A review of things you need to know before you go home on Monday; strong farm sales, searing mortgage market, survey sees more, NZ credit rating raised, bond yields jump, NZD higher, & more

A review of things you need to know before you go home on Monday; strong farm sales, searing mortgage market, survey sees more, NZ credit rating raised, bond yields jump, NZD higher, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
There are no changes to report here.

TERM DEPOSIT RATE CHANGES
None here either.

MORE BUYERS & SELLERS MAKE FARM DEALS
There were 116 farm sales in January, and 27 of them were dairy units. The December to May is when most dairy units sell, and this year activity has been strong, up more than +70% than in the same two months of 2019/20 or 2018/19. Overall farm sales are +20% higher in January than the average for a January over the past four years. Although overall median prices ($/ha) are up this year, those for dairy units are down -7% compared to January 2020 (although they are little-changed from December).

ESCAPE TO THE [NEAR] COUNTRY
There were 640 lifestyle block sales in January, a level that is +30% more than for January 2020, and that takes the annual sales rate up over 9000 for the first time since the end of 2016. Average prices are up +16%.

SEARING MORTGAGE MARKET
The past year finished with the fourth consecutive monthly record high of mortgage lending, while despite the 'lost' month of April, some $8 billion more was borrowed in 2020 than the year before.

HEARTLAND INTERIM PROFIT UP 11%
Heartland Group Holdings posted an 11% increase in interim profit to $44.1 million. Heartland also expects June-year profit to be at the upper end of its previously issued guidance range of $83 million to $85 million. The group says it continues to "explore opportunities to consolidate banking services to achieve scale and enhance customer offerings." Additionally Heartland is "seeking to achieve the optimal holding structure" for its Marac motor vehicle finance business "to provide access to flexible and efficient capital." On this, work is underway to allow Heartland to potentially separate Marac into a group subsidiary.

NIB NIPPING AT SOUTHERN CROSS
The local subsidiary of Aussie health insurer NIB reported results for the six months to 31 December 2020 with premium revenue up +7.9% to $136 mln and an "underlying profit" of $11.7 mln was basically unchanged. These results were both better and weaker than the parent declared in Australia where revenues slipped but overall profits were up more than +16% year-on-year. The NIB New Zealand operations are chaired by Tony Ryall. NIB's ASX-traded share rose on the news. For comparison, Southern Cross reports premiums more than four times larger than NIB with them growing +6.1% pa. Southern Cross's profits trebled in their fiull year to June.

A LOCKDOWN WINNER
Listed logistics company Freightways (FRE) reported a +29% rise in revenues for the half-year to December 2020, but a good chunk of that was from its purchase of the Big Chill Distribution division. They did not disclose the same-business change. But they did disclose that they had to pay $19.2 mln more for the Big Chill business based on its very strong performance. That extra charge cut heavily into their half year profit result, but without it, NPATx was up +41%. Their share price is little changed today but is up +50% since late August.

ANZ & TOWER IN $14 MLN GENERAL INSURANCE DEAL
ANZ NZ is selling the distribution interests in general insurance policies underwritten by Tower to Tower for $14 million. ANZ says the deal is part of a push to simplify its business. Tower provided insurance for ANZ and National Bank customers between 1990 and 2009 and continues to cover about 23,000 customers under renewals of those policies. The deal will see Tower take on full interest in the products, which will be rebranded as Tower products. Since 2010 Vero has underwritten and managed ANZ’s general insurance products. Tower CEO Blair Turnbull says the deal delivers positive value for Tower shareholders by ending all future ANZ commission payments on the portfolio. Premiums from the ANZ portfolio contributed $40 mln in 2020 to Tower’s Gross Written Premium.

HIGHEST IN TEN YEARS
The RBNZ commissioned survey of what household think house price inflation shows the expectation is it will be up +6% in a year. It is a view that has been rising since June, and it is now the highest since this quarterly survey started in 2011.

UPGRADE
S&P Global Ratings raised New Zealand's foreign currency sovereign ratings to 'AA+' from 'AA', citing a faster-than-expected economic recovery. "New Zealand is recovering quicker than most advanced economies because the country has been able to contain the spread of COVID-19 better than most others." We are now just one tick off a AAA rating. S&P says "We could raise our ratings if New Zealand's fiscal indicators strengthen markedly or if external imbalances improve."

"SUSTAINED BOOM"
Westpac has has lifted its forecast for dwelling prices with +10% gains now expected in 2021 and then again in 2022. "The upturn is being supported by record low interest rates; the confident expectation amongst borrowers that these rates will remain low for years to come; ample credit supply; and an improving economic backdrop, as the roll-out of vaccines promises to bring the pandemic to an end and drives a sustained lift in confidence."

GOLD FIRM
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1788 and up +US$3 from where it closed in New York last week.

EQUITIES UPDATES
The NZX50 Capital Index has opened down -0.7% today with most of the majors falling away. The ASX200 is up +0.2% in early afternoon trade. Shanghai opened flat, Hong Kong opened up +0.8% and Tokyo is up +1.3% in their early trade. The S&P500 futures index is little-changed and giving no signals on how New York will open.

