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 raised its fixed home loan rates again today. That takes their 2 year rate above 7% and its highest since 2009. Heretaunga Building Society raised fixed rates too. China Construction Bank has launched a 1% cash back offer for new home loans.
TERM DEPOSIT/SAVINGS RATE CHANGES
ASB became the second main bank (after Kiwibank) to offer a 6% TD rate for a one year term. More here. Heretaunga Building Society, and China Construction Bank also raised TD rates today.
AN AUGUST RECOVERY
Barfoot & Thompson August sales volumes were its highest since March 2022. Auckland's largest real estate company says signs the 'heralded' recovery of the Auckland housing market is imminent can be seen in the 'high' property sales volumes and the prices paid
Q2 SURPRISE
Our Q2-2023 terms of trade held up better than expected. Import prices fell more than export prices. But that is expected to reverse in Q3 and hurt. Higher export dairy volumes in Q2 will be replaced by the impact of sharply lower dairy prices in Q3, and just as oil prices rose.
TRADE DEFICIT STILL QUITE SMALL
The Q2 trade result for both goods and services was out today. We recorded a -$1.3 bln deficit in the quarter, but that was far smaller than the -$3.3 bln deficit in Q2-2022. For the year our overall (goods+services) trade deficit was -$19.5 bln. That is however actually less than 5% of our overall economic activity (GDP). That may surprise many readers. Our +$2.0 bln quarterly surplus with China would have been almost $100 mln larger without the fast-growing EV car imports. However, if dairy exports don't hold up, almost all of these metrics will get sharply worse quickly.
MORE POLICY UPDATES
Our political party policy comparatives have now been updated with Act's energy policies, and Labour's health/dentistry policy. National's regional development policies are also now included.
A STAKE IN A BEHEMOTH
The NZ Super fund has taken a 5% shareholding in Brussels-based Euroclear Group, a provider of critical financial markets infrastructure in Europe. The NZSF will be Euroclear's fifth-largest shareholder. With approximately €36 tln of assets under custody and over €1 quadrillion per annum worth of securities transactions, Euroclear provides post-trade services including transaction settlement, asset servicing and collateral management.
FAST FALL
The Rabobank assessment of the global dairy industry reveals that Fonterra's has slipped three places to ninth as it continued to dispose of non-core assets while adjusting to pressure on milk volume growth. In 2023 Fonterra sold its Chilean subsidiary Soprole in early 2023 and its sale of DPA Brazil, a joint venture with Nestlé, to Lactalis is pending, so its rank may fall further. Way out from in the #1 position is France's Lactalis which is growing fast by acquisition.
REGULATOR FED UP? OR EMPTY THREAT?
SkyCity casino is facing potential suspension of its casino operator's licence with questions raised by the Department of Internal Affairs over it complying with its host responsibility program. Its shares fell from their $2.34 close on Friday to $1.96% today, a -16% dump.
A LOT LESS NEW LENDING
RBNZ data for July reveals a very sharp slowdown in new lending. There was $9.0 bln of total new lending in July, down -27% from the $12.2 bln in June and down more than -17% from $10.8 bln in July 2022. These are big movements. Part of this is lending to the rural sector - but dairy still seems to be favoured. Lending to dairy was up +7.0% in July from a year ago (although down -10% from two years ago). But lending to the sheep & beef sector was down a sharpish -19% in July from a year ago and -32% lower than two years ago. It is not clear whether this is due to bank reticence ("tighter credit standards" or lower demand by borrowers. Bank lending for residential property development is very sharply lower, down -39% in July from a year ago, down -57% from two years ago. The July levels are a tiny $90 mln in new lending for this sector, maybe enough for only 200 dwellings, or less. New lending for owner-occupiers is down too, -12% from a year ago in July, -44% from two years ago. More here.
MORE CORPORATE BOND FINANCING
Toyota Finance has raised $150 mln in a 3 year bond issue, and it will pay about a 5.94% yield for this A+ rated funding.
SWAPS UP
Wholesale swap rates were probably higher today, perhaps solidly higher but really just returning to Thursday's level, but the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.65%. The Australian 10 year bond yield is down up +10 bps at 4.09%, all of that last night. The China 10 year bond rate is up +4 bps at 2.62% in an unusual move up. The NZ Government 10 year bond rate is back up +8 bps to 4.96%, and well above the earlier RBNZ fixing of 4.85% which was unchanged today. The UST 10 year yield is up +2 bps from this morning, now at 4.20% and holding its gain from the end of last week.
