Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
China Construction Bank has increased its fixed rates for terms of three years and longer, but left 1-2 year fixed rates unchanged at 2.65%
TERM DEPOSIT RATE CHANGES
No changes to report today.
BIG BIKKIES
In the year to June 2021, the real estate sales industry is estimated to have raked in almost $2.4 billion in residential sales commissions. That is a level that exceeds our exports of wine worldwide over the past year ($1.9 bln) , exceeds our exports to South Korea in a year ($1.7 bln), and exceeds our imports of medical equipment in a year ($2.2 bln).
FITCH REVISES OUTLOOK ON BIG FOUR BANKS
Fitch Ratings has revised the outlook it has on its A+ credit ratings for ANZ NZ, ASB, BNZ and Westpac NZ to stable from negative. Fitch says this reflects NZ’s significantly improved economic outlook since early 2020. It expects 5.5% GDP growth this year and 3.3% growth next year.
NEXT STOP, +4%
ANZ is saying that CPI inflation will reach a high of 4.2% year-on-year in Q3 2021, as shipping disruptions, the border closure, materials costs and other one-off factors (eg mortgage rates increases) see prices surge. Underneath all this is a strong underlying inflation impulse, driven by the very tight labour market, rising inflation expectations, and firms finding that they have the power to pass on higher costs to consumers.
ESG GETS ITS OWN HYBRID INDEX
"S&P DJI" (the world's largest index provider) announced its first ESG index for New Zealand. This is being called a significant milestone, especially ahead of the regulatory changes associated with default KiwiSaver. It will be a "tilted index", based on the S&P/NZX50 Portfolio Index but over- or under-weighting companies based on their respective S&P DJI ESG Score. "ESG" scores are a new fad related to "environmental", "social" and "governance" attributes and companies actively promote these to gain an investment demand advantage. They have proven popular with New Zealand retail investors, and luckily for them, companies with higher ESG score have been outperforming those without them, on an overall basis - which has reinforced investor demand. Kernel will have the first fund tracking this ESG index. "S&P DJI" a joint venture between S&P Global, the CME Group, and the Murdoch-controlled News Corp.
COMMERCIAL PROPERTY NOT SO FAVOURED
Last week, the capitalisation of the eight companies in the Property sector in the NZX50 dropped more than the overall index, down by -1.5% in the week, and only up by +3.6% in the month. Only Kiwi Property Group (KPG, #19) rose last week (up +0.8%). The largest fall was recorded by Argosy Property of -4.1% (ARG, #25). Overall, the capitalisation of this sector is now $12.1 bln, or 10.1% of the overall NZX50 capitalisation. In Sepetmber 2020, this share was 9.1%, so in the longer run these companies are making gains.
IS IT REALLY EXCESS AT THIS TIME OF NEW STRESSES?
In Australia, regulator APRA has ok'd some regulatory support for home loans affected by the current pandemic lock downs. But in doing so, it is signaling it doesn’t consider these lock downs as a material credit event for banks. So banks are pushing ahead with major cash returns to shareholders. First out of the blocks is ANZ with an expected AU$1.5 bln return. It will probably be followed by the other three with CBA said to to wanting to return AU$5 bln. This money is being classed as "excess capital" following APRA guidance and shareholders like what they hear, bidding up bank share prices.
NO PRESSURE LET-UP
There were 78 new community cases in NSW today, and another 13 community in Victoria where their lockdown has been extended for another 7 days. Queensland and South Australia are now also reporting cases in the community, prompting a new SA lockdown. All this is knocking consumer confidence in Australia. None of this gives confidence the Trans-Tasman travel bubble will re-open anytime soon. There were 5 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 yesterday, the gold price is up +US$3/oz to US$1817/oz in early Asian trading.
EQUITIES NOT FOLLOWING EUROPE & US DOWN AS SHARPLY
The NZX50 Capital Index is trading flat near the end of its session after being sharply lower earlier. The ASX200 is making a similar comeback in early afternoon trade and is now down just -0.1%. Tokyo has opened down -0.2% in morning trade, and Hong King is down -0.6% in their opening trade. Shanghai is down -0.2% in early trade. Earlier, the S&P500 ended its session down -1.6%.
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 and flattened again. The 90 day bank bill rate down -1 bp at 0.46% and holding most of yesterday's 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 -5 bps so far at 1.54% and the same as the earlier RBNZ fix of 1.54% (-7 bps). The US Govt ten year got down as low as 1.17% earlier which meant it shed -11 bps at one stage. But it is now at 1.21% in a minor partial claw back.
NZ DOLLAR SOFTER
The Kiwi dollar has fallen -½c to just on 69.3 USc. Against the Aussie we are little-changed at 94.4 AUc. Against the euro we are also -½c lower at 58.7 euro cents. So the TWI-5 has slipped to just under 72.4 is a -40 bps slip.
