A review of things you need to know before you go home on Friday; fixed rate cuts, good trade data, visitor spending surges, equities higher, WMP signals up, swaps unchanged, NZD jumps

A review of things you need to know before you go home on Friday; fixed rate cuts, good trade data, visitor spending surges, equities higher, WMP signals up, swaps unchanged, NZD jumps

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

TODAY'S MORTGAGE RATE CHANGES
We heard today that AMP Home Loans will be making some small reductions to its 1 and 2 year fixed mortgage rates. That almost certainly means that the funder of these rates, Kiwibank, will be making similar reductions to their mortgage 'specials' on Monday. If they do, that will have Kiwibank pricing these rates below their main rivals for these terms.

TODAY'S DEPOSIT RATE CHANGES
No changes here today. But with the falls in wholesale rates, they can't be too far away.

THE UPSIDE
The release today of the January trade balance brought a surprise. Markets were expecting a deficit of -NZ$270 mln. It actually came in as a NZ$8 mln surplus. The turnaround is because exports were higher than analysts were expecting (and probably many readers too), and imports were lower, especially because of the low crude oil price. New Zealand is a winner from low oil prices (and will be a loser if they rise). To be fair, it is normal for January usually records a trade surplus and this one is smaller than 'usual' for January. The surprise is only against 'expectations'; markets had factored in a substantial deterioration that did not eventuate. The NZD rose on the news, and has stayed up.

A BIG JOB
The Financial Markets Authority (FMA) pointed out today that is about to take over licensing and regulating the funds management industry, the industry that manages about NZ$100 bln of our retirement and investment funds. It's only a technical point of a transition, but in the big picture it is an important shift. In an aging population, quality regulatory oversight is a crucial balance element in the link between the 'smart' financial professionals, and the 'working savers and investors' who fund the fees for that industry. Good sustainable outcomes are essential for everyone involved. NZ$100 bln is a big number, but it is not large compared with Australia who has AU$2.6 tln under management. On a population-equalised basis, that means we match it with them when our funds under management reaches NZ$550 bln. We have NZ$450 bln to go ...

IMPRESSIVE GAINS
Yesterday's strong growth in international visitor numbers has enabled officials to value the benefit to the New Zealand economy. Data released today shows that international visitor spending has increased by +31% to NZ$9.7 bln in 2015. That is an impressive NZ$2.3 bln increase. Australia, China and the USA were the main drivers of the rise, in that order.

ENDING ON THE UP
Equity markets are stable in New Zealand and Australia, but Hong Kong is up by +2% today in mid-day trading and that is being repeated in Shanghai and Tokyo.

AN UPTICK?
Without getting too carried away, we also see the dairy derivatives markets signaling rises in WMP ahead of next week's auction.

WHOLESALE RATES HOLD
NZ swap rates are unchanged today. But that leaves them at record lows for fixed terms 3 to 10 years, and close to record lows for 1 and 2 years. The 90-day bank bill is softer by -1 bps today at 2.57%.

NZ DOLLAR RISES STRONGLY
The Kiwi dollar is a full 1c higher today than this time yesterday. It jumped on the unexpectedly positive trade data and as stayed up. It is now at 67.7 USc, and at 93.4 AUc. The TWI-5 is now at 72.3. Check our real-time charts here.

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NZ swap rates are unchanged today. But that leaves them at record lows for fixed terms 3 to 10 years, and close to record lows for 1 and 2 years. The 90-day bank bill is softer by -1 bps today at 2.57%.

Yesterday's 2033 NZ government bond tender produced a successful ave yield of 3.3084% , just ~10.70bps lower than the interpolated semiannual BEY interest rate swap quote. Where is the publicly disclosed Floating Rate Agreement zero coupon stack data to justify this extremely low risk spread price structure for what is essentially high risk unsecured interbank lending.

Time is well past for a public investigation. The collateral liquidity demands placed upon counterparty agents paying fixed is a financial stability factor of great seriousness in it's own right while relentless swap yield compression causes remain undisclosed .

