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
Kiwibank raised all its carded fixed home loan rates for terms 1-5 years. The rises ranged from +6 bps (for 2 years) to +30 bps (for 4 and 5 years).
TERM DEPOSIT/SAVINGS RATE CHANGES
Kiwibank also raised term deposit rate offers, in fact taking their six month 6.05% offer up to a market-leading level. Their one year rate is up to 6.15%. More here. ICBC also raised rates today.
MOVING UP
The latest dairy auction brought higher prices by +4.2% this morning, recovering all the falls since May 2023. And that has prompted both ASB and Westpac analysts to upgrade their payout forecasts. Forecasts by all main analysts are here (base of page).
MOVING CLOSER
We still don't have a monthly CPI measure as almost all other OECD economies do, but we are making some progress toward that goal. Stats NZ said it will produce more timely monthly pricing information for some CPI components, expanding what it already does for rents.
STAFF SHORTAGES HAMPER AUDITORS
The Office of the Auditor General reports deficiencies in understanding the effectiveness of state spending
SOLIDLY POSITIVE
Data out of China today was quite positive. The Chinese economy expanded by +4.9% in Q3-2023 from a year ago, slowing from +6.3% in Q2 but beating market forecasts of +4.4%. For a country as large as China, that is a big up surprise. Retail sales climbed by +5.5% in September from a year ago (remembering they essentially have zero inflation), accelerating from a +4.6% rise in the prior month and exceeding market estimates of +4.9%. It was the largest increase in the pace of trade since May. Electricity production rose +7.7% from a year ago, suggesting the headline growth may in fact have some substance behind it. It is the first time in quite some time Chinese growth data has been led by electricity production.
CLEANING UP CRYPTO FRAUD & SCAMS
In Australia, they have released their long-awaited crypto regulations and they are expected to wipe out the bulk of Australian-registered exchanges as they will struggle to comply with the new requirements designed to limit the scams and fraud rife in the industry.
CHEAP SHEEP
Staying in Australia, there are more reports of farmers desperate to quit stock ahead of the expected El Nino droughts looming. Some are even prepared to give them away as prices collapse to less that the freight to move them off farms. Even then, there were few takers. To be fair, these are only tiny pockets of desperation at this stage, but the trend is clear and market prices are diving, especially for sheep. No farmer wants to be stuck with livestock they can't feed or sell. In addition to the obvious animal welfare concerns, the legal liability is severe.
SWAPS ON HOLD
Wholesale swap rates have probably risen today on the back of some pretty big moves in benchmark bond rates globally. But the real reaction will come at the close. Our chart will record the final positions. Update: It was only at the long end that brought increases. The 90 day bank bill rate is down -3 bps at 5.66% and now only +16 bps above the OCR. The Australian 10 year bond yield is back up +12 bps from this time yesterday to 4.66%. The China 10 year bond rate is unchanged at 2.73%. The NZ Government 10 year bond rate is up +10 bps to 5.56% from yesterday, but still above the earlier RBNZ fixing of 5.49% which was up +10 bps today. The UST 10 year yield is up another +12 bps from this time yesterday at 4.84%. Generally rates inversions are unwinding.
EQUITIES MOSTLY WEAKER AGAIN
The NZX50 is down -0.4% in late trade today. The ASX200 is up +0.2% in afternoon trade. Tokyo has opened down -0.2%. Hong Kong has opened down -0.4% and Shanghai has opened down -0.5%. Wall Street closed unchanged on the S&P500 in Tuesday trade earlier today.
GOLD RISES
In early Asian trade, gold is now at US$1940/oz and up +US$24 from this time yesterday. Earlier in New York it closed at US$1923/oz, and earlier still in London ir closed at US$1928/oz.
OIL RISES
Oil prices are also rising on the wars and threats. The US price is up to US$88/bbl, a rise of +US$3/bbl since this morning. The international Brent price is up to US$91/bbl, a rise of +US$2.50/bbl over the past few hours.
NZD WEAKER AGAIN
The Kiwi dollar has slipped -20 bps since this time yesterday and now at 58.9 USc. Against the Aussie we are down more than -¼c to just on 92.6 AUc. Against the euro we are soft at just under 55.7 euro cents. That means the TWI-5 is down -30 bps at just on 69.
BITCOIN LEVELS OUT
The bitcoin price is firmer again today, now at US$28,362 and up just +$39 (less than +0.01%) from where we were at this time yesterday. And volatility over the past 24 hours has been lqw at just under +/- 0.9%.
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58 Comments
Indeed. Perhaps they thought it was just about them and that global events and a sagging currency mean nothing. All imports up, especially oil up, which men's everything that moves...also is up. Aka inflation.
