Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
All major banks passed on today's -75 bps OCR cut in their floating rates. SBS Bank has done so as well, followed by TSB and the Co-operative Bank. So far however there have been no fixed rate changes. But think about those floating rates - after today's cut they average about 4.50% when the OCR is only 0.25%, and 85% of home loan borrowers are on fixed rates. By passing it all on only for floating, banks are not giving up much.
TERM DEPOSIT RATE CHANGES
Both Westpac and Kiwibank cut some TD rates. SBS Bank has also cut its one year TD rate.
BIG SURPRISE CUT
The big news today was the surprise RBNZ -75 bps OCR rate cut, and the signal that any future moves won't involve interest rates, rather their Large Scale Asset Purchase program. They also gave banks more headroom to lend more. This is the monetary policy part of the weighing against the bad economic impacts of the coronavirus border closing. The fiscal policy response will come tomorrow, and is expected to be even larger.
THE FED THROWS THE KITCHEN SINK
That was followed by an even bigger US Fed rate slash, and an aggressive restart of their QE program. This was also directly related to the economic impacts of the coronavirus infections in the US and related border closures.
AIR NEW ZEALAND SLASHES INTERNATIONAL ROUTES
The national airline has cut back its long-haul international services by a massive -85%. Qantas is readying it own huge cuts.
CALM BEFORE STORM
The service sector's activity dropped to its lowest level since 2012, according to the BNZ - BusinessNZ Performance of Services Index as the coronavirus impact started to bite in February. But it was a survey that showed the sector was still expanding. However, hardly any respondents thought things would improve - or even hold the same - in March.
MIGRATION TURNS UP
There was a perhaps surprising jump in net immigration in January, reversing a recent downward trend. In the year to January, +56,500 permanent migrants arrived, +9,613 in January alone. January and February are normally the peak months to welcome migrants, but January 2020 was a record high. In January, there was a minor net outflow of New Zealand citizens, and in the year to January, more than 6000 New Zealand citizens emigrated. This data is StatsNZ's newish 12/16 series. More here.
INFLATION STILL THERE
ANZ's monthly inflation gauge was up +3.2% in February, kept at that level by rising cigarette tax hikes.
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GOING VIRAL (SORRY ABOUT THAT)
The latest compilation of Covid-19 data is here. The global tally is now 167,450 of officially confirmed cases, up +56% in a week. There are now 86,430 cases outside China, a rise of nearly +30,000 in one day as the numbers keep on jumping in Italy (up +9634 in one day), Spain (up +3,464) and the USA (up +2,231 in one day from 1268). Spain is about to pass South Korea in confirmed cases. Worldwide there have now been 6440 deaths, of which 1,809 have been in Italy, 292 in Spain, 75 in South Korea and 63 in the USA. Fast rises are also occurring in Germany (11 deaths) and France (91 deaths). Europe seems to be the new epicenter. But in the rest of the world, the number of reported cases has gone from 10,404 yesterday to 17,979 today.
AUSSIE QE COMING
In Australia, the RBA is set to announce further monetary stimulus measures on Thursday to calm financial markets, including moving towards buying government bonds.
FACING MORE BIG LOSSES
The NZX50 Capital Index is down -3.7% so far today. The ASX200 is down -6.9%. Shanghai has opened down -0.7% and Hong Kong is down -2.5% in early trade. Tokyo is up +0.3%. But now it is a waiting game until the NYSE opens tomorrow - although European markets will do so before that and they will be giving real early signals.
LOCAL SWAP RATES SINK
Wholesale swap rates have crashed about -16 bps across the curve, less at the long end. The 90-day bank bill rate only fell -26 bps to 0.64%, ignoring the -75 bps OCR chop. But big official cuts probably have investors reassessing lending risks and wanting higher premiums. In Australia, their swap curve is sharply lower across their curve, down about -12 bps. The Aussie Govt 10yr is little-changed from Friday, now at 0.81%. The China Govt 10yr is also little-changed at 2.72%. The NZ Govt 10 yr yield is down -8 bps to 1.03%. Following their emergency Sunday rate cut, the yield on UST 10yrs dropped from 0.98% tp 0.67%, down -31 bps.
