What happened Monday

A review of things you need to know before you go home on Monday; few retail rate changes, house prices 'stubbornly high', commodity prices up, NZR shrinking, swaps stable, NZD soft, & more

5th Jul 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No more changes to report today.

TERM DEPOSIT RATE CHANGES
Bank of India raised some TD rates today.

FIRING ON ALL CYLINDERS
Barfoots reported a strong June real estate market in Auckland. Barfoots sell just a bit less than half of all houses in Auckland. Both their average and median selling prices hit record highs in the month.

NO RELIEF
Yesterday (Sunday), wholesale electricity prices jumped sharply, essentially doubling to about $550/KWhr, spiking because of a sharp rise in household heating demand. They have slipped back today to levels that are 'normal' in the context of the past month or two ($250+/KWhr) but still very high in the context of what we had in 2019 ($116/KWhr) and 2020 ($110/KWhr).

COMMODITY SUPERCYCLE GAINING TRACTION
The ANZ World Commodity Price Index continued to rise in June, lifting +0.8% m/m to be +28% higher than a year ago. Dairy was the only major category to lose ground during the month, but there were very strong gains again recorded for logs and sawn timber.

S&P EXPECTS SALE OF WESTPAC LIFE NZ
Now that the Westpac Banking Corporation has decided to retain 100% of Westpac New Zealand, S&P Global Ratings has revised its outlook on the kiwi subsidiary's AA- credit rating to stable from negative. This brings Westpac NZ in line with where S&P has ANZ NZ, ASB and BNZ. However S&P says although it has reaffirmed its A+ rating on insurer Westpac Life NZ, it's retaining a negative outlook on the rating because the likelihood of a sale is high.

CHANNEL INFRASTRUCTURE COMING
Refining NZ foreshadows 240 job losses through Marsden Point restructure. Shareholders in NZ's only oil refinery will vote next month on plans to turn it into an import-only facility by the middle of next year; the move's expected to cost in excess of $350 million

FALL BACK
After a record high in April, Australian building permit levels fell sharply back in May, driven by a -10% fall in approvals for private sector houses. Weak apartment approvals have been a feature for some time, but if building permits for houses fall as well, that would usually be a game-changer in their housebuilding industry. But some of this is artificial as there was an extension of the time to build for HomeBuilder projects from 6 to 18 months. Builders are no longer rushing projects through the approvals process alleviating the pressure to meet the deadline.

GOLD FIRMER
Compared to where we opened this morning, the gold price is up +US$2/oz to US$1779/oz in early Asian trading.

EQUITIES UP HERE, FLAT THERE
The NZX50 Capital Index is up +0.6% in late trade and has now recovered all its weakness since mid May. The ASX200 is up +0.1% in early afternoon trade. The very large Tokyo market has opened today down -0.5%. Hong Kong has opened down -0.1% while Shanghai has opened the week up +0.1%. Of course Wall Street will be closed until Wednesday NZT.

SWAP & BONDS FLAT
We don't have today's closing swap rates yet. If there are significant changes again today, we will update this item. They are probably soft at the long end. The 90 day bank bill rate is down -1 bp at 0.34%. The Australian Govt ten year benchmark rate is down -5 bps at just on 1.43%. The China Govt ten year bond is still at 3.10%. The New Zealand Govt ten year is down -3 bps so far today at 1.68% and now slightly above the earlier RBNZ fix of 1.67% (-5 bps). The US Govt ten year is unchanged from this morning's open at 1.43%.

NZ DOLLAR SOFT
The Kiwi dollar has been slipping slightly, now at 70.2 USc. Against the Aussie we are also little-changed at 93.4 AUc. Against the euro we are softer at 58.2 euro cents. That means the TWI-5 is at 72.9 and slightly lower than the weekend level.

BITCOIN HOLDS
The bitcoin price is now at US$34,563 and unchanged from where we opened this morning. Volatility in the past 24 hours has been moderate at +/- 2.2%.

This soil moisture chart is animated here.

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Source: RBNZ

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21 Comments

by ham n eggs | 5th Jul 21, 4:08pm 1625458128

https://www.theguardian.com/business/2021/jul/02/1970s-stagflation-2008…

Conditions are ripe for repeat of 1970s stagflation and 2008 debt crisis ...
Warning signs are there for global economy, and central banks will be left in impossible position

by JimboJones | 5th Jul 21, 6:47pm 1625467627

I’m not that convinced. It won’t take much of a rate rise to stop inflation.

by theglc | 5th Jul 21, 9:18pm 1625476688

Everyone on this site, knows it coming.

It has been written about and discussed hundreds of times, it is just a matter of how long central banks can keep the party going.

