A review of things you need to know before you go home on Tuesday; mortgage rate cut, mortgage holiday, SME finance guarantee, core funding ratio cut, freight support, swaps hold, NZD firm, & more

A review of things you need to know before you go home on Tuesday; mortgage rate cut, mortgage holiday, SME finance guarantee, core funding ratio cut, freight support, swaps hold, NZD firm, & more
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Here are the key things you need to know before you leave work today.

Westpac has cut its one and two year fixed rates, but not standard rates.

First Credit Union have raised TD offer rates.

The Government and banks have announced a six month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from COVID-19. There will be a $6.25 bln Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy.

The Core Funding Ratio has been slashed by the RBNZ to 50% from 75%. Ugghh. Not sure unwinding measures designed to make banks more resilient is such a great idea.

ANZ is determined to sell UDC and has selected American "private equity" firm Apollo Global Management as their preferred bidder, according to Aussie media reports. It is a tough time to be a seller, so ANZ must be keen to make any deal. You can be sure Apollo aren't missing a trick to use the current crisis to its advantage.

Air freight operators can apply for grants to ensure critical imports and exports keep flowing. They must provide details of the prices they will charge for carrying freight.

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There are now more than 140 cases identified in New Zealand, with 40 new cases today, including community transfer. Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 378,000 of officially confirmed cases, up +110% in a week. There are now 297,000 cases outside China and almost all of them are in five core countries. Italy is up +5000 from just this morning's tally. The US is up +8000 cases from this morning, almost ten times more than one week ago. Most other countries are not exploding like these two however.

There are tens of thousands of Kiwis around the world and they are now stranded outside the country with virtually all avenues to return now shut. Likewise there are many thousands of foreign nationals and tourists in New Zealand, similarly trapped here. There will be severe hardship coming for both groups.

The NZX50 Capital Index is strongly higher today, up more than +5% so far. The ASX200 has up more than +3%. Tokyo opened higher by +4.8% and Hong Kong opened +3.7% higher. Shanghai however is only up +1.8 at their open. It appears that the US Fed's unlimited market support earlier today is behind the change of fortune. But investors just don't seem to understand the epidemiology of the virus and where it will go, especially in the US. But the S&P500 ended the NYSE session down -2.9%.

In Australia, consumer confidence plunged by a massive -28% last week taking it to just above to just above the all-time lows recorded in 1990. Their confidence is now -17% below the lowest point seen during the GFC. Westpac economists in Australia say their jobless rate will reach 11% by June (that is, in ten weeks), and their economy will shrink by -3.5% in Q2, 2020.

Wholesale swap rates are little-changed today, essentially embedding yesterday's large falls. The two year is up +3 bps on the day, the five year is up +2 bps and the ten year is unchanged. The 90-day bank bill rate is also down -5 bps to 0.53%. In Australia, their swap curve is down too, but in a much sharper bear fall than NZ. The Aussie Govt 10yr is down -5 bps to 0.88%. The China Govt 10yr is up +1 bp at 2.72%. The NZ Govt 10 yr yield is unchanged at 1.46%. The UST 10yr is little-changed at 0.81%, after falling then rising.

The Kiwi dollar has risen more than +1c to 58 USc. Against the Aussie we are down to 97.7 AUc but only a small fall. Against the euro we are firmer too, also up +1c to 53.7. That means the TWI-5 is now at 65.4.

The price Bitcoin is also rising, now at US$6.604 and up a very strong +12% from this time yesterday. 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 ».

Our exchange rate chart (including bitcoin) is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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I have limited or no sympathy for some of the kiwis trapped overseas. Some of them left the country only 2-3 weeks ago, when any person with half a brain could see the risks. My friend's sister is stuck in the UK, after going there 3 weeks ago for a holiday. Stoopid

Yeah this is right. A number of colleagues left overseas from 6 weeks ago to a couple of weeks ago. I suggested to all of them they defer their trip, it's far too dangerous of a time to travel and they may end up being stuck. Nobody listened and two are now stuck overseas, the other whinging about "their ordeal" in trying to get home.

