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 RATE CHANGES
ASB changed rates today. More here. That only leaves Kiwibank unchanged among the majors. China Construction bank raised rates too, as did Resimac.
TERM DEPOSIT RATE CHANGES
ASB also change their TD rates as well, matching ANZ. HSBC, SBS Bank and Nelson Building Society (NBS) all also raised their term deposit offers
STILL VERY STRONG JOBS MARKET, JUST LESS SO
Employment confidence fell in the June quarter, the first decline in two years. Perceptions about current job opportunities continued to strengthen, but earning growth and job security were more subdued.
NZGBs YIELD 4% NOW
There were two well-supported NZ Government bond tenders today raising $200 mln. The $100 mln April 2025 attracted $305 mln in bids from 33 bidders. 15 won something at an average yield of 3.66% which was up from 3.53% two weeks ago. The May 2032 $100 mln attracted $275 mln inn 32 bods and 9 bidders won something at an average of 4.00%, up from 3.87% two weeks ago.
ON TRACK FOR A NEW RECORD
Fonterra raised its milk price forecast for the new 2022/23 season by +50c to a mid price of $9.50/kgMS within a wide $8.75-$10.25 range. They also raised their earnings forecasts, although gave no guidance on a changed dividend level (currently 20c). Analysts forecasts and payout history are here.
FEWER SALES. HIGHER PRICES
Fewer farms are being sold but their prices are higher than a year ago. The latest rural property report from the REINZ shows 403 farms were sold over the three months to the end of May, down -11% compared to the same period of last year. But their All Farm price Index, which adjusts for changes in the mix of sales by farm types, size and location, was up a whopping +31% over the same period.
SHARPLY FEWER SALES
Lifestyle block sales have declined sharply compared to a year ago, with 1743 sales in the three months to May, down -32%, said the REINZ.
PAYMARK ANNUAL PROFIT UP 13%
Paymark Ltd, now owned by France's Worldline SA, posted a 13% rise in 2021 profit to $20.947 million from $18.546 million in 2020. Operating revenue rose 11% to $81.315 million, and operating expenses increased 14% to $40.928 million. Paymark paid $11 million in dividends, down from $18 million in 2020.
NERVOUS KIWISAVER INVESTORS
ANZ Investments is urging KiwiSaver members not to panic about the sell-off in global financial markets and instead focus on their long-term investment goals. They are getting an increase in members reaching out to them through their contact centre or via social media channels. During the last week alone, ANZ saw the same number of interactions via our social media channels as for the whole month of May. Call volumes are currently about 20 per cent higher than usual. “But it is important investors remember that financial markets do go up and down," they say. “If we step back for a moment and focus on the long-term, which is what investing in KiwiSaver is all about, history tells us that markets recover - some faster than others, but they do recover.”
ELLISON MOVES ON TO THE SBS BOARD
SBS announced that Phil Ellison will be joining the SBS Bank board in July. He has been the CEO of SBS subsidiary Finance Now for the past 22 years, during which Finance Now has grown significantly and delivers major earnings.
NEAR THE EDGE
Australian digital broker Stake is offering Kiwi retail investors Stock Lending. With Stock Lending, Stake investors earn passive income on the US stocks they hold on their platform by allowing them to be lent out through the securities lending market. Securities lending is when a security is lent to a borrower to enable practices such as shorting, stock arbitrage, index and ETF trading or hedging, and the borrower pays a fee, similar to an interest payment for borrowing cash. (Naked short selling is not legal in New Zealand. But shorting using borrowed stock may not be illegal. Always check. For example, you can't short sell Fonterra or LIC. Check every other situation.) This new Stake feature doesn't apply to NZ equities.
EXPOSED
The FMA says there appear to be shortcomings in the cyber resilience and operational systems among entities it licenses, including underinvestment in technology and the use of unsupported or legacy systems.
STUNNING RISE
As at March 2022, per capita net wealth in Australia rose to AU$575,000 (NZ$635,000) according to their national accounts update. That is a +35% increase since the start of the pandemic, almost all driven by asset price inflation (house prices and superannuation balances). That totals almost AU$15 tln. But as fast as it rose, it might be under threat now.
