What happened Tuesday

A review of things you need to know before you go home on Tuesday; HNZC passes on 9bps, more costly disasters, less people killed, more bond issues coming, swap rates lower, NZD higher

23rd Aug 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
Housing NZ Corpn have cut their floating rate today by -9 bps from 5.65% to 5.55%. That means they (or their funder) held on to 16 bps of the OCR reduction.

TODAY'S DEPOSIT RATE CHANGES
FE Investments (credit rating B) have raised their one year term deposit to 5.66% from 5.00%, and their two year rate to 6.25% from 6.00%.

WORSE, BUT BETTER
From earthquakes in Japan to bushfires in Canada, disasters cost the world economy US$92 bln in the first half of the year, reinsurer Swiss Re says. The figure marks a +38% increase compared with the same period a year ago, they said, adding that only less than US$4 bln attributed to man-made events, while the remainder was due to natural disasters. At the same time, the human cost of disasters was far lower, with around 6,000 people dying in catastrophic events in the first half of 2016, compared with 12,000 during the first six months of 2015.

PETROL PRICES TO RISE?
Retail petrol prices at the pump may have nearly hit their lowest since 2009 (after discounts) but with the crude price rally over the past two weeks they seem set to rise. According to MBIE monitoring, the average 91 unleaded price last week was $1,635 (the listed pump price was $1.783 on average). Expect the new listed prices to be up well into the mid $1.80s soon (discounted to the low $1.70s). This same monitoring shows the local companies only retaining about 38c/L which is the second lowest level since early 2014. Crude oil and taxes account for the rest. Taxes account for just under 90c/L and at that level they are near their lows since early 2011. (Taxes include GST of course, plus.)

BACK TO THE BOND WELL
ANZ NZ plans five and seven year bond issues seeking at least NZ$100 mln each and is open to unlimited over-subscriptions. We will report the rate they pay when it is revealed. Meanwhile, Kiwi Property Group wants to borrow up to NZ$125 million through an issue of seven-year, fixed rate, senior secured bonds.

CRACKING DOWN ON MOBILE TRADERS
The Commerce Commission is prosecuting another mobile trader, charging them with offenses relating to lending practices under the CCCFA. They are the eighth mobile trader to face charges this year.

CHINA BUSINESS SENTIMENT FALLS
China’s largest companies reported a softening in business conditions in August as a noticeable fall in demand and less favourable credit conditions outweighed a slight uptick in output, according to the latest MNI China Business Sentiment Survey.

PROPERTY DEVELOPER & CRIMINAL
Proceedings against William Yan and Wei You under the Criminal Proceeds (Recovery) Act 2009, along with two of Mr Yan’s associates, have been settled today following discussions between the relevant parties and approval by the High Court. In accordance with the settlement, the Police have seized property to the total value of $42.9 mln. This is the single largest forfeiture that has occurred in New Zealand to date and is the first that relates to crimes alleged to have occurred in China.

NEW MILK PRODUCT?
USDA researchers have developed a new 'plastic' film to protect food. But it is not a plastic film made from hydrocarbons. Rather it is formed from casein, a core milk protein. That makes it digestible and bio-degradable. And one country makes plenty of milk for export. Us. It has got some people pretty excited. Not sure what regular casein sells for, but specialist rennet casein sells for US$6,325/tonne. But one thing I know about hydrocarbon plastic film is that it is inexpensive. LLDPE sells for about US$1,150/tonne. May need to wait a while before the costs become realistic.

SWAP RATES SOFTEN
The local swaps market followed Wall Street lower today. Mid afternoon, rates are down -1 and -2 bps in a slight flattening tone. NZ swap rates are here. The 90-day bank bill rate is unchanged at 2.23%.

NZ DOLLAR RISES
The Kiwi dollar has risen today, accentuating the irony that happens whenever RBNZ governor Wheeler speaks saying the currency is too high. It is now at 73.1 USc, 95.7 AUc, and 64.5 euro cents. The TWI-5 is still at 75.8 and that is its highest since the RBNZ rate cut and MPS. 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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13 Comments

by keyo_ | 23rd Aug 16, 4:16pm 1471925769

> Police have seized property to the total value of $42.9 mln

Nothing compared to the $293 million he laundered through SkyCity. The guy is lucky he didn't get sent back to China for kidney harvesting.

by David Chaston | 23rd Aug 16, 4:33pm 1471926801

Evidence on that $293 mln claim ?

by keyo_ | 23rd Aug 16, 5:15pm 1471929310

http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11699236

The investigation also uncovered Yan's astonishing SkyCity records where he gambled $293 million over a 12-year period - despite being banned twice for two years and losing a total of $23 million.

by sharetrader | 23rd Aug 16, 5:22pm 1471929769

what great washing machines sky city have

by J.C. | 23rd Aug 16, 5:55pm 1471931731

Whole thing stinks. The politicians seemed to think he was worth endorsing and are concerned about his "human rights." What nonsense. What are the NZ police forfeiting the guys' "wealth" if he is supposedly innocent? Surely we should be protecting his liberty if he's done "nothing wrong." Where's Dover and Shane now?

by billsay | 23rd Aug 16, 5:31pm 1471930276

ASB announced this afternoon that "ASB’s stand-alone credit profile has changed from A- to BBB+"

https://www.nzx.com/files/attachments/241973.pdf

by J.C. | 23rd Aug 16, 5:59pm 1471931947

ASB's response is along the lines of "it's not about ASB, it's about the systemic risks to the NZ economy."

by billsay | 23rd Aug 16, 9:02pm 1471942942

Systemic across all NZ banks although ASB and Rabobank were assessed as having less timely financial support from their foreign parent banks:

S&P did downgrade the SACPs of ASB and Rabobank by one notch each "... reflecting our assessment of timely financial support from their respective parents, if needed," S&P said.

Let us hope that the RBNZ is considering revising their light handed approach and are not relying just on NZ depositors to bail out the banks by their unique OBR regime.

by profile | 23rd Aug 16, 5:51pm 1471931504

Better, but Better. The chart in the Swiss RE links puts the "worse" $92B losses into perspective - it was $325B for the same period in 2011. Remarkedly benign times for the past half decade - though click bait media would not give that impression.

by Boatman | 23rd Aug 16, 6:25pm 1471933547

I see Brent fell another 1% in Singapore a few hours ago

by Stephen Hulme | 23rd Aug 16, 7:02pm 1471935726

"If it seems strange that the BOJ is hamstringing the price discovery mechanism of the Japanese stock market by partially nationalizing it, it is all the stranger that it chooses to do so by substantially skewing its buying towards such a distorting index," he said. "The arbitrary decisions of the Nikkei committee get to choose the destination of trillions of yen of BOJ – and hence government - money." Read more

by James007 | 23rd Aug 16, 7:05pm 1471935952

Petrol tax only around 90c/litre - needs to be substantially more to encourage behavior change and offset all the damage we are causing to our world.

by Stephen Hulme | 23rd Aug 16, 7:21pm 1471936868

“Everything feels distorted and unnatural; you know the source of that is the central banks but equally there’s nothing to stop them carrying on,” said Matt King, head of credit strategy at Citigroup.

Wall Street has long seen central-bank action through the lens of the options market, since Alan Greenspan’s tenure as Fed chairman. The “Greenspan put” has under current Fed chief Janet Yellen become the “Yellen put,” named for an option used to protect against falling prices.

If the Fed offers free insurance, there is no point buying your own, which ought to keep the price of puts—that is, implied volatility—down.

Faith in how far central banks will protect against losses comes and goes, though. In market-speak, the Yellen put is less out of the money if a smaller price fall pushes the Fed to act. At the moment, investors seem to think the put is barely out of the money at all.

The danger, then, is not so much complacency about markets, but complacency about central banks. The lesson of the past seven years is that policy makers will step in every time disaster strikes. But investors tempted to rely on the central banks should note that disasters did still strike, and markets had big falls before help arrived. The time to buy insurance is when it is cheap, and for the U.S. stock market, that is now. Read more