What happened Wednesday | interest.co.nz

2022-06-15 12:42:00 By : Mr. Steve Wang

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES Unity Money (ex NZCU Baywide) raised home loan rates for 6 and 12 months.

TERM DEPOSIT & SAVINGS RATE CHANGES The Cooperative Bank has raised most of its TD rates. Unity Money also raised their TD rates. TSB also raised its Websaver rate from 0.70% to 1.10%.

HOUSE PRICES DOWN, VOLUMES DOWN SHARPLY The REINZ is reporting significant house price declines in most parts of the country in May. In fact, Median prices in Auckland now lower than they were a year ago, with the median price on the North Shore down by -$145,000 in May. Sales volumes dived to be -28% lower than for May 2021, and -30% lower than the average of the five May months prior to the pandemic.

WIDENING C/A DEFICIT DOESN'T MATTER - UNTIL IT DOES The Q1-2022 current account deficit widened in data released today to -$8.5 bln. That was $1.9 bln worse than the previous quarter, mainly due to an $871 mln rise in the value of goods imports and an $831 mln fall in the value of services exports. For the year, the C/A deficit has topped -$23.3 bln or -6.5% of GDP which is up markedly from -5.8% of GDP for the year to December 2021. But for all that, this is about what markets expected. (For perspective, the US current account deficit is -3.1% of GDP.)

MAERSK LAUNCHING NZ COASTAL SHIPPING SERVICE Global shipping line Maersk says it's launching a dedicated New Zealand coastal service, Maersk Coastal Connect, for the first time in its 25 years of operating in New Zealand. Maersk will use two 2,500 TEU container vessels on a weekly basis sailing between Timaru, Lyttelton, Nelson, Auckland and Tauranga. It says the combined North to South and South to North capacity will reach 250,000 TEUs annually with the service to start on July 12 to be operated by NZ crew.

FOREIGNERS INVESTING HERE Reassuringly, foreigners still like investing here. Foreign investment recorded a net inflow of $4.5 bln (which increased liabilities) in the March 2022 quarter. This was mainly driven by portfolio investment net inflow of $4.8 bln and direct investment net inflow of $2.5 bln.

LOWER FOREIGN DEBT At 31 March 2022, New Zealand’s international assets were $342.1 bln, $4.8 bln less than at 31 December 2021. International liabilities were $502.3 bln, down $7.0 bln over the same period. This resulted in a net liability position of $160.2 bln, $2.2 bln narrower than at 31 December 2021 and 46% of annual economic activity. In 2019 before the pandemic it was 57% of GDP.

FILLING ITS BOOTS We recently noted that ASB was looking for $100 mln in an unsecured five-year bond issue plus the ability to accept unlimited oversubscriptions. In the end they accepted $750 mln from investors, and are paying 5.52% for these funds. For comparison, ASB offers term deposit investors 4.0% for a five year term.

TRIGGERED There was a carbon market auction today. Demand was sufficient to trigger release of remaining 1.6 mln units units from the cost containment reserve in addition to the regular 4.8 mln units scheduled. NZUs traded at $76.00 today, above the trigger price of $70, so that is why the reserve additions were released. The recent history of the NZU carbon price is displayed in the RH sidebar of the desktop version of our rural section.

SIGNS OF TOUGHER TRADING FOR SMEs & COMPANIES Credit rating agency Equifax is noting that consumer delinquency volumes remain flat for 30 and 90 days past due bands, with mixed experience by product; Telco & utilities delinquencies have increased month-over-month for April 2022 across both delinquency bands, with some rise in 30 days past due for vehicle loans. They also see more commercial debt delinquencies, led by construction industry delinquencies.

