What happened Wednesday

A review of things you need to know before you go home on Wednesday; No retail rate changes, RBNZ holds and dumps easing bias, retail spending softens, ASB profit slips, IAG profits halve, swaps rise, NZD up, & more

12th Feb 20, 3:59pm by David Chaston

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

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
None here either.

EXPECT A HALF YEAR OF VIRUS BUFFETTING
The RBNZ held its Official Cash rate at 1.0% in the face of trade threats from China's virus emergency. It is assuming the impact will be 'short'. "Nevertheless, some sectors are being significantly affected." The RBNZ's own OCR projections are slightly firmer and its easing bias has now gone. The NZD rose about +½c immediately after the release, and more gains later.

RETAIL SOFT
Retail card spending dipped again in January with less spent on food and beverage (hospitality) and groceries and liquor (consumables), Stats NZ said today. When adjusted for seasonal effects, retail spending fell -0.1% in January 2020, after a -0.9% fall in December 2019. Year-on-year to January 2020 retail transactions were up +4.2%. The number of card transactions is up +3.1% in January from the same month a year ago and up +3.3% for the full prior 12 months.

NOT A RECORD
ASB reported its half-year profit to December signaling a fall of -5%, and their net interest margin dropped -10 basis points. This is a pull-back from a record high and they also booked a loss on sale of its funds administration business, Aegis. Meanwhile, parent CBA also reported a strong result that was less than its previous record.

ANOTHER BOND ISSUE LIKELY TO BE POPULAR
Westpac is making a local bond issue, seeking $200 mln "plus unlimited oversubscriptions", split evenly between a three year Floating Rate Note and a five year Fixed Rate Note. Previous bank bond issues have been heavily oversubscribed. Indicative margins over swap are likely to be under 70 bps for the 3 year Note, and about 83 bps for the five year Note. At today's levels that means rates of about 1.82% and 2.01% respectively.

KIWISAVER DATA BREACH
Update: Generate KiwiSaver has revealed a data security problem. It says there was unauthorised third party access to the fund manager’s online application system between 29 December 2019 and 27 January 2020, and that some of its members’ personal information has been accessed illegitimately. This does not affect members’ investments, which are held by Public Trust in a completely separate system. This affects approximately 26,000 of the 90,000 members that have joined Generate over the past seven years.

JOB ADS BOUNCE BACK
A big jump in Auckland job advertising has surprised some and starts 2020 off strongly. This was underpinned by full-time jobs and public sector jobs. Rises in the rest of the country were good too.

INSURANCE HIT
Giant Aussie insurer IAG (the dominant general insurer in New Zealand) has seen its profits halve, mainly because of "exceptionally harsh" risks in Australia. No doubt they will want to recover that so premiums could face upward pressure.

UPDATE
The China coronavirus COVID-19 data is now 45,200 confirmed infected, and 1115 deaths. That is +85% higher than a week ago for infections and +125% higher for deaths.

LOCAL SWAP RATES TURN UP
Wholesale swap rates changed direction today and moved up. They are up +11 to +14 bps or more across most tenors. The 90-day bank bill rate is down -1 bp to 1.22%. Australian swap rates are also up across the board but by about less than half the NZ move in early trade. The Aussie Govt 10yr is up +4 bps to 1.07%. The China Govt 10yr is now up +9 bps at 2.88%. The NZ Govt 10 yr yield is also up +9 bps at 1.36%. The UST 10yr yield is up +5 bps to 1.61%.

NZ DOLLAR UP
The Kiwi dollar is noticeably higher after the RBNZ MPS, up because they took the possibility of future rate cuts off the table. Against the greenback we are back up to 64.7 USc and since this time yesterday that is more than a +¾c rise. Against the Aussie we are back up to 96.1 AUc. Against the euro we up at 59.3 euro cents. That means the TWI-5 is up to 70.5 and where we were at briefly this time last week.

BITCOIN LEAPS
Bitcoin is rising after breaching US$10,000 again this morning, and is now at US$10,325 and up +5.7% in a day. The bitcoin price is charted in the currency set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

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23 Comments

by Audaxes | 12th Feb 20, 4:12pm 1581477161

Talking of insurance:

A panel of “currency experts” has now warned the G-20, the Financial Stability Board, and the IMF that the IMF is a dud.

