What happened Thursday

A review of things you need to know before you go home Thursday; mortgage & savings rate changes, NZGB tender yields fall, tourist spending rises, more younger workers, river pollution problems, fewer realtors, NZD recovers

27th Apr 17, 4:01pm by David Chaston

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

MORTGAGE RATE CHANGES
NZCU South has raised its fixed rates for 1 and 2 years by +15 bps to 5.20% and 5.25% respectively. NZCU Baywide also raised rates for 12 and 18 month fixed terms. These rises are +11 bps and +5 bps to 5.10% and 5.30% respectively.

DEPOSIT RATE CHANGES
The Co-operative Bank trimmed -10 bps from its 6 month rate to 3.35%. Heartland Bank has made a range of changes to various savings accounts, mostly reducing these by -25 bps.

RESILIENCE
The Government target of getting net public debt down to 20% of GDP by 2020 looks like it will be achieved; it will be 24.3 this year. So they are resetting the target to be be down to 10-15% by 2025. The drive to reduce this benchmark is so that it has dry powder if an unexpected financial shock eventuates. And the last time we had two together (the GFC and the Christchurch earthquake).

DEBT ROLLS AT LOWER COSTS
The latest Government bond tender of NZ$150 mln 2037's received bids of NZ$495 mln at a coverage ratio of 3.3x. The average weighted yield this time is 3.55% which is -29 bps below the last tender in March. This yield has fallen in each of the previous four consecutive auctions for this maturity and was 4.065% in December 2016.

WHERE TOURISTS ARE SPENDING
Spending by tourists is growing strongly, especially in the regions. MBIE data shows that spending in Auckland is up +4% year-on-year. In Wellington it is +2% and Canterbury +3%. But the real growth is in places like Nelson, Tasman and the West Cast (up +10%), and Northland, Otago and Southland, all up +8%. Missing out however is Marlborough which only saw growth of +1% pa. Meanwhile, Air New Zealand has added to its inbound capacity to take advantage of the rising demand.

MORE WORKERS, GETTING YOUNGER
The working aged population (that is, the population aged 15 to 64) grew by +98.600 in the year to March, Statistics NZ is reporting. That is a +2.7% pa gain. The overall population grew by about the same in that period. If confirmed, that means our median age is still falling and may now be below 37. It peaked at 37.6 years in 2013. This data goes against the general narrative of an ageing population and has important implications for the sustainability of age-related benefits.

IMPORTANT WORK TO DO, AND A MIXED PICTURE
New Zealand’s rivers and lakes are under increasing pressure, according to the latest peer-reviewed national report from the Ministry for the Environment and Stats NZ about the state of fresh water. Our fresh water 2017, released today, measures the quality of our waterways; water quantity and flows; biodiversity in rivers and lakes; and the "cultural health" of fresh water (that is, what Maori think is the situation). One interesting aspect is that the problem is worst in urban environments but the negative effects impact on a greater number of rivers and lakes in rural, pastoral environments. The overall picture is that pollution from nitrates is increasing, from phosphates is decreasing, from E. coli is stable and that water clarity had been deteriorating but has improved over the past decade.

NUMBERS DECLINE
The number of 'active' real estate agents is now falling. It peaked in January, but by March the numbers had fallen by more than 200, half of them in Auckland. 14,506 individuals are licensed in this industry nationally, 6,695 in Auckland alone.

WHOLESALE RATES SLIP
Rates for terms of 2 years and longer are all down -1 bp today. The 90 day bank bill remains unchanged at 1.97%

NZ DOLLAR STEADIES
After being clobbered last night as part of the flight from commodity-based currencies, the Kiwi dollar has managed to claw a bit back today and now up to 69.1 USc. Against the AUD, we are slightly firmer at 92.3 AUc. Against the EUR we are slightly softer at 63.3 euro cents. The TWI-5 is still under under 74, and now at 73.8.

