A review of things you need to know before you go home on Friday; standout mortgage offers, PMI still negative, food prices jump, rents higher in provinces, $200 mln overbudget, swaps soft, NZD soft, & more

A review of things you need to know before you go home on Friday; standout mortgage offers, PMI still negative, food prices jump, rents higher in provinces, $200 mln overbudget, swaps soft, NZD soft, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
HSBC launched a 3.20% home loan rate. TSB launched a $4000 cashback offer for new business (or as the Aussie would say, part of the loyalty tax on existing customers).

TERM DEPOSIT RATE CHANGES
No changes to report today.

WEAK BEFORE COVID-19
New Zealand's manufacturing sector experienced a second consecutive month in contraction, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index although the decline was small. But as BNZ noted: " ... in the context of the latest global ructions – this time related to the COVID-19 virus – January’s PMI could arguably be read as a relatively decent outcome. At the same time, it is surely too early for the PMI to capture the economic consequences of the virus. What we do know is that only two respondents to January’s survey specifically mentioned the “coronavirus” as a negative influence on their business."

FOOD PRICES TURN UP QUICKLY
Higher prices for meat, poultry, and fish contributed to a +3.5% increase in food prices for the year ended January 2020, the largest annual rise in food prices in over eight years, Stats NZ said today. That is a rise from +2.4% on the same basis in December.

RENTS UP FAST IN THE PROVINCES
StatsNZ says rents rose +3.9% nationally in the year to January for properties that turned over in the month (flow). They rose +3.3% pa on a stock basis. In Auckland, those rental gains evaporated to just +0.3% pa. In Wellington they fell to +1.9% pa, and in Christchurch they rose +2.8% pa. But in provincial centers the increases are a lot higher. For the rest of the North Island, StatsNZ says the rises are running at +6.0% pa and in the rest of the South Island at +5.5% pa.

OVERSUBSCRIBED
Westpac raised $475 mln in its two Note offers after seeking at least $200 mln. The three year Floating Note raised $200 mln and will pay a yield of 0.7% plus the three year reference rate (if it was today it would have been 1.87%). The five year Fixed Rate Note raised $275 mln paying 2.08%.

SMEs IN GOOD SHAPE
Xero SME Insights
reveals strong cashflows and short payment arrears in December 2019 but they weren't as low as for December 2018.

OVER BUDGET
The private contractor building the Wellington Transmission Gully project has wrung an extra $191 mln from the Government to keep working on it.

STILL DOUBLING
The COVID-19 numbers are still rising, up to 64,400 and a +4000 rise from yesterday. The death toll is up to 1491 from 1368 this time yesterday. This time a week ago, the Chinese were reporting 31,400 and 638 deaths.

EQUITY MARKET UPDATES
Wall Street closed -0.2% lower earlier, in line with most European markets (except London which was down -1.1%). Today. Shanghai has opened up +0.2%, and Hong Kong has opened up +0.4%. Tokyo has been open an hour longer, but is down -0.5%. Locally the ASX200 is up +0.3% and the NZX50 is down -0.2%.

LOCAL SWAP RATES DOWN
Wholesale swap rates are lower today, down -3 to -4 bps across the curve. The 90-day bank bill rate is down -1 bp at 1.21%. Australian swap rates are little-changed today. The Aussie Govt 10yr is down +1 bp to 1.08%. The China Govt 10yr is now up +2 bps at 2.88%. The NZ Govt 10 yr yield is down -5 bps at 1.37%. The UST 10yr yield is unchanged 1.61%.

NZ DOLLAR SOFT
The Kiwi dollar is just a little softer against the greenback at 64.4 USc. Against the Aussie we are also softer at 95.7 AUc. Against the euro we up at 59.4 euro cents. That means the TWI-5 is soft at 70.2.

BITCOIN SAYS UP
Bitcoin is little-changed since this time yesterday at US$10,214. The bitcoin price is charted in the currency set below.

This chart is animated here.

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Our exchange rate chart is here.

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29 Comments

Comment Filter

Highlight new comments in the last hr(s).

