What happened Monday

A review of things you need to know before you go home on Monday; lower mortgage rates, lower worker confidence, higher dairy prices, swaps unchanged, NZD up

28th Sep 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
SBS Bank reduced almost all its home loan rates today, including its 'specials' It added a 5 year 'special at 5.29%, and has a market-leading 6 month 'special' at 4.99%. It also joins others with a 4.49% one year rate. (But BNZ and ASB have a lower one year rate.)

TODAY'S DEPOSIT RATE CHANGES
There are no changes to report today.

CONCERNS GROWING
Employment confidence as measured in the Westpac/McDermott Miller survey has taken a dive in September. The index is now below 100 for the first time since 2012. New Zealanders have become increasingly concerned about the state of the labour market. Weakness in earnings growth is a key concern. The number of workers who expect a pay increase over the coming year has dropped to its lowest level since the survey began in 2004. Workers are also increasingly nervous about their employment prospects.

SOFT COMMODITY STRENGTH
The dairy futures market rose again today, reinforcing the view that next week's auction will again lock in significantly higher prices (maybe +20%).

WHOLESALE RATES STABLE
There has been no change to swap rates today. The 90 day bank bill rate is also unchanged at 2.84%.

NZ DOLLAR UP
The Kiwi dollar also held its ground today. This is the week when, due to daylight savings, we are an hour ahead of Australia and have an hour less of international influence in our currency markets. The NZD is now at 63.8 USc, at 90.8 AUc and at 57.1 euro cents. The TWI-5 is now at 68.3. Check our real-time charts here.

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Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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13 Comments

by King of the whiners | 28th Sep 15, 4:36pm 1443411387

QE without end, forever and ever.........

http://www.independent.co.uk/news/business/news/it-is-possible-the-glob…

''The reality is that the level of global debt is simply too great to be dealt with by conventional means. Since 2007, it has grown by $57trn (£37trn), or 17 per cent of GDP, as public and private debt has risen in the big economies. In mid 2014, global debt was $199trn, or 286 per cent of the world’s GDP, up from $87trn in 2000.If unfunded entitlement obligations such as pensions and healthcare are included, the level of indebtedness rises dramatically. A crude measure of sovereign net worth can be calculated by subtracting these liabilities and government debt from the value of government assets and tax revenues. As a percentage of GDP, this measure shows the US at minus 800 per cent, France minus 600 per cent and the UK minus 1,000 per cent. Italy is at minus 1,250 per cent and Greece minus 1,600 per cent. ''

And US shale bust goes from bad to worse:

http://www.bloomberg.com/news/articles/2015-09-25/junk-debt-investors-f…

'It’s every U.S. shale investor for himself as the worst oil rout in almost 30 years drags down its latest victims.

Wildcatters attracted billions of dollars during the boom after years of near-zero interest rates sent investors hunting for returns in riskier corners of the market. U.S. high-yield debt has more than doubled since 2004 to $1.3 trillion while the amount issued to junk-rated energy companies has grown four-fold to $208 billion, according to Barclays Plc. Most of the companies spent money faster than they made it even when oil was $100 a barrel and are struggling to stay afloat with prices at $45.

"The bubble is bursting," Cutter said. "And if oil stays where it is, the worst is yet to come."

by Stephen Hulme | 28th Sep 15, 4:49pm 1443412147

Seems as though it has burst in Australia and possibly New Zealand, if it wasn't for the most recent positively motivated dairy auction activity.

