What happened Monday

A review of things you need to know before you go home on Monday; Kiwibank changes some TD rates, housing confidence rises, manufacturing sales weak, swap rates little-changed, NZD stays high, & more

9th Dec 19, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
None to report today.

TERM DEPOSIT RATE CHANGES
Kiwibank trimmed some rates of one year and less, but raised their 200 day rate to 2.75%, up +5 bps.

GOOD TIME TO BUY
Housing confidence is at a seven year high. ASB's chief economist says lower mortgage rates have pushed up housing confidence but he warns it doesn't herald a return to boom times.

SILVER LINING?
The Q3 manufacturing sales data has come in up +1.0% from the same quarter a year ago. That is its lowest year-on-year growth since September 2016. From a peak +10% growth at the end of 2017, it has steadily declined. But some analysts see a silver lining, noting that the quarter-on-quarter drop is due to a very sharp fall-off in processing meat and dairy products. But few sectors are actually growing at a material rate. However, it does appear that even though meat and dairy sales are under pressure, margins for this sector are widening.

TINTED GLASSES
Various institutions claiming 'thought leadership' are making bold assertions about retail sales in the lead up to Christmas. But two out today (both trying to be Kiwi, but launched out of Australia) are singing quite different tunes. The Accenture one claims it will be a banner year with Kiwis outspending Aussies for holiday retail. But the Finder one is far more pessimistic and based on an in-house sample of their own subscribers. It is always fun watching Aussies tell us about ourselves and it just shows again the distortions of looking at New Zealand through Aussie eyes.

ANZ NZ SEEKS NEW CHIEF RISK OFFICER
ANZ New Zealand says its chief risk officer Bruce Macintyre will retire on December 17. Keith Algie, currently the bank's head of wholesale credit risk, will stand in as chief risk officer until a permanent appointment to the role is made in the New Year.

STORM RELIEF, SORT OF
Westpac NZ is offering financial support to personal and business customers affected by the weather events on the West Coast, Mid and South Canterbury, and Central Otago. The relief package features a range of possible support options for both business and personal customers. These may include a temporary overdraft facility, and/or suspension of principal loan payments for up to three months and/or deferred payment on business credit cards for up to three months. But none of this 'relief' involves interest cost relief.

PARTIAL TRANSPARENCY
Consultation is open on food labeling laws as they apply to country of origin. They will apply to food such as fruit, vegetables, meat, fish, seafood and cured pork, at retail outlets including online. However, they won't apply to foods sold for immediate consumption at businesses such as restaurants, cafeterias, takeaway shops, canteens and caterers or at fundraising events.

LOCAL SWAP RATES UNCHANGED
Update: Late in the day these rose steeply again. ~~Swap rates are little changed today, with a hint of a steeper yield curve~~. The two year is unchanged, the five year is up +2 bps, and the ten year is up +4 bps. The 90-day bank bill rate is -1 bp lower at 1.19%. Australian swap rates have also not moved much. The Aussie Govt 10yr is up +2 bps today at 1.17%. The China Govt 10yr is also up +2 bps at 3.23%. The NZ Govt 10 yr yield is up +5 bps from this morning and now at 1.54%. The UST 10yr yield was up +4 bps over the weekend, and holding today at 1.84%.

NZ DOLLAR STILL FIRM
The Kiwi dollar is lower that where it opened this morning but still above its Friday close, now at 65.5 USc. Against the Aussie we are still at 95.9 AUc. Against the euro we are much lower at 58.3 euro cents. That means the TWI-5 is now at 70.7.

BITCOIN UNCHANGED
Bitcoin is now at US$7,529 and that is flat since the opening this morning. 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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19 Comments

by Mark Hubbard 1965 | 9th Dec 19, 4:23pm 1575861784

For those of us in bonds, that NZ Govt 10 yr yield rise has become as relentless as depressing. What is causing this: yield's have been coming up long term overseas, and yes, infrastructure, but painting a few schools can't explain all this.

