A review of things you need to know before you go home on Tuesday; car sales strong, B&T sales volumes bounce back, commodity prices rise, bank shares zoom higher, swaps dip, NZD firms, & more

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

MORTGAGE RATE CHANGES
No changes to report.

TERM DEPOSIT RATE CHANGES
None here either.

SMALL SLIPPAGE
9,942 new cars were sold in January, -7.9% less than the all-time record for January in 2018 (and -2% lower than January 2017). SUV sales were down -3.7%. Keeping the totals up were very strong sales to rental car companies representing 17% of all car sales. In fact for the top five models sold, rental car sales represented about two thirds of their sales and is the driver behind the Toyota Corolla's #1 spot. Sales of EVs and used imports will come later in the week.

HIGHEST JANUARY SINCE 2016
Major Auckland realtor Barfoot & Thompson's sales bounced back in January, but selling prices have eased back as vendors set realistic asking prices.

COMMODITY GAINS
The ANZ World Commodity Price Index started the year strongly with a +2.1% month-on-month lift, arresting the downward trend present throughout the second half of 2018. Dairy was the main driver behind the lift in the index, with meat also making a substantive contribution. Prices in NZD rose at a slightly higher rate.

ON CREDIT WATCH
Auckland-based non-bank deposit taker FE Investments, which is holding about $55 million worth of public investors’ money, has had its ‘B’ long-term issuer rating with S&P Global Ratings placed “on CreditWatch with negative implications”.

ESG NOW A CREDIT QUALITY DETERMINANT
Credit rater Standard & Poors is now saying that. Environmental, social, and governance (ESG) matters are climbing the business agenda and investors are increasing their focus in their investment mandates on companies that are seen as acting more sustainability. They say that ESG issues now impact credit quality.

UNCERTAINTY OVER
The day after the Hayne Report was released, the Australian equity markets have taken off. The ASX200 is up a stunning +2.3% in midday trade. Banking stocks are driving the rise, as a classic relief rally takes hold. CBA is up +4.8% (the one that fell the least in advance), Westpac is up +7.6%, ANZ is up +6.7% and even NAB is up despite the sharp Hayne criticism, up by 4.8%. The big insurers are getting some love too; AMP is up +10% and Suncorp is up +1.5%. And see this.

SWAP RATES HOLD
Local wholesale swap rate moves are a little weaker today by about -1 bp for terms to 5 years, otherwise holding. The UST 10yr yield is up +4 bps to 2.72%. Their 2-10 curve has widened to just over +18 bps. The Aussie Govt 10yr is now at 2.22% (unchanged), the China Govt 10yr is unchanged at 3.15% (they are on holiday this week), while the NZ Govt 10 yr is down at 2.23% and that is down another -1 bp. The 90 day bank bill rate is unchanged at 1.92%.

BITCOIN DIPS
The bitcoin price is marginally lower at US$3,409.

NZD FIRMS
The NZD is also little-changed against the greenback again at 68.9 USc. On the cross rates we slightly stronger at 95.6 AUc, and unchanged at 60.2 euro cents. That puts the TWI-5 back up to 73..

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USD 
NZD
End of day UTC
Source: CoinDesk

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12 Comments

Consumer spending in Aussie is dire. I suspect most people put more focus on house price declines, but this is important. Yes Dec retail sales were nasty but the trend also looks awful when you lay over other important indicators like wage growth, etc.

https://www.businessinsider.com.au/australia-economy-retail-sales-decemb...

If consumers aren’t spending then their money is being diverted elsewhere, logically. But where does the money end up? Surely if someone has less disposable income due to needing to make mortgage payments then on the other side of the equation someone is profiting. Where’s the money going from there? Is more and more money sitting idle in bank accounts of a few?

Consumers are spending, but the growth rate is falling. Car sales have fallen off a cliff. Savings rates are also falling in Australia. Debt servicing and repayments will be gobbling a fair chunk of change.

Debt servicing and repayments remove money from circulation......?

Yep, see below.

Nzdan

long time no speak, and congratulations on becoming a very good commentator on interest.. we should share that bottle of Atarangi Pinot soon. In answer to your question:

'If consumers aren't spending their money in Oz, where is it being diverted to?'
answer is debt repayments.... if you've watched any DFA stuff, which I'm sure you have, then repaying debt actually destroys money in the economy. Remember, the banks didn't have that money in the first place, it was created, https://www.youtube.com/watch?v=oSobNFYdtzM

so if more people pay back loans than take them on.... (and we should all aspire to be debt free at some point in our lives) then as that happens the money in the economy is actually being destroyed...

Hope that helps to answer the question

Best regards
Nic

Good Evening Nic

Yes that was where I was leading my "beat around the bush" dialogue. I'm not fully on board the whole banks printing money theory. I think the big issue is excess capital sitting in term deposits/bank shares, enabling the bank to lend this out on houses that were built 20+ years ago, sucking interest dollars from the productive sector, allowing the TD/shareholders to grow their portfolio which then allows them to lend more. You get a temporary stimulus as the funds are released to complete a sale, but those funds are expected to be returned with a bit on top exceeding inflation. The money doesn't disappear, but the resulting growth ends up in the hands of someone who already has a surplus of funds. 1 person with $1 million invested versus 20 people with $50k to spend, big difference to the economy long term.

Watching the Aussies squirm & squeal is (almost) a pleasure from this side of the ditch. Sure, what happens over there will usually effect us, but it's still brings a smile to my dial watching them try to work it out.
Trouble is not many were in the workforce when they last struggled, so it's all a bit new to most of them.
Sad to see, he he!

I guess the banks stock prices rebounding shows what the concensus is about the consequences of the report. Business as usual

You don't think a slap over the knuckles with a soggy bus ticket is going to stop them doing it all again?

Thanks Pragmatist... A wonderful analogy, and no it won't... so it's up to the people that do understand and you are possibly one of less than a couple of thousand, out of nearly 5 million who does understand...so I guess it's about how much do you care about your kids future or even your own to raise a voice.... As someone who has duelled with you on this site... you have an understanding of the reality that you should really share with others.]
Best regards
Nic

SanBio Co., once a darling to investors thanks to its highly anticipated traumatic brain injury medicine, has wiped out more than $4 billion in value over the past week. The company on Jan. 29 announced a surprise failure in a key trial for the drug. The shares were untraded for a week on a glut of sell orders, before exchanging hands for the first time on Tuesday and are poised for a record five-day nosedive of 78 percent.

The stock, which had the largest weighting of almost 14 percent on the Tokyo Stock Exchange Mothers Index as recently as last Tuesday, has tumbled to the No. 5 spot with a current weighting of a little over 3 percent. No other Japanese stock recorded a decline as steep as SanBio’s in the period, although Sumitomo Dainippon Pharma Co., SanBio’s partner in the SB623 drug, came close with a 31 percent slide.

https://www.bloomberg.com/news/articles/2019-02-05/little-known-japanese...