A review of things you need to know before you go home on Wednesday; Westpac ups floating rate too, QV sees house price uncertainty, unsold house stocks grow, Moody's downgrades Kiwibank, swaps up & steeper

A review of things you need to know before you go home on Wednesday; Westpac ups floating rate too, QV sees house price uncertainty, unsold house stocks grow, Moody's downgrades Kiwibank, swaps up & steeper

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

MORTGAGE RATE CHANGES
Westpac has followed BNZ and raised its floating rate. Westpac's rise is +10 bps to 5.75%.

DEPOSIT RATE CHANGES
ASB has ended its 90 day 3.15% 'special', reverting to 2.75% for that term. FE Investments have cut their 18 month rate and raised their 2 year rate.

GROWING UNCERTAINTY
QV says average property values are now falling on Auckland's North Shore, Waitakere and its central suburbs. Prices are also falling in parts of Hamilton and Canterbury. QV says it sees growing uncertainty in which direction house prices are now heading.

DOWNGRADE
Moody's credit ratings agency dropped Kiwibank's long term rating one step to A1 from Aa3 following the state controlled bank's ownership shuffle.

RATINGS CONCERNS WIDEN
In a related item, S&P Global Ratings says increasing economic imbalances, pressures on sovereign credit quality, and potential weakening of sovereign supportiveness are the main threats to the credit quality of Australian banks and finance companies.

A RISING STOCK
Inventory of houses for sale is rising nationally. According to realestate.co.nz, there are now 16.3 weeks of inventory at the February sales rate. In Auckland, it is up to 17.8 weeks. In Wellington it is 8.7 weeks. In Hamilton it is now 14.5 weeks and Tauranga it is 15.1 weeks. Christchurch is now up to 18.7 weeks and Dunedin 12.2 weeks. Inventories fell in the Hawkes Bay, Manawatu and Nelson.

(MUCH) BETTER TERMS OF TRADE
A rise in milk powder prices and a fall in prices of consumer electronics helped drive the terms of trade for goods up +5.7% in the December 2016 quarter, Statistics New Zealand said today. The lift in the terms of trade in the December 2016 quarter was the largest quarterly increase since the September 2013 quarter. The terms of trade for services also improved. Better quality goods and services are reflected as price falls. These price falls can be seen in the prices households pay for telecommunication and computing equipment, as measured by the consumers price index. The latest consumers price index shows that telecommunication equipment fell -89% and computing equipment fell -68% over the last 10 years.

(MUCH) BETTER AU GROWTH
Continuing the (much) better theme, the Aussie GDP growth performance for the December 2016 year came in far better than markets were expecting. They were looking out for a +2.0% growth and they god +2.4% pa. The growth was broad-based.

AUSSIE HOUSE PRICE SURGE RESUMES
CoreLogic says Aussie capital city house prices have grown at their strongest annual rate in almost seven years. Sydney dwelling prices grew +18.4% in the past year. Melbourne is up +13.1% on the same basis.

NEW GIG
Fisher Funds has appointed Bruce McLachlan as chief executive to replace Carmel Fisher who will retire from her executive role. McLachlan has been CEO at The Co-operative Bank for the past four years. Fisher Funds is a business essentially controlled by TSB Bank as its biggest shareholder at 49%. The Co-operative Bank says its CFO Gareth Fleming will be interim CEO while the search for the new CEO is finalised.

WHOLESALE RATES HIGHER
New Zealand wholesale swap rates rose and steepened today even though Wall Street was pretty much unchanged overnight. But after Trump speech highlights were leaked, the benchmark UST10 yr yield rose sharply, and is now at 2.40%. Local swap rates are up +2 bps for two years, +4 bps for five years, and +5 bps for ten years. The 90 day bank bill rate is unchanged at 2.00%.

NZ DOLLAR SLIPS
That same Trump move has seen the USD strengthen slightly. The NZD has slipped slightly to 71.5 USc. On the cross rates we are at 93.4 AUc, and at 67.7 euro cents. The TWI-5 index is now at 77.1. Check our real-time charts here.

