Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Kiwibank has cut both its 2 and three year fixed rate 'specials' to 3.39% and 3.65% respectively.
TERM DEPOSIT RATE CHANGES
Heartland Bank have announced a 100 day 'special' at 2.60%, making that the top rate among any bank for about a 3 month term. First Credit Union trimmed rates across their whole rate card, some of them quite hard compared to other credit unions. Kiwibank has cut its market-leading 2.80% 6mths TD rate by -10 bps to 2.70%.
REASON TO BE POSITIVE
In something of a surprise result, the February PMI came in stronger and positive and an expansion for the first time in three months. The strongest February component was for new orders. Auckland and Canterbury led the way in the month. But the surveyors point out that overseas things changed fast and it is reasonable to assume they will here too. However with no new coronavirus cases identified for six consecutive days, and zero related to transmission inside the country, we are running in a lucky streak. Long may it continue. And long may the confidence measures like PMI's stay positive. If China really is on top of their situation, that could go a long way to helping us avoid either a pandemic or economic shock.
FOOD PRICE INFLATION
Food prices rose +3.1% in the year to February, driven by meat (up +6.1%). But fruit and vegetable prices fell (-0.3%). Eating out prices are up +3.7% in the year.
BUSINESS AS USUAL
This month’s Xero Small Business Insight Snapshot saw business as expected in January 2020, along with an improvement in late payments for small business in New Zealand. The average late payment days experienced by small businesses improved year-on-year in January, reducing to 9.8 days late in 2020 (compared to 10.7 days late in January 2019).
VIRUS NUMBERS STILL IN EXPONENIAL GROWTH
The latest compilation of Covid-19 data is here. The global tally is now 128,343 of officially confirmed cases, up almost +10000 from this time yesterday. The biggest growth is in Spain (up 8x in a week) and the USA (up 7x in a week). Iran is also reporting a large increase in cases and there are reports of secret mass graves there, so they could be vastly under-reporting.
MARKET ROUT DEEPENS TODAY
Wall Street (S&P500) ended down -9.5% on top of yesterday's -4.9%. We are now in a bear market. In fact, trading had to be halted on the NYSE for a second consecutive do to calm paniced traders. Nothing the US Administration said, or the central bank did, helped. And to be fair to the Fed, it really isn't a financial issue and they are not set up to deal with a public health issue. But the Administration should be. Shanghai is down -3.2% in early trade today, Hong Kong is down -5.9% and Tokyo is down -9.3%, all on top of yesterday's carnage. Locally, the ASX200 is down another -7.3% so far and the NZX50 Capital Index is down another -6.0%. All these are daily declines. Defaults, furloughs, closures and bankruptcies could be the story in coming weeks. Boeing's stock was down -18% today taking its fall to -65% since global authorities grounded the 737MAX. With no new airplane sales, and parts & service sales dropping as airline customers retrench, it is hard to see this industrial giant having much of a short-term future. The flow-on impact in the US will be enormous.
LOCAL SWAP RATES RISE
Wholesale swap rates are up about +5 bps across the curve. The 90-day bank bill rate is unchanged at 0.90%. One thing that might be happening in all this uncertainty is that the cost of debt is rising as fewer investors are prepared to risk private sector debt exposures. In Australia, their swap curve is higher by about +6 bps across their curve today. Things are not much different for some public Government guaranteed debt. The Aussie Govt 10yr is up another +5 bps to 0.82%. The China Govt 10yr is up +3 bps at 2.71%. The NZ Govt 10 yr yield is now up +5 bps to 1.11%. But the UST 10yr is down by -6 bps to 0.76%.
NZ DOLLAR DEVALUES
The Kiwi dollar is lower by more than -1c than this time yesterday at 61.3 USc. Against the Aussie we are up almost +1c to 97.5 AUc as the Aussie dollar get hit harder than the Kiwi dollar. Against the euro we are down -½c at 54.9 euro cents. That means the TWI-5 is down to just under 67. Since the start of the year, the NZD has devalued -7% on a TWI basis, down -9% on a USD basis.
BITCOIN SMASHED
Bitcoin is now at US$4,659 which is a -41% dump from this time yesterday. The bitcoin price is charted in the currency set below, and today it is worth taking a look.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
82 Comments
"The Reserve Bank of Australia is pumping $8.8 billion into short-term commercial bank funding to ease a squeeze in global credit markets."
And so the Credit Squeeze tightens...(ie: If the markets weren't tightening up, there'd be no need for intervention)
Besides, who wants to go into the weekend short, after all this week's selling on every market? Only the brave my friends, only the brave. And who does fortune favour?
Thanks for the info.
I guess I wasn't too far off the money yesterday?
