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A review of things you need to know before you go home on Thursday; very short funding, surging used car imports, electric plans, swap rates near record lows, NZD holds steady

A review of things you need to know before you go home on Thursday; very short funding, surging used car imports, electric plans, swap rates near record lows, NZD holds steady
5th May 16, 3:59pm by David Chaston

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

TODAY'S MORTGAGE RATE CHANGES
No changes announced today. And that is despite wholesale swap rates again touching their record lows (with the irony of bank CEOs all claiming they can't cut because "whole costs have risen"). See below.

TODAY'S DEPOSIT RATE CHANGES
No changes here either.

GOING (DANGEROUSLY?) SHORT
The latest 'funding by maturity' data from the RBNZ (L3) shows that NZ banks now have 82.6% of their funding all due in less than one year. This is near the record high (82.7%). Since the RBNZ began publishing this system data five years ago, this short-term-ism has risen and risen. Actually, it has never been below 79.7%. Ironically, any banker looking a a client with a maturity risk this high might decide such a level is not prudent. (And it is 85.7% if you change the standard to "less than 18 months.) Yes, banks are different. And with other magnifying risks, like high leverage.

TEN PERCENT MORE
Used car imports came in at 12,140 which is the same level for April as for March. New car registrations fell a lot between the two months, but not used cars. Which just proves the new car market is one motivated by the corporate buyer (who maximises their depreciation and therefore tax benefits), whereas the used import market is for the rest of us who don't have that motivation. Year-on-year, the used import volumes are up +10% in April.

KEY SENTIMENT IMPROVER
Chinese car buying sentiment became more positive in April. Building domestic demand in the Middle Kingdom is an important transition they are going through. The MNI China Car Purchase Indicator, a composite indicator designed to gauge overall conditions in their car market, rose +6% to 96.9 in April from 91.4 in March. The gain in the indicator, which is made up of two components, was driven by a combination of a decrease in consumers’ expectations for fuel costs, as well as an improvement in the assessment of the current buying conditions for cars.

SERVICES EXPANDING
Staying with the China theme for another item, their latest Services PMI is still expanding, but was down -0.4 to 51.8. That is now a pretty modest expansion level, but at least it offset their contracting factory sector.

GLOBAL TRADE RISKS RISING
Earlier in the month we reported that NZ's trade surplus fell in March. Earlier in the day, we reported the US's trade deficit fell. And now we are reporting that that Australia's trade deficit fell in March too. The common theme seems to be the falls in export levels are less than the falls in import levels. Of course international trade is a zero sum affair, so someone somewhere must be importing more than they are exporting. But it is not 'us' - yet. However in a slightly sinking market, things catch up quickly. Trade risks are rising.

MOVING QUICKLY
Hard on the heels of the well-publicised woes of its rival Murray-Goulburn, Fonterra Australia has today revised its farmgate milk price from AU$5.60 per kgMS to AU$5.00 per kgMS for the current season. Fonterra has always maintained the market offers in Australia were unsustainable.

GOING ELECTRIC
The Government today set out a 10 point plan to juice up the electric car market in New Zealand. They want to double sales every year until the electric-only car fleet reaches 64,000 in five years. One initiative is a bulk-buying strategy in partnership with big private sector car buyers. But there is a long way to go. NZ's existing petrol and diesel car fleet numbers 3.5 mln vehicles and they are an average of 14 years old. Clearly new battery technologies will be necessary to make a bigger transition.

ACCOMMODATION VS AFFORDABILITY?
Labour's Healthy Homes Guarantee Bill passed its first reading today with Peter Dunne's support. It would force landlords to improve insulation and pay for heat pumps. Both landlords and the Government are opposed saying it would increase rents.

WHOLESALE RATES DROP AGAIN
There has been another serious fall in wholesale swap rates today, down a further -3 and -4 bps across the curve. The cumulative impact has to take these rates down to just 1 or 2 bps above there all-time lows. NZ swap rates are here. The 90-day bank bill rate toggled around its recent levels, today +1 bp to 2.38%.

