What happened Monday

A review of things you need to know before you go home on Monday; many more retail rate changes, PSI expands faster, MM high but steady, tractor market almost dies, swaps flatten further, NZD soft, & more

19th Jul 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
TSB is the latest bank to raise its fixed home loan rate offers. The Co-op Bank, and the Bank of China also moved higher. Details here (in the table) and here.

TERM DEPOSIT RATE CHANGES
Kiwibank cut its hot 200 day rate, and raised its 1 year rate. But a review of last weeks changes (including who has the highest offers for each term) is here. China Construction Bank have raised rates too. As did Christian Savings.

SERVICE SECTOR EXPANDING FASTER
New Zealand's services sector was in expansion mode for the fourth consecutive month, according to the BNZ-BusinessNZ Performance of Services Index (PSI). The PSI for June was 58.6. This was 2.3 points up from May, but still below its highest ever result of 61.1 in April. Both the 'sales' and 'new orders' categories were stand-outs, but none more so than 'employment'. Interestingly, it was the retail sector that was one of the weakest. As good as the services sector is, it isn't as expansionary as the factory sector (PMI).

OVERALL MEDIAN MULTIPLES HIGH & STEADY
For readers who follow the median multiple changes (the relationship between median household incomes and median house prices), you should note that we have updated our tracking of this measure for most urcan areas through to June 2021. (It is not a metric we particularly respect, but many general news sites get excited by it, so we track it on a first-principles basis, nationwide.)

NZX50 PROFILE UPDATES
Last week ended with a small -0.5% fall in the capitalisation value of the NZX50, but for the month it is up +0.8% to $130.1 bln. You should note that we have updated the profiles of Serko (SKO, #37, Pacific Edge (PEB, #38), Investore Property (IPL, #39), and Trust Power (TPW, #41).

TRACTOR MARKET ALMOST DIES
New data out from Stats NZ shows that only 10 new tractors were registered in June, the lowest for any month ever, and lower than for any month in the 2020 lockdowns (14). In the past four months only 59 new tractors have been registered. The average per month over the past 47 years is 184.

PETERING OUT?
ANZ's commodity tracker is suggesting that the strong recovery growth in commodity demand and prices may be petering out. High frequency data are pointing to a soft patch ahead for commodity markets. Nevertheless, the absolute levels of demand growth is still high they say. Ongoing supply side issue across many markets may support prices for a while yet however.

NO PRESSURE LET-UP
There were 100 new cases in NSW today (98 in the community) and another 11 in Victoria (10 in the community). Neither levels give confidence the Trans-Tasman travel bubble will re-open anytime soon. There were 3 new cases in New Zealand, all caught at the border, none in the community.

GOLD'S DROP STABILISES
Compared to where we were this time on Saturday, the gold price is up +US$2/oz to US$1814/oz in early Asian trading.

EQUITIES GENERALLY LOWER
The NZX50 Capital Index has slipped a minor -0.1% in late trade today. The ASX200 is down -0.9% in early afternoon trade. It is worse in Tokyo which is down -1.5% in morning trade, and -2.0% in opening trade in Hong Kong. Shanghai is down -0.7% in early trade. The S&P500 futures index suggests Wall Street will open down -0.4%.

SWAP & BONDS RATES FLATTEN FURTHER
We don't have today's closing swap rates yet and if there are significant ongoing changes we will note them here. They probably fell for 2 years and longer but were up for 1 year. The 90 day bank bill rate up at 0.47% with an unusual +4 bps daily leap. The Australian Govt ten year benchmark rate is down a chunky -6 bps at just on 1.23%. The China Govt ten year bond is unchanged at 2.97%. The New Zealand Govt ten year is down -6 bps so far at 1.59% and below the earlier RBNZ fix of 1.61% (-6 bps). The US Govt ten year is down -2 bps from this morning at 1.28%.

