A review of things you need to know before you go home on Tuesday; more rate cuts, car sales in decline, too tight on the farm, house prices rise, excess bank liquidity, 2yr swap rate hits zero, NZD firms, & more

A review of things you need to know before you go home on Tuesday; more rate cuts, car sales in decline, too tight on the farm, house prices rise, excess bank liquidity, 2yr swap rate hits zero, NZD firms, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
BNZ has reduced its one year fixed rate to match most others.

TERM DEPOSIT RATE CHANGES
BNZ has reduced TD rates to generally match ANZ and Kiwibank as the lowest offers available.

SALES IN DECLINE
Sales of new cars in October continue to fall away, with no boost from rentals, NEVs or even utes. Only SUVs are still selling, even if at lower levels too.

NZMIT No2 TO BE WOUND UP
The FMA has stepped in and appointed a temporary manager to manage three schemes previously operated by Fund Managers Otago. The trustee in this case determined it was in the best interests of investors to remove them as manager of those schemes because of issues relating to governance, solvency of the manager and regulatory breaches. Only one of the three funds is currently active with 600 investors, but it too is to be wound up now.

NEW RULES PLUS AN OFFICIAL HANDICAP
Federated Farmers is reporting that about 900 positions can't be filled nationally on farms and that as the season progresses, losses are mounting for farmers. Border closures and limited approvals mean about 200 expert machinery operators are short, limiting harvests, and 700 dairy farm workers are short because locals won't apply or don't have the skills. "Farmers feel particularly despondent about how they will achieve the new Freshwater regulations under the stricter re-sowing dates that will apply next season."

MORE SUPPLY, LOWER SALES RATE
More properties passed through Auckland's Barfoot & Thompson auction rooms last week but the sales rate was down to 54% compared to previous weeks being over 60%.

MONEY FROM THE SKY
The CoreLogic house price index was up +8% in the year to October. For Auckland the rise was +6%, for Wellington +11% and for Christchurch +5%. Dunedin rose +14% in the same period.

EXCESS LIQUIDITY
Banks generally reported a Core Funding Ratio of 88.6% in September, miles above the the regulatory requirement to keep core funding above 50%. It is even miles above the pre-pandemic Core Funding Ratio minimum of 75%. Overall, banks have 62% of their funding at maturities of 3 months or less, which is almost a record high (July was the high). For domestic deposit funding it is 74.1% and a new record high. If it wasn't for offshore wholesale funding it would be very hard for them to have any term in their funding books. Only 12% of that offshore funding is 3mth or less, 63% is one year or more.

RBA GOES ALL IN
Update: The Reserve Bank of Australia has cut its OCR from 0.25% to 0.10% (as expected) and announced a new AU$100 bln Govt bond buying program on their secondary markets. Much of what the RBA announced today is similar to what many other central banks are already doing although their continued targeting of the three year rate is still a bit unique. Their stated reason for pulling the trigger today is the prospect of elevated unemployment for the foreseeable future. More here.

GOLD PRICE UP
The price of gold is now at US$1897 in early Asian trading, and that is little-changed from the closing New York price earlier today but +US$7 above the afternoon fix in London.

EQUITIES UPDATE
Earlier today, the S&P500 closed up +1.2% of some good economic data. Shanghai has opened up +0.7% and Hong Kong is up +1.8% in their early session. The Tokyo exchange is closed today (Culture Day.) The ASX200 is up +2.0% in early afternoon trade and the NZX50 Capital Index is up +0.3% in later trade.

SWAPS HIT ZERO, BOND YIELDS DIP
Update: Today, the two year swap rate ended at zero percent, the lowest level for any wholesales swap rate ever. The previous low was 0.0025%, but this time the decimal point detritus has been dispensed with. The 90 day bank bill rate is unchanged at 0.28%. The Australian Govt ten year benchmark rate is down -2 bps at 0.81%. The China Govt ten year bond is little-changed again at 3.20%. And the New Zealand Govt ten year is down -2 bps at on 0.54% and the same as the earlier RBNZ-recorded fix of 0.54% (+1 bp). The US Govt ten year is down -1 bp from this time yesterday at 0.85%.

NZD FIRM
The Kiwi dollar is noticeably firmer, up +½c at 66.5 USc. Against the Aussie we are unchanged at 94.1 AUc. Against the euro we are also a little firmer at 57 euro cents. That all means our TWI-5 has risen to 70.1.

BITCOIN DIPS
Bitcoin is down -1.2% from this time yesterday at US$13,619 (but it is still above NZ$20,000). The bitcoin rate is charted in the exchange rate 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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32 Comments

China includes more Aussie export items into the increasing list of bans and Australia's counter is to contemplate lodging a formal complaint with the WTO.
That'll show 'em!
https://www.abc.net.au/news/2020-11-03/china-broadens-trade-war-against-...

" If it wasn't for offshore wholesale funding it would be very hard for (banks) to have any term in their funding books."
What a fabulous way to run a long-term mortgage book! Ultra reliant on Offshore Funding to keep the ship afloat. What could possibly go wrong? There's nothing more unsettling than when you have a hole in your funding book and can't get anyone to make you an offer at any price. It's called a Liquidity Squeeze. But that won't happen, will it.....

