A review of things you need to know before you sign off on Thursday; Crown accounts confirm deficits, fewer job ads, BNZ posts record profit, huge NZGB demand, swaps lower, NZ stable, & 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
Heretaunga Building Society bumped up its 2 year rate today

TERM DEPOSIT/SAVINGS RATE CHANGES
No changes here today. But we should correct one item from yesterday. After SBS Bank's ending of their 6.70% one year offer, the next best is the 6.30% from Heartland Bank who can pay interest quarterly compounding. The Rabobank 6.30% is only available at maturity.

THE EXPECTED NEGATIVE START
The Crown accounts for the three months to September reveal OBEGAL in deficit by -$2.5 bln which was lower than the -$2.7 bln forecast. That improvement was attributed to slightly higher taxes on companies. But they were in fact marginally less in $ terms than the same period a year ago (just a bit more than expected). On the other hand, taxes on individuals were up +6.0% from a year ago. (A year ago they were up +14.7% year-on-year, so the impulse is waning.) GST was up +6.3% year-on-year in September although that was the expected gain. When you apply generally accepted accounting principles to the Crown accounts, the three month loss was -$3.9 bln, and more than the -$3.5 bln forecast. Net debt was 18.0% of GDP at June 2023, but has risen fast to 20.6% of GDP (a rise to 19.1% was expected in the PREFU).

DOWN SHARPLY
The downtrend in job ads embedded in October. The BNZ/Seek data shows it was down -5.6% from September and down -29% from a year ago. These are not small changes. But staffing intentions in business community – looking out 6-12 months or so – has perked up over recent months, so it is possible election uncertainties played a part in the October backpedaling.

HEARTLAND SAYS AUSSIE ACQUISITION PROVING COMPLEX
Heartland Group Holdings CEO Jeff Greenslade says the regulatory process around Heartland's proposed acquisition of Australia's Challenger Bank is proving complex. Speaking at Heartland's annual meeting, Greenslade said a NZ bank buying an Aussie bank and integrating existing businesses, is a novel process on both sides of the Tasman. He cited "a range of technical issues to resolve" across the two jurisdictions. Applications are with regulators on the basis of Heartland Bank becoming the owner of Challenger Bank, under which Heartland’s existing Australian businesses will be held. Greenslade said he's hopeful of receiving in principle approvals prior to Christmas or if not, early in 2024, to be followed by completion as soon as practicable. Meanwhile, Heartland's 2024 financial year guidance is for net profit after tax of between $116 million and $122 million, excluding any impacts of fair value changes on equity investments held, the impact of the dedesignation of derivatives, and any costs related to the acquisition and integration of Challenger Bank. The guidance doesn't include the impact of Challenger Bank becoming part of Heartland. The Heartland Group's 2023 profit came in at $95.9 million.

CRO STEPS DOWN
Kiwibank today announced that after nine years with the bank, Liz Knight will step down as Chief Risk Officer on 1 December 2023.

FONTERRA STEPS UP
Fonterra is setting its climate goals specifically now and says it will target a 30% reduction in greenhouse gas emissions per tonne of milk it collects.

BNZ OUTSHINES PARENT
BNZ has reported a record annual profit for the year to September, topping $1.5 bln as their net interest margin (NIM) widened sharply to an impressive 2.4% from 2.15% a year ago. Parent NAB only posted a NIM of 1.74% (including the BNZ result). But their second half was lower than their first half, even if only marginally.

BOND TENDER AWASH IN OFFERS
131 bids worth $2.0 blm were staked for the $500 mln NZGBs on tender today. Ten bids won the May 2030 $175 mln at 4.92%, down a sharpish -27 bps from one week ago. 17 bids won the May 2032 $225 mln at 4.98%, down -36 bps from 4 weeks ago. And just seven bids won the April 2037 $100 mln at 5.14%, up +1 bps from eight weeks ago. That leaves $1.5 bln in cash on the table unsatisfied and looking for a home.

TOP FARMERS HUDDLE IN NZ
Twenty-eight farmers from five continents and 12 different countries will soon spend 10 days in New Zealand taking part in the latest Rabobank Global Farmers Master Class (GFMC) – a state-of-the-art agri learning program established in 2012 to bring together leading farmers from around the world to address global food security. Things will kick off in Hamilton on November 27 and finish in Queenstown on December 6. The master class’s content-dense program will feature presentations from top agricultural thinkers and business experts, interactive workshops and case studies, as well as visits to a range of flagship agribusiness operations in both the North and South Islands.

CRUDE PRICES STABLE. PUMP PRICES HIGHER
Today we updated our petrol price charts and they tell an interesting story. In NZD, crude oil costs last week were -4.8% lower than a year ago, -6.6% lower than its end of September peak. Despite that, pump prices (outside of Auckland were $2.83/L which was +18.9% higher than a year ago although down -5.4% from the September peak. That raises the question - why are pump prices higher in a year when crude oil prices are lower? The oil company component is little changed. But the taxes we impose on ourselves are very much higher, up 26.9% from a year ago and down only -1.2% from the September peak. Given that taxes make up nearly half of the pump price, this is the primary reason pump price relief is so low from lower crude prices.

DEFLATION EMBEDS AGAIN
China slipped fully into deflation in October with consumer prices -0.1% lower than in September and -0.2% lower than in October a year ago. Neither levels are in themselves important, but the trend is.

CHINA'S PPI DEFATES TOO
Meanwhile, Chinese producer prices (PPI) remained -2.6% lower in October from a year ago, although these prices were unchanged from September. So perhaps the deflationary forces are running out of steam in China's factories. But they are not out of the woods yet. These pressures are still severe and perhaps one reason Beijing has reverted to imposing a fixed (to the USD) exchange rate. Even when goods from China are sold in CNY, they are priced first in USD, making the claims that the CNY/CNH is rising a bit hollow.

SWAPS STILL SHIFTING LOWER
Wholesale swap rates have probably eased back again today. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is down -1 bp at 5.62% and now just +12 bps above the OCR. The Australian 10 year bond yield is down another -8 bps from yesterday to 4.51%. The China 10 year bond rate is little-changed at 2.67%. And the NZ Government 10 year bond rate is down another -8 bps at 5.10% from yesterday, and the earlier RBNZ fixing was at 5.08% which was down -7 bps today. The UST 10 year yield is down at 4.48% and down -10 bps from this time yesterday. The UST 2yr is now at 4.92% and down -2 bps, so that curve inversion has deepened to -44 bps.

EQUITIES MOSTLY FIRMER
The NZX50 is up +0.3% in late trade today. The ASX200 is up +0.6%. Tokyo has opened up +0.9%. Hong Kong is down -0.2% at its open. Shanghai has opened up +0.1%. Singapore is +0.4% higher at its open. Wall Street ended its Wednesday session up a minor +0.1% is confused trade today.

GOLD DOWN AGAIN
In early Asian trade, gold is now at US$1952 and down -US$16 from where were this time yesterday. Earlier it closed in New York at US$1950/oz. Earlier still it closed in London at US$1959/oz.

NZD STABLE
The Kiwi dollar has moved -10 bps lower to 59.2 USc. But against the Aussie we are +20 bps firmer at 92.3 AUc. Against the euro we are a little softer at 55.3 euro cents. That means the TWI-5 is little-changed at 69.

BITCOIN FIRMS FURTHER
The bitcoin price is firmer again today, now at US$36,001 and up +1.7% from where we were this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.3%.

This soil moisture chart is animated here.

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