What happened Friday

Economy / news

A review of things you need to know before you sign off on Friday; Foodstuff merger decision delayed again, directors banned, personal loans securitised, thoughts on our foreign loans, swaps firm, NZD unchanged, & more

21st Jun 24, 3:59pm by David Chaston

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 again today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

DELAY EXTENDED
The Commerce Commission has pushed back its decision due date for the Foodstuffs NI/SI merger for a second time due to ‘unresolved issues’, and will now release its final decision in October.

BANNED FOR 5 YEARS
Two former executives of the disgraced MegaUpload.com platform, Mathias Ortmann and Bram van der Kolk, have been prohibited from managing or being a director of any company for five years. In June 2023, the High Court at Auckland sentenced Ortmann and Kolk to two years, seven months and two years, six months imprisonment respectively, after both men were convicted of being part of a criminal group and causing loss by deception for their involvement in illegal reproduction and distribution of copyrighted works. Mega now has Shane Te Pou, the NZ Herald columnist and Labour Party activist, as its "interim" CEO.

SECURITISING PERSONAL LOANS
Latitude Financial securitised $250 mln of personal loan debt with investors today, with the best bits commanding +130 bps over the BKBM 3 year benchmark. That was a 24% chunk. The rest needed 180 to 500 bps premiums to clear.

BEING SPECIFIC
This week's Q1-2024 national accounts also revealed something that many readers may not realise. We noted Wednesday that our net IIP (international investment position) is negative with more liabilities than assets. Most readers will jump to the conclusion that those liabilities are 'loans' - but they are not. Some are just book entries, some trade credit and accounts payable, some SDR liabilities, some financial derivatives, some company 'liabilities' in lieu of shareholder equity. If we just isolate the true 'loans', the situation is very much better. Those are now running at just -9% of GDP, still about the lowest ever (which was -8% in 2021). If you go back to 2000, the highest level of loans due by New Zealand to the rest of the world was -28% of GDP in 2008. That is huge and unheralded progress from then. And that is gross loans. We of course are owed for loans we have made to overseas borrowers. Netting the two, our strict 'loans' position is only -5.4% of GDP.

BANK SHARE PRICES
Perhaps we should note that the share price for CBA ( ASB's parent) has hit a new record high today at about AU$127 and up more than +2% this past week, up more than +12% so far this year. (That compares with ANZ up +12% in 2024, NAB up +17%, and Westpac up +18%.) But it is CBA that is getting the market accolades, probably for its outsized June move.

INFLATION RISES IN JAPAN
Japanese CPI inflation rose in May to 2.8%, up from 2.5% in April. Food was up +4.1%,

THE LIQUIDATION TRAIL
In Hong Kong, four defaulted Chinese developers are headed into court hearings on liquidation demands next week, marking one of the busiest such stretches ever for the sector. They include Kaisa, Shimao, Dafa, and Redsun. If they are in fact liquidated, they will join a number of other high profile defaulters in China's property sector like Evergrande and Dexin. Sunshine is sure to be added to the list as well, and don't forget Country Garden is yet to be resolved. If that too is liquidated that will be another giant to fall. Some of the lenders taking action to get them liquidated are Chinese state banks.

SWAP RATES MAY BE FIRMER AGAIN TODAY
Wholesale swap rates are likely to be a little firmer again today on global forces although that may again be limited to longer terms. Our chart below will record the final positions. The 90 day bank bill rate is unchanged at 5.61%, a level it has hovered around for 110 days now. The Australian 10 year bond yield is up +1 bp from this this time yesterday at 4.28%. The China 10 year bond rate is staying down at 2.26%. The NZ Government 10 year bond rate is up +4 bps at 4.68% from yesterday and the earlier RBNZ fix was at 4.62% and up +5 bps from yesterday. The UST 10yr yield is up +1 bp from yesterday at 4.26%. Their 2yr is now at 4.74%, so the curve is a bit less inverted at -48 bps.

EQUITIES MOSTLY LOWER
The NZX50 is down -0.1% today in late trade. The ASX200 is up +0.2% in afternoon trade. But Tokyo has opened unchanged. Hong Kong has fallen -1.6% at its open, Shanghai has fallen -0.4%. Singapore is up +0.3%. Wall Street has ended its Thursday session down -0.3%.

