A review of things you need to know before you go home on Thursday; minor rate changes, record trade deficit, popular govt bond tender, record mortgage interest paid, TPP ratified, swap rates lower, NZD soft

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
General Finance has cut their long term 4 and 5 years rate offers.

A RECORD, NOT IN A GOOD WAY
New Zealand recorded its largest monthly trade deficit ever of -NZ$1.6 bln for September. Unfortunately that comes on top of a very large deficit in August as well at over -$1.5 bln. The track turned bad starting in early 2018 with export growth falling away while import growth has picked up. We have policy settings to party-on even though our export earnings aren't justifying it. The average rise in imports in each month in 2018 is more than +14% year-on-year, while the average rise in exports is under +9%. That difference is cumulative and catching up with us now. It is true an Air NZ Dreamliner arrived in September ($275 mln). But over the past two years we have had them before (four times) and they tend to come at this time of year. In the past, they didn't cause 'records' to be broken. In 2017 we have only five months with a material negative trade balance. In the shorter nine months so far in 2018 we have had six such months already, and October and November are usually big deficit months as well.

TPP RATIFIED
Speaking of trade, New Zealand has joined Japan, Mexico and Singapore in ratifying the sans-US TPP trade deal, with Australia and Canada expected to follow soon bringing the trade deal into effect.

WILDLY POPULAR
Today's $150 mln NZGB bond tender for April 2025s was wildly popular attracting bids of $836 mln and driving the yield down to 2.19% pa. This is a drop of -5 basis points from the September tender of this issue, and -56 bps lower than the same auction a year ago. There have been 25 auctions for the April 2025 maturity and 2.19% is the second lowest yield ever achieved. (A March 2017 tender for $200 mln of this maturity attracted bids of $1.4 bln so that was even more popular, but the yield was 3.13% then.)

ANOTHER KIWIBIULD BALLOT
Housing Minister Phil Twyford says the ballot will open next week on the first 10 KiwiBuild homes to be built in the Waikato. They are all two bedroom. standalone homes priced at $480,000 each.They are part of the Lakeside development at Te Kauwhata that will eventually include 175 KiwiBuild homes. Construction of the first 10 KiwiBuild homes is expected to be complete by Christmas. Te Kauwhata is 77 kms south of Auckland.

STILL MAKING INTEREST-ONLY LOANS
Banks are still making interest-only loans, mainly because revolving credit facilities are classed as interest-only (even though they come with a sinking credit limit which has the same effect as principal repayment). Of the $4.8 bln on new mortgage lending in September, almost 30% was interest-only (incl. revolving credit). But almost 92% was with an LVR of 80% or less.

LENDING LEVELS MODEST
There is no real evidence of increased lending to first home buyers. In September the level was at about the average for the rest of 2018. Lending to investors is down about -16% on that same basis. In fact, total new lending in September was low, indicating a weak start to the Spring selling season, with the lowest overall amounts lent since February, and only marginally more than the same month a year ago.

RECORD INTEREST PAID
In each of the September years from 2015 to 2017, the annual amount of interest paid on mortgages has been falling. But in new data out today, that trend reversed and the amount of interest paid in the year to September 2018 was $11.9 bln, a record high. That is equivalent to 4.2% of nominal GDP. (Bet you thought it was higher than that.)

MORE RED INK
After Wall Street's -3% dump overnight, Shanghai was opened -1.75% lower and has been softer since.

SWAP RATES DROP
Swap rates are down following international markets. The two year is down -2 bps, the five year is down -3 bps, and the ten year is down -4 bps. The UST 10yr yield is sharply lower at 3.10% and down by -6 bps following Wall Street's steep pullback. The UST 2-10 curve is holding at +27 bps however. Benchmark bond rates are slipping as well. The Aussie Govt 10yr is at 2.62% (down -5 bps), the China Govt 10yr is at 3.56% (also down -5 bps), while the NZ Govt 10 yr is at 2.59%, and down -8 bps. The 90 day bank bill rate is unchanged at 1.90%.

BITCOIN HOLDS
The bitcoin price is now at US$6,457, and still the same as this time yesterday.

NZD SOFT
The NZD is lower today at 65.22 USc. On the cross rates we are also marginally softer at 92.2 AUc, and 57.2 euro cents. That puts the TWI-5 at just over 69.6.

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