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%.
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80 Comments
around $15 bln of fixed mortgages repricing at higher interest rates each month
If they reprice at an average of 3% higher, that's $450 million more in interest paid per annum, that in turn equates to $9'000 per family of four per annum. Now tell me again that higher interest rates are not going to hurt...
The downturn will likely be aggravated by there being no legs for our economy to stand on. We've been talking about the chronic underinvestment in productivity enhancement from both the private and public sectors for a long time.
Turns out even the migrant influx into NZ has been more of a sham than previously expected with INZ officers swearing the number of rorted cases could be in the tens of thousands in recent months. Editorial: Migrant exploitation woes a stain on New Zealand’s reputation - NZ Herald
Editorial: Migrant exploitation woes a stain on New Zealand’s reputation - NZ Herald
This really depresses me. Mainly because the problem is far more widespread than what people realize. F'more, we celebrate our diversity mainly because we can go out and get an Indian for dinner. Multiculture-lite in many ways. We like to think we're all "cosmopolitan" but it's really a load of tosh.
It really depresses me since this exploitation is well known and well documented (ref Prof Stringer's report Dec 2016). I've written numerous polite emails to various INZ ministers and my MP but never had a reply (Labour and National). [It is hard to remain polite and factual in the face of unfeeling embedded bureaucracy especially when our PM gave 'Kindness' as her touchstone.]
Migrant exploitation is rife in most workplaces: from restaurants to construction sites to offices.
Given how labour intensive our economy is overall, most politicians would rather keep quiet about the issue rather than find a meaningful solution to our skill and productivity woes.
We're the Dubai of the South Pacific, but with much higher taxes and crappy infrastructure.
Who told us that? Perhaps mostly this current Labour government? Maybe they thought the impact of inflation and consequent interest rate hikes would not strike home sufficiently prior to the election. But they have and what’s more, the guile and glibness of Finance Minister Robertson, don’t panic it’s only transitory, has been exposed for what it is and fellow contributor PM Hipkins is finding the electorate will not allow him to shake of his complicity in the government process that brought NZ to this point. The polls are really tolling loudly now accordingly, aren’t they.
Hallmark of the current approach by the 'higher powers' and a reflection of everyone's state of mind who find this completely acceptable. If you cant raise the standards (economy, healthcare, education, safety) because you are lazy and incompetent - then lower the standards and gaslight everyone into believing that is normal. Also throw around words like kindness, equality and woo woo; along with a nice song and dance
Twink! Toxic, nasty, dangerous compound.Back in the 70’s a secretary somehow flicked some in her eye. We had a doctor on the staff who happened to be right there. Copious saline wash immediately prevented damage. No Yvil, or anyone else for that matter, don’t fiddle round with Twink.
Every data pointed out the need to increase OCR urgently, yet RBNZ did not.
NZD crashing and inflation out of control.
I think they knew these extra rises coming up will be the straw breaking the camel's back of the property market hence why they try to delay it a bit further.
Remuera’s $10m ‘mystery sale’ home now rented out for $1200 a week https://www.oneroof.co.nz/news/44132
So a yield of 0.62% before costs / tax assuming full occupancy. And rates alone is $10,215.
"OneRoof understands that the owner did not buy the property to develop it."
That's not really the way to think about that property. The $10m is for the 2200 sqm and the house is thrown in for free. You wouldn't ordinarily get anything for the land so $60k a year pays the outgoings but no return to capital. $4,500 per sqm there is prob good buying.
The owners bought the apartment behind it for $5 million (one of the highest prices paid at the time in the area), now CV $8 million... $3 million gain... What will happen with this purchase combined with their existing property... Obviously they're not stretched on cashflow so they can sit & wait with plenty of options at hand.
"No word on Healthcare recruitment goals".
Breaking news this afternoon: Otago University closing one of its physiotherapy teaching facilities.
https://m.facebook.com/story.php?story_fbid=pfbid0R3AYGBuaGfgp6KuvocPhS…
U.S existing home sales slide to lowest rate since 2010. No one can afford to move with 7-8% mortgage rates.
https://www.marketscreener.com/news/latest/U-S-Home-Sales-Fell-in-July-…
All those market players who earn their dime clipping tickets on house sales must be feeling the pain. Banks particularly need to write new loans to keep the money flowing in.
Things start to go wrong when this market churn rate starts to fall, as it happened in late 2007.
All those market players who earn their dime clipping tickets on house sales must be feeling the pain. Banks particularly need to write new loans to keep the money flowing in.
Too right. But according to my normie mates, no worries down here at the end of the world. Just a scratch wound that's already healing. Nothing that a good cup of tea won't fix.
US banks already working on a fairly simple solution: allowing mortgage holders to change the house securing their existing mortgage. So people can sell their house and buy another and simply transfer there existing mortgage (fixed at ultra low interest rates previously) onto the new house, and only any increase in lending required (if any) paying the new mortgage rates approaching 8%.
US banks already working on a fairly simple solution: allowing mortgage holders to change the house securing their existing mortgage. So people can sell their house and buy another and simply transfer there existing mortgage (fixed at ultra low interest rates previously) onto the new house, and only any increase in lending required (if any) paying the new mortgage rates approaching 8%.
Nonsense
A great opinion piece from stuff addressing all those landlord pieces we are forced to read.
https://i.stuff.co.nz/life-style/homed/renting/132800974/the-gravy-trai…
That is a great article. Only thing I would add is that the lines between mortgages are too blurry, that’s the problem.
what to do up your own house? Cool, just refi your investment protest and pocket the difference. That’s the key reason interest should not be deductable.
Interesting position from the Landlord. Doesn't want to spend the money rewiring and removing asbestos from the house, converting it from a death trap, so he's just going to leave it empty out of spite...an idle threat at best. Judging by the photo in the article, the roof probably needs doing as well.
https://www.stuff.co.nz/life-style/homed/132782366/why-were-considering…
Holy smokes! Check out the state of our current account balance compared to the rest of the OECD:
https://pbs.twimg.com/media/F4LNdOhasAAjJ_H?format=png&name=4096x4096
"The US government has already spent $5.3 TRILLION this year. We are on track for the 4th consecutive year with $6 trillion or more in government spending. Since 2020, the US government has spent a jaw dropping $25 TRILLION. To put this in perspective, the market cap of the S&P 500 is $37 trillion. Spending since 2020 is equivalent to 68% of the entire S&P 500 market cap. We have a spending problem"
https://twitter.com/KobeissiLetter/status/1694055758873141403?s=20
"I believe that banking institutions are more dangerous to our liberties than standing armies," Jefferson wrote. " If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around(these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered."
Of all the forecasts and prophecies this one starts to appear more probable. Is the Great Reset Initiative still a thing or is it in motion?
But what a time to be alive - when men were principled and were willing to lose their lives based upon principles...instead now we have weak mean cowardly trying to protect asset bubbles/wealth with no care for principles.
I.e. they have prioritised wealth over doing the right thing.
It is a sad situation.
(In related to the US/Fed)
"JUST IN: Interest rate CUTS are now no longer expected to begin until JUNE 2024. Just 3 months ago, futures were pricing in up to FOUR rate cuts in 2023 alone. Meanwhile, odds of an additional rate hike this year remain near 44%. Markets are preparing for a LONG Fed pause. Higher for longer is back.
https://twitter.com/KobeissiLetter/status/1694120625890062389?s=20
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