You should have been preparing years ago, but if you havnt there is still time, but how much time? thats the $64,000 question.

by ham n eggs | 5th Jul 21, 4:15pm 1625458520

"With or without a surge in inflation – and/or tumbling markets and a cascade of defaults – what’s likely to happen is that the cost of essentials will carry on rising, whilst top-line prosperity continues to erode.
Being slightly more technical about this, we can call this a squeeze on the discretionary (non-essential) sectors of the economy. "

https://surplusenergyeconomics.wordpress.com/2021/07/02/204-how-it-happ…

by taimaiakka0 | 5th Jul 21, 4:19pm 1625458744

https://www.economist.com/finance-and-economics/2021/07/04/central-bank…

Fed like RBNZ is screwed as can they cannot afford to remove stimulus and distribution of easy n cheap money without creations chaos.

So ponzi will continue as reserve bank by themselves will never be able to act as they themselves are solely responsible for putting themselves in a hole - stinky hole. They can delay / avoid by talking that everything is temporary and fine but for how long.

by printer8 | 5th Jul 21, 4:51pm 1625460708

taimaiakka
They do gently and RBNZ have already indicated their proposed timeline.
It seems we are getting complacent and think that all is well and Covid is over.
We still currently have the global pandemic ranging in many countries, we are at high risk with economic consequences as just one recent Wellington visitor showed, and with borders closed the significant international tourism industry is still severely affected.

by J.C. | 5th Jul 21, 5:14pm 1625462049

Ponzi economics has a history of self destructing. There appears to be a belief among the team of 5 million that our Ponzi dances to its own tune. This is probably true to some extent.

by J.C. | 5th Jul 21, 6:19pm 1625465973

Cameron Bagrie tweets it's 'pretty obvious' rates need to go up in response to the B&T media release.

by Brock Landers | 5th Jul 21, 5:46pm 1625463988

The three stooges at the RBNZ seem to be blind to things that are "pretty obvious".

by J.C. | 5th Jul 21, 6:18pm 1625465912

Like possums caught in the headlights of a fast moving vehicle on a loose metal road

by custard | 5th Jul 21, 6:42pm 1625467320

He can tweet himself silly all he wants – however it’s "pretty obvious" the RBNZ will not change course no matter what damage their intransience inflicts.

Quite incredible really, this is no longer a disaster in the making – it’s happening in front of our very eyes.

by theglc | 5th Jul 21, 9:20pm 1625476842

they will all blame it on the Pandemic, but we all know....

by Audaxes | 5th Jul 21, 5:37pm 1625463477

FLP + $500m to $3.556bn

by Squishy | 5th Jul 21, 6:49pm 1625467786

It's surprised me commodities haven't rallied more. Arable crops are really being impacted by drought and heat in North and South America.

Good news on oil though, OPEC are infighting which might halt the relentless rise of prices.

by HouseMouse | 5th Jul 21, 7:22pm 1625469755

Does any one know how much weight bankers place on stress testing mortgage payments at interest rates of 5 or 6%? I assume not much seeing the approvals that many are getting.
I bought 2 years ago and there's no way I could afford to pay the mortgage at 5%...

by Rob Reid | 5th Jul 21, 7:39pm 1625470777

Don't worry - if it comes to that, New Zealanders "expect" a tax payer bailout.

by J.C. | 5th Jul 21, 8:44pm 1625474665

Does any one know how much weight bankers place on stress testing mortgage payments at interest rates of 5 or 6%?

I wonder more as to how much BS is applied when assessing loan quality these so-called stress test benchmarks.

by senmcglinn | 5th Jul 21, 7:22pm 1625469757

58.2 eurocents should read 59.2 I think.

by Mountie | 5th Jul 21, 7:26pm 1625469974

News from over the ditch. Sydney Airport shares up 33% today.

by custard | 5th Jul 21, 11:04pm 1625483064

https://www.nzherald.co.nz/nz/number-of-children-living-in-motels-reach…

“Number of children living in motels reaches record high despite Govt's pledge to combat child poverty”

Never mind – it’s all good apparently!!

"FIRING ON ALL CYLINDERS
Barfoots reported a strong June real estate market in Auckland. Barfoots sell just a bit less than half of all houses in Auckland. Both their average and median selling prices hit record highs in the month."

As a country, really - what on earth have we done to ourselves.

by Alter Ego | 6th Jul 21, 6:26pm 1625552783

We have bought gangs of Teachers back from Aussie and given them a free junior Boarding school in motels, so they can pursue their hearts desire. Doubling of educating the homeless and problematic people into the "Bargain" Daft as a brush this Labouring, but no work ethic. Totally crazyy and a Free get out of Jail Card. Aussies and Kiwis "Working" together. Rotorua...I do believe.?? Poor Children. No small wonder we have problems. We made em.

Guess who is educating them. ?