A review of things you need to know before you go home on Wednesday; many retail rate cuts, trade data holding up, equity markets in fairyland, swap rates volatile, NZD holds firm, & more

A review of things you need to know before you go home on Wednesday; many retail rate cuts, trade data holding up, equity markets in fairyland, swap rates volatile, NZD holds firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
ASB and the Cooperative Bank have both cut home loan rates, the Co-op Bank cutting them all. Details here.

TERM DEPOSIT RATE CHANGES
ASB and the Cooperative Bank have both cut term deposit rates as well. The Police Credit Union did as well. Details on our TD pages here and here.

LEVEL 4 EMERGENCY
A State of Emergency has been declared and we are now at Level 4. Hunker down and be safe. Take the situation seriously by observing all the rules. We need this thing behind us as soon as possible and that won't happen when community transfer is increasing. You want it to last only 4 weeks? That will happen only if everyone does the right thing. There are now more than 205 cases identified in New Zealand, with another 50 new cases today, including four community transfer cases confirmed.

HOW 'SUPPORT' WILL WORK
Rabobank is the latest to announce "support" for its borrowing clients. They say, "working with clients case-by-case, this could include: deferring scheduled principal payments, waiving break costs on early redemption of term deposits to allow access to needed funds, waiving fees on loan increases necessary for re-building operations and, waiving fees for equipment finance variations".

YESTERDAY'S TRADE DATA WAS IMPROVING
Exports rose +5% in the year to February while imports fell slightly. That trimmed