A review of things you need to know before you go home on Friday; consumer confidence low but rising, record mortgage debt, other borrowing falls, huge jump in bank deposits, swaps stay low, NZD stable, & more

A review of things you need to know before you go home on Friday; consumer confidence low but rising, record mortgage debt, other borrowing falls, huge jump in bank deposits, swaps stay low, NZD stable, & 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. But we have heard there may be some cuts in the pipeline and as early as Monday.

TERM DEPOSIT RATE CHANGES
Kookmin Bank cut is TD rates, and SBS Bank cut savings account rates. We expect some more reductions next week for TDs too from a major.

MOVING AWAY
More residential properties are being purchased by overseas buyers but foreigners are still selling more New Zealand properties than they buy, meaning net foreign ownership is decreasing.

BETTER, BUT NOT GOOD
Although consumer confidence lifted +9 points to 108.7 in October, with the current and future conditions indexes lifting by similar amounts, it remains under par. The historical average is around 120, but this October level is much improved from March. The key retail spending indicator of the net proportion of households who think it’s a good time to buy a major household item improved +12 points to +11%. Despite the good improvement, that’s still a recessionary level.

SALE OF UDC SCREWS UP RBNZ DATA RESULTS
On 1st September 2020, ANZ completed the sale of UDC Finance. Prior to that, UDC were included in their banking sector statistics as a consolidated entity under ANZ. From September onwards, UDC will instead be included in statistics as a non-bank lending institution, rather than as part of the Bank series. It is a change that affects both data sets materially. See details here under the 'Special Note' tab.

RECORD MORTGAGE BORROWING
Home loan lending
is rising and has pushed the total of all mortgages up by +6.8% in September 2020 from September 2019. That is a the largest month-on-month increase ever recorded of a $ basis, +$2.3 bln, and the largest year-on-year increase (+18.5 bln) since the heady days of late 2016.

FAST ATROPHY
Loan balances for personal consumer lending fell -11.7%
in the year to September as BNPL schemes cut into this market increasingly.

NO APPETITE FOR BORROWING
Business lending fell -1.2%
in September from a year ago, the second straight month of decline and the most since the 2010 recession.

NO APPETITE FOR LENDING?
Rural lending fell -1.7%
year-on-year to September and its fastest retreat since the current RBNZ data started in 1992.

LOVING BANKS SAFETY, REJECTING LOW RATES
Household deposits at banks rose a spectacular +9.4%
to be more than $200 bln for the first time ever. They rose +$2.7 bln in one month, and have risen +$17.3 bln in the year to September and that is the biggest rise ever recorded. And this is despite savers abandoning term deposits. They fell -$1.6 bln in a month, and -$6.6 bln in a year. These are both levels never seen before. Don't forget, savers were pouring funds into term deposits at the rate of +$11 bln per year at the start of 2018. Household savers still have their money at banks, and in increasing amounts, but now overwhelmingly 'at call'.

RBNZ PREPARES FOR POST-LIBOR WORLD
The Reserve Bank of New Zealand says it has signed the "IBOR Fallbacks Protocol," published by the International Swaps and Derivatives Association (ISDA). The RBNZ says this is an important step in supporting an effective and efficient transition away from LIBOR and other key interbank benchmark offer interest rates (IBORs) by the end of 2021. ISDA recently released documentation on the transition away from IBORs to alternative risk-free interest rates. The RBNZ is "strongly encouraging" other NZ institutions to follow suit before the protocol takes effect on January 25.

REFERENDUM RESULTS
The End of Life Choice Bill is now law, with voters approving it 2:1 - sort of a landslide approval. It comes into effect on 6 November 2021. It was closer for the cannabis referendum, but still a clear result that is unlikely to reversed when the 485,000 'special votes' are included. The interim result is 46.5% Yes, 53.5% No. To get a win, more than 330,000 of the 'special' votes (or 67%) will need to be won to change today's interim result. And even with that hurdle, it would then need Pariamentary approval, which is also less than certain. Today the Goverment said The Cannabis Legalisation and Control Bill will not be introduced as legislation this term. More here.

MORE INTENSE BORDER PROTECTION
New mandatory testing for all replacement maritime crew arriving in New Zealand, regardless of the time they spend in transit, is about to be enforced. This will begin next week, with any maritime crew in managed isolation for more than 24 hours getting a COVID-19 test. At the same time, testing of all maritime crew departing New Zealand will start, providing end to end protection in this area.

CRAZY, CRAZY LEVERAGE
The Shanghai and Hong Kong IPO of Jack Ma's Ant Group was completed for US$34.5 bln, the world's largest. That that is the least of it - more than US$2.8 tln was bid for that issue, meaning it was oversubscribed by 80 times!. And even more amazing, Chinese brokers allowed bidding with up to 33x leverage, fueling a truly crazy frenzy. There has never been anything quite like this. Shanghai and Hong Kong are devaluing the term "Wild West".

GOLD PRICE MOVING UP
The price of gold is now at US$1,875 in early Asian trading, and that is -US$2 lower from this time yesterday. It is +US$7 higher from the closing New York price earlier today, and +US$5 higher than the afternoon fix in London.

EQUITIES UPDATE
Wall Street ended its trading session today up +1.2% where the S&P500 fell away sharply at its close after being up almost +2% earlier. For the four days so far this week, the S&P500 is down a substantial net -4.5%. The NZX50 Capital Index is down -0.9% in late trade today while the ASX200 is down -0.4% in early afternoon trade. Shanghai has opened flat, Hong Kong is down -0.4% and Tokyo is also down -0.8%, all in early trade.

