A review of things you need to know before you go home on Friday; meaningful rate changes, developer jailed, uncertainty's impact, trust in Parliament, CNY rejected, swaps and NZD little changed

A review of things you need to know before you go home on Friday; meaningful rate changes, developer jailed, uncertainty's impact, trust in Parliament, CNY rejected, swaps and NZD little changed

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

MORTGAGE RATE CHANGES
ASB and Sovereign have launched a lower 4.39% 18 month mortgage rate. They have also raised their two year rate.

TERM DEPOSIT RATE CHANGES
SBS Bank launched a 3.70% one year term deposit offer, a significant bonus over its rivals for that term. It is only available until February 18, 2018.

DEVELOPER JAILED
Cavalier developer and slumlord Augustine Lau, who has lost most court cases brought against him has been sentenced for damaging pōhutukawa and totara trees. He got 75 days jail. The sentencing judge said that to describe his attitude as poor would be an understatement.

UNCERTAINTY HURTS
RBNZ boffins have been looking at the impact uncertainty has on New Zealand's economy. They checked the impact of global uncertainty, and domestic uncertainty*. They found that both domestic and global uncertainty is followed by statistically significant falls in output, consumption, and investment. They also found that the impact on investment is significantly larger than the impact on consumption. (* There were no measures for domestic uncertainty, so they had to develop one for this study.)

TRUST IN PARLIAMENT
A new survey out from Statistics NZ based on their 2016 General Social Survey, a two yearly poll of 8000 people with face-to-face data collection, shows that 30% of Kiwis have very low trust in Parliament, 33.6% said their trust was in a 5-to-6-out-of-ten basis, for 29.5% it was a 7-or-8-out-of-ten, and for 6.9% of the public it was a 9 or 10. But only Māori rated trust lower than average for scores for 7 and above. Pacific people and Asians rate trust much higher than other New Zealanders. The most sceptical are in the 25-64 age group. Those aged 15-24 and 65+ are the least sceptical. Scores measuring voters personal 'influence on politics' are obviously lower.

US UNCERTAINTY
The US Treasury Secretary declared Wednesday that a weaker UD dollar would help US export trade and the Administration is comfortable using that as part of their trade policy. But today, the President hung him out to dry, declaring that "a strong dollar is my policy". Markets for the US dollar were incredulous at the chaotic state of US trade policy. The President also said he may want back in to the TPP. He would be in a weak position to extract concessions now.

GOING BACKWARDS
The US dollar is still king in international trade. And the Chinese yuan is struggling to be taken seriously as the basis of trade, even though the Chinese generate vast amounts of it. In 2015, 2.31% of all transactions were in the yuan. In 2016 it was down to 1.68%. And data out today pegged it at 1.54% in 2017. This is not a positive track, and so long as China is a based on a strongman, party-above-the-law basis, that is not likely to change. Only the EUR (32.6%, up +3.1% in a year) is providing the USD (39.2%, down -3.4%) any serious competition. (The EUR however has an internal advantage, being used in the borderless transfers within its 19 members, so its share is actually overstated. The US dollar is not counted in this way between its 50 States.)

WHOLESALE RATES HOLD
Following yesterday's sharp drop, wholesale swap rates are unchanged today. The 90 day bank bill rate is unchanged at 1.88%. The UST 10yr is down -3 bps at 2.62%. In China, their sovereign 10yr yield is up +1 bp today to 3.98%. The NZ Govt 10yr yield is now at 2.93% (down - 2 bp). And the Aussie 10yr is also -2 bps lower at 2.82%. Local market activity is very much lower today given it is Australia Day and a public holiday across the ditch. It will be a public holiday in the top half of the North Island on Monday.

NZ DOLLAR LITTLE CHANGED
The NZ dollar is down marginally from this time yesterday at 73.2 USc. But we are basically unchanged against all others at 91.1 AUc and 59 euro cents. This puts the TWI-5 at 74.0.

BITCOIN UNCHANGED
Bitcoin is now at US$11,324, unchanged from this time yesterday.

Daily exchange rates

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USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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25 Comments

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Highlight new comments in the last hr(s).

If the state to state $US transactions were included in the figures above, that would make an absolutely huge difference to the comparison. Same with the Yuan.

Why does Interest.co not report on the NZX? or any other stock markets for that matter?

.. productive assets are not encouraged in NZ ... they're not sexy ... we want houses ... just endless chatter about the Kiwi housing market ...

David C. & the team know what their audience craves .... keep giving the addicts their daily fix of housing news and views ...

Is investing in the NZX "productive"?

10
up

It's a lot more productive than buying an existing house and renting it out. Even if you're not actively investing in a capital raise and giving money to a company for them to invest, you're supporting the capital market. More liquidity and higher prices on the stock exchange make it more possible for companies to raise money and invest. A healthy share market helps make the country more productive, buying a rental property achieves nothing for the country as a whole.

Just pointing out the very obvious but houses produce whats commonly called 'shelter'. This productivity has a stream of value, its called rent. The product is so valuable that for most people the purchase of shelter represents the single biggest cost and the single biggest asset they will ever own.
Buying houses increases house prices, rising house prices is correlated to increased house building.
Stocks are good, property is good, most of the rich have both.

10
up

No, Houses provide shelter.. builders & developers produce houses. Not landlords, irrespective of what many on here claim..

The sooner we get back to that the better, houses are being used for absolutely the wrong reasons these days. I just hope Labour has the guts to break the cycle to be honest.

"Helping you make financial decisions" Just as long as its Housing or Kiwisaver? That's a very blinkered view of finance.

Oh im not so sure, property and stocks have long been pillars of building long term wealth.