I also have zero pity for tourists "stuck" in this country. You had probably 6 weeks to organise getting home. You decided to keep holidaying like everything was normal. Now you can pay to stay in a hotel for the next few months, tough bickies. At least they will be cheaper.

yep, agree on the tourists stuck here
tuff bickies, your fault

It would seem that a bunch of tourists are completely oblivious to what is going on. Camper vans everywhere, freedom camper poo vans parked in groups at attractions socialising in groups. Thursday is going to get interesting.

Agreed, but let's not forget those who started this plague. Sure, those Kiwis trapped overseas are indeed stupid, but our anger should remain focused on those who are responsible for this virus; the weapons of the future we can now confidently predict will be biological weapons of mass fatalities without the infrastructure damage and long term radiation harm caused by nuclear weapons.

Anyone understand how the 'mortgage holiday' will likely work?

Grant Robertson said today that each bank will separately define how their policy will work. That public information when available will be posted on the Government's Covid website. You read what your banks terms/conditions and qualification criteria are there - and then ring your bank with the requisite detail regarding your specific circumstances.

As I understand it is modeled on the Aus mortage holiday scheme - so a google of that will help in the meantime.

Good informed comment

In factual summary; give a bit of breathing space BUT it's just a compounded fund that must be returned back to the banks, eventually ;-)
Banks is under pressure from govt. to show their social skills, reluctantly they obliged for the 6 months, more than that?..worldwide strong fellowship of the rings, is as good as .. it's weakest link.

Why change the Core Funding Ratios?

The interview with Antonia Watson...they say they have enough liquidity to cover all bases for 12-18 months?


Right. So WTF has changed?

Hard to know really - have foreign currency lenders frozen this source of funding for periods greater than one year?
Core funding defined by RBNZ:

New Zealand-incorporated registered banks are also subject to a minimum core funding ratio (CFR). The basic notion underlying the CFR is a comparison between an estimate of the funding of the bank that is stable and can be assumed to stay in place for at least one year (‘core funding'), and the core lending business of the bank that needs to be funded on a continuing basis. Core funding is defined as retail deposits plus wholesale funding with maturity of more than one year.

Nonetheless, I find it hard to fathom why NZ banks continue to pursue this currently expensive funding avenue, unless when it is XCCY basis swapped into NZD and booked as a derivative trade no capital requirements apply, but that seems unlikely under current asset based regulations?

So why don't banks fund all customer loans locally in the time honoured way?: create credit by purchasing customer IOUs with their own IOUs, which masquerade as deposits. Regulatory capital control is exercised at the asset level via the RWA regime.

By now, surely you remembered in every anecdotal.. when the leader, CEO, CFO, C of C Cs opening their mouth in the midst of larger/global uncertainty. The only certain things is this: Their job is to provide public with 'assurances' but never to reveal the real conditions behind. C'mon you remember vividly when her buddy/JK while at the top talking about robust AML regulations in NZ, there's no launderer etc. - the rest? is history, but surely we all can learn from it. My crystal ball push me to said things that they shall follow: OCR down & down again (the follow my suggested number on this web site), QE, mortgage holiday.. soon the LVR relaxation, off course the CAR 5 to 7yrs, this 75% to 50% liquidity, This either delay or reduce for April deposit guarantee, then May another OCR down.. C'mon don't tell me you not read the same here... the big Q is just when.. this Covids prolonged, .. then when the OBR has to kick in. Worldwide debt & printing money already surpassed that sanity threshold, news to public ears is just that 'cleverly wording of assurances' but not changing the real underlying facts - You can draw the parallel to Boeing 737max, beautiful, sleek, advanced, approved etc. but deep down as like one of those senior designer internal memo..'it's designed by clowns and supervised by monkeys. (No pun intended to both).

I see from the other thread that commentators are up in arms over the changes announced this afternoon. But aside from the commendable attempt to assist fellow New Zealander through a tough time, the reality is that we are a tiny nation in the grand scheme of things.
The most telling impact on us will not be from 'giving landlords free money' or any potential misuse of grants but from how the rest of the World tries to recover from this disaster, and THAT will affect everything we do from here on in. How the USA travellers; how the funding market work etc. will have greater impact on our lives, and from what we see at the moment - it's not looking pretty.


