Rates updates and more

Adverse market conditions hurting, Lombard holding extra cash. Comment: Bridgecorp and advisers.

Monday, July 30th 2007, 8:57AM

There is an expectation rates offered to depositors will increase over the coming weeks on the back of last week's official cash rate increase.

In the bank market Rabo has increased its one and five year rates by 10 points each, however, Bank of New Zealand also lowered rates on its nine-month term over the weekend. For instance the rate for amounts of between $10,000 and $49,999 fell from 8.40% to 7.90%.

These rates appear to be specials which have been promoted by BNZ.

Amongst the bigger finance companies UDC, Capital + Merchant and Marac all made changes during the week.

Marac increased rates by between 10 and 60 points on its quarterly interest options and also introduced a new 15 month special of 8.85% with interest quarterly.

UDC's increases were smaller in magnitude (five to 10 points) and across most maturities.

Others to move rates include PSIS, HBS, and sharebrokers adjusted rates in their call accounts.

Adverse market conditions hurting
A number of the funds offered to New Zealand investors that invest in the structured credit markets are having tough times.

Australian-based Absolute Capital suspended redemptions on its Diversified Yield Fund last week.

Absolute Capital also promoted the two PINS funds that are listed on the NZDX.

The company said last week that the capital guarantees on the portfolio notes supporting the PINs products remains unaffected by these adverse market conditions.

It also said that some of the funds in its portfolio had suspended redemptions, other funds are unaffected by the market turmoil and "there are also a number of defensive credit funds in the portfolio that are starting to buy assets from forced sellers."

Lombard holding extra cash
The Lombard Group says it held about $35 million in cash in the leadup to the collapse of Bridgecorp, the DominonPost reports.

Lombard managing director Michael Reeves told shareholders at last week's annual meeting that the board had anticipated the collapse of Bridgecorp and held cash in anticipation of the collapse.

Lombard had no related party lending, common among other finance companies, and only a nominal reliance on the financial adviser network for funds flow, the paper reported.

Comment: Bridgecorp and advisers
While talking to advisers at the IFA Conference last week it started to dawn on me one of the reasons why Bridgecorp fell over.

The picture that began forming after the first day is that it was the advisers themselves which triggered the collapse. [Read On].