SWAPS VERY LOW, BOND YIELDS MOVING UP
Yesterday, the two year swap rate stayed very low but above zero. If there is significant movement today, we will update this when the data is available. The 90 day bank bill rate is unchanged at 0.28%. The Australian Govt ten year benchmark rate is up +1 bps at 0.83%. The China Govt ten year bond is also up +1 bp at 3.21%. And the New Zealand Govt ten year is up +2 bps at just under 0.54% and now above the earlier RBNZ-recorded fix of 0.51% (+1 bp). The US Govt ten year is up +4 bps from this time yesterday at just on 0.82%.

NZD UNCHANGED
The Kiwi dollar is little-changed at 66.4 USc but that involved a jump on the announcement of the referendum result to make back earlier declines. Against the Aussie we are also unchanged at 94.1 AUc. Against the euro we are firmer at 56.8 euro cents. That all means our TWI-5 is unchanged at 69.9.

BITCOIN FIRM
Bitcoin is up +2.5% from this time yesterday at US$13,559 and enough to put it back above NZ$20,000. The bitcoin rate is charted in the exchange rate set below.

This soil moisture chart is animated here.

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End of day UTC
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19 Comments

I genuinely think this Reeferendum will be closer than people anticipate.

The no vote is more weighted to older age groups, yet most overseas voters will be well below the age of 60.

What is the average age of the overseas voter, and what was the yes/no split for that age group in the referendum?

The Swinging Sixties, when cannabis went mainstream, with the like of Jagger, McCartney, Clapton etc standing up for legalisation, would put those in their 20's then ( say born 1940) in their 70's and 80's now? Like as not many of them ticked "Yes".

Special vote is not even half overseas voters, mostly in NZ, I know this as I am one, some work groups are in this group and they have 10s of thousands of staff

You are correct.

good to see maritime testing , but still a loop hole if they arrive and go straight to the ship,
example seamen arrives heads straight to ship berthed at auckland port does not need to be tested, then ship carries on to port of tauranga or port of lyttleton, meanwhile at next port NZ workers , pilot, stevedores or maintenance crew go on board.
it should be compulsory to test for all crew that arrive

So 63% of all borrowed money was to fund the demand side of our economy, up an insane +19b in 12 months, and we wonder why productivity is so piss-poor in NZ.

For reference, another global peer published similar stats today showing nearly half of all outstanding loans to the private sector in Singapore are owed by non-financial businesses (63% owed by all businesses).

https://tradingeconomics.com/singapore/loans-to-private-sector

And if we try really hard we might get those Households to borrow even more to end up circulating back into the Household Savings pool by ramping up the price of residential property! How smart are we.....

True. Thanks to years of under investment in educational reforms, our people are dumb enough to buy houses and unwanted crap using truckloads of borrowed money, induced by the "wealth" effect of increasing asset prices.

"Record mortgage borrowing" period year end September 2020, of which approximately 45 percent of the increase is interest only. With the first deferral period having ended September, where a significant number of mortgages have been revamped there appears to be little insight into the stock and flow of New Zealand's mortgage debt, and the net effect of the mortgage holiday particularly given the low number of residential sales in 2020.

(...and this is despite savers abandoning term deposits. They fell -$1.6 bln in a month, and -$6.6 bln in a year).

LOL this is just the bare beginning of a veritable tidal wave, which has started to show only in part simply because many term deposits are only going to mature in the future.
It will be interesting to see what will happen to the CFR (funding of the banks that is "stable" and can be assumed to stay in place for at least one year) once this wave starts getting into full swing.
I bet Orr will pretend surprise (like he is pretending now at the increase of speculative housing activities which are a direct result of his reckless policies) and he will berate all retail banks for this, ready to point fingers at anybody but himself.
It would be really funny if it was not so dangerous to the stability of the whole NZ financial system.
The banking system is in the hands of a bunch of incompetent plonkers at the helm of the RBNZ. It does look very worrying indeed.

Funding for lending will prop things up for a bit.
Personally as my TD mature in the Oz banks, I will transfer them into Kiwibonds and Kiwibank....

good news for a travel bubble with WA , if you listen from 41 minutes on he compares the way WA have handled covid the same as NZ and talks favorably about NZ, a travel bubble could be arranged, hope our PM is on the phone
BREAKING: WA's hard border is opening up
Western Australia's hard border is finally easing up.
From November 14, travel will be permitted from states and territories that are deemed "very low risk".
https://www.smh.com.au/national/coronavirus-updates-live-victorians-urge...

Wait people are taking out new loans and it’s interest only? I thought the banks were being conservative as we go into a recession?

It's the refinancing of all the "mortgage deferrals".

Just bought a new ute (MY20 is on run-out, and there is deep discounting). Sales guy said they've done 3x monthly volume since lockdown ended, but that will come to a shuddering halt real soon now as new stock is months away and supply lines/freight logistics are quite uncertain.

It's also bled right into used ute prices - crazy $ being asked for second-hand stock and trade-ins. So houses aren't the only asset class being pushed higher by low interest rates, lotsa printed munny sloshing around, tight supply and FOMO.

Sounds like classic substitution. The ute becomes an alternative form of accommodation. Been there.

Yep. Money is free right now. Chatting to a mate who works for an investment fund tonight, and he says they've had to be very careful around the strategy increasing their fund with all the money being thrown at them. Tricky business turning $300M dollars down at a time from multiple parties. Lots of politics.

More good news certainly for NZ economy based on quick support by govt & RBNZ, the economic development of LVR barrier removal clearly showing an immediate effect! - Customer & business confidence to spend is back, all being pull up by investors that willing to take more of the loan risk from the Banks, which in turn gave confidence in the renters market about their dwelling stability, add to that another FHBs massive confidence boost into the market the next 3-5years the govt & RBNZ must steadfast to give more stimulus here.

Sharemarkets around the world slowly crashing...