So inflation underpinned, and doller down. Equals HFL.
I blame the hopium,
by F----g high | 17th Oct 23, 8:21pm – “Now that the tables are turned.”
"Only yesterday"
by Retired-Poppy | 17th Oct 23, 3:17pm
You're sounding obsessed by micro reading everything I post! Try not to over-think because you'll never get that time back!
I don't think it'll be up.. but the narrative will be restrictive for sometime
HFL... https://i.stuff.co.nz/business/money/300991887/higher-for-longer-intere…
In Australia, they have released their long-awaited crypto regulations and they are expected to wipe out the bulk of Australian-registered exchanges as they will struggle to comply with the new requirements designed to limit the scams and fraud rife in the industry.
Good. Quick scan of the document and it's a pretty broad regulatory framework. Quite unlike that of the Japan Financial Services Agency (which they haven't looked at nor have they looked at the U.S.). Getting rid of any fly-by-night exchanges is admirable, but why hasn't it been done already? It's 2023. Stick with credible exchanges like Independent Reserve. Accept accounts from NZ as well.
Crazy Horse - not sure if anyone replied to you earlier regarding yield curve inversions.
It has been a reliable indicator in recent decades. The exception being 1965:
https://pbs.twimg.com/media/F3gHE0FbEAElLeQ?format=jpg&name=medium
The US 2/10 is now starting to normalise - which typically speaking has been when trouble starts hitting financial markets. If again reliable, the next 6-12 months should be cautious (if worrying about employment or taking on high debt/high risk/buying risky assets)
Here's an interesting chart on the same topic..
'Evolution of Initial Unemployment Claims After Yield Curve Inversion'
https://pbs.twimg.com/media/F8SlYC0WkAAPu0W?format=jpg&name=large
If history repeats, we should see unemployment rise over the coming months. Perhaps the only difference this time around is the change in demographics playing out (retiring boomer cohort) as well as the massive stimulus that we've had before the yield curve inversion which is highly unusual - usually the yield curve inversion occurs at the end of a 7-10 year business cycle - not 1-2 years after unprecedented levels of COVID stimulus to prevent a depression.
Interesting times for financial/economics geeks.
Thank you IO ....looks like we possibly could be in for a dozee of a recession based on the reversion towards to zero, on the St Louis Fed chart, as it went negative back in July 2022 and on October 16 (Monday) was STILL -0.38% So that is a huge amount of time in the minuses !
The 1965 chart onwards shows we haven’t been this far down since 1980-83, so if something does happen, in the next few months to a year, it will be way worse than the GFC ! ….especially with all that debt.
Speaking of the USA, just came back from doing Route 66 - all the way from Chicago to the Santa Monica Pier 😊 …a fantastic trip BUT if you think inflation is bad here!, well if you buy a donut etc you pay in USD the same amount in dollars, as in NZ ! …so your $4 US donut costs you in NZD $7 !
While in some parts of California gas is right up to $6.50 US a gallon or $1.71 US a litre …..so already NZD 2.90 a litre !
The USA is officially now not cheap in any way.
$6.50 gallon must be some outliers, the general consensus seems to be around $5.50 average with some at $5.70. Still, that's $2.50 NZD per liter.
"The 1965 chart onwards shows we haven’t been this far down since 1980-83, so if something does happen, in the next few months to a year, it will be way worse than the GFC ! ….especially with all that debt"
I'm not so sure - it might be very different. It could be stagflation instead of a deflationary recession.
If unemployment starts ramping up while inflation is still high, central banks may stimulate again (for example the US can't afford for its tax take to fall from reduced incomes - otherwise its government debt issues will be exacerbated) and create even more inflation - it would look different to the GFC. Rates would keep going up, asset prices would keep getting reduced in inflation adjusted (real terms) but might look flat in nominal terms.
If the US 10 year breaks the 5% yield, the sky is the limit in my opinion for interest rates going forward (no specific timeline - thinking years/decades ahead). I think it will be a sign of embedded higher rates/higher inflation going foward. It may not make it of course an retract and if so, a good sign that our inflation fight is being better managed/more under control and a sign interests rates here in NZ will flatten out in the near term.
I'd be keeping a closer eye on this, than the NZ CPI data if I had concerns around interest rates and debt levels.
https://fred.stlouisfed.org/series/DGS10
None of you seem to be factoring in the exponential function, or anything to do with physical stocks, It must be like staring through the bottom of a bottle in the dark, half-cut. How can you do it?
In 1965, the global population was 3.3 billion, in 1980 4.4 billion, in 2008 6.8 billion - it's now 8 billion.