NZ DOLLAR SOFTISH
The Kiwi dollar has eased from its morning start to just on 69.8 USc. Against the Aussie we are little-changed at 94.36AUc. Against the euro we are also little-changed at 59.2 euro cents. So the TWI-5 has slipped to just under 72.8.

BITCOIN HOLDS
The bitcoin price is now at US$31,652 and virtually unchanged from where we were at when we opened this morning. Volatility in the past 24 hours has been low at +/- 1.8%.

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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44 Comments

by J.C. | 19th Jul 21, 4:14pm 1626668092

Sydney retailers believe lockdown may push the industry to the brink because welfare payments have been reduced according the AFR. Remember, a butterfly flapping its wings can cause all kinds of disturbances. The team of 5 million might scoff but best not to take these thing lightly.

https://www.afr.com/companies/retail/retailers-say-reduced-welfare-paym…

by apizap | 19th Jul 21, 4:25pm 1626668721

Who's scoffing? We need them to keep buying OUR stuff!

by J.C. | 19th Jul 21, 5:33pm 1626672807

Who's scoffing?

The team of 5 million. Robbo told them that the current story is about 'growth', hence inflationary pressure.

by Chris-M | 19th Jul 21, 4:25pm 1626668744

I recon that we would be best to just close the boarders completely apart from a trickle of carefully controlled returning Kiwis. The risks of dealing with the Australians is just too large. They cannot control it interstate and it is only a matter of time before we get caught. We can only be lucky so many times. Look at how once the Delta variant gets in it is un-controlable. Our previous measures are not fit for purpose with the new variant. As for allowing these delta infected fisherman we are mad. Now that we have started word will get round and we will be inundated.
Close everything down and go like hell until we are all vaccinated. From what we have seen the net contribution of the bubble with Australia is very small if not negative. We don't need it.

by Carlos67 | 19th Jul 21, 4:38pm 1626669496

Jacinda would need to put out an official international broadcast that international fishing boats are not welcome with sick crew and thats never going to happen we are way to soft. Our quarantine facilities are hopeless for the Delta variant, its only a matter of time before it gets out as its twice as contagious. Like you said all boarder traffic should now cease except for Kiwi's returning home. We still have no dedicated MIQ facility despite having over a year now to build one.

by Hummy | 19th Jul 21, 6:18pm 1626675537

Maybe it's better she goes. As being kind is not going to fix anything anymore. And never did. We need a leader not a dreamer.

by muzled | 19th Jul 21, 7:54pm 1626681295

Who you replacing her with hummy?

I think there are a lot of people here quite interested who your chosen one would be.

by Hummy | 19th Jul 21, 8:23pm 1626683012

I think there are some real good leaders out there, but to survive in beehive is near impossible as it's all about them and not about country anymore. Should be 12 year limit on political job.

by Fluffybunny | 19th Jul 21, 8:56pm 1626684990

Be interesting to see what the avg career length is for an mp. A complete guess from me would say under 12 years?

by Notgreedykiwi | 20th Jul 21, 5:17am 1626715063

Good politicians are folklore stories.
The kind of society we are bringing up these days only want to look after their own well being. No one else.
So stop dreaming that there are people out there who are doing good for you or the county.

by Notgreedykiwi | 20th Jul 21, 5:18am 1626715098

by Notgreedykiwi | 20th Jul 21, 5:18am 1626715122

by Notgreedykiwi | 20th Jul 21, 5:19am 1626715159

by Notgreedykiwi | 20th Jul 21, 5:19am 1626715167

by powerdownkiwi | 19th Jul 21, 4:36pm 1626669407

Christian Savings?

