A review of things you need to know before you go home on Monday; no rate changes, weak factory sales, what ails our capital markets, swaps lower, NZD firm, & more

A review of things you need to know before you go home on Monday; no rate changes, weak factory sales, what ails our capital markets, swaps lower, NZD firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today, so far.

TERM DEPOSIT RATE CHANGES
None here either

WEAKENING
Factory sales were weak in the June quarter, led by meat and dairy manufacturing which fell in June after two strong quarters, Stats NZ said today. The volume of dairy and meat product manufacturing fell -8.2% in value after a +11% rise in March 2019. Year on year, the growth in overall manufacturing sales waned from +6.2% in Q2-218 to +1.3% in Q2-2019. BNZ says this data is "questioning the pulse of New Zealand’s GDP".

FIXING NZ'S CAPITAL MARKETS
The FMA has released a report on New Zealand's capital markets noting they are not working particularly well. They singled out problems with KiwiSaver and its focus, and capital markets that only work for larger companies. The report written by EY says it wants to see more capital flowing more efficiently to New Zealand enterprises, as well as providing more investment opportunities for a greater number of Kiwi investors.

NO SPARK
Asian equity markets have opened flat today. Australia and New Zealand are no different. After falling steadily since the end of August, the Fonterra share rose +7c today to $3.25.

BOUNCE-BACK?
In Australia, July home loan growth surged and probably grew as fast in August. The July data shows a sharp turn up from June. After being down an average of -14% on a year-on-year basis in each of the first six months of 2018, July came in just -3% lower than the same month a year ago. On a seasonally adjusted basis, that represents almost a +4% rise from June. First home buyers are being given the credit for the turnaround. New lending to businesses, which didn't fall as hard in the first place, isn't bouncing back like households.

SWAP RATES SLIP
Wholesale swap rates are giving up a little of last week's sharp rise. The two year is down -1 bp, the five year is down -2 bps, and the ten year is down -4 bps. The 90-day bank bill rate is unchanged at 1.17%. Australian swap rates are little-changed in early trade, if anything softer. The Aussie Govt 10yr is down -4 bps to 1.05%. The China Govt 10yr is down -1 bp at 3.04%, while the NZ Govt 10 yr is down -3 bps to 1.16%. The UST 10yr yield is at 1.56% and where we left it at the end of trading last week.

NZ DOLLAR FIRMER
The Kiwi dollar is a little firmer, now at 64.3 USc. Against the Aussie we now just over 93.8 AU cents. Against the euro we are also up at 58.3 euro cents. That puts the TWI-5 up at 69.6.

BITCOIN STABLE
Bitcoin is at US$10,405, hardly changed from where we opened this morning. The bitcoin price is charted in the currency set below.

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Source: CoinDesk

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20 Comments

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BNZ says this data is "questioning the pulse of New Zealand’s GDP"

The FM is still not convinced that the worsening economic condition calls for fiscal easing. I suppose we won't see any developments till the election year budget in May 2020.

A question for the financial whizz's .
Why would anybody "buy "10 year govt bonds at 1.16%? Or is that return plus inflation rate ? Seems to me you would have to ultra conservative or pessimistic to take such a low rate over a long term like that ?

I'm not a whizz, but it's quite simply return of capital as opposed return on capital.

Yes indeed, even if purchase price yields turn negative, for linkers and nominal sovereign bonds that result in a net loss in today's dollars, it is still a hedged bet that some capital will be returned upon redemption or deflation will improve the buying power of the future stream of cashflows.

Because you think it's going to zero or sub zero within 12 months. You'd make about 15% of that actually happens. Most bond investors don't hold to maturity, it's an investment with a target like all other investing.

And yet, to my limited knowledge, all sovereign bonds that don't default before redemption are owned on that date. At anytime it's hard for all to cash up. The same for bank deposits.

FIXING NZ'S CAPITAL MARKETS
The FMA has released a report on New Zealand's capital markets noting they are not working particularly well. They singled out problems with KiwiSaver and its focus

Really?

When people put all their money into property for tax free "accidental" capital gains the answer to our capital market's woes is more access to folks retirement accounts instead?

Exactly...

RE Aussie:First home buyers are being given the credit for the turnaround. New lending to businesses, which didn't fall as hard in the first place, isn't bouncing back like households.

Somethings never change.

Australia’s banks turned into giant building societies, lending almost exclusively against residential property and rarely, if ever, making unsecured loans to businesses or people any more.

If someone asks for a business or personal loan these days, the banker asks for the house.

The result is that traditional small business lending has dried up, and with it business investment, while Australia has the highest ratio of household debt to GDP (134 per cent) in the world, since business owners have to borrow against their houses.

And, by the way, the upward pressure on values from banks has probably contributed to the over-pricing of Australian real estate.

As a result of a combination of the “risk-weighted assets” system and the credit crisis, banks have basically withdrawn from the thing they were set up to do: facilitate commerce. Link

So the tail continues to wag the dog. What's new?

Lending for all things housing in Aussie rose 5.1% in July. They're doubling down and going for broke. Absolutely no fear.

Most of the people I've heard "Absolutley no fear" said about (mostly motorcyclists and other petrolheads, plus a couple of skydivers, are either dead, in wheelchairs, or had very close calls and lucky escapes.. I wonder how many lucky escapes Australias financial system has left?

Getting the feeling that the locals think they are untouchable.... usually dosen't end well.

Our dollar goes up even with this dismal manufacturing data results??

a broken system

NZD a trading commodity, not anything to do with NZ meat, etc exports. Ok a little to do with exports but not enough to cause the financial market impulses to change in real-time.

An alternative reality exists in the NZ economy.

Even a broken system doesn't move in a straight line - possible evidence?

Weak manufacturing, ever deeper lows in business confidence....can someone tell me why the NZX is reflecting a different reality? Up nearly 400% since the low of 2009 and not a serious correction since that date!

The casino investment mentality overwhelms NZ culture with little to show for the majority.