A review of things you need to know before you go home on Thursday; drama in the interest rate swap markets, jobs lost and gained, factories humming, NZD strengthens

A review of things you need to know before you go home on Thursday; drama in the interest rate swap markets, jobs lost and gained, factories humming, NZD strengthens
For Thursday, October 16, 2014. Image sourced from Shutterstock.com

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

TODAY'S MORTGAGE RATE CHANGES
Housing NZ Corporation cut its one year home loan rate by -4 bps to 5.95% and its 3 year fixed rate by -10 bps to 6.49% today.

TODAY'S DEPOSIT RATE CHANGES
Ethical finance company Prometheus Finance has raised its rates by +25% for terms 1 to 3 years. That makes their one year rate 4.00%.

BACK IN FAVOUR?
Some interesting data out of China today. Foreign direct investment into the country has been waning recently. Analysts were expecting that to continue with a -14% drop year-on-year expected. But the September data out today saw it grow +2% year-on-year. That is a big positive surprise.

NO FALL IN SPRING
Surprising many, todays GlobalDairyTrade auction saw prices rise +1.4% in NZ dollars. But our exchange rate firmed at the same time wiping out all the gain and in NZ dollars overall prices were down -0.4%. There are some anecdotal signs that the worst of the EU-Russia stress is contained with EU farmers reducing output, and rising demand again from China if not other East Asian buyers. This market will be on tenterhooks for the rest of the year, however. Nothing is certain.

NEW PAYOUT ESTIMATE
Still, the payout reduction guesses keep coming for the current season. ASB has cut its forecast Fonterra payout to $5.10 per kg of milk solids from $5.30, the same as Fonterra’s. It has a $6.50 forecast for 2015-16.

JOB DEMAND UP
The ANZ Job Ad index strengthened in September - not markedly, but faster than it strengthened in August. That is better than it going the other way.

JOBS CHURN
Fletcher Building's Tasman Insulation is to shut its Christchurch plant, and expand its Auckland plant to a 24/7 operation. That will see 29 positions go in Christchurch, but 11 new positions elsewhere. Fletcher say they have 200 positions company-wide that they can't fill so they expect most affected will be reassigned.

STRONG FACTORIES
Our manufacturers are reporting strong conditions. They have experienced their fourth consecutive increase in expansion levels during September, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for September was 58.1. This was 1.1 points higher than August, and the second highest result recorded so far for 2014. Perhaps the only issue was that this strong result was helped by rising stocks, but most other components we strong as well.

GOVT BONDS SNAPPED UP
Today's $300 mln auction of the NZGS 2027 bond was covered 2.7 times. The yield is an impressive 4.09% given what European and American (and Japanese) government bonds are paying.

WHOLESALE RATES
Domestic swap rates fell between -2 bps  and -7 bps today in a strong flattening trend across the curve. These falls came after even larger declines in benchmark bond yields on Wall Street overnight. The 1-5 curve is now only 38 bps, and the last time it was this flat was November 2008 as we were coming out of inverted rates. This is a big deal. There is now plenty of room for mortgage rate cuts - and sadly, term deposit rate reductions. The 90 day bank bill rate was also lower, down to 3.67%.

OUR CURRENCY JUMPS
Check our real-time charts here. Today the Kiwi dollar rose against the US dollar and is now at 79.9 USc. It is also up strongly to 90.9 AUc and the TWI sits at 77.2.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

9 Comments

Comment Filter

Highlight new comments in the last hr(s).

Why on earth are we issuing Tresaury Bonds at over 4% .
The 270% over-subscription tells you we are offering too much
Surely we could borrow cheaper money  

I'd hazard a guess that the private investor being more nimble on their feet than our Bond people has taken a look at the trends out there globally and jumped into 4% as a good deal.
regards
 

How is it that NZ knows better than all other developed countries?  
NZ alone insists on rate rising bias.   

So, no more OCR rises til 2016? 2017? maybe a drop?

regards

Keeping the economy viable will block any future OCR rises 

Interest rates globally suppressed and lower for longer.  
OCR rises are a distant mirage on the horizon. 
Those who fixed for 3+ years earlier this year on the basis of urgent 'Rate hikes' mantra from banks will be regretting their decision.  As the world recession slumps lower and lower in a backdrop of war and country-based bankruptcies.

Gee you are gloomy, ask GBH for some of his gummy bears.....prozac filled ones...
;]
regards

Gloomier the better for the mortgagebelt:   Low mortgage rates, deflation in cost of goods, high dollar for travel, gloomy is good. :-)

It had to happen - Europe and USA unravelling and therefore we will see lower interest rates in NZ. Most likely to see an OCR cut perhaps before Christmas! Not likely to see OCR increase again for at least 3 years. Ebola and ISIS having an fear factor impact which is likely to see our net migration surge to record levels! Impact of Reserve Bank currency intervention likely to be reversed and exchange rate back to where it was 8 weeks ago.