Ah yes, I was going to say something then remembered the Trotter column. Probably not allowed that kind of humour anymore.

by DoneBizz | 19th Jul 21, 7:10pm 1626678653

Watch the FOMO and the rate of interest rise rapidly in the day to come on Christian savings powerdown:)

by CWBW | 19th Jul 21, 5:00pm 1626670856

I find it interesting that while ANZ's commodity tracker suggests that the strong recovery growth in commodity demand and prices are petering out, they are advocating for a urgent interest rate rise through their inflation scare communications over the weeks through their economics department.

by J.C. | 19th Jul 21, 5:17pm 1626671867

Do you think ANZ and RBNZ are trying to spook the sheeple?

by Zack Brando | 19th Jul 21, 5:12pm 1626671543

I think a growing story in NZ is the broken infrastructure. For so long the reporting has only been on the need to expand infrastructure.

$120 to $185 billion is estimated to be needed for "water care" alone. Here in Christchurch alone we have 100's of kilometers of leaking pipes. Wellington has seen the emergence of spontaneous water features. Auckland could probably use a dam.

That's just water infrastructure, not to mention other infrastructure.. let alone the quality of our waterways.

So who's going to pay for all this? Rates.. are councils going to up Rates? Or are renters/workers expected to pay for this? Our cities seem to be crumbling, even protected heritage buildings seem to be deathtraps.

Can workers afford to pay for this? I don't think they earn enough. Who is going to fix this? The same imaginary workers building the Cycle Bridge [which we all know won't happen].

Both Science and Religion agree natural disasters will increase.. surely insurance companies have worked this out too? Who will pay the increased insurance costs.. renter/workers?

Renters and Workers are going to need to earn a lot AND in a low inflationary environment to afford these costs..

My bet is very little will get built or fixed. Rates could 3x I suppose - the gnashing-of-teeth would be extreme.

by Brock Landers | 19th Jul 21, 5:12pm 1626671559

Who is going to pay? Just like everything else in New Zealand, policy will be carefully crafted to benefit the boomers. Everybody else will be made to pay.

by J.C. | 19th Jul 21, 5:18pm 1626671921

Who is going to pay? Just like everything else in New Zealand, policy will be carefully crafted to benefit the boomers.

Reverse mortgages can cover it.

by powerdownkiwi | 19th Jul 21, 5:19pm 1626671951

That worked for a while. The boomers were just the upper deck Titanic passengers, though: it hits them later but it still hits them.

But the first comment re infrastructure is the kicker; entropy is setting in - as it is all over the 'developed' world. We're getting into Red Queen territory; running faster and faster to stay on the same spot, while the floods, wildfires and storm-surges get worse meaning it's a compound maintenance problem.

by Zack Brando | 19th Jul 21, 5:27pm 1626672438

Well I think workers and renters are tapped out. Either nothing gets built/fixed or richer Kiwis will have to start canalizing each-others wealth.

Not everyone can be a rentier, that's obviously just not possible.

by J.C. | 19th Jul 21, 5:35pm 1626672941

Not everyone can be a rentier, that's obviously just not possible.

That's my theory. The scarcer the asset, the better I guess. Good argument for the ol' rat poison.

by Hans Brink | 19th Jul 21, 5:49pm 1626673799

They have cut back funding for provincial roading infrastructure maintinance which is odd considering we are an economy dependant on produce milk, meat and logs all from the provinces.

by DD62 | 19th Jul 21, 6:29pm 1626676160

Hans, you forget that the country is being run (LOL) by a bunch of academics and career poli's that have never had a real job or exposure to the real world! They don't even understand where the income comes from to run the place! NZ is heading quickly to a very bad place!

by gnx | 19th Jul 21, 7:58pm 1626681486

Have you seen National. Simeon Brown looks and sounds like he joined straight from school

by Foxglove. | 19th Jul 21, 8:16pm 1626682593

ChCh is said to have $6 billion or so of assets pertaining to water supply. Purely a book figure, fixed assets, surely. Leveraged about $1 billion against them. So to be simple, if the creditor came to collect, what to do? Dig up the pipes, dismantle the pumps, take out the meters, and sell them off elsewhere? Don’t think so. Alternatively they take possession and start charging the city for using the parts they now own, imagine that. What’s it all about then!