To be fair though, there are a helluva lot of people on here that should be listening to the property investors that contribute!
If you follow the property investors actions over the past few years you would be at least semi retired!
The thing with shares you can be doing very well one minute and then basically broke the next after a sharemarket crash which will happen at some stage in the future without doubt.

Property markets can also fall. Share markets at least give you the opportunity to sell even in the bad times - no waiting months for an offer wondering if you've priced it right. Shares also tend to outperform property, as a reward for the extra risk. They're different asset classes with their own benefits and issues - the most sensible answer is to own some of both as they aren't too correlated, even less so if you have part of your share portfolio invested overseas.

Don’t agree that sharemarkets outperform property at all!
Providing you know what you are doing, you will always make far more money dollar wise than you will with equities.
I feel extremely comfortable with mega millions in property however if I had the same amount in shares etc. I would not be able to sleep.
With property,I have control, with shares someone else does and that doesn’t suit me!

Most studies show equities outperform property, feel free to google if you're genuinely interested. All you have with property is the illusion of control - you're still a small fish in a big pond with no control over where the market goes in terms of rents or prices, or whether your houses are still standing after the next earthquake. There is risk in all markets whether you appreciate it or not, hence the beauty of diversifying. I have no investment which would cause me to lose sleep if it went to zero tomorrow.

You may want to read some articles about stock markets vs real estate in a crash.. you'll need to open your mind to the possibility that property isn't the be all and end all of the investment game. So somehow I doubt you will.

https://www.fool.com/investing/value/2009/06/12/the-top-10-depression-st...

" Despite the conventional belief that the Great Depression was a terrible time to invest, investors who bought stocks in 1931 -- just prior to a 71% market drop -- would still have broken even in less than five years!

And stocks that the average investor bought after they became even cheaper -- say, at the start of 1932 -- would have multiplied in value more than 15 times during the next 22 years:"

http://www.people.hbs.edu/tnicholas/anna_tom.pdf

This quote sums up the second link :
"Using new data on market-based transactions we construct real estate price indexes
for Manhattan between 1920 and 1939. During the 1920s prices reached
their highest level in the third quarter of 1929 before falling by 67% at the end
of 1932 and hovering around that value for most of the Great Depression. The
value of high-end properties strongly co-moved with the stock market between
1929 and 1932. A typical property bought in 1920 would have retained only
56% of its initial value in nominal terms two decades later. An investment in the
stock market index (including dividends) would have outperformed an investment
in a typical property (including net rental income) by a factor of 5.2 over
our time period.
"

and just for giggles read this one, it certainly implicates that when this current bubble goes pop the economy is in for a very hard time.. Nobody has jobs, nobody can pay rent..

http://www.nber.org/papers/w20501.pdf

You don’t control property as proved by your recent bursts of anger on this site The Boy. The RB and the government control property and can turn it on and off at their leisure. Hence your dislike of Labour who are about to intervene. And as experienced by Christchurch (now 17th in terms of property values in NZ) natural disasters can affect values. It pays to have investments in NZ and overseas, in different locations unlike yourself and to invest in several asset classes. I have and I sleep very well. Unlike you I can afford to holiday in places better than the Gold Coast.

Gordon, no anger whatsoever!
More frustration that so many on here think that this coalition is going to be good for the country and are sadly being misled, but they will realise in due course.
I do have control of our property as we solely manage all and can do what we like with them and don’t rely on others to make decisions.
As I have said we do have equities but it wasn’t from our investing!
Funny you should mention the GC Gordon as I am there at the moment! Australia Day today! Very patriotic!

Check with the quants the stock market & other forms of investment are reasonably good and outperforms property often. However there is a different factor in play with housing which is the opportunity to take on large debt at a low enough rate that can easily be outperformed for benefit. There is more technical work and complexity in the stock markets but not the level of debt you can borrow to invest on. Hence housing is the poor man's, mom and pop, investing level. Often not enough capital or financial skills needed beyond upkeeping property, something most households can handle. So sure you can make a bit by turning the debt wheel, but often leave most of it to just mindless ticking along. If you had more money or the ability to research you could be making better returns and support more productive forms of investment. But are you the man enough to?

Of course I am closed shop in regards to preferring housing over equities that can be worthless if wrong decisions are made.
A heck of a lot of people lost their life savings in 1987.
Different strokes for different folks as they say and at the end of the day we can invest In What we are comfortable with!
Property is what I know and provides a great income, freedom of choice plus our children won’t have any financial worries ever, so that is very hard to beat I would say.

THE MAN 2, you come across as an "Ï will believe it when I see it" kind of person.

The thing about property is that it can halve in value and you still have the privilege of maintaining it, paying rates and insurance. If you happen to have a mortgage, your bank is your Landlord and is in control. You are just a caretaker of the banks security. As we all know, property is not always liquid. Yes if the tenant pays, there is a dividend. These days, dividends are as paltry as overvalued shares and don't reflect the inherent risk and associated liabilities of being a Landlord. Globally there seems to be very little risk spread which historically serves as a warning it could all crash quite soon. There are virtually no buffers and the traditional tools of recovery next time around will have even less effect.

With the "too big to fail" approach, policy has simply delayed the day of reckoning and increased the likelihood and the size of the next correction.

For the time being its 4.27% interest monthly term deposits for me.

RP, you and I are at risk of a hair cut with OBR as well, albeit you’re in for a five year ride compared to my one. Nothing is safe.

Property is a funny thing – the good news is that lending institutions believe so much in it that they will lend against it to the nth degree, no questions – unfortunately, that is ultimately the bad news in this sphere .
Property and associated lending is one of the key causes of bankruptcy and financial failure.
Manage prudently!

The Aussie $ has wings and the US dollar is struggling
https://finviz.com/futures.ashx