Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
TSB and the Cooperative Bank have trimmed some short rates and raised some long ones, all to market levels.
TERM DEPOSIT RATE CHANGES
Nothing to report here.
MOST NEW INVESTOR BORROWERS ARE HIGH DTI RISK
New figures from the RBNZ show that up to 71% of the money being borrowed each month recently by investors for houses has been done on high debt-to-income ratios.
BOOM, & INFLATION BUILDING
The preliminary May results of the ANZ Business Outlook showed an 9 point jump in business confidence and a 10-point leap in firms’ own activity expectations. All the sub-components also showed solid lifts: export, investment and employment intentions, capacity utilisation, and profit expectations. Business pricing expectations hit yet another record high, and cost expectations are off the charts. Inflation expectations lifted from 2.0% to 2.2%.
PROJECT WASHINGTON
Fonterra has launched consultation on a set of capital restructure proposals that appear to close the door on any non-farmer investment in the co-operative.
BETTER THAN THE BANKS?
Treasury released the Crown Accounts for the nine months to March 2021 today. It reported a surplus for March of +$234 mln. It also reported net Crown debt as a % of GDP at 33.3%, below forecast and well below the 39.7% forecast in the HYEFU for June 2021. A core reason is that we are having a V-shaped recovery which is showing up in very impressive gains in income tax taken from individuals. In March 2020, that individual tax take was $3.449 bln. In March 2021, it was $4.534 bln, a stunning +31% jump and a record high for any month. (And the March 2020 result was +7.0% higher than March 2019, so no COVID base impact applies here.)
BNZ REPORTS PROFIT SURGE ON HOME LOAN LENDING
BNZ has posted a big rise in interim profit boosted by a positive turnaround in credit impairments, solid revenue growth and a major drop in expenses. Home loan lending rose +8%.
MORE RECORDS
Residential building consents for the year to March were a record high. Residential construction is booming with more than 40,000 new homes consented in that 12 month period.
NON-RESIDENTIAL CONSENTS RISING
There was a total of $770 mln worth of non-residential consents in March, up +6.1% from February. Both factory and office building consents were strong contributors. Factory consents’ share of the total value rose to 22% in March from 12% in February, while office consents grew to 15% from 10% of total consents. The strongest region in March was the Bay of Plenty.
YIELDS RISE
The stripped-down NZGB bond tender today was for $300 mln in three maturities, and overall $973 mln was bid. A feature today is the rising yields investors are seeking. Perhaps you may have thought big demand chasing a smaller pool would have driven down yields, but it was not the case. The $100 mln May 2024 maturity went for a yield of 0.49% pa and up from 0.40% pa. The $100 mln May 2028 maturity went for a yield of 1.35%, up from 1.19% at the previous event. And the April 2037 maturity went for a yield of 2.27% pa, up from 2.10% pa.
MORE TOURISM SECTOR SUPPORT
The Government is committing $200 mln to assist struggling tourism regions. Half are in the Queenstown region, the others nationwide.
AML BREACH GUILTY
Derivatives trader CLSAP (formerly KVB Kunlun) has admitted to anti-money laundering breaches following action by the FMA. Sentencing is yet to happen.
IMF REPORTS ON NZ WITH MUMBLES & PLATITUDES
The IMF has released its assessment of New Zealand. It sees growth this year of +4% and +3.2% in 2022. It also emphasised the importance of "avoiding a premature removal of fiscal and monetary policy support".
OFF AGAIN?
There is a strong chance (Update: it happened) that flights to Sydney will be paused as a COVID outbreak hits there, and very close to NSW Government ministers. New restrictions are in place now around gatherings and mask use there.
ANOTHER SHIPPING STRESS
Worse, there is a growing movement in some large international shipping ports to bar crew-changes on ships that include staff arriving from India or Pakistan. This will have a ripple impact on crewing and then ship availability.
NEXT LEVEL COLD SHOULDER
China's frustrations with Australia have boiled over and Beijing has announced it will stop talking to Canberra. In a notice on an office website, Beijing has applied an "indefinite suspension of all activities under the China-Australia Strategic Economic Dialogue Mechanism". It is particularly unhappy with "certain people in the Australian federal government". The AUD has slumped, taking the NZD with it to some extent.
SPEEDING UP TRADE TALKS
New Zealand and the United Kingdom have agreed "to rapidly lift the tempo of talks", as the two countries enter a new phase in free trade negotiations. The goal is to get "the next round of talks" going by July. Tariff-free agricultural access (New Zealand's goal) will be tricky however.
GOLD FIRMS
The gold price is up to US$1786/oz, matching the earlier New York level and US$4 above the overnight London close.
EQUITIES MIXED
On Wall Street, the S&P500 ended flat in today's session. Shanghai has reopened today and is up +0.3% in early trade. Tokyo has also reopened and is up a very impressive +2.1% in morning trade. Hong Kong is up +0.9% in opening trade. The ASX200 is down -0.4% in mid-day trade, while the NZX50 Capital Index is down -0.8% in late trade.
SWAPS & BONDS FIRM
We don't have today's closing swap rates yet. If there are significant movements today, we will note them here later when we get the data. They are probably firmer. The 90 day bank bill rate is up +1 bp at 0.37%. The Australian Govt ten year benchmark rate is down -3 bps at 1.65%. The China Govt ten year bond is down -2 bps at 3.17%. And the New Zealand Govt ten year is up +4 bps at 1.73% and +1 bp above the 1.72% in the earlier RBNZ fix (+3 bps). The US Govt ten year is unchanged at 1.59%.
NZ DOLLAR RISING
The Kiwi dollar was at 72.2 USc and up almost +½c from this time yesterday - until the China news, and it is back to 71.9 USc now. Against the Aussie we are firmer at 93.2 AUc (moving together). Against the euro we were up at 60.2 euro cents but this has slipped under 60 now. That means the TWI-5 is now at 73.9 and lower than where we oped this morning.
BITCOIN FIRM & VOLATILE
The bitcoin price is now at US$57,012 and +3.2% above this time yesterday. Volatility however has remained high at +/- 3.7%.
This soil moisture chart is animated here.
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