A review of things you need to know before you go home on Wednesday; no rate changes, QV data eases, used import car sales weak, dairy prices jump, short-termism extreme, swaps stable, NZD falls, & more

A review of things you need to know before you go home on Wednesday; no rate changes, QV data eases, used import car sales weak, dairy prices jump, short-termism extreme, swaps stable, NZD falls, & more

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

MORTGAGE RATE CHANGES
No changes here today.

TERM DEPOSIT RATE CHANGES
None here either.

TURNED
QV figures show the average residential property value in Auckland has declined for three consecutive months and is now lower than it was a year ago. Everywhere else, the growth in values is slowing.

WITHERING
The number of used imported cars sold in February was -7.6% lower than in the same month a year ago. This is now the 13th consecutive month of falling sales (a trend that follows 18 consecutive months of expansion). The withering of this used import category is in contrast to the expanding (but also slowing) new car category. The annual sales rate of 144,600 is now as low as what it was in August 2016 and represents a fall of -13% since its peak in January 2018.

HEALTHIER
Today's dairy auction brought higher prices yet again, up +3.3% and completing a string of seven consecutive gains that have raised prices almost +24% in US dollar terms. This auction saw the key WMP price rise an impressive +6% in two weeks. Overall, the gains were magnified in New Zealand dollars as the currency slipped back, and allowing a rise of +4.3% in local currency from the prior auction. Over the same seven latest auctions, prices in NZ dollars are up a bit more than +24%. Year-on-year WMP prices are up actually down -1% in USD terms despite today's gain, but are up +6% in NZD terms.

SHORT-TERMISTS
Customers of New Zealand banks are extreme short-termists. Only 4.3% of all customer deposits at banks are for terms of greater than 1 year. While that isn't a record low, the trend is to even more extreme short-term profiles. Banks have no choice but to seek funding from wholesale sources to meet their core funding and matching ratio obligations. They sure can't rely on customers

TURNING
The Australian economy expanded at its slowest pace in more than 18 months, edging up only a +2.3% annual rate in the December quarter, far below the expected +2.6% and the Q3-2018 increase of +2.8%. Inventories are up; household consumption spending growth slowed. It was a surprise that weighted in the Aussie dollar. And the NZD dipped in sympathy. (Eagle-eyes might also notice that on a per capita basis, Aussie GDP has now fallen for two consecutive quarters.)

BLAMING SUPPLY WOES
Meanwhile, RBA governor said a surge in population and a lack of new dwellings were the main factors behind the sharp run-up in house prices in Sydney and Melbourne. He is now not looking at higher official interest rates in 2019. And he is saying that the housing woes ('adjustment') won't disrupt their economy.

SWAP RATES UNCHANGED
Local swap rates are little changed today. If there is a shift, it is a slight softening at the long end. The UST 10yr yield is also little-changed at 2.72%. Their 2-10 curve is slightly lower at +17 bps while their 1-5 curve remains barely inverted at -2 bp. The Aussie Govt 10yr is up +2 bps to 2.17%, the China Govt 10yr is up +3 bps to 3.24%, while the NZ Govt 10 yr is down -1 bp so far today to 2.20%. The 90 day bank bill rate is unchanged at 1.91%.

BITCOIN UP
The bitcoin price is back up to US$3,827, a rise of +3.3% today.

NZD EASES
The NZD has eased following the Aussie GDP miss, taking us with it to 67.8 USc. But we are holding against the Aussie at 96.1 AUc, and little-changed at 60 euro cents. That puts the TWI-5 down to 72.5.

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USD 
NZD
End of day UTC
Source: CoinDesk

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24 Comments

And he is saying that the housing woes ('adjustment') won't disrupt their economy.

Tell em he's dreamin!

You only need to look at household consumption in today's GDP print....

I agree. Plus the fact that Australia is technically in an economic recession on per capita basis may be an early sign of it. Even household spending per capita must be in the red, given the rapid population increase.

The overall growth figure somehow ended on the positive side only due to generous government spending on large infrastructure projects and public services.

