What happened Wednesday

A review of things you need to know before you go home on Wednesday; some rate changes, price pressures build, jobs market strong, factories busy, Auckland stars, swaps fall, NZD holds, & more

9th Jun 21, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Resimac has cut its floating rate for LVR<70% to 2.79% from 2.99%.

TERM DEPOSIT RATE CHANGES
Asset Finance raised its 1 year rate to 3.50%.

PRICE PRESSURE OFF THE SCALE
Latest ANZ Business Outlook Survey shows an unprecedented net +85% of businesses expect higher costs ahead. In May, they suggested that business conditions were peaking; but they have expanded from there into June. Inflation expectations are now 2.33%, the highest since November 2017.

JOBS MARKET PRESSURE BUILDS
The latest BNZ/SEEK employment report shows job ads at a fresh record high in May, recording a last expanding labour market.

GETTING ON WITH IT
ANZ's June update of its Truckometer indexes shows plenty of volatility and revision. But it also shows strong traffic growth for both personal use (cars) and trucks (heavy). ANZ suggests some activity is higher because firms are working to adjust to supply chain disruptions. But they also suggest that most of it is because "firms and people are getting on with it".

HIGHER RATES & FEES
Local authorities saw their rates and "regulatory income" (which includes fees and fines) rise by +4.5% in the year to March 2021. That is turning higher again after a 2020 which saw this growth fall to just +2.2% pa at one point.

EARNINGS OUTAGE
Mercury Energy (MCY) has sharply cut its earnings guidance to $460 mln, down from the prior $520 mln. They say lower hydro generation is behind this given earlier dry conditions, and an unplanned and probably long-term outage at its Kawerau geothermal power station. These declines kept them from getting any additions from the higher earning of its Tilt Renewables investment. It's an ugly result that would have been even more ugly if it wasn't for Tilt.

"MORE AMBITION REQUIRED"
The Climate Change Commission has published its final emissions reduction budgets, saying New Zealand's starting point is worse than expected, so more will need to be done.

THREE TIMES+ OVERSUBSCRIBED
The new May 2032 NZ Government bond has been issued via syndication for $2.25 bln. These bonds carry a coupon of 2%, attracted $7.5 bln in the book-build process and were issued with a yield to maturity of 1.8725% pa at the bottom of the guidance range when they were announced. The "joint lead managers" (ticket clippers) were ANZ NZ, BNZ, Commonwealth Bank of Australia, and J.P. Morgan Securities Australia. As we have earlier noted, the subsequent normal NZGB tenders are been cut back.

FACTORIES BUSY BUILDING STOCKS?
Manufacturing sales came in +2.7% higher in the March quarter than for March 2019 (the March 2020 data is pandemic-affected of course). Manufacturing volumes are +2.2% higher on that basis. These are not impressive gains, but at least they are gains. Of some concern is that finished stocks are up almost +13% on the same basis. Manufacturing to build stocks can be an indication things aren't sustainable at current levels. This March data is a contrast to the strong June business confidence survey above.

HO HUM
The NZX listed property equities rose +2.4% last week and are up +3.6% since the start of October 2020. Last week's mover is Vital Healthcare (VHP) which was up +1 place to 27th in the NZX50. This is a sector with an overall capitalisation of $11.4 bln or 9% of the overall NZX50 capitalisation. It is not a sector that is starring in the overall index. Interestingly, these 8 companies together have a capitalisation less than Fisher & Paykel Healthcare's $16.6 bln.

A GLOBAL #1
Auckland has topped the Economist's The Global Liveability Index 2021. Sydney fell out of the top ten. Osaka Japan was #2, Adelaide was #3, and Wellington was #4 sharing that spot with Tokyo. (It doesn't look like housing affordability was a big factor in this survey. The main categories for scoring were crime and threats, healthcare, culture & environment, education, and infrastructure.)

AN INFLATION ENGINE
China's producer prices grew +9.0% in May from a year ago, the fastest rate of increase in 13 years and higher than the +8.5% expected. In April they rose +6.8% on the same basis, so the pace is quickening. Their consumer prices rose +1.3% year-on-year and while that was faster than for the prior month it was less than the +1.6% pa expected.

GOLD HOLDS
Compared to this time yesterday, the gold price is down -US$8 and now at US$1892/oz . It closed in New York at this same US$11893/oz and in London at US$1893/oz.