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13 Comments

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The S&P statement seems like a prelude to a credit rating downgrade for the Australian banks.

The last time that REINZ's Auckland's inventory was higher than New Zealand's inventory for sale was all the way back in 2008. Nice chart Interest.co. Look forward to Barfoots churn rate this week, as there is shadow inventory backing up.

Continuing the (much) better theme, the Aussie GDP growth performance for the December 2016 year came in far better than markets were expecting. They were looking out for a +2.0% growth and they god +2.4% pa. The growth was broad-based.

Hmmmm...

Inner districts of Sydney drove almost a quarter of Australia’s expansion last fiscal year, underscoring the city’s pre-eminent position in the nation’s economy. Read more

Aussie housing is clearly bubblicious, but the Aussie economy could be about to heat up. The AUD fell 25% or more and the benefit of that is starting to kick in. Personally I'm warming to AUD and cooling on USD, (probably prematurely).

Prime Minister Shinzo Abe’s goal of reflating the Japanese economy has been dealt a setback as pay rises remain off the table at two of the nation’s biggest banks for a second straight year.

Labor unions at Bank of Tokyo-Mitsubishi UFJ Ltd. and Mizuho Financial Group Inc. don’t intend to ask for an increase in base wages for the year starting April, according to people with knowledge of the matter. Mizuho’s union reached the decision after taking into account the pressure on banks’ profits from factors including negative interest rates, according to one of the people. Read more

Moving to the US.

Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores.

This is, of course, a trend already clearly defined in broader data such as retail sales. What is at issue, and what may be of use from Target’s data, is the possible driving factor behind “rapidly-changing” consumers. There is the possibility of simple randomness, a sort of unseen, unknowable tipping point for where online shopping almost all-at-once became the dominant trend. I find that an unlikely case.

Instead, Target’s quarterly detail includes transaction level data that points in the direction of something else. Comparable sales are the product of the number of transactions in each store as well as the average amount spent on each transaction. The latter is further broken down by the average price of each transaction as well as the number of items in it.

The data provided by Target shows an unmistakable inverse relationship (the 4-quarter average of these variables, below, is perfectly clear) between the average unit price and the number of items a customer will buy during a single transaction. While the relationship could be defined by several factors, it is quite reasonable to submit that lack of wage growth would be perhaps the defining variable. In other words, as the average price rises “too much” it forces consumers (at least at Target) to buy fewer items in a single purchase, a limitation that is very familiar to anyone on a discretionary budget that doesn’t expand. Read more

Barfoots auctions today:
37 lots and only 14 sold.
A success rate of 38% under the hammer.
Isn't this supposed to be the busy time of year.
hmmm.....

Yeah now is historically by far the strongest sales period..
So yeah not looking good for the RE sector

As he said lat week. They shipped the jobs off shore and then used euro dollar debt to fund the credit required to buy stuff once the wages were gone. Now euro dollar contraction is a nightmare for, maceys, j c penny, sports authority,kohls etc

Homes are selling quicker in Invercargill than they are in Auckland. But , but...

Predatory lending by banks comes under the Aussie microscope.
If The Banks lose this one, THEY will be liable for any shortfall in lending that a customer cannot repay. Those with a mortgage that can show that they wouldn't have otherwise been able to take out the loan will be able to walk away, without recourse. Lots at stake with this one - for ALL lenders!
"ASIC alleges Westpac breached responsible mortgage lending laws"
http://www.afr.com/business/banking-and-finance/financial-services/asic-...

And we wonder why DTI measures are a no go in New Zealand. We have idiot accountants saying that the average mortgage in Auckland already exceeds 10x income , not understanding that most bank mortgage calculators come up short on that metric, we have mortgage brokers , whose only purpose in life is to garner a commission, and we have financial innovation , in the form of interest only loans, that dominate Auckland. Everything works on the way up.

Rising inventory and rising interest rates. Interesting to see how it plays out.

Westpac taken to court over lending

Westpac failed to properly assess whether potential borrowers could repay their home loans, ASIC has alleged.