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
Only the Police Credit Union has changes today, trimming its 2 year TD rate to 5.60%
MIGRANTS BUY MORE HOUSES
Migrants made up a record share of house purchases in 2023 with more than 16,000 homes sold to buyers here on residence visas last year. That is the highest number in any year since Statistics NZ started collating the figures in 2017. REINZ reported there were 61,780 transactions in 2023, so that is 25%. (In fact it is likely to be less because not all sales are made though REINZ members, and new houses are often sold direct by the developer.)
FHBs BORROW MORE HOME LOANS
First home buyers have hit an all time high for share of new mortgage advances in December. The latest RBNZ figures show first home buyers picked up over a quarter of the new mortgage monies advanced in the final month of the year - although it was a slow month overall.
STILL HAWKISH
A somewhat hawkish speech by the RBNZ chief economist has put some upward pressure on the NZD, although it looks to have no impact in wholesale interest rates. In this case, 'hawkish' means the RBNZ has signaled it is staying the course to get inflation down and that rate cuts by them are not close yet.
DIRECTOR CHANGEOUT
TSB has announced that lawyer Kate Armstrong will join the bank's Board as a director. Armstrong was recently a senior manager at Westpac. She replaces retiring Kevin McDonald.
SBS BANK ISSUING 10YR BONDS
SBS Bank said it wants to issue up to $60 mln of unsecured, subordinated 10 year debt securities as redeemable shares. The Bonds are expected to constitute Tier 2 Capital for SBS Bank’s regulatory capital requirements. These bonds are expected to be rated BB+ by Fitch, so sub-investment grade. They are unlikely to be cheap funding. (For perspective, BNZ issued $375 mln in Tier 2 bonds in mid 2023 with a 6 year tenor, investment grade, and they were priced with a yield of 7.3%.)
EYES ON DAIRY PRICES
[Update: We got this wrong; there was no dairy auction overnight. It is next Wednesday, February 1, 2024. But there was a GDT Pulse event instead.] There is another dairy auction overnight. The dairy derivatives market is betting that WMP prices will keep on rising, possibly up +4%. And they are betting the stable run for SMP will be broken with a +5% rise for that foodservice product. We'll see.
RETAIL CASUALTY
The New Zealand Vacuum Cleaner Company has today entered Voluntary Administration. The company is part of the Australian-owned Godfreys Group and operates the group’s New Zealand retail stores. Godfreys Group’s Australian entities also entered Voluntary Administration today.
RETAIL WEAKNESS
Australia said that December retail sales were weaker than expected, falling -2.7% from November to be just +0.8% higher than year ago levels. That was the steepest drop since August 2020. This follows a revised rise of +1.6 in November and a fall of -0.2% in October 2023. Meanwhile inflation ran at about 4.3% over the same time, so retail volumes in 2023 shrank about -3.5%.
SWAP RATES HOLD
Wholesale swap rates will probably be little-changed 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 -7 bps at 4.16%. The China 10 year bond rate is down -3 bps at 2.49% and a 20 year low. And the NZ Government 10 year bond rate is down -3 bps at 4.75%, while the earlier RBNZ fixing was at 4.66% and down -2 bps from yesterday. The UST 10 year yield is now at 4.08% and down -5 bps from this time yesterday. The UST 2yr is at 4.33% and so that key inversion is back out to -25 bps.
EQUITY WINNERS & LOSERS
The NZX50 is unchanged in late trade today. The ASX200 is up another +0.4% in early afternoon trade. Tokyo has opened up +0.4% in early trade. But Hong Kong has dived -1.7% at its open giving up all of yesterday's gain and more. Shanghai which fell yesterday is down another -0.7% in opening trade today. (The one corner racing higher are ETFs for offshore companies.) Singapore is up +0.4% at its open. The S&P500 closed on Wall Street in Monday trade up +0.8%.
OIL SLIPS
Oil prices are down -US$1 from yesterday at just over US$77/bbl in the US while the international Brent price is now just over US$82/bbl.
GOLD FIRMS
In early Asian trade, gold is now at US$2031 and up +US$8 from this time yesterday.
NZD FIRM
The Kiwi dollar is now just on 61.4 USc and up almost +½c from yesterday at this time. Against the Aussie we are marginally firmer at 92.7 AUc. Against the euro we are +¼c higher at 56.6 euro cents. That means the TWI-5 is now at just over 70.3 today.
BITCOIN RISES
The bitcoin price is on the move higher today, now up to US$43,506 and a gain of +3.5% since this time yesterday. There's been moderate volatility over the past 24 hours of just under +/- 2.1%.
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38 Comments
Australia said that December retail sales were weaker than expected, falling -2.7% from November to be just +0.8% higher than year ago levels
Food + 0.1%, but h'hold goods down a whopping -8.5% for the month (-3.3% yoy).
This is very bad considering the combined impact of inflation and off-the-richter population growth. This implies a negative impact on real GDP, despite the Ponzi firing on an cylinders. So much for the wealth effect.
Amazon abandons $1.4 billion deal to buy Roomba maker iRobot
Amazon’s deal to buy Roomba maker iRobot is off, the companies announced today, after iRobot said the deal has “no path to regulatory approval in the European Union.” iRobot is also announcing that it’s laying off around 350 employees, or around 31 percent of its workforce as part of a restructuring. It expects to notify the majority of affected employees by the end of March.
https://www.theverge.com/2024/1/29/24034201/amazon-irobot-acquisition-o…
Despite being banned, Chinese flocking to ratty and crypto according to the Japan Times.
