Here's my summary of the key events overnight that affect New Zealand, with news the Aussies are now seriously concerned about their debt-to-income relationship.
But first, in the US the employment gains keep coming in the US with private sector payrolls rising by a healthy +263,000 in March according to the pre-cursor ADP Employment Report. This was much better than analysts were expecting, and markets are impressed today. Markets are now expecting Saturday's non-farm payroll report to outperform as well. Analysts had expected a +177,000 gain then, but they will no doubt be revising that forecast as we speak.
However, it is not all roses. There were two indexes out overnight (here and here) that measure the expansion of the giant US services sector and both show the expansion slowing somewhat.
And just as we publish, Wall Street has suddenly turned negative, maybe on some concerns that show though in the Fed minutes that markets are getting ahead of themselves.
These US Fed minutes were released a few minutes ago and that confirmed they will likely begin shrinking their US$4.5 tln portfolio of Treasury and mortgage securities later this year, though they remained undecided on some important tactical questions, such as how quickly to reduce the holdings and to what level.
In Australia, as banks turn themselves into mortgage banks (or what we used to know as building societies), their regulator has decided to push ahead with tougher capital rules. Their goal is to make the banks' capital base "unquestionably strong' from a position now where it is not. APRA has grown frustrated with the endless delays out of Basel on the matter and has decided to push ahead on its own. Shareholders are going to have much more at risk, it seems, and borrowers may pay the price with harder access to loans and possibly higher interest rates. There is little doubt that this new aggressive stance will flow over to New Zealand.
In Australia, their household debt-to-income ratio is pushing 190% (188.7%) in RBA data released as at December 31, 2016. That compares with the New Zealand level of 167.9% and rising at only half the rate of the Aussies since the start of the GFC.
In New York, the UST 10yr yield tried to find its feet earlier but is slipping lower to 2.33%. And our local 2-10 wholesale rate curve is now its flattest in ten weeks.
Oil prices are little changed US$51 for the US benchmark, while the Brent benchmark is now over US$54.50 a barrel.
The gold price is lower today by -US$6 to US$1,248/oz.
And the New Zealand dollar starts today lower too, at 69.5 USc. On the cross rates the Kiwi dollar is down to 91.8 AU¢ and against the euro is at 65.3 euro cents. The NZ TWI-5 index is at 74.7 and that is now its lowest level in almost six months.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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In Australia, as banks turn themselves into mortgage banks (or what we used to know as building societies)
Building Societies were originally set up as non-profit co-operatives or mutual societies whose members were both savers and borrowers. These issued mortgages enabling low paid workers to borrow to buy a house and savers to earn interest on their deposits. They played an active role and were considered to be largely beneficial to their communities.
Now, the banks dominate the mortgage market and with a few keystrokes conjure up new money to drive a housing ponzi - removing the opportunity for low paid workers to buy their own home and skimming a handsome profit in the process.
That's progress!
Is it more than that.
Its the Australian virus way of thinking that that seems a bit Kangaroo Edward IMHO.
EG 1.
The company, which has 440 petrol outlets, is the latest to become embroiled in wage fraud issues. It follows scandals at Domino's, Caltex, Pizza Hut and 7-Eleven.
http://www.smh.com.au/business/retail/united-petroleum-busted-by-fair-w…
EG 2.
Hats off to Westpac CEO Brian Hartzer for the use of understatement by declaring Australian Prudential Regulation Authority's (APRA) alleged crackdown on real estate investors wouldn't have "any particular profitability impact".
Boosting profits by a few billion tends not to hurt. And higher profits tend to lead to higher bonuses. APRA is playing Santa Claus for bank CEOs
http://www.smh.com.au/business/banking-and-finance/apra-plays-santa-cla…
its a health issue!
Put it this way, you have a complete mess, the world is going to end. How many times do you hear:
"Thank god, its OK, the Australian is here and so its all sorted!"
- Hugh Jackman is counted as an American Immigrant.
"The Reserve Bank has a challenge because it wants interest rates to stay low, so that consumers and businesses are continuing to be stimulated, but they don't want that to turn into too much debt on the housing side."
LOL - utter and complete utopian nonsense - the RBA governor needs to get a job with realistic expectations.
Phew, that's a relief; our household debt-to-income ratio is only 167.9%, which beats the Aussies at 188.7%. Presumably 50% would be really good.
On a related note the RBNZ have produced an unusually clear table S10, which shows the bank balance sheets in simple clear terms. This is unheard of. No obfuscation, no attempt to disguise that they have a mere 7.8% equity in their business. The RBA and the RBNZ must be feeling confident that the banks are strong enough that light can be shone into their darkest regions. Well done them.
http://www.rbnz.govt.nz/statistics/s10-banks-balance-sheet
Elon Musk assures me Debt to income ratios will not be relevant on Mars ...
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/…
However, it is not all roses. There were two indexes out overnight (here and here) that measure the expansion of the giant US services sector and both show the expansion slowing somewhat.
Yes indeed.
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