What happened Wednesday

A review of things you need to know before you go home Wednesday; TSB decreases deposit rates; overseas trade review; rental yields; ETS changes; tertiary education review; new trains; rates rise; dollar stable

26th Jul 17, 3:58pm by Suraj Varma

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

MORTGAGE RATE CHANGES
No changes to report today.

DEPOSIT RATE CHANGES
TSB has reduced its term deposit rates. The 1 month rate has fallen by -25 bps to 1.25%, 9 months by -5 bps to 3.45% and 12 months by -5 bps to 3.35%.

OVERSEAS TRADE
Exports rose by +$454 mln in June 2017 to $4.7 bln, when compared with June 2016. Imports, on the other hand, rose by +$319 mln to $4.5 bln. The growth in exports was led by milk powder, butter and cheese, which made up $1.2 bln of exports, and the value of dairy exports to China was up +102%. Growth in imports was led by cars, which topped $500 mln for the first time. This was driven by 2,566 more cars being imported in June 2017, when compared with June 2016. The trade balance for the June 2017 month was +$242 mln, the fourth consecutive surplus. The annual trade deficit for twelve months ending June 2017 was -$3.7 bln, down from -$3.8 bln for the twelve months ending May 2017.

RENTAL YIELDS
Interest.co.nz's Rental Yield Indicator, which compares the relative attractiveness of residential investment property in 56 locations throughout the country shows that yields are up in some areas and down in others, with some movements being quite large. Auckland has had mixed results, with yields rising in Manukau due to declining property prices, falling in Avondale due to rising property prices and also rising in some areas in West Auckland. There was similar volatility in other parts of the country.

EMISSION TRADING SCHEME CHANGES
Climate Change Minister Paula Bennett has announced a raft of changes to the Emissions Trading Scheme (ETS) that will help New Zealand meet its 2030 emissions reduction target. The changes include auctioning of ETS units, limiting participants use of international units, development of a different price ceiling to eventually replace the current $25 fixed price option and coordinating decisions on supply settings in the ETS. These changes will make the NZ ETS more similar to schemes in other countries. While these changes have been agreed in principle, there will be further work to determine how they are implemented over the next 12 to 18 months.

TERTIARY EDUCATION REVIEW
The Government has responded to the Productivity Commission's report of New Models for Tertiary Education released March 2017. The Government's work will focus in the key areas of creating a more student centred system, meeting the needs of the industry through relevant and responsive teaching, improving performance across the system and encouraging new models and providers. The Government has decided not to accept the recommendation of reinstating interest on student loans.

GREEN BOND ISSUE COMING IN NZ MARKET

International Finance Corporation, a member of the World Bank Group with a triple A credit rating, has hired ANZ and BNZ to issue a 10-year green Kauri bond on its behalf. The banks say the transaction is expected to follow in the near future, subject to market conditions. It would be the first such bond issue in the NZ market.

NEW TRAINS
Auckland Council has agreed to purchase 17 new electric trains for a combined total of $207 mln. This comes as a result of increased patronage of the rail network and desire to increase peak capacity, which will be reached in 2019. Some of the trains will be used to replace diesel trains between Papakura and Pukekohe.

ELECTRIC CARS
Government's 2017 electric car target has been achieved 5 months early with around 200 electric vehicles registering each month. There are 4,027 electric vehicles registered at the moment and if registrations continue to increase at the same rate, the Government will be on track to meet its target of 64,000 electric vehicles by 2021.

CO-OP BANK RECRUITS NZX'S CFO
The Co-operative Bank has appointed Bevan Miller as its new chief financial officer succeeding the long serving Gareth Fleming. Miller, currently CFO at NZX, joins the bank on November 1 subject to Reserve Bank approval. Ellen Cheyne, The Co-operative Bank's head of finance, will act as interim CFO until November.

AUSTRALIAN INFLATION
The CPI in Australia rose +0.2% in the June 2017 quarter, up +1.9% y-o-y. The most significant rises were medical and hospital services (+4.1%), new dwellings for owner occupiers (+0.9%) and tobacco (+1.0%). Domestic holiday travel and accommodation (-3.2%) and automotive fuel (-2.5%) were the categories that declined the most. Cyclone Debbie also caused strong price rises in selected fruits and vegetables.

OBAMACARE
A plan to repeal Obamacare that Republican senators have been working on for the last few months has failed to get the required 60 votes to proceed. The vote was 43 in favour and 57 against.

WHOLESALE RATES RISE
Wholesale swap rates are higher and the curve is steeper today. The 2 year rate was up +1 bps, 5 year was up +4 bps and 10 year up +6 bps. The 90 day bank bill rate is holding at the lower 1.93% level.