Central banks have lost control of global liquidity. The dollarised international financial system has become treacherously unstable and vulnerable to a sudden reversal in capital flows.

Yet the International Monetary Fund is a diminished force and no longer has the firepower to act as the world’s lender of last resort in an emergency. That is the stark conclusion of a G20 task-force of leading currency experts.Link

by Fritz | 12th Feb 20, 4:30pm 1581478214

Wow, this is quite amazing criticism of the Chinese government, from an academic within China.
Great bravery.
But I guess he's 'goneburger'....

https://www.theguardian.com/world/2020/feb/11/coronavirus-outspoken-aca…

by Uninterested | 12th Feb 20, 7:52pm 1581490360

Yes they will be rounding him up and his family for saying such things.

by Andrewj | 12th Feb 20, 4:53pm 1581479620

Oh boy it's getting dry. Northland hasn't had rain since November, I'm in HB and it's getting really dry here too, I just got back from Wellington and it was bone dry all the way down.

by redcows1 | 12th Feb 20, 5:29pm 1581481788

We've still got a touch of green here on the farm with areas of paspalum, but it's not growing, even the 10% of the farm in chicory is struggling now. Cows OAD for a week now. Despite that we are way better off than most.
Odd because it's only really lack of rain, temperatures haven't been outrageous and not even too much Westerly wind here.

by scarfie | 12th Feb 20, 7:23pm 1581488583

I recall the last dry period on the Waikato, Northland doesn't look that bad yet but it might soon if they don't get rain. Cracks in the grount already.

by Audaxes | 12th Feb 20, 5:27pm 1581481636

Giant Aussie insurer IAG (the dominant general insurer in New Zealand) has seen its profits halve, mainly because of "exceptionally harsh" risks in Australia. No doubt they will want to recover that so premiums could face upward pressure.

Could IAG be suffering from the same costs that ACC reported not so long ago, in addition to extraordinary large, high value claims.

The corporation presented its 2018-19 financial results to Parliament on Wednesday, with a huge increase in its "outstanding claims liability" (OCL) producing its highest-ever deficit and overshadowing other results.

The OCL is the amount of ACC estimates all its current claims will cost over the next 100 years. Lower interest rates mean the fund has to invest more now to cover costs down the track.Link

by powerdownkiwi | 12th Feb 20, 5:17pm 1581481047

Acc doesn't 'invest', any more than pension funds or Kiwisaver do. What they do is bet on shares being redeemable in the future. The assumption is that the future will miraculously provide more and more portions of the physical planet, to underwrite the ever-bigger future buying-expectations. I think it would be nearly ten years ago that this ACC vulnerability was mentioned hereabouts.

by scarfie | 12th Feb 20, 7:27pm 1581488851

Yes it has been covered here about ACC. If there was another Chch type event there wouldn't be any support. If I recall correctly the payments from Chch more or less had to be defferred over a number of years to allow premiums to catch up. Yep insurance is very much a part of the FIRE ponzi game. Interesting thing is I first came across a work colleage about 20 years ago that didn't believe in insurance, He paid himself the premiums and build up a nest egg just in case.

by President of P… | 12th Feb 20, 5:19pm 1581481197

Lonewolf I hope you kept your hodlings..... nice bull run warming up out there.... if you're into alts have a look a tixl
President of Property

by lonewolfnz | 12th Feb 20, 6:01pm 1581483709

Of course. 85% BTC, 15% ETH (leaving aside trades). Will look at other alts. Yes I was a TIXL ICO investor (my second ICO since ENJIN). Interesting idea but I think it has crashed a bit.

I think my TIXL went up 1000% or something, but I sold on the way down and exited at a price of 3.5 or so BNB per token. Now its 1.2 BNB.

