Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
ASB raised fixed rates for terms 3 years and longer. See here.
TERM DEPOSIT RATE CHANGES
No changes here today.
BNZ, KIWIBANK WAIVE CONTACTLESS PAYMENTS DEBIT FEES FOR SMES
BNZ and Kiwibank are the first banks to waive fees for contactless payments. This follows calls for a reprise of the 2020 relief, and pressure from the Finance Minister. Update: Now ANZ has also agreed to waive these fees.
BEST TERMS OF TRADE? PROBABLTY NOT
Stats NZ reported that our Q2-2021 terms of trade rose to record highs, equaling June 2020 levels. That is a +3.3% rise from Q1. Export prices rose +8.3% and export volumes were up +2.9%. But as exports tend to be sold CIF, and freight costs have jumped to stratospherically levels, the export component of our term of trade overstates what New Zealand really gets for its exports. The main beneficiary is the shipping line carrying them. Meanwhile, import volumes rose +4.4% despite the delays and challenges getting goods in and out of the country. (We gorged ourselves on computer services, apparently. Amazon and Microsoft cloud services are likely to be a big part of that - and those companies have effective tax avoiding strategies in place, so it is unlikely they are contributing anything meaningful here from all this activity.)
LOOKING OUT FOR VULNERABLE CUSTOMERS
The FMA is reminding suppliers of financial services, no matter the size or business focus, must have business appropriate support systems for customers in vulnerable circumstances.
STRONG DEMAND, RATE SET IMMINENT
Transpower's 5 year retail bond will be successful with more than the $200 mln sought being offered. That means the pricing will be at the bottom of the previously indicated range, meaning it will be at the [rising] 5 year swap rate, plus 0.35%. Yesterday that 5 year swap rate was at 1.70% but it might have dipped a little today. Today is the date when pricing is set. Update: priced at 2.047% pa.
WHEN HIGHER PRICES AREN'T GOOD FOR AN EXPORTER
Export customers are paying more for our logs when they can get them, but our growers are getting less. That is because freight is taking an increasing slice of this trade.
SPECULATORS PILE IN TO ONE WAY BET
Keith Woodford is reporting that yesterday, the Government lost control of the Emissions Trading Scheme to speculators. This has big implications and challenges for the path ahead, he says, as institutional investors outgunned Government at the carbon auction. Today the carbon price rose to $59/NZU but the Government has signaled it will be $98.34/NZU in 2025. Anyone can buy in the secondary market. Buying now at $59 for a 2025 price of $98.34 (and a clear indication that prices will be well over $100 after that) gives a likely return of at least 13.6% per annum. There is risk of course, but given the official drive to get the price of carbon up, it is not high. Speculation like this will likely be a huge distortion, and speculation for such a one-way bet could be heavy, The consequences on pricing for ordinary things could be large.
HIGHER YIELDS
36 of 82 bids were successful at today's NZ Government bond tender where $1.1 bln was chasing $500 mln offered in three tranches. The May 2026 $200 mln went for a yield of 1.43% pa, a rise from 1.29% two weeks ago. The May 2028 $200 mln went for a yield of 1.63% pa up from 1.48%. And the April 2033 $100 mln went for a yield of 2.04%, up from 1.83% two weeks ago.
CAR SALES DROP SHARPLY
The lockdown sharply undercut new car sales in August, down -27% as lockdown effectively took out two weeks’ worth of sales. Considering that almost all sales were only possible until August 17, a total of 11,725 registrations was relatively strong. We will have more on this later.
NEW TRADE SURPLUS RECORD
In Australia, July delivered a back-to-back fresh record high for the merchandise trade surplus. It was +AU$12.1 bln and well above most analysts expectations. Their June surplus was revised up to AU$11.1 bln, from the initial estimate of AU$10.5bn.
PANDEMIC PRESSURE REMAINS INTENSE
In Australia, there were another 1288 new community cases in NSW today with another 1151 not assigned to known clusters, so they remain completely out of control. They now have 20,068 locally acquired cases. Victoria is reporting another 176 new cases today, so it is bad there too. Queensland is now reporting two new case. The ACT has 12 new cases. Overall in Australia, more than 37% of eligible Aussies are fully vaccinated, plus 23% have now had one shot so far. There was only one new case in New Zealand at the border, but 49 more in the community, all in Auckland. So far, 29% of eligible Kiwis now have both shots, another 26% the initial shot.
RBA, OTHERS IN CBDC PROJECT
The Reserve Bank of Australia is working alongside the Bank for International Settlements' Innovation Hub, Bank Negara Malaysia, the Monetary Authority of Singapore, and South African Reserve Bank on "Project Dunbar." This is a project developing prototypes for shared platforms that will enable international settlements with digital currencies issued by multiple central banks.
GOLD STABLE
Compared to where we were yesterday, the gold price is unchanged again at US$1813/oz in early Asian trade, after finishing at US$1815/oz in New York and US$1812 in the afternoon London fix.
EQUITIES HOLD, EXCEPT AUSTRALIA
The NZX50 is flat in late trade while the ASX200 is down -1.0% in early afternoon trade. Tokyo has opened up a minor +0.1% today while Hong Kong has opened +0.4% in very early trade. Shanghai is up +0.3%. Earlier the S&P500 closed flat in their Wall Street Wednesday session after giving up earlier good gains.
SWAP & BONDS RATES EASE AFTER YESTERDAY'S JUMP
We don't have today's closing swap rates yet. They have probably slipped back marginally. We will update this if there are significant changes when the end-of-day data comes through. The 90 day bank bill rate is down -1 bp at 0.49%. The Australian Govt ten year benchmark rate is now at 1.21% and down -4 bps. The China Govt 10yr is now at 2.85% and up +1 bp. The New Zealand Govt 10 year rate is now at 1.82%, unchanged but still above the earlier RBNZ fix for that rate at 1.81% (+5 bps). The US Govt ten year is now at 1.30% down -3 bps from this time yesterday.
NZ DOLLAR STILL FIRM
The Kiwi dollar is now at 70.6 USc, and staying up. Against the Aussie we are softer at 95.9 AUc as the Aussie firms. Against the euro we are little-changed at 59.6 euro cents. The TWI-5 is still at 73.6 and at the upper end of the 72-74 range we have been in for most of the past ten months.
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BITCOIN UP
The bitcoin price is now at US$49,662 and up +6.1% from this time yesterday. Volatility in the past 24 hours has been highish at +/- 3.0%.
This soil moisture chart is animated here.
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