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
Westpac raised its 9 month rates by +10 bps to 3.40%. ICBC raised all its rates by +5 bps across the whole term range. ICBC now has rates of 4% or higher for terms of 3 years and longer, one of the very few banks to offer this.
HEALTHY GROWTH SURPRISE
To nearly everyone's surprise (but perhaps not the Prime Minister who seemed to have signaled advance notice), our June quarter GDP surged +1% against expectations of +0.8% rise, its biggest q-on-q biggest rise in 2 years. Real GDP is now +3.1% higher in Q2-18 than Q2-17. For the full year to June 2018 we are +2.9% higher than the full year to June 2017. On this basis, the rises is similar to that posted by the US recently, but a bit less than the Aussie equivalent result. The size of the rise means OCR cuts may now be off the table. And the report failed to justify the deterioration in business confidence (at least not yet) (H/T Kiwibank economists.).
PRODUCTIVITY RISING
In the year to June, as reported above, GDP grew +2.9%. However, as previously reported in the HLFS survey, payroll hours grew +2.4% in the same period. That means labour productivity was up +0.5%, the fourth consecutive quarterly rise. Per capital GDP rose as well.
LOOKING FOR 'FAIRER TAXES'
Tax Working Group interim report was released today and the Cullen-led body says work on capital income 'not yet complete'. But taxes on capital gains are clearly signaled and they gave two options. But they also said it is not recommending either wealth taxes or land taxes.
HE GETS JAIL, SHE GETS HOME DETENTION
A Christchurch real estate agent has been sentenced to seven months’ home detention and 200 hours of community work on charges brought by the Serious Fraud Office. She benefited from a fraudulent scheme involving 13 properties and $300,000 in commissions. It was a scheme with her husband and he has already been sentenced to jail for his part in the fraud.
YIELDS FIRM
The latest NZ Govt bond tender for $150 mln received bids totaling $431 mln. The yield rose from 2.89% in the equivalent August tender, to 3.00% in today's tender. These bonds mature in 2037, so are ~20 yr durations.
GREENER
Renewable energy production hit a 37 hear high in the June quarter. This accounted for 85% of electricity generation, up from 79% in the same quarter a year ago. Hydro was up +13%, wind was up +12%, and non-renewable sources were down -27% from the same quarter a year ago. All this was despite national electricity demand being unchanged for the quarter compared to the same period last year.
SWAP RATES RISE SHARPLY & STEEPEN
Swap rates rose and steepened again today and the rises have been chunky. The 2 yr rate rate is up +4 bps, and all longer rates are up +5 bps. That puts the swap 2-10 curve up at +90 bps and its steepest in six weeks. The UST 10yr is also rising, now at 3.06% with the UST 2-10 curve now just over +27 bps. The Aussie Govt 10yr is at 2.72% (up another +2 bps), the China Govt 10yr is at 3.69% (up +1 bp), while the NZ Govt 10 yr is at 2.70%, and up +2 bps. The 90 day bank bill rate is unchanged at 1.89%.
BITCOIN FIRMS
The bitcoin price is marginally higher today at US$6,390, a +1.0% rise from this time yesterday. But a few hours ago, things got very volatile when on one market a futures contract expired. That exposed the thinness of this market, and the ease with which a few larger trades can knock it around - an event bad people will have noticed.
NZD UP
The NZD is solidly higher today after the GDP result. It gained +50 bps and now trades at 66.5 USc. On the cross rates we are similarly higher at 91.6 AUc, and at 56.9 euro cents. That puts the TWI-5 at 70.2 and over 70 again for the first time in three weeks.
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26 Comments
With this figure out today, along with international rising interest rates, growth rates and inflation numbers – I struggle to see a 50/50 raise/lower scenario being maintained deep inside Mr Orr’s crystal ball.
This assumes no swans, disasters etc.
I also see a few Term Deposit Rates inched up today – I don't think that has happened for a while.
