Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
BNZ and the Cooperative Bank cut short rates, with the Coop bank cutting their FHB special to 1.99%. More here. The Coop Bank also raised its longer term rates.
TERM DEPOSIT RATE CHANGES
No changes today.
WIDER DEFICIT, BUT STILL VERY MANAGEABLE
Our current account deficit blew out in Q1-2021 to -2.2% of GDP, mainly because our services surplus essentially vanished. Analysts expect the current account is now in a worsening track in 2021. But it wasn't all bad news; our foreign net liability position (IIP) improved and sharply, with Stats NZ noting: “The liability position is the smallest it’s been in a couple of years, but what’s really interesting is how much it shrank this quarter. It’s the biggest quarterly change in New Zealand’s liability position in over 20 years.” We get the Q1 GDP economic activity data tomorrow and observers expect a +0.9% year-on-year expansion (and above the pre-pandemic activity levels).
ANOTHER SLIP
Dairy prices fell -1.3% at today's auction in US dollars although the strengthening greenback eliminated the fall in NZD.
THE DTI ARM WRESTLE INCHES FORWARD
The Finance Minister agrees 'in-principle' to give the RBNZ debt-to-income regulatory tools, but he is still 'discussing' with them how the impact on first-home buyers would be minimised. More here.
LOG PRICES UP
The global shortage of logs and sawn timber have pushed prices to a record high. Regulatory limits are encouraging the surge when there is a worldwide shortage of wood products. Local timber buyers haven't get really felt the impact of these higher international prices, but they will soon.
CARBON PRICE UP
The carbon price reached $41.20/NZU as its bull run continues, up +12% in June so far.
GOLD'S RETREAT EXTENDS
Compared to this time yesterday, the gold price is down -US$7 and now at US$1856/oz in early Asian trading. It closed in New York earlier today at US$1859/oz and in London at US$1865/oz.
EQUITY MARKETS MEANDER
The S&P500 closed with a small downer session, -0.2% and was lower for almost all the day. Tokyo has opened with a -0.3% fall in early trade, and Hong Kong has opened down -0.2%. Shanghai's mood isn't much better, down another -0.5%. The ASX200 is up another +0.3% and a new record high. The NZX50 Capital Index is down -0.4% in late trade.
SWAP & BONDS YIELDS STABLE
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. They probably held. The 90 day bank bill rate is unchanged at 0.32%. The Australian Govt ten year benchmark rate is up +4 bps at 1.49%. The China Govt ten year bond is down -1 bp at 3.15%. The New Zealand Govt ten year is up +2 bps at 1.67% and now above the earlier RBNZ fix of 1.65% (-2 bps). But the US Govt ten year is up +2 bps to 1.50%.
NZ DOLLAR UNCHANGED
The Kiwi dollar is still holding at 71.4 USc. Against the Aussie we are little-changed at 92.8 AUc. Against the euro we are still at 58.9 euro cents. That means the TWI-5 is still at 73.2.
BITCOIN SLIPS
The bitcoin price recent rise isn't holding and it is now at US$39,909 and down a minor -0.8% from this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.2%.
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48 Comments
No, absolutely not. This is a new approach.
"The Reserve Bank said that as of March 33 per cent of investor borrowing, but less than 7 per cent of borrowing by first-home buyers, was at a DTI of more than seven."
https://www.stuff.co.nz/business/125458249/reserve-bank-gets-new-tool-t…
For those who are sick of the shill pieces of rubbish around BTC that they seem to regularly post on this site, here's some real journalism from today about the adoption of BTC in El Salvador https://www.wsj.com/articles/a-global-first-bitcoin-as-national-currenc…
// Edit [paywall] - it's the WSJ article in this Google search link
They need to decide what currency is everything denominated in don't they? Can you really have two currencies (one of which is highly volatile)? Why would anyone lend money for example if it can be paid back in another currency at a lower value? Its just a bonkers move from a desperate country. If they made it their only legal tender currency then that would be kind of significant.
Who is this "They" you speak of? I know we seem to have gone and forgotten what capitalism actually is in the West, but the market will decide. Each individual has a different risk profile, and they'll act accordingly. Depending on the time frame that risk profile changes - BTC is increasing in value on average by 200% YOY for the last 12, and the USD is decreasing in value by about 10% YOY. So if you're saving to buy something without time pressure BTC is the obvious choice, whereas if you have to buy groceries next week USD is. Not that hard to grasp really.
To deal with bitcoin’s wild price fluctuations, the legislation establishes a free-floating exchange rate determined by the market. If someone immediately transfers his bitcoins to dollars when he receives them, then it shouldn’t matter how volatile the exchange rate is because he’ll always have the equivalent in dollars. Salvadorans are free to hold their savings in either currency; the legislation simply puts bitcoin on par with the U.S. dollar and doesn’t disadvantage the cryptocurrency with higher transaction costs.
"So if you're saving to buy something without time pressure BTC is the obvious choice, whereas if you have to buy groceries next week USD is. Not that hard to grasp really."
So fiat will remain the day to day currency and BTC will be a form of investment - isn't that just like every other country in the world?
I don't mind the idea of crypto becoming legal tender as long as the money supply can grow with the economy. But when the supply is almost fixed, isn't it just incredibly deflationary?
So fiat will remain the day to day currency and BTC will be a form of investment - isn't that just like every other country in the world?
With the exception of BTC being treated as a currency with no tax on capital gains, I guess that'll be the case, unless/until the USD money printer implodes.
Edit //
I don't mind the idea of crypto becoming legal tender as long as the money supply can grow with the economy. But when the supply is almost fixed, isn't it just incredibly deflationary?
