What happened Thursday

A review of things you need to know before you go home on Thursday; lots of floating rate cuts, one sub 6%, change at Heartland, swap rates rise and flatten, NZD rises ignoring Wheeler

23rd Jul 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
Most big banks jumped straight out to announce floating rate reductions to match the RBNZ decision. We had early calls from Kiwibank and ANZ. SBS Bank then announced the lowest floating rate at 6.14% for a while. (But kudos to Cooperative Bank for announcing very early - their cut came on Monday.) But an announcement late today from BNZ of a Total Money rate of 5.99% has become the current lowest floating rate offer.

TODAY'S DEPOSIT RATE CHANGES
There have been no term deposit rate changes announced so far today.

DOWN, DOWN
Today is all about the OCR rate cut. RBNZ says "some further easing seems likely" and they said a further fall in NZ$ is still necessary. They have cut their GDP growth view to 2.5% from 3%.

EXECUTIVE 'INTEGRAL TO HEARTLAND'S FORMATION' LEAVES
Heartland Bank's executive director and head of strategic & product development, Michael Jonas, has announced his resignation. Managing director Jeff Greenslade said Jonas had been integral to the formation of Heartland, the acquisition of PGG Wrightson Finance, achieving bank registration, and the acquisition of Sentinel and Australian Seniors Finance.

NOT CLOSE
If you had been following the debate in the Greek Parliament over whether they would actually enact the law changes to effect the deal with the EU, you could be forgiven if you thought the Government might struggle to get the necessary support. But they have now voted: the law was approved by 230 lawmakers. 5 MPs abstained, 63 voted against bill.

WHOLESALE RATES UNCHANGED
NZ swap rates flattened severely today following the OCR decision. One year rates rose +5 bps, two years rose +4 bps, five years were up +1 bp while ten years where down -2 bps. The 90 day bank bill rate was unchanged at 3.06%.

NZ DOLLAR UNCHANGED
The NZ dollar is basically unchanged on the day at 66.3 USc, at 89.9 AUc, and 60.6 euro cents. The TWI is still at 71.1. Our exchange rate did fall last night but after the RBNZ announcement it rose back strongly to yesterday's levels. Currency markets ignored the RBNZ's plea for lower cross rates, probably because the Bank has now completely removed the use of the words “unsustainable and unjustified” when describing the value of the NZD. 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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7 Comments

by Stephen Hulme | 23rd Jul 15, 4:50pm 1437627054

Cheap credit fails to overwhelm debt related spending austerity patterns, causing global commodity stockpile growth.

Cotton stockpiles in India are poised to jump to a record as exports plunge and a revival in monsoon rains boost crop prospects.

Inventories will surge 25 percent to 7.39 million bales by October from 5.89 million a year earlier, the Cotton Association of India estimates. That would be the highest ever, data from the nation’s Cotton Advisory Board show. The surplus may further widen with next year’s harvest likely to be a near record 40 million bales, according to trader Gill & Co.

China is importing less cotton, used to make everything from jeans to tee shirts, after inventories in the world’s largest user swelled. That has shippers from India to U.S and Australia battling for market share in countries such as Bangladesh and Vietnam. Prices in New York slumped to a five-year low in January amid global oversupply. Read more

Obviously, Says law, summarised as "supply creates its own demand" can be put to rest.

But not the greater fool theory.

by steven | 24th Jul 15, 7:35am 1437680108

"Why are commodity prices, including oil prices, lagging? Ultimately, the question comes back to, “Why isn’t the world economy making very many of the end products that use these commodities?”

"The way workers afford higher commodity costs is primarily through higher wages. At times, higher debt can also be a workaround. If neither of these is available, commodity prices can fall below the cost of production."

http://ourfiniteworld.com/2015/07/22/nine-reasons-why-low-oil-prices-ma…

"It looks to me as though we are heading into a deflationary depression, because the prices of commodities are falling below the cost of extraction."

by bender | 23rd Jul 15, 5:19pm 1437628775

Also today, in an address our Finance Minister says govt should get out of running businesses as they can't do it. Well, his govt can't after firing the competent managers that were in place. It's a self-fulfilling prophecy. Funny how in the USA, the economy always does better under Democrats than under Republicans. Same here except when they fell for Rogernomics to our continued detrement.

by Stephen Hulme | 23rd Jul 15, 5:52pm 1437630723

Historically stockbrokers fared better under labour governments - that is up to the eighties - not so sure now, as all parties claim the same centre ground.

by steven | 24th Jul 15, 7:40am 1437680443

or, the opportunity to make money through economic growth which I'd suggest is what stockbrokers do (did), has waned.

"If we look at 10-year US treasury interest rates, there has been a steep fall in rates since 1981."

https://gailtheactuary.files.wordpress.com/2015/07/10-year-treasuries-j…

ergo losses and lack of making money as a stokbroker seem assured.

"If the economy is now moving too slowly, what do we expect to happen when interest rates start rising? Even level interest rates become a problem, if we have become accustomed to the economic boost we get from falling interest rates."

Which we have....

by Stephen Hulme | 24th Jul 15, 9:30am 1437687048

Yes indeed, I gave up stockbroking in New Zealand at the beginning of 1982 to move to the UK and rode that T10 yield down to embarrassing riches for both the firm and myself . Came home to rest in 1998 while the NZD was still 3.06 to a pound.

by Kakapo | 23rd Jul 15, 6:13pm 1437632002

Thomas Frank's 'The Wrecking Crew' is an interesting read on that subject.