I wonder if RBNZ has lost control over the long end (and in US also) ... the rise in long rates is just starting to make its way into mortgages, the bond hurt will be better when banks finally give better deposit rates. But I'm in satire now, so I'll stop.

by bw | 9th Dec 19, 4:36pm 1575862602

Just another thought, of course:

“One should be more worried when a rapid re-steepening occurs, as that is a better signal for an imminent downturn at which point risk-off strategies make more sense.....what really happens is when the curve steepens, the market prices recession with really strong conviction. It’s the moment when a recession starts to appear ”
https://www.cnbc.com/2019/08/15/investors-should-be-more-worried-when-t…

by Mark Hubbard 1965 | 9th Dec 19, 5:21pm 1575865304

Yes, historically I agree. The curves invert, then the big steepening rate rise is normal before the wheels then fall off. But our macros aren't that bad: albeit still low inflation expectation, so I'm wondering on the extent of the rise.

by Audaxes | 9th Dec 19, 6:15pm 1575868556

I think this explanation is relevant:
Audaxes | 19th Jul 19, 9:35am

Gold rose $20 yesterday and did the same today - it currently stands at $1445.94/oz. Furthermore, UST 2 yr yields collapsed overnight, thus the 2s- 10s spread moved from 22 to 27bps.This bear steepener in reality (bull steepener in bond trading) is perfectly clear. The short end drops quickly with the long end following if at a slower rate. Nominally, the whole curve shifts lower but because the short end is moving fast the curve steepens while it shrinks. Traditionally, this is the recession signal. [my bold]

by JediNight | 9th Dec 19, 4:35pm 1575862553

What are the rules of Kiwisaver after you're 65? Can you take some of your term deposit money and put it in there for a year and then take it back out again? It seems to have a decent return.

by bw | 9th Dec 19, 4:44pm 1575863086

You'd have to assume you can:
"You can make voluntary contributions (or lump sum payments) at any time...Once you've made a lump sum payment it's "locked-in" until you're eligible to withdraw your savings." and at 65, you can withdraw all or part whenever you like.
https://www.kiwisaver.govt.nz/already/contributions/you/voluntary/

by JediNight | 9th Dec 19, 9:53pm 1575881636

So is this not a viable alternative for the old, moneyed, and griping?

by Lanthanide | 9th Dec 19, 10:47pm 1575884849

Yes it is an alternative, if you have a kiwisaver account. Many over the age of 75 won't, since they would have been over 65 when it started and you couldn't open an account after 65. That restriction was recently removed, possibly at the same time the $1000 kickstart was removed.

It does depend on your provider though, as they will have limits as to how often and what minimum amount you're allowed to withdraw.

by linklater01 | 10th Dec 19, 8:17am 1575919075

Mark,

But what control does the RB have over long-term rates, as opposed to the OCR?

You write; "yield's have been" and that of course is wrong as yields is plural. As an old apostrophe pedant, I am mourning the recent demise of the Apostrophe Protection Society in England. I simply have to accept that fewer and fewer of us know or indeed, care about the misuse of the apostrophe, so I must just let it go. RIP apostrophe.

by Andrewj | 9th Dec 19, 4:32pm 1575862339

https://chinaeconomicreview.com/beijing-orders-state-offices-to-replace…

by Henry_Tull | 9th Dec 19, 9:37pm 1575880669

That's one way to stop Microsoft Suite being pirated!

by J.C. | 9th Dec 19, 4:47pm 1575863228

Housing confidence is at a seven year high.

Propaganda and probably statistically wrong. More accurate statement would be "27% of people think it's a good time to buy, but 60% of people are undecided".

by Andrewj | 9th Dec 19, 5:34pm 1575866084

%60 of people are undecided most of the time.

by J.C. | 9th Dec 19, 6:10pm 1575868249

Yes. Also, if 27% of people think it's a good time to buy now, it is not necessarily any different from 23% or 24% using statistical significance. Therefore, the hooplah is moot. The only realistic claim is that there is no change in sentiment.

by bw | 9th Dec 19, 6:24pm 1575869060

No, no. You don't understand. There's a Net 14% of people who think it's a Good Time to buy; that's all you need to know ( 27%, Good minus 13% Bad), so the marketplace is on the launch pad with fingers on the "Go!" button....

by J.C. | 9th Dec 19, 6:35pm 1575869742

Yes, but it would be good to see the media people actually give the data some gravitas and perspective. I suspect that there would need to at least 5 % pts for any significant difference.

by bw | 9th Dec 19, 6:51pm 1575870704

Absolutely! But that....might affect their advertising revenue....

by J.C. | 9th Dec 19, 8:29pm 1575876598

Personally, I don't have a problem with interest dot's revenue streams.

by Hardly | 9th Dec 19, 9:59pm 1575881972

God forbid a 10 year bond might reflect the possibility interest rates might rise one tiny iota some time.

Sorry to be so sarcastic but this idea interest rates and inflation are going to be low forever is silly. Yes, interest rates have surprised on the downside for years, but do you really believe inflation is dead?