OIL FIRM
The oil price is up +50 USc at just over US$81/bbl in the US, and just over US$85/bbl for the international Brent price. All this change however was from last night.

GOLD UP
In early Asian trade, gold is firmer again, up +US$25 from this time yesterday at just on US$2359/oz although all that gain was also from last night.

NZD LITTLE-CHANGED
The Kiwi dollar is only marginally softer from this time yesterday, at 61.2 USc. Against the Aussie we are unchanged at 91.9 AUc. Against the euro we are up +30 bps at 57.4 euro cents. This all means the TWI-5 is little-changed at 70.7.

BITCOIN SLIPS
The bitcoin price is down -0.5% from this time yesterday, now at US$64,838. Volatility of the past 24 hours has been modest at just on +/- 1.5%.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

Select chart tabs

Source: NZFMA

This soil moisture chart is animated here.

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

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

41 Comments

by IT GUY | 21st Jun 24, 4:02pm 1718942554

What a week, enjoy the weekend crew and the rugby, Go the Blues!

by Foxglove. | 21st Jun 24, 4:16pm 1718943387

From Canterbury here and hoping Vern Cotter gets his well deserved acclamation with a win here. Always thought he was somewhat patsied in 2011 when they asked him to run against Steve Hanson when the latter was already shoe horned in.

by unaha-closp | 21st Jun 24, 4:35pm 1718944535

Go the Chiefs.

Interestingly, Clayton McMillan was made captain by Vern Cotter at Bay of Plenty.

by General Comment | 21st Jun 24, 4:09pm 1718942996

Shortest day of the year today. The future looks brighter for longer!

by BadRobot | 21st Jun 24, 4:55pm 1718945723

Good to take a walk in the sun today (I'm in Christchurch)

by bw | 21st Jun 24, 4:24pm 1718943882

Didn't see Vanke mentioned above?

https://asia.nikkei.com/Spotlight/Market-Spotlight/China-Vanke-the-post…

by IT GUY | 21st Jun 24, 4:36pm 1718944601

its just another Real estate in China is so totally screwed story.... its screwed everywhere this is USA

Price discovery in commercial real estate, which had been frozen while sellers insisted on prices from the good ol’ ZIRP days, is starting to thaw. Real estate giant Related Companies has unloaded the property at 321 W. 44th St., New York City, for less than $50 million, reports Bloomberg.

Not only is that a 67 percent discount from the nearly $153 million that Related Fund Management paid for it in 2018, but also, the lenders, including Canadian Imperial Bank of Commerce, agreed to a “short sale.” For those who have forgotten 2008 or were too young, a “short sale” is when the lender agrees to a property sale for less than the outstanding amount on the mortgage. The owner loses everything, and the lender takes a large loss. In this case, the repayment to the lenders was more than cut in half as the property’s mortgage exceeded $100 million.

Another recent office building sale had Blackstone and its lender agreeing to sell 1740 Broadway for $186 million. Blackstone Inc. bought the building in 2014 for $605 million.

by bw | 21st Jun 24, 4:35pm 1718944555

And in the grand scheme of "It's always darkest just before the lights go out entirely", are we that much different?

by IT GUY | 21st Jun 24, 4:40pm 1718944851

Our real estate bag holders have not accepted their losses yet..... if avg ALK rents are $650 then Average sale prices prob should be about 500k

without capital gains its only a yield play

by RookieInvestor | 21st Jun 24, 4:44pm 1718945076

Unfortunately that's not NZ anymore, if yield covers rent then investor will gobble it up.

by Pa1nter | 21st Jun 24, 4:59pm 1718945978

Rental yield isn't setting prices, and hasn't for a long time.

by IT GUY | 21st Jun 24, 6:12pm 1718950320

Price discovery in real estate, which had been frozen while sellers insisted on prices from the good ol’ ZIRP days, is starting to thaw.

by Pa1nter | 21st Jun 24, 6:50pm 1718952643

Yeah probably. Less people have less money.