MAERSK LAUNCHING NZ COASTAL SHIPPING SERVICE Global shipping line Maersk says it's launching a dedicated New Zealand coastal service, Maersk Coastal Connect, for the first time in its 25 years of operating in New Zealand. Maersk will use two 2,500 TEU container vessels on a weekly basis sailing between Timaru, Lyttelton, Nelson, Auckland and Tauranga. It says the combined North to South and South to North capacity will reach 250,000 TEUs annually with the service to start on July 12 to be operated by NZ crew.

SHARP JUMPS Yesterday there were some very unusual jumps in wholesale and benchmark interest rates. They continued today although not by quite as much (see below). These sharp rises in local wholesale swap rates, followed by an 11 year high for the main US Treasury benchmark, are putting mortgage borrowers on notice that they face even higher rates in the very near future

SWAP RATES UP FURTHER We don't have today's closing swap rates yet but they have probably jumped yet again. Additional rises of more than +5 bps will likely be recorded. The 90 day bank bill rate is up at 2.75%, a second consecutive day it has risen by +9 bps. That means it is now a better than equal chance of a +75 bps rise at the next RBNZ OCR review. The Australian 10 year bond yield is now at 4.10% and up another +12 bps from this time yesterday. The China 10 year bond rate is now at 2.84% and up +1 bp. And the NZ Government 10 year bond rate is now at 4.30%, and up another +8 bps from this time yesterday and just higher than the earlier RBNZ fix for this bond which was also up +7 bps at 4.29%. The UST 10 year is now at 3.42% and up +6 bps since this this time yesterday (although it did hit 3.50% earlier).

EQUITIES FALL HARDER On Wall Street the S&P500 ended its Tuesday session down -0.4%. Tokyo has opened down -0.7%. Hong Kong has opened up +1.3%, with Shanghai up +1.2%. The ASX200 has opened its Wednesday session down -0.3% in early afternoon trade. The NZX50 is flat in late trade today.

GOLD DOWN In early Asian trade, gold is down -US$9 from this time yesterday, now at US$1816/oz. But that is higher than the US$1811/oz it closed at in New York.

NZD SLIPS FURTHER The Kiwi dollar is lower again, but only marginally from this time yesterday, now at 62.4 USc. Against the AUD we are little-changed at 90.2 AUc. Against the euro we are -½c softer at 59.7 euro cents. That all means our TWI-5 is lower at 70.5 and -20 bps lower in a day.

BITCOIN STOPS FALLING Bitcoin is holding at its new lower level, now at US$21,869 and up 2.3% from where we were this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.5%.

Daily exchange rates Select chart tabs US$ AU$ TWI ¥en ¥uan €uro GBP Bitcoin Daily benchmark rate Source: RBNZ Daily benchmark rate Source: RBNZ Daily benchmark rate Source: RBNZ Daily benchmark rate Source: RBNZ Daily benchmark rate Source: RBNZ Daily benchmark rate Source: RBNZ Daily benchmark rate Source: RBNZ End of day UTC Source: CoinDesk

Daily swap rates Select chart tabs 1 year % 2 years % 3 years % 4 years % 5 years % 7 years % 10 years % Opening daily rate Source: NZFMA Opening daily rate Source: NZFMA Opening daily rate Source: NZFMA Opening daily rate Source: NZFMA Opening daily rate Source: NZFMA Opening daily rate Source: NZFMA Opening daily rate Source: NZFMA

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Just heard ZBs 4pm news "House prices are still rising" I kidd you not. They then went on to qualify it "year on year". Very slanted journalism at best.

Reminds me of another joke:

Q. What's the definition of propaganda?

A. A socially correct male goose.

Or on a certain nations quiz show. can you give the christian names of the following famous statesmen, 1) Churchill 2) Roosevelt 3) Ghandi?Contestant thinks and thinks finally when prompted when running out of time responds. Not sure myself about any of these but tink  the last one might be Goosey Goosey?

#2 is an interesting one, who do you think of first, Teddy (Theodore) or Franklin?

Guess a bob each way.Freddie?

Excluding Auckland, now that they've dipped into the negatives YOY.

