A review of things you need to know before you go home on Wednesday; few rate changes, housing market turns up, Tatua stars again, more pommie regulators, cash under threat, swaps sink, NZD soft, & more

A review of things you need to know before you go home on Wednesday; few rate changes, housing market turns up, Tatua stars again, more pommie regulators, cash under threat, swaps sink, NZD soft, & 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.

TERM DEPOSIT RATE CHANGES
SBS Bank has trimmed a few key TD rates between 3 months and nine months.

HOUSE PRICE VIEW I
In the first of two real estate market reports for September out today, the latest QV data shows housing values in Auckland may have turned the corner and started rising again, with values still rising in most of the rest of the country.

HOUSE PRICE VIEW II
And Barfoot & Thompson, Auckland's dominant realtor with over 40% market share, had a surge of sales in September but prices remain flat and stock levels are down. But 15% of listings dropped out of the market in September. Prior to this month, the average drop-out rate at Barfoots in 2019 was 11%.

A STAR PERFORMER
Star dairy co-op Tatua has set a 2018/19 final payout of $9.66/ksMS and retained $1.16 of that for its balance sheet. The net $8.50 payout (up +5% since 2017/18) compares very well with Fonterra's $6.35 (down -6.5%). (Tatua however has only about 110 supplying farms and its products are highly niche, unsuitable for major scale expansion.)

'ASPIRE TO BE MORE LIKE THE UK'
Preparing to take on conduct licensing, the FMA appoints Clare Bolingford from its UK equivalent to the new role of Director of Banking and Insurance. Not sure UK experience is a plus for New Zealand however - we already have too many of this type bowling in to tell the colonials to be more like the UK. Still, the FMA head came from that same jurisdiction, so they seem to be doubling down.

PRESERVING A TRADITION
With the apparent turn away from using cash by most people, banks are being perceived to be likely to shift exclusively to cashless services. Now the RBNZ has jumped in to preserve the access to traditional cash. Banks have already contracted out their ATM networks and cash handling services and the regulator is consulting on them taking an "expanded stewardship role for cash".

DOWNGRADING A TRADITION
Ratings agency S&P has put SOE NZ Post on credit watch negative for its+ rating. It says the ongoing structural decline in mail volumes, extraordinary costs associated with unpaid holiday leave, and noncash impairment of the mail business and related tax assets have affected NZ Post's results for fiscal 2019. And their intention not to remarket or redeem its subordinated notes ahead of the Nov. 15, 2019 reset date will likely increase its leverage. Managing a decline won't be easy for the enterprise who has legal obligations to maintain core services that few now use - except its owner, the Government.

FAST YIELD DECLINE
The LGFA offered $160 mln at tender today and got bids worth $372 mln over the three separate tranches. The April 2022 was placed at 1.08%, the April 2024 at 1.23% and the April 2033 at 2.06%. The last time these maturities were offered in July 2019 the respective yields were 1.59%, 1.79% and 2.71%. The hunt for yield is driving down local government borrowing costs fast.

CORE FUNDING RATIO DIPS
It is only a minor change, but core funding fell in August while loans and advances rose, dipping the overall banking system core funding ratio to its lowest since May 2017. At this stage we don't know which institutions are feeling this pressure.

ANOTHER HIT
In Australia, Banking Day is reporting that about 100,000 Australian home borrowers could be hit with rate increases on owner occupier mortgages after up to A$70 bln worth of home loans were reclassified as investment borrowings by APRA. Most of the impact was suffered by Westpac. CBA also took a hit. NAB and ANZ seemed to have few implications by this move. The result will likely mean those banks will require more regulatory capital.

LOUD VOICES AGAINST A SMALL CHANGE
Following yesterday's RBA -25 bps rate cut, banks in Australia are changing their home loan rates but reducing them by only about half the official cut. Every politician is up in arms with an easy soundbite. But savers might be cheering the banks, or at least not criticising them as much.

SWAP RATES SINK
Wholesale swap rates are down an unusual -6 bps today across the curve. The 90-day bank bill rate is down sharply too by -4 bps to 1.09%. Australian swap rates are also down -4 bps to -6 bps. The Aussie Govt 10yr is down -4 bps to 0.97%. The China Govt 10yr is unchanged at 3.16% in holiday trade, while the NZ Govt 10 yr is down -4 bps at 1.09%. The UST 10yr yield is down -3 bps at 1.65%.

NZ DOLLAR LITTLE-CHANGED
The Kiwi dollar is marginally softer today at 62.5 USc and just off its ten year lows. Against the Aussie we are firm at 93.1 AU cents. Against the euro we are at 57.1 euro cents. That leaves the TWI-5 at just on 68.1.

BITCOIN FIRM
Bitcoin is up again today, now at US$8,301, a small rise from this time yesterday. The bitcoin price is charted in the currency set below.

