Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes today.
TERM DEPOSIT RATE CHANGES
ASB has cut all TD rates, and taken them down to market-lows, generally below all of their main rivals. This is a signal that others will no doubt follow.
GOING SOFT
Building consent figures suggest home renovation work is easing off. The value of consents issued for alteration work to existing dwellings has hit its lowest point in five years - with both Auckland and the Bay of Plenty particularly soft.
DOING BETTER
Shamubeel Eaquab has been tracking Auckland's L3 lockdown compared with the previous lockdown. Details here. Activity has fallen during the restriction he notes, but business and economic activity seem to be holding up better under current restrictions than last time.
HEAVY DEMAND FOR VERY SKINNY YIELDS
Another big Government bond tender today, and another overwhelming show of demand. All up $950 mln was offered and it attracted $2.25 bln in bids. The April 2023 was won with an average yield of 0.05% compared to the 0.32% yield at the previous tender. The April 2029 tender was won at 0.48% (compared top the previous 0.67%), and the April 2033 tender was won at 0.75%, down from 0.89% at the prior tender.
WE ARE PAYING THEM OFF FAST
Domestic billings on NZ issued credit cards fell -1.5% in July from a year ago. Balances on cards are down -13.3% year-on-year. These cards are still incurring average interest rates of 17% pa. Under 60% of these balances now incur interest, cycle low levels.
ASSET PRICE BOOM
Expectations of housing inflation roared back in the September quarter according to an RBNZ survey. More than half of respondents think house prices will rise from here, although at a fairly modest rate (+2.2% pa). That is quite different to the June quarter when no-one thought house prices would rise. None of this is surprising however when the RBNZ is creating the conditions for asset price inflation.
FULLER, BUT NOT ENOUGH
We are ending the week with slowly rising reservoir levels in Auckland, now up to 62% full. But normal is 88% for this time of year. The recent heavy rain helped less than hoped for. The hydro lake situation is equally concerning.
AUSSIE RETAIL SALES BUMP
In Australia, retail sales rose at a +3.3% month-on-month pace in July, up +12% year-on-year with a bounceback effect, with household goods sales up +30% from a year ago. And this was with data for Victoria declining in their lockdown.
INSOLVENCY FIRMS INSOLVENT
And more than 300 insolvency firms are registered for Australia's JobKeeper support program because their public moratorium on insolvent trading has seen their business collapse.
THE REAL TRACK ISN'T WHAT THE POLITICIANS CLAIMED
The Australian Government famously called itself in surplus late last year, and too early. It never eventuated. Now official independent analysis shows that their federal budget will not return to surplus this decade and not at least until at least the 2030s. By 2030 Australia's government debt will be AU$800 bln higher than without the pandemic.
NO MORE MR NICE GUY
Inability to pay the rent on time has seen Westfield board up 129 stores run by Mosaic Brands in Australia. Landlords are getting desperate.
'AN UPTREND, SHIRKING OFF SHORT TERM RISKS'
Ratings agency Fitch sees the NZD holding its own. It says: "We now expect that the New Zealand Dollar will average USD0.640/NZD (from USD0.625/NZD previously) in 2020 as the unit remains on a recovery path despite the resurgence in new Covid-19 cases. With elections scheduled for October, we believe that the unit will remain vulnerable over the coming months, however, a good track record in terms of combating the Covid-19 outbreak could mean that the currency could finish strongly towards the end of the year. We retain our view that over the long term the currency will continue appreciating against the US dollar with economic fundamentals seen to be strengthening over 2021."
EQUITY UPDATES
The S&P500 ended the session in New York today up +0.3%. That followed European markets last night that were down sharply. Today, Shanghai has opened up +0.8%. Hong Kong has opened up +1.3%. Tokyo is up +0.3%. In Australia, they are flat in early afternoon trade. Here the NZX50 Capital Index is finishing the week up a strong +1.3%. That is heading for a +3.2% rise for the week.
SWAP RATES UPDATE
Swap rates were down sharply at the end of trading yesterday, but we don't have today's result yet, We will update this note if it is a significant movement. The 90-day bank bill rate is unchanged at 0.27%. The Aussie Govt 10yr is up +2 bps at 0.89%. The China Govt 10yr is unchanged at 3.02%. But the NZ Govt 10yr yield down -4 bps to 0.62% and a new all-time low. The UST 10yr is down -2 bps at 0.65%.