Suppose they can always switch to the 5 year annualised return if they really want to torture the numbers.

Yes they will have to start giving 2 yr  on 2 yr house price rises lol

Yes same when I listened to the radio today....year on year prices rises are softening....as opposed to prices are now falling. 

To be fair they are also still playing the propeller investment ad that the best way to pay off your mortgage is to buy an investment property...

Advertising revenue and paid media 

Propellors  advertisment is all screwed up or just twisted.

If you take into account inflation it’s down y on y. Over next few months as rates and inflation  keep climbing they will find another angle.

ZB is the shittiest centre-right talkback radio. It exists as a pressure valve to echo back stupid points for very mild pushback against the current radical neoliberal agenda.

Since the right wing gave up on defending morality or fighting against the shitlib agenda long ago, it can only talk about economics, and as such can only bait people to drink the poisoned chalice with the promise of easy riches.

Cindy and Robbo are kinda neoliberals. Mallard's just into anything related to cronyism. 

"House prices are still rising"

They can say what they want but fact is, if you are not dealing in facts at this point in time you are walking a dangerous path. Up to each and every person to do their own homework now more than ever.

"The 90 day bank bill rate is up at 2.75%, a second consecutive day it has risen by +9 bps. That means it is now a better than equal chance of a +75 bps rise at the next RBNZ OCR review"

Was it Carlos saying a 75bps hike in OCR that people were laughing at recently? Might be more likely than not now. 

If we don't get a 75 bps from Orr next month the exchange rate is going to dip into the 50s against USD after the Fed bumps between 75 and 100 bps tomorrow... and you know what that means...

Orr is seeking more guidance from Tane Mahuta (another Mahuta !)


Not completely the same scenario but I get vibes similarly from what has played out in Montreal. Once the leading Canadian city, circa 1976 Olympics for instance. Vibrant, cultured and energetic. Then the compulsory imposition of French wwhatever you might think of. Can’t call a pizza a pizza for example. Toronto is now resultantly booming.  Likewise Australia beckons here, more and more so.

I'm 67 this year, middle aged children have been independent for 20+ years (both have homes), siblings and mum have been in Oz  15 years. My 2nd wife of nearly 30 years died last year so I'm on my own now spending this year sorting out her estate, told myself no irreversible changes this year.

I've decided to wait & see results of next year's election before deciding whether to move to Oz. I'd fail Oz Super means test but would probably prefer to live in a democracy without racist co governance.

Yeah - they don't have the 'co'.

They just have racist governance

I agree, however Oz is now showing signs of improving in a few areas without Scomo. I also have other relatives & ex work colleagues in Oz who are from diverse ethnicities - they seem to manage their lives very successfully, tend to simply ignore the political rhetoric. My late wife was originally from Malaysia (Chinese ethnicity) so we knew where racist co governance ends up - endemic disadvantage & corruption, destroying both the social fabric and the economy.

There are other drivers 'wrecking the economy' now. We are going to continue blaming other people and other things for that - Putin, Covid, Supply-chains, anything but the truth.

I have an Aussie partner, we've been here 40+ years, and wouldn't go back there if you paid us. Where humanity is going, Aus will be - physically and socially - hell

Reflecting on my own views & experience a bit more I'd say that I see co governance as implementing legally institutionalised racism. At least without that there's still hope of humanity's collective enlightenment and improvement.

He is a moron. A fair weather sailor who sat around while bull markets increased the value of the NZ super fund, and claimed the credit.

Now he thinks a Maori world view will make everything better. Come again? What fool would ever think this. Maori had no functioning economy, no system of finance and no written language. Before Europeans arrived they were a quaint Stone Age people growing a few veges, harvesting seafood and burning the occasional forest to flush the Moa out.

It’s absurd that he is now prattling on about stuff that he has even less knowledge of than finance. In fact it’s an embarrassment.

He should be fired quick smart.

