A review of things you need to know before you go home on Friday; CBL escapes liquidation, some TD rate changes, higher inflation expectations, S&P ok with Budget 2018, more bond offers, swaps still rising, NZD firms

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

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
ANZ have increased their 8 month rate by +25 bps to 3.55%. TSB have cut their cash PIE by -10 bps to 1.55%.

EXPECTING HIGHER PRICES
The RBNZ survey of household inflation expectations (M13) was out today and that sees them rising from 3% to 3.2% in one year. Almost half of those surveyed expect higher inflation ahead. And 39% of responders think house prices will be higher in a year, up from 7% in December. A few days ago the RBA also did a household inflation expectations survey in Australia and that shows consumers there expect +3.7% inflation in a year while "union officials" and market economists expect +2.2%. (No kidding, they officially survey union officials.) The current NZ inflation rate is 1.1%; the current Australian inflation rate is 1.9%.

CBL ESCAPES LIQUIDATION… FOR NOW
CBL Corporation remains in voluntary administration, as creditors couldn’t agree at a meeting held this afternoon on whether the company should be liquidated or handed back to its directors. The administrators say: “Whilst the necessary 75% of creditors by value would have supported the resolution to put the company into liquidation at this point in time, a majority by number would not have been achieved which would have caused the liquidation resolution to fail. Related party creditors were a factor. Correspondingly, the resolution to hand control of the company back to its directors would also have failed.” Another meeting will be held by July 2.

HEARTLAND ANNUAL PROFIT ON TRACK
Heartland Bank has posted a +9% rise in unaudited nine-month net profit after tax to $48.6 million, and says full-year profit is on track to hit the upper end of its $65 million to $68 million guidance range. The bank's net interest margin came in at 4.43% and its cost to income ratio at 41.3%. It says impairments in the motor, personal and rural lending areas have increased, but its non-performing loans dropped to 1.70% of gross receivables at March 31 from 1.80% at June 30 last year. Heartland sees no impact on its business from the Australian government extending its pension loan scheme, which has some similarities to Heartland's reverse mortgages.

S&P GIVES BUDGET 2018 A TICK
This is what they say: “We note that this year’s Budget contains moderately higher spending on infrastructure and social services over the next few years, partly offset by higher taxation revenue. However, the fiscal projections are not materially different from what we previously expected and there’s nothing in this year’s headline budget numbers to warrant an immediate change to our existing ratings or stable outlook on New Zealand. Our current view is that New Zealand's fiscal performance will likely remain sound during the next few years. This is despite some emerging external risks that may dampen economic growth among New Zealand’s key trading partners, including increasing global trade tensions and rising investor aversion to some emerging markets.” S&P rates New Zealand's sovereign debt as AA Stable.

BUDGET DETAIL UPDATE
We have published details for all Budget 2018 category spending $10 bln or more in the next year  That reveals things like which DHBs get what money (and the increase - the average was +4.1% with the Northland DHB getting a +6.2% rise, the four Auckland DHBs getting 32.7% of the DHB money, up +4.9% for 34.5% of the population, and the Canterbury DHB getting a rise of just +3.0%), and how much the Accommodation Supplement has grown (it's $1.5 bln, up +24.7% in a year).

IN THE MARKET FOR $100 MLN+
ANZ Bank NZ said it will offer of a new series of unsecured unsubordinated fixed rate bonds with a term of five years to New Zealand retail and institutional investors. The offer is expected to be for up to $100 million with the ability to accept unlimited over-subscriptions at ANZ’s discretion.

IN THE MARKET FOR $1 BLN
Housing New Zealand says as a result of Budget 2018 decisions, the Minister of Finance and the Minister of HNZ have increased the limit on Housing New Zealand’s Borrowing Protocol (allowing it to seek financing from outside the Crown) from $1.08 bln to $3.05 bln. HNZ now plans to issue around $1 bln of term debt prior to 30 June 2019, via its New Zealand Dollar Medium Term Note Program.

RIVALS SPEND MORE HERE
Spending by international visitors in New Zealand reached $10.9 billion for the year to March 2018, according to the latest International Visitor Survey. Visitors from China and the United States made up around half of the overall growth in spending.

AMERICAN ANALYST WARNS OF STIFF COMPETITION
The likely forced slaughter of US cattle due to drought is set to pressure global beef trade and prices, posing a threat to New Zealand beef returns, says a Rabobank US analyst. He also warns that New Zealand exporters will compete with US exports in the China market.