NZ DOLLAR UNCHANGED
The Kiwi dollar is essentially where it was at this time yesterday, at 68.9 USc, at 92 AUc and 60 euro cents. The TWI-5 is at 71.7. Check our real-time charts here.

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

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21 Comments

by  antonymouse  |  5th May 16, 5:11pm 1462425074

TTIP (and TPP) —American Economic Imperialism Paul Craig Roberts

http://www.paulcraigroberts.org/2016/05/O3/ttip-american-economic-imper…

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These so-called “free trade agreements” are not trade agreements. The purpose of the “partnerships,” which were drafted by global corporations, is to make corporations immune to the laws of sovereign countries in which they do business. Any country’s sovereign law whether social, environmental, food safety, labor protections—any law or regulation—that impacts a corporation’s profits is labeled a “restraint on trade.” The “partnerships” permit corporations to file a suit that overturns the law or regulation and also awards the corporation damages paid by the taxpayers of the country that tried to protect its environment or the safety of its food and workers.

The law suit is not heard in the courts of the country or in any court. It is heard in a corporate tribunal in which corporations serve as judge, jury, and prosecutor.

In other words, the “partnerships” give global corporations the power to overturn democratic outcomes. Allegedly, Europe consists of democracies. Democracies pass laws protecting the environment and the safety of food and labor, but these laws democratically enacted reduce profits. Anything less than a sweatshop, with starvation wages, no environmental protection, no safety legislation for food or worker, can be overturned at will by global corporations under the terms of the “partnerships.”

Only a traitor, a well paid one, could sign such a pact.

also:

http://www.independent.co.uk/voices/ttip-leaks-shocking-what-are-they-e…

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by  Afewknowthetruth  |  5th May 16, 4:39pm 1462423152

'Only a traitor, a well paid one, could sign such a pact.'

Would a gang of traitors do?.

Betrayal -the byword of the age we live in.

Regarding electric cars:

'Who Killed the Electric Car? is a 2006 documentary film that explores the creation, limited commercialization, and subsequent destruction of the battery electric vehicle in the United States, specifically the General Motors EV1 of the mid-1990s.'

https://en.wikipedia.org/wiki/Who_Killed_the_Electric_Car%3F

(not that electric cars would have prevented planetary meltdown but they may have slowed it down.)

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by  David Chaston  |  5th May 16, 5:24pm 1462425848

Raging conspiracies aside, anyone can read what the US and others signed up to on the TPP. At least you get a view there of what actually eventuates after all the normal negotiation. It is here.

And if you want objective analysis about what the TPP does and does not include, then follow our analysis, here.

Of course, you don't have to read any of this. It's just much easier to make up stuff which will confirm your conspiracy assumption. I bet Roberts hasn't read any of this stuff. And if he has, he is quickly moving on to the soft TTIP target because the negotiations are only getting underway there and it is easy-and-cheap to attack opening negotiation positions, especially 'leaked' ones.

Ditto the "independent".

But the released TPP treaty is evidence that not everyone gets everything in their starting positions. Negotiation 101 (a course most conspiracy folks avoided). Bluster is much more fun than having to do any actual work or thinking.

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by  Stephen Hulme  |  5th May 16, 6:08pm 1462428507

The TPPA could add an extra $2.7 billion to GDP by 2030 (that's a rise of 0.9%). Read more

Can an informed apparatchik officially raise the bidding on this not so winning outcome?

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by  Afewknowthetruth  |  5th May 16, 6:45pm 1462430751

Thanks for the link David.

Unfortunately, it confirms our worst fears: bureaucratic gobbledygook and mutually exclusive statements:

'Article 20.2: Objectives

1. The objectives of this Chapter are to promote mutually supportive trade and environmental policies; promote high levels of environmental protection and effective enforcement of environmental laws; and enhance the capacities of the Parties to address trade-related environmental issues, including through cooperation.'

All trade is dependent on consumption of [finite and rapidly depleting] fossil fuels and the generation of vast quantities of CO2. Excessive generation of CO2, which enters the atmosphere and oceans and causes massive environmental damage of the kinds we are witnessing now, is the greatest threat humanity has ever faced..

