What happened Wednesday

Economy / news

A review of things you need to know before you sign off on Wednesday; higher retail rates, higher dairy prices & payout, more price indexes more frequently, swaps jump, oil up, NZD down, & more

[updated]

18th Oct 23, 3:59pm by David Chaston

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%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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58 Comments

by Retired-Poppy | 18th Oct 23, 4:16pm 1697599011

Dollar down - swap rates up. Only yesterday some here were popping the corks on the back of lower rates - go figure.

The vested need to look more globally and less myopically.

by Averageman | 18th Oct 23, 5:50pm 1697604615

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.

by Retired-Poppy | 18th Oct 23, 6:32pm 1697607165

I blame the hopium,

by F----g high | 17th Oct 23, 8:21pm – “Now that the tables are turned.”

by Flying high | 18th Oct 23, 8:35pm 1697614507

"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!

by Dgm | 18th Oct 23, 4:10pm 1697598649

There was so much chatter around rates falling due to the fall in cpi.. their bubble has burst early..

by JimboJones | 18th Oct 23, 5:07pm 1697602038

One bank catching up with the competition is not a trend.

Wasn't the chatter more about the OCR? Do you think the next move will be up?

by Dgm | 18th Oct 23, 6:59pm 1697608787

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…

by Retired-Poppy | 18th Oct 23, 5:21pm 1697602897

Not nessasarily. On the back of the rising cost of wholesale funds globally, I think fixed rates and TD's, still have considerable upside. As you know, most of our mortgages being fixed, this would not bode well.

by J.C. | 18th Oct 23, 4:33pm 1697600012

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.

by Independent_Observer | 18th Oct 23, 4:33pm 1697600037

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)

https://fred.stlouisfed.org/series/T10Y2Y

by Independent_Observer | 18th Oct 23, 4:47pm 1697600833

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.

by Crazy Horse | 18th Oct 23, 5:14pm 1697602499

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.

by Nzdan | 18th Oct 23, 5:20pm 1697602845

$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.

https://gasprices.aaa.com/?state=CA

by Independent_Observer | 18th Oct 23, 5:35pm 1697603717

"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.

by Flying high | 18th Oct 23, 8:45pm 1697615104

The 1965 chart onwards shows we haven’t been this far down since 1980-83,

can you also do some great depression analyses IO. From an historical viewpoint the 1920s decade has a lot of similarities with 2020s

by Independent_Observer | 18th Oct 23, 4:41pm 1697600506

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

by JimboJones | 18th Oct 23, 5:10pm 1697602211

The market is predicting higher rates than we had last decade, but not as high as we have today. Seems like a good outcome if it ends up that way.

by Independent_Observer | 18th Oct 23, 5:23pm 1697603025

Not sure I follow your reasoning but open to your explanation if you have one - re what the market is predicting.

by powerdownkiwi | 18th Oct 23, 5:41pm 1697604088

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?

by Independent_Observer | 18th Oct 23, 5:58pm 1697605087

Good points pdk - perhaps our egos like to think that we know more about what is going on than what is really the case.

by Flying high | 18th Oct 23, 8:52pm 1697615562

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

by the Joneses | 19th Oct 23, 7:30am 1697653802

Yeah and there are way more ants than people too, so that means, um, er, that is a fact also...

by powerdownkiwi | 19th Oct 23, 7:30am 1697653811

How many spruiker trolls does that equate to?

by J.C. | 18th Oct 23, 4:49pm 1697600961

Gold in Kiwi pesos hit a new high and almost moved across NZD3,300. Consistent with the Ashley Church 7-10 year theory at the moment.

by J.C. | 18th Oct 23, 5:36pm 1697603803

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…

by JimboJones | 18th Oct 23, 5:36pm 1697603808

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.

by Te Kooti | 18th Oct 23, 5:42pm 1697604170

A lot of these won't be missed but I'm not sure how you contract out of Te Tiriti via referendum, it might actually be entertaining to see them try.

by Three Veg | 18th Oct 23, 5:58pm 1697605122

Reinventing what the Treaty means should be left to the professionals.

by Te Kooti | 18th Oct 23, 6:06pm 1697605575

If we are throwing away contracts, statutes and case law, perhaps we should have a referendum on Peter's title to any property he owns

by MLSmith1 | 18th Oct 23, 7:31pm 1697610676

You must be aware all law is made by man; and in that, it’s subject to his will….

