A review of things you need to know before you go home on Thursday; many rate changes, mixed housing data, huge Crown profit, feeble DIRA reform, swaps hold, NZD firms, & more

A review of things you need to know before you go home on Thursday; many rate changes, mixed housing data, huge Crown profit, feeble DIRA reform, swaps hold, NZD firms, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
There are a number of changes announced today. China Construction Bank have split their rates so they can show 'specials' and standard rates separately. TSB has announced lower one and three year 'specials' but these are not as low as their price-match promise rates. ICBC has decreased most rates including their floating rate, but no reduction takes them to a market-leading position. And the Police Credit Union has trimmed its one year rate. All details are here.

TERM DEPOSIT RATE CHANGES
Treasury have cut all their Kiwi Bond rates from 1.75% for all terms of six months to four years, to 1.50%. This ensures savers take the full pain of the RBNZ rate cut. 1.5% is now the effective risk-free benchmark in New Zealand.

DOWN IN AUCKLAND, UP ELSEWHERE
Quotable Value says housing markets are still softening with average values lower than 12 months ago in Auckland in May. The national growth rate slows to just +2.3%.

VOLUMES DOWN
Barfoots Auckland claims prices are steady in May, but sales volumes are at their lowest level in nine years for a May month. The 821 properties they sold in May 2018 were -20% less than in May 2018.

RENT UPDATES
MBIE have released May bond rental data that shows average Auckland 3br house rents are unchanged from April at $650/week, 0% different to the rent in May 2018. Wellington 3br house rents are lower at $630/week in May than April, but +5% higher in a year. Christchurch 3br house rents are now at $430/week and +1% up in a year.

IMPRESSIVE PROFIT(S)
Treasury reported the Crown Accounts for the ten months to April 2019. The result for April alone was an OBEGAL of $2.4 bln which is the highest single month ever recorded. For the year to April, the Crown made a profit (let's call it a sanitised 'surplus' to keep Government MPs happy) of an impressive $5.2 bln for the ten months and $7.3 bln for the past twelve months. (That is $1,468 per person. And as we have pointed out for the four Aussie banks, they collectively make $1,075 per person in after tax profit, the only number that comes near. Feeling harvested?)

POOR MIXED MESSAGES
The Government signaled what it will change in the DIRA, the law that regulates Fonterra and its dominant position in the New Zealand milk market. Essentially it has resolved to tinker, with few reforms. Famers aren't happy. One of the eye-catching provisions is that Fonterra will be required to supply Goodman Fielder +40% more milk at cost price (+10c/L higher than last year) so that it can compete more aggressively with Fonterra. This is a controversial decision as Goodman Fielder is half owned by the giant Singaporean conglomerate Wilmar International, the very same company responsible for the huge growth of the palm oil industry. That industry is directly responsible for huge clearings of rain-forest in Indonesia and Malaysia with controversial consequences. Supporting them with regulated supply priority over local alternatives is a curious signal to say the least. Beating up on dairy farmers for environmental reasosn, and then turning around and giving cheap regulated access to a foreign company with links to environmental despoliation seem odd positions for any New Zealand government.

STEADY TO GOOD
Commodity prices were steady in May from a year ago, according to ANZ's data tracking in world price terms. In New Zealand dollar terms, they are rising and +5.7% higher in the year.

CHEAP & LINKING LOWER
Today 28 bidders won a share of a $100 mln NZ Government inflation linked bond offer. They accepted just +0.984% pa plus CPI inflation, by far the lowest ever for this type of bond. Inflation is currently just 1.5% and if it stayed at that level (an unreasonable assumption), that means this bond pays a measly 2.48%. Still, that is much better than a Kiwi Bond (see above).

REALLY BIG GAINS
The Aussies have reported another sky-high trade surplus in April, an impressive AU$4.9 bln. That has built to almost AU$38 bln in the year ro April, almost five times the level it was in the corresponding previous year. And remember, this is a result for goods and services.

MIXED RESULTS
Wall Street ended today up +0.8% with a late spurt. In Asian trading so far, Hong Kong and Tokyo are also higher, but by less, while Shanghai is down about -0.5%. The ASX200 is up +0.7% so far, the NZX50 is up +0.2% in late trade.

SWAP RATES HOLD
Local swap rates are up +1 bp across the curve. The UST 10yr yield is little-changed at 2.12%. Their 2-10 curve is a 'positive' +29 bps and their negative 1-5 curve is now at -16 bps. The Aussie Govt 10yr is down -1 bp at 1.48% but we should note that Aussie swap rates are tumbling today, down about -4 bps across the board so far. The China Govt 10yr is down -1 bp to 3.27%, while the NZ Govt 10 yr is up +1 bp to 1.71%. The 90 day bank bill rate is down -1 bp to 1.63%.

NZ DOLLAR FIRM
The Kiwi dollar is firmer again and now at 66.3 USc. On the cross rates we've firmed similarly to 95.1 AUc. Against the euro we are up as well at 59.1 euro cents. That puts the TWI-5 up to 71.2.

