What happened Tuesday

A review of things you need to know before you go home on Tuesday; still no rate changes, rentals bolster car sales, home ownership rate falls, Chinese talk up rate hike, AU building consents jump, swaps up, NZD holds high

9th Jan 18, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes to report here.

TERM DEPOSIT RATE CHANGES
No changes here either.

RECORD HIGH
The tourism boom has seeded a spike in rental car sales which gave car sales figures a real boost in December, helping 2017 achieve all-time records. SUV sales won a massive 57% market share in December.

HOME OWNERSHIP RATE FALLING
The latest tenure estimates from Statistics NZ confirm the trend of falling home ownership rates and rising rentals. New Zealand's home ownership rate is now 62.8% as at December 2017, down from 64.8% five years ago and 66.3% ten years ago. Twenty five years ago (that is, a generation ago) it was 72.7%.

HIGHER RATES COMING
Chinese economists are talking up the likelihood of interest rate rises there this year. Now that officials and State media are adding to the talk, that makes it almost a certainty.

SURPRISING SPURT
There has been a surprisingly strong rise in building approvals in Australia for apartments (dwellings not houses). They are up +37% in November from the same month a year ago. Building consents for houses are up just +1.7%. The very strong December is a positive end to a year that has been very weak. In fact, even including these November levels, the year to November is still lower than the equivalent prior year.

BACK TO NORMAL
New Zealand's hydro lake storage is running at 81% of average but inflows have picked up to 94% of average. The recent storm has done wonders for soil moisture and water storage levels that were becoming troublesome. Interestingly, we are 'below average' this year by about the same amount of 'above average' this time last year. It looks line the weak La Niña pattern has now faded and we are back to normal.

WHOLESALE RATES TREND UP
Swap rates are firmer again today up +2 bps across all durations 2 to 10 years. The 90 day bank bill rate is up +1 bp to 1.87%. In China, their sovereign 10y yield has slipped -2 bps today to 3.93%. Their two year has dipped as well, so they are holding on to their new expanded 2-10 curve. The NZ Govt 10yr yield is up another +3 bps today at 2.81% and that is a gain of +10 bps in twelve trading days..

NZ DOLLAR HOLDS
The NZ dollar has held on to its 71.8 USc level against the greenback which is making a bit of a comeback today. On the cross rates we are at 91.5 AUc and 60 euro cents. This puts the TWI-5 at up at 74.1. In contrast, the bitcoin price is at US$15,215 after having got down as low as US$13,980 this morning. But as at now the decline is 'only' -US$800 or -5%.

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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35 Comments

by Stephen Hulme | 9th Jan 18, 4:52pm 1515469977

USDJPY and JGB Futures are tumbling after the Bank of Japan 'tapers' its purchasing of longer-dated bonds.

The JPY has strengthened the most since January 2 against the USD: Read more

by J.C. | 9th Jan 18, 6:10pm 1515474635

Yes. The stock price of Sumitomo Metal Mining has increased 150% over the past 18 months. Wonder what happens now.

by Stephen Hulme | 9th Jan 18, 5:21pm 1515471718

China’s first sovereign dollar bond in more than a decade has done poorly for investors who scrambled to get a piece of the rare offering amid overwhelming demand. The tight pricing of the notes, lauded by China’s finance ministry, had a lot to do with it, according to analysts.

The $2 billion securities sold in late October handed investors 0.73 percent of losses in the last two months of 2017, one of the few Asian nations that saw their government bonds generate negative payback during the period. Read more

by JB | 9th Jan 18, 5:36pm 1515472615

Maybe they planned to hold them to maturity and don't care about mark to market complexities. Their view of a loss would be no interest or principal repayment - neither going to happen.

by Stephen Hulme | 9th Jan 18, 8:28pm 1515482912

I guess you have never traded bonds financed with other people's money ( repurchase agreements) and had to stump up for a collateral call? Not all of us are unleveraged retail clients who pony up their life savings, in full, to settle a trade. A more comprehensive theoretical analysis can be read here and you too can become a leveraged "haircut trader" - same deal as 5-10% down on the house, but more liquid and your size.

