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
None here again today,
TERM DEPOSIT/SAVINGS RATE CHANGES
SBS Bank has launched a new 6.40% nine month term deposit effective tomorrow. That is up +35 bps from their prior nine month rate and is the highest carded rate from any bank for any term (although PIE rate offers may give you higher effective comparable yields). We are expecting more rate rises on Monday too.
FHB PROSPECTS IMPROVE
Home loan affordability is slowly but steadily improving for first home buyers. That is because of small declines in mortgage rates, static house prices and rising incomes. If there are tax cuts next week, they will help too.
WEAK SENTIMENT BRINGS LOWER INFLATION EXPECATIONS
The ANZ-Roy Morgan consumer confidence survey lifted slightly in May. As they said, " ... perhaps as the shock of the “recession” headlines wore off somewhat. That said, 84.9 is a very weak level, with the historical average sitting above 110. Possibly also contributing to the lift in confidence, inflation expectations eased from 4.4% to 3.8%, the lowest read since October 2020. Expected house price inflation eased from 3.5% to 3.2%."
STILL FALLING HARD
The carbon price is now down to NZ$45/NZU, a -38% drop in a year.
TWO NEW DIRECTORS FOR HEARTLAND
Heartland Group Holdings, which recently completed the acquisition of Australia's Challenger Bank, has named two new independent directors. The first is Robert Bell, the founding CEO of digital bank 86 400, who has also worked at Cuscal, Australia Unity Bank and ANZ, and is a director of HFC Bank. The second, Simon Beckett, has worked for Wells Fargo, GE Capital and Cerberus Capital and is a director of ORDE Financial. He's described as having "deep M&A experience."
NO MATERIAL PROGRESS
April exports fell faster than April imports, but we still managed to post a goods trade surplus - of a tiny +$91 mln for the month. But that was less than half the April 2023 level, which itself was less than half the April 2022 level. So the track is all wrong. For the year to April, the trade deficit in goods was -$10.2 bln, only exceeded by the equivalent 2023 result (which was a massive -$17 bln deficit). In the five years prior to the pandemic, these annual deficits averaged just -$3.8 bln, so we are not making any progress in paying our way in the world. Until we can achieve that, resource allocation in New Zealand will be a zero-sum game. And fewer winners, more losers.
CLEANOUT
The Climate Change Commission Chair, Rod Carr will retire at the end of his term later this year. Commissioners Catherine Leining and Professor James Renwick will also leave the Commission this year at the conclusion of their terms, which have been extended until appointments are made. There are currently eight Commissioners.
STABLE BORROWING
14.5% of the 15,722 new mortgages in April were to first home buyers, about the same level in each of the first four months of 2024, similar to the average for 2023, but much more than the average in any period prior over the past ten years. 13.8% of them were to investors, a rising level and back to early 2021 levels. The average mortgage for FHBs was $555,000, roughly the same as it has been for three years now. For investors, the average loan size is $545,000.
STABLE BORROWING PURPOSE
One in eight of these new mortgages were where the borrower changed banks. That is the recently stable level. Top-up mortgage lending generated 43% of loan transactions and that level isn't out of the ordinary. Top-up borrowing averages $103,000 per loan. Borrowing for a new home purchase overall now averages $558,500 which is also historically unremarkable.
INFLATION'S RISE TAILS OFF
In Japan, their inflation rate fell to 2.5% in April from 2.7% in March. Their core inflation rate dropped to 2.2% from 2.6%. While these falls were not unexpected, they are the lowest levels since January.
THE DAY-THREE REACTION
The unexpedly hawkish RBNZ MPS has seen some investors re-evaluate their positions and assumptions, especially offshore investors. Three days after the event is starting to give some signals about the drift of those reassessments. Three days after the May 2022 and November 2022 RBNZ decisions which brought chunky rate hikes (+50 bps), investors took the signals and started bidding up one year swap rates. They did something similar after the February 2023 and April 2023 rate hikes. This time of course there has been no rate hike, but they have started bidding up one year swap rates anyway, approaching +20 bps. They seem to be accepting rate cuts are not necessarily the next RBNZ change. Similarly, money markets have scaled back the expected two 2024 rate cuts to now just one at the last meeting of the year. That move has been quick, so after today even that may not be there.
SWAP RATES RISE & QUITE QUICKLY
Wholesale swap rates are likely to be firmer yet again today with echoes from the surprisingly hawkish RBNZ MPS still motivating offshore investors. Our chart below will record the final positions. The 90 day bank bill rate is still little-changed at 5.62%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is up +4 bps to 4.35%. The China 10 year bond rate is now at 2.32% and little-changed. The NZ Government 10 year bond rate is up +3 bps to 4.83% from this time yesterday and the earlier RBNZ fix was at 4.78% and up +3 bps from yesterday. The UST 10yr yield is unchanged from yesterday at 4.47%. Their 2yr is now at 4.92%, so the curve has shifted out marginally to -45 bps inverted.
EQUITY MARKETS RETREAT
The NZX50 is ending today down a full -1.0% and if it holds that, there will be no gain for the week (or loss). The ASX200 is down another -1.1% in afternoon trade and heading for a similar weekly retreat. Tokyo is down -1.2% in late morning trade. Hong Hong has retreated again, down another -1.1% and Shanghai is unchanged in early trade. Singapore has opened down -0.5%. Wall Street ended its Thursday session down -0.7%.
OIL EASES SLIGHTLY
The oil price is a touch lower from this time yesterday, now just under US$77/bbl in the US, while now also now at just over US$81/bbl for the international Brent price.
GOLD RETREATS FURTHER
In early Asian trade, gold has retreated another -US$34 from where were yesterday, now at US$2334/oz.
NZD HOLDS
The Kiwi dollar has slipped -10 bps to 61 USc today as things settle further. Against the Aussie we are firmer at 92.4 AUc. Against the euro we are unchanged at 56.4 euro cents. This all means the TWI-5 is now at 70.3 and little-changed.
BITCOIN EASES FURTHER
The bitcoin price has slipped again, now to US$67,741 and down another -2.9% from this time yesterday. Volatility of the past 24 hours has been moderate at +/- 2.7%.
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