My total holdings are up x10 since the dip in December 2018. Lets see if I can add another zero!

by J.C. | 12th Feb 20, 6:10pm 1581484217

No XRP Wolf?

by lonewolfnz | 12th Feb 20, 6:30pm 1581485449

No. They are mass dumping tokens onto the market, hence the massively supressed price. I sold all my alts (including XRP) the night that Libra released their white paper. And the proposed sovereign coins such as the DCEP token issued by China may replace this. And the proposed IPO by Ripple Labs is a potential kick in the pants for token holders.

That said, alts are flying right now so a 60% jump or so in a month wouldn't surprise me at all. This is a token that used to do 100% a day. Speaking of which, check out Hedara Hashgraph

by J.C. | 12th Feb 20, 6:46pm 1581486374

Yes. Aware of the dumping but attracted to Ripple technology. Not sure why they even have XRP, except as a test case and to feather their own nests. Disclaimer: Been buying XRP regularly until 6 months ago and prefer to focus on BTC and ETH.

Re HH, I hear you even if I'm not a big fan of alts.

by Masher | 12th Feb 20, 6:35pm 1581485727

Id rather have money in XRP before a lot of other "sound" investments.

7% today

by lonewolfnz | 12th Feb 20, 7:18pm 1581488317

I wouldn't touch it (yet) but HBar went up 140% today (some google partnership thing)

by youngdumbandbroke | 12th Feb 20, 10:13pm 1581498833

Lone wolf, what trading platform and wallet do you use or recommend?? Just starting to research crypto now

by lonewolfnz | 13th Feb 20, 8:18am 1581535136

I use binance for alt trading. Kucoin for the more unique alts. FTX for derivatives (be careful!). Bitmex to watch the markets. And kiwi-coin as my preferred way to turn NZD to BTC.

Just be careful if you truly are young dumb and broke - aside from the young bit, it doesn't mix with crypto!!!!

by youngdumbandbroke | 13th Feb 20, 8:53am 1581537200

I was looking at Bitprime.nz for buying BTC etc looked to be decent review wise and provided a few coin options. I'll look into those ones you posted thanks !

by lonewolfnz | 13th Feb 20, 5:17pm 1581567429

Once you have bitcoin you can trade on any exchange in the world (almost) so no need to be confined to NZ with its low volumes

by Henry_Tull | 12th Feb 20, 8:39pm 1581493178

Parliament fired up.
Some should mention, the drought, flood and viral pestilence, they don't seem to have noticed!

https://i.stuff.co.nz/national/politics/119463686/simon-bridges-says-nz…

by sharetrader | 12th Feb 20, 11:02pm 1581501748

pity he talks the talk but does not walk the walk

Rt Hon WINSTON PETERS: Oh, sorry—sorry. Well, you know, some people would be proud of that, but never mind.

Now, one forgets how distorted National on the economy was and how rundown the social services were, and they had one plan and one plan alone: open the floodgates of immigration—and that's a fact. Between the 1990s and the 2000s, immigration was around 12,000 per annum, and then, under National after 2014, it massively exploded to 38,300. In the year after—2015—it was 58,300. In the year after that, it was 69,100, and by 2017, it was 72,300. They only had one part of the economic plan: just explode the population.

Now, everybody in Auckland knows what that meant, and everybody around the country knows what that meant: house prices going through the roof, a lack of housing, and a massive demand for schools, hospitals, and infrastructure. The stress was minus, and immigration explains the housing market distortion and crippling infrastructure deficit. Health, education, social services were run down. Evidence of neglect was everywhere, from people sleeping in cars to rotten walls in hospitals.

by sharetrader | 12th Feb 20, 11:07pm 1581502026

i agree with this BUT he has done nothing about it
Rt Hon WINSTON PETERS:
—it's important for New Zealanders to recognise this—is that we need a dialogue with the New Zealand people about our future population policy because the forecast of New Zealand's population by 2050 has got us there already. All the forecasts said that where New Zealand would be in 2050 is today's population, and no one has had a discussion with any New Zealanders at all and the consequences are huge. We can see the straining and suffering out there, where we've got Third World problems that we have allowed to be created, because we haven't had a focused, smart policy.

Where are they all going to? Mainly to Auckland. All around the provinces we need workers. So we need a focused immigration policy that looks at making sure the provinces get their fair share of overseas expertise as well.