LOCAL EQUITIES TENDING POSITIVE
Wall Street ended its session virtually unchanged from the prior day. The Tokyo market has started out down -0.3%, and Hong Kong has opened -0.1% so far. Shanghai is up +0.3% in early trade. The ASX200 is down a minor -0.1% in early afternoon trade, but the NZX50 Capital Index is heading for a +0.4% gain late in its session. Auckland Airport (AIA #2 +2.0%) and Ryman (RYM #9 +1.8%) lead the NZX50 gainers. ATM #10 +1.6% and FPH #1 +1.2% also booked good gains.

SWAP & BONDS YIELDS SOFT AGAIN
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. They probably fell. The 90 day bank bill rate is unchanged at 0.32%. The Australian Govt ten year benchmark rate is down -7 bps at 1.53%. The China Govt ten year bond is little-changed at 3.14%. The New Zealand Govt ten year is down -4 bps at 1.78% and now above the earlier RBNZ fix of 1.77% (-5 bps). And the US Govt ten year has fallen back -4 bps to 1.53%.

NZ DOLLAR HOLDS
The Kiwi dollar is holding at 72 USc and where it was when we opened this morning. Against the Aussie we are little-changed at 93 AUc. Against the euro we are soft at 59.1 euro cents. That means the TWI-5 is now at 73.5 and very little-changed from where we opened this morning.

BITCOIN VOLATILE
The bitcoin price is now at US$32,555 and very little different from this time yesterday. But in between things have been volatile, falling at one point to US$31,035 and near is 2021 lows. Volatility in the past 24 hours has been very high at +/- 4.5%.

This soil moisture chart is animated here.

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Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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68 Comments

by northman46 | 9th Jun 21, 4:02pm 1623211377

It seems baffling that affordability or cost of living aren't taken into account when ranking the most liveable cities. Wellington being fourth makes me lose all respect for it.

by Advisor | 9th Jun 21, 4:27pm 1623212839

The ranking methodology says:

The extent to which cities were sheltered by strong border closures, their ability to handle the health crisis and the pace at which they rolled out vaccination campaigns drove significant changes in the rankings

Based on that info, Mogadishu must have moved several places up the livability ranking with Somalia reporting fewer cases than most European and North American countries.

by Uninterested | 9th Jun 21, 5:13pm 1623215618

Those doing the survey can't have visited Auckland then....

by brisket | 9th Jun 21, 6:05pm 1623218710

I think the ranking methodology assumes you are a highly paid expat, a consultant for HSBC or something. That’s the target demographic. Quality of life for normal people is pretty irrelevant. Always a good opportunity to whip out the ‘Yay Kiwi’ narrative though.

by northman46 | 9th Jun 21, 6:23pm 1623219832

No doubt. The Reddit 'NZ is a Utopia' circle jerk will be in full swing once Europe / Americas wake up.

by stuart786786 | 9th Jun 21, 4:17pm 1623212266

Reflection of housing market - how can Robertson's and Orr's of NZ be blind or unable to see or is it that are aware but ....

In February 2021 market was very hot as per media report and data and since April as per Mr Orr market is cooling BUT a 2 bedroom unit purchased in February 2021 for $825000 ( At peak) is now again in market and asking between 1.1 million to 1.2 million - is not in the best street or near beach.

https://www.propertyvalue.co.nz/auckland/manukau-city/pakuranga-heights…

This reflects the craziness. Asking insane price and also getting it though doubtful that this speculator will be successful but still....

by Passerby | 9th Jun 21, 5:33pm 1623216835

Another thing that really baffles me is that Jacinda abd co are so happy to let 30%+ house prices like it’s absolutely nothing. Not a flinch but oh no how dare underpaid nurses ask for a 17% pay rise. That’s preposterous!!!!!

by Groat | 9th Jun 21, 5:39pm 1623217172

Its because her, her hubby and her family are getting richer.

by blobbles | 9th Jun 21, 4:41pm 1623213706

Wow! Look at the arbitrage profits to be made between the NY and London gold prices! 10k difference (@David, I think you added an extra "1" in the NY price :-p)

by custard | 9th Jun 21, 5:30pm 1623216634

PRICE PRESSURE OFF THE SCALE
JOBS MARKET PRESSURE BUILDS
FIRMS AND PEOPLE ARE GETTING ON WITH IT
HIGHER RATES & FEES
STRONG JUNE BUSINESS CONFIDENCE SURVEY

And yet – we still have the OCR set at 0.25% - an emergency rate set over a year ago when the world and it’s economy looked as if it was to about to enter a death spiral from which few would survive.

Are we still in that position – no.

Fearful RBNZ thinks best there’s no change – happy to endlessly “wait and see”.