SWAP RATES FALL
We don't have today's closing swap rates yet but they probably fell, although our in-day monitoring of short rates isn't perfect so this comment is tentative. Treat with caution. The 90 day bank bill rate is down -2 bps at 2.78% today. The Australian 10 year bond yield is now at 3.84% and down another -17 bps from where we were yesterday. The China 10 year bond rate is now at 2.79% and -1 bp lower. And the NZ Government 10 year bond rate is now at 4.01%, and down -19 bps from this time yesterday and still lower than the earlier RBNZ fix for this bond which was down -20 bps at 4.02%. The UST 10 year is now at 3.16% and down -11 bps.
EQUITY PRICES MIXED BUT NZ50 UP STRONGLY
Wall Street ended its Wednesday trading marginally lower with the S&P500 down -0.1%. Tokyo has started its Thursday session flat. However Hong Kong is up +0.6% in early trade. Shanghai is up +0.4%. The ASX200 is trading in early afternoon up a minor +0.2% but the NZX50 is up a strong+1.1% in late trade ahead of the holiday. It's a rise led by Contact, Chorus, Auckland Airport and F&P Healthcare.
GOLD FIRMS
In early Asian trade, gold is up +US$7 from this time yesterday at US$1834/oz.
NZD SOFTER
The Kiwi dollar is -20 bps lower than this time yesterday, now at 62.7 USc. Against the AUD we are holding at 90.8 AUc. Against the euro we are -60 bps softer at 59.3 euro cents. That all means our TWI-5 is now down -40 bps at 70.5.
BITCOIN STILL JUST ABOVE US$20,000
Bitcoin is now at US$20,354 and virtually unchanged from yesterday's US$20,480 and a mere -0.6% below that level. Volatility over the past 24 hours has been moderate at +/- 2.8%.
MATARIKI
We will not be publishing this review tomorrow because it is a public holiday in New Zealand (Matariki). We will be publishing normally on Saturday.
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44 Comments
Bloomie does an analysis of the economies most at risk of their housing market bubbles being pricked.
NZ comes out on top.
In the Bloomberg Economics analysis, housing markets in New Zealand, the Czech Republic, Australia and Canada rank among the world’s bubbliest and are particularly vulnerable to falling prices. Portugal is especially at risk in the euro area, while Austria, Germany and the Netherlands are also looking frothy.
https://www.bloomberg.com/news/newsletters/2022-06-22/what-s-happening-…
Bloomberg have published substantially the same article repeatedly over successive years. Here is a last year's version:
https://www.bloomberg.com/news/articles/2021-06-15/world-s-most-bubbly-…
Much like most economists warnings at this point, eventually one day be proven right, but by then their analysis won't help anybody.
Much like most economists warnings at this point, eventually one day be proven right, but by then their analysis won't help anybody.
What they will do is simply update their analysis to see if there are any changes. I'm not saying that Bloomie's analysis is correct or even that there is a bubble. You have to decide that for yourself.
In rural areas, yes, but those properties are worth less than €1 in real terms because maintenance, rates, utilities etc. cost money and there is no demand at all due to population decline. Same in Japan, go a couple of hours outside of a major city and you'll find houses are worth nothing.
In both those cases what typically happens is when the owner dies the inheritors of the estate don't want to assume the liability so possession passes to local government. Local government don't want it either so they dispose of it by auction.
ANZ Investments is urging KiwiSaver members not to panic about the sell-off in global financial markets and instead focus on their long-term investment goals. They are getting an increase in members reaching out to them through their contact centre or via social media channels.
Their "Conservative" fund is down 4.5% over the last 12 months in NZD terms! I'd be pretty unhappy as well. Any business that accepts fees to manage funds have to take it on the chin when they make a serious mistake.
Even if markets were to stay flat from now until the end of the year, KiwiSaver yearly returns will probably still keep on falling. There was a bit of a peak towards the end of last year, so the peak to trough figure latter this year could be a nasty shock for some.
The problem with so-called "conservative" funds is that in many cases bonds are a major portion of them, and bonds are not always and necessarily all that "conservative" (especially in an environment where surprises on the upside regarding interest rates are quite likely, and maybe this is still not fully priced into existing bonds values). Moreover, when it comes to international bonds there are currency hedging issues to consider. Unfortunately there are financial advisors who tend not to stress these points, for the lack of better words.