Increasing trade would increase emissions, thereby degrading the environment even faster than it is being degraded now.

This disastrous state of affairs is described in the TPPA document as ' promote high levels of environmental protection' and 'enhance the capacities of the Parties to address trade-related environmental issues'.

Could bureaucratic gobbledygook and mutually exclusive statements be why Jane Kelsey, law professor at Auckland University, is so against TPPA?

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by  antonymouse  |  5th May 16, 4:22pm 1462422170

Have the EU bureaucrats lost their collective minds??
Do they want to hasten the break-up of the EU??

EU Plans $290,000 Per Person Fine on Countries Refusing “Fair Share” of Refugees

https://mishtalk.com/2016/05/04/eu-plans-290000-per-person-fine-on-coun…

The European Commission has proposed reforms to EU asylum rules that would see stiff financial penalties imposed on countries refusing to take their share of asylum seekers.

The bloc’s executive body is planning a sanction of €250,000 (£200,000; $290,000) per person.

The UK and Ireland can opt out of asylum policies, and the British government has already indicated it will not take part. Denmark is also exempt.

Countries refusing to accept their quota would effectively be fined – with the money going to frontline states such as Italy and Greece that have carried the burden.

The proposals for sanctions alarmed Central European countries that have refused to implement the refugee quota deal:

Poland’s foreign minister wondered if it was “a serious proposal”
Slovakia’s interior minister complained the proposed “fair share” system failed to respect reality
Hungary called it “blackmail” and “unacceptable”
The Czech Republic said it was an unpleasant surprise as it returned to a concept of mandatory quotas which had been rejected

The four countries were outvoted when the quota plan was agreed.

Hungary’s government on Tuesday announced plans for a referendum on the EU’s resettlement plans.

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by  Stephen Hulme  |  5th May 16, 5:17pm 1462425466

Fonterra has always maintained the market offers in Australia were unsustainable.

Can a cooperative owner explain why Fonterra kept paying to match the competitor that recently folded. Do local dairy farmers regret this indefensible wealth transfer mechanisn to citizens of another sovereign nation undertaken supposedly upon their behalf and welfare?

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by  David Chaston  |  5th May 16, 5:33pm 1462426390

If you pulled out of any market at the first instance a competitor used an irrational price, you wouldn't be in many markets. And you would miss the opportunities that fall to those left when the irrationality disappears. You have to be there to get the advantage when it comes.

Maybe some 'local dairy farmers' regret it, but I suspect most are smart enough to know that some positions have good longer run potential for the patient. Like now in Australia. Turning tail at the first hurdle seems a poor business strategy.

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by  Stephen Hulme  |  5th May 16, 5:35pm 1462426538

Are you a cooperative owner?

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by  Henry_Tull  |  5th May 16, 7:01pm 1462431674

Yes. One needs to look at the Bonlac agreement. The price is contractually tied to the MG fgpmt.

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by  Henry_Tull  |  5th May 16, 8:47pm 1462438050

there we are

Fonterra could not cut the price sooner because it was obliged under its Bonlac supply agreement to meet the benchmark price. In other words, it couldn't move unless Murray Goulburn did.

And Murray Goulburn finally cut its farmers' milk cheques last week, from $5.60 to $4.75-$5 a kilogram, after it said it would struggle to meet even half of its net profit forecast outlined in its prospectus for its partial float on the ASX last year.

The co-operative has been accused of artificially elevating the farm gate price to satisfy investors in its non-voting listed trust because the dividend is tied to the farmers' milk payments.

Whatever the case, the profit and farm gate cut led to Murray Goulburn's managing director Gary Helou and chief financial officer Brad Hingle leaving the company and farmers fuming.