Every day, their inaction looks a bigger, more glaring mistake.

by Groat | 9th Jun 21, 5:44pm 1623217450

The RBNZ has made fools of themselves and have proven incapable of doing the easiest of jobs. We need a full enquiry about their devestating policies. Orr and Bascan't, in my opinion, should be thrown in prison.

by printer8 | 9th Jun 21, 6:53pm 1623221625

Groat
It is your inability to see beyond your singular self interest view to demonstrate any understanding of the wider implications of RBNZ actions is making you the fool.

by frazz | 9th Jun 21, 6:50pm 1623221456

"It is your inability to see beyond your singular self interest view" ..crikey printer you really have some big blinkers on - nearly fell out of my seat when I read your comment! Fancy you of all people uttering that...

by printer8 | 9th Jun 21, 7:11pm 1623222707

frazz
Rubbish. You are in the same category as Groat - an inability to see beyond a singular narrow vested view. Me, as previously posted, I've been out of property investment since 2016 so don't have a vested interest, and no blinkers on as I can see the wide ranging rationale of the actions of both RBNZ and the Government. By re-reading Groat's and your comment its pretty basic (and hopefully not beyond you and Groat) to see who has the blinkers on . . . and when previously challenging Groat to question what these could be it drew a total blank.
frazz, - or Groat - prove that you don't have blinkers on by at least acknowledging the rationale of RBNZ actions.
I wait for either your or Groat's response - so put up before you comment.

by Passerby | 9th Jun 21, 8:15pm 1623226527

Me thinks P8 is actually the great Mr.Orr, the way he defends RBNZ is beyond amazing. They are gods who can do no wrong.

by Ezy | 9th Jun 21, 8:33pm 1623227637

Nah just from the same clueless generation unfortunately.

by printer8 | 9th Jun 21, 9:18pm 1623230314

Passerby
"P8 is actually the great Mr.Orr" Another ridiculous flippant comment from you.
To show that you have a bit of understanding, see if you can identify from the RBNZ perspective what the the rationale for their actions has been.
Doesn't take intelligence to blindly throw glib comments around. If you want to be taken seriously, you too need to put up before you comment further.

by Passerby | 9th Jun 21, 9:59pm 1623232774

OK boomer!

by Yvil | 10th Jun 21, 9:17am 1623273474

"OK boomer !"

What an insightful, well written comment with valid points… Not. One resorts to personal attacks when out of arguments

by Groat | 9th Jun 21, 10:51pm 1623235908

All the big selfish ego's on this comments section are boomers. Funny that.

by printer8 | 9th Jun 21, 11:26pm 1623238003

Passerby and Groat
There you go - unable to show any insight to the issue other than your narrow self-interest so reduced to respond only by slagging off.

by Yvil | 9th Jun 21, 5:43pm 1623217409

To all the miserable, perpetual complainers on here:

"Auckland has topped the Economist's The Global Liveability Index 2021"

by Groat | 9th Jun 21, 5:44pm 1623217488

Auckland is a dump.

by Yvil | 9th Jun 21, 7:35pm 1623224114

Hahaha, so you do recognise yourself as being a miserable complainer!

by Groat | 9th Jun 21, 9:45pm 1623231958

Auckland is a dump.

by Yvil | 10th Jun 21, 9:23am 1623273827

That explains your previous comment so much better, very insightful, well written, with valid points.

by custard | 9th Jun 21, 5:52pm 1623217968

Auckland’s setting and natural environment is quite nice.

The city itself isn’t much of anything.

by richard1965 | 9th Jun 21, 6:04pm 1623218699

Yeah and also North shore

https://www.oneroof.co.nz/news/39574

by lowercase capitalist | 9th Jun 21, 6:18pm 1623219497

Seems like an oversight to not include affordability as a metric in these rankings.

by HouseMouse | 9th Jun 21, 6:44pm 1623221056

Something Yvil does not care about nor The Economist, apparently.

by Yvil | 9th Jun 21, 7:33pm 1623223983

Some people think they know better than the Economist, oversized ego or just ignorance?

by powerdownkiwi | 9th Jun 21, 8:22pm 1623226978

Many of us know better than the Economist.

by HouseMouse | 9th Jun 21, 8:24pm 1623227042

You do realize that survey is to help place global execs right?
No you obviously didn't, Showing YOUR ignorance....

by Flying high | 9th Jun 21, 7:11pm 1623222690

Covid helped the ranking... "This year, Auckland in New Zealand rose to the top of the index owing to its successful approach in containing the covid-19 pandemic. Its society largely remained open and the city scored strongly on a number of metrics including education, culture and environment."

by richard1965 | 9th Jun 21, 5:50pm 1623217810

Interesting article on Fed and inflation

https://www.ft.com/content/af4394f1-cc0b-4240-9170-daf5d08ed2b8

Everyone is waking up to question reserve bank and it's policy.