SWAP & BONDS RATES TAKE OFF AT LONG END
Update: The 10 year jumped +14 bps today and the 7 year was up +12 bps. From 3 years, there have been outsized rises. We don't have today's closing swap rates yet. If there are movements today, we will note them here later when we get the data. It is likely they will be rising, especially at the long end. Today the 90 day bank bill rate is down -1 bp at 0.27%. The Australian Govt ten year benchmark rate is +6 bps higher at 1.56%. The China Govt ten year bond is unchanged at 3.30%. But the New Zealand Govt ten year is up +13 bps today to 1.65%. That is well above where the earlier RBNZ fix was, at 1.59% (+8 bps). The US Govt ten year is up +4 bps from this morning, pushing on up to 1.38%.

NZD RISING
The Kiwi dollar is even firmer today and now at just over 73.3 USc, up from this morning and up much more than +1c from this time Friday. On the cross rates we are firmish at 92.8 AUc. Against the euro we are also firmer at 60.4 euro cents. That all means our TWI-5 is up at 74.4.

BITCOIN SLIPS
The bitcoin price is now at US$56,783 and -1.6% lower than where we opened this morning. Volatility over the past 24 hours has been +/- 2.2%.

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22 Comments

15
up

A few weeks back, I erroneously mentioned that Bitcoin's market cap was greater than the value of the NZ housing market (approx NZD1.2 trillion). A commentator was quick to pounce and point out that I was wrong. Only took about 14 days for my comment to be correct.

To be fair J.C. NZ is a rounding error economy on the global stage.

True. If BTC can get to Aussie's AUD7 trillion, then people might take notice. Battle of the bubbles.

Still interesting to note because most NZers seem to think BTC is an elaborate scam (my subjective observation). They don't think the housing market is a scam though (also a subjective observation).

Still a bit f'd up that our whole incredibly overvalued housing stock (including all the upmarket mansions etc) are worth less than something that is effectively worth nothing. (although I guess you could say that about any currency)

That's the perspective I would expect to hear around the water coolers.

Good to see dairy farms moving.

Up here pretty much all the farms available have been sold in the last 3-4 months. Outside investors - a lot of slow money - looking for a cash return above bank rates. Carbon farmers outbidding beef farmers. Going forward reluctant farm vendors as no where to put the sale proceeds and get a return. Sadly for dairy farm prices 2 good payouts in a row are being overwhelmed by negativity around increasing government regulation and staffing issues.

Here we go again, round and round the mulberry bush from one asset class to another in the hope of making a return above Bank rates

Another day of losses on the NZX. -8.35% since peak (last month).

I can never understand why you would want to invest in the market for a short term gain. The fact is the NZX50 has returned over 90% over the last 5 years. What's wrong with that?

Whats wrong with that is that you have cherry picked 5 yrs :)

Well lets say 370% over the past 10 years, and tax free

Who's investing for short term gain? I'm just observing the downward trend developing. Just as we would if it was bitcoin, houses or NZDs.

Mortgages at 2%, balance transfers at 0% - good conditions for repaying debt atm.

You know the rules - NEVER repay debt.
In fact, at those rates - take on as much as you can get!
If you have surplus, sock it away in an Offset Account etc, because in the grand scheme of banks "giving you an umbrella on a fine day and taking it back when it rains" you don't want to need to ask for liquidity (try to re-draw a mortgage etc) if it gets tight.
(NB:Scrapping the ability to run retail Offset Accounts should be one of the first BOLD moves Grant should make)

bw. Your comments remind me of the woman I knew some years ago who won Lotto. She had never had any money at all and had always rented. So she bought a house for the first time.
Some idiot advised her debt was good. So she ended up with a big mortgage and some millions in the bank. Naive.
And bw would be advising her never to repay debt.
Go figure

Well obviously having millions in the bank while having a mortgage on one house is dumb. Your supposed to leverage all your money against property

Wespac's new improved forecasts put national median house price end 2022 at $857000, and all things equal Auckland at $ 1,240,200 up a modest $ 238000. Why would you sell?

And where will rents be? What will the national debt be? Adrian Orr is the patron saint of property investors (Grant Robertson is the Pope).

What’s really scary is that these numbers and subsequent comment right now seems quite rational.

Looking way back – Equiticorp using its manipulated share price to purchase NZ Steel during the 1980’s excess – at the time it all seemed fine - John Key even gets a small mention.

http://www.stuff.co.nz/business/695065/NZs-most-notorious-white-collar-c...

“When it unraveled it saw high flying businessman and Equiticorp boss Allan Hawkins fall from grace and jailed and lead to severe criticism of the Labour government of the day - which was found to be involved in the money go round.”

My goodness – “severe criticism of the Labour government of the day” – how could such a thing happen?

Yes it seems the RBNZ is green lighting an Auckland house price median of 1.5 million within the next 3 years.

20
up

“What happened today”

Well – big fat diddly squat when it comes to government action to address some of the major issues facing the country and its people right now.

This Covid “happy place” that they politically wish to wallow in needs to be brought to an end.