Despite signs of a slowing rate of economic activity and perhaps a slight easing in jobs pressures, the financial markets continue to be gripped by the credit freeze.
A week on from the Reserve Bank’s 0.25% lift in its cash rate to 7.25%, yields on bank bills have once again blown out.
In fact yields on 30, 90 and 180 bills are now between 0.10% and 0.16% above where they were the day of the rate rise, after steadying at the end of last week and dipping lower.
Yields yesterday were around 7.70% for 30 day bills, 8.12% for 90 day bills and 8.25% for 180 day paper: all are at or close to 12 year highs.
In contrast, yields on 2, 5 and 10 year bonds have all eased in recent days as the funding concerns concentrate in the short term paper area and investors buy Commonwealth Government bonds (what few there are around), for safety.
While the cost of short term money is rising and revealing the intensity of the squeeze, its power is being revealed by the upturn in the amount the Reserve Bank is injecting into the money market: yesterday it did $1.7 billion of repurchase agreements for a $979 million shortfall on the day.
That’s a sign of growing concern that the cash rate might be pushed higher than the 7.25%. That was the largest amount since $2.2 billion almost 10 days ago.
But the bank has left more money in the exchange settlement account for the banks (at the end of each trading day) than it has since the worried days of early January, when there was a fear of a credit lock up over New Year.
The RBA left a massive $2.77 billion in the ESA Monday night, the largest since January 9.
These pressures have nothing to do with the health of the wide economy: it is being driven by growing investor unease with banks, some forms of sovereign or near sovereign debt especially in the US, and a fear that a big financial group could have liquidity problems.
Currency markets were rattled yesterday by those worries (see the accompanying story) and share markets again took a hit.
In the wider economy the latest ANZ jobs survey has revealed a downturn in job ads for the first time since November 2006.
The total number of jobs advertised in metropolitan newspapers and on the internet fell 2% last month to a still high 268,869 per week.
The survey also revised downwards January’s 1.8% increase to a rise of 0.8%.
To put the move in its context, the total number of advertisements in February was 24.4% higher than a year ago.
The ANZ said February’s decline was led by internet job ads reacting more quickly to changes in the economy, such as a downturn in confidence or a rise in rates. They fell 2.2% in the month to an average of 249,677 per week.
Newspaper job advertisements rose 0.3% to an average of 19,192 per week, but Queensland and South Australia had big falls.
Tasmania, which was up 6% and NSW more than 4%, offset those moves with solid rises and ads in Western Australia and Victoria also increased, by 3.7% and 1.0% respectively.
The February labour force figures are out tomorrow.
And there was a seasonally adjusted 2.2% rise in the number of people obtaining finance for owner-occupation of a home in January to 67,886 from December
Figures from the Australian Bureau of Statistics data show the value of loans for owner-occupiers in January totalled $15.9 billion, up 1.7% on December.
The ABS said that "In seasonally adjusted terms, total value of dwelling finance commitments excluding alterations and additions increased 3.7%. Investment housing commitments increased 8.3% and owner occupied housing commitments increased 1.7%.Total housing finance by value rose 3.7%.
"The number of loans to buy a newly built home fell 4.9% in January, the seventh consecutive month of contraction and a real sign that the home building industry is depressed and won’t be kick started until interest rates fall and more land and cheaper development prices become more common (and that may be a long time).
"The total value of owner occupied housing commitments (seasonally adjusted) rose by 1.7% (up $270m) in January 2008, following a revised 0.7% rise in December 2007.
“The increase this month was due to a rise in refinancing of established dwellings (up $164m, 3.9%), purchase of established dwellings excluding refinancing (up $125m, 1.3%) and construction of dwellings (up $21m, 1.8%) which were partially offset by purchase of new dwellings (down $41m, 6.3%).
"The total value of investment housing commitments (seasonally adjusted) increased by 8.3% (up $556m) in January 2008 compared with December 2007, following a revised decrease of 2.2% in December 2007.
“The increase this month was due to increases in construction of dwellings for rent or resale (up $483m, 81.5%), purchase of dwellings by others for rent or resale rose (up $55m, 7.6%) and purchase of dwellings by individuals for rent or resale (up $19m, 0.3%)."
From that you can see there was an upturn in investor activity, but that interest has waxed and waned for most of the past 10 months, rising one month, falling the next.
Refinancing of existing mortgages remains the big driver for owner occupiers, while the construction of new houses is depressed.
