A review of things you need to know before you go home on Thursday; TD rate changes, SMEs grumpy still, immigration slowing, NZGB yields up, swaps up, NZD stable, & more

A review of things you need to know before you go home on Thursday; TD rate changes, SMEs grumpy still, immigration slowing, NZGB yields up, swaps up, NZD stable, & more
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Here are the key things you need to know before you leave work today.

No changes to report today.

Update: Kiwibank have also raised some TD rates, and added a Fiji draw as an incentive.

Small businesses are still very pessimistic, but less so. The ANZ Business Micro Scope report says a net 28% of small businesses surveyed were pessimistic about general business conditions in the year ahead - but that is less than the 50% pessimistic in the September quarter.

According to Chinese real estate listing portal Juwai.com, inquiry levels by Chinese nationals for New Zealand property is up 10% after rising quarterly in all of 2019. (Of course, this may just be sales spruiking by Juwai.)

Annual net migration has slowed to +41,500 in the year to November (down from +43,000 in the year to October and a peak of around +64,000 in 2016). Westpac says slowing population growth adds to their expectation that the construction boom will soon peak. Indeed, there is a real risk of a boom/bust cycle in Auckland, given how much population growth has slowed and construction has increased.

The latest tender of $150 mln of April 2037 NZ Govt bonds was well supported with almost $450 mln offered. But yields are rising, now averaging 1.93% compared with 1.71% at the prior tender. The last time this yield was 2% or higher was in May 2019.

Stagnation of tourist arrivals turned into decline in November as the number of tourist arrivals into New Zealand fell more than -3%. That amounts to 13,700 fewer tourists arriving. And that is before the fallout and contagion from the Aussie bush fires has an impact here.

Fitch Ratings has revised its Outlook on New Zealand's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Positive from Stable and has affirmed the rating at 'AA'. Fitch has affirmed the Long-Term Local-Currency IDR at 'AA+' with a Stable Outlook.

In Australia, their unemployment rate fell to 5.1% s.a. taking pressure off the RBA to cut interest rates when it meets next on February 4. The Aussie dollar rose on the news. (The actual jobless rate rose to 4.9% from 4.8% in October.) Their actual participation rate rose to 66.4% and a record high (at least, since 1978). Full time jobs were unchanged in December from November, but part time jobs rose by +29,000.

And staying in Australia, ANZ has cut the majority of its term deposit rates by between -5 and -10 bps. Its best rate is now 1.15% for a five year term deposit. I am sure Aussie savers feel better about this because of their taxpayer-backed deposit insurance cover. (The best ANZ NZ term deposit rate is 2.65% for six and nine months.)

Forget the weekend rain (and mud-rain) in NSW and Victoria, it is back very hot again. 40-degree heat and strong northwesterly winds are whipping up old and new fires. Canberra airport has been closed due to new fire threats. It will be very tough on the firelines. One fire has just jumped a river. And Aussie electricity (and insurance) prices are about to jump.

Westpac Group has a new chairman in Australia, hard-nut British banker John McFarlane, who was ANZ's CEO for ten years until 2007.

Wholesale swap rates have risen today, up +2 bps for two years and up +1 bp for one year. The 90-day bank bill rate is unchanged at 1.27% after falling -2 bps yesterday. Australian swap rates are up about +3 bps. The Aussie Govt 10yr is unchanged today at 1.11%.  The China Govt 10yr is sharply lower at 3.02% down -7 bps today. The NZ Govt 10 yr yield is down another -2 bps at 1.51%. The UST 10yr yield has fallen today, down another -2 bps and now under at 1.76%.

The Kiwi dollar is still just under 66 USc although little-changed from this time yesterday. Against the Aussie we are lower (on their jobs data) now at 95.9 AUc. Against the euro we are at 59.5 euro cents. That means the TWI-5 is still at 71.1.

Bitcoin is down -1.8% today to US$8,566 after a period of little change after a fall that started at 3pm NZT. The bitcoin price is charted in the currency set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

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Point well made.

Yes, some of us have been suggesting for a while that Auckland might be getting close to 'overbuild' territory.
One of the reasons I don't think price increases this year will be very significant.

Shining Some TIC Light On The Missing (More Than) Half of The Ongoing Repo Story

Why haven’t US Treasury yields exploded higher? Sure, they are, at the long end, up from their lows set in late August – the rate for the 30-year long bond reaching down to a new record. The winds of sentiment have shifted, benefited by globally coordinated (not quite synchronized) monetary “stimulus” as well as a healthy dose of trade deal positivity. All leading many, especially those in official circles, which include practically all of the financial media, to confidently (and ceaselessly) declare the worst is behind us.

And yet, the benchmark 10-year UST is just 30 bps above its 2019 low and the 30-year bond yield not even that much.

We have to suspect that something else is going on, and since we do our chief suspect remains the repo market. One of the primary sources, if not the primary source, at times, of demand for just these securities is as collateral for use in that place.

Hold up, you say, but didn’t Jay Powell fix repo?

Immigration down.
Benefit stats all trending the wrong way.
Impact of fires to come.
Impact of Carona virus thing to come
All this equals a great time to buy a house.

Good news - Fitch Ratings has revised its Outlook on New Zealand's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Positive from Stable and has affirmed the rating at 'AA'. Fitch has affirmed the Long-Term Local-Currency IDR at 'AA+' with a Stable Outlook.
Good to have strong and stable Governance at the moment - what could possibly go wrong?


I well remember the unedifying role of the ratings agencies, Fitch included, in the GFC. All these AAA securities that were toxic junk. Nevertheless, these agencies remain important, so it must cause apoplexy in those who insisted that this government would wreck the economy when our status is revised upwards.

China birth rate collapses


interesting graphs here

they need to come down and look at our welfare system

An interesting topic - maybe more important than climate change, proliferation of nuclear weapons and even house prices. There are two factors (1) the link between introduction of broadband and dramatic increase in impotency and social media friendships replacing organic friends (2) humans like other mammals produce a population overshooting the resources required for a pleasant lifestyle then settle back down. Look at the first countries in Europe to have population declines - Ireland and Scotland have (or had when I was younger) fewer inhabitants than they had 150 years earlier. They went from desperate survival with famines to a reasonable lifestyle with universal education, a range of foodstuffs, travel, etc. Take St Kilda - the remote islands off the west of Scotland - inhabited for 4000 years until 1930 - life was simply too tough so they left.
Even the most undeveloped countries now have internet access - everyone can see what is needed for a decent life and it is not plenty of children.

Couldn't Shane buddy up to Jacinda to save them? We need a few houses built, don't we????

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