BITCOIN DROPS BELOW US$30K
The bitcoin price is now at US$29,563 and down -6.6% from this time yesterday. It was last below US$30,000 in mid June after the Chinese central bank moved against it. Volatility in the past 24 hours has been high at +/- 4.0%.
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24 Comments
The US Govt ten year got down as low as 1.17% earlier which meant it shed -11 bps at one stage. But it is now at 1.21% in a minor partial claw back.
Lower Yields And (fewer) Bills
Inching Closer To Another Warning, This One From Japan
Thus, a flip – and even a brief one – from positive to negative for Japan’s 10-year government bond has proven to be a dependable signal (given wider context) that somethin’ ain’t right. For the Reserve Bank of New Zealand, the folks at the Bank of Canada, and the taper-confused policymakers at the Bank of England, they might hope that this 10-year maturity in Japan’s bond market doesn’t go any further than it already has: graphic evidence
A global reminder of house prices. https://www.economist.com/graphic-detail/global-house-prices, and why New Zealand will fall into recession and negative rates.
Daily update from our Chinese friends http://www.chinaembassy.org.nz/eng/mfasr/t1893359.htm
Yes I have been waiting for it to crap out and start with a "2". My take on Crypto is there is only so much money going into it overall and everyone is just jumping ship from one to another to try and make a quick buck. This makes getting out of a death spiral pretty difficult as people pull out of what's tanking to put it in what's booming. The question is at what point in dollar terms is Bitcoin dead.
My take on Crypto is there is only so much money going into it overall and everyone is just jumping ship from one to another to try and make a quick buck.
You don't understand the market then. Most BTC is not selling. You talk about the crypto market like all assets are the same. It's not like that at all.
Repo eligible (RP) ultra short term government collateral must have more utility than the return on it.
One dealer accepted 0.25% return for $50m one month RBNZ Bills yesterday.
Three month NZ Government TBills were tendered today at an average accepted rate of 0.3925%.
Nick Mowbray from ZURU has pointed out the price gouging from the shipping companies and has pointed out that they are reporting profits in Q1 that are more than the 10 previous years of Q1 profit combined.
Quoting directly from Nick: "Do these shipping companies consider the devastation this is causing to supply chains and companies having to change where they produce goods ? The world relies on trade and regions being able to specialise and become more efficient. Cost effective global trade is deflationary."
Anyone notice that all long term guidance has been removed from the Ministry of Health Dashboard? I wonder if they are quietly trying to walk back their commitments...
https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-no…
Sounds like you didn't see the encouraging pictures on TV news last night of an aeroplane landing, followed by joyfully smiling workers unloading a cargo of vaccines. Then more pictures of said vaccines being administered to the lucky chosen ones, smiling gratefully. Didn't spot a picture of the dear leader on the wall behind but the uplifting voice over proclaimed we are six percent ahead of target. So really, given it's all going so good, like, what's your beef ?
ESG – in one breath we’re talking "environmental", "social" and "governance" attributes.
And then you go and spoil it all with talk of an initial first fund joint venture including Murdoch-controlled News Corp.
News Corp having the gall to even pretend to attach itself to "environmental", "social" and "governance" attributes – just smells of money and greed.
So, "CPI inflation will reach a high of 4.2%... as shipping disruptions, the border closure, materials costs and other one-off factors (eg mortgage rates increases) see prices surge. Underneath all this is a strong underlying inflation impulse, driven by the very tight labour market, rising inflation expectations, and firms finding that they have the power to pass on higher costs to consumers"
Dissect this factor by factor and you will find the only substantive, persistent drivers there are a 'very tight labour market' (which is not very tight at all), and 'firms passing higher costs to consumers', which will only be inflationary *IF* wages rise to allow consumers to pay higher costs without compromises in other areas of spending (wages won't rise by the way because labour is uber-ised and unions have died).
Note also that it is claimed that 'inflationary expectations' and 'higher mortgage costs' will drive up inflation - and those factors are driven up by.... OCR *increases*!!! Monetary policy is so dumb.
Interest rates peaked at 19% in 1981, and over the last 40 years, they have been in a secular downtrend. In other words, for the last 40 years, the discounted cash flows have caused every asset to skyrocket. Bonds, equities, and real estate have all appreciated by orders of magnitude based on the valuations supported by ever-decreasing interest rates, and these price increases cannot be effectively measured with the flawed CPI metric. Now, with the Federal Reserve’s funding rates at the zero lower bound, reducing interest rates is no longer an option.
https://bitcoinmagazine.com/markets/the-conclusion-of-the-long-term-deb…
George Gammon is the man to explain.....
https://www.youtube.com/watch?v=jScS6jwCCX0
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