What happened Thursday

A review of things you need to know before you go home on Thursday; some chunky retail rate changes, house prices fall, NZGBs out of favour, Jardens cops OMF censure, swaps hold, NZD firms, & more

14th Oct 21, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
ASB have raised their key fixed rates to the highest in the current home loan market. More here. The Cooperative Bank raised its floating rate by +15 bps to 4.55%.

TERM DEPOSIT RATE CHANGES
Rabobank increased most of its term deposit rates today, and they increased most of their savings account rates as well. The Cooperative Bank raised all their TD rates for terms 1-4 years. And they raise some savings account rates as well.

A BIG DROP
A big drop in Auckland's median house price pushed the national median down by -$55,000 in September, according to the REINZ data update. It is very unusual for prices to fall in the September start to the Spring selling season. In fact you have to go back to 1998 to find a similar September drop. Auckland sales activity is only about half the pre-pandemic level as the City is stuck in lockdown.

A BIG GAIN
Interestingly, Barfoots grabbed 50% share of all September sales in Auckland, only the second time ever that have had a share that high in a month that isn't a January. (The other time was April 2014.)

MORE DERIVATES TRADING PROBEMS
Licensed derivatives issuer OMF co-mingled derivative investor money with its own money and not in a separate trust account between September 2015 and July 2020, a breach of its license obligations. That has brought censure by the FMA. But it all happened before OMF was purchased by Jarden, so Jarden is the entity that cops the censure.

DETAILS ON FONTERRA'S TRANSITION
A Fonterra press release reveals some interesting trading milestones for the dairy giant. It now does $3 bln in foodservice turnover and is targeting $5 bln in annual foodservice revenue. It is investing $1 bln in an effort to move commodity products up the value ladder, and has increased its R&D budget by +50%. The science for these gains is developed in their Palmerston North research center. China is the key growth market but big growth is also coming other SE Asian markets. The US is difficult to grow because of their tariff barriers to NZ dairy, so IP is monetised there via licensing.

WANING INTEREST?
Maybe interest in the NZ Government Bond tenders is waning. Only $904 mlnb was bid for the $500 mln offered, the least these events have attracted since one in February, and a long time before that. In fact the April 2037 $100 mln attracted only $105 mln in bids and its yield rose from 2.18% to 2.49% pa. The $200 mln May 2031 bond saw its yield rise from 1.83% tp 2.13% pa. The $200 mln May 2026 bond recorded a yield rise from 1.53% tp 1.69%.

EXPORTING INFLATION
Consumer price inflation might be racing higher in many western countries, in response to rising demand and high commodity prices. But they certainly are not seeing that in China where the month inflation was zero in September and the annual change just +0.7%. The story is sharply different on the factory floor however. Chinese PPI rose +10.7% from a year ago, the highest jump since 1995. Month-on-month they rose +1.2% and that indicates the recent changes are running even faster.

LOWER EXPECTATIONS
In Australia, consumer inflation expectations have slipped from a high +4.4% in September to +3.6% in October, according the the Melbourne Institute survey.

LOWER EMPLOYMENT
Jobs and the participation rates both fell in Australia in September. But that was mainly because of a large drop in part-time employment. Full time jobs inched up.

PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen to 2292 cases reported there today, and that was far more than expected. Deaths were 11 yesterday. There are now 20,505 active cases in the state. In NSW there were another 406 new community cases reported today with another 285 not assigned to known clusters. They now have 5,587 active locally acquired cases which is lower, but they had another 6 deaths yesterday. Queensland is reporting zero new cases again. The ACT has 58 new cases. Overall in Australia, more than 64% of eligible Aussies are fully vaccinated, plus 19% have now had one shot so far. There was one new case in New Zealand at the border, and 71 more in the community. So far, 60% of eligible Kiwis now have both shots, another 23% the initial shot. So far the New Zealand vaccination effort is faltering (83.0% of Kiwis nationally aged 12 and over and only rising slowly) and the Australian rate is also slowing with theirs now at 83.3% of all 16 year olds and older.

GOLD MUCH FIRMER
Compared to where this time yesterday, the gold price is up +US$29 at US$1791/oz in early Asian trade.

EQUITIES FIRM
The S&P500 rose +0.3% today in their Wednesday session. The very large Tokyo market has also opened up a full +1.0%. Hong Kong is closed for a public holiday today. Shanghai has opened -0.1% lower. The ASX200 is up +0.9% in early afternoon trade. The NZX50 is up +0.3% in late trade.

