A review of the things you need to know before you go home Thursday; some minor changes in retail rates, big positive surprise in GDP, big market reaction, NZGB issues, upside swaps, NZD stays net etc.
Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Fund manager Simplicity’s home loan offer has reduced rates for its floating offer. Despite its spruiky claim, it is not the “lowest in New Zealand”. Heartland is set at 1.85% over one year. But at 1.90%, it’s low for a variable rate. And the Co-op Bank offers 1.99% for a fixed FHB loan. Westpac cut its one-year fixed rate by -6 basis points to compete with its competitors.
CHANGES IN TERM DEPT RATES
Heartland Bank has moved its TD special offer from a six-month term to a four-month term, now offering 1.10%. Westpac is also increasing all of its TD rates for 1 year or more.
March quarter economic growth figures released by Statistics New Zealand an increase of + 1.6% * compared to the December quarter blew up all forecasts and expectations, after a decrease of -1.0% in the December 2020 quarter. The Reserve Bank had forecast a decrease of -0.6% for the March quarter. The market was expecting a + 0.5% rise – although expectations have risen sharply in recent days after the release of positive data ahead of the GDP release. Retail sales figures in particular had performed much better than expected. (* for production GDP. For expenditure GDP, the increase was + 1.4%.)
RESPONSE FROM THE FINANCIAL MARKETS
The NZD gained +40 basis points after the GDP release, although it fell -80 basis points earlier following the positive upgrade of the US Federal Reserve’s dot-plot. The 10-year NZGB rate rose from 1.67% this morning to 1.80% today, an increase of +13 bps. The yield on the 2-year NZGB bond fell from 0.25% to 0.35%, up + 10 bps.
REACTIONS FROM ECONOMISTS
Economists have changed their minds about when OCR will start to be increased next. ASB says this will likely happen in May 2022. ANZ now says it could be increased “as early as February” 2022. For BNZ, it is “earlier than May 2022”. Other banking economists are also advancing their estimates.
SMALL INCREASE IN YIELD
The last New Zealand government tender saw three bids of $ 100 million, attracting $ 815 million in auctions. The May 2024 tenor was the most popular and was aiming for a return of 0.55% per year, slightly higher than the 0.51% of the same event five weeks ago. The May 2028 tenor opted for a return of 1.43%, down from 1.41% in the previous event. The April 2037 tenor rose to 2.34%, up slightly from the 2.29% in the previous equivalent event five weeks ago.
HEAD OVER WATER AGAIN
the Australian unemployment rate fell from -0.4% to 5.1% in May and returned to pre-pandemic levels. This means they added +165,000 jobs in May from April, but “only” +265,000 as of May 2019. Full-time employment is back above the norm of there has two years of +174,000 or only + 1.3% in two years when employees headcount increased by + 2.1%. However, the markets applauded the improvements. (The unemployment rate in New Zealand is 4.7%.)
australia population growth fell to just + 0.5% in the year through December 2020, the weakest expansion in at least 40 years, possibly longer. (New Zealand’s population growth in 2020 was + 1.7%.)
GOLD DROPS HARDER
Compared to the same time yesterday, the price of gold is down -US $ 35 and now at US $ 1,821 / oz in early Asian trading. It closed in New York earlier today at $ 1,812 / oz and in London at $ 1,861 / oz.
DECLINE IN THE UNION EQUITY MARKETS
The S & P500 closed down -0.5% after the Fed projections which increased the prospect of higher interest rates. Tokyo opened with a pretty steep -1.1% drop in early trade and Hong Kong opened down -0.5%. Shanghai is down -0.1% in early trade. The ASX200 is down -0.5% and off its record. The NZX50 Capital index was down -0.4% at the end of the session.
STRONG INCREASE IN SWAP & BONDS RETURNS
We do not yet have today’s swap closing rates. If there are any significant changes again today, we will update this item. They probably got up. The 90-day bank note rate was up +1 bp to 0.33%. The benchmark ten-year Australian government rate is up +10 basis points to 1.59%. The ten-year Chinese government bond is unchanged at 3.15%. The ten-year New Zealand government is up +13 basis points to 1.80% and above the RBNZ’s previous correction of 1.78% (+13 basis points). The ten-year US government is up + 7bp to 1.57%.
NZ DOLLAR UNCHANGED DESPITE VOLATILITY
The Kiwi dollar is down -40 basis points from yesterday at 71 USc. But this masks a drop of -80 bps after the Fed’s statement, then a recovery of +40 bps after the surprise of New Zealand’s GDP. Against the Aussie, we’re up +20 bps to 93 AUc. Against the euro, we are up 20bp to 59.1 euro cents. This means that the TWI-5 is actually unchanged from this time yesterday at 73.2.
BITCOIN slips again
The recent bitcoin price surge is fading further and it now stands at US $ 38,670 and down -3.1% from yesterday. Volatility over the past 24 hours has been high at +/- 3.1%.
This soil moisture table is animated here.
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