China's economic downturn "has made investment on the mainland risky, uncertain and disappointing, so people are looking to allocate assets offshore", said a senior executive of a Hong Kong-based cryptocurrency exchange, who declined to be identified due to the sensitivity of the topic.
Bitcoin and crypto assets have attracted such investors, he said: "Almost everyday, we see mainland investors coming into this market."
As retail investors make a dash for cryptocurrencies, China's brokers and other financial institutions aren't far behind. Starved of growth opportunities at home, many of them are exploring crypto-related businesses in Hong Kong.
https://www.japantimes.co.jp/business/2024/01/28/markets/chinese-rush-b…
Makes sense. Could be a good investment.
It’s a pity that’s what investment has come to. No one wants to start a business or do something productive, the real money is in buying assets before everyone else wants them. And in this case the asset isn’t even productive.
J.C. .....read the JT article ....don't be surprised if the West finally wakes up from their "crypto" slumber of ignoring and/or dissing cryptocurrencies and realise it is the BEST hedge currently against inflation FULL STOP ......and that is the major reason I got into it, as so many out there just don't realise how inflation is just "eating away" any term deposit at the bank, despite these higher interest rates.
Still HODL'g here .....but will trade out of some of my crappy alt coins into ETH - and cut down my tax bill this year !!
Growing number of foreigners, including kiwis, buying property for next to nothing in remote parts of Japan:
https://www.japantimes.co.jp/community/2024/01/29/niigata-airbnb-real-e…
Japanese TV recently did a piece on Niseko and the insane prices foreigners (many Aussies and Kiwis) were paying for food. For example, a bowl of tempura udon noodles for JPY3,500 - similarly priced at JPY700 in the cities. Ski resorts are expensive but the Japanese commentators thought it was outrageous.
It doesn't even have to be that remote. A friend of mine that married a local just built a place in a city of 100k people for about $200k or so. They're mortgage rates are around 2% as well.
Not too far from the nearest big city (Yamagata) which is about 2 hours by car or 3 by train, or a 1 hour flight to Tokyo.
When I last visited a few years back now it was also an affordable place to live, my nice hotel was about $50 a night, and from what he says it still is.
Yup
my wife is from Nagoya (4th biggest city and an economic powerhouse). We both quite like the small city of Inuyama on the edge of Nagoya. Fairly quiet but only 30 minutes by train to central Nagoya. Can get a tidy, new 3 bed townhouse for circa NZ 270k.
Could be an option for us in 5-6 years.
A somewhat hawkish speech by the RBNZ chief economist has put some upward pressure on the NZD, although it looks to have no impact in wholesale interest rates. In this case, 'hawkish' means the RBNZ has signaled it is staying the course to get inflation down and that rate cuts by them are not close yet.
Imagine central bankers as bureaucrats at Chornobyl, thumbing through pages upon pages of design manuals and procedures totally confident they've got everything under control. The unexpected isn't really unexpected; it just isn't in the procedures. check out part of my interview with @hendry_hugh here https://youtu.be/lDNYKsE0UKo Link
A massive new investigation has tied the biggest corporations in America — from Coca-Cola to McDonald's to Walmart — to prison labor. Some prisoners have 30% of their wages taken by the state for room and board, even though they're paid less than $3/hr.
I would not be surprised if we eventually see similar here in the agriculture sector, just less obvious.
https://apnews.com/article/prison-to-plate-inmate-labor-investigation-c…
Du Val dangles NZX listing, seeks debt swap for equity: https://businessdesk.co.nz/article/property/du-val-dangles-nzx-listing-…
Would love to see some investigative journalism on these two and several of the other "high-profile" developers.
I don't hand out financial advice often other than to keep friends and family away from debt financing developers/finance firms (other than securitisation which is generally water tight).
Prima facie, investors here must have given up a lot of their rights to be threatened with convert to equity or 0% interest. Ordinarily a bond/debenture holder would take possession and tip them into administration in this situation.
"First home buyers have hit an all time high for share of new mortgage advances in December. The latest RBNZ figures show first home buyers picked up over a quarter of the new mortgage monies advanced in the final month of the year - although it was a slow month overall."
and
Migrants made up a record share of house purchases in 2023 with more than 16,000 homes sold to buyers here on residence visas last year. That is the highest number in any year since Statistics NZ started collating the figures in 2017. REINZ reported there were 61,780 transactions in 2023, so that is 25%. (In fact it is likely to be less because not all sales are made though REINZ members, and new houses are often sold direct by the developer.)
Was the placement of these two paragraphs fortuitous?
I place the period 2002-2007 as the worst in terms of the housing mess. High migration with quite a high wealth profile and bugger all house building.
I was trying to buy at the time and couldn’t. Super competitive, and with prices jumping year by year the deposit requirements kept jumping higher. No Kiwisaver withdrawal opportunity. And interest rates were climbing each year. It was awful.
Mind you, that period of house price growth was kinda the first in line of gross house price inflation spanning 3 Governments. So no benefit of hindsight as such for the Government. Key and Ardern both had benefit of "housing crisis hindsight" and still did sweet F/A to solve it.
https://www.news.com.au/finance/money/trust-me-anthony-albanese-dodges-…
https://www.news.com.au/national/politics/new-australian-tax-rates-reve…
https://www.news.com.au/finance/money/tax/most-of-the-australians-negat…
Meanwhile in Australia. When will we get an update on the promised tax cuts for the "squeezed middle"?
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