SWAP & BONDS RATES HOLD
We don't have today's closing swap rates yet. They probably rose held at the short end and rose at the long end. We will update this if there are significantly different changes when the end-of-day data comes through. The 90 day bank bill rate is unchanged at 0.68%. The Australian Govt ten year benchmark rate is now at 1.65% and down -4 bps from this time yesterday. The China Govt 10yr is now at 2.98% and unchanged. The New Zealand Govt 10 year rate is now at 2.14% (+6 bps higher from this time yesterday) and now well above the earlier RBNZ fix for that rate at 2.10% (+1 bps). The US Govt ten year is down another -3 bps to 1.55%.

NZ DOLLAR FIRM
The Kiwi dollar is up about +4 bps to 69.7 USc today. Against the Aussie we are little-changed from this time yesterday at 94.5 AUc. Against the euro we are unchanged at 60.1 euro cents. The TWI-5 is now at 73.4 and slowly creeping back to the upper end of the 72-74 range we have been in for most of the past eleven months.

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BITCOIN RISES
The bitcoin price is now at US$58,060 and a rise of almost +3.1% from this time yesterday. Volatility in the past 24 hours has been high at just on +/- 3.7%.

This soil moisture chart is animated here.

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Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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36 Comments

by frazz | 14th Oct 21, 4:26pm 1634182016

Probably time for Bitcoin price to sit above Gold?

by J.C. | 14th Oct 21, 6:18pm 1634188689

The ol' rat poison is scorching hot at the moment. Even though today's gold price movement is encouraging, the gold market is rigged beyond recognition now.

by nigelh | 14th Oct 21, 7:33pm 1634193229

Who is the main rigger?

by J.C. | 14th Oct 21, 7:35pm 1634193353

Good question. The LBMA of course, but then you have the BIS, JPM. It's endless. Almost like a conspiracy.

by Audaxes | 14th Oct 21, 6:18pm 1634188709

Maybe interest in the NZ Government Bond tenders is waning. Only $904 mlnb was bid for the $500 mln offered, the least these events have attracted since one in February, and a long time before that. In fact the April 2037 $100 mln attracted only $105 mln in bids....

Maybe there is no risk adjusted available balance sheet capacity to carry longer duration sovereign debt issues based on NZ near horizon term interest rate expectations?

by chebbo | 14th Oct 21, 6:30pm 1634189439

Exactly what I was just about to say ... o ^{O (what? I totally understand some of those words.)}

by Audaxes | 14th Oct 21, 8:05pm 1634195138

LOL: You need RiskMetrics in your life.

A dose of VaR never did anyone any harm.

by Audaxes | 14th Oct 21, 4:53pm 1634183586

Consumer price inflation might be racing higher in many western countries, in response to rising demand and high commodity prices. But they certainly are not seeing that in China where the month inflation was zero in September and the annual change just +0.7%.

Economic recovery is now the main battlefield of international competition. However, whether each major power likes it or not, economic recovery will be politicized in different ways. China and the US have taken completely different epidemic prevention approaches and the two countries are in a fierce political game. China has overcome the difficulties of economic recovery more effectively, so it will generate more comprehensive confidence. This confidence will also be transformed into a powerful foundation for China to resist US' censure. Link

by Fishdish | 14th Oct 21, 5:45pm 1634186737

How will the West cope if they cant get their toys?

by J.C. | 14th Oct 21, 6:19pm 1634188778

The Mowbrays are branching out into affordable luxury shampoo among other things.

by Yvil | 14th Oct 21, 4:58pm 1634183912

Interesting to see the house median drop in Auckland at a time when Barfoot is reaching a new record in the share of the number of sales. Barfoot do not generally sell high end houses

by Fishdish | 14th Oct 21, 7:57pm 1634194668

Very astute!

by keithwoodford | 14th Oct 21, 5:02pm 1634184140

The big drop in the median house price is simply a function of Auckland sales numbers being very low, and with this intersecting with Auckland being the most expensive city. Median house prices continued to rise in most other parts of New Zealand.