Elections can’t come soon enough so that people like this guy can be put to pasture permanently and we can begin to fix the mess that he and his ilk have made.

A lot of assumptions there. The Maori weren't 'stone age' - that's a misconception. They were of the firewood age. And they were at the limits, at circa 150,000, of what NZ could support. We have a few more winter-tolerant food species, and a little more science, but without the injection of fossil energy, I reckon NZ can carry 2 million, tops.

Ask youself who was closer to sustainable -  in the real sense of the word - and it is the Maori, by some orders of magnitude. But they were still overpopulated enough to have to fight over resources....... Some of their approaches, then, will be more applicable than 'ours'. But too many are making the mistake of believing Maoridom to be a 100% panacea. Which it isn't.

Not sure about your assumptions here. The Stone Age period was the period when tools and weapons were crafted from STONE and ended after humans discovered how to smelt copper and other metals with FIRE. There is zero evidence of Maori ever making weapons or anything else with metal, only STONE. Therefore, STONE AGE applies here.

to be fair have myself  gleaned a lot of value from pdk’s contributions here. but quite honestly I have never heard of the firewood age and neither has google or wiki or any other identity as far as I can see?

Neither. But, facts as they may be, we have a financial disaster looming. Maori vote for the idiots in Labour by an overwhelming majority. They are also the demographic who as most at risk as a result of Labours and Orrs actions. So I can only assume that their world view cannot be that crash hot. They completely failed to sniff out this woke bunch of losers and will suffer badly for it.

And the wheel, where exactly was that then?

They didn’t know about the wheel either. 

To my mind David Lange summed matters up rather succinctly. Referring to a claim by Tau Henare that the navigation trans pacific had put Maori into world leadership category at that particular time in history he mused that that was a bit rich if you care to take a look at Salisbury Cathedral in comparison.

A national government isn’t going to change any of this.  it’s entrenched in the civil Service thanks to the education system of the past 3 or four decades. 

The market has already given its early review of NZ$ down from 74 to 62 a drop of 16% and the trade defecit has widened and will widen further, the good news is exporters will get a bit more. The bad news is that the Fed reckons raising interest rates will reduce inflation but fail to mention that will also cause a recession like it has done every time these same conditions apply likely stating this time its different, except its not. Is this part of a plan or simply our "leaders" cannot learn from history. Did I mention the approx $5 Billion loss the RBNZ is sitting on as a result of their betting the NZ$ in the market and being wrong, time for a visit from madame guillotine.

I have been calling 0.75% since Feb, but fortunately people weren't laughing at me.  I think it was Carlos that people were laughing at.  Fortunr has been quite vocal about a minimum of 75bps too.    

by Nzdan | 21st Feb 22, 10:21pm

I'm locking in my bet for a 0.75% rise to 1.5%.  

by Nzdan | 12th May 22, 8:30pm

That's okay nobody ever takes me seriously in life. Wish I could say I'm going to enjoy having the last laugh but this is seriously going to hurt a lot of people.

Not raising by at least 75 bps each at the next two OCR reviews, considering the current circumstances, would be a serious dereliction of duty on part of the RBNZ, and a blatant breach of its core mandate to control inflation.  

If the FED goes 75 we are really in trouble. Orr will be forced to leapfrog the effect that will have. We were cranking it up with little effect before the FED even started their engine so 100 will not be keeping up. Pretty scary stuff really.

Carlos - I hope you are wrong but think you are right - again.

And if so, isn't raising the OCR to try and influence the currency futile? 

Carlos, I enjoy your posts, but I'm going to disagree with you on the FED increasing by 75 point or more.  I think they'll say 75 points could happen in the near term though.  My reasoning is, they have consistently said they don't want to surprise the market.  The markets will then bounce up for a few days to a week, then continue dropping, as reality hits.

The external current account deficit is at a very serious level. But it is very close to where I expected it to be.  It is not sustainable.  And that is a key reason why I remain nervous about the NZ dollar.   Once the financial reef fish figure out the situation then anything could happen given the need for an external current account deficit to be balanced by a capital inflow.

