What happened Tuesday

A review of things you need to know before you go home Tuesday; minor rate changes, Crown books positive, dairy auction shaky, Avondale to get spruce-up, Treasury sees positive outlook, swaps rise, NZD firms, Bitcoin slips

7th Nov 17, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes reported today. But NZCU South has reduced its secured personal loan rate by -1% to "from 9.95%", and increased their unsecured personal loan rate to "from 13.95%". They do not state an upper limit.

DEPOSIT RATE CHANGES
SBS Bank reduced its call count rate, and its potential bonus saver rate by -0.35%.

GOOD RESULT
The Crown's accounts for the three months to September have come in very much as budgeted, at a -NZ$90 mln deficit. A NZ$93 mln deficit was expected. That is on an OBEGAL basis. However, on a full basis (including accounting for the value changes in investment positions), those three months have delivered a +NZ$1.6 bln surplus, +NZ$1 bln more than forecast.

TENTERHOOKS
Markets are nervous about tomorrow's dairy auction, with the derivatives market suggesting a drop in WMP of -3.6%. If that is what happens, analysts will likely be reducing their payout forecasts.

SLOW RECOVERER
For the first time since the GFC, the ASX200 has broken above the 6000 index level, and up +0.8% on the day. It has slipped slightly below since. (The NZX50 index is now over 8000, and far above its pre-GFC 4,210 peak.)

NO CHANGES EXPECTED
The "first Tuesday in November" is not only Melbourne Cup day, it is also a day the RBA reviews its official interest rate. No change from the 1.50% rate is expected today. (The RBNZ is doing a review on Thursday, and no-one expects that 1.75% rate to change either.)

AN INTENSITY PROJECT
Auckland Council is to spend some big bucks sprucing up a major neighbourhood in Avondale. The train station, upgraded bus network and new cycleways will improve transport options, especially to Queen Street. The regeneration will incentivise developers to build residential neighbourhoods that offer a mix of housing types, including terraces and apartments. No cost indication was given.

BITCOIN INDUSTRY
MyBitcoinSaver, the New Zealand micro-savings platform for Bitcoin, has today announced the closing of a $400,000 round of seed funding.

A POSITIVE OUTLOOK
Treasury released its monthly economic indicator Report for October today. They see an easing in business activity and soft agricultural production pointing to slower growth in the September quarter than forecast in the Pre-election Update. But they also see stronger-than-forecast CPI inflation and rising terms of trade to support nominal growth, and labour market conditions that are stronger than expected. They say GDP growth is expected to pick up in the December quarter on the back of a better outlook for global growth.

WHOLESALE RATES RISE
Swap rates are higher today, up +2 bps for two years, up +3 bps for five years, and up +3 bps for ten years. The 90 day bank bill rate is unchanged at 1.94%.

NZ DOLLAR FIRMS, BITCOIN SLIPS
The NZ dollar is up marginally today at 69.4 USc. On the cross rates we are at 90.3 AUc and at 59.8 euro cents. The TWI-5 is up at 72.7. The bitcoin price is much lower today although it is not below $7,000 yet. Currently it is at US$7,067 and down -4.2% on the day, and down below NZ$10,200.

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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5 Comments

by Stephen Hulme | 7th Nov 17, 4:30pm 1510025403

Under pressure to trim borrowings, China’s companies have found a way to reduce their lofty debt burdens -- even if some of the risk remains.

Sales of perpetual notes -- long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature -- have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system. The bonds are so popular that issuance by non-bank firms has jumped to the equivalent of 433 billion yuan ($65 billion), more than seven times sales by companies in the U.S.

“Chinese issuers love perpetual bonds because they are under great pressure to deleverage,” said Wang Ying, a senior director at Fitch Ratings in Shanghai. “Sophisticated investors should do their homework and shouldn’t be misled by the numbers in accounting books.”

Accounting rules stipulate that companies can book perpetual bonds as equity, a serendipitous ruling for Chinese companies that are struggling to rein in their reliance on credit at the behest of regulators. But firms still have to pay interest on the notes and in China, companies typically redeem them within five years to avoid big jumps in coupon rates. [emphasis added] Read more

Old hands will remember Brierley Investments relied on convertible pref. issuance to maintain a respectable debt to equity ratio for accounting purposes, if not in reality.

by Stephen Hulme | 7th Nov 17, 7:45pm 1510037106

Three myths govern British politics today – and the investigation by the Guardian and others pulps each one. Take first the cliche that the public in the UK, the US and elsewhere are at war with their elites. This week proves that the opposite is true – it is the elites who have been fighting trench warfare against their publics, by denying them the revenues they need for their hospitals and schools. That war is one source of this current anti-elite mood. Read more

by linklater01 | 8th Nov 17, 10:29am 1510090175

Stephen,

I am currently reading "Democracy In Chains", The History of the Radical Right's Stealth Plan for America,by Nancy McLean. It's fascinating and not a little scary.

by RickStrauss | 8th Nov 17, 10:48am 1510091326

Another good read is Edward Luce's 'The Retreat of Western Liberalism', highlighting the hollowing out of the middle class through the siphoning of growth away from them and across international shores. So while growth may look okay, middle class folk aren't getting the benefit of it but are instead facing a declining standard of life.

Reactions such as Brexit and Trump are a reflection of folks' disbelief that those who claim to represent them really do any longer. Not they they end up getting anything better from the likes of Trump (who's basically doing the opposite of what he promised, in some ways), but the message has been passed to those in power that some folk have had enough.

I forget the name of the economist, but one suggested we're seeing you can have any two of the following three: Democracy, Globalisation, and Growth (domestic). But not all three.

This is where my concern has been growing with our politicians, that they're simply too naive and ideologically-driven in their view of globalisation and the approach other players are taking, to really deliver good long-term outcomes for NZers.

by Fritz | 8th Nov 17, 11:08am 1510092514

Yes. I grew up firmly middle class. My wife and I have jobs equivalent to, probably even superior to, my parents.
Yet the quality of life in terms of what we get for our skills and hard work is significantly less than what my parents were able to realise. It has to be said too, that although my parents worked hard and were very diligent, they hardly ever worked move than 40 hours per week. My wife and I consistently work 45-50 hours, so we are working harder and realising less.
Must track down that book.