They have gotten away till now but seems will have to face the music soon.

by Audaxes | 9th Jun 21, 6:15pm 1623219315

Investments In Intangible Assets Have Minimized Inflation

by Audaxes | 9th Jun 21, 6:22pm 1623219776

The new May 2032 NZ Government bond has been issued via syndication for $2.25 bln. These bonds carry a coupon of 2%, attracted $7.5 bln in the book-build process and were issued with a yield to maturity of 1.8725% pa at the bottom of the guidance range when they were announced. The "joint lead managers" (ticket clippers) were ANZ NZ, BNZ, Commonwealth Bank of Australia, and J.P. Morgan Securities Australia.

Three times + oversubscribed. Demand for safe, liquid sovereign securities remains undiminished irrespective of MSM inflation hysteria.

The "ticket clippers" are in the business of purchasing securities and creating a record of the money they owe the government, which gets credited to the RBNZ Crown Settlement account. The same banks are debited central bank reserves until transfer payments are deposited into beneficiary private sector bank accounts.

by Flying high | 9th Jun 21, 6:28pm 1623220096

Fiji covid update: 845 infections and wait for it...4 deaths. No, dont laugh

by mfd | 9th Jun 21, 6:33pm 1623220425

0.5% fatality rate (so far) is pretty consistent with other countries. Why would you laugh at that?

by Flying high | 9th Jun 21, 8:18pm 1623226736

You are very wrong there mfd. 1 percent NZ, 2 percent USA is quadruple

by mfd | 9th Jun 21, 10:05pm 1623233139

You can take them with huge pinches of salt due to undiagnosed cases, and NZ has such small numbers significantly affected by a single rest home that it's not really a meaningful number beyond an order of magnitude. Fiji does have a fairly young population, so wouldn't be surprising if they suffered fewer deaths.

by False economies | 9th Jun 21, 7:21pm 1623223316

You know deaths lag infections...?

by Flying high | 9th Jun 21, 8:15pm 1623226525

Not any more as there are treatments ... remdesivir is one but also "So far the only drug that has been shown to reduce deaths from the disease has been dexamethasone"

Wall to wall sickening Fiji coverage on the newshour implied rampaging carnage of hundreds if not thousands of deaths.

The fijians dont want to have complete lockdown and who can blame them

by Ezy | 9th Jun 21, 6:35pm 1623220528

Historic day for Bitcoin - El Salvador has voted in parliament with a super-majority 62 out of 84 votes to make BTC legal tender. As soon as the motion is published in the gazette, all retailers in the country have to accept BTC transactions.

This is going to drive a massive uptick in POS solution adoption like the lightning network. The innovation in this space is just beginning and IMO we're seeing the first big event that marks a cross-over from innovator to early adopter stage on the technology adoption curve.

Westerners like Peter Howson from the bitcoin beat-up article 2 days ago, who wax lyrical about what a big waste of energy Bitcoin is, then jump on their phones to scroll pics of kittens on Instagram are completely out of touch with the real world utility of BTC. Decentralised non-custodial banking, secured by proof of work is no joke.

https://www.cnbc.com/2021/06/09/el-salvador-proposes-law-to-make-bitcoi…

by custard | 9th Jun 21, 6:40pm 1623220802

Oh dear – El Salvador – really?!?

by frazz | 9th Jun 21, 6:54pm 1623221640

Yes custard - over 75% of the population do not have a bank account (or denied access) - game changer and others in the region will soon follow.

by custard | 9th Jun 21, 7:15pm 1623222944

I’m aware of some of the issues you point out – however I do struggle to reference El Salvador as some sort of significant or convincing pivot point.

If “others in the region” consist of Guatemala, Honduras and Nicaragua then again – this is hardly the “A” team coming out to bat.