I see Auckland Transport has published a Bus fare increases from 1 March for Bus fares ........... when the price of a litre of Diesel has basically halved to 72 cents per litre at Gull and way cheaper for bulk users .

How on earth can this increase possibly be justified for running dirty smelly buses that are 20 years old , paid for years ago , and zero capital expenditure by bus companies , static wages , and the lowest interest rates since WW2

This is my WTF ? news item for the day .

Someone needs to ask these highwaymen some pointed questions about this cozy cartel and its price-rigging operations .

Its little wonder that our public transport system in Auckland utterly dysfunctional , hopelessly inadequate , and so useless that even Auckland transport staff refuse to use the service .

Hang on a sec. Those who pay the fares are only paying about 40% of the actual cost. Public transport fares are not set on a cost-plus basis. They are set to encourage more people to ride, and that needs fares set well below the cost of providing the service.

You can't have it both ways. If you paid a fare that covered the costs, perhaps you could  expect a price reduction if things like diesel fell. But until then ...

The only people rigging the fares are the riders who won't ride unless the price is very low.

Yep, my understanding is 60% of the cost of public transport is subsidised? So I am partially paying that subsidy as a rate payer just not out of my pocket every day. Which is interesting, as I wonder what the true cost actually is for each option when you/I would have to pay $200 a month? for a car park, plus petrol wear and tear, its actually pretty close I suspect. You can gain convenience in spades mind with a car.

The real cost of transport, both public and private, is being transferred to the next generation.

A decade or so from now they will have to try to scratch a living on a planet that has been depleted of fossil fuels and which has been so overheated that much (most} of it will be uninhabitable.

Atmospheric CO2 is at a record high for this time of year (404ppm) and rising at an unprecedented rate of over 3ppm per annum. A new record high will be achieved in May 2016, probably around 408ppm.

https://www.co2.earth/daily-co2

And Arctic sea ice is at a record low.

http://nsidc.org/arcticseaicenews/

Whether it will become ice-free this year is still uncertain.

It's not a question of will it all collapse, but when will it all collapse?

In the meantime, everything industrial humans do makes everything that matters worse.

Poor old RBNZ - forced to cut rates against their will in 2016.

Events keep occurring.

ZIRP & NIRP elsewhere will surely wash up on our shores.

The RBNZ, just like it's foreign cohorts, is destined for the dustbin of history due to inept misunderstanding of the mechanics of the global credit creation process. Redefining inflation as a metric to affect redistribution of wealth in the vain hope of resurrecting an inglorious past represents an indefensible arrogance which correctly lays dashed upon the rocks of abject failure.

Stephen, in all seriousness, it's not a "misunderstanding". They know exactly what they are doing. It's a pure approach of absolute corrupt practice to keep the status quo and the illusion of 'all is well, we have this under control'. What they don't seem to grasp is how openly obvious are their bias and protectionism and at who's economic future & expense.
They will eventually defend the indefensible..and you know what? many will fall for it and except it like the new normal.

Do you think the Bank of Japan knew what they did? View graphic

Do the shrill and demanding NZ advocates of inflation related official rate cuts expect the same, or are they eternally trapped in outmoded convention belonging more appropriately to a bygone era, but certainly not applicable today?

The global bond dealing community remains truly grateful, but eternally indebted to the actions of the Bank of Japan.

Name me a major asset that has not seen one single yoy decline since the start of 2007? Clearly not equities or commodities. What about bonds? Again clearly not corporate bonds. What about 10y government bonds? I?ll give you a clue. It?s not the US, UK or Germany, all which saw negative yoy returns, most notably in 2013.

The only major asset to have seen continuous positive yoy returns since before the Global Financial Crisis is 10y Japanese bonds, now yielding -0.06%. In a world of negative policy rates, I am scratching my increasingly bald head as to where, if anywhere, yields will bottom. Why bother with global equities when you can own the JGB (see below)?! Read more