NZ DOLLAR WHIPSAWS
The Kiwi dollar is lower by more than -1c than this time Friday at 60.4 USc and similar to where it ended on Saturday. It fell below 60 USc after the RBNZ cut, but jumped back up to this level after the US Fed cut. Against the Aussie we are up almost +1c to 98.3 AUc as the Aussie dollar get hit harder than the Kiwi dollar. Against the euro we are down -½c at 54.4 euro cents. That means the TWI-5 is down to just under 66.7.
BITCOIN UP
Bitcoin is now at US$5,287 and up +13% from the very low level we had on Friday, but little-changed from where we saw it this morning. The bitcoin price is charted in the currency set below, and today it is worth taking a look.
This soil moisture chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
67 Comments
Why did the government even bother to make that 'closed border' announcement is beyond me when the reality is far from it .
Is there no adverse well-being implication of the government's decision to put all its faith in the ability (and integrity) of foreign travellers to self-monitor.
When almost everyone working in their offices are spin doctors Ministers become weak at getting things done; all talk and no do is the story of the last two years. And so have the quarantine you have when you are not really having a quarantine. They are marching us off a clearly visible cliff, and to repeat a line I heard "Every new measure taken during an epidemic will appear extreme at the time and wholly inadequate in retrospect"
If we do nothing, the hospitals get flooded and mortality will be more like 4-5% compared to 1-2% if we manage to keep things steady. Italy got flooded, hence their high death rates (together with an elderly population). Areas that are flooded have to decide which of their patients will receive meaningful treatment and which will be most likely left to die.
Tough decisions to be made, here.
The attempts to contain the virus are intended to avoid an outbreak situation that would overwhelm our healthcare infrastructure (something that has struggled to keep up with usual demand as it is).
Your flawed logic behind that statement is the same as saying "installing fire safety procedures and devices in millions of buildings around the country costs more than letting a few burn every once in a while", which could be true in financial speak but the social costs of the latter are far worse.
It's a big assumption that our healthcare system would get overwhelmed.
The virus, like most flus, seems to propagate much more readily in cold winter climes.
There's every possibility that without the extreme measures being taken that the virus would have propagated, but not so intensively as the northern hemisphere, over the next few months. The biggest population centres, in the upper North Island, will still be quite warm for at least 3-4 weeks.
So within minutes of the US futures open, the big indices had dropped 5% and triggered a trading halt. I’ve got a feeling tonight is going to be a bloodbath for the US stock market, perhaps exceeding Thursday’s 10% fall.
This looks flat, it’s not in fact; it just bottomed out near instantly before hitting the limit down and staying there:
Small anecdote of a visit to Flight Centre (have a voucher for travel and was checking out possible bargains for mid-year). Four counter staff, no-one on phones, we were the only customers inside the door in a 15-minute time period. Voucher is intact (fingers and toes crossed, though). And the mall itself (early afternoon, Monday, Palms, Christchurch) was quiet as was the Countdown in the corner. Social distancing is here.
Flew from AKL airport this morning, everything seemed cruisey, although much less crowded, just a few wearing face masks, cafes well patronised, people animatedly chatting quite closely, no plague bells being carried, almost normal, including a rental car driver with not a clue about lane keeping or NZs give way rules almost being cleaned up at the main roundabout.
Still no community based assessment for Corona.Fiddling with interest rates instead.
Heads out of sand please.
3 weeks ago Italy had 12 cases, now 1800 dead!! We have picked up 8 egregious cases by blind luck.
Australia riddled and still only a half hearted travel ban!!
Xtract Digit Messrs Bloomfield/Clark!!!!stop hiding in the elevator....
Testing remains unclear. NSW has done 20,000 and NSW Premier expects to have test kit shortage.
NZ test capacity 550 per day is low, and even that number is not being used.
MoH yet to put out cleaning protocols, protocols of how to clean areas where infected have had close contacts. This is a big gap, as the virus last days + on surfaces.
The detail has to be delivered on, because we have all seen the graphs, the PM is now using the same graphs that short the slower we are, the more deaths.
Us GPs are only allowed to test high risk overseas arrivals or those with known contact as of today.
The problem is testing en masse in GPs surgeries when the storm strikes is totally untenable and too risky for words so we need community bases assessment centres sorted right now
Taiwan, Singapore, Hong Kong had all this ages ago and so have done much better so far
I've had no known close contacts and haven't been overseas. Therefore, if I get some of the symptoms (runny nose, muscle aches, sneezing) - I'll just stay at home with the standard over-the-counter meds I'd use for a cold/flu. If I get a lot worse (chills, persistent high fever, extreme difficulty breathing), I'll ring the helpline which would likely trigger me getting a test.