This is another proof of the incompetence and recklessness of the RBNZ. And this is just the beginning - with the current trends, there will be very little domestic term funding left. Who would, in his/her right mind, invest in a NZ bank term deposit with the current settings?
Offshore wholesale funding is fickle and unpredictable, and I thought that the RBNZ learned this lesson from the GFC: nope, it seems.

So what does one do with their hard earned cash? I mean $100k, not a lot to many on here, but I can’t or don’t want to join the House ponzi scheme, live rural, have few options really? I see scare mongering that the bank 20% shave can happen, inflation can happen my money worth nothing? Hell guys, stop saying what’s so shit if you can and offer an answer or suggestion. About to slit my FOMO and force a house purchase...? Ideas. Cheers

P2P lending?

I will always recommend Bitcoin. Not only can no one print more of it and steal your value, but you can hold it yourself, and it only has a $200b market cap compared to golds 10 trillion. It is the best asymetrical bet available to everyone today. 1x loss or 10x profit potential (at a very conservative estimate)
https://chrisgimmer.com/bitcoin-reserve-asset/#:~:text=Portability%3A%20....
Also google Microstrategy who just put their entire 450m in treasury reserves into Bitcoin.

The free, farm ready training programme set up to recruit Kiwis into dairy jobs is being put on hold, despite about 800 job vacancies on farms around the country.

In total, 629 people showed interest in the three stage farm training programme, 575 people registered and there were 72 graduates with more placements to farms ongoing.

DairyNZ People Team Leader Jane Muir said GoDairy would continue but its training component would be paused until March 2021.

‘Christmas is not a strong period where dairy farmers employ and we think we will have more success with the training programme from March next year.’

dairynz-plans-review-of-farm-training-programme-before-it-resumes-in-2021

So farmers are plugging away with these labour shortage press releases, but a training program has been suspended because they are not hiring at the moment. Go figure.

I am sure Dairy NZ management staff big salaries will still be paid out over this period...paid by me and you the tax payer?

Wrong - DairyNZ is funded by dairy farmers.

Yer...but nah
In 2019/20, a total of $68.3 million was collected through the milk solids levy, plus DairyNZ received government co-funding. That money is invested into a wide range of programmes, guided by the dairy sector strategy, Dairy Tomorrow.

Paypal's punt on bringing rat poison and other cryptos into the mix seems to be exceeding their expectations with the waiting list for access two or three greater than anticipated.

https://upnewsinfo.com/2020/11/02/paypal-plans-a-much-wider-embrace-of-c...

Very interesting. Things seem to be moving at speed. If many Reserve Banks keep thrashing their own financial systems, crypto might become a very serious alternative.
My worry is government intervention: Governments might want to try anything they can to put their greedy hands into this growing pot, or even eliminate it, especially in an environment of negative interest rates.

Crypto’s and PM’s are pro humanity driven by the people of the globe against delusional and fraudulent central banks.

Not too late J.C..switch some of that mouldy paper for some hard money?

Not too late J.C..switch some of that mouldy paper for some hard money?

In the scheme of things, I'm an early adopter of rat poison.

The better of 2 weevils?

RBA cuts cash rate and targets 3 years Bonds at 0.1%.
Just confirming what we already know - the future will be Deflationary. It's written right there in the 0.1% 3 years. What do we see? Negative growth.
Marvellous!

The Commonwealth Bank of Australia is the first major bank that has committed to a moratorium on home foreclosures until September 2021 after pressure from the financial counselling services body.

Battening down the hatches.

https://www.smh.com.au/business/banking-and-finance/cba-launches-morator...

instead of putting houses on the markets in ones and twos they are going to wait and do 500 at a time.

If everything and everyone gets bailed out everywhere in the world then the looser is surely cash, or anyone holding it?

Nope since when is anyone holding cash worried ? Cash is only a problem when you dont have any.

It's pretty obvious that over the last 20 years the NZD has lost most of it purchasing power in terms of gold or real estate. Anyone holding cash over that period had their ass handed to them on a plate. I just don't see that trend reversing. It seems like the rules have changed and there is no crisis that will cause Interest rates go up again, not unless there's a global reset which ushers in a new currency.

Interesting Tucker Carlson, why people are voting for Trump
https://www.youtube.com/watch?v=FI_aK6W-jp0

Here is VDH from last week offering great prep & insights for the next fascinating 24 hours.

https://youtu.be/M7aUsj6gPdM

yep, he's telling the truth for many many people, you can stay under your rock if you wish.

I see - the good old "If I believe it, it's true" kind of truth. How very post modern of you!

Bit like your faith in the current government aye OB?

Is this the rally where 57000 people were bussed in, then the busses didn’t show up to take em home? Bwahaha, another fake rally! As for Tucker, really AJ? You are stirring here eh?

an inconvenient truth

10
up

Whats going on at the OIO?

Two foreign-owned forestry companies have been given Government approval to buy land in multiple transactions without requiring approval for each purchase from the Overseas Investment Office.

Known as standing consent, Oji Fibre Solutions and Nelson Forests can both buy up to 15,000ha of sensitive land up to a maximum single purchase of 2500ha of land that is exclusively or nearly exclusively in forestry.

https://farmersweekly.co.nz/section/forestry/view/foreign-investors-get-...

# can't see wood for the trees

C'mon Henry - don't you think it's great that NZ fuel users can fund foreign conglomerates to fight for us on the front lines of climate change? And at the same time shut out those evil carbon neutral/negative grazing family farms?