A review of things you need to know before you go home on Thursday; record high house prices, good rental yields, rising bond yields, banker pay 'reform', swap rates up, NZD up, & more

A review of things you need to know before you go home on Thursday; record high house prices, good rental yields, rising bond yields, banker pay 'reform', swap rates up, NZD up, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes today. Update: ASB has instituted a 30% LVR restriction for investors, "immediately".

TERM DEPOSIT RATE CHANGES
The Cooperative Bank reduced its TD rates today.

HOUSE PRICES IN ORBIT
According to the REINZ, the national median selling price hit a record high of $725,000 in October, an increase of +$36,000 (+5.2%) in a month and up by +$120,000 (+19.8%) since October last year. In Auckland the median selling price increased by +$45,000 in the month of October, rising from $955,000 in September to $1 million in October. That was a +4.7% increase for the month and a 16.3% increase for the year.

RENTAL YIELDS ATTRACTIVE
Rental yields suggest residential property will remain attractive to investors. Current rental yields suggest rising house prices are unlikely to deter investors as long as interest rates remain low. Lower quartile house prices over the six months to the end of September were higher in 38 locations and lower in 18 when compared to the six months to the end of June. Over the same period, median rents were higher in 30 locations, lower in seven and unchanged in 19.

LOW YIELDS ARE SO YESTERDAY
Today's Treasury bond auctions have revealed quite sharp rises in yields bidders are prepared to offer, a notable turnaround in just a week. Only two of 22 bidders won anything in the April 2023 $250 mln tranche, leaving $672 mln on the table who presumably bid higher. The two winning bids averaged a yield of 0.22% pa and well up from the -0.01% winning average a month ago. It was only marginally better for bidders of the April 2029 tranche, also $250 mln. Eight bidders won there with an average of 0.74% pa, and well up from the 0.39% pa a month ago. $478 mln was unsatisfied from 27 losers who also bid even higher. The final $100 mln tranche for the April 2033 issue attracted $328 mln in bids from 33 bidders but only 13 won anything at an average 1.06% pa yield. The month-ago yield was just 0.69% pa. All up $1.978 bln was chasing $600 mln, leaving almost $1.4 bln unsatisfied from 67 bidders who were wanting even higher yields.

TIGHT BORDER SEES CITIZENS & TEACHERS ARRIVING, MAINLY INTO AUCKLAND
StatsNZ released September migration data today, pointing out that in the six months to that date which covers the pandemic lockdowns and restricted border entry, a net of +7200 citizens returned, but a net of -4700 non-citizens departed. There was a flood of citizen teachers returning, but few citizen medical workers choosing to return. More than 40% of those arriving headed for Auckland.

BANKER PAY REFORM
In Australia, regulator APRA has issued new manadatory guidelines for financial companies on how they must design remuneration packages for employees, including senior managers. The key drivers must become "best financial interests of beneficiaries", and "prevention and mitigation of conduct risk". (see clause 19, pg 9). No specific mention is made of profit performance, other than as it "aligns with the entity’s business plan" and such profit incentives must be less than a material weighting given to non-financial outcomes. Basically, their pay systems will go from being rewarded for saying "yes", to one that rewards for saying "no" to clients. But these new proposals are being regarded as a backflip from the Hayne recommendations, by cutting the minimum deferral periods for banker bonuses to six years from seven for chief executives, to five years from six for senior managers, and to four years from six for "highly paid material risk takers".

SCREWS TIGHTENED
China's next moves against Australian exports are timber from Victoria being banned, and investment in big new gas developments in WA being withdrawn.

GOLD PRICE SLIPS
The price of gold fallen in Asian trade, now at US$1863/oz and down by -US$14 from this time yesterday. The closing New York price was US$1865 and this was +US$4 more than the afternoon London fix of US$1861/oz.

EQUITIES UPDATE
The S&P500 ended its Veteran Day session earlier today up +0.8% and just marginally below its September 2 record high. Shanghai has opened today flat, Hong Kong is up +0.3% and Tokyo has opened up +0.7%. The ASX200 is down -0.3% in mid-day trade while the NZX50 Capital Index is up +0.3% in late trade.

SWAPS AND BOND YIELDS MUCH HIGHER
Wholesale swap rates rose sharply yesterday. The 2 year was up +12 bps to 0.21%. The 3 year was also up +12 bps to 0.23%. The 5 year was up +13 bps to 0.37%. The 90 day bank bill rate is unchanged today at 0.28%. The Australian Govt ten year benchmark rate is down -3 bps to 0.93%. The China Govt ten year bond is up +1 bp at 3.26%. And the New Zealand Govt ten year is up another +6 bps at just under 0.89% and now well above the earlier RBNZ-recorded fix of 0.84% (+8 bps). And the US Govt ten year is down -2 bps to 0.94% in the ongoing US election shadow and shenanigans.

NZD HIGHER AGAIN
The Kiwi dollar is slightly higher than this time yesterday, now at just on 69.1 USc and its highest against the USD since March 2019. Against the Aussie we are up at 94.8 AUc. Against the euro we are firmer too at 58.57 euro cents. That all means our TWI-5 has risen to just over 72.1 and that makes it the highest level of 2020.

BITCOIN FIRM
Bitcoin is up +1% from this time yesterday at just on US$15,600. The bitcoin rate is charted in the exchange rate set below.

This soil moisture chart is animated here.

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30 Comments

18
up

During an interview with Mike Hosking last week, prime minister Jacinda Ardern said New Zealanders coming home after Covid-19 was a major factor in record levels of home lending

The blame for skyrocketing house prices has shifted from low-wage migrants to cashed up Kiwis, while those in charge of the system continue to dodge responsibility for pumping up buy-side lending.

