What happened Wednesday

A review of things you need to know before you go home on Wednesday; Orr shocks with -50 bps OCR cut, most major pass on almost all of it to floating rate, QV prices slip, dairy prices fall, swaps drop hard, NZD falls sharply, & more

7th Aug 19, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
ASB cut its floating rate by -50 bps, a full pass-through of the RBNZ rate cut. ASB also trimmed its two year fixed rate by -4 bps to 3.75%. Westpac and Kiwibank has also cut floating rates. BNZ has cut them too and matched the ASB 2yr fixed rate cut.

TERM DEPOSIT RATE CHANGES
No changes to report.

BIG CUT SURPRISE
There is only one story today and that is the -0.50% rate cut by the RBNZ, surprising markets which only expected a -25 bps cut. More here.

HOUSE PRICES STILL WEAK
QV figures show property values on a long slow decline in Auckland, and starting to head downwards in several other regions.

DAIRY PRICES FALL
Dairy prices fell -2.6% today, reversing the last auction's gains. But in NZD, there was no change.

FONTERRA FOILED
Fonterra is now planning to sell part of its ill-starred investment in China's Beingmate on-market having failed to find a buyer for the whole 18.8% stake.

GOLDEN RECORD
The gold price is up sharply again today, now at US$1485/oz. That puts the NZD price at NZ$2,318 and a new all-time record high.

SWAP RATES SINK SHARPLY
Wholesale swap rates were down just -2 bps prior to the rate cut, but were bid down sharply after, down -10 bps. The 90-day bank bill rate is up +2 bps to 1.44% before the OCR cut. After it fell to 1.17%. Australian swap rates are also a little softer today ahead of a no-change rate review expected at 4:30 pm today. The Aussie Govt 10yr dipped under 1% at one point but is currently at 1.02%. The China Govt 10yr is unchanged at 3.08%, while the NZ Govt 10 yr down -12 bps today to just under 1.18%. The UST 10yr yield is down further, now at just 1.68% and another -5 bps since the open this time yesterday.

NZ DOLLAR FALLS
Following the OCR cut, the Kiwi dollar fell and is now just on 64.2 USc and more than -100 bps lower. Against the Aussie we down to 95.6 AU cents. Against the euro we are firmer at 57.2 euro cents. That means the TWI-5 is now at 69.4.

BITCOIN STABLE
Bitcoin is little-changed from this time yesterday, still at US$11,630. The bitcoin price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

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16 Comments

by J.C. | 7th Aug 19, 4:26pm 1565151982

With TDs looking dire, NZ Dividend Fund (DIV.NZ) up nearly 2% obviously because of the high dividend yield. Likewise, Smartshares NZX50 up about 1.5%.

Be interesting to see how long this plays out.

Gold and gold miners continue to forge ahead like there's no tomorrow. You won't read about it in Granny Herald.

by waymad | 7th Aug 19, 4:28pm 1565152085

Well, all of this - TWI, exchange rate and growth projections - are gonna play havoc with the Gubmint's Budget projections. There's a lotta sleeps before the HYEFU can re-vamp the Budget, which gives plenty of time for the awful reality to sink in. But, glass half full, WTI crude is $USD53.90 and that might ease the pain somewhat.

by Gummy Bear Hero | 7th Aug 19, 4:39pm 1565152782

... the fossilised bones of a giant kakapo were found in central Otago , it has been announced today

Nearby were the remains of another creature Being matemous in the claws of an endangered Fonterrabilous theos ....

... in a gully next along the skeletal remains of Reservebankimus orrian were discovered ... clutching a small rock onto which the words " houses ... must keep the bubble alive " were inscribed...

by JediNight | 7th Aug 19, 4:48pm 1565153318

Judging by the depositional patterns in the local geology, they were all caught up in a great tsunami of fiat currency

by Advisor | 7th Aug 19, 4:44pm 1565153080

Home loan approval to owner-occupiers in Australia fell 0.9pp in June to its lowest number since late 2012, despite RBA cutting OCR from 1.5% to 1.25% in May.
I guess investor confidence in the Aussie housing market must be up again because owner-occupiers aren't driving the recent surge in sales. Is it too soon to say the rate cuts worked in Australia?

by Cowpat | 7th Aug 19, 5:40pm 1565156436

How does Roger get off the mat, as Orr goes below the belt. Will other central banks take preemptive, non data dependent action before Monday.
Hopefully our central bank delved into the market over the past few days.

by Nzdan | 7th Aug 19, 5:58pm 1565157517

“NZ embarks on QE”.

