What happened Monday

A review of things you need to know before you go home on Monday; rate updates, housing market updates, equity market updates; swap rates dip, NZD stable, & more

13th Jan 20, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
There have been a few mortgage rate changes in 2020, from the Police Credit Union, and Kainga Ora/HNZ. The biggest change was from Bank of China who withdrew all their 'special' rates, including their market-leading 3.15% one year rate.

TERM DEPOSIT RATE CHANGES
We have had changes from First Credit Union, Nelson Building Society, and the Wairarapa Building Society, all reductions. FE Investments raised its one year TD rate to 4.80%

HOUSING MARKET UPDATES
Over the break, there have been three data updates covering the real estate market. All three essentially give the sane story - listings are low, sales volumes are low, but prices are rising. They also indicate that it is not Auckland, Christchurch or Queenstown where the housing market action is any more - it is just about everywhere else. Realestate.co.nz reported low listing levels and higher asking prices. QV said housing values are rising in most communities except the three previously mentioned. And Barfoots confirmed the Auckland position (low volumes, low listings, lower prices in December than November).

WATCHING FOR EXCESSES
ANZ has been watching this regional upward price pressure and says it wouldn't be surprised if the RBNZ tried to keep a lid on ny excesses by tightening LVR restrictions in 2020.

GROWING BY +$1 BLN PER WEEK
The RBNZ released the value of all housing in New Zealand as at the end of September 2019 and that totaled $1.157 tln. It was up by +$52 bln from September 2018.

LOOKING OUT
Tomorrow, the NZIER will release its Quarterly Survey of Business Opinion, the only business confidence survey out this month as the ANZ one takes its usual January break. Statistics NZ will release data for November building consents.

LOOKING WEAK
After starting with gains, the NZX50 is now in negative territory, down -0.1% in late trade. Across the ditch, there hasn't been any positive all session so far with the ASX200 down -0.6%. Retail analysts are confirming that the bush fires will have a negative impact on their economy in the short term and for as long as they last.

LOCAL SWAP RATES WEAK
Over the holiday break, wholesales swap rates firmed and then weakened as the US flayed around with incoherent policy. The net effect is that wholesale rates have fallen. Today they are down -1 bp more across the curve, resulting in a net -9 bps drop since Christmas Eve for the two year tenor. The ten year has fallen -14 bps over the same period. The 90-day bank bill rate is unchanged at 1.25%. Australian swap rates are unchanged today. The Aussie Govt 10yr is down -2 bps so far today. The China Govt 10yr is also down -2 bps at 3.12%. The NZ Govt 10 yr yield has matched them both, also down -2 bps, now at 1.47%. The UST 10yr yield is unchanged today at 1.82% but down -10 bps from Christmas Eve.

NZ DOLLAR FIRM
The Kiwi dollar has firmed marginally from this morning's opening, now at 66.4 USc. Against the Aussie we are unchanged at 96.1 AUc. Against the euro we have held at 59.7 euro cents. That means the TWI-5 is still at 71.5 and little-changed from its pre-Christmas level..

BITCOIN HOLDS
Bitcoin is little-changed today from the open this morning, now at US$8,147. But recall, on Christmas Eve it was at US$7,101. The bitcoin price is charted in the currency set below.

This chart is animated here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

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10 Comments

by Yvil | 13th Jan 20, 4:55pm 1578887726

On the interest rates front, I have re-fixed a loan for 1 year at 3.39% with ANZ today. (reflects my opinion that rates are less likely to decrease over the next few weeks/month but that they will be lower in 12 months)

by Fritz | 13th Jan 20, 5:13pm 1578888787

Auckland has been dead flat for the last 3 or so years. This is despite big drops in interest rates, and significant population growth. I'm still curious as to why some people think things have changed sufficiently for significant increases (3-5% or more) to occur in the next 1-2 years, especially when a whole lot of new housing is coming on line, and interest rates won't go much lower.

by Foyle | 13th Jan 20, 5:37pm 1578890226

Because, as always with investors rationalizing their choices: this time it's different™

by Nzdan | 13th Jan 20, 5:40pm 1578890405

Wait until all the regions stop seeing house price inflation. What will happen to the economy if mortgage lending growth pulls back?

by Yvil | 14th Jan 20, 10:47am 1578952061

Fritz, my call last September for house prices to rise to new highs by March 2020 is because of the drop in the OCR in August. What people who don't buy RE don't understand is the lag of cause (interest rate drop) to effect (rising house prices). It is foolish to think that drops in the OCR have an effect on house prices recorded before 6 months time.

by DIYman | 13th Jan 20, 5:52pm 1578891151

Big difference between the forces at play between Auckland, Christchurch and Queenstown. Doesn't make any sense to lump the three together. For a start off, Christchurch prices are approximately half of the other two, and without bumper to bumper traffic.

A reasonable hotel room in Queenstown just cost me $488, a night, without breakfast,$100 extra compared to what I usually pay, something to do with impending Chinese New Year, the same in Auckland cost me $385, for next week, with breakfast, and Christchurch was $249 with breakfast!! Must be something to do with the cost of a sparky or a plumber to fix anything, anyone got some other ideas?

I know where I would rather live.

by J.C. | 13th Jan 20, 6:15pm 1578892502

Recent business trip to Osaka I snapped up a reservation in an apartment hotel next to Osaka Castle for USD30 per night through Agoda (off the rack rate about USD120). Not much effort required to find a place under NZD249 in Singapore either. Bargains tough to find in NZ or Australia.

by Nzdan | 13th Jan 20, 8:11pm 1578899487

House values have been growing by $1 billion per week. Yay we're richer. On a side note, total outstanding mortgages in NZ increased an average of $15.7 billion per year over 4 years (RBNZ C32). NZ GDP = $305 Billion.

$15.7 billion / $305 billion = 5% less $5 billion in bank profits = 3%. Annual GDP Growth is 3%. Am I conflating 2 completely irrelevant pieces of data?

by theglc | 13th Jan 20, 11:04pm 1578909860

Im a bit skeptical about that "values have been growing by $1 billion per week" as surely it includes new builds that people have moved into as well.

Given that there is probably in excess of $10B worth of new builds completed each year that add to the stock.

And yes your calculation is rubbish for comparisons as the outstanding mortgages INCREASED by $15.7B while bank profits total comes from total outstanding mortgage debt.

by Fritz | 13th Jan 20, 8:39pm 1578901172

This is an interesting article on China's economy, suggestive that things are a bit more precarious there than commonly thought:

https://edition.cnn.com/2020/01/13/economy/china-2020-economy/index.html