We've got a metric shit tonne of debt to honour, so the next 20-30 years until we get back in balance are probably going to be pretty grim but the piper has to be paid - Link. Either that, or the human race will cease to exist due to the hard bounds of our finite system and consequences of climate change.
El Salvador should have just gone US Dollars in fact they probably tried but my guess is that the country is so stuffed people began printing it themselves. Lets face it they are stuffed, as are so many other countries. Expect a string of others to adopt Bitcoin as well. Perhaps thats its final destiny, a whole load of already corrupt countries being the only ones using it after the FED releases a digital currency.
Just shows how ignorant your comments are Carlos - they already are on USD.
"El Salvador abandoned its own currency (the “colon”, named after Christopher Columbus) in 2001 and adopted the US dollar as its legal tender. This process of “official dollarisation” was seen as a reform that would curb inflation and increase trade with the US (by far its major trading partner).
I don't say this often but this site would be better off without your dribble.
Back in the day (~1982) when I was seconded from London to secure my Series 3 – National Commodities Futures Exam ticket I used to read the WSJ on the subway downtown. I was shocked when they reduced the reading comprehension levels of the articles from 12 to eight year olds.
The global shortage of logs and sawn timber have pushed prices to a record high. Regulatory limits are encouraging the surge when there is a worldwide shortage of wood products. Local timber buyers haven't get really felt the impact of these higher international prices, but they will soon.
Lumber Prices Post Biggest–Ever Weekly Drop With Buyers Balking
Lumbering Economy And The Curves Behind Transitory Inflation
I have attended Bayleys auction this afternoon and am at Ray White's auction right now, the market is still red, red hot. Bayleys had 100% sales rate (out of 6 only) and here at RW multiple bidders are fighting with each other as if the $ millions offered were given to them. It seems money has no value anymore. Huge bids made for really poor houses. A single car park in went for $170'000...
It's not available in endless abundance globally and locally.
High quality borrowers (collateralised residential mortgage loans, monetised government debt issuance) are given as much money as they could want while the rest of the economy is deprived of funds; liquidity and safety being the only preferences in what sounds entirely familiar.
“while the rest of the economy is deprived of funds”
Agreed –there’s a real economic / social travesty being played out in front of our very eyes - and quite sadly those with hands on the levers appear completely disinterested in doing anything meaningful about it.
Custard the rest of the economy lost its voice.
For some background the Employers and Manufacturers joined with other regional business groups some twenty years ago.
They decided to form Business NZ to give them a stronger voice in Wellington.They chose a CEO who just so happened to come from Westpac....Phil OReilly.
They have spent the last ten years denying that our manufacturing and real economy is being stripped....remember the manufacturing crisis pushed by John Walley?
Phil moved on and they got a new CEO who is Kirk Hope...also ex Westpac and also ex CEO of the NZ Banking Association.
Phil now chairs OECD committees and is aligned to god only knows who...probably no one but his clients for his lobbying business, and his ego.
The EMA has a board.Andrew Hunt is chair and is on the board of the National party. Fletchers have a revolving seat sarc, Dave Thomas (GIB) resigned but Daniel Welsh (Winstones) has taken the seat. Jenny Shipley is a director for a chinese business called Alpha Group...and their GM is on the board.I could go on but maybe you can see a trend.
Membership fees are paid on the number of employees one has...so if you employ seven thousand staff as say a bank does , a construction conglomerate or a council you have a certain say...or incentive to not say anything but go with the ride.
What hundreds of battler kiwi businesses say or do doesn't really matter....IMO...but maybe Im cynical and these people really are the best of the best who have risen to the top to lead NZ to victory in business in a golden era.
Surely they wouldn't have lead us to the slaughterhouse?
The irony being there is probably not much more risky lending these days than a low equity million dollar plus house purchase of some crap hole. These loans barely make sense at current interest rates, what if we do get real inflation, there is no way some PI can pay the interest if interest rates double or triple and rents don’t.
Ray White's auctions are now finished too, sold 8 out of 8, add the Bayleys auctions and that's 14 out of 14 a perfect 100% clearance rate, all with multiple bidders. A tiny old flat in poor condition in Royal Oak described by the auctioneers as "entry level" on a cross lease sold for over $1 million!!! I've been buying and selling real estate (not as an agent) for 25 years, I've never seen anything like it, not even in the 2004 - 2007 period.
Where do so many purchasers get such huge amounts of funds from to spend such incredible sums of money ?
Guess which country tops the list and credit for it goes to our favourite Jacinda Arden.
https://www.bloomberg.com/news/articles/2021-06-15/world-s-most-bubbly-…
https://www.cnbc.com/2021/06/16/uk-inflation-jumps-past-bank-of-england…
“UK inflation jumps past Bank of England target, hits 2.1%”
“Governor Andrew Bailey and most colleagues say the increase in inflation will be temporary and does not require the central bank to scale back its huge stimulus programs. It is expected to leave policy unchanged on June 24 after its latest meeting.”
But many of these price increases will basically stick – they won’t unwind – so unless matched with wage increases purchasing power is now diminished.
Diminished purchasing power leads to economic slowdown – Central Banks respond by lowering interest rates yet further – and on we go.
Check how hot the market is and Robertson and Orr playing with time - Months before DTI could be introduced....really months...
https://www.oneroof.co.nz/news/townhouse-on-cross-lease-section-sells-f…
Perhaps banks’ lending on existing equity which itself is already based on stratospheric levels – subsequently taking prices to ever further stratospheric levels – then rinse and repeat until it simply can't work anymore.
As to why they’re doing it you’d have to ask the bankers themselves – after all, aren’t they the smartest guys in the room?
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