My advice to every tenant, who is provided no government rental subsidy ,that given the current remarkable circumstances ,write to your landlord and advise that you will defer paying any rent for the next six months, under the landlord rental holiday scheme.

What a stupid suggestion!
The tenant has a contract with the Landlord
The fact that the landlord may get a mortgage holiday doesn’t mean that the tenant gets free rent for 6 months, it has to be paid for the accommodation provided.
The tenant needs to apply for any entitlement and pay their rent.
We will not be applying for any rental holiday as financially it just doesn’t make sense to do so.
So far we have had only one email from a tenant yesterday before the 585pw was announced today.
We will work with out tenants to resolve any issues however discounting rent amounts upfront is irrational.
4 weeks rent as a bond is hold by MBEI but we are not able to use that for rent shortages as of right.


"Discounting ( deferring ) rents up front is irrational, yet deferring mortgage repayments up front is rational.?


THE MAN 2 your comment makes you sound so greedy. I wish people like you who have it all could see things from a struggling persons perspective. You think that the tenant should pay rent whilst the owner pays no mortgage... and on multiple properties by the sounds. NZ never used to have people like this. What went wrong?

and Landlords have a contract with the bank.


As soon as I got back from the S island on Monday, I told my tenant that the annual rent increase due on April 1st would be deferred for the duration of this crisis. In these exceptional circumstances, this seemed to me to be a responsible gesture both for the tenant and me. She has been there for over 10 years and I wish to retain her.
Sadly, your reaction does not surprise me. It fits your profile.

..to every tenant... But not every landlord is getting a mortgage holiday only those who's income is affected by the virus - and if the bank agrees.

I understand that if the landlord has a mortgage holiday they can pass on some of those savings to the tenant, but rates, insurance, maintenance costs still apply.

People just need to be fair and considerate, and look out for each other that includes tenants, and landlords.

Did the superfund get any of this action?
"The problem, experts say, is that investors like Baillie Gifford and Amundi and Oppenheimer were getting high returns - as much as 11% a year.

And the bonds required a certain number of people to die before countries receive any payout, among other conditions, complicating any immediate efforts to snuff out the virus."

This is truly awful.

by ngakonui gold | 24th Mar 20, 5:48pm

"So if the banks go down will my term deposits be safe?"

CBA up 4.2 percent, ANZ 4.8 percent, NAB up 2.8 percent, and Westpac the laggard up 1.91 percent. All still near their lows.

In this climate? don't dwell on your interest, withdraw it, put it into access account (skip any dep), break it in fraction of 30-50k max, spread within banks, if possible shifted some to OZ as they guaranteed capitalisation is much clearer than NZ, if you could while holidaying in stable ASEAN countries, open up account (not as easy as it sounds though, so be prepared) - then spread it again in guaranteed govt deposits scheme and/or use foreign banks is you still a bit cagey. eg. ANZ, and couple US banks, you can also opt for each countries risk of currency.
Your hard earned money, when dealing with Banks? the best is as good as basic return/intact on all of your principalities. That's your real fight, not the interest.


From a mate in the States

As some of you know I worked and still work in the pharmaceutical industry and was (and I guess still am) a research technician in organic chemistry. As I moved on in the industry my specific areas of specialty became Infectious diseases, oncology and dermatology and so after 51 years I have seen a thing or two. Thinking about what has occurred in the past three weeks is almost beyond comprehension and so with really nothing to do since we are staying home (any more wax on the cars and they will slide out of the garage), thought I might give a little perspective to my friends.

Are you feeling confused as to why Coronavirus is a bigger deal than Seasonal flu? Here it is in a nutshell. I hope this helps.

It has to do with RNA sequencing.... I.e. genetics.

Seasonal flu is an “all human virus”. The DNA/RNA chains that make up the virus are recognized by the human immune system. This means that your body has some immunity to it before it comes around each year... you get immunity two ways...through exposure to a virus, or by getting a flu shot.