The value of exports from Australia’s service sector including banking and telecommunications fell from 26 percent as a share of total exports in 2000, to a likely 20 percent this year. The country’s export base has narrowed to levels approaching that of a “banana republic,” says Andrew Charlton, who was an adviser to former Labor Prime Minister Kevin Rudd. The last few Australian governments have assumed low interest rates and a falling currency would help revive the non-commodity industries. “No such resurrection is occurring,” he says. “Even some low-income countries like Nepal, Kenya, and Tanzania have greater export diversity than Australia.” Read more

by profile | 28th Sep 15, 5:35pm 1443414936

"Even so, “we would caution investors not to expect a steep drop in US shale production even at that level of spending since maintenance capital requirements may be 25% lower in 2016,” Barclays said."

http://blogs.platts.com/2015/09/22/upstream-oil-execs-low-long-living-w…

by King of the whiners | 28th Sep 15, 5:59pm 1443416361

The proof is in the pudding - US oil production dropping like a stone, down 500,000bpd since June:

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

by profile | 28th Sep 15, 6:14pm 1443417290

Hardly unprecedented - steeper, deeper drops in '12, '08 and '05 and the pain is shared around - "Saudi Arabia has withdrawn tens of billions of dollars from global asset managers as the oil-rich kingdom seeks to cut its widening deficit and reduce exposure to volatile equities markets amid the sustained slump in oil prices.

The Saudi Arabian Monetary Agency’s foreign reserves have slumped by nearly $73bn since oil prices started to decline last year as the kingdom keeps spending to sustain the economy and fund its military campaign in Yemen."

http://www.ft.com/intl/cms/s/0/8f2eb94c-62ac-11e5-a28b-50226830d644.htm…

by King of the whiners | 28th Sep 15, 7:17pm 1443421023

Except the Saudi's aren't desperately slashing production (their output is as it was 6 months ago).

[ deleted. Please keep the personal abuse out of the conversation. Ed ]

by profile | 28th Sep 15, 7:34pm 1443422094

Maybe, just maybe, the Saudi's are trying to maintain market share (public statement) and balance their $110/bbl national budget so not so keen to slash their production. There is a difference between a private shale well investment and a shaky government cartel.

For all your blood on the floor the US production drop not be been a steep or as deep as previous aforementioned years.

by notaneconomist | 28th Sep 15, 5:28pm 1443414498

Employment confidence should be taking a dive too......the productive sector is like pressed meat......the bureaucracy will have to take a pay cut or they threaten to destroy many small business owners....

by profile | 28th Sep 15, 5:31pm 1443414700

Whiner and Steven - Warren thanks you for all the work you've put in.

"I love apocalyptic predictions" on climate change, Buffett told CNBC on Monday, because they probably do affect rates.

But right now, he said, "The rates have come down very significantly, so we're not writing much, if anything, in the U.S."

"The public has the impression that because there's been so much talk about climate that events of the last 10 years from an insured standpoint and climate have been unusual," he continued. "The answer is they haven't."

http://www.cnbc.com/2014/03/03/no-climate-change-impact-on-insurance-bi…

by iconoclast | 28th Sep 15, 6:54pm 1443419651

The knowledge economy

shonks, spivs, banks, the corrupt

Michael Pascoe looks at the week ahead, in banking and exposes what the banks are up to, what they know about you, who they will do business with, and who they won't

http://media.smh.com.au/video-business/video-businessday/banks-v-bitcoi…

by steven | 29th Sep 15, 7:47am 1443466060

LOL, now that was interesting, thanks.

by King of the whiners | 28th Sep 15, 9:58pm 1443430719

Oh dear. Shell abandons Arctic oil and gas exploration for the forseeable future:

http://www.theguardian.com/business/2015/sep/28/shell-ceases-alaska-arc…

'Shell is expected to take a hit of around $4.1bn as a result of the decision.'

Shame. Still I guess shale oil investors know how it feels, so they will have the compensation of not feeling lonely.

Guess there will be a few lobbyists who won't be getting a pay cheque this month....

by steven | 29th Sep 15, 6:59am 1443463176

One of the most difficult places on earth and oil is $50, hardly surprising. That's the thing on the mistake of the Hubbert curve, its shown as symmetrical, ie assumes we can afford to extract the oil. So there maybe 1trillion left but how much is ever going to be got?