What happened Monday

A review of things you need to know before you go home on Monday; two mortgage rate cuts, AT ups prices, Fonterra's China troubles rise, wholesale rates rise further, NZD stable, bitcoin becalmed

22nd Jan 18, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
First, SBS Bank dropped its one year fixed 'special' to 4.44%. Then TSB matched them.

TERM DEPOSIT RATE CHANGES
No changes here today.

MONOPOLY PRICING POWER
Auckland Transport announced bus, train and ferry fare 'changes' today. True, there were a few 'no change' items, and even fewer reductions. But most fares for services that carry most people, the increase is +10c on February 11. A big, centralised, socialised systems like this one is vulnerable to arbitrary changes (and, like the Sydney trains, industrial action). The more they are adopted, the greater the power on the choke-points. (Public transport needs to be decentralised and competitive.)

UPDATED TO DECEMBER
For those who follow our 'regular savings' analysis of KiwiSaver funds, you should note that this data is now updated through December 2017. We will have analysis later in the week.

FONTERRA'S CHINA STRATEGY IN MORE TROUBLE
Fonterra's 19% stake in China's Beingmate is worth less today (two words, at this time at least). Beingmate has warned stockmarkets of an earnings downgrade. Worse, four directors, including the two Fonterra ones, "have expressed reservations relating to some aspects of Beingmate’s financial management and reporting practices".

NO DEAL YET
The latest news from the US Congress is that they are still deadlocked. The next vote has been delayed by a day (Monday US time).

WHOLESALE RATES RISE AGAIN
The rise and rise of long term wholesale interest rates and benchmark sovereign bond yields shows now signs of slowing down. Local swap rates are unchanged at the short end, but up another +2 bps higher at the long end today. The curve is steepening. It's is not just New Zealand. The UST 10yr is higher at 2.67%, another rise of +3 bps and Wall Street hasn't even opened yet. In China, their sovereign 10yr yield is now at 4.09% firming by +4 bps today. The NZ Govt 10yr yield is up as well at 3.02% (another +1 bp). And the Aussie 10yr was higher too at 2.87% (+2 bps) although it has settled a little recently. It is yield rises across the globe, at least until the Americans can sort out their Budget impasse.

NZ DOLLAR UNCHANGED
The NZ dollar is a little changed since this time Friday at 72.8 USc. We are still at 91.1 AUc and level pegging at 59.5 euro cents. This puts the TWI-5 at 74.1.

BITCOIN GOES QUIET
Bitcoin is at US$11,410, little changed from its Friday price at this time of US$11,522. Maybe punters are absorbing the news that France and Germany are to take a cryptocurrency regulation proposal to the next G20 meeting in March. And the talk that some investors would flee bitcoin for gold, is just that - talk. Gold is a little lower again today.

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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13 Comments

by Narrabeen Boy | 22nd Jan 18, 4:59pm 1516593549

How long till interest rates rise with swap rates rising daily.

by Yvil | 22nd Jan 18, 6:33pm 1516599214

3 years ago according to Roger Kerr

by Ex Expat | 24th Jan 18, 12:26pm 1516750006

;)

There used to be a 'wit' here who when asked about advice on buying a house in an area for $x (usually a woeful budget for the area), would reply that he/she had one and would be back soon with the address.

When he/she came back, the reply was, "sorry it sold four years ago".

by kiwi_overseas | 22nd Jan 18, 5:04pm 1516593882

"MONOPOLY PRICING POWER"
What an absurd commentary about fare increases.

PTs primary objective is to provide transport for those that cannot otherwise afford to travel by car. It is fundamentally a social service and not there to make a profit. As a secondary objective PT also provides an alternative travel mode for commuters (especially where congestion tolls are in place (as they should be). PT services are already subject to competitive tender and subject to a KPI based on farebox returns. If Auckland Transport is efficient fares shouldn't go up by more that the CPI on average.

In the hands of a single private sector provider it would still be a monopoly and monopoly rents extracted.
In the case of multiple private sector providers we would have the absurd situation as in the UK where there is no defined network that users understand and can use as the private operators only run the routes they want to.

But yes there are future opportunities for the private sector to be more involved in public transport. Rideshare operators can probably provide more efficient on-demand transit services connecting to the core PT network instead of inefficient and costly fixed PT routes with low patronage.

by Ralph | 22nd Jan 18, 5:34pm 1516595681

"worth less today (two words, at this time at least)"

Top work.

by JimboJones | 22nd Jan 18, 9:00pm 1516608056

David, if you want PT to be decentralised and competitive then it is only fair to do the same with roads. Do you think the government should privatise the road network? With modern technology, a user pays road network is very feasible. Want to drive your car over the hundreds of millions of dollars worth of land under fanshawe street - well that won’t come cheap. You would probably need to take the bus.

by Andrewj | 22nd Jan 18, 9:12pm 1516608736

PFI – A Cautionary Tale
https://www.craigmurray.org.uk/archives/2018/01/pfi-cautionary-tale/

by dtcarter | 23rd Jan 18, 11:42am 1516660970

Yes and just look at the six petrol tax increases the last government pushed through. Didn't see any monopoly pricing power warnings on this sites for those

by scarfie | 23rd Jan 18, 11:59am 1516661961

Is it not the road that makes the land worth hundreds of millions? Any infrustructure that makes use of the commons should pay a lease back into the public purse, which then makes it economically unfeasible. That is why public ownership makes sense, you need to keep speculation out of it.

by dtcarter | 24th Jan 18, 12:12pm 1516749131

more like the footpath. Drivers in the CDB are in the minority these days.

by meh | 24th Jan 18, 12:55pm 1516751719

Hmm, is it not the infrastructure that makes the land worth hundreds of millions? Any infrastructure that makes use of the commons should pay a lease back into the public purse.... you need to keep speculation out of it.

I can't help but think that this is part of the problem with overpriced housing. All that infrastructure and even location (ie, views, scenery etc) contributes to high land values and yet the house owner believes they are entitled to the gains, even though those gains are not from any of their own personal efforts. Shouldn't a percentage of the increase in value also go back to the public?

by Ralph | 24th Jan 18, 1:31pm 1516753874

Interestingly, the idea of the commons has somewhere in its roots the idea of a number of common interests independent of ownership - even the owner of a government.

So who would you pay this fee to?

If you say government then there is quite some question as to how equally represented the majority of people who did not vote for this government (in principle true for any sitting government unless everyone voted for them).

And if you intend to monetise increase of value are you intending to pay out the decrease of value?

And I assume we must talk increase in real value and not nominal value or else it just becomes another inflation tax.

by dtcarter | 23rd Jan 18, 9:13pm 1516695189

David, perhaps this proposal for roading reform would be to your liking.

https://www.beehive.govt.nz/feature/better-transport-better-roads