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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24 Comments

by Stephen Hulme | 27th Apr 17, 4:08pm 1493266083

The latest Government bond tender of NZ$150 mln 2037's received bids of NZ$495 mln at a coverage ratio of 3.3x. The average weighted yield this time is 3.55% which is -29 bps below the last tender in March.

The farewell trade to the reflation outlook has just been priced.

by David Chaston | 27th Apr 17, 4:38pm 1493267917

Personally, I doubt that. There are just too many funds mandated to find IG sovereign debt. That is separating the signals. Reflation is likely even while sovereign debt yields are falling. Those rates aren't signalling in the way they used to. Only when the US Fed and the ECB have wound back their liquidity (and Japan, China etc) will we again be able to trust the signaling from benchmark bonds. But that probably won't happen in my lifetime!

CDS spreads are the better signal of bond risk, I suspect.

by Kate | 27th Apr 17, 5:00pm 1493269259

But that probably won't happen in my lifetime!

Are you optimistic, David?

What I suspect won't happen in my lifetime is that the US Fed and the ECB (and others) ever "wind back their liquidity" - as that statement implies to me you expect some kind of a controlled maneuver.

A physical impossibility I think - instead the spring will snap.

by Stephen Hulme | 27th Apr 17, 5:28pm 1493270917

CDS spreads are the better signal of bond risk, I suspect.

I'll stick to the funded markets.

by Stephen Hulme | 27th Apr 17, 4:16pm 1493266605

N.Z. Plans Spending Splurge to Keep `Growing Like Sydney' Read more

Australia plans to label new debt to further grow Sydney. Read more

Gotta laugh.

Meanwhile, Earliest China Data Signal Economic Momentum Eased in April Read more

by Boatman | 27th Apr 17, 4:17pm 1493266634

Okay the first sign that things are really slowing is when the number real estate agents starts to fall

by Ralph | 27th Apr 17, 4:34pm 1493267680

I suspect it would be very wise to continue to pay down debt. Between the failure to deal with most of the structural drivers of the GFC and the opaque risk China represents the risk profile around us is not great.

by Cowpat | 27th Apr 17, 4:36pm 1493267811

6695 Auckland real estate agents have sold 5699 homes this year.

by notaneconomist | 27th Apr 17, 4:41pm 1493268099

One would think there would be a price war on RE Agents fees!

by David Chaston | 27th Apr 17, 4:46pm 1493268411

It is a bit tough and a distortion to include January in those three months. Everyone is allowed a month off. But over the past year, an average of 7,011 agents+offices (registered) sold 28,165 properties in Auckland*. So that is 4 each. However, as you know, this is a commission-only business and there are many, many people who keep their registration active but drop out for an extended period (for many reasons). A minority of agents do the majority of the transactions.

* the national numbers are 15,264 agents+offices doing 87,660 transactions in the year to March. Or an average of 5.7 each.

by Cowpat | 27th Apr 17, 5:19pm 1493270369

Last time I looked , January was a month of the year.

by zorba - old | 27th Apr 17, 10:34pm 1493289261

And only 11,000 listings to fight over..someone's cats won't be fed anytime soon.

by Boatman | 27th Apr 17, 4:41pm 1493268068

I see share prices continue to march upwards , the S&P at near record , Nasdaq breaches 6000 and Asian stocks continue their exuberance .............

