What happened Monday

A review of things you need to know before you go home on Monday; many rate cuts, service sector buoyant, kiwifruit blocks sell briskly, property investor borrowing in focus, swap rates fall, 60% of an OCR cut priced in

18th May 15, 4:00pm by David Chaston

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

TODAY'S MORTGAGE RATE CHANGES
Rate cuts came today from Kiwibank, ANZ, AMP Home Loans, and NZ Home Loans. None of these changes however were market leading. These followed Sovereign on Friday who does have a hot rate in the market. Going the other way, BNZ ended its very competitive 5.15% two year 'special', effectively raising their two year offer to 5.39%.

TODAY'S DEPOSIT RATE CHANGES
Kiwibank cut its deposit rates for terms 6 months to 3 years. And they shifted their 'special' back from 5 months at 4.3% to 3 months at 4.15%.

POWERING ALONG NICELY
The BNZ-BusinessNZ services sector monitor, the PSI, is still tracking at quite high levels. The key indicators of activity/sales and new orders/new business remained over the 60-point mark, which bodes well for the short term in terms of ongoing growth.

KIWIFRUIT GOLD
Farm sales volumes in April were unremarkable coming it at 160 for the month. However if it wasn't for booming Kiwifruit orchard sales, we would be reporting a soft market overall. Sales of arable, grazing, finishing, dairy and forestry units were all at lower volume levels than a year ago, but the sales of horticulture blocks was at more than twice the year-ago rate. On a price-per-hectare basis, horticultural blocks are selling at +52% more than a year ago. Compared with that the year-on-year $/ha gains are more modest. For dairy they are +12%, for grazing +9%. But for finishing units, prices are lower by -5%.

SALES A'PLENTY
Sales of lifestyle blocks in April came in at 694 nationally, their highest level for an April since 2007. Again, what really kept the numbers up were the transactions in the Bay of Plenty.

COMINGS & GOINGS
Our birth rate is still very low according to data out today for the March 2015 year. It is at 12.68 per 1000 people and falling, while out death rate is 6.94 per 1000 people and rising. In fact that death rate is at its highest level in a decade.

WHY THE RBNZ IS WORRIED ABOUT INVESTORS
In new expanded data perspectives out today from the RBNZ, about half of all investor borrowing is 70% LVR or higher, and overall investor borrowing for property is exploding. In March it reached $1 bln in a month for the first time ever and almost doubling in just 8 months. And investor loans reached 33% of all new housing lending, the highest level since the RBNZ started collecting this data in August 2014.

FAST GROWTH
A review of the ICT industry out today shows that it employs 27,000 people in New Zealand and generates $6.2 bln in revenues.

SECOND CREDIT RATING AGENCY WELCOMES RBNZ MOVE
Moody's has joined Fitch in declaring the Reserve Bank's move to restrict lending to residential property investors in Auckland to ones with at least a 30% deposit as being good for banks, saying it's credit positive. Moody's says the plans announced last week especially benefit ANZ, ASB, BNZ and Westpac given they, combined, held approximately 86% of total NZ system mortgages as of December 31, 2014.

WHOLESALE RATES FALL AGAIN
Wholesale swap rates fell today essentially mirroring the falls on Wall Street over the weekend. Across the board, these rates are now down -3 to -5 bps. Markets are now seriously pricing in a rate cut to the 90 day bank bill rate which is down even further today to 3.48%. Since the beginning of May they have fallen 15 bps, so that is 60% of a June rate cut 'priced in'.

NZ DOLLAR FALLS TOO
The New Zealand dollar has fallen today from this time on Friday as the US dollar has made some minor gains. As of late this afternoon it is at 74.3 USc, 92.7 AUc, 65 euro cents, and the TWI-5 is now down to 76.9. Check our real-time charts here.

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

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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6 Comments

by profile | 18th May 15, 6:02pm 1431928974

" ...a draft paper leaked to the Wall Street Journal said that even in its most optimistic scenario, the price will not exceed $76 a barrel until after 2025. It also considered a scenario in which it fell below $40. OPEC denied that the draft existed, but the conclusions ring true: the chances of a return to triple-digit crude prices look slim.

The one thing that might make it break out of this range and head back above $100 is a surge in demand. However, economic growth and energy consumption have decoupled in the rich world; and it is an open question if emerging economies will be as wasteful of energy in coming decades as the established ones were in the past century. Ever more affordable renewable-energy sources, and cheap gas, are proving increasingly attractive alternatives to many users of oil products.

Paul Sankey of Wolfe Research, a New York-based outfit, believes that underinvestment resulting from the recent sharp dip in crude may lead to one last spike in the oil price; but after that, he reckons, the “oil age is over”. Even if that proves an exaggeration, a return of OPEC’s dominance seems a distant prospect."

http://www.economist.com/news/business/21651267-american-shale-firms-ar…

by scarfie | 18th May 15, 7:07pm 1431932843

We are facing an energy event and a financial event, which while related will play out different ways. You can't see either so what exactly is your point?

by Zombie ponzi | 18th May 15, 6:21pm 1431930119

The RBNZ investor credit data is a shocker - would have been fascinating to see data from pre-August 2014 as the market was pretty flat at the point in time. Seems there are a lot of investors out there with 20-30% equity - very negatively geared, hence very reliant on capital gains and probably having to feed their investments quite a bit of cash. Also, $1bn per month is a lot of demand that will come out of the market on October 1st assuming those investors are not able to raise 30% equity.

by cowboy | 18th May 15, 9:14pm 1431940463

Not particular surprising if you think about it. That would include the larger portfolio folks.
As you say 20-30% leads to negative gearing, so the owner has to have enough income to cover the repeating investment and also repairs and downtimes (empty).

They can't have a large portfolio at play that game. The more properties they hold, the more likely that at any given point one or more will be empty/damaged, the only way to effectively manage that is come to a positive cashflow position.
Yet at any time you got over 85-90% equity then it's dead money and it's better to use the income and a bit of equity as security to either buy another investment property or diversify into some perhaps with more risk/return potential. After all, at the 85-90% investment position the property will be strongly cashflow positive on top of any personal or other incomes.

that's also why it's important to have the 30%, when the cycle enters it's colder half, it is better than the homeowners still have equity, especially if there are likely to be job losses. negative geared, negative equity, and no job income is not a good place to be in.

by sharetrader | 19th May 15, 12:21am 1431951661

neg gearing to offset personal tax is a bad system, designed by those in power to take advantage of it.
housing investing should be treated like any other business and losses carried over to offset against future profits. and if you sell before its used you lose it, no credit back from the IRD.

by dazz | 19th May 15, 3:44pm 1432007080

All the Best John Banks, as for the so-and-so who lied under oath..............