Same paddock, but we've chewed the grass down at ever-increasing rates.
Do you really think that a collection of absentee farmers - who cannot see, therefore cannot measure, the paddock - making short and long--term bets on how many animals will be carried in the future, means anything? That it can predict when the paddock turns to dust? Surely that is better done on a 'how long is the remaining grass/how many animals/what rate of consumption' basis?
Somebody please explain to me (maybe I'm just missing some essential point) how reading bets differs from reading tea-leaves?
In 1965, the global population was 3.3 billion, in 1980 4.4 billion, in 2008 6.8 billion - it's now 8 billion.
You could say we are breeding like flies. Not really because according to insect expert Erica McAlister, there are 17 million flies for each person in the world.
8 billion flies is equivalent to 471 people
Malaysian government revisiting the idea of using the gold dinar as a reserve currency.
"Islamic countries are familiar with the dinar. Furthermore, with growth exceeding USD1 trillion in the halal industry, other countries are well-informed about the position of the dinar."
https://www.nst.com.my/news/nation/2023/10/968034/govt-revisit-using-go…
Still don’t get why NZers thought these were good policies: https://www.nzherald.co.nz/nz/election-2023-whats-set-to-get-cut-under-…
Are we heading for civil war if we start taking away the treaty? I sure don’t want to fight.
Swaps looking flat 1-2 years now and longer terms still trending up. Looks like the yield curve is trying to get back to 'normality' (whatever that means these days).
Possible we're close to the peak for short term rate hikes for now (e.g. 1-2 years) but might be more to come yet for terms out to 5 years.
Every now and then T. Alexander talks some sense:
https://www.oneroof.co.nz/news/tony-alexander-dont-be-fooled-by-good-in…
Bank of America's unrealized losses on held-to-maturity securities now exceed $130 Billion
https://www.reuters.com/business/finance/bank-americas-unrealized-losse…
Staying in Australia, there are more reports of farmers desperate to quit stock ahead of the expected El Nino droughts looming. Some are even prepared to give them away as prices collapse to less that the freight to move them off farms.
Strange I don't know about the rest of Australia but I was over in NSW a few weeks ago and it looked really green and lush this year. Soil moisture looking high across the country:
https://www.agriculture.gov.au/sites/default/files/documents/WeeklyAust…
Either farmers are ahead of the curve or they're panicking and someone will make a killing on stock.
In the U.S. housing market, the 10-year government bond now yields a higher return than the cap rate (profit from operating a rental property).
Real estate investor demand will be collapsing if it's more profitable to buy bonds.
Investor purchases down 45% yoy: https://www.redfin.com/news/investor-home-purchases-drop-q2-2023/
RMBS plummeting: https://finsight.com/rmbs-single-family-rental-abs-bond-issuance-overvi…
this is what we have go to in NZ this attack and you can be out in 3 and a half years?
https://www.nzherald.co.nz/nz/christchurch-man-quinton-ohlson-jailed-fo…
I would want to meet face to face as well
Yep. The maximum sentence for manslaughter is life imprisonment. There is no minimum sentence, and sentencing is highly dependent on the judge.
"Justice Dunningham said that, as the attack was filmed, it was not spontaneous. Kelly “could not outrun you and he was surrounded”.
She allowed Nagel a total discount of 55 per cent for his youth, guilty pleas, personal background, remorse and rehabilitation potential. This took the sentence to two years, which could be converted to home detention.
As the judge began to discuss the possibility of home detention, Kelly’s son walked out of court, followed by others.
Justice Dunningham sentenced Nagel to two years’ imprisonment and granted him leave to apply for home detention."
I'm increasingly convinced that judges should only be present for 'procedural stability' during court proceedings e.g. if the defendant starts misbehaving and needs to be held in contempt, but otherwise should start handing off sentencing to an AI that just looks up the crime(s) in a database, has some kind of transparent mathematical formula for calculating discounts up to a maximum level of say 25%, and then passes sentence.
Either that or make judges personally (financially, because let's be fair they are top drawer snout-in-the-troughers) liable if a weak sentence is handed out and the offender goes on to reoffend during a certain timeframe afterwards. If a judge doesn't like it, the easy solution is to hand out tougher sentences and avoid the risk.
If we have to build more prisons and hire more prison guards, so be it. That's something I don't mind my taxes being spent on.
Maybe the judge has a soft spot for manslaughter convicts.
Justice Rachel Dunningham's husband, Andy Nicholson, was convicted of three counts of manslaughter in 1991.
https://www.stuff.co.nz/national/politics/67613141/husband-of-judge-has…
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