A review of things you need to know before you go home on Friday; more rate cuts, affordability worsens, more user-pays coming, credit card growth stalls, swaps unchanged, NZD soft, & more

A review of things you need to know before you go home on Friday; more rate cuts, affordability worsens, more user-pays coming, credit card growth stalls, swaps unchanged, NZD soft, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Westpac has followed ANZ matching BNZ with a 3.54% two year rate. SBS Bank trimmed its three year rate.

TERM DEPOSIT RATE CHANGES
Heartland Bank cut most of its savings account interest rates today, some by aas much a -35 bps. Their Direct Call account is now down to 1.60%, a -30 bps reduction.

AFFORDABILITY WORSENS
There's been a cruel sting in the tail of falling interest rates - they've already started pushing up house prices at the bottom end of the market, making home ownership less affordable for aspiring first home buyers.

MORE USER-PAYS TAXES COMING
The NZIER is pointing out that funding roading infrastructure in a "carbon-free" world will need new ways of taxing drivers.

LESS APPETITE FOR HIGH CREDIT CARD INTEREST
Credit card balances
are virtually unchanged in August from a year ago. Buy-now, Pay-later schemes are taking the wind right out of this sector. In fact, if it wasn't for spending on cards here by tourists, there would be close to no growth in amounts being billing on these cards. Now only 59.9% of personal credit card balances incur interest and that is the lowest level recorded since these records began almost 20 years ago. However, despite moves by some banks to introduce lower interest rate cards, the data shows that the average rate being paid is still touching 18% pa, virtually unchanged in a decade.

ANOTHER MAJOR LOSS
Australian regulators are having a hard time imposing their will on the financial industry. First it was ASIC losing a case against Westpac over the HEM, with the judge saying ASIC didn't even know the law. Now it is APRA losing its enforcement case against IOOF with the judge in that case saying their case was "unpersuasive" and relied on hindsight. Populism by regulators doesn't seem to end well in the Aussie courts. But at least the politicians have given the regulators a free-pass to spend unlimited taxpayer money on these cases.

EQUITY MARKET UPDATE
On Wall Street earlier today, the S&P500 gave up all its earlier gains to close unchanged on the day. That makes it up also unchanged over the past five trading days holding on to the +2.7% gain so far this month. Shanghai is marginally higher in early trading today, but down -1.3% so far this week and up +4.1% so far this month. Hong Kong isn't quite so positive, although it is up +0.3% in early trade today, but down -2.5% so far this week. However it is up +3.1% so far this month. Tokyo is up +0.4% so far today, up +1.0% so far this week and up an impressive +6.9% so far in September. But it is tamer for the ASX200, up a more modest +2.4% so far this month, while the NZX50 is up only +0.8% since the start of the month.

EYES ON THE RBNZ
Next Wednesday, at 2 pm on September 25, 2019 the RBNZ will be reviewing its OCR. There will be more than the usual interest in this decision given the softening economic data.

SWAP RATES HOLD
After yesterday's sharp shift down, wholesale swap rates are little-changed today. The 90-day bank bill rate is still unchanged at 1.14% and that's stability for this rate for seven straight sessions now. Australian swap rates are also fell solidly later in the day. The Aussie Govt 10yr is down -2 bps at 1.06%. The China Govt 10yr is up +1 bp at 3.13%, while the NZ Govt 10 yr is down another -4 bps to 1.19%. The UST 10yr yield is down -2 bps at 1.78%.

NZ DOLLAR LOWER
The Kiwi dollar is down further at just on 62.9 USc. Against the Aussie we are little-changed at 92.7 AU cents. Against the euro we have slipped to 56.9 euro cents. That puts the TWI-5 down to just under 68.2.

BITCOIN FIRM
Bitcoin is marginally higher at US$10,230 and continuing to meander in a tight range just above the US$10,000 level. The bitcoin price is charted in the currency set below.

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Source: CoinDesk

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11 Comments

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Highlight new comments in the last hr(s).

First it was ASIC losing a case against Westpac over the HEM, with the judge saying ASIC didn't even know the law.

ASIC and APRA are both captured anyway. As an aside, ASIC had the opportunity to go after a notorious boiler room carel operating out of SEA and targeting Aussies and other English-speaking mugs. Their effort to protect Australian citizens is questionable.

The Kiwi is sinking. Long live the Kiwi.

There's been a cruel sting in the tail of falling interest rates - they've already started pushing up house prices at the bottom end of the market, making home ownership less affordable for aspiring first home buyers.

The RBNZ could not have had any other expectation, just as those that bid up the NZ government bond market expect OCR to be cut in half to infinity, possibly negative. Michael Reddell, an ex RBNZ economist, said as much this week, on this site. The invisible neutral rate collapse has no limit, and central banks, while ignorant of it's eventual trajectory, will cut official short term interest rates to respect their ideological duty to get ahead of this unseen, but certain decline, evidenced by term bond market yields. Circular enough for everyone?

At some point things like unemployment, and ability to pay, will become the dominant factor. I suspect we are getting close to that point, where sentiment is over ridden by maths. This is a trend with a limit, it isn't infinite like the bulk of the population believe. But yes, lower interest rates will cause an asset price bubble. What happens to all bubbles?

They are kept inflated by ever increasing amounts of financial wizadry sold to the general public as sane policy?

And people are stupid enough to buy in....

Seems to be a view in my private conversations that some sort of MBS will happen in NZ when it all finally goes tits up. But I would suspect there will be a bit of a hit to prices first. Watch Japan to see what will happen here, except by the time it happens here we won't be able to find yield offshore like the Japanese have.

Most weeks I read Mr Kerr's ramble on a Monday morning with increasing conviction and benefit that the weekly outcomes will be opposite to those penned by the above writer. The Antipodean currencies have steadily declined since his last posting, against the USD and almost every other meaningful currency .Although there are still a few meaningful hours of trading left in the week ( and markets are fickle things ) before Mr Kerr will need to locate another graph or reason for support. Perhaps the AUD will outperform the NZD for solace, perhaps not. However I turn to Mr Kerr's forecast for All Black dominance and see the odds for a South African win by a mere 13 points are very inviting.

The technical term for what you describe is a Negative Reference Group. So one way of using it is to do the opposite of what any member of the NRG recommends....

you cannot escape the correction