NZ DOLLAR STABLE
The Kiwi dollar is at the same level as yesterday, at 74.3 USc. On the cross rates we are stable at 94.0 AUc and at 63.8 euro cents. The TWI-5 is at 77.3. Bitcoin has fallen from this time yesterday, no trading at US$2,566.

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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8 Comments

by James007 | 26th Jul 17, 4:22pm 1501042950

Green Bonds, Electric Trains, Electric Cars, - now we just need 100% of our energy from renewables!!

I'm voting Green.

by jh | 26th Jul 17, 5:17pm 1501046274

My friend got a redundancy notice from a kitchen pac factory in Christchurch. He was told orders (or business or ?) is down 24%. Unfortunately he has just split from his missus and bought a Christchurch Over Priced ["It's a Sign of Success"] house.

by Stephen Hulme | 26th Jul 17, 5:26pm 1501046776

The Bank of Japan’s two new board members said it’s too early to talk about any exit from the current monetary stimulus program because inflation is far below target, echoing the view of Governor Haruhiko Kuroda.

“Before any exit strategy we must think about how to bring inflation to the 2 percent price target in a stable manner,” Goushi Kataoka, 44, an economist and a known reflationist, said in his inaugural press conference on Tuesday. The other new member, 63-year-old former banker Hitoshi Suzuki, said it’s “somewhat risky” to start discussing an exit when price growth is far from the goal.

The pair joined the board on July 24, less than a week after the BOJ pushed back its forecast for reaching 2 percent, reinforcing the view that the central bank may be years behind its global peers in winding back its stimulus program. The most recent reading for core inflation in Japan was just 0.4 percent.

During their five-year terms, the BOJ is likely to face critical questions ranging from how it can meet the inflation target to how it will manage its expanding balance sheet, which is already about the same size of the economy. Read more

Hmmmm....

QQE was believed to be such madness. It would make the scale of trillions seem like rounding errors, where yen would now be counted in not the tens of trillions but hundreds. It would surely show who was boss in the monetary realm, and the boss wasn’t going to accept anything less than inflationary compliance.

BoJ chief Haruhiko Kuroda sure felt that way. In announcing his new credible irresponsibility on April 4, 2013, he beamed for the assembled cameras and declared, “This is an unprecedented degree of monetary easing. I’m confident that all necessary measures to achieve 2% inflation in two years were taken today.”

It was unprecedented for sure, but unprecedented what? The unprecedented program was altered at the end of October 2014, suggesting that though the Bank of Japan’s asset side of its balance sheet might get to a quadrillion it still wasn’t moving that way quite fast enough. Still inflation (CPI) in Japan went right back to zero, even negative again in 2015 and 2016.

In its latest meeting now thirteen quarters into QQE altered several times more (to add both negative interest rates early last year and now yield curve control later), the Bank of Japan once again has revised its inflation forecast. Initially, as Kuroda had said, the central bank allowed two years of irresponsibility to achieve a 2% CPI – and not just an occasional monthly print at or above 2%, but QQE was meant to continue until inflation stayed there in a show of seriously reckless conduct. Read more

Inexplicable nonsense!!!!!!!

by Kate | 26th Jul 17, 6:53pm 1501051990

Central bankers have acted the prospective bank robber who bursts into the bank instead brandishing a banana after forgetting to put on pants.

Great link.

by Stephen Hulme | 26th Jul 17, 5:32pm 1501047172

Growth in imports was led by cars, which topped $500 mln for the first time. This was driven by 2,566 more cars being imported in June 2017, when compared with June 2016.

Primarily, debt funded purchases?

Motor Trade Finance (MTF) revealed on 26 July that it is preparing to meet asset-backed securities (ABS) investors in a series of meetings in New Zealand in early August. An ABS transaction may follow, according to the meetings’ arrangers Commonwealth Bank of Australia and Westpac Institutional Bank. Read more

Securitising the stale customer IOUs to make room for new freshly fabricated bank credit drawdowns?

by Kate | 26th Jul 17, 6:58pm 1501052322

But of course. The Aussie banks are like pillars in Atlantis.

by solardb | 26th Jul 17, 6:36pm 1501051002

Repeal Obamacare 43 to 57 , thats a whipping, considering they thought they were only 1-2 republicans short of passing. I don't think Trump will last the year out.

by RickStrauss | 26th Jul 17, 7:13pm 1501053189

It was a stupid route to take, "repeal and replace".

Improve, sure.