Audaxes | 12th Mar 20, 7:24pm
In a world of falling interest rates, it will come as no surprise that term deposit offers are falling as well.It might surprise some that if ANZ's share price keeps falling at the current rate of decline it will have no choice but to pay more to the so called "sticky" depositors, because their current credit rating will be downgraded. ANZ is not issuing sovereign debt with the full faith and credit of the government.
In reality they are offering the credit worthiness of the purchased borrower's IOUs in the form of an unsecured pass through bank IOU to the depositors with no more capital skin in the game than $8 for every $100 dollars of debt recorded.
There is further mystery:
So, the Fed offers $500bln repo facility, 84d maturity. Bazooka, right?
Total bids: $78.4bln.
Markets totally unimpressed, so it isn't like there wasn't demand for liquidity.
Maybe dealers don't have the spare collateral? Find out tomorrow, another $500bln 84d on offer. Link
In 2008, ASIC banned the shorting of Aussie bank stocks. These are arguably the "safest banks in the world" (according to the cheerleaders). And Captain Watson was talking the other day about resilient and safe ANZ was.
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2008-re…
What's the truth? If our property markets are impregnable and failsafe, surely money would be flowing into them. ANZ is down 31% this year.
Back to those fun filled GFC days when the financial institutions didn’t know what or who to trust.
RB’s find it easy to pump in “short-term” funding – it just seems to get a bit sticky when trying to pull it back out again.
And good luck with that pile of junk bonds – they’ll truly be living up to their name now.
Amazed earlier today when I saw the Australian GP was being cancelled – that’s one big event to set up for and then not run.
I assume the promoters would have event insurance – what would be the norm in terms of coverage/pay-out for a pandemic causation.
Considering all the events in the world being currently cancelled someone somewhere is taking a bath – the owners/promoters or the underwriters.
Will poorly managed underwriters even have the wherewithal to even pay-out should they have to.
I do know that if an F1 event is cancelled due to a virus the annual hosting fee is not payable by the promoter to the commercial rights holder.
The cynic in me says the government was supportive of intervening after everyone had checked into their hotels for the weekend. Everyone pays a premium over F1 weekend.
I do see a slight bounce...
I dont know Bitcoin but its not like the Bitcoin bankers have loaned bitcoins out of thin air and are likely to fallover soon putting everyone who has kept their Bitcoin with them into trouble.
So why short it so heavily? True Bitcoin nuts should be happily buying up with the long term view that US$10K is guaranteed to be reached again eventually.
I dont know Bitcoin but its not like the Bitcoin bankers have loaned bitcoins out of thin air and are likely to fallover soon putting everyone who has kept their Bitcoin with them into trouble.
I disagree. The margin trading on BTC is fully covered by the individual stakeholders, not some "BTC banker."
Now Spain starts lockdown
https://twitter.com/BNODesk/status/1238305472815472641
I am guessing by Sunday Germany and France will also be joining them.
We need to close the borders to everyone except Kiwis as we cannot handle the cases we will soon start seeing let alone importing more.
The biggest blow to our economy could come from a shutdown or reversal in our thriving people import sector as jobs dry up and temp workers are forced to leave.
Zero to negative rental growth, better wage growth in recovering sectors, less congestion on our streets... Sounds like every single one of Simon Bridges' nightmares could come true.
We are hopefully getting the recession we need to rid ourselves of junk bonds, zombie companies, overvalued shares, overvalued property. I am really, really hoping for a financial crisis next, even though it will mean people losing their shirts.
The big question is whether the rules will change. Will the world switch from the unsustainable capitalist model to include energy and pollution limits? Will the powers that be realise that they need to account for real energy and resource limits in their financial models? Will they stop trying to steal future wealth by bringing debt forward?
One can only hope, but I suspect we will still have one more boom left in us yet, one more chance to really screw things up...
At General HubHub, as I wrote in the other topic interest rates are not relevant anymore. The game is about capital preservation, as in how do you limit your losses. It is not about capital gain in debt-backed assets and this has been the case for a while now.
Why do you think Warren Buffet is sitting on 60% US Dollars? Because interest rates as a central bank tool do no longer matter nor should you base your investment decisions on them right now.
Cool name ‘Guwop’. While I tend to agree with you, they are however relevant to our one trick economy, when it comes to property. It is now after all, really the only game in town. Both this government and the next will swamp us with immigration, to keep the frenzy going.
Not been an unsustainable capitalist model at all. It has been an unsustainable Central Command and Control Model, whereby non viable "investments" have been subsidised by the smoke and mirrors of central banking to protect the status quo of the privileged political/bureaucratic classes and their accomplices the money centre banks. The West has taken on board the rotten core of Collective Oligarchism, with predictable results. I mean we even have flat screen TVs that listen to us. Orwell saw it coming. I think of it as the South American Republic Syndrome.
The key tribes are the blue political tribe, and the red political tribe, who are in a constant tussle to gain control of the Bureaucratic Tribe and the Banking Tribe. Whichever political tribe is in power steals from the other political tribe. No one represents the national interest.
