Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
There have been no changes to report again today.
TERM DEPOSIT RATE CHANGES
None announced today here either.
HIGHER PRICES, WITH HIGHER FORECASTS
Dairy prices rose +2.2% today in USD terms, a fourth consecutive dairy auction event without a fall. The trend higher is based on the global recovery of the foodservice sector, which more analysts seem to think Fonterra is in good position to gain from. In fact, ASB today raised its 2021/22 farmgate milk payout forecast to 8.75%/kgMS, and that is the highest of any main analyst. See all updated analysts' forecasts here.
CUTTING FONTERRA AUSTRALIA LOOSE
The Aussie media is reporting that Fonterra will hold a board meeting this week to determine what investment banks will work on the IPO float of its Australian operation.
THE ETS WILD WEST
To defend production, the milk price will need to stay high. European investors are raising the pace at which they are buying up farmland to retire into carbon farming, all subsidised by the New Zealand taxpayer and the ETS. The pile-in is getting frantic with most farm sales now going to these high-bidding foreign buyers. And they are doing it without the rules even settled. Livestock farming as a business may be in a sunset phase. Certainly foreign ownership of New Zealand farmland is in a sunrise phase. Rural communities are toast. Here is an update on the forestry/ETS growing complexity.
A $2.4 BLN HONEYPOT
Lockdowns have had less effect on real estate agency commissions than might have been expected. Real estate agencies earned an estimated $503 mln in commissions in the September quarter, taking the total for the year to just under $2.4 bln, and +43% more than for the year to September 2020.
THERE ARE ISSUES WITH OFFSHORE BANKS WITH NZ BRANCHES
Because the RBNZ regulation of banks doesn't apply to foreign banks operating here as a branch of the offshore institution, the RBNZ is assessing how it might clean this up. They see three issues: banking regulation doesn't always apply to 'branches', offshore crises for banks with branches might inadvertently affect New Zealand badly, and the RBNZ finds it very difficult to supervise branches when all the financials and operations are offshore.
UPGRADE & EXTEND
The IRD has sent this message: "The final stage of Inland Revenue’s multi-million-dollar programme to upgrade and simplify the tax system begins tomorrow. Inland Revenue will close at 3pm on Thursday 21 October and reopen on the morning of Thursday, 28 October. During that time, myIR will be unavailable and phone lines and offices will be closed.” More here. Any filing required during this time, including for GST, is extended to November 4, 2021.
KAHA AKE, NEW HOMES AT PACE & SCALE
The NZ Super Fund is forming an 80:20 partnership with Tauranga-based Classic Group, to be known as Kaha Ake to develop new-build homes at pace and scale nationally. The partnership’s first development will be in Warkworth, North Auckland delivering more than 500 lots for a new community to be developed. Over the coming years the partnership expects to achieve a development pipeline of upwards of 3,000 sites for new homes. It's a partnership based on a $300 mln commitment,.
WATER, WATER EVERYWHERE
Our hydro lakes are full and inflows above average for this time of year. Demand is suppressed because of the Auckland lockdown. Wholesale electricity prices are very low. (Auckland's water storage reservoirs are now almost full and above their long-term average levels.
PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen to 1842 cases reported there today, and no improvement. There are now 22,958 active cases in the state and there were 12 deaths yesterday. In NSW there were another 283 new community cases reported today with 5,428 active locally acquired cases which is lower, but they had another 7 deaths yesterday. Queensland is still reporting zero new cases. The ACT has 17 new cases. Overall in Australia, more than 69% of eligible Aussies are fully vaccinated, plus 16% have now had one shot so far. There were two new cases in New Zealand at the border, and 60 new community cases. Now 85.4% of Kiwis nationally aged 12 and over have had at lease one vaccination and the Australian rate is now at 85.1% of all 16 year olds and older.
GOLD ON HOLD
In early Asian trading, gold is little-changed from where we were this time yesterday, now at US$1771/oz.