If it's some generic econobox house in a fairly undersirable or poor neighborhood, then the rental yield equation is more relevant than say, some sort of gentrified inner city suburb. Then it's really more a case of how broke your target market is.

Once there is more blood in the floor, then we'll see some more price action all round.

by unaha-closp | 21st Jun 24, 5:46pm 1718948810

Our building industry is cratering and immigration is going to max levels. There is very high chance that rental returns will increase quickly for the next few years.

by Foxglove. | 21st Jun 24, 6:40pm 1718952035

Don’t know. First of all there has to be tenants who can afford the rents. Money is tight now and tightening. There is much yet to percolate out of the mire that was created around the pandemic. People that borrowed and spent for no sound or thoughtful purpose are well and truly on the receiving end now. Just a small indication. I attend a modest gym with a modest subscription. It’s been ticking along well enough for over 15 years. Members are leaving and new members are not arriving. Why? Moneys too tight to mention that’s why. There is a lot of troubled water yet to come to the bridge by my reckoning.

by Pa1nter | 21st Jun 24, 6:52pm 1718952746

They did say "the next few years".

It's grim now, what about in 3 years?

If it stays grim, then we got more problems than rent prices.

by Averageman | 21st Jun 24, 8:21pm 1718958089

Yep. Options... massive asset reset. Or. Make sure you have medicine and bullets. Many under 40 have never known an extended financial reset. Gfc was shortened by Central Banks low rate lifesupport. Unfortunately this just made the gamblers double down. Thus an unrestrained correction would/will be much worse.

Thanks finance ponzi.

by Pa1nter | 21st Jun 24, 8:27pm 1718958455

And so what do you reckon the odds are of an unrestrained correction?

Financial reinvention is the only way they can keep things going.

by Averageman | 21st Jun 24, 10:35pm 1718966109

Shouldn't the question be "what can the vested interests do to keep the music playing"?

by Pa1nter | 21st Jun 24, 10:54pm 1718967291

Most of the population is a vested interest. Unless you're of the opinion those benefitting least from the system will be better off if the system is allowed to fail entirely.

People are naively thinking this is an inflection point whereby things will swing in their favour, when the best case scenario is they might just get halted from becoming significantly worse.

Just so we're clear though, you're saying central banks will just let everything crater, and won't come to the rescue using a debt mechanism?

by Fleeced sheep | 21st Jun 24, 11:18pm 1718968712

The trouble with the "tenants cant afford the rent argument" is that the government keeps handing out subsidies. Some of my best tenants were people that indeed couldnt afford the rent, and 100% of it came direct from work and income. At some point there comes a rebalancing where you get more people under the same roof (theres plenty of people out there that wouldnt have the same govt support offered), but my guess is the potential for lower rents lies surely with effecting the people per dwelling ratio with either/ both low immigration or high new build numbers. Id be keen to hear some insight from some of the more seasoned investors out there from a time rents decreased in NZ. I've not seen it in my 25 years of being a landlord.

by RookieInvestor | 21st Jun 24, 4:40pm 1718944854

Good to see positive comments for once, maybe we are getting close.

by J.C. | 21st Jun 24, 7:29pm 1718954973

Statistical psyops in the US:

Job growth was overestimated by more than 770,000 last year. Put differently, about one in every four jobs that was supposedly added last year never existed. That’s like completely eliminating all of the jobs gained in three whole months of 2023.

https://www.washingtontimes.com/news/2024/jun/19/joe-bidens-job-growth-…

by IT GUY | 21st Jun 24, 7:39pm 1718955567

The risk of a sovereign debt crisis is back

AFR: The financial market volatility induced by the political dramas in France show the world is moving into a new risk regime, writes Christopher Joye.

by J.C. | 21st Jun 24, 8:18pm 1718957903

Chris Joye ruffles feathers. Persona non grata at many neighborhood BBQs.

by ChrisOfNoFame | 21st Jun 24, 9:57pm 1718963824

The authors have dubious track records.

Just sayin'.

by J.C. | 21st Jun 24, 7:32pm 1718955127

JP Morgan reckons the US economy is in a 'selective recession' as lower-income consumers can't cover the cost of living.

