Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Kiwibank brought out a new lower 1-year 'special' rate, but a higher 3-year 'special', while also tweaking its 4 and 5-year rates higher. The 1-year special rate, dropping 10 basis points to 4.19%, is the lowest carded, or advertised, 1-year rate among any of the large banks.
AMP also brought out a 4.19% 1-year rate and also took 3 and 5 year terms higher. See all banks' carded, or advertised, home loan rates here.
DEPOSIT RATE CHANGES
No changes to report.
CHINA WEIGHS IN ON NZ CURRENCY
The Reserve Bank has released the new 'weightings' for the next year for the Trade Weighted Index, which measures the overall strength of the New Zealand currency against our major trading partners. These days the TWI includes as many as 17 currencies. A key thing to note about the latest weightings is the continuing rise in significance of the Chinese currency. It continues to occupy second place behind the Australian currency but has closed the gap, making up not far short of 20% of the TWI now versus 18% a year ago, while the Aussie dollar drifts down to a bit over 20.5% from nearly 22%. The American currency remains the third most important with a just under 14% weighting, down from 14.5%. These currencies, along with the fourth-placed euro, make up around two thirds of the TWI weightings. The British pound accounts for little more than 4.5% now.
A LIFE LESS TAXING
Revenue Minister Michael Woodhouse and Small Business Minister Craig Foss today welcomed a survey showing small businesses are continuing to spend less time on tax compliance. The Inland Revenue survey shows the median time SMEs spent within their business on tax compliance was 27 hours, 25% less than in 2013, while the cost of doing the work had reduced from $2076 three years ago to $1573, down by 24%.
MINISTER HEADS TO APEC
Trade Minister Todd McClay travels to Peru today for the annual Asia-Pacific Economic Cooperation (APEC) Ministerial Meeting in Lima where he expects to hold talks on RCEP, FTAAP and TPP. McClay joins trade and foreign ministers from 20 other APEC economies accounting for half of global trade and 60% of world GDP. The APEC Ministerial Meeting comes ahead of the APEC Economic Leaders’ Meeting on November 19 and 20 November, which Prime Minister John Key will attend, accompanied by McClay. APEC brings together: Australia, Brunei Darussalam, Canada, Chile, the People’s Republic of China, Hong Kong China, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russian Federation, Singapore, Chinese Taipei, Thailand, the United States and Viet Nam.
WHIP IT UP
With dairy prices having held on overnight to the massive gains seen at the global auction two weeks ago, economists are seeing an upgrade in milk price forecast coming sooner rather than later from Fonterra. A price ultimately in excess of $6 per kilogram of milk solids is now seen as possible - something that was seen as laughable four months ago when the Whole Milk Powder price was about 40% lower than it is now.
ASB HAS STRONG QUARTER
ASB has recorded a strong September quarter, with net interest margin 2.28%, up one basis point from the equivalent quarter last year and cost-to-income ratio down 290 basis points year-on-year at 34.6%. Cost of funds was 3.09% for the quarter, versus 3.79% in the September quarter last year, and 3.14% in the June quarter this year. ASB grew its residential mortgage book by a net $1.458 billion, or 3%, in the three months from June 30 to September 30, to $49.249 billion. The percentage growth rate was comfortably above the 2.3% growth recorded by housing loans in Reserve Bank sector credit figures for the September quarter, and comes after ASB grew home loans by a net $1.324 billion, or 2.9%, in the June quarter.
BONDS DOWN, SWAPS UP
NZ bond yields opened broadly lower with bigger falls in the longer dated bonds, reflecting similar moves in the US market. While the bonds were down across the board NZ Swap rates are fractionally higher. Markets are currently pricing in 90% chance of a Fed rate hike in December. Meanwhile, according to BNZ the local market prices little chance of any monetary policy response to the ongoing impact of recent central NZ earthquakes. The total value of nominal NZ govt bonds on issue fell from $81.8bln to $81.2 bln last month while the percentage of foreign owners of our nominal (excludes inflation indexed bonds) government bonds currently sits at 67% up from 65% last month. The 90-day bank bill is down -2 bp at 2.05%.
CHOPPY TRADE IN NZ DOLLAR
The NZD was sold down in the early hours of the morning on the back of positive US economic data only to have the Kiwi bounce back on another positive Fonterra dairy auction. After the initial activity the NZD/USD has been very choppy and reasonably range bound. As we write NZD is trending higher against the traditional safe havens of USD and JPY. The Kiwi dollar is still down slightly over the course of the day against the US at 70.87 USc. On the cross rates, it is trading at 93.91 AUc, and is at a shade under 66.1 euro cents. The TWI-5 is now at 75.87, slightly down from yesterday at the same time. Check our real-time charts here.
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3 Comments
Germany’s Bundesbank delivered an ultimatum to other major banking powers including the U.S. that it will walk away from talks on revamping global capital rules unless its key demands are met.
Andreas Dombret, a member of the Bundesbank Executive Board, said on Tuesday that Germany won’t accept a deal “at any price.” He laid out a series of demands, including two “essential areas of action” for talks later this month in the Basel Committee on Banking Supervision, the international standard-setter. Both will probably be met with skepticism in Washington.
Dombret said one “essential” point for Germany is the preservation of the risk-sensitive framework, in particular allowing banks to use their own internal models to measure credit risk for determining capital requirements.
Europe and Japan support the internal-model approach, while the U.S. has said regulators should consider discarding it because it creates the potential for banks to game the rules.
A second priority for Germany is to prevent the introduction of a so-called output floor in the final Basel package, Dombret said. This floor would cap the benefit banks can gain by measuring asset risk using their own statistical models instead of the standardized formula set by regulators.
“In theory, it acts as a way of putting a stop to the frivolous calculation exercises associated with using internal models,” he said. “In practice, however, it works against the focus on risk. This is something we’re not prepared to accept. We have no interest in banks taking on additional unwanted risks. Basel III has developed other instruments, such as the leverage ratio, to fight against risks of modelling and misuse.”
The FDIC’s Hoenig said last week that the “mere fact that risk-based approaches must always be constrained and negotiated by regulators -- through the complex processes of flooring inputs and outputs, for example -- only underscores the necessity of a simple, robust, and uncompromised leverage ratio.” Read more
I guess there is no question which way the four Australian banks are leaning?
Unsecured OBR prepositioned bank creditors certainly need representation to demand the RBNZ publicly outline how these challenges to BIS policy guidelines influence the output of risk calculation models in respect of interest rate returns.
Oops.
For the first time since February, 5Y JGB yields have spiked above BOJ policy rates (to -9.5bps), but despite a policy of maintaining 10Y yields and attempting to steepen the yield curve, it appears Kuroda and his cronies have lost control as the short-end of the Japanese bond market is collapsing. Read more
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