Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Housing NZ Corporation today cut its five year fixed rate by -24 bps, taking it from 5.99% down to 5.75%.
DEPOSIT RATE CHANGES
No changes to report here either.
MORE PRODUCTIVE?
The NZ PMI scores for October show no sign of sagging, up as a raw score at 59.4 and the highest October since 2014. As BNZ points out, this survey is about the "nuts and bolts" of manufacturing, not sentiment. But one indicator might be worth watching in the future; the employment category was very weak again in October, for the second straight month. True its not contracting, but it is not expanding either as the overall activity indicators are. New Zealand manufacturers seem to be able to get more output without increasing labour inputs. That is a good sign for productivity, even if it isn't for jobs.
PRODUCERS SEE SHARPLY HIGHER PRICES
Producers managed to raise prices at the fastest pace since March 2009 in the September 2017 quarter according to data out from Statistics NZ today. That showed an annual rise of +5.3%. On the inputs side, producers faced a +4.3% rise, the fastest for these costs since December 2011. Statistics NZ noted fast rises for electricity costs firms are paying.
VIRTUALLY NO FARM COST INFLATION
On farms, they are facing very little inflationary pressure. The Farm Expense Price index out for September today has all costs other than livestock rising just +0.8% over the year. The fastest rises are for horticulture units, up +2.3% whereas dairy is up just +0.1% and Sheep & beef farms are up just +1.0% in the year.
THOSE PESKY ADMIN COSTS
And while we are at it, it is worth checking out how costs for a number of key admin functions for businesses generally are tracking. For example, accounting fees and legal costs are rising at the rate of +4.5% pa, while road freight is up +2.2% pa and seafreight is up +8.8% pa. And believe it or not, "finance service charges" are down -9.3% yaer-on-year. Other costs are included in our chart too.
RMOs - NEW FUNDING INSTRUMENT FOR NZ MORTGAGES?
The RBNZ today announced a consultation on new mortgage bond standards. When the Reserve Bank lends to banks and other counterparties it does so against ‘eligible collateral’ (usually lower risk financial assets). Mortgage Bonds are a key form of eligible collateral in many countries with the Reserve Bank first accepting them in response to the global financial crisis when its lending to the banking system increased significantly. In New Zealand mortgage bonds are not generally traded. The new standard may change that. The RBNZ is keen because what they propose "will improve the risk position of the Reserve Bank by promoting the use of higher quality and potentially more liquid, mortgage bonds as collateral in the Bank’s lending operations; support New Zealand market lenders by creating an additional funding instrument for residential mortgages; and promote a deeper capital market through the availability of simple, comparable and transparent mortgage bond instruments."
NO GROWTH
Data out in Australia today shows that vehicle sales are essentially unchanged both for October compared with the same month a year ago (+2.6), and for the year to October compared with the equivalent previous year +(0.3%). Holding these numbers positive are the growth in commercial vehicle sales. But passenger car sales atre down -3.8% and -6.4% respectively for those periods, while SUVs are up just +1.2% and +3.8% respectively. This Aussie data contrasts sharply with the Kiwi data which grew +10.5% year on year in the 12 months to October.
TOO TOUGH
In the past two days, both Pakistan and Nepal have cancelled some key Chinese infrastructure projects, worth more than US$16 bln, principally because they couldn't accept the tough conditions China wanted to impose, including ownership and control requirements.
WHOLESALE RATES UNCHANGED
Swap rates rose +1 and +2 bps across the board, 2 to 10 years. But it is not much of a bounce in the context of the past week's falls. The 90 day bank bill rate is unchanged at 1.94%.
NZ DOLLAR STABLE, BITCOIN RISES
The NZ dollar is slipped and then rose, but just back to where it was at this time yesterday. It is back at 68.6 USc. On the cross rates we are at 90.5 AUc and at 58.2 euro cents. The TWI-5 is still at 71.7. The bitcoin price back up in the clouds, hitting a record US$7,998 at 11am today. It is still high, currently at US$7,882 and up +10% on the day.
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9 Comments
The RBNZ today announced a consultation on new mortgage bond standards. When the Reserve Bank lends to banks and other counterparties it does so against ‘eligible collateral’ (usually lower risk financial assets).
Does one need to study the recent IMF Contingency Planning and Crisis Management Framework
on New Zealand document?
This process has helped to transform hard to sell (illiquid) individual mortgage loans into a ‘liquidity substitute’ that can be pledged to obtain cash from the Reserve Bank. If a counterparty that had pledged mortgage bonds as eligible collateral were to default, the Reserve Bank would be secured through these loans and would eventually be paid back directly by the mortgage borrowers.
these loans and would eventually be paid back directly by the mortgage borrowers.
Big assumption in times of real stress....The Borrowers may have already gone broke....
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