A review of things you need to know before you go home on Thursday; some rate changes, cheaper funding, construction jump, taxes rise, new trade talks scheduled, swaps up. NZD firm, & more

A review of things you need to know before you go home on Thursday; some rate changes, cheaper funding, construction jump, taxes rise, new trade talks scheduled, swaps up. NZD firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
The Co-operative Bank has trimmed two key rates down to levels competitive with the main banks.

TERM DEPOSIT RATE CHANGES
The Co-op Bank has trimmed a short TD rate, and its bonus saver.

CHEAP FUNDING
Today's 2040 Government linker bond tender achieved a yield of just 0.49% above inflation (which was last reported as 1.7%). That is its lowest ever. A year ago this same bond yielded inflation plus 1.80%, two years ago it was inflation plus 2.36%. Yield chasers are getting desperate. Previous bond investors are pocketing big capital gains.

CONSTRUCTION JUMP
The value of construction activity rose by +11.8% in the June quarter compared to a year earlier. That is almost $4 bln of work completed.

SECOND LEVEL TAX INCREASES
The level of local authority rates and "regulatory income" (read: fines and fees) was up +8.9% in the June quarter from a year ago. Given that the population rose +1.6% in the same period, and inflation was +1.7%, this means the real increase per capita was still more than +5.6%. Much if this is because central government pushes legal requirements down to this sector without matching funding (so they can't be accused of tax increases).

NOT SO POPULAR
Used car imports registered in August were -7.6% lower that the same month a year ago, the eighteenth consecutive decline. In fact, the annual level is now back down to the year to May 2015 levels.

OCTOBER TALKS RESTART
China has announced that trade talks with the US will recommence at a senior level in early October with their negotiator going to Washington DC. Before then, lower level officials will work to clear issues to narrow th ekey issues. Markets reacted positively to the news. Gold fell.

EQUITIES LEAP
Wall Street ended trading earlier with the S&P500 up +1.1%. In early trading, Shanghai is up +1.5% today, Hong Kong is up +0.5% after yesterday's spectacular rise. Tokyo is up +2.4%. The ASX200 is up +1.0% and the NZX50 is up +0.9% and a new record high.

A TRADE WAR WINNER
Australia booked another monster trade surplus (goods and services), of +AU$7.3 bln in July on top of the all-time record in June. In the year to July, the surplus was +AU$55.6 bln and far above the +AU$9.1 bln in the prior equivalent year. The latest annual surplus is +2.9% of GDP.

SWAP RATES FIRM
Wholesale swap rates are up +2 bps today across all terms. The 90-day bank bill rate is unchanged at 1.17%. Australian swap rates are up about +4 bps today. The Aussie Govt 10yr is down -1 bp at 0.93%. The China Govt 10yr is unchanged at 3.09%, while the NZ Govt 10 yr is down -2 bps to 1.06%. The UST 10yr yield is up +6 bps to 1.52%.

NZ DOLLAR FIRMS
The Kiwi dollar firms again to 63.7 USc. Against the Aussie we are a little softer at 93.4 AU cents. Against the euro we are unchanged at 57.8 euro cents. That puts the TWI-5 up at 69.1.

BITCOIN STABLE
Bitcoin is at US$10,549, almost unchanged from this time yesterday. The bitcoin price is charted in the currency set below.

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45 Comments

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A nice summary of the Brexit debacle from someone who has actually studied it in detail:
A full-fledged finger to the british people....

Brexit was revolutionary, and it was a very British democratic revolution in the ballot boxes. The majority of the people of the United Kingdom, on the whole, in the largest direct democratic mandate in the history of humanity, voted to “take back control” from the ever-growing European Union. Except the elites of the country never wanted it, never expected it, and didn’t prepare for it. Even the Brexiteers never expected to win and weren’t ready when the spotlight of history was bestowed upon them.

If I was in the UK I'd be worried about these guys and voting exit.
https://www.zerohedge.com/news/2019-09-02/when-losing-winning-germany-afd

I would suggest that Labours failure may see a popular party arise here before too much longer. Maybe not next election, but surely the one after.

Bernard Hickey barking on the matter of Labours capitulation to the status quo. https://www.newsroom.co.nz/2019/09/05/791512/young-renters-just-got-doub...

We'll just wait until all the baby boomers are dribbling into their pajamas at the Summerset Village (not long now) and then we (the collective society) can pass some policy that is progressive and focuses on productivity (and is beneficial to the future).

What, hand it over to the pansy generation?

Good things take time, no point rushing it

At least they care about something other than me myself I Andrew

Another consequence of a housing crisis and idiots and policy makers who believe ever increasing house prices should be the way of sound economic growth . Ireland's Q2 Daft rental report
Just 2700 homes for rent nationwide
https://www.daft.ie/report/2019-Q2-rental-daftreport.pdf

Such a fitting name too....Daft.