10
up

Did she provide any evidence? Not that the Hosk really needs stuff like that.

10
up

From the Herald:

Westpac chief economist Dominick Stephens said he found it surprising that a narrative around a historic wave of Kiwi arrivals was taking hold. The much bigger part of the story this year was that there were far fewer numbers of people crossing our borders - in both directions."There's no real evidence of a wave," he said. "In fact, it's stronger than that. There's evidence the opposite of a wave is occurring.

"There is always a steady flow of Kiwis arriving in the country," he said, "Over the past six months, the number of Kiwis arriving long-term has actually averaged half of the normal number. So there is an unusually low number of Kiwis arriving at present."

Blaming returning Kiwis was John Key's line.

The other thing with this whole influx that many don't understand is there are a lot of Kiwis coming for for three months over Xmas to avoid paying quarantine costs. Its a lot more achievable compared to previous years given how many people are working from home.

I know a few that have purchased one way tickets, and will book the return when back in NZ, but are essentially doing Dec, Jan and Feb in NZ (while working), and head back to the Northern hemisphere spring mid March.

21
up

Yes it's a load of BS.
The current boom is due to ultra cheap and widely available money.

10
up

It's more than that
It's the "total messaging" coming out of Government and Robertson and RBNZ
And the Negative Interest rate pushing bank economists
OCR Interest rates coming down further next year
LVRs lifted in May
FLP
QE
No CGT
Why wouldn't you

12
up

Isn't she a fraud.
Very similar to the smiling assassin.

I don't think she's a fraud. I think she honestly believes that Grant Robertson and Adrian Orr can "sort all that stuff out".

Why don't you think she's a fraud? Her actions have consistently not followed her rhetoric and promises.

10
up

She's putting on her very concerned frown on tv.
Faux concern about the housing market.

If Adrian Orr keeps claiming he has no mandate for house prices then journalists should be asking who does have that mandate and start asking them the uncomfortable questions.

It's hard to tell if Jacinda is playing stupid or really is that stupid to not understand credit bubbles. Her naivety with "supply" is wearing thin.

Grant Robertson should have no excuse. He knows exactly what's buggering everything up and it's in his remit to do something about it.

Blasphemy! How dare you insult the supreme leader

World's 2nd largest bank China Construction Bank Corp. is planning to raise up to $3 billion from a sale of bonds that individuals and institutions can trade in and out of using U.S. dollars or....wait for it.....rat poison.

https://www.wsj.com/articles/a-big-chinese-bank-is-selling-bonds-that-ca...

This is very interesting. I am starting to think that the moment when Bitcoin is going to be universally regarded a perfectly serious (albeit on the speculative side of the spectrum) asset class of its own is getting very close.

We're already passed that milestone

Taking one for the team, West Coasters now require the equivalent 4 median homes for one median priced Auckland .Xmas hamper on way. Never bowl underarm, median Auckland home now $140,000 dearer than Sydney median. Xmas hamper on way . 1.009 million , the sqm value of our mother's garage. Chump change ,forecast RBNZ annual increase in housing wealth 125 billion. What's wrong with an economy supported by 1.35 trillion in housing wealth. Demand ,what demand 2190 , the total increase in the number of properties sold in the 2020 calendar year (REINZ ) when compared to 2019, a statistical irrelevance. Fewer homes have sold ex Auckland in 2020 than 2019. As such , Auckland drives the national price.
Demand, 2019, ranked 28/30 in terms of annual sales by volume and turnover over the past thirty years. 73 billion in interest only mortgage borrowing , that's OK. Imagine selling 1.35 trillion of compressed woodchip in a rush.

Look, I'm not smart enough to follow all that hard numbery stuff, but wandering through it to that "compressed woodchip" punch line was worth it.

Fonterra telling porkies? A Covid campaign in Asia to promote the use of Anchor cream cheese 'apparently' created a boom in the baking of garlic cream cheese buns in Korea and Vietnam. However, an online survey showed that many Vietnamese had never eaten it or heard of it.

https://www.fonterra.com/nz/en/our-stories/articles/the-sweet-success-of...

It went viral (within a bubble).That's all going viral means. A whole lot of people in an echo chamber echoed. Doesn't mean a thing to people on the street.

It went viral (within a bubble).That's all going viral means. A whole lot of people in an echo chamber echoed. Doesn't mean a thing to people on the street.

It went viral (within a bubble).That's all going viral means. A whole lot of people in an echo chamber echoed. Doesn't mean a thing to people on the street.

doctors USA came out criticizing US covid response, BS on that, pack of morons
https://79days.news/watch?id=5f8dd9459f98c81507da6245

JA coming out today with crocodile tears / concern for FHB / Rising house price

BUT

Why talk No action.

Real Scam and Sham

What crocodile tear..

Her deputy just like National only highlighting supply side of problem ignoring problem of speculative demand....

https://www.newshub.co.nz/home/politics/2020/11/finance-minister-grant-r...

Correct scam and shame

JA seems to have worn out her welcome incredibly quickly, circles I'm in that were rabid fans of her a month or two ago are very critical of her now. Some of it is related to her stance on the reeferendum but also her condolences but lack of action are wearing thin. I think Labour are in for a heck of a beat up in the coming year if they don't sort it out.

This is why David Seymour won 10 times more seat than before :

https://www.newshub.co.nz/home/money/2020/11/david-seymour-unleashes-on-...

Time for revolt by average Kiwis and FHB.

Seymour deserves the Parliament MVP.

The pretend libertarian? MVP of what?

MVP of calling a spade a spade

Yes. What I also said above.
Phoney.