EQUITIES MOSTLY POSITIVE
The NZX50 is up another +0.5% late in its session. The ASX200 is up +0.8% in early afternoon trade. The very large Tokyo market has opened today up +0.6% in morning trade. Hong Kong has opened +0.9% higher in very early trade,but Shanghai has opened lower, down -0.4% in their opening trade. The S&P500 started out positively and gained all day in its Tuesday session, ending up +0.7%.
SWAP & BONDS RATES STEEPEN
We don't have today's closing swap rates yet. They probably steepened. The 90 day bank bill rate is down -3 bps at 0.75% as markets work out the pace of coming OCR rises. The Australian Govt ten year benchmark rate is now at 1.83% and up another sharp +10 bps from where we were this time yesterday. The China Govt 10yr is now at 3.01% and down -5 bps in a reversal. The New Zealand Govt 10 year rate is now at 2.39% and up another huge +8 bps, but the one and five year bond yields are little-changed. The point is, they are holding those CPI-induced gains. That takes them now above the earlier RBNZ fix for that 10yr rate at 2.35% (-1 bps). The US Govt ten year is up a strong +9 bps from this time yesterday to 1.67%.
NZ DOLLAR FIRMER AGAIN
The Kiwi dollar is up again, now to 71.7 USc and a further +50 bps gain in a day. Against the Aussie we are up to 95.8 AUc. Against the euro we are up to 61.6 euro cents. The TWI-5 is now at 75.2 and now well above the top of the 72-74 range we have been in for most of the past eleven months and its highest in eight months. These recent rises will help keep a lid on imported inflation.
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BITCOIN FIRMER
The bitcoin price is now at US$63,890 and +3.4% above this time yesterday. Volatility in the past 24 hours has been moderate at just over +/- 2.5%.
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30 Comments
Somehow 3000 homes way up in Warkworth seems to contradict the new-found bipartisan enthusiasm for densification:
'The NZ Super Fund is forming an 80:20 partnership with Tauranga-based Classic Group, to be known as Kaha Ake to develop new-build homes at pace and scale nationally. The partnership’s first development will be in Warkworth, North Auckland delivering more than 500 lots for a new community to be developed. Over the coming years the partnership expects to achieve a development pipeline of upwards of 3,000 sites for new homes. It's a partnership based on a $300 mln commitment.
The important part of the bipartisan enthusiasm was the 'bi-partisan' bit - this policy, as you suggest, is of relatively minor importance.
If politics can take housing off the political agenda, that gets flogged in any direction at each election; remove it from the conversation, then that will be a worthwhile achievement.
But re Warkworth? "Take the jobs to the people instead of the people to the jobs"
If a growing workforce can live in Warkworth, then so can new business ventures to employ them.
The carbon/climate impact of this greenfield growth is massive!! None of this new housing will have sufficient access to employment without a private car. Huge new expensive infrastructure is required. The hypocrisy, cognitive dissonance and gas lighting of this current Govt, promising hope as we hurtle to oblivion makes me wanna vom.
"Climate Change" is a term used by the likes of Globalists, The United Nations and The World Economic Forum to gain control over Nation States.
"..as we hurtle to oblivion.." Climate Fear, Covid Fear and Mass Propaganda Campaigns have been very effective in brainwashing most people and the cultivation of extremists ["useful idiots"]. Fear and Anxiety are fundamental ingredients for brainwashing.
Heads of Nation States are invited to Davos and indoctrinated rather well.. made to feel special - part of the club [which they're not]. All the leaders of the 5 Eyes Nations have parroted the "Build Back Better" slogan, heck PM Ardern was parroting it on the campaign trail.
You can't comply your way out of tyranny so I'd recommend not binding yourself up with the climate/carbon-credit/green-pass people.
Good Luck
ZB - no, it's just physics. We got too big, did too much. Finite planet - entirely forseeable, and indeed was.
Don't blame 'others', eh? This Govt is lost; can't do what it has to do (too many of you-types who would complain) and probably doesn't realise you can't do it anyway.