NZ DOLLAR LOWER
The Kiwi dollar is lower that this time yesterday at 65.4 USc. Against the Aussie we are softer at 90.8 AUc. Against the euro we are also softer at 55.1 euro cents. All those changes have pushed the TWI-5 down to 68.3. But all these rates are slightly higher than where we opened this morning.
BITCOIN RISES MARGINALLY
The price of bitcoin has firmed today by about +US$100, to US$11,842 and a gain of +0.7%. The bitcoin price is charted in the currency set below.
This soil moisture chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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64 Comments
"Gold may be collateral of last resort but many still treat it as a hedge against everything going wrong – including central banks and their numerous big errors (forecasts). Therefore, even with renewed deflation and market liquidations tied right into collateral problems gold has been moving in that other direction – UP…
....the opportunity cost of holding gold as a hedge against big errors (like a credit bubble bursting) is best illustrated by the yields of competing assets which similarly function as a safety (liquidity) hedge. In other words, lower rates, or, more precisely, lower implied future rates, the less the opportunity cost of using gold.
The demand to do so is likewise very simple, as stated in the quote above. If you think central banks are in danger of losing control – in either direction – then metal is your friend; maybe your best friend if under deflationary circumstances you’re thinking in collateral terms. - Coutesy of Alhambra investments
Another big Government bond tender today, and another overwhelming show of demand. All up $950 mln was offered and it attracted $2.25 bln in bids. The April 2023 was won with an average yield of 0.05% compared to the 0.32% yield at the previous tender. The April 2029 tender was won at 0.48% (compared top the previous 0.67%), and the April 2033 tender was won at 0.75%, down from 0.89% at the prior tender.
Things to look forward to:
Cheap ECB loans push 3m Euribor, rate at which EZ banks can borrow from one another, to record low of -0.491%. Could fall to ECB depo rate at -0.5% as banks can always place excess cash w/ECB at this level. But true price for unsecured overnight cash is close to -0.55%, CBK says. Link
Japanese Inflation Stays at Zero Even as Economy Reopens
A surge in Japan’s bill issuance is exerting upward pressure on yields and reinforcing the case for the central bank to buy more.
Yields on three-month treasury bills rose to -0.06% last week, a level last reached in early 2016 before the Bank of Japan introduced its negative rate policy. Demand from global funds, typically the biggest buyers, has failed to keep pace with supply, prompting the BOJ to step up purchases.
The government’s $2.2 trillion stimulus plan has unleashed a flood of bond supply, with issuance set to increase by almost two-thirds in the current fiscal year. While borrowing costs remain low by historical standards, the uptick in yields threatens to infect other parts of the curve and weigh on the nation’s hefty debt burden.Link
I’m not so sure that expectation of house values rising is very accurate when banks are currently taking weeks to process mortgage applications then telling people who can afford the payments, their deposit is not genuine savings and rejecting them. At the same time the banks are deferring the people in trouble who can’t afford the payments. I see genuine problems in the near future unless banks start easing their criteria
You make a valid observation. I only see banks changing to accepting new applicants when they see the risk of further downside dissipate.
So far I have not seen any downside risk being removed or discounted. All the wage and business subsidy is keeping this in mid-air hoping until a vaccine comes early next year.
Dago - You seem to be assuming that all property transactions have mortgages they don't, there are a lot of cashed up buyers out there. The market is ripe for a significant movement upward over the next 4-5 years. Whether it is right or wrong all asset classes are a target for the excess money being pumped into the system. Be in with a grin or loose if you snooze !
You seem to be assuming that all property transactions have mortgages they don't, there are a lot of cashed up buyers out there.
Yawn. Stats NZ data suggests that the vast majority of NZ h'holds are not sitting on mountains of cash. That gels with NZ having among the highest h'hold debt to GDP in the world.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12358239
"Two large dairy farms want to take enough water from the Waikato River to supply nearly half the population of Auckland.
This comes as Watercare is seeking more water from the river to bolster the city's water supply during the worst drought in Auckland's history and water restrictions"
Time to start charging - the only way we will get efficient resource allocation.
Lets have another crack at farmers! Auckland's DAILY consumption is around 400 million litres. So TWO dairy farms want to take 100,000 cubic metres of water each per day! Are they going to create a lake? Just another dipshit journo who doesn't bother to do any research!
Some big assumptions in Eaquab's work.
For example, traffic volumes being up 15% on previous L3. This may not be indicative of more buoyant economic activity. It may be indicative of more people flouting the guidelines. Anecdotally, I would suggest that is likely.
Clearly it isn't BAU at a retail and education level, but pretty much everyone else is at work in some form. I'm quite surprised that this is enough of a drop in activity to kill off transmission, both in the known cluster and the potential source which could still be out in the wild.