BITCOIN STEADY
Bitcoin is little-changed from this morning at US$7,830. This price is charted in the currency set below.

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22 Comments

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The DIRA Fonterra/GF/Wilmar proposal will sail straight over the heads of the 99% of Kiwis and will thus be enacted as proposed. Unless some pollie reads Interest......

I thought exactly the same.
"Beating up on dairy farmers for environmental reasosn, and then turning around and giving cheap regulated access to a foreign company with links to environmental despoliation seems odd positions for a New Zealand government."
No it doesn't - it fits their modus operandi of virtue signaling to a tee. Looks good at a visable local level but is a nett negative.

Yea and I bet if the great freemarket supportting other party we're in power they'd make sure there were real changes.
Surely there's a story here for a good investigative journalist. There's something really dodgy about Goodmanfielders position in the fresh milk market. They seem to bring absolutely nothing to the table but walk away with arms full of loot.
And nobody says a damn thing.

I assume your talking about national and if so, they are very similar to labour just without all the glitter and sparkles.

I was being sarcastic,9years worth of it.
They wouldn't have sparkles and glitter no. They'd have Fed Farmers and dairy NZ sagely nodding their heads behind which ever great talking head is put forward. (Really hate that use of sidekick noddies especially Bennett and Collins for some reason )

Correct. Using National as your target for sarcasm just turns the whole thing into a my side your side dichotomy which isn't productive at all though. Let's critique what needs to be critiqued and try not to deflect.

My apologies then reading the left/right thinking into your"virtue signal". It's a personal hate too so I know I shouldn't react to it.

Redcows - It appears you and Withay are in agreement. Withay says National has no glitter and sparkle, you mention Collins and Bennett.
I do agree with your sentiment that farming leaders seem to fawn over National and I feel irrationally so. The last 10 or so years only the boys at the big end of town have been winners. I am not a follower of any one party but the current combination seem to be offsetting each other quite nicely.

I may be completely mad but -

a far better idea would be to insist Fonterra provide milk at cost to the NZ market only --- whilst encouraging and providing them with the best environment to make as much money from overseas buyers for the rest that they can

The government bails out farming -- and farmers in the event of major weather events -- like free insurance policies -- and supplying New Zealanders milk at cost price would be a pretty good trade for this --

Radical thinking- but should everythign a government do not be in the best interests of the people and businesses taht live and operate here ?

Bailouts for major weather events? Give an example please.

"• access to New Zealand's network of charitable Rural Support Trusts that are set up throughout the country to co-ordinate drought recovery activities

• assistance around flexibility with tax payments through Inland Revenue

• standard hardship assistance provided by Work and Income

• emergency benefits"
I don't think that even comes close to a bailout.

"MBIE have released May bond rental data that shows average Auckland 3br house rents are unchanged from April at $650/week, 0% different to the rent in May 2018."

Ouch, not only is there no capital gains, there is no rental income growth either. Gotta be a kick in the teeth for the spruikers.

Interest rates are down, investors throughout NZ are doing just fine.
Have recently had the pleasure of renting a couple of houses for other people as they don’t like doing it!
Both houses were in the lower end of price bracket, and I can tell you that the quality of people looking leaves a lot to be desired as to desireability as wanting to take them on as tenants.
Demand in ChCh is huge at the moment as people keep coming into ChCh, but hopefully the quality improves in general.

Not if they were leverage junkies like yourself.. or if they are coming to the end of their interest only period.. refinancing in a falling market while negative geared.. bank might just say, "yeah, nah!"

Yes I do love to leverage, and that is the way you get ahead.
My Business Bank Manager says that we are his safest customers that he has.
The thing is that if you own far more than the Bank and you are positively geared on everything and plenty of surplus, with interest rates low, there is no problem!
We average over 9% on average and with interest rates under 4%, you can see that property investing is by far the safest investment around.
Equities is what I would be more worried about, with this coalition government doing absolutely nothing of benefit to business in NZ.

That is why people invest in worldwide ETFs, man. Why would one limit herself to these two small islands? That tunnel vision man.. smh

TM2,

"We average 9% on average"(the second use of the word is superfluous). However,that aside,what does 9% represent? Is that total return,net income plus 'growth'? If so,how do you know how much growth there has been without actually selling? Over what period do you claim to make this figure?
I suspect that as usual from you,it's just hot air. What you know about the equity market market could,I suspect,be written in large letters on a postage stamp.

Synlait have the contract with GF now for the South Island. So is the 40% just replacing what Fonterra was saving by Synlait now providing the GF South Island milk? Otherwise how is GF going to supply 40%+ MORE milk soley in to the Nth Island? If so - that really is government interference with the running of a private company (Fonterra).

You sure you got that right about a synlait GF tie up? I thought Synlait simply nicked the supermarket contract off GF.

Can we stop this "-20% less" nonsense please? That means 20% more.