A review of things you need to know before you go home on Monday; no rate changes, Heartland seeks funding, FMA raises the AML bar, Treasury gets no surprises, wealth effect examined, swaps up, NZD firm & more

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

MORTGAGE RATE CHANGES
Nothing to report. Of particular interest is how and when other banks respond to the hot 5 year rate from Kiwibank.

TERM DEPOSIT RATE CHANGES
None here either.

HEARTLAND BANK SEEKS MINIMUM OF $75 MLN
Heartland Bank wants to borrow a minimum of $75 million through an issue of five year, unsecured, unsubordinated, fixed rate notes. The offer is open for oversubscriptions. Heartland says the interest rate will not be less than 3.50%, with the indicative margin range 1.75% to 1.90% pa. The interest rate and issue amount are expected to be announced on April 5. To be listed on the NZX debt market, the notes are expected to have a BBB credit rating from Fitch.

RAISING THE BAR
The FMA is expecting higher standards in the AML/CFT space now that five years have passed since the law became effective. Specically, they want to see more in-depth reviews of client on-boarding and account monitoring processes, and they will focus more on front-line staff who perform tasks such as client on-boarding, to assess their understanding of the obligations.

TAKING THE TEMPERATURE
Ahead of the 2019 Budget, Treasury officials have been touring the country talking to businesses. They say they found sales activity is weakening in 2019, with tourism expected to weaken soon. Businesses report rising cost pressures and the labour market remains tight. Business investment has slowed but credit availability is good, they report.

NEW FMA CHAIRMAN & BOARD MEMBER NAMED
Commerce and Consumer Affairs Minister Kris Faafoi has named Mark Todd chairman of the Financial Markets Authority (FMA) and Chris Swasbrook an associate member. A former Bell Gully partner, Todd has been on the FMA board since 2015 and succeeds Murray Jack as chairman at the end of the month. Swasbrook is managing director of Elevation Capital Management and will become a full FMA board member in June.

NZ SUPER FUND, OTHERS GATHER SUPPORT FOR SOCIAL MEDIA CONTENT INITIATIVE
The NZ Super Fund says there are now 23 investment organisations, with total assets under management of more than NZ$800 billion, aboard its initiative to strengthen controls on social media content. The objective of the engagement is to convince social media companies Facebook, Google and Twitter to strengthen controls to prevent the live streaming and distribution of objectionable content, such as the shootings that took place in Christchurch on March 15.

SHEWAN STEPS IN AS CHINA CONSTRUCTION BANK NZ ACTING CHAIRMAN
China Construction Bank New Zealand has named John Shewan, currently a non-executive director, its acting chairman in place of Jenny Shipley.

GROWTH EVAPORATES
In Australia, the scale of the changed mortgage lending activity by the big four banks has been revealed in the latest APRA data. Mortgage growth halved in 2019 from 2018 with most of the pullback being for investor lending. ANZ has made the most aggressive retrenchment, dropping -4.5% to this sector. But now NAB is the most exposed with over 40% of its lending to investors. The same data shows that Westpac was the most aggressive acquirer of investor loans in the year to 2018, but added little in 2019. CBA started their de-risking from the investor sector much earlier than any the others. This mortgage lending is huge; of the total AU$1.36 tln, CBA is the largest at a 32% market share (heavy owner occupiers) and holding its share. Westpac is heavy investors, and leaking share somewhat. NAB is the minnow in this lending category. (Total New Zealand mortgage lending is only $222.1 bln for these same four banks. Their population is 5 times as large as NZ but they have 6.5 times the mortgage lending.)

OUCH
And staying in Australia, their home builders report unusually low sales in February.

CREDIBLE
We were sceptical this morning when we reported the official China factory PMI which reported a jump back into expansion territory. This afternoon, the private Caixin/Markt PMI was also reported and that also showed a good return to a modest expansion. It seems the recovery in factory fortunes in China is for real.

WEALTH EFFECT STUDIED
The RBA and the RBNZ each published separate research on how the wealth effect impacts their economy. In New Zealand, the RBNZ research suggests that in a boom, the additional wealth tends to shift investors to paying down their obligations faster, whereas when times turn, leveraged losses affect consumption directly. However the RBA research suggests that when the wealth effect is strong, it underpins consumption. When it weakens or turns they found it doesn’t actually hurt consumption provided labour demand remains firm.

DOUBLE DIGIT DROPS
CoreLogic is reporting that Aussie main centre house prices are down the most since their 1990s recession. Property prices in Sydney have now fallen almost -14% since they peaked while Melbourne is down almost -11%. Meanwhile, business conditions have improved, bucking a six-month downward trend.

LOCAL SWAP RATES RISE
Local swap rates have risen +2 bps across the board. This is on top of the rebound we got on Friday for the longer durations (5yr up +6 bps, 10yr up +7 bps). The UST 10yr rate blipped up this afternoon and is now at 2.44%. Their 2-10 curve is at just +15 bps while their 1-5 curve has narrowed sharply down to negative -13 bps. The Aussie Govt 10yr is at 1.82% (up +3 bps today), the China Govt 10yr is at 3.08%, while the New Zealand Govt 10yr is at 1.89% and up +6 bps so far today. The 90 day bank bill rate is down -1 bp at 1.84%. Basically the market is signaling it over-egged the reaction last week.

NZ DOLLAR HOLDS
The NZ dollar is now at 68.2 USc, about the same rate as it opened this morning. It is also unchanged against the Aussie at 95.9 AUc, and also at 60.8 euro cents. The TWI-5 is stable at 72.9.

BITCOIN FIRM
Bitcoin is at US$4,113 and a +1% gain from this time on Saturday.

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