Banks, investors getting free ride from depositors

https://www.newsroom.co.nz/2019/03/06/473876/banks-investors-getting-fre...

Sadly, some journalists have quite poor financial literacy and that comes through in their reporting.

The 5-year fixed-rate bond had a 3.70 percent coupon (interest rate), far in excess of the 2 percent offered to ANZ’s depositors using its “serious saver account”.

It amazes me why anyone would think that an at-call accounts should pay the same as a 5 year bond.

Almost all offer rates involve a positive yield curve (its only deep in a recession when that is not the case). Ignoring the yield curve in the reporting is plain wrong.

If New Zealand depositors invested for longer than a year, they could also get better rates. In fact, banks offer premiums to depositors for longer term above what they pay wholesale investors. But ~96% of retail depositors just won't respond to that premium. Not sure why.

Forcing anyone, including a bank, to pay more than market rates is as wrong as forcing depositors to have to choose long terms to get better rates. We are all adults, and we make our own decisions based on market offers. Screwing the scrum via regulator powers will just cause other unintended outcomes.

Besides, there are options to invest for higher returns other than though banks (even ones with investment grade credit ratings). Not choosing those options is hardly a bank's problem.

The main problem with the link you provided is the low quality of the analysis.

If New Zealand depositors invested for longer than a year, they could also get better rates. In fact, banks offer premiums to depositors for longer term above what they pay wholesale investors. But ~96% of retail depositors just won't respond to that premium. Not sure why.

Have you considered investor psychology? Sure they can get better rates for >12 months, but people make subconscious and conscious trade offs when comparing two different IRs. It's quite possible that investors cannot rationalize the benefits between the differential.

Well the yield on floating mortgage rates is high at 5.95% plus, while longer term fixed rates are lower.
Floating 5.95. Fixed 1 year 3.95

Maybe people are worried if they have a longer term deposit and interest rates rise they will stuck in a term deposit that is "sub optimal". If the deposit is shorter than a year once the deposit matures they can get the higher rate. I have some money in a Rapid Save account with the BNZ - it's my emergency fund. Could i get a better rate sure but it is there for a purpose and it is a trade off I'm willing to "suffer"

I'm similar to you.

While house prices in small towns are booming.
Wairoa up 27% annually.
https://www.radionz.co.nz/news/business/384059/nz-regional-town-house-pr...

When Wairoa is up 27% we know the end is surely nigh. The small town I live in was “booming” about 11 years ago, then we know what happened next...

Wairoa, Mahia peninsula, Gisborne, .... what’s not to like?

I guess there are a few more opportunities there than the next stop East...the Chatham Islands.

HSBC aggressive in Canada. Have just introduced a 5 year 2.99 rate. 50bps below rivals. A little leeway on its 2 year in NZ.

Australia's economy has slumped into a per-capita recession for the first time since 2006, leaving the country relying on population growth to propel its economy and raising questions about the Coalition's economic management months out from the federal election

https://www.smh.com.au/business/the-economy/australia-falls-into-per-cap...

Population growth propelling economic growth...where have we seen that before?

Everywhere

Trademe listings are moving up again after a flat week last week. Why the pause? Who knows.

People waiting for March madness?

Go Wairoa.

Small towns are hip and attracting not only Aucklanders, but also refugees from regional cities.
Large cities are a scourge on humanity, and families are fleeing.

250 new listings for Auckland on TradeMe today.

Minus expired listings, total now up to 13,708. Will be interesting to see if it cracks 14,000 again.

If I extrapolate listings from this time last year into now it would certainly crack 14,000 by mid-April – it not sooner.

Taking a very superficial view of recent supply/demand variables – demand helped of late by lower interest rates (though questionable availability?) and supply up say 12% over this time last year (but the increase of possible dubious quality?).

And yes – it’s obviously far more complex than that – interesting to watch it all play out though.

Auckland listings on realestate.co.nz poked it's head thru the 14,000 level overnight.