The limitation of comparing it to the US current account deficit is that the $US is in a unique position as the global reserve currency. But in any case, our deficit is twice as big as a proportion of GDP.  Last time I looked, Australia was running a current account surplus. And that is a key reason why I expect the AUD to strengthen.

Does Foreign Direct Investment Generate Economic Growth? A New Empirical Approach Applied to Spain

The banks can't keep the current interest rates at these swaps. 1 year rate should be 5.5% very soon.

I do wonder how long it will take them to respond. 

Can they just draw on FLP?

the FLP is  ending at the end of this month i think......

Yes the only thing the FLP is achieving is subsidizing banks with losing tax payer funded bonds.

Maersk. Interesting development. Massive international shipping concern who have been consistent carriers, reefer & general cargo, to and from NZ for over 40 years I would think. Therefore they must have done their sums thoroughly enough.This may offer an opportunity to greatly enhance cargo  flow  from north to south and back again. Let’s just hope industrial, environmental, and local body identities  are not already priming their torpedoes.

They must see congestion clearing at AKL port, or maybe plan on substitution later?

Perhaps picking a reduction in road transport?

Indeed - it would seem the US is in need of Russian Ural crude.

US postponed sanctioning of Russian Central Bank, Vnesheconombank, Otkritie Bank, Sovcombank, Sberbank and VTB Bank so they can process all energy related transactions until early December. A rare but sensible move by Washington. Meanwhile EU continues on its suicide mission. Link

This is motivated by the current exporting crisis. Speak to anyone in the horticultural industry, no one can get containers to ship goods and no one can get reliable ship schedules to move goods to anywhere.

The state should fund three SOE shipping services to provide shipping with each of the three alliances instead and use some of that printed money to buy some ships to ensure exports keep flowing.

The state should fund three SOE shipping services to provide shipping

someone will be along shortly to shout "communism!"...

Maersk are running with very high margins at the moment, so there must be money to be made in these routes, either directly or by ensuring their larger (International) vessels run efficiently, otherwise they wouldn't bother.

Or is it a case of sending all new ships on new routes so as to not disrupt the supply imbalance and price on the main routes. 

The current account deficit is shocking!! It will increase even further with the NZD dropping and and our continuous borrowing to fund imported goods and services. I think the inflow of capital during the March 2022 is related to overseas investors buying up land for carbon farming practices.

If the dollar drops then imports will decrease (in terms of overseas currency) because less will be bought. And this will decrease the deficit. But it will be painful.  Investor buying up land for carbon farming will have had a small effect on the NZ dollar (making it stronger) but that has not been the major cause of the situation we are now in. The loss of tourism and education services are key factors but they are not going to come back in a hurry to their pre- pandemic levels.   We are in some trouble.   So far we have been saved by record prices for our agricultural exports - primarily the much maligned dairy, but also beef and sheep meats.  KeithW

Interesting to note that my colleague is tracking shelf butter prices across Asia. Some large increases followed by intense discounting. You can infer what you want from this but I imagine price sensitivity is impacting upon sales. VinaMilk UHT prices have barely moved up in 2 years compared to foreign brands. You can guess what brand the shopper will favour. 

On the "plus" side, for balance of payments at least, those record food prices don't look like going away any time soon. But also might see a change in the balance of what constitutes marginal grazing land being converted to carbon farming?

KW you may bring me up to date here. If the NZ$ plunges that basically lifts export returns invoiced in overseas currencies. Going back quite a bit 70/80s for instance, when NZ was something of a weak seller for quite a bit of primary produce it was common practice for the importers to pick off any devaluation and demand the CIF prices to be lowered relatively. Would hope the dramatic reduction of players competing in say the meat industry will have sorted that out largely by now,  but have you noticed the trend as still existing? 