As I pointed out a while back, Admiral Rickover got there in 1957. It's not rocket science
Absolutely, Zack Brando. There is huge advantage of being aware of what you have said. That there is a positive future beyond all the fear being peddled globally. Best to focus on reality instead. And yes, this Carbon market is a false economy. It doesn't produce anything or render any service at all. It's ten foot pole material, and in time could easily go belly up. After all it's not the Govt's money, and they are the ones endorsing it. My advice is to never get into bed with the Govt. Never outsource your personal thinking to the popular media, academics or the masses. Just quietly do your own thing, according to your own understanding.
The US Govt ten year is up a strong +9 bps from this time yesterday to 1.67%.
Now late in 2021, and once more the “taper” but not really a “tantrum” and more important than either: where’s the steepening?
Nominal rates since early August have been rising perhaps under modest, really minimal short-term resetting (maybe something else) toward hawkish monetary policy influencing the short end in a somewhat similar if lesser way than eight years ago. The market thinks there’s a plausible chance for the two-step: first taper at some point this year and then rate hike whenever after.
Unlike 2013, the long end today just isn’t going along with the FOMC’s more optimistic take. By contrast, in 2021, the yield curve is flattening. Whatever steepening took place did so much earlier in the year when vaccines and “stimulus” hysteria were back then unchecked. - Link
Jeff Snider is a wealth of knowledge, really good article thanks for the link.
I agree. The fed will never be able to unwind its balance sheet. Sure maybe they will make the same mistake again but sure enough they will be back with more easing shortly after when it all turns south.
Question is can they stop the short end going below zero next time?
The next year is going to be very interesting indeed.
I'm surprised we haven't seen any mortgage rate rises this week yet. Perhaps they're waiting to see whether swaps level off? Or perhaps they're waiting to see what happens with tonight's Lotto jackpot, so they can cajole the lucky winner into strengthening their balance sheet for them to the tune of $40m...
Strength their balance sheet?! Hardly.
Any lucky winner in their right mind will be knocking on their bank manager's door bright and early tomorrow morning, asking them when they can get their $200,000,000 worth of mortgages approved - and if not, one of their competitors surely will. (They'll deal with the minor matter of serviceability at some later stage)
Because the RBNZ regulation of banks doesn't apply to foreign banks operating here as a branch of the offshore institution,.....
Well isn't that convenient. Just noticed that Chris Tremain is still Chairman of the Bank of China's local operations and the bank signaled it was moving into the NZ mortgage market in 2020. Those plans may have changed now.
Just so happens that Tremain has his own commercial and residential property companies outside his role at BoC.
https://www.mpamag.com/nz/news/general/bank-of-china-nz-looks-to-expand…
Bank of China operates in NZ as a subsidiary, not just a branch. Therefore they are subject to the full RBNZ regulation.
The main retail bank that operates as a branch only is HSBC.
You can see all the operating branches here marked as (B), and the subsidiaries also also on the same page.
"........European investors are raising the pace at which they are buying up farmland to retire into carbon farming, all subsidised by the New Zealand taxpayer and the ETS. The pile-in is getting frantic with most farm sales now going to these high-bidding foreign buyers........"
We are a seriously dumb country. Not even able to look after ourselves. Don't even understand ownership.
Just as importantly, what do we think will happen to our CPI if China gets into a bit of economic strife?
My guess? They'll weaken their currency and export shiploads of goods to us all at even lower price.
Do we realise what a shocking situation we have gotten ourselves into? (No, is the answer)
... due in the Herald tomorrow , a claim that the government will target the richest 400 New Zealanders in an attempt to soak more taxes out of them......
Thin edge of the wedge stuff ... .... who's next for the envy taxes from this bunch of chardonnaysocialist wastrals ...
Did anyone else think this school announcement today was going to tell us when kids were going back to school? This seems to be about the 4th consecutive “we’ll tell you next week” announcement. It’s really not good enough.
remember when they considered bringing the holidays forward so they would be over in time to go back! They probably could have pushed the holidays back a month or two instead and made no difference.
To defend production, the milk price will need to stay high. European investors are raising the pace at which they are buying up farmland to retire into carbon farming, all subsidised by the New Zealand taxpayer and the ETS.
I told you so! It's really not hard to make money if only people follow the motto.
Be quick.
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