. And the NZ Government 10 year bond rate has fallen to 5.16% and down -5 bps from yesterday, but still higher (just) than the earlier RBNZ fix which was up +5 bps to 5.14%. That is again the RBNZ's series highest since July 2011. The UST 10 year yield is at 4.31% and down -3 bps from this time yesterday.

EQUITIES MIXED
The NZX50 is up +0.4% near the end of trade today. The ASX200 is up +0.7% in afternoon trade. Tokyo has opened up +0.3% today. Hong Kong is unchanged at their open, but Shanghai is down a sharpish -0.7%. Wall Street closed earlier with the S&P500 down -0.3% all lower in their afternoon session.

GOLD FIRMER
In early Asian trade, gold is at US$1901/oz and up +US$4 from yesterday. It closed earlier in New York at US$1897/oz, and earlier still in London at US$1893/oz.

NZD FIRMS SLIGHTLY
The Kiwi dollar is up +¼c at 59.6 USc from yesterday but basically where it was this morning. Against the Aussie we are holding at 92.4 AUc. Against the euro we are up +½c at 54.9 euro cents. That means the TWI-5 is up +30 bps at 68.6.

BITCOIN STILL ON HOLD
The bitcoin price is little-changed again today, now at US$26,028 and down a minor -US$20 from this time yesterday. Volatility has been modest at just over +/- 1.5%.

This soil moisture chart is animated here.

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