I wonder to what extent currency advantages are negated by proximity to mkt at the moment. 

They don't 'invest' David. They put a foot in the door to make a profit, which returns overseas. That says a net loss to NZ, particularly if resource depletion is involved (as it nearly always is; virtual can be done anywhere).

Try: Colonise. It's a much more accurate description.

Are you for real? This is an investment and finance site, making a profit is the whole point. Foreign dollars funding local ventures creates jobs, tax revenue etc. Countries haven't existed in a financial vacuum for decades.

In my experience.. "foreign dollars" tends to purchase existing assets rather than creating "new" ventures....AND... the cashflow from those assets often enuf , goes offshore as repatriated income...

HENCE.... our big problems with NZs' Current acct..     Chronic deficits that make NZ a Chronic Debtor Nation.

So John Key flogging off some of our state assets overseas wasn't a good idea? His mates that collected around $400m in sales commission certainly thought so.

That’s what happens when you follow a spendthrift labour government. The same is going to be a problem in 2024. Read the comments here and you see an economic apocalypse. It would be foolhardy to rely on tax projections. 

Yeah right.  Key followed a labour government that paid down heaps of debt from the previous National government.

Australian minimum wage increased by 5.2 per cent in Fair Work Commission decision


Looks like swaps are up 10-15 bps right across the 1-10y. 

The vanilla pundits are starting to call it https://i.stuff.co.nz/opinion/128954010/its-the-interest-rates-stupid--…

Gold is faltering, and "digital assets" are making kaka in their beds.

So much for hedges against inflation.

Value of fixed debt eroding nicely. 

Gold is faltering, and "digital assets" are making kaka in their beds.

So much for hedges against inflation.

The gold price is manipulated so that's why it's not really tracking inflation.

As for digital assets, only BTC is the real hedge, if you buy into the idea. Since the start of 2020 (before the latest money printing really started to kick off), BTC is up 200%. Looks like an inflation hedge to me. 

That's a good spin from "it's dropped in value 70% since it's all time high".

And it sounds like there's issues withdrawing funds from exchanges, with absolutely no central intervention or protection. 

At least Tulips looked pretty.

That's a good spin from "it's dropped in value 70% since it's all time high".

Still up 200% as I said (just before the money printing too center stage). If it had stayed at its ATH, it would be closer to 500-600%. 

It should be up 500-600% like Amber Heard would be less guilty if only she had a chance to speak more.

- means of exchange: not really

Nice cherry picking on the dates what about those that got into BTC during the last 8 months. Crypto fans should probably go into hiding at the local church and start praying for a few months.

If house prices are falling , don't sell your house. What's the problem?

Anyone think Orr will suddenly get a position in Europe organized by Jacinda...


ECB has called an emergency meeting as the credit market rout is driving up yields on bonds. It seems to be the Italian 10 year going above 4% that triggered the meeting. Essentially there is fragmentation of Euro Zone markets as less credit worthy countries in Southern Europe will find it difficult to manage debt as rates rise.

However, unlike Euro Zone crisis 1.0, buying bonds will be difficult because the ECB is now in a very high inflation environment. Need another plan.

Putin will be hoping a few cracks start opening up among the European allies. 

Ind Ob - Putin hopes will be fulfilled and hopefully the Evil Union will collapse into the cesspit of incompetence bureacracy and corruption it has dug for its members.

India is already taking up the slack with oil imports. That's the problem with high prices the Russian's just discount it a bit and struggling countries buy it instead. You cannot lose selling oil and gas the whole world is dependent on it now.Tens of billions still pouring into Russia they are unstoppable.

Yeah it wasn’t that long ago those countries were very near insolvent, has anything changed since then other than 14 years of low interest rates and lots of can kicking?

Well Greece, Italy, Portugal and Spain actually have more debt than during that crisis but had little issue due to low rates subsequently. Greece has some protection because half of it's debt is on the never never with the ECM. 

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