A review of things you need to know before you go home on Thursday; deposit rate changes; GDP; home loan affordability; EU trade deal; power generation; bond tender; rates higher; NZD lower

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

MORTGAGE RATE CHANGES
No changes again today.

TERM DEPOSIT RATE CHANGES
Westpac has lowered its 9 month term deposit rate by -5 bps to 3.35%.

GDP GROWTH
Gross domestic product (GDP) rose 0.5 percent in the March 2018 quarter, Stats NZ said today. This followed a 0.6 percent increase in the December 2017 quarter. Growth in service industries more than offset a fall in construction activity. Agriculture recovered in the March 2018 quarter, up 0.4 percent, following a 2.8 percent fall last quarter. A rebound in milk production contributed the most to the rise, largely due to improved weather conditions, after hot, dry weather in the December 2017 quarter. Household spending was flat in March, after increasing 1.2 percent last quarter. This movement aligns with retail industry production, which rose just 0.3 percent this quarter. Growth in business investment, particularly in plant, machinery, and equipment, was supported by an increase in the import of capital goods. Exports fell across a wide range of goods, while export services were buoyed by tourism. GDP per capita was flat this quarter, following a 0.1 percent increase in the December 2017 quarter.

HOME LOAN AFFORDABILITY
Housing became more affordable for first home buyers in nine regions and worsened in three last month, according to the latest interest.co.nz Home Loan Affordability Reports. The movements in affordability were mainly driven by changes in the Real Estate Institute of New Zealand's lower quartile selling price, which dropped slightly in May compared to April in eight regions, improving affordability in those regions. Conversely the lower quartile price rose in four regions compared to April, worsening affordability in those places. The improvement in home loan affordability was also helped by a very slight drop in mortgage interest rates, with the average of the two year fixed rates offered by the major banks dropping to 4.66% in May from 4.69% in April.

EU TRADE DEAL
The impending free trade deal between New Zealand and the European Union is expected to boost goods trading by close to 50%, according to an impact assessment. And both negotiating parties are looking to make the agreement a “blueprint” for future free trade agreements (FTAs) around the world. Today, EU Commissioner for Trade Cecilia Malmström and Minister for Trade and Export Growth David Parker officially launched (FTA) negotiations.

POWER GENERATION
A combination of the hottest month on record and an early snow melt led to a lower proportion of renewable electricity generation and higher levels of other sources of generation in the first quarter of 2018 compared to the same the quarter last year, according to the New Zealand Energy Quarterly released today by the Ministry of Business, Innovation and Employment. Renewable generation was still 81.1% of all power generated. The warmer conditions resulted in a reduction in residential electricity demand but higher commercial and industrial demand led to a slight increase in national demand.

AUCKLAND COUNCIL BORROWS NZ$200MLN
Auckland Council closed its green bond offer having borrowed $200 million. Investors will be paid 3.17% per annum, reflecting a margin of 50 basis points per annum over the swap rate for the five year term of the bonds.

RETIREMENT VILLAGE RESIDENTS
The Rates Rebate (Retirement Village Residents) Amendment Act 2018, ensures that retirement village residents who do not own their unit, but pay fees to live there, are recognised as rate payers, and are therefore entitled to apply for a rebate from 1 July 2018.

BOND TENDER
Tender 639 for $200 mln worth of bonds maturing on 15 April 2037 was conducted today. The tender had 30 bids for a total value of just $232 mln, giving it a coverage ratio of 1.16x, which is very low. The weighted average accepted yield for the tender was 3.2631%, with the lowest accepted yield of 3.2350% and the highest accepted yield of 3.3000%.

BENCHMARK INTEREST RATES HIGHER
Local swap rates are essentially unchanged. Any movement so far today has been on the firm side - the 10 yr is up +1 bps. The UST 10yr is now at 2.95%, back up +5 bps. The Aussie Govt 10yr is at 2.69, up +5 bp, the China Govt 10yr is at 3.63% (up +3 bps), and the NZ Govt 10 yr is at 2.99%, up +7 bps. The 90 day bank bill rate is up +1 bp to 2.02%.

BITCOIN UP
The bitcoin price is now at US$6,780 which is +2.7% higher than at this time yesterday.

NZD LITTLE CHANGED YET AGAIN
 The NZD is lower than this time yesterday at 68.5 USc. On the cross rate we are at 92.8 AUc and 59.2 euro cents. That has the TWI-5 still at 72.1.

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