Some laws have universal truths… Te Tirity is not one of them!

by powerdownkiwi | 18th Oct 23, 7:57pm 1697612273

I'm guessing Te Kooti is of sizeable stature?

So much cake, so much eating too...

by kiwikidsnz | 18th Oct 23, 6:23pm 1697606581

It's the "professionals" who got us into this. Starting with Geoffrey Palmer & Justice Cooke.

by profile | 18th Oct 23, 6:09pm 1697605785

Contracting out of Te Tiriti via unaccountable activist judges doesn't seem like cricket.

by kiwikidsnz | 18th Oct 23, 6:26pm 1697606814

...because appeasement and blackmail have such a long track record of historical success ?

Time to call the bluff of the Thugs Veto pronounced by Shaw & Tamihere the day after the election. Just remember who started it.

by JimboJones | 18th Oct 23, 6:43pm 1697607790

When was the last time you were affected by the treaty? And was it significant or just annoying? Why have a referendum that could cause significant unrest? There just seems to be no logic at all.

by jeremyr | 18th Oct 23, 7:18pm 1697609938

Because it’s necessary. No pain no gain.

by JimboJones | 18th Oct 23, 8:54pm 1697615645

Ok can you have the pain, I don’t want it, the treaty doesn’t affect me in the slightest. I wish I’d taken a photo of my voting slip I could blow up and put on my front lawn when the war starts.

by kiwikidsnz | 18th Oct 23, 7:22pm 1697610130

‘There are no Principles of the Treaty. Only the Articles”.

Winston Peters.

by profile | 18th Oct 23, 7:28pm 1697610506

The last time I saw a referendum that didn't cause "significant unrest" was Saturday. I'm significantly affected by the treaty right now. Equality of Suffrage isn't such a bad idea -why let a few activist judges wreck it?

by Independent_Observer | 18th Oct 23, 5:37pm 1697603876

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.

by HouseMouse | 18th Oct 23, 5:57pm 1697605065

Every now and then T. Alexander talks some sense:

https://www.oneroof.co.nz/news/tony-alexander-dont-be-fooled-by-good-in…

by J.C. | 18th Oct 23, 6:13pm 1697605985

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…

by Rob Reid | 18th Oct 23, 8:35pm 1697614554

I'm sorry, I can only think in trillions these days. So BoA's unrealised losses are 0. No problemo. Everything is fine here. Thx.

by IT GUY | 18th Oct 23, 6:26pm 1697606760

Rates are only going up, the IT contract market has gone nuts in the last 2 weeks, lots of demand projects kicking off, time stands still for no man....

by J.C. | 18th Oct 23, 6:50pm 1697608246

Make hay while the sun shines

by JimboJones | 18th Oct 23, 7:00pm 1697608826

Plenty of other industries are not going up right now.

by Squishy | 18th Oct 23, 6:36pm 1697607374

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.

by J.C. | 18th Oct 23, 7:00pm 1697608814

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…

by IT GUY | 18th Oct 23, 7:00pm 1697608851

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

by kiwikidsnz | 18th Oct 23, 7:11pm 1697609517

Yep. The maximum sentence for manslaughter is life imprisonment. There is no minimum sentence, and sentencing is highly dependent on the judge.

Christchurch teen Mark Nagel jailed for killing stranger with martial arts-style kick outside Ballantynes - NZ Herald

"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."

by IT GUY | 18th Oct 23, 7:20pm 1697610021

we are going to see poor decisions if this continues... people want justice and if they do not see it then bad things are a possible outcome.....

by Averageman | 18th Oct 23, 7:59pm 1697612354

Could the judges either take directive from the new govt based on the new electoral mandate...or retire?

by tis i | 18th Oct 23, 8:03pm 1697612624

Fuck me….

by Chaosinflesh | 18th Oct 23, 8:35pm 1697614554

That's as weak as the home detention sentence for the loon who attacked a walker with a samurai sword, then left him to bleed out on the side of the road.

Some of our judges need to be stood down.

by dumbthoughts | 18th Oct 23, 10:30pm 1697621424

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.

by Nzdan | 19th Oct 23, 6:46am 1697651179

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…

by kiwikidsnz | 19th Oct 23, 8:04am 1697655853

Thanks for that.

by Rob Reid | 18th Oct 23, 8:45pm 1697615156

"The court heard Ohlson had an extensive criminal history, including 15 previous convictions for burglary and some violence offences." And he was on meth.

And we are stuck with this guy.