Perhaps a lot of people who might be exhibiting mild symptoms are just staying at home and seeing if they can ride it out - never seeking a test. Hence the low rate of testing - there just aren't that many people seeking them at this stage.
Kate, the low rate of testing is because we can't; there is a lot of demand.We have no idea whether the current snuffles in kids are Corona, it is unlikely, but we'll find out in 2 weeks.Or hopefully never if we just follow Taiwanese model of care. No sentinel testing done yet.
Yeah, P/E has been crazy for quite a while, even if you allow for their under promise/over deliver track record. It's a coy that invests heavily in R&D and has always been a low div share with some currency buffer premium, so a higher P/E justified .... to a certain extent. Mine cost me an average of just under 5 bucks and are a long term hold. Haven't bought any more for 5 years or so.
This whole thing is turning into a disaster. A total over-reaction.
In the past, we didn't stop living because of something like this. We faced far greater threats, and kept going.
This is a very bad cold that typically no more than 1% of people die from, most of whom are already in poor health.
The so called 'cure' is going to be far worse than the illness.
I realise my view is very much a minority one. But it's my view, nonetheless.
Speaking of supermarkets - Woolies in Aus has just introduced 'elder hour';
https://www.3aw.com.au/coronavirus-woolworths-introduces-dedicated-shop…
It is these sorts of targeted initiatives to keep the vulnerable distanced (and thereby safer from infection) that will make a difference to healthcare facilities and therefore lower the death toll.
We should socially distance our most vulnerable and let the young and healthy maintain as normal routines as possible.
Perhaps it is an over reaction. Its a very difficult call. My bitch with the government over this self isolation is whatever you do, do it with conviction, and dont bullshit us. Saying they have taken the strongest measures in the world is lies. We dont need lies and puffery from our pollies at the moment.
I have just been reading about Boris' plan. Letting the young get it, to create a part of the community with immunity. Thats another big call. Huge to go against the consensus.
Damned if you do damned if you dont has never been more appropriate as one watches the demise of the economy.
Dr Campbell
looks like it's going to be a long isolation period. Also watch Chris Martenson from 31 mins in, looks like more young people getting sick.
https://www.youtube.com/watch?v=efaDuE-XEi4
https://www.youtube.com/watch?v=kO4aLB9jwKA
Italy lost 370 people today.
Fritz. The 'cure' will indeed be very painful but it'd be even more so if the coalition had dithered any longer and we ended up being forced to cast thousands of old people adrift on ice floes as per Northern Italy. Even if our attempt to flatten the infection curve isn't fully successful, we will be able to say we at least gave it a decent nudge.
I think you are completely misreading the situation. The global economy is about to tank whether NZ put in place stricter boarder controls or not. At least this way we can avoid/slow the spread here to ensure hospitals dont get overloaded.
NZ recessions almost always occur due to international events, rather than local ones.
Stuff the Banks , they are outright crooked in this whole thing right now , and if there is a public backlash then that's what they deserve
The age old rule of thumb for Mortgage lending rates was 1/3 rd over the Central Bank rate
So in the days of inflation , if the ECB , BoE , or the Aussie CB fixed a rate of say 6% then mortgages would be around 9% , maybe a risk weighted 10% or if you were a prime client , maybe 8,5%
Following the same rule of thumb the current OCR would indicate that Mortgage rates should be under 1% to around 1% at the most .
The rate of 4,4% quoted is usurious and would allow a massive margin on Mortgage lending ( who makes 800% per annum in ANY business? ) , and an astronomical margin on unsecured lending at 16% + , or even vehicle and asset finance which looks to me to be around 10 to 12%
Its a bloody disgrace
BASICALLY WE ARE BEING SCREWED by the BANKS who are acting in a seemingly uncoordinated collusion right now
Yes, we're all going to be screwed alright. The real issue was that we've been making it up as we go along for over a decade now, & to rub salt into the wound they're going to continue along that path until it works. At least that's what my little brain can comprehend, thus far. This is one hell of a way to go broke. Just as well we grow the food isn't it?
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