KeithW

by J.C. | 14th Oct 21, 6:37pm 1634189820

Yes Keith. Also, it's also difficult to derive any meaningful statistical relationship between sales volume changes and price movements in a market that only goes up.

by CWBW | 14th Oct 21, 6:59pm 1634191189

You're talking to an economist who knows his stuff and imposing on him your statistical knowledge. You obviously have little understanding of statistics and it would be wise not to demonstrate your DK and trolling people in the comment section.

by powerdownkiwi | 14th Oct 21, 7:16pm 1634192209

An economist who knows his stuff, swims in a very small bowl.

In a very big room.

by frazz | 14th Oct 21, 7:21pm 1634192500

by J.C. | 14th Oct 21, 7:24pm 1634192665

You're talking to an economist who knows his stuff and imposing on him your statistical knowledge.

Not imposing anything. Keith will understand exactly what I'm saying.

by CWBW | 14th Oct 21, 7:40pm 1634193606

It is not at all difficult to derive meaningful statistical relationship between sales volume changes and price movements in a uni-gradient, non-stationary graph- actually it's even simpler than bi-directional and 3 dimensional.

Stop digging.

by J.C. | 14th Oct 21, 7:57pm 1634194633

Your response is unravelling your own troll. I'm talking about regression with price movements as a dependent variable.

by CWBW | 14th Oct 21, 8:29pm 1634196594

It's the other way round actually- you'd being trolling anyone who are pro-housing.

I doubt you fully understand most of the things you talked about.

If you'd truly understood regression, you wouldn't make your previous statement about difficulties in establishing statistical relationships between price, time and volume.

by Fishdish | 14th Oct 21, 8:03pm 1634195010

He's just a keen fisherman, waiting for a bite!

by Fishdish | 14th Oct 21, 5:49pm 1634186962

Looks like gold is on the up, another crash coming, I can smell it.

by Independent_Observer | 14th Oct 21, 5:51pm 1634187100

What does it smell like?

by frazz | 14th Oct 21, 6:15pm 1634188512

Fish

by Independent_Observer | 14th Oct 21, 7:05pm 1634191502

lol - yes was waiting for him/her to say it ;-p

by CWBW | 14th Oct 21, 6:34pm 1634189695

"It is very unusual for prices to fall in the September..."

Of the 70 districts with a median house price data in New Zealand, 41 districts recorded a rise in median house prices and 1 with no change.

I would say that nationally, more than half the country experiences an increase in median house prices.

by J.C. | 14th Oct 21, 6:38pm 1634189902

I wouldn't hire you as analyst based on that kind of rigor.

by CWBW | 14th Oct 21, 6:46pm 1634190378

Neither would I ever work for someone who can't count nor read.

by J.C. | 14th Oct 21, 7:27pm 1634192820

Do you understand that the median house price could be higher in all 41 districts and and still be lower nationally?

by CWBW | 14th Oct 21, 7:35pm 1634193309

Try re-reading my original post slowly and carefully.

Anyone who blindly throws a dart on a NZ map to buy a house last month would have a 59% chance of capital gains with their new purchase over the month and that's not even weight distributed.

by J.C. | 14th Oct 21, 8:10pm 1634195424

Rubbish. Throwing a dart which lands on a district with a higher median price does not equate to a 59% probability that a house purchased has a higher price mom. For ex, 2 districts have a higher median price mom and 1 district has a lower median price mon. District 1 has 101 sales; District 2 has 51 sales; and District 3 has 21 sales. Throw a dart and the probability you hit a higher median priced houses is 50%, not 66%.

by CWBW | 14th Oct 21, 8:24pm 1634196260

That's why you need to go back to school to understand sets, sub-sets and unions.

If you have 1 poor district 2 rich districts, a blind dart throw on the 3 and you'll have ⅓ chance of landing on the poor one- regardless of the actual numbers in that set.

59% is based on district, and you come up with a straw-man argument on individual houses within that district. An average buyer would had experience an average result according to his buying district.

Now I wonder if you're genuinely inadequate or simply dishonest.

by pigeonbox | 14th Oct 21, 8:40pm 1634197254

Cool your jets fellas

by J.C. | 14th Oct 21, 9:25pm 1634199904

I understand probability well. And that is why if you throw a dart, the chances of hitting a higher than median priced house over a month is 50%, not 59%. Actually, the more correct answer is 29.5% using Bayesian probability and the condition being that 59% of districts with a higher than median house price mom.

You understand?

by HouseMouse | 14th Oct 21, 7:52pm 1634194364

rigor mortis