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A review of things you need to know before you go home on Wednesday; Coop Bank raises a rate, two positive surprises, commission pressure on Akl REAs, swap rates up again, NZD firms

A review of things you need to know before you go home on Wednesday; Coop Bank raises a rate, two positive surprises, commission pressure on Akl REAs, swap rates up again, NZD firms

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

MORTGAGE RATE CHANGES
No changes to report today, so far.

DEPOSIT RATE CHANGES
The Co-operative Bank raised their one year rate as a special to 3.50% 3.30%.

SURPRISE I
There were two positive economic surprises today. The first one (which makes the ASB rural economist look very good indeed) was a +11.4% jump in dairy auction prices, bolstered by a +19.8% jump in WMP prices. For a change, the futures market got the direction right, but for WMP but only signaled have the actual change. Today it took on board the much higher WMP prices, and added another +4% on top for good measure. So these markets are now suggesting there is more upside.

SURPRISE II
The other positive surprise was the growth in employment in the September quarter. The workforce is now a remarkable +6.1% larger than a year ago and the unemployment rate is down to 4.9% seasonally adjusted (actually, in raw numbers it is down to 4.8%). A part of these quite significant changes relate to the growth in the numbers of over 65s still working (I am one). There are now 157,000 over 65s working in the labour force, or 6.3% of it. Five years ago there were 104,000 (4.8%), ten years ago there were just 61,000 (2.8%). This is one of a number of changes driving our participation rate to over 70%, an all-time high. (Australia's participation rate is 64.5%, the same rate in the US is 62.9%.) So far, wage inflation is pretty tame, but the employer stress signs are there it will pick up soon.

COMMISSION STARVE?
Low sales volumes are hitting real estate agency commissions in Auckland and Waikato/BoP. The slow start to spring will have crimped real estate agency commissions in the upper North Island but the good times still roll on around the rest of the country.

A RATE HIKE FROM THE PEOPLES' BANK
I will let this one stand on its own. "Effective 1 December 2016, the cash advance interest rate for the Kiwibank Low Rate Mastercard, the Kiwibank Mastercard Zero and the Kiwibank Mastercard Gold will increase from 19.95% p.a. to 22.95% p.a."

NO SIGN YET
The RBNZ's survey of inflation expectations shows the two year inflation expectation is now +1.68%. This up minorly from 1.65% in the last survey, but down from 1.85% a year ago. However, more professional analysts are seeing the inflation rate past its bottom.

SLOWDOWN BITES
Although last week was a short, holiday-truncated one and the housing loan approvals data reflects that, it also reveals the continuing softness in this market. The growth (change) in the number and value of approvals continues to fall. On a 12 month basis, the volume of approvals is growing at its slowest rate in 58 weeks, and on a value basis it is at its slowest growth rate in 71 weeks.

WHOLESALE RATES UP
The sharp rises in wholesale swap rates resumed today. They are up +3 and +4 bps across the board. The cumulative impact of these raises is now starting to become significant. The 2 year rate is up +20 bps, the five year is up +35 bps and the 10 year is up +45 bps since the beginning of October. The 90-day bank bill is unchanged at 2.13%. We have also seen +2 bps yield gains (price drops) in NZGBs. As an aside, although we are seeing swap rates rise today, these same rates are falling in Australia, and quite sharply. UST rates are also falling.

NZ DOLLAR UP
Today's good news has pumped up the NZD somewhat. It is now at 72.2 USc. On the cross rates, it is trading at 94.6 AUc, and is at 65.3 euro cents. The TWI-5 is up at 76.1. And it is worth noting we are at a new all-time record high against the British pound, now over 59 UKp. 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
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End of day UTC
Source: CoinDesk

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3 Comments

The RBNZ's survey of inflation expectations shows the two year inflation expectation is now +1.68%. This up minorly from 1.65% in the last survey, but down from 1.85% a year ago. However, more professional analysts are seeing the inflation rate past its bottom.

While the NZGS 15/03/2019s trade around 2.065% there is not much enthusiasm to price forward real economic growth premium. In fact current pricing certainly defies the inflation expectation forecast.

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Why are the migrants not buying Auckland homes . Trade me listings going up .

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Penultimate weekly release of RBNZ C16 mortgage approval figures which is a shame. Even if it's not a perfect indicator it is one of the few that is forward looking.

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