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21 Comments

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I bit my tongue & renewed 2 TD's at ANZ today. Capital is running out of interest that's for sure.

That 5% you got for 5 years back in 2014 was a good decision wasn't it! Likey the 2.75% you got today for another 5-year run will, too, prove to be 'good value'!

These record low interest rates are going to make life very difficult for some people. I know a single retiree that relies on an interest top up to the $375 super. A lot of savers wallets will be slamming closed I think. I believe a balanced OCR of around 2.5 % is a better for the whole economy.

It might sound harsh, but savings are there to be used - they are past income, retained, ready to be applied.
So just like any income, it should be spent, today, if it's needed.
Any 'retirement plan' should include drawdown of the principal amount of savings, regardless of the interest rate they may earn at any given time.
Assume an investment rate of 0%, and assume an 'end date' for when the savings should be run down to $0 ( I use 100 years old, but that's me being optimistic!). As I have written before "there's no point being the richest corpse in the cemetery" or dying with YOUR money unspent.
If you want to plan for a structured inheritance, that comes off first (set an inheritance amount and plan to spend the remainder; anything extra leftover can be a bonus!) not last ( hoping to keep something back to pass on).
Anyway, basing life on the return on savings is no way to go, and hasn't been for some time and is less likely to be in the future.

This a very narrow view of capitalism.

What is? Spending a lifetime's worth of retained work effort to secure a peaceful and fulfilled retirement, and spending those savings on whatever brings joy to an aging life? ( well, from any age one 'gives away working', actually)
For those that want to 'leave it to the kids" - fill your boots! All I'm suggesting is that doing that should be part of a deliberate plan, not a hope that 'there will be something left' to do so.
Anyway, if those who decide to 'live off the interest' stick to that, they will die well-off, but probably have a miserable existence in the meantime ( if that comment I replied to above is any judge) because, in my view, interest rates are headed to '0%'

Let cash die if that's what the market wants. WHy force the banks to prop it up - after all it's the RBNZ's product.

Once the cash is gone the folk who know best can pummel savers with negative interest rates to force them to spend their money and stimulate the economy.

There's always bonus bonds.

Unless low interest rates produce the opposite results where the average person pushes their savings and pledges hundreds of future paychecks on a mortgage with a foreign-owned bank and, in turns, ends up with a reduced discretionary income for the foreseeable future to spend on other goods and services.

must be galling for existing candidates at FMA to see them parachute in another expat to be in charge.she wont be able to change it to be like the UK because my guess is they will have to change completely if they leave the EU,or is that why they are brexitting out here,for a quiet life?

YTD Barfoots, Auckland's market leading chip board seller , has only sold fewer homes in the past twenty years in 2008 and 2010. Although September saw a "surge"in sales , in reality the past three months , the winter months saw little volume difference to 2018 with both average and median prices declining. The RBNZ will continue to cut the OCR as volumes continue to fall and GDP slips away.

Does anyone see a weaker Kiwi$ feeding through to an increase in inflation ?

In grocery prices are going up as a result of reduced discounts I.e. list price is the same, but the special is reduced. Most is sold on special. Not sure if it’s related to the $ decline though. Inflation number is a joke anyway.

So Barfoots revealed that 15% listings were pulled in Sept. I noticed this on RE NZ for last 3 weeks. Older listings going through floor. That is % over 3m OTM dropping rapidly. Something unusual is afoot

RE the comment about the FMA appointment: ".....we already have too many of this type bowling in to tell the colonials to be more like the UK". I think that is a rather unpleasant and unreasonable comment. How would you feel if your equivalent in the UK was making comments criticising the appointment of colonials to very significant positions in the UK - a Canadian as head of the BoE and a NZer as head of RBS? To me at least, its a complement to our systems and the job descriptions that well qualified, highly experienced and very senior people from overseas want to work in NZ.

Also suits the NZ associates of the ex UK employee - my mother, a retired long serving civil servant was aware of the pressure to raise NZ senior salaries in line with the foreigners previous STG salary multiplied by then exchange rate ~ 3 dollars to a pound.

13
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Its just amazing how the children of leading politicians are such amazing businessmen

The latest example is the son of Joe Biden, former vice president of the United States of America .

Biden junior is so brilliant that he earned millions of dollars in the Ukraine – of course this had nothing to do with his father being vice-president.

It was his natural brilliance and all-round competence that earned him mouth-watering amounts of money.

They should have got the likes of Biden's son in to run Fonterra. Trying to save money by having only having 24 people earning over $1M and the top cat only getting around $5M pa is being cheap. If they had just paid the going rate for talent. Trumpies daughter for example.

Michael Reddell climbs into the latest round of RBNZ Annual Report puffery and self-congratulation ('Best Central Bank.....!) in his usual inimitable way. In MR's words, give me strength.....