by JB | 9th Jan 18, 5:33pm 1515472380

Falling home ownership is a disaster waiting to happen as long term, more and more super annuitants without their own home will become eligible for accommodation supplement pushing the costs of super well above current already high and rising estimates.

by J.C. | 9th Jan 18, 6:11pm 1515474710

Good point.

by Houses Overpriced | 9th Jan 18, 8:02pm 1515481322

The national government will be very proud of this stat

by Grant A | 9th Jan 18, 9:47pm 1515487640

Houses Overpriced - its got dick all to do with the National Govt, and the same can be said of the multitude of other Govts who all have the same problem for the same reason (do you just think its a coincidence), and everything to do with the GFC and the way the major economies tried to escape it with massive QE and asset price inflation - apologies if you actually are aware of that and just playing stupid politics

by MortgageBelt | 9th Jan 18, 10:16pm 1515489406

The National Government did have specific high targets to increase the number of International students coming into NZ, specific targets to increase the so-called investor category immigrants - many of whom simp,y bought rental houses, they kept the rates of immigration high despite the number of NZers returning, they refused to admit that foreign or related house purchasing had any effect on the hyperinflation of Auckland house prices, among many other settings and a hands-off approach to Auckland hyperinflation. Add to that a campaign to sell NZ as a safe haven for tax free trusts etc.
National can certainly take a lot of credit for allowing Auckland to runaway on house prices.
Oh yes, let’s blame the GFC for Auckland house prices.

by profile | 9th Jan 18, 10:30pm 1515490250

Yeah can't really blame the GFC nor National - just pollies and vested interests in general.

"Then, from 1999 to 2008, prices rose 113 per cent under the last Labour-led government. Through the most recent government's term, there was 69 per cent growth in house prices nationwide."

https://www.stuff.co.nz/business/property/98475352/labour-governments-h…

by MortgageBelt | 9th Jan 18, 10:36pm 1515490565

There was also the deliberate aim to make Auckland a Super city which also had an effect.

by PocketAces | 9th Jan 18, 11:21pm 1515493274

Best we do not forget that at the beginning of house price rises (the term you speak of anyway) we were coming off them being depressed and actually fallen, after that it was just ridiculous, and the government of the day just stood by and did absolutely nothing, even though there were plenty of people calling for them to do so.

by profile | 10th Jan 18, 6:33am 1515519208

They hadn’t fallen in the previous administration. “Data from CoreLogic shows house prices grew 49 per cent from 1990 to 1999, under National-led governments.” The governments of the day don’t “do nothing” they actively come up with new and wonderful ways to make it more difficult to build a house. All being active landlords they like to protect their assets and expand their shiny bum empires.

by Ex Expat | 10th Jan 18, 8:08am 1515524896

Absolutely agree, and the three ring circus is about to get a lesson in economics. The first shoe to drop is student rentals going up in price.

by Grant A | 10th Jan 18, 7:26am 1515522415

Absolutely blame the GFC - students and immigration are only minor influences compared to taking interest rates to zero, or near to, globally and forcing investors into more high risk investments, and more so into buying assets as faith in paper money has diminished with the advent of historic QE levels. Problem is most people only see the less significant local issues and completely miss the big picture that requires some reading and understanding, something I would have thought was better understood here.

by PocketAces | 9th Jan 18, 11:21pm 1515493298

Yep, good old free market, do nothing policies, oh damn, I guess I just described National

by Houses Overpriced | 10th Jan 18, 7:53am 1515524037

GA, You have to be dumb or a hard core speculator

by Didge | 10th Jan 18, 8:58am 1515527937

A speculator.