But overall I just watch and view with interest – perhaps it really is a game changer – I have no skin in the game either way.

by TommyYank-old | 9th Jun 21, 7:57pm 1623225461

Or could El Salvador's promotion of Bitcoin simply reflect it is a Narco Economy and it's principal politician's are on the take and aiding their sponsers in hiding their cash flows.

by Pacman_46 | 9th Jun 21, 9:48pm 1623232081

You do realise the bitcoin blockchain is a public ledger, so probably the worst way to transact for crime as every transaction is traceable? Better to keep using suitcases of freshly printed USD for that.

by Ezy | 9th Jun 21, 8:30pm 1623227425

35%+ of the worlds population is unbanked. That's 2.6 billion people. A sovereign nation taking this legislative step to address this is no small deal. A precedent has been set.

by The Person | 9th Jun 21, 9:26pm 1623230803

Yet that 75% of the population with no bank account, do have an account with a bitcoin broker?

by refactornz | 9th Jun 21, 9:45pm 1623231910

With bitcoin you don't need a broker, that's optional.

by Galloleous | 10th Jun 21, 9:25am 1623273932

Lol you dont need a broker, thats the point. It is straight peer to peer with no middle man and you just put an app on your phone. You control your coins at all times :)

by J.C. | 9th Jun 21, 6:40pm 1623220855

Yes. Bitcoin has been legal tender in Japan since 2016. Surely that's a bigger deal than this. Not trying to belittle the significance in any way but it's not the first country in the world to make BTC legal tender.

by Ezy | 9th Jun 21, 6:51pm 1623221476

Japan has the Yen, but for a country like El Salvador (despite it's corruption) who uses the USD as it's sovereign currency moving to a decentralised standard like BTC is a big deal. You should read the bill in the linked article. 70% of El Salvador are un-banked. This isn't anything like Japan.

by J.C. | 9th Jun 21, 7:01pm 1623222070

Fair points. I was just trying to point out that the recognition of Bitcoin under Japanese law is probably more important for general acceptance than El Salvador. Most Western nations don't take notice of countries like El Salvador and don't care about its woes.

by Independent_Observer | 9th Jun 21, 7:13pm 1623222787

haha 'with 64 out of 84 members of parliament being holders of BTC'

by J.C. | 9th Jun 21, 7:45pm 1623224744

Yes. And Tesla will now have to accept BTC in El Salvador.

by Independent_Observer | 9th Jun 21, 8:00pm 1623225629

Just what Musk wants....oh wait..or was the doge...can't remember!

by J.C. | 9th Jun 21, 8:32pm 1623227567

No capital gains taxes either

by Yankiwi | 9th Jun 21, 10:12pm 1623233549

Ezy,

How is your forecast for $100kUSD in June for bitcon going?

I remember when you were jumping to buy more when it went below $40k USD and that it was quite unlikely to make it to $32k USD. Well, it has made it to that level several times since then. The wild part is that it has vacillated from 32 to 40 to 32 to...at present 34. Go ahead, HODL. As Clint Eastwood would say, I dare you...

by Ezy | 10th Jun 21, 7:20am 1623266410

My prediction couldn't account for an entitled billionaire with Asperger's, a sense of humor that thinks shilling meme coins is funny and a Trumpesq penchant for tweeting unfortunately. I bought the most Bitcoin in a single purchase I've made at 31k though. I stand by my $100k prediction, but probably looking more like August given the current state. I'm still picking a top of around $350k this cycle. I would tell Clint Eastwood, my family are going to be setup in future generations to be the Rockefellers of NZ.

by Galloleous | 10th Jun 21, 9:31am 1623274319

Still buying with any spare change I can get my hands on. This cycle is no where near over yet. We were looking for a correction when Muskrats's tweet just gave it the push over the cliff. Liquidations did the rest, destroying anyone and everyone (me included for a small part) that had leverage. It was also compounded by people opening new leveraged longs on the way down hoping to catch the bottom, which in turn just got liquidated.
Massive crazy times.

by Ezy | 10th Jun 21, 10:19am 1623277150

Leverage is for people with a huge risk tolerance - definitely not me. BTC is my reserve, then I've got a tidy sum staked in SOL, with a smaller amount liquidity farming. Even the farming is quite high risk for my appetite with the risk of impermanent loss in volatile markets pretty high.

by HouseMouse | 9th Jun 21, 6:42pm 1623220934

That livability report is a nonsense. How can a report on 'liveability' not consider affordability?
More kiwis should consider Adelaide, at number 3 without taking account of affordability. Would be above Aucklabd if affordability was considered.

by Justa comment | 9th Jun 21, 7:10pm 1623222620

If it was 'Affordability' Auckland and Wellington would be 1627 and 1436 ho ho ho

by J.C. | 9th Jun 21, 8:34pm 1623227667

Osaka at #2. Can get anywhere without a car. Can ride a bike for transport not as a death wish.

by redcows1 | 9th Jun 21, 10:36pm 1623234965

I call bull$#@ on that. My understanding from the anti bikers and anti foot brigade and anything remotely green is that that sort of thing is entirely impossible for any city anywhere and that's why we don't do it here. They must be right surely.