Well done the Aussies. Except, er...
Australia's net foreign debt liability position increased $19.4b to $1,143.5b.
https://www.abs.gov.au/ausstats/abs@.nsf/mf/5302.0

Although Barfoots released its monthly update this week, I did not see Mr Ninnes's regular auction stats for the previous week. Given that auctions remain the most popular sales method according to Barfoots , 26 August -1 September saw 71 neatly presented homes taken to auction, each with appealing indoor outdoor flow. Of the 71 , 4 got withdrawn for sentimental reasons, 2 postponed due to sunny weather and school holidays. North Shore got the weekly doughnut with a maiden in the morning session as buyers would not get out of bed , although after drinks the afternoon saw 3 from 8 in spirited bidding. In total , a successful week with 30 homes referred to solicitors out of 71, a 42 percent success rate or alternatively 58 percent failure rate, or negotiation later.

Final one, ANZ now see the RBA cutting the cash rate by 75 bps, by mid 2020. ANZ previously only saw the RBA reducing the OCR by 25.

air nz putting whenupai back on the agenda and this time they have infratil in their corner, this will be interesting to watch
https://www.stuff.co.nz/business/115574914/air-new-zealand-auckland-coul...

Jacinda a no show on Kiwibuild was the equalivant of the AB's sending out a little known player to front the press after a RWC loss. Message recived loud and clear that we dont have a leader that will stand up and take any blame.

10
up

Agree. My opinion of her has descended quite steeply this year. She's great at the smile and wave, but not much else.
Would have made a great Queen.

Agree JK too

I didn't start with that much confidence but did the sit back and see how it goes before bagging her thing.
Now she's through the floor. Time for me to battern the hatches and look after number one because when the hard times hit, from what I've seen she will not deliver anything of substance and stand behind it 100%.

From your large comment stream Kezza it seems you have been looking after number 1 for quite some time. Hope the IRD don't catch up with you.

We all have to remember is that two of the main reasons Jacinda and her nonentities were voted for was because of CGT and Kiwibuild. Hhhmm.

Jacinda has Helen working on getting the pot bill passed so the masses are too stoned too notice what the hell is going on.

Good to see where their priorities lie....

CHEAP FUNDING

For whom? - certainly not the tax payer. Today's tender was a re-opening of the 2.5%, 20/09/40 IIB. The government is stuck with funding at a minimum 2.5% until redemption of prior outstanding obligation - the unspoken costs of incessant central bank interest rate cuts. Averaging down one's losses is hardly compensation.

Just gimme tax cuts. I have given up on the notion of a government doing something for the greater good.
So.might as well look after number one.
So income tax cuts please, whoever's listening.

Unfortunately I have to agree - politics has been hijacked (polarized) to the point of being pointless and useless in this "post truth" world. Looking after your tribe / family seems like the best option.

Sadly, yes. But there is no point fighting it

Same here. Batton down the hatches and look after number one.

Go shoot some possums or something. Or go surfing :-)

or stare at the sun

FNZ (NZX50) up 24% YTD. Barely gets a mention in the media. Looks a bit troubling when stock markets are doing this in the current climate. Sold all my shares in it today (was one of the first investors).

Barely gets a mention in Interest who blithely follow NZs obsession with investing solely in property, property and property.
Strange as shares are a major part of investment discussions all round the world and there are plenty of good dividend paying companies on the NZ exchange that look better every day as interest rates drop.

Would be good to see some more in depth share market, companies and VC reporting. NBR do a fair bit in that space and although I get it free at work I much prefer Interest, if I had the choice I'd read it here. Even addition of charts on major indicies would be great.

.

I've been taking a bit of profit recently as well JC given the great returns this year - and purchased some gold + silver in foreign currency a while back. A bit more defensive for now.

Yes. We are similar. I've been in gold since 2006 and bought my first silver (ETF) last month. I own some gold mining stocks, but procrastinated on jumping into GDX. Would have been a great buy 6 months ago. I'm about 70% cash after today (2% crypto). It can be a bit tough watching the gold price going nowehere for 6 years while Granny Hearld is screaming property at you.

Likewise on silver. ETPMAG by chance? Its looking quite bullish so happy with that move for now...but time will tell.

TD's for your cash for now?

Silver...

Yes I own ETPMAG. Being planning to buy for over 12 months but terrified of what JPM might do to the silver market. DId a comparison with TDs and drip-feeding GOLD going back the last 11 years. Even with the 6 years of zero growth, you'd have been better off with GOLD. Instead of TDs, I'm going for DIV (monthly payments with reinvested dividends).

Do you have any reading material or websites you would suggest to someone looking at starting an investment portfolio? . I understand the basics but still somewhat circumspect on how to go about entering the investment game. Thanks

One of the better books that keep it pretty simple (and NZ based) was Martin Hawes Investment Guide. That will give you an understanding of the fundementals of investing/portfolio creation.

If you want to really stretch yourself and understand value investing then Benjamin Graham 'The Intelligent Investor'. This is Warren Buffet style investing.

Wondering how much higher MCY can go..up 50% YTD. Tempted to exit.

I sold half my holding last week.P/E isn't completely detached and still getting paid a reasonable dividend after purchasing 5 years ago - might hold the remaining half.

Surprised that the div yield is so low on MCY. I would take some profits, depending on how much you own.

Dividends are still growing from memory - price may just have got ahead of fundamentals for now

I'm holding because it's there for dividends. An organic rebalancing of my portfolio is happening, you don't need to cash out to rebalance unless your portfolio is very large.