EQUITIES MOSTLY START THE WEEK POSITIVELY
The NZX50 is down -0.3% near today's close, again. The ASX200 is up +0.5% in afternoon trade. Tokyo has opened up +0.3% to start its week. Hong Kong is up a full +2.0%, returning to trade after Friday's typhoon shutdown. Shanghai has started it's week up +1.1%. Wall Street is on a long weekend holiday and won't trade again until Wednesday morning NZT. The S&P500 futures are very little changed so far.
GOLD FIRMISH
In early Asian trade, gold is at US$1944/oz and up +US$4 from this morning, a trivial +0.2% rise.
NZD UNCHANGED
The Kiwi dollar has held at 59.5 USc, little-changed from the 54.4 USc level we started with this morning. Against the Aussie we are marginally softer 92.1 AUc. Against the euro we are unchanged at 55.2 euro cents. The TWI-5 is still at 68.7.
BITCOIN HOLDS
The bitcoin price is basically from this morning, now at US$25,902. Volatility over the past 24 hours has been very low at under +/- 0.6%.
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33 Comments
I wouldn't say it's hugely in defiance of expectations. Immigration is pumping, National are expected to win and have been very vocal about their pro-property stance, and interest rates (at least appear to) have stabilised. In saying all that, I'm calling this little pump a big fat bull trap. Lower lows incoming early 2024.
True. This is probably the single most important factor affecting house prices in New Zealand. However, cashed up Kiwis returning from UK, USA, EU, Middle East and Asia will potentially put upward pressure on house prices. I estimate house prices increasing by 0.1-0.2% per month fairly soon.
CoreWeave Secures $2.3 Billion Debt Financing Facility led by Magnetar Capital and Blackstone to Meet Surging Demand and Ongoing Expansion of Specialized Cloud Infrastructure to Power AI
Coreweave was an obscure hedge fund that turned into an unremarkable crypto mining company that turned into a cloud computing company. Coreweave is using chips as collateral. But as anyone would ask, won't these chips become obsolete quickly? Obviously.
And who is Magentar Capital? A notorious hedge fund that helped create mortgage backed securities and bet against them during the GFC. Nobody prosecuted or really suffered. They made a motza.
Caveat emptor in the clown world.
https://www.blackstone.com/news/press/coreweave-secures-2-3-billion-deb…
https://www.propublica.org/article/all-the-magnetar-trade-how-one-hedge…
Liam has finally worked out that shares may not be the best investment right now:
https://www.nzherald.co.nz/business/market-watch-what-high-interest-rat…
I know some firms that do a lot of new residential work who are starting to get patchy in their upcoming workload. It's easier business doing group housing than servicing a wider customer base, but it's prone to boom bust cycles.
That said there's a decade of retirement home building being done. Lower value work though.
https://www.reuters.com/world/china/part-chinas-economic-miracle-was-mi…
BEIJING, Sept 4 (Reuters) - Chinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020.
The 60-point agenda was meant to fix an obsolete growth model better suited to less developed countries - however, most of those reforms have gone nowhere leaving the economy largely reliant on older policies that have only added to China's massive debt pile and industrial overcapacity.
Chinese President Xi Jinping's first major reform plans a decade ago were also his boldest, envisaging a transition to a Western-style free market economy driven by services and consumption by 2020.
A transition to a Western-style free market economy driven by services and consumption?
Chinese are fundamentally savers so expecting to behave like mall rats and drunken sailors was never going to fully possible.
Some good news out of WA - there has been growing investment in the mining belt for ore-refining projects, which should benefit the region and the lucky country as they capture much more value out of their mined resources.
Yes National win........
Swaps current confirmed uptrend, stiffens into a much more northern direction.....
Daily swap rates | interest.co.nz
RBNZ pull out the HIMARS and hits us all with at least 50bps RISE and promises more in 2024, unless we all chase and demand less.
- we pay no attention and 10% rates are seen by Dec 2023.
Unlikely to be the 1 or 2 years agreed.
Many floating options are near and over 9% already and some of these will be at/around 10%, if we all keep up our spending and earnings demand ways.
Or will the Nats pay Orr off with millions and install an NZesk Arthur Burns........who will lower rates too early and see to it, that the 2020s in NZ, will be roiled with higher rates for much longer?
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