A review of things you need to know before you sign off on Monday; less trade, more jobs, bigger intervention capacity, mortgage interest cost jumps, swaps firm, NZS holds, & 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
TSB trimmed its two year fixed home loan rate to 6.75%. And that is now the lowest 2yr fixed rate from any bank, matching China Construction Bank.

TERM DEPOSIT/SAVINGS RATE CHANGES
No changes to report today.

LESS TRADE
December delivered a -$323 mln monthly trade deficit. But that was half the December 2022 deficit and just a third of the 2021 deficit for that month. It capped a year that delivered a massive -$13.6 bln merchandise trade deficit, second only to the 2022 -$14.6 bln deficit. All this was done with declining exports (down -4.5% for the 2023 year from 2022), and -5% fewer imports (down -5.0%). But the December decreases were more dramatic, with exports down -8.7% from the same month a year ago, and imports down -12.5%. The fall in December month exports is basically down to a big -16% fall to China. The fall in imports is down to a broader set, led by us buying -40% less from the US, -14% less from the EU, -12% less from China, and -10% less from Australia. Despite all that our imports of petroleum products rose, and quite sharply.

MORE JOBS
Some jobs data out today indicates our labour market is still expanding with surprising strength. Not everyone thinks this will last much longer. Filled jobs were up +3.3% in December from the same month a year ago, and even inched higher than in November. Don't forget we will get the December Household Labour Force Survey results on Wednesday after Waitangi Day, next week. It seems that long-empty positions are finally getting filled, by a fast expansion of labour supply from immigration.

CHANGE IN CURRENCY DEFENCE FUND
The RBNZ's outstanding swap commitments fell in December from November to $12.5 bln, a six month low. But their FX intervention capacity rose a minor +$200 mln to $18.8 bln, a new record high, in nominal terms at least. It is up +54% in a year however, the largest proportionate rise since 2007 and 2008.

HIGHER RATES FORCE REPAYMENT CHANGES
From calendar 2014 to 2020 home loan borrowers paid banks about $11 bln per year in interest on their mortgages. That dropped to $9.5 bln in 2021 then leaped to $12 bln in 2022. But in 2023 it rose far faster, costing $17.7 bln, a +47% surge as interest rate hikes started to bite hard. (RBNZ C35) Despite that, borrowers maintained their strong prepayment buffers. In 2019 they made 82% more in additional repayments that the scheduled amount on the loans (not including full repayments). This rose slightly to 85% in 2021 as interest rates dipped to low levels. But as rates and repayment requirements have risen borrowers have largely held the dollar buffers, but that has let the proportions fall away. In 2023 both were trimmed, with $15.7 bln in extra repayments made and that was just under 60% of the scheduled payments. Still a healthy buffer however. The stress is being reflected more in discretionary retail sales than in mortgage wobbles.

SUPERMARKET SUFFERING
"The trading performance in New Zealand Food has continued to be challenging," Woolworths Australia said in a statement on the ASX. "H1 F24 EBIT expected to be NZ$71 million, 42% below the prior year. The result includes approximately NZ$13 million of costs associated with the transformation of Woolworths New Zealand." Back in 2005 Woolworths bought the Foodtown supermarket chain and booked goodwill of NZ$2.3 bln on the purchase, which will now be written down by -$1.6 bln to NZ$700 mln.

SHADE OVER SUNCORP
Meanwhile, another large insurer is running into rough weather, both literally and figuratively. It will be no surprise that Suncorp is flagging big natural hazard losses. But they have also flagged a gnarly rise in the cost of car claims that they are having trouble dealing with. EVs and electronic cars are much more costly to repair. They don't have this issue on their own. It won't only be climate-related issues that drive insurance premiums higher.

INFLATION EXPECTED TO EASE
On Wednesday, there will be a lot of data released, especially locally. But we should keep an eye on the Aussie monthly inflation indicator for December. Analysts expect that to come in at 3.7% for the month, down from 4.3% in November. It is the sort of progress the RBA will like. They are targeting a rate between 2% and 3%. (And recall, the December quarter CPI in New Zealand came in at 4.7%.)

MOSTLY LOWER
Last week the NZX50 capitalisation fell by -$749 mln to $113.9 bln. The 2024 shift to date has been +$483 mln however. Last week most sectors retreated. But the Food sector rose +3.9% in the week, the telecommunications sector was up 1.0%. All the others fell, especially the Tourism sector which was down -6.5% after a big run-up the previous week. Profiles and updated capitalisations for all NZX50 companies are here.

SWAP RATES HOLD
Wholesale swap rates could be a little firmer today. However, the key reaction will come at the close. Our chart below records the final positions. The 90 day bank bill rate is unchanged at 5.66%. The Australian 10 year bond yield is down -1 bp at 4.23%. The China 10 year bond rate is unchanged at 2.52%. And the NZ Government 10 year bond rate is up +4 bps at 4.78%, while the earlier RBNZ fixing was at 4.68% and down -4 bps from Friday. The UST 10 year yield is now at 4.13% and down -1 bp from where we opened today. The UST 2yr is at 4.35% and so that key inversion is back out to -22 bps.

EQUITY WINNERS & LOSERS
The NZX50 is up +0.4% in light trade while Auckland is on holiday. The ASX200 is also up +0.4% in early afternoon trade. Tokyo has opened up +0.7%. Honk Kong has opened up a strong +1.5%. Shanghai has opened little-changed. Singapore is also little-changed at its open. The S&P500 futures suggest Wall Street might open tomorrow up +0.4%.

OIL HOLDS
Oil prices are unchanged from this morning at just over US$78/bbl in the US while the international Brent price is now just over US$83/bbl.

GOLD FIRMS
In early Asian trade, gold is now at US$2023 and up +US$4 from this morning.

NZD STILL ON HOLD
The Kiwi dollar is now just on 61 USc and marginally firmer than this morning. Against the Aussie we are little-changed at 92.6 AUc. Against the euro we are slightly higher at 56.3 euro cents. That means the TWI-5 is still at just over 70 to start the week.

BITCOIN HOLDS
The bitcoin price has moved down slightly today to US$42,040 and down -0.7% from this morning. There's been modest volatility over the past 24 hours of just under +/- 1.4%.

This soil moisture chart is animated here.

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