Most Americans have likely exhausted the savings they accumulated during the pandemic. Excess savings from the COVID era were probably depleted in March of this year, according to a paper from San Francisco Fed economists. In Primerica's survey, 38% of middle-class respondents said they didn't have a $1,000 emergency fund.

https://unusualwhales.com/news/the-us-economy-is-in-a-selective-recessi…

by Foxglove. | 21st Jun 24, 8:20pm 1718958028

Bloody gloomy, globally. As someone posted here not all that recently - society as we know it, can no longer afford itself.

by Pa1nter | 21st Jun 24, 8:29pm 1718958556

Yep. It certainly seems like there's a huge gap between the lifestyles we think we can afford, and what we can actually afford.

by IT GUY | 21st Jun 24, 9:09pm 1718960993

I was thinking about this the other day, NZ has made so much wealth from property, most have no way to make that sort of cash now, much will change.

by Pa1nter | 21st Jun 24, 9:23pm 1718961835

I was thinking more about the economy and population in general.

If our debt keeps growing, and our economy is 59% consumption, surely that indicates we live significantly beyond our means. So our true standard of living is likely far lower than what some already feel to be too low.

by ChrisOfNoFame | 21st Jun 24, 10:07pm 1718964444

JP Morgan would do well to stop with the weasel word and just tell it like it is ... The middle class is shrinking. And they ain't moving up.

by agnostium | 21st Jun 24, 9:14pm 1718961274

If you want to know why your rates are so high and why it seems council can't be as efficient as you would like I present this bell-end. He knows he hadn't registered his vehicle, he knows the fine is justified, yet because of people like him we have to spend money sending parking wardens out to enforce the rules, he then chewed up council officer time reviewing and preparing the case and then court time being a dick about it.

This tantrum would have cost ratepayers and taxpayers over 10K, he got charged $30, and it happens all the time with almost every decision a council officer or bureaucrat makes, all because old entitled rich people demand they be treated like "customers".

https://www.stuff.co.nz/nz-news/350319244/former-speaker-house-appeals-…

by Pa1nter | 21st Jun 24, 9:31pm 1718962313

Yeah, cause only old people are expensive time sinks of public resources.

by Middleaged | 21st Jun 24, 9:47pm 1718963268

The guy was going to involve the High Court over a ticket which he even admits was justified. Looks like an arrogant self-entitled plonker to me.

by agnostium | 21st Jun 24, 10:00pm 1718964003

Someone should LGOIMA the Council and Courts and request how much staff resource was expended on the issue so he could "feel better about it".

by agnostium | 21st Jun 24, 9:58pm 1718963926

When I worked in local government for a while, I was responsible for two wards, one in a very affluent suburb and the other in a mixed to lower income one. The latter was significantly bigger than the former. The ratio of complaints/cases/issues was about 8:1 for the affluent suburb.

Rich old people are significantly over-presented. Everyone else is either busy living life or focused on trying to make ends meet. Old rich people suck up a significant resource. They also tend to be better connected so can often bypass the standard process and suddenly you're having to investigate and respond to a trivial enquiry because the Board/ELT/local councillor has got involved.

by Pa1nter | 21st Jun 24, 10:09pm 1718964540

Some systems are going to be challenged more by wealthy entitled people than those who think the system's against them, sure.

On the flipside, recently I had to spend some time at an A&E. Person in their 30s rocks up, complains they've been stabbed in the legs (no blood visible). Wanted drugs, failing that, money for transport. Then proceeded to go into the bathrooms and destroy them, came back out and hurled abuse at the staff some more and generally upset most patients in the room. Then they left the building and all the staff were barricaded behind their counter, and locked the exterior doors for 45 mins, meaning no other patients could enter, no current patients being tended to.

So in short, there's douchebags around every corner.

by Frank. | 22nd Jun 24, 8:45am 1719002728

What that story tells us, in short, is that NZ needs EDC laws written urgently.

by Nzdan | 22nd Jun 24, 8:34am 1719002080

"Do you know who I am?"

by Pa1nter | 22nd Jun 24, 8:58am 1719003536

Haha, that's turned into "you don't know me", followed by a list of mental illnesses and what's happened to them.