A review of things you need to know before you go home on Wednesday; new very low home loan rate, 95% LVRs, strong new car sales, subdued job ads, strong commodity prices, swaps steepen, NZD holds

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

MORTGAGE RATE CHANGES
The really big news today is HSBC launching a 3.85% fixed rate for 18 months under their Premier program. NZCU Baywide is now offering 95% LVR home loans, to a maximum of $600,000.

TERM DEPOSIT RATE CHANGES
No changes here today.

MORE AT LOWER PRICES
Sales volume activity was up at Auckland realtor Barfoot & Thompson in May although prices eased slightly for the second month in a row. Their median price in Auckland is now $820,000 (down -$10,000), their average price is now $918,465 (down -$11,800).

DRIVING SUCCESS
Strong new car sales in May are pointing to all-time records in June. New car sales records still being broken as buyers choose bigger vehicles. SUVs now account for 65% of all car sales. Tourist car sales also strong.

GOING SOFT
ANZ's job ads data series was updated today and that showed a subdued picture. ANZ says: "Job ads increased +2.2% in May, but remain consistent with soft employment growth. While the labour market is tight, the economy is dealing with headwinds and business caution is weighing on labour demand."

A WEAKNESS IS A STRENGTH
Far from being a disadvantage, New Zealand's predisposition for commodities in international trade doesn't actually seem to be hurting us. Today's commodity price index data for May from ANZ reveals more strong rises, the fifth consecutive rise in 2018. Of the 17 commodities, ten rose, three were unchanged and four declined – the largest contributions came from cheese, skim milk powder and lamb, together making a +1.1% contribution to the monthly change. Prices rose across all broad categories except seafood, which was unchanged. Aluminium prices lifted by most (up +3.2%), finding further support from global trade tensions; horticultural prices (up +2.8%) were a close second. The weaker Kiwi dollar in the month helped boost NZD returns +5.0% m/m, lifting annual growth to +6.8%.

UNDER-PERFORMER
Statistics NZ reported a key quarterly series today, Building Work Completed. Infometrics assessment was: "Construction activity had a disappointing start to 2018, with the volume of work in the March quarter dropping -0.9% from December. Non-residential construction was almost -10% below expectations for the quarter, with Auckland the biggest contributor to this shortfall. Residential activity also declined over the quarter, but the 0.5% drop was smaller than we anticipated." Still, on a year-on-year basis, this completed work was up +7.0%.

4.8% GROWTH NOT ENOUGH
The growth in local authority fess, fines and rates is still rising at +4.8% pa, according to new data updated today. These public (monopoly) bodies are vocal that this is not enough, seeking central government authority to allow new taxing avenues. They are getting a sympathetic ear.

OUT-PERFORMER
The Australian economy grew much stronger than expected in the first quarter of 2018, up +3.1% pa compared with growth of +2.4% on Q4-2017. Markets were expecting an improvement (+2.8%) but not as much as was delivered. The Aussie currency rose strongly on the news. (The New Zealand GDP result is due to be announced on Thursday, June 21, 2018. Analysts are yet to give a view, although the RBNZ is expecting +2.9% growth.)

THE PAYOFF FOR LAGGING THE FAD
One reason the Aussie economy is doing well, and both their state and Federal finances are in better shape, is because of the surprising strength in the price of brown coal ("thermal coal" for burning in power stations, as opposed to coking coal, used to make steel). It seems that around the world, politics is giving up coal production faster than alternative sources of electricity are coming on stream, so the price for those still mining it is rising fast. And the Aussie states collection of royalties are benefiting. Who would have thought? The lessons of moving too fast are raw in Australia, as anyone who buys electricity or gas there know too well.

ANOTHER BIG BOND ISSUE
Industrial and Commercial Bank of China (New Zealand), rated A1 Stable (Moody’s) / A Stable (S&P Global), has launched a new $75 mln Floating Rate Note. The issue has a tenor of 3 years with an indicative margin of 1.10% over 3-month BKBM. Today's 3-month BKBM is about 2.00%.

BENCHMARK INTEREST RATES STEEPEN
Local swap rates are unchanged today for the two year duration, but up +1 bp for five years, and up +2 bps for ten years. The UST 10yr yield is unchanged, holding at 2.94%. The Aussie Govt 10 yr is now at 2.75%, down -1 bp. The China 10 yr is at 3.68%, also down -1 bp. But the NZ Govt 10 yr is up +1 bp to 2.82%. The 90 day bank bill rate is unchanged as well at 2.00%.

BITCOIN HOLDS
The bitcoin price is now at US$7,608, up +2% from this time yesterday.

NZ DOLLAR UNCHANGED
The NZD is unchanged at 70.4 USc. However we are lower against the Aussie at 91.9 AUc following their strong GDP outcome, but little changed against the euro at 60 euro cents. That has the TWI-5 now at 73.1.

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