Hi Custard
'I also see a few Term Deposit Rates inched up today – I don't think that has happened for a while'
Notice how it was Westpac increasing TD rates, I think I may have mentioned Westpac a few times recently, were they not hinting at wanting a lower cash rate just yesterday in an article posted on interest.co ? That tightens their spread between lending and deposit rates.... I have have a feeling that they'll be the first to find funding from the international markets more difficult... Similarly they were the first to raise floating mortgage rates in Australia a couple of weeks ago. If I were the Reserve Bank Governor I'd be going to the government and saying that it may be a good time to repeal the OBR for the safety of NZ depositors... Bollocks to the Aussies if they don't know how to save that's their bed to lie in.
He'll hold them as low as he can for as long as he can.... it's a really difficult situation as he needs to keep them low or the housing market collapses and we have a deep recession but if he keeps them too low for too long inflation rips a big hole in the retirees pension pots and household disposable incomes and we have a deep recession.
His last forward guidance should have been a bit firmer and what he should of said is, 'we want to keep rates low for a while longer, if you feel that higher rates could cause you an issue with your debt obligations then please get your house in order over the next few months.' (Looking over his shoulder he winks at Fonterra's representative, 'same goes for you sunshine').
it's going to be a problem of secular stagnation
https://www.youtube.com/watch?time_continue=24&v=tYK1yF1F6TM
Nic - I think we agree – in my mind interest rates need to be “normalised” as soon as possible – for a variety of reasons.
If we were to drop back 20 or so years, and had a similar economy and similar price settings / pressures etc. - I would suggest we would have a very different OCR to that of today,
Many are fawning over Mr Orr currently – I don’t know if I really buy into it.
He's doing a fantastic job of weakening the dollar without actually doing anything. His last forward guidance was Carneyesque in it's delivery and achieved everything it was meant to do. No one wants a collapse, it has to be a 'soft crash' landing which means weaker dollar for a while, help a few exporters make some coin, hopefully they use that coin to reduce debt exposure rather than buy a new Land Rover....because eventually inflation in the real economy will force a rate rise... I say eventually but mean before the end of next year. Households should be using the time to prepare themselves, those that don't prepare, don't deserve to be preserved and in the mean time watch the banks close the doors on debt availability as they prepare themselves for the end of the credit cycle, he's keeping rates low for them too.
What I don’t get is that central bankers are well aware of the current situation where households have stretched their finances beyond capacity to kid themselves into the rich and fabulous lifestyle. However, nobody moves a finger on commercial banks who are still trying to shove more debt down the throats of the average man on the street.
Shouldn’t there be a plan of action to mildly get banks to de-risk their positions? As I type this I realise that such a move would take away the only engine driving growth, or the illusion of it, debt.
We have a mortgage and a small personal loan from when we upgraded the family wagon. Just the other day I received a text message and email from the bank telling me I was pre approved for another loan.
“I seeee you aren’t leveraged enough.......heeeeerrrreeee.....have some moooooorrrre debt.........muuhhhhaahaahaaahaaahaaa”.
Australia's household debt to income has climbed rapidly ahead of other developed countries, leaving the country exposed to the next potential crisis, one of the world's largest investors warns.
AllianceBernstein chief economist Guy Bruten told the conference "it does seem that we are transitioning to a different phase."
"There has been no de-leveraging since the financial crisis," Mr Bruten warned, who also argued the rise of populist politics "will be a long-run phenomenon".
https://www.afr.com/markets/australia-most-exposed-to-debt-crisis-state…
But everyone watches the same clock, don't they?!
Shades of Darwin in Aussie years ago. Then if you ( or your junior on the spot!) turned up at the counter at 1/4 to, and asked for the release....they gave to you!
Even before mobiles, that was somewhat of an advantage.....
"It’s difficult to judge just how far it will have to go before irrational bureaucrats have their minds changed for them. For that, these minor selloffs that are shouted out as BOND ROUTS!!!
In the end, it didn’t matter because there is no decoupling. If the global economic system is rolling over, which is the whole point behind decoupling, eventually it will come for everyone. That’s the yield curve’s lack of slope, or the eurodollar curve’s very interesting shape."
http://www.alhambrapartners.com/2018/09/19/processing-powells-rout/
New Zealand's house prices have been ranked the most overvalued in the developed world behind only Hong Kong.
https://www.oneroof.co.nz/news/35410
“There’s no business like insurance business”
HOW THE FED BANKRUPTED THE INSURANCE INDUSTRY
http://professorfekete.com/articles/AEFHowFedBankruptedInsInd.pdf
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