Novel viruses, come from animals.... the WHO tracks novel viruses in animals, (sometimes for years watching for mutations). Usually these viruses only transfer from animal to animal (pigs in the case of H1N1) (birds in the case of the Spanish flu). But once, one of these animal viruses mutates, and starts to transfer from animals to humans... then it’s a problem, Why? Because we have no natural or acquired immunity.. the RNA sequencing of the genes inside the virus isn’t human, and the human immune system doesn’t recognize it so, we can’t fight it off.

Now.... sometimes, the mutation only allows transfer from animal to human, for years it’s only transmission is from an infected animal to a human before it finally mutates so that it can now transfer human to human... once that happens..we have a new contagion phase. And depending on the fashion of this new mutation, that’s what decides how contagious, or how deadly it’s going to be..

H1N1 was deadly....but it did not mutate in a way that was as deadly as the Spanish flu. It’s RNA was slower to mutate and it attacked its host differently, too.

Fast forward.

Now, here comes this Coronavirus... it existed in animals only, but nobody knows for how long, but one day, at an animal market, in Wuhan China, in December 2019, it mutated and made the jump from animal to people. At first, only animals could give it to a person... But here is the scary part.... in just TWO WEEKS it mutated again and gained the ability to jump from human to human. Scientists call this quick ability, “slippery”.

This Coronavirus, not being in any form a “human” virus (whereas we would all have some natural or acquired immunity). Took off like a rocket. And this was because, Humans have no known immunity and doctors have no known medicines for it.

And it just so happens that this particular mutated animal virus, changed itself in such a way the way that it causes great damage to human lungs..

That’s why Coronavirus is different from seasonal flu, or H1N1 or any other type of influenza.... this one is slippery, and it’s a lung eater...And, it’s already mutated AGAIN, so that we now have two strains to deal with, strain s, and strain L....which makes it twice as hard to develop a vaccine.

We really have no tools in our shed, with this. History has shown that fast and immediate closings of public places has helped in the past pandemics. Philadelphia and Baltimore were reluctant to close events in 1918 and they were the hardest hit in the US during the Spanish Flu.

And let me end by saying....right now it’s hitting older folks harder... but this genome is so slippery...if it mutates again (and it will), who’s to say, what it will do next.

Be smart folks... acting like you’re unafraid, in my opinion is just plain stupid.

#flattenthecurve. Stay home folks... and share this.

And on that score, I can't help but think that all this Level 4 stuff here; valid though it may be, isn't solely about 'us'.
It's about "What happens if this gets out in, say, Africa? And 100 million people want to escape to somewhere, anywhere, that isn't afflicted"
That's' when we'll need the borders closed. That's when we'll need an extended Level 4. Not to keep 'us' apart, but to keep those not already inside New Zealand at bay. "Get home now, whilst you can" was probably the clue.

Great info - thanks Andrew.

I would suggest not completely true. There are documented cases where people have tested positive and not caught it. Not caught meaning they did not develop symptoms. They obviously did catch it, but because their immune system dealt with it the symptoms did not show.


I think the answer to that lies in our DNA, also some people get very low doses of virus and then bodies get time to fight it.

'If we look back in history, the black death wiped out half the population of Europe. What was it? It was almost certainly not the plague, although many people claim that it was. From the descriptions of those who died from it, it seems it was possibly a form of Ebola (haemorrhagic fever).

‘The Black Death of the 1300s was probably not the modern disease known as bubonic plague, according to a team of anthropologists studying these 14th century epidemics. “The symptoms of the Black Death included high fevers, fetid breath, coughing, vomiting of blood and foul body odor,” says Rebecca Ferrell, graduate student in anthropology. “Other symptoms were red bruising or hemorrhaging of skin and swollen lymph nodes. Many of these symptoms do appear in bubonic plague, but they can appear in many other diseases as well.”