Read more: http://www.smh.com.au/business/fonterra-follows-murray-goulburn-in-slas…
Follow us: @smh on Twitter | sydneymorningherald on Facebook

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by  Stephen Hulme  |  5th May 16, 5:34pm 1462426443

The latest 'funding by maturity' data from the RBNZ (L3) shows that NZ banks now have 82.6% of their funding all due in less than one year. This is near the record high (82.7%). Since the RBNZ began publishing this system data five years ago, this short-term-ism has risen and risen

Hmmmmmm - do our local banks present to much term credit risk to funding agents to get a sensible duration extension at a cost commensurate with the profit profile the Australian owners demand? Rollover risk, RBNZ, unsecured creditors be damned eh.

It really is third world - the regulator's bite is weaker than it's bark.

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by  Justice  |  5th May 16, 6:25pm 1462429524

GOING ELECTRIC:

Ok, in regards to the Governments electric car interest.

I'm going to be a cynic on this one. I believe it's nothing more that a ploy to future proof the incomes for Electricity suppliers to profit off along with the Government to siphon taxes from.
Let me explain:
At this very moment in time NZ has a 'surplus' of electricity production yet we still see Contact and others putting up their prices at a much reduce speed than they would like. I believe in the future this 'surplus' will be quickly eroded as the factual hinderance that it is for these companies. They will claim EV's are pushing energy demand to the brink as excuses to put up prices more aggressively come that time.
I mean, lets be honest, they are even using 'micro generators' as an excuse to make a buck and not pay equal generation rates. Micro generation (not even at 1% in this country yet they changed the buy back rates) still plays a role in keeping those southern lakes that little bit fuller regardless of day or night time use of electricity by all. The GRID can be essentially a storage system as well as a supply via micro generation.

I would love to see the day come when micro generators can sell their electricity to others aside from who they may grid connect with. It's called third party supply/cross street generation. This allows micro generators to chose a customer themselves for the electricity they produce via transferring the 'surplus generation' discount to someone such as their neighbor, a local school or business...etc The grid is effectively owned by all of us as it was bought and paid for from our taxes long ago.

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by  JB  |  5th May 16, 7:43pm 1462434183

As a shareholder in Vector I was under the impression that Vector - a listed public company owned the local grid in Auckland.

Why would a generator pay anyone more for energy than they can buy it off the wholesale market ?
They too have shareholders who's interests the are required to act in.

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by  KH  |  5th May 16, 10:16pm 1462443393

No problem about changing the nature of the electricity companies to suit the needs of modern society. Such changes have been done before. Max Bradford changed the rules one time and a generator I owned, via the local council, was no longer able to be owned. Compulsory sale.
If the system won't play ball with modern needs. Chop it.

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by  mspace  |  5th May 16, 6:52pm 1462431161

Electric cars need to be significantly cheaper to really make a big market impact, and that's only going to happen with a big change in battery technology, or a huge increase in oil prices - both of which will eventually come, it's a question of when.

I've said it before, but paying BMW 3-series money for a bare Tesla Model 3 makes zero sense, and the high price is mainly because of the battery cost.

(And, in my opinion, electric cars need a a serious re-look at design - all electric cars except the BMW i8 are astonishingly ugly, including Teslas).

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by  sharetrader  |  5th May 16, 11:51pm 1462449078

it still surprises me how they still build conventional shapes when no engine bay is needed, its time they took they thought outside the box.
I prefer the greens idea of no fringe benefit tax for electric company cars, you would increase the numbers on the road in no time

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by  JB  |  5th May 16, 7:47pm 1462434455

Before we get too carried away just remember it takes about 300 charging stations to dispense the same energy equivalent as a single petrol pump.

Unless these are charged at home or are plug in hybrids there are going to be some long delays at your friendly local charging station.

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by  Dave2  |  5th May 16, 10:22pm 1462443722

A change is going to come, to quote Sam Cooke. Electric driverless vehicle aren't a linear development from current vehicles, but will completely transform the whole transport network in only a few years - just not the next few. We need to think about a change like that between 1910 and 1940 - most people using a horse to most owning a car . I don't plan to buy a new car for about ten years, and might find there's no reason to own one then.

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by  Afewknowthetruth  |  5th May 16, 11:43pm 1462448589
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