by Stephen Hulme | 27th Apr 17, 4:55pm 1493268956

Dr. Bernanke noted that corporate earnings have risen at the same time; he believes corporate earnings will continue to grow and “catch up” to asset prices. Read more

by Cowpat | 27th Apr 17, 5:12pm 1493269974

I read Peri's comment re lending, so today I clicked on the Mike Pero add that keeps on popping up, to see how much I can borrow on their mortgage calculator . I'm 25 married to a 29 year old. We are in great stable jobs bang on the Auckland median income for a 'median ' couple $1605.90 net a week, little chance of large pay increases. We have saved $73000, not sure how. No kids, we will never have them, no student debt .No credit cards or other debt. One car with monthly repayments of $200, of course its a late model , one bike. Otherwise our average living costs amount to $14560 per annum just like Mike Pero says,we will give each other $140 per week , of course rates/insurance for home and car/maintenance will not be factored in , and being young and child free we will not need power, in the home, there will be no medical costs, holidays and we will do without the lattes or influence retail sales. . Petrol is rarely required to power the car , food is not always needed as we are both dieting. So to borrow the maximum that Mike Pero allows of $590,000 at 5.0 percent interest rates,and of course interest rates will not rise, we will pay $38268 for the next 30 years, almost 3x our annual outgoings, and we cannot a afford a lower quartile Auckland home. Of course ,if we could afford one we will win the lottery, what if we lie on our mortgage application. I see no future problems.

by Zachary Smith | 27th Apr 17, 6:33pm 1493274821

Cowpat, your figures don't mention anything about current housing costs. Do you live somewhere for free?

by Cowpat | 27th Apr 17, 7:10pm 1493277038

Of course this was all hypothetical . The calculator did not ask for current living costs, so I just punched in average annual living costs. I am going to assume that current costs , ie rent will have no bearing after purchase

by Zachary Smith | 27th Apr 17, 7:21pm 1493277673

Yes, I see. I guess the maximum mortgage interest costs are about the same or a little more than you currently pay in rent. That's not great I know. If you could get a mortgage that costs about the same as rent but covers capital and interest then that would be a sort of perfect situation I imagine, making buying a house preferable to renting.

by Cowpat | 27th Apr 17, 5:27pm 1493270852

Trade Me median asking rents for Auckland , surge 3 percent in past year.. As yields collapse ,smart investors continue to pile into the world's best property market.

by Zachary Smith | 27th Apr 17, 6:35pm 1493274952

A 3% increase in rents represents a "yields collapse"?? You mean capital gains collapse I presume.

by Cowpat | 27th Apr 17, 7:17pm 1493277433

Zach are you keeping me on my toes. . I was giving the Trade me figures a ' zerohedge' type headline . If median rent has only risen $15 y/y then the rental yield has fallen (collapsed) if Auckland median house prices have continued to rise, at a faster price

by Zachary Smith | 27th Apr 17, 7:26pm 1493277980

Oh I see. I always imagine "collapsed" as being like a collapsed lung or balloon. Anyway property owners never tie rental yield to current value of the property. They work on the original cost of the property. For me the rents have potentially gone up and my mortgage costs have gone down so it is anything but a collapse currently.

by Cowpat | 27th Apr 17, 7:42pm 1493278963

So recent investors have purchased at very low yields then? A collapse is like a burst balloon , similar to bubble bursting ,

by Stephen Hulme | 27th Apr 17, 5:45pm 1493271929

Japan isn’t alone with its productivity woes. In the U.S., poor productivity has has been a factor behind the reluctance of employers to fatten pay checks. The problem is more dire for Japan right now though because the drag it’s having on wages is undermining the central bank’s efforts to stoke much-needed inflation.

“In Japan, I think manufacturers are much more sensitive about productivity per hour than in the U.S. and Europe,” said Koichiro Imano, a former professor of economics at Gakushuin University in Tokyo. “They are very strict and so productivity in factories is very high. But it’s completely different for white-collar workers.”

In the offices ruled by Japan’s "salarymen," it’s putting in long hours that still counts with many bosses.

Men in Japan work some of the longest hours in the world, according the Organization for Economic Cooperation and Development, with the average male working 8.9 hours a day, the highest of 26 countries surveyed after Mexico. That compares with 7.9 hours in the U.S. and 7.3 hours in the U.K., according to the OECD. Read more

I suspect NZer's work too many unproductive hours Read more

So much for the service sector!!!!!