Modern bubonic plague typically needs to reach a high frequency in the rat population before it spills over into the human community via the flea vector. Historically, epidemics of bubonic plague have been associated with enormous die-offs of rats. “There are no reports of dead rats in the streets in the 1300s of the sort common in more recent epidemics when we know bubonic plague was the causative agent,” says Wood.’ 2

Of course, we cannot be sure what the Black Death was. We do know that it came, it killed, it went. It also appeared to leave a legacy of people with CCR5 Delta32 mutations. People with this mutation cannot, it seems, be infected by the Ebola virus (or, indeed HIV). Ebola and HIV both gain entry to cells using the CCR5 protein, and if it is missing, the virus cannot get in. [Yes, you can cure HIV by giving bone marrow transplant from a donor with the CCR5 Delta 32 mutation – little known fact].'

Thankfully this is not the black death. The Asian flu killed 2 million, incl. 100k yanks in 1957
We are nowhere near those numbers.

"This unintended experiment in coronavirus spread will help researchers estimate the number of fatalities that would occur in a fully infected population, Levitt said. For instance, the Diamond Princess data allowed him to estimate that being exposed to the new coronavirus doubles a person’s risk of dying in the next two months. Most people have an extremely low risk of death in a two-month period, so that risk remains extremely low even when doubled."

Scarfie, you've mentioned a perfect description of 'carrier' .. in our book? worst than that? is the young carrier which has been tested several times, but yet? still a positive carrier.. the danger of 'false negative' test result, nothing we can do, so much test can be done, assume... then release back.. to do the unknown.

There are some tools in the shed - "A new academic study, published on Friday March 13 by US scientific researchers, also said that chloroquine appeared to be an effective treatment, and appears to align with the findings in France.

It said: “Use of chloroquine (tablets) is showing favorable outcomes in humans infected with Coronavirus including faster time to recovery and shorter hospital stay…

“Research shows that chloroquine also has strong potential as a prophylactic (preventative) measure against coronavirus in the lab, while we wait for a vaccine to be developed.

“Chloroquine is an inexpensive, globally available drug that has been in widespread human use since 1945 against malaria, autoimmune and various other conditions…[it] can be prescribed to adults and children of all ages."

I happen to be Facebook friends with a French doctor who, together with his colleagues, was rather scathing about the Marseille study today. Perhaps don't get your hopes up, this is not proven yet.

If I may add into technicalities?: the serious respiratory happening when the body/self inflammation is in the lower part of lungs (it's inflame as body reaction to the foreign object fight by product of it? is liquid, this block further of air (o2/co2) transfer aka makes breathing difficult, as certain senior ageing group knowingly on decaying path despite their all healthy body components which serve as multiple backup systems in life, the quick succession chain of failure components, that finally caused death. The elderly individual best chance of survival/bring mortality rate down to around 10-15%: 1) timely hospitalisation/straight into ICU, put into Low Tidal Volume Ventilator 2) sometimes necessary to put body into sleep/dormant/comatose, to effectively:administer combination of drugs 3) bed positioning, upper body slightly up than the lower body - Now, that is the best human can do right now, no matter how advanced country on their healthcare, one cannot cope with virus shock & awe numbers influx of elderly patients that come. We tried to flatten the curve, let's hope we'll win albeit on borrow time. No one like to repeat the experiences of triaging incoming patients as; how old? keep this, transfer this, leave this one (use soft term in front of patient, that make it sounding all okay) .. but you know when visit back couple mins later it will be time death declaration. Mostly for this age group, almost like peaceful sleep if this can bring a consolation. And yes, as Andrew stated, the corona/crown part is very adaptable now to variants of host protein (say animal), which sadly tend to be consume by human. The jumping of it, let alone being consumed.. my estimate? in that Wuhan market.. the butcher use less protection/awareness during the cutting/butchering process, a small tiny drop of blood/splatter from the creature.. to the eyes, nose, mouth.. is suffice to warrant a migration - the rest? is history now. So? watch out for Covid20-22 and good luck for those worldwide young renters out there try to figure out the consistent protein type that the viruses consistently attached, thus allowing the worldwide another young renters type, try to figure out the most effective inhibitors. GBU all be kind to one another.

Thinking about moving maturing TD's and savings accounts into Bonus Bonds. Any thoughts on validity of this thinking from experienced finance gurus here? Bonus Bonds is a managed fund right that would be immune to any OBR/haircut type situation?