BENCHMARK INTEREST RATES DIVERGE
Local swap rates are up +1 bps for all terms of 4 years and longer, up +2 bps for 10 years, unchanged for shorter durations. The UST 10yr yield has risen to 3.12%, up +1 bp today. The Aussie Govt 10 yr is now at 2.94% (up +4 bps). The China 10 yr is at 3.75%, up +1 bp. And the NZ Govt 10 yr is also up +1 bp at 2.88%. The 90 day bank bill rate is unchanged at 2.00%.

BITCOIN FALTERS
The bitcoin price has fallen below US$8,000 and is now at US$7,977 which is a -4.6% drop from this time yesterday.

NZ DOLLAR FIRMS
The NZD is now at 69.9 USc and up +½c on the day. But we are little changed against the Aussie at 91.7 AUc, or at 58.3 euro cents. That has the TWI-5 at 71.8.

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14 Comments

Quote: "39% of responders think house prices will be higher in a year"

I think it's fair to say the majority of commenters on this site have a different view. Why this discrepancy?

Could be that 61% of responders were based in the Auckland region?

(The rest of us still feel that we are in a catch-up part of the cycle)

It’s just rebounded to the level prior to the election, it’s still well down on 2016. Apart from RP who’s in a negative feedback loop of epic proportions, and his sidekick CJ099, the rest seem to more upset that prices are this high than predicting a downturn. There are some new homes being built nearby in St Heliers so I gather some supply is coming for owner occupiers at least. With Kiwibuild hibernating on deep freeze and high immigration rates unabated I’d say there is even balance at current levels. Even homes.co.nz say my home up 3% last month to 99% of CV.

The improved sentiment concerning house price inflation is good to see. This has been achieved in some part no doubt through the unrelenting upbeat attitude of the property bulls on this site. Well done chaps. Everyone wants things to be stable and edging up if only to keep pace with inflation.

Not much news on the auction front this week with the budget overshadowing things. 19 Auckland properties added to the auction results pages. 8 sold above 2017 RV and 11 below.

26.913M in sales with a 2017 RV of 26.453M and 2014 RV of 18.195M
1.7% above 2017 RV and 47.9% above 2014 RV.

Again, remarkably similar to all results this year with no sign of a crash at all.

I'm not sure why you are congratulating people - at the moment things appear to be stagnating. What happens from here is anyone's guess - mine is more stagnation (unless there is an external event). The stagnation is peoples belief that not much is going to change but that in itself could change - if anything the poll reflects how peoples sentiment can change and does change. .

Can you also include 2008 and 1999 CVs for comparison?

Not the 2011 CV?

While it would be interesting the data doesn't appear to be easily available. I reference the 2014 CV largely because it is presented on the same page as the 2017 one on the Auckland Council Geomap website so is very easy to include.

I also tend to view the 2014 CV as more accurate largely because I own a property that appears to be 500k overvalued for 2017 which has made me very suspicious of them. However that said the auction results published here are remarkably accurate on average.

Averages are the reality just as in most scientific results. Individual statistics can be highly deceptive as there is always going to be the odd exceptional result.

The results are indicative only of motivated buyer's perceptions of the current property market. The samples are small but I think large enough to be useful still however that conclusion is moot.

Our 2017 CV is 2.2x the 2008 CV. We bought in 2009 for 86% of the 2008 CV. Homes.co.nz reckons houses in our area are selling for 99% of the 2017 CV. It’s our home, not an investment or piggy bank and I can understand why some are bitter that they don’t have the same opportunity. That said I can’t see any way to wind back the clock as new builds are more expensive and have less space and land.

Quote: "The likely forced slaughter of US cattle due to drought is set to pressure global beef trade and prices, posing a threat to New Zealand beef returns"

Cattle is not my expertise but I don't get the logic. If US slaughter their cattle, wouldn't that cause less competition for NZ beef?

More dead cattle = more meat

To that end, anyone notice more "beef" at the supermarket lately?

My (also uninformed) thought would be more competition (meat) now followed by less competition later on assuming it takes a while to restore herd sizes once conditions are better.

"Cattle owners are looking beyond the expiring April live cattle at the June contract selling $20 under the last cash price and watching as packers purchase cash purchases at $120+ into May and wondering if on June first we will witness a wall of cattle and a collapse of cash prices. With the latest cattle on feed report showed cattle on feed 150 days and more, up 50%, there is little incentive to hold on to cattle in the feedlot."

https://new.attenbabler.com/index.php/2018/04/23/u-s-cattle-on-feed-upda...