I’m sure Roger will still put a positive on it.

by Cowpat | 7th Aug 19, 5:51pm 1565157075

Ore and Orr https://markets.businessinsider.com/commodities/iron-ore-price

by custard | 7th Aug 19, 6:25pm 1565159148

Was the problem yesterday one of not enough cheap money – so today has the problem been solved?

Or will they have another go at the “problem” in November.

Rinse, repeat.

by custard | 7th Aug 19, 8:43pm 1565167418

The reserve bank would do themselves an immense favour if they gave more of an attempt to measure real inflation – especially the non-tradeable side of the equation.

How many average NZ’ers sat down tonight and had a tasty slice of laptop – or tomorrow will get a haircut or dental work, happily priced as a direct function of cheaper flights to Sydney?

Our inflation numbers that the RBNZ so frequently refers to are, in my mind, a complete nonsense – especially for lower wage earners, in Auckland, and renting.

And in a small part – therein lies the problem.

by Fritz | 7th Aug 19, 9:14pm 1565169290

conventional economic thinking and practice is f%$$ed.
(flawed)

by Andrewj | 7th Aug 19, 9:21pm 1565169684

This year has been a bit of a shocker. 1k on the insurance, rates up %18, road user fees %10 this year and another 10 next year, Regional council are on a spending spree, huge increase this year and I expect another next.
Oh yeah, it's going to get tough, never mind, I can go to ground, already started, amazing how little we really need.

by custard | 7th Aug 19, 9:38pm 1565170681

Really Andrew – are you sure you’re just not making this up – after all, those in the know tell us there’s no inflation.

Ok – so no inflation is obviously absolute nonsense – as you so rightly attest.

And so people hunker down, snap the wallet shut and proceed with caution.

And the RBNZ merrily reply by making money cheaper – for goodness sake, the cost of money is not the issue here.

by Andrewj | 7th Aug 19, 9:54pm 1565171669

It is getting serious, i'm thinking that I may have to move to a tropical island and rent our house to some slave- sorry wage earner.

by custard | 7th Aug 19, 10:02pm 1565172124

I can recommend Aitutaki – wonderful memories of One Foot - but might be a bit quiet for you in the long term.

Best you soldier on in NZ and enjoy all that cheap money – thanks RBNZ!

by Belle | 8th Aug 19, 2:53am 1565189623

I am with you Aj it is getting serious. I have been watching our kill fees going up, little bits here and there. Looking like $40 plus now. If you are dairy its an extra $5 or so. Nait, mbovis, carbon tax, it just keeps digging in to survival margin.
I am not sure what tropical island. Maybe just a campervan in northland. Freedom camp. Fish for tea.
All the faces in the crowd at the stock sales are ancient and getting older. I dont see my property retaining its value, who out there would go farming now. NZers hate us. (Despite needing us several times a day or the alternative is death). The govt want to tax us out of existence, til we cover our land in that pest of a pine tree. Pine trees dont feed people. Our grasses and clovers are ignored in ghg arithmetic. Apparently they dont use C02 at all. Zip. Nada.
I went to school. C02 plus sun equals photosynthesis doesnt it.
Yet jets fly in and out every hour. No one says a word. Tourists walk out of the airport and hire a car.
But for me to run my business that feeds people, Jacinda and the watermelons want me to pay an extra tax of 3k for the vehicle that enables me to do it. Plus more for RUC.

I use to be pretty positive about it all. Not so much anymore.
There will be a day, when the food in the shops is such a crippling price, the masses will turn and look at our forest of a nation, and wonder what happened to our food producers. Where did they go and why.
There is a reason great nations look after their food production. They have experienced great hunger and starvation.
The reason we flew through the GFC was we produce food. Not stuff. We do it cheaply. We do it using less carbon emissions than most nations.
My grandees are 7 and 9. When they come and stay what do they want from Nana. Chops for tea. Lamb chops. Or a burger with a real mince patty. A glass of milk and real butter on a sandwich. They want meat and dairy. Both skinny white girls. Fussy food eaters. Townies. But they still know intrinsically what is healthy for them.
Yet we are the nations enemy.