Forget bitcoin. A new coin called YFi is just three weeks ago. Its creator said it was completely worthless - which people took to mean extremely valuable. Its price has now flipped bitcoin and a single token is now worth around $13,000, and there are six forks. Its creator did not keep a single token himself and is angry and broke. And then there is Yam, a magic potato coin that within 24 hours, had attracted $600million of funds onto its platform. It had a terrible smart contract failure, and its market cap plunged from 60M to zero in 15 minutes. But don't worry there is already a Yam 2 coin.... (this is why I think its 2017 all over again)
Lies sir. SHRIMP coin is up 2.3%
My "Goto" Youtube survivalist (Jeremiah Babe) says PMs, "brass", food, water, pay down debt.
If I cared about real estate I would be buying cheaper suburbs and selling expensive central city as people start to flee. Look for suburbs that have been held back by long horrible travel times - won't matter so much as more of us work more from home.
Maybe home visit tech support firms?
The point about Defi is right. I put $1.2k into a defi insurance coin called Nexus Mutual (thanks to Alex Saunders of Nugget's news). 2 months later, that crypto coin is worth $33k. I can't believe it myself but its true.
That's pretty normal for you guys on the cutting edge of crypto. But even at a more sober level, earning 8% on stablecoins is probably smarter than slumlording in NZ.
Quick maths.
https://mobile.twitter.com/theisabelb/status/1296618219663511554
This morning 105 - 16 = 89 cases community transmission.
Tuesday last week 4 cases community transmission
89 ÷ 4 = 22.25.
Today 22.25 times more cases than last week Tuesday.
Surge: a strong, wavelike, forward movement, rush, or sweep:
But who is making the comparison?
Why.
I see almost no chance Biden will lose, but if he does it will be even more rioting and looting than would normally happen - the indicators of despair have been building for years, eg this from April 2019:
https://www.sciencedaily.com/releases/2019/04/190415200249.htm#:~:text=…
"Summary: Indicators of despair -- depression, suicidal ideation, drug use and alcohol abuse -- are rising among Americans in their late 30s and early 40s across most demographic groups, according to new research. These findings suggest that the increase in 'deaths of despair' observed among low-educated middle-aged white Baby Boomers in recent studies may begin to impact the youngest members of Generation X more broadly in the years to come."
Rising entitlements to subdue the masses, rising taxes, capital flight, homelessness. Trump or Biden - I doubt it matters. I can't wait for the robots to finish their takeover - we'll be way better off as their pets.
Massive worldwide Deflation (with some occasional false-flag signs of inflation) until the United States finally bites the bullet and jacks up their interest rate to 15%. Throwing the rest of the USD-indebted world into bankruptcy.
Gold will probably be used to re-inflate the US economy but at risk of confiscation. The rest of the world will be on their own this time.
I think there will continue to be rampant inflation in asset prices (the rich and governments ending up owning everything and bidding over each other with inflating fiat currency), and very slowly deflation in living costs (because people in numbers just can't pay anymore, and incomes will slowly drop for many). I don't know what this will mean for official inflation rates, but I don't think they matter much - it's a rich or poor world.
Then a collapse in confidence in the fake currency, attempts by governments to regain control using their own new digital currencies (trying to fend off things like bitcoin), people rebelling and trying to work with gold and silver, chaos.
But more broadly, years ago I reached the view that there will be a massive wave of global socialism (off the back of rioting and looting), govts chasing the rich and the big companies around the world trying to tax them, and in the end doing deals something like "Look - pay the tax so we can appease these big useless populations, or you won't have any safe places for your mansions and your factories, and you won't have many consumers to profit from.". For now, I still see it playing out that way, especially as automation continues it's creep, regardless of current headlines.
David keeps saying that the hydro lake situation is deeply concerning.
Transpower keeps saying it's normal.
Current storage would have to drop by 3/4 before we need to start watching the levels.
https://www.transpower.co.nz/system-operator/security-supply
Thanks for that. The alert levels seem to be way down there...
Other possible contributing factors that come to mind are the long range seasonal forecasts (dry, at least up north) and low snow pack. Anyone know how much effective storage is in snow above the hydro lakes?
Yeah seen that.. no apparent reason except maybe lockdown effect. The NZX sent them a "WTF?" letter. CRP did the same thing a couple of weeks ago, doubled then fell back. With Cannasouth it might be people preempting the referendum which would be a bit dumb because they're medical. Who knows? Not a stock I'd be buying
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