What happened to the better procedure to ID infections better and faster? 15k plus thrown on in a day but then it is not identifying new infections today... strange...

'RNA virus
An RNA virus is a virus that has RNA as its genetic material. This nucleic acid is usually single-stranded RNA but may be double-stranded RNA. Notable human diseases caused by RNA viruses include Ebola virus disease, SARS, rabies, common cold, influenza, hepatitis C, hepatitis E, West Nile fever, polio, measles, and coronavirus. The International Committee on Taxonomy of Viruses classifies RNA viruses as those that belong to Group III, Group IV or Group V of the Baltimore classification system of classifying viruses and does not consider viruses with DNA intermediates in their life cycle as RNA viruses. Viruses with RNA as their genetic material which also include DNA intermediates in their replication cycle are called retroviruses, and comprise Group VI of the Baltimore classification. Notable human retroviruses include HIV-1 and HIV-2, the cause of the disease AIDS. Another term for RNA viruses that explicitly excludes retroviruses is ribovirus.Wikipedia'

Coronavirus is a retrovirus?

What a cost blowout on the Transmission Gully project!
And like the Auckland Central Rail tunnel project, no revised cost benefit study published?
"Importantly Transmission Gully will also provide the region with a key route that will be more resilient to extreme weather and other events including storms and earthquakes."
Does anyone seriously believe this? Sure, this route is away from the sea but it traverses some very steep and I would say unstable hillsides.

pretty easy to win a tender if you know the gov't has got your back.

Funny how cost blow outs on public transport projects are front line news but on road projects it’s fine.
Not sure what the purpose of a PPP is if they can just ask for more money! “Sorry it’s a bit harder than we guessed”: I doubt our company would get away with that with our customers.

Look how the roads ventures are structured. NZTA agrees to take all the residual risk.
Qed nothing to see.

I was involved in supplying some of the material to the earlier stages of the project. We did very well out of variations from project managers with a fresh box of Collins A5 Order Books and not a lot of diligence. It's almost like Supply Agreements are something both parties should read and understand before signing, particularly when you're the author.... I'm not surprised they had cost overruns, but a lot of that came down to underestimating the sheer amount of earth that needed moving. Someone hadn't factored in when you remove 'x' amount of earth from the side of a hill, gravity kicks in and some of the earth above it settles into the newly created cavity.....I could be wrong though?

It's all a rort.

“Higher prices for meat, poultry, and fish contributed to a +3.5% increase in food prices for the year ended January 2020”

Overseas events might put a bit of a dent in some of these price increases moving forward – which should be a good thing for local consumers – i.e. those on NZ wages and salaries.

Producers tell us we need to pay international prices when they’re rising – do we get the same gleeful reaction when they’re falling – or do my much wanted crayfish get put back in the ocean?!?

Sure – I like beef and lamb (did I mention crayfish?) – but prices just became a bit toppy over the last 6 months or so at the supermarket – I can’t compete with the overseas consumer and their funny money.

Per your link - bring back more realistic local pricing and “specials” and it’ll be going in the trolley.

Is it really that expensive? You can probably buy a nice steak for the price of one square centimetre of Auckland real estate.

At what point could we get Ethereum added to the daily update? Its up 100% this year alone and leaving bitcoin in the dust. Tonnes of news and development, including JP Morgan involvement.

A bit selective given this year is only 45 days old.

Ethereum is massively down against Bitcoin and has promised the world and delivered nothing. "Web 3.0". "World Computer". These terms were used to describe a network that almost five years later still does nothing more than allow people to trade virtual "Cryptokitties".

I'd suggest you look into Vitalik Buterin's previous scam, where he promised quantum computing and also solicited investment for it.

That's all quite apart from the fact that Bitcoin's stated aim is to obviate Central Banks. Ethereum is just another central bank with a committee which decides the issuance rate.

Okay fair enough how far back should we go then? How about 2015. Its up 900% vs Bitcoin in that time frame.