I would argue that the situation you describe is the end result of a broken capitalist model. Not the capitalist model we are supposed to have (encouraging competition and efficiency, hence higher and higher productivity and living standards), but one that has a revolving door between retail and central banks which have led to the situation we are describing. One that has normalised legalised corruption between money printers (be it via fractional reserve lending or QE) and the retail banks that utilise the cash. We need to get back to a proper capitalist model AND include the energy/resource limits I am describing. A capitalist model given the planets resource and energy limits should lead to huge efficiency in our energy/resource use and it's monetary proxy.
I think the rest of your statements aren't focused on the same issue and frankly sound like and old man yelling at the wind! :-p
The simple answer being no - we don’t want to rid ourselves of junk bonds, zombie companies, overvalued shares, overvalued property – and why should we - we simply love these things too much.
So more QE, lower interest rates and market intervention quickly please – don’t disappoint us.
Fingers crossed for lots and lots of abundant cheap money coming up soon - after all – why stop a good thing.
@ custard , its real , and I have been wondering for at least 2 years when it was going to actually happen .
I have not been surprised one bit , what did catch me off guard was the trigger , I always said it would be caused by China, but was expecting a debt -fueled rout .................not expecting it to come from someone eating Horseshoe Bat soup
Custard, it's ok dig into something called Adjustment Reaction.
It looks like some people have quicker than you, some people are slower than you.
Doesn't matter key is to be aware of it.
There is a mgt subset about crisis management and crisis managers. Most people familiar with the literature would mark the PM as no crisis manager, crisis manager.
I notice my comments earlier this morning about the PM getting off her backside and announcing a travel ban have elicited the normal personal attacks I get from my allegedly "right wing extremist " views .
One even suggesting my rhetoric was "confused " because what I was suggesting would damage business .
Well to hell with business, when we have something that is killing more people than cigarette smoking we need to do what we did with the tobacco industry .
If airlines are bringing sick people here, that could cause deaths , then we to stop them .
If Auckland airport shareholders have a new shorter hairstyle afterwards , and ditto for SkyCity shareholders , then its a small price to pay
it's easy.
1,2,4,8,16,32,64,128,256,512......... 19 doublings you're at a million, With a finite resource, the last doubling (actually, it's an equalling) is from 50% depleted to all-gone. The doubling before was from 1/4 to 1/2. The one before, from 1/8 to 1/4. 3 doublings from 1/8 gone, to all gone. At 3% growth, that's 72 years.
Next question?
Not that simple mate when it comes to a virus. You need to add in time and the R0 value. You chose 2 as the R0. Corona has an R0 of between 4 and 7. Time wise it looks like 4 days when it gets hold without serious containment measures. More likley it goes 1 then 4 days later you have 4 then 4 days later 16 then 64 you get the picture.
Scotty from Marketing has just announced from Monday all non essential groups >500 will be banned. Public transport, schools, universities, airports not included. Think its Monday so SFM doesn't look bad as he always has ponced on that he will go to the Sharks match on Sat.
This has gone down as top medical authorities recommend that schools, universities, public transport shud have been included. I hope their Clayton's decision is correct.
I note that the cricket has already closed the stadiums for the ODIs. Realistically NRL and the Super whatever it is this year will not be affected as both denominations of rugby typically draw smaller crowds than this.
totally bizarre to me that govt's bailed out banks and other financial institutions in 2008 , whilst mortgagees lost their houses. I guess giving people support to stop them defaulting on their houses ( the money thereby going to the banks) would be seen as socialism, whereas giving the same money to the banks is "ensuring the market economy survives".
No one knows. Not the market players or those in 'control', the Central Banks.
But...if Boris is to be taken at face value, the risk is heavily weighted in favour of 'down' over an extended timeframe. What was it he said? It could take decades for us to fully recover from this situation... ( or something like that). We may have gone full circle from 'buy the dips' to 'sell the rallies'.
*Cough*
"...NYSE for a second consecutive do to calm paniced traders."
Boeing has been mismanaged since its merger with Lockheed Martin. Thinking of the value destroyed by financial engineering would make many shareholders cry. An aerospace company should never be run by accountants.
This is probably more than a financial correction – which many have suggested is overdue, including myself.
In reality the world’s economies may be heading towards total failure.
This could well lead to complete financial collapse – for which there is no plausible road map out.
You mean a bit like collapse couldn't happen in Lebanon - where Beirut was seen as the "Paris of the East" not that long ago? Or Somalia and Libya, where stability existed for decades, albeit under different 'rules' to those we enjoy? Or Syria, that used to be a civilised society until 10 years ago? Or Zimbabwe, where trillions of dollars were printed to flood the market with life-saving liquidity? Or Yugoslavia? Or Venezuela?
Total collapse can and does happen, for all sorts of unforeseen and unpreventable reasons.
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