My current thinking is that bonus bonds are 'safer' than bank savings/TD accounts at present. Would this be correct thinking?

This over removing $$ from the bank and hiding in the freezer...

Years ago when OBR was introduced, I asked the RB this question - a rather jumbled response suggest they were not immune from the haircut, but just where they fit in the line-up was not made clear. I'd send them an email for clarity.

Bonus Bonds are not government guaranteed.
No safer than a Term Deposit.

My understanding if they are a managed fund - so it if there were a haircut, my understanding is that it is TDs and savings accounts that would take the hit. If managed funds start taking a hit, where do you end? Think of all the $$ that banks have in managed funds.

Kiwi bonds.
Now paying only 0.75% for 4 years, but hey, at least you will get your money back.

That 0.75% could be considered a 100% return if half of all TD's/savings accounts get wiped out across the country. Capital preservation is the focus in this market.

Uninterested... you will get your money back from KiwiBonds provided the Crown doesn't default on its debt. And even if it did, the Crown can't be wound up (unlike a trading bank) so the Crown would always owe you (and it can raise the money by taxation or printing it).
The KiwiBonds prospectus sets out the risks at Section 5:
Risks of investing General Risks
Your investment in the Bonds is subject to the following general risks:
Credit risk
If the Crown defaults on, or is otherwise unable to comply with, its payment obligations under the Bonds you may not recover the money you pay for the Bonds or receive the expected returns.
Consequences of Crown defaulting
Although the Crown could, in theory, default on its obligations under the Bonds it cannot be put into liquidation or wound up. Accordingly, the provisions of New Zealand law that give priority to certain creditors over others in the liquidation or winding up of a debtor do not apply to the Crown.
Claims of all creditors of the Crown would be brought under, and governed by, the Crown Proceedings Act 1950. You would not be liable to pay any money to any person as a result of the Crown’s insolvency solely because you are a Bondholder.

No, they're not safer. "Your money is pooled with other bondholders' money and invested in fixed interest assets and cash and cash equivalents." I believe most of the funds are invested with ANZ.

My point is that they are in a fund right and not a savings account/TD. And my understanding is that a OBR type haircut wouldn't touch funds, just savings/TD accounts.

The future of finance and markets will be very interesting now we have infinite QE and money printing. Especially for bitcoin....

Yep its a very slippery slope isn't it. Possibly completely using up the ability to pay for another big EQ event.
Or would they just print more, more, more: 30% of GDP, 40%, 60%.....

Imagine being on your last day of Home Detention.

Home detention immediately becomes no deterrent whatsoever.... Lets all become criminals....

There's an app for that - "In addition to isolating people, the Israeli government has made a priority of identifying virus carriers. In the most controversial development, the domestic security agency the Shin Bet, using hitherto secret anti-terrorist cybertechnology, is collecting location data from the mobile phones of virus carriers and sharing it with the health ministry. Officials use this data not only to track whether quarantine is being obeyed but also to match it with the mobile data of everyone with whom the sufferer has come into contact. The result is that people suddenly get a message pinging to their mobiles to say they have been exposed to a virus carrier and must immediately self-isolate for 14 days.

Now an app has even been developed in Israel to warn people whenever they have been exposed to someone who’s got the virus."

They can only do so much Dave, this time you can call it flogging the dead plastic toy pony (look real though). This to show the current situation, then later on provide future reasoning.. that they've done everything they could, quickly in timely manner But.. - Basically, RBNZ try to show the opposite action that previously they looks like trying to do..CAR 5yr okay.. 7yrs then, 75%.. akh Covids, okay 50%, prolong lock down? 25% then. In the process of past progress, greed/probability, eventuality, they just follow that car golden rule design; just carry one spare tire is enough, who would have thought? that all 4 tires needed at the same time, in cold winter night, in the middle of nowhere and we've got baby, elderly & pregnant mommy in the car. Ouh, forgot car battery just around 25% fitness, no phone reception the petrol gauge is knowingly gave faulty read by last cheap/uncertified young mechanic being paid cash under the table.