I stayed away from ETH last year. But keeping a close eye on it now. The bitcoin halvening event will be huge.... but if Eth 2.0 is pulled off successfully (that's a big if) I think we might see some fireworks. Having said that if they had a daily ETH review imagine the ripple investors here wanting their update. Then the B-Cash holders etc etc etc

You mention JP Morgan like it’s a good thing….

“JP Morgan puts traders on leave as Justice Department’s criminal investigation continues”

https://www.cnbc.com/2019/09/13/jp-morgan-puts-traders-on-leave-amid-cri...

Cornered the silver market in many ways. Very privileged to get away with what they do.

Vampire Squid JPM...even has the royal Sussex on their payroll

Synlait share price still being money hammered. Whole dairy sector looking shaky in Asia.

The number reduction was basis infant market regulations, ccp putting thumb on the scale, any virus related revision yet to come.

The infant formula, formula is a real (ongoing) issue. In a heads xI wins, tails you lose sort of china rules way.

Yes. I think Chinese interests are happy for the commodity but want a share of the spoils from the branded product. Due diligence on these relationships from the NZ / Aust side leaves a lot to be desired.

The private contractor building the Wellington Transmission Gully project has wrung an extra $191 mln from the Government to keep working on it.

I posted this from the then Transmission Gully website :

by Stephen Hulme | 1st Aug 16, 2:29pm

"Whilst very low interest rates do distort some economic and investment decisions in New Zealand, the benefits in terms of commencing major infrastructure build projects (transport, irrigation and civil) earlier than normal due to the massive reduction in the financing costs are massive. It is an opportunity in a lifetime for central government, local government and the private sector to advance such projects at a pace".

Is that so?

Transmission Gully costs estimated at 29July 2014.

"The Transmission Gully project’s net present cost is $850 million. This is the “whole of life” cost, for WGP to build and then operate the road for 25 years. Because the costs are spread over time, they are expressed in today’s terms.

This is $25m less than what the contract would be expected to cost through conventional procurement, and hence meets The Treasury’s value for money test for PPPs.

The cash payments will be around $125 million per year, starting only when the project is finished and open for use, and lasting for 25 years. This stream of cash payments brought back to today’s dollars is $850 million and is the “net present cost”.
At the time of the above press release 10 year NZGSs were yielding ~4.5%. Currently they yield 2.165%.

In reality one would expect: This stream of cash payments brought back to today’s dollars is $850 million and is the “net present cost, to have risen considerably and possibly doubled if I could be bothered to undertake a full IRR analysis, and was in possession of the original discount factor and timing method".

What is the present value of those cash payments now?

"Whilst very low interest rates do distort some economic and investment decisions in New Zealand, the benefits in terms of commencing major infrastructure build projects (transport, irrigation and civil) earlier than normal due to the massive reduction in the financing costs are massive. It is an opportunity in a lifetime for central government, local government and the private sector to advance such projects at a pace".

...low rates are not stimulative at all, rather they are indicative of monetary contraction. Another way of saying that in mainstream terms is if a central bank “needs” to stimulate year after year after year it isn’t actually stimulating anything, it is being slowly strangled by the same monetary noose in sympathy with the real economy. The real economy loses function and activity while the central bank loses (rightfully) credibility. Link

NZ use be good with projects (hydro). This is an epic loss of knowledge, I wonder if the loss is tax deductible.

https://www.google.com/url?sa=t&source=web&rct=j&url=http://www.competit...

https://www.amazon.co.uk/Principles-Corporate-Finance-7th-Ed/dp/0071151451

Really awful. The Japanese drug stores will be taking a huge hit from their huge growth from Chinese tourism.

More than 30 drugstores sit on a 1 km stretch extending along the covered avenue and into the Namba area to the south. A Tsuruha Drug store in the middle of the shopping strip features a display with a Chinese-language message of encouragement for China and Wuhan, the city at the epicenter of the outbreak.

Customer traffic has dropped by half since the ban was imposed on Monday, the store manager said.

https://asia.nikkei.com/Spotlight/Coronavirus/China-tour-ban-dampens-spi...

And that's just the start.