by MortgageBelt | 19th Jul 21, 5:13pm 1626671594

NSW will have COVID numbers down by early August. Then the bubble (NSW/NZ) travel can resume.

by Cowpat | 19th Jul 21, 5:16pm 1626671771

Having read Mr Wong's morning article, alluding to the legal requirement , that the RBNZ commence lifting the OCR, I cannot wonder if the RBNZ will again , as in 2014, commit another policy error urged on by the same banks. Although the RBNZ has not sent out any speakers to dampen the banks crescendo , the NZD is barely moved

by Whatwillhappen | 19th Jul 21, 5:20pm 1626672047

#hugatractordealer

by Anzac888 | 19th Jul 21, 5:54pm 1626674094

Hahahaha!!!! Fat Bloody Chance!

by J.C. | 19th Jul 21, 5:53pm 1626674002

Zillow Home Value Index for the U.S. for June released late Friday. Price increase accelerates to a highest on record 26.4% (yoy) as typical home value rises to $293,349.

by Justa comment | 19th Jul 21, 5:55pm 1626674126

I looked at your link to Median Multiples, wow worse than I thought.
All Auckland areas over 10x.
To think the UK has bank limits at present of 4.5.
Yep, we really are in our bubble here.

by Nzdan | 19th Jul 21, 6:44pm 1626677053

Supposedly the median multiple value is not important. As long as the serviceability numbers (aggregate household incomes to debt servicing costs) stack up that's all that matters so I have read on here.

by Millennial_Woman | 20th Jul 21, 6:47am 1626720437

Lol, it will matter when interest rates quadruple

by GraemeRansom4234 | 19th Jul 21, 7:32pm 1626679940

If tractor sales have tanked, is it a supply problem or a demand one? I live next to a tractor dealer. Last year, they had a heap of those big ones in stock but now it is the tiny ones and ride on mowers.
Any thoughts?

by Westminster | 19th Jul 21, 7:52pm 1626681171

Rural protests last week and tractors sales data,
Asset bubbles everywhere except in Rural
Maybe all linked ?

by Galloleous | 20th Jul 21, 11:12am 1626736351

Looking at the reported numbers, I would say Demand had already dropped off, or was starting to before covid hit. So thats a demand problem.
Post covid, I would say that new regulations and expenses have been weighing on buyers minds. On top of this banks have been hammering rural loans with the new capital requirements so there is a rstriction of borrowing. Makes farmers just put off a new tractor purchase.
Would be interesting to look at the second hand tractor market in conjunction though, as this is just new registrations.
Since covid, then supply def would be a factor so they probably couldn't even buy one if they wanted to.

I still think it is a pretty big leading indicator of the sentiment of the rural sector if they aren't looking to spend big with a good predicted payout. They are more focused on paying down debt and bills with the potential for interest rate hikes as well as increased operating costs.

by Just a farmer | 19th Jul 21, 8:07pm 1626682033

Would love some more context to those tractor sales figures. It certainly looks like a catastrophic fall in farm confidence at a glance.
I can’t see it being a supply problem, the dealerships here are chocka full of tractors.

by Just a farmer | 19th Jul 21, 8:24pm 1626683065

Well I was curious enough to reach out to someone I know who manages a tractor dealership, and he said they are on track to easily double last years tractor sales numbers, so who knows how Stats NZ have come up with their figures. My reliable source says they are very pleased with how things are going.
Did Stats NZ lose the rest of the paperwork maybe? Happens to the best of us.

by spinach1 | 19th Jul 21, 9:07pm 1626685671

Has it occurred to anyone that they may not be registered if not to be used on the road? Has there been a change in cost of registration causing this?

by Galloleous | 20th Jul 21, 11:14am 1626736453

The point to note is that it is new registrations. Either they arnt registering them, or the second hand market is booming?

by frazz | 19th Jul 21, 9:02pm 1626685368

Yet everything we produce is exported apparently (so we have to pay sky high prices) - something does not add up?