A review of things you need to know before you sign off on Friday; credit conditions tighter for some, exports to China fall, NZGB bond tender very popular, swaps hold high, NZD falls, & 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
No changes to report today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

A $1.5 BLN TICKET CLIP
Real estate agency commissions have returned to pre-pandemic levels, and could be in for a period of relative stability. They topped an estimated $400 mln in the September quarter, were more than $1.5 bln for the full year to September.

TIGHTER CREDIT CONDITIONS FOR SOME
The RBNZ released its September Credit Conditions survey report (C60). It reports falling demand for mortgages, firms delaying capital expenditure, ditto because of the impending election, and 'significant' declines in demand for lending for commercial property. Availability of mortgage credit rose but availability for consumer credit fell. Access to credit for SMEs tightened but was unchanged for corporates, and even for commercial property deals.

CAREFULNESS
Apart from tourist activity, expansion in the use of credit cards dried up in September, falling in real terms by the pace of inflation. (C13) So it will be no surprise to learn that the nominal level of balances outstanding rose by very little. In fact the latest data to August shows that less than 53% of all personal credit card balances now incur interest, and while that isn't its lowest level ever, it is close. And by implication, that is not revealing any particular sign of credit stress by households. Just reticence and carefulness.

OUR QUIET DE-RISKING UNDERWAY?
Our September exports were more than -17% lower than a year ago, but that was unusually high back then. From 2021, our 2023 exports were more than +10% higher than two years ago, when those 2021 levels were more than +12% higher than the prior 2020 year. However, a feature of our exports is the tailing off of China as a customer - yes we are diversifying away from China ("de-risking"?). In the year to September 2023 we exported NZ$19.3 bln (27.2%) of our NZ$70.4 bln total exports to China. In the prior 2022 year that was a 29.2% share. The shift is happening faster more recently. September's exports to China were more than -20% lower than a year ago.

BUT NO TRADE DEFICIT IMPROVEMENT
But we are importing a lot less from China too. At the same time we are importing more from Australia, Japan, the US and Korea. So while we may be de-risking from Chian, we are up-risking to those other four main destinations. The consequence was that our merchandise trade deficit in September was little-changed in September 2023 from either 2022 or 2021 at about -$2.3 bln for the month. We may have record exports, but we also have record imports, and for the year to September a near-record -$15.3 bln merchandise trade deficit. (The record was set in the year to May 2023.)

THE POSTPONED NZGB TENDER WAS VERY POPULAR
But few investors won anything. Yesterday's busted Government bond tender (#880) which was postponed because of a technical failure took place today. And there was huge demand. $500 mln was offered in three maturities. $1.75 bln in 126 bids chased this $500 mln. Only 26 bids won anything. The May 2026 $200 mln went for 5.43% yield to just 3 successful bidders. That was up from a yield of 5.20% five weeks ago when that bond was last offered. The $200 mln May 2034 bond went for 5.59% to just 9 bidders, up from 5.31% three weeks ago. The May 2041 bond went for 5.76%, up from 5.17% five weeks ago.

FREE PASS
Nominations for the by-election in the Port Waikato electorate closed today. Labour, the Greens and ACT all decided not to contest it. NZ First is the only party in Parliament to challenge National. It will almost certainly result in one more National list candidate in Parliament, by overhang because Andrew Bayly should romp in (if the General Election result is any indication). All the tiny conspiracy parties are taking their opportunity however, so it is likely to be a weird process.

FONTERRA'S PERFORMANCE REVIEWED
The DIRA Act 2001 requires Fonterra to submit to an independent report on their performance. This was released today. But how 'independent' it really is is open to debate given the reviewer (Northington Partners) is selected and paid by Fonterra. But despite that it is a useful review for Fonterra watchers. And there is Government oversight of these reviews, sometimes intense. It is a worthwhile a read.

STABILISING
In China, they held lending rates steady at the October fixing, as widely expected. The one-year loan prime rate (LPR), which is the medium-term lending facility used for corporate and household loans, was left unchanged at a record low of 3.45%; and the five-year rate, a reference for mortgages, was maintained at 4.2% for the fourth straight month. This decision came amid growing signs that the Chinese economy is stabilising.

JAPANESE INFLATION EASES
In Japan, their CPI inflation rate fell to 3.0% in September from 3.2% in August, the lowest level in a year.

EMERGENCY CAPITAL REQUIRED
The RBA released its Annual Report today and it reported huge financial losses from its extraordinary pandemic stimulus measures that have blown out to about AU$43 bln and sunk its balance sheet deeper into negative equity. See page 191. (The RBNZ released its Annual Report on October 12, 2023, and it retained little-changed net worth levels. See page 101.)

SWAPS HOLD HIGH
Wholesale swap rates have probably held high today after the moves in benchmark bond rates globally. 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 5.66% and now only +16 bps above the OCR. The Australian 10 year bond yield is unchanged from this time yesterday to 4.77%. The China 10 year bond rate is up +1 bp at 2.75%. The NZ Government 10 year bond rate is down -1 bp at 5.66% from yesterday, but still above the earlier RBNZ fixing of 5.55% which was up only +6 bps today. The UST 10 year yield is unchanged from this time yesterday at 4.95% after getting as high as 4.995%. It almost got to 5% earlier, just a whisker shy. Generally rate inversions are unwinding.

EQUITY VALUES REACT TO HIGH YIELDS
The NZX50 is down -1.0% in late trade today taking the weekly drop to -2.2%. The ASX200 is down a sharper -1.4% in afternoon trade, and heading for a -2.4% weekly drop. Tokyo has opened down -0.7% and it that holds will also be down -2.4% for the week. Hong Kong has opened down another -0.8% on track for a weekly -3.7% retreat. Shanghai has opened down -0.2% and on track for a -3.0% fall if that holds. Wall Street closed down -0.9% on the S&P500 in Thursday trade earlier today and is down -1.2% for their four days so far this week.

GOLD RISES FURTHER
In early Asian trade, gold is now at US$1974/oz and up +US$25 from this time yesterday. Earlier in New York it closed at US$1974/oz, and earlier still in London it closed at US$1954/oz.

NZD WEAKER YET AGAIN
The Kiwi dollar has slipped -30 bps since this time yesterday and now at 58.2 USc. That is its lowest since early November 2022. Against the Aussie we are down -¼c at 92.3 AUc. Against the euro we are softer by -40 bps, now at just on 55.1 euro cents. That means the TWI-5 is down another -30 bps at just on 68.4. That is down -80 bps in a week. Commodity currencies are out of favour when risk is 'off'.

BITCOIN INCHES UP
The bitcoin price is marginally firmer again today, now at US$28,606 and up +0.7% from where we were at this time yesterday. And volatility over the past 24 hours has been moderate at just over +/- 2.6%.

NZ ON HOLIDAY
It is a long weekend holiday in New Zealand now. Monday is Labour Day. This report will return on Tuesday, but we will keep you up to date with the global changes and analysis over this full weekend.

This soil moisture chart is animated here.

Keep abreast of upcoming events by following our Economic Calendar here ».