Bonds tend to have less volatility than shares (in the short term) but this does not mean that they are exempt from fluctuations, in some cases potentially significant.
Kiwiwealth's cash fund is currently outperforming their default conservative by over 4% YoY.
While taking the long term view is commendable, it's worth remembering that the current downturn isn't a temporary departure from an otherwise sustainable trajectory, to which we can expect it to return. It's a reversion to the mean, from unprecedented heights.
Unless your long term view can be measured in decades, it may be prudent to consider return of capital rather than return on it.
Winter of discontent redux.
https://www.sunlive.co.nz/news/296730-transpower-issues-power-cut-warni…
'The great things about the Westpac survey is the long run of data. And over 35 years of data - including two v nasty recession - the medium-term econ outlook of households is now bleaker than it has ever been.'
Wages earners are about to be thrown under the bus globally:
Bank shareholders are first in the rank for return on capital while bank depositors are just unrewarded, unsecured bagholders.
Lest we forget :
According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.
But as the head of the ECB recently sneered - "We Should Be Happier To Have A Job Than To Have Savings" But not too much GDP.
The majority of bank credit creation in the UK (same in NZ) is not even used for transactions that contribute to and are part of GDP, but instead is used for asset transactions. They are not part of GDP, since national income accountants require a ‘value added’ for inclusion in GDP, not just the shifting of ownership rights from one person to another. When bank credit for asset transactions rises, asset prices are driven up, because the loans do not transfer existing purchasing power, but instead constitute an increase in net purchasing power: money is being created and injected into asset markets. When a larger effective demand for assets is exerted, while in the short-term the amount of available assets is largely fixed, the price of assets must rise. Link
The Barfoot & Thomson auctions this week have been a bit lacklustre as expected. I like to study those that had bids but were passed in.
Some expensive properties getting bids that are a million or so below RV.
I've been tracking one house that passed in for 920k on 8 June now advertised for offers over 900k.
Some houses have been passed in yet the owners had made 100k a year since they bought them. That's bold of them I think.
A couple of quite nice mid range houses in pleasant areas sold for their current RVs.
ray white sold this at auction this week for $1.1M . 46Alfred street Onehunga, QV $1.6m
https://www.raywhite.co.nz/auction-results/
scroll down to the bottom of page 1
https://www.qv.co.nz/property-search/property-details/246520/
check out what was paid for it. very little profit here.
Yes I'm expecting to see more of this. A return to early 2020 prices when the pandemic started.
The B&T North Shore auction looked to be particularly dismal today. 16 properties, one sold under the hammer, one sold later, one withdrawn and the rest all passed in without a single bid! That's quite remarkable. Nothing for me to study.
On the homes website it reached close to 1.8m estimate in April 22. That is a vertiginous drop. 1.8m to 1.1m in two months!
https://homes.co.nz/address/auckland/onehunga/46-alfred-street/PakwX?gc…
That’s amazing. Undoubtedly reached those heights because of its decent sized section and THAB zoning. But it’s in a crappy corner of Onehunga near industry, and THAB zoning is about to become much more prevalent.
it’s also too narrow for decent redevelopment, at around 15 metres.
someone previously paid way over the odds!!! Probably got caught up in all the hype.
Market has changed quickly. Start of this year my place was worth 2 million. I would have been happy to borrow 1, giving me a 3 million budget.
Today my place is worth 1.6 million. Further I am borrowing money at 6% instead of 3% so I am willing to only borrow 500k. My new budget is 2.1.
People who want yesterday’s prices today are delusional.
Those 10 yr swap rates have really backed up in the last few days. A wild ride on the 5 to 10 year range. Some are now picking the rates to fall again in a couple of years. Who knows, I dont. Maybe central banks should have a fixed 2.5% OCR giving balance to savers and borrowers, and just accept the ups and downs of the economy. Would be interesting. A permanent 5.5% mortgage rate and 4% TD rate with 2.5% inflation. There you go, easy.............Have a good weekend all.
The last one I saw was here: https://www.interest.co.nz/property/116439/falling-house-prices-more-of…
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