by Houses Overpriced | 10th Jan 18, 9:34am 1515530081

sure not both ??? :)

by Grant A | 10th Jan 18, 5:34pm 1515558859

House overpriced - Please explain to me why as a one sentence answer with no facts, and only some dumb opinion about the author, is dumb in itself, or at the least a useless comment. - nope not involved in property in any way other than living in one. But very interested to hear why my comments are dumb in your humble opinion. Do you have any background in markets, fully understand the implications (and ongoing) of QE and ZIRP etc. If so I'd love to hear about your opinion on it, but If you don't please don't bother responding - maybe go have a chat to someone informed on such matters as say Steven Hulme first

by Houses Overpriced | 10th Jan 18, 6:26pm 1515561995

GA your keep proving your ignorance of the fact that the national party exaggerated the issue. Proves you're a hard core National supporter. No wonder your insistence on denial

by Grant A | 10th Jan 18, 7:23pm 1515565405

Houses overpriced - I’ll treat that as the uninformed comment that I suggested you’d need not make if that was the level of discussion that you could contribute, but at least I know now for sure to ignore your posts as Ex Expat and no doubt others have already figured out ...bye

by Houses Overpriced | 10th Jan 18, 7:26pm 1515565603

You finally get the message.. gosh how daft can you guys be

by Ex Expat | 10th Jan 18, 6:59pm 1515563962

Didge and Houses overpriced are leftie trolls. I don’t expect an intelligent comment out of either of them and haven’t been surprised yet.

by Houses Overpriced | 10th Jan 18, 7:12pm 1515564729

Look at the shit on your back before commenting on others

by Double-GZ | 10th Jan 18, 8:16pm 1515568604

There is no shit at your back Ex Pat you are clear!
I agree with you, they are definitely leftie trolls (especially HO) and need to be ignored!
Well put, Ex Pat *clap clap*

by Houses Overpriced | 10th Jan 18, 8:17pm 1515568625

The drug lord is back!

by Grant A | 10th Jan 18, 9:46pm 1515574005

Thanks Double-GZ - Good to know and I appreciate the confirmation of that. Makes you wonder why they bother when no one other than similar witless trolls will converse with them....but it their time to waste I guess.

by Houses Overpriced | 10th Jan 18, 9:58pm 1515574725

Hence you keep replying, shows your level of intelectuality

by profile | 9th Jan 18, 10:24pm 1515489867

Chances of La Nina now fading?

http://www.bom.gov.au/climate/enso/indices.shtml
http://www.weatherzone.com.au/climate/indicator_enso.jsp?c=nino34

by Cantabrians | 10th Jan 18, 9:37am 1515530267

Yes, La Nina has almost peaked with neutral ENSO (El Nino/Southern Oscillation) forecast by early to late spring (northern hemisphere) so you might say around our April
http://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/

by custard | 9th Jan 18, 10:59pm 1515491968

Falling home ownership rates.
An absolute disgrace – politics aside – the complete nonsense of the last 5 or so years makes my blood boil.
The idiocy, the stupidity of what was allowed to happen, a blind eye if that was what it took.
To the betterment of whom?
This will look so very foolish in years to come

by Grant A | 10th Jan 18, 7:29am 1515522598

Don't worry Custard, at the rate property investors I know seem to be bailing on their investments there's alot coming onto the market - bad news for renters, but likely good news for people wanting to purchase properties because I cant see how prices will hold up in that environment.

by Roger Witherspoon | 10th Jan 18, 6:51pm 1515563517

A rather overlooked aspect of the whole sorry saga whereby successive NZ governments encouraged rising house prices and immigration and actively discouraged building or change of any sort, is the anti-business attitude that has taken hold. Whilst the Clark/Cullen government was busy encouraging house prices to double and getting rid of the defensive fighter jets and other rather self defeating activities; the Australians were enjoying a once in a century mining boom. Over here any application for mining is treated as a highly suspect activity, on the assumption that any increase in mining will turn the entire North and South Islands into arid desert wastelands. Here we are endowed with magnificent resourses and yet we prefer to poison our fields by importing Cadmium laced fertiliser from Morocco to mining the good stuff ourselves. If I am right we are about to miss out on another mining boom and the Aussies will be even more full of themselves. Sigh. Sadly, the property investors are right, it is the only game in town.

Aussie, $200 billion dollars worth of projects underway:
https://www.australianmining.com.au/news/australias-major-mining-projec…

NZ: We don't want any of that nasty dirty mining here,
https://www.stuff.co.nz/business/industries/66038589/Chatham-Rock-Phosp…