What happened Tuesday

A review of things you need to know before you go home on Tuesday; Kiwibank shifts attack point, UDC gets credit downgrade, WMP prices improve, Fonterra reputation again in China spotlight, swaps stable, NZD holds

25th Oct 16, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes for borrowers today.

DEPOSIT RATE CHANGES
Kiwibank shifted its point of attack today, dropping its previous 4 month special by -40 bps from 3.60% to 3.20%, and raising its one year rate by +35 bps to 3.60%.

DOWNGRADED
Standard & Poor's has downgraded the credit rating for UDC substantially. Previously, it had a AA- rating, the same as its parent ANZ. But S&P says this ownership link is now tenuous and ANZ may sell it to some other party. With the diminished credit profile (but still investment grade), we will be hearing of higher investment rate offers soon.

A BRIGHTER RESULT?
It hasn't been a very reliable fore-teller of the dairy auction results recently, but the dairy futures markets are expecting some good gains. The last GDT average price for WMP was US$2,760/MT, whereas the derivatives market is trading contracts at about US$2,975/MT, which is indicating a gain of +7.8%. For SMP it is a tad lower, but still over +7%.

EXPIRED MILK POWDER ONSOLD IN CHINA
Fonterra has been caught up in another food safety issue in China. Some of its expired product has been acquired by third-party packers in Shanghai and repacked with fraudulent labeling. No-one is suggesting Fonterra has anything to do with this, but Chinese officials are chasing the cowboys, attempting to shut down the trade. Reputation damage is at stake for Fonterra however.

ANOTHER ONE FOR THE FMA TO STRIKE OFF
New Zealand registered, overseas operating financial service provider (FSP) Breder Suasso has been skewered by Naked Capitalism's Richard Smith. Here's Smith; "Breder Suasso is still registered, but not regulated, as an FSP in New Zealand. Tens of millions of dirty dollars have moved via its one-time associate Global Transaction Services (UK). The US DoJ thinks hundreds of millions more have travelled via another very possible Breder Suasso partner, Global Transaction Services LLC. Now the Poles seem to think Breder Suasso’s been opening secret dollar accounts. It is the ideal time for FMA to slam the stable door." Breder Suasso has previously featured in several interest.co.nz articles, including this one telling potential customers of "many cases of personally bankrupt individuals who have been unable to pay their taxes or have failed in business but who still live in mansions and drive Ferraris owned by their [New Zealand] trusts and there is nothing anyone including the Government can do about it."

FRAUD LOSSES ON PAYMENT CARDS RISE
Banks and retailers incurred US$21.8 bln worth of fraud losses on credit, debit and prepaid cards last year, according to the Nilson Report. Global card volume purchases reached US$ 31.3 tln. So that means for every US$100 in volume, 6.97 cents was fraudulent, up from 6.21c per US$100 in 2014. Losses to card issuers were US $15.7 bln or 72% of gross fraud losses worldwide. Merchants and acquirers lost the remaining US$6.1 bln or 28% of the total.

WHOLESALE RATES STABLE
There has been very little change to swap rates today. The one year rate is up +1 bp to 2.08%. All rates 2-5 years are unchanged. The 7 and 10 year rates are lower by -1 bp. The 90-day bank bill is up +1 bp to 2.13%. Yields for NZGBs are all unchanged..

NZ DOLLAR UNCHANGED
The NZD/USD is now at 71.3 USc as it was at the start of business today. On the cross rates, it is trading at 93.8 AUc, and is at 65.6 euro cents. The TWI-5 is now at 75.6. 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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8 Comments

by Stephen Hulme | 25th Oct 16, 6:44pm 1477374245

Barclays Warns ‘Politics of Rage’ Will Slow Global Growth

Globalization is fundamentally incompatible with rising nationalist anger.

Brexit, rising populism across Europe, the ascent of Donald Trump in America, and the backlash against income inequality everywhere.

A slew of political and economic forces have nurtured a growing narrative that globalization is now on life support—a potential game-changer for global financial markets, which have staged a rapid expansion since the end of the Cold War thanks to unfettered cross-border flows.

No more: Trade volumes have stalled while the “politics of rage” has taken root in advanced economies, driven by a collapse in the perceived legitimacy of political and economic institutions, a new report from Barclays Plc warns. The result, the bank says, is an oncoming protectionist lurch—restrictions on the free movement of goods, services, labor, and capital—combined with an erosion of support for supranational bodies, from the European Union to the World Trade Organization.

“Even mild de-globalization likely will slow the pace of trend global growth,” Marvin Barth, head of European FX strategy at Barclays, writes in the report. “A sense of economic and political disenfranchisement due to imperfect representation in national governments and delegation of sovereignty to supranational and intergovernmental organisations” has generated the backlash, he said. He cites as a major factor the collapse in support for centrist parties in advanced economies and adds that the role of income inequality may be overstated. Read more

by David Chaston | 25th Oct 16, 7:06pm 1477375572

It is hard to understand why the English think they are still the centre of it all. They aren't, and haven't been for a long time now. Just because an English banker sees the world through Brexit-tarinted eyes doesn't mean the rest of the world noticed.

by Stephen Hulme | 25th Oct 16, 8:01pm 1477378885

Barclays is a bit more than just an English bank - it is a member of the G-SIB group and a Fed Primary Dealer.

by Zachary Smith | 25th Oct 16, 8:30pm 1477380654

The English are much more influential than most other groups. Brexit has been of great interest to the Europeans, Russians, Chinese, Japanese and Americans.

by Stephen Hulme | 25th Oct 16, 7:02pm 1477375356

Fonterra has been caught up in another food safety issue in China. Some of its expired product has been acquired by third-party packers in Shanghai and repacked with fraudulent labeling.

Surplus to requirements rehypothecation collateral previously posted to secure expired Chinese Commodity Funding Deals? Read more

by tim12 | 25th Oct 16, 9:05pm 1477382706

I think that Hillary and her globalist mates are naive if they think they are will denationalise the US. If she wins it will only be by a small margin meaning a little less than half the population are strongly against her. The nationalist headwind will not go away after the election.

by Real money | 25th Oct 16, 10:23pm 1477387421

The problem won't be the internal politics of USA but the concern that being the warmonger that she is, she will take America and the world to war. Just look at her track record and even her recent statements of the need for a no fly zone in Syria. One of her generals conceded publically that would mean war with Russia. All the preparations seem to be being made with NATO forces amassing on Russia's borders, a USA inspired missile shield recently installed on its border and Putin trying to warn western media that USA means to take them to war, a speech completely ignored by the western main stream media. Analyst say that we are closer to war than during the Cuban missile crisis. If only the main stream media didn't cherry pick the news. Unfortunately our media just repeats the American drivel.

by Zachary Smith | 26th Oct 16, 12:08am 1477393718

Check out this RT piece comparing the attitude between the very similar battles of Mosul and Aleppo:

https://youtu.be/nBqA7bbVe9M

Unbelievable hypocrisy.

Here we see the forces about to assault Mosul. Clearly on display are six Katyusha rocket trucks that are very indiscriminate weapons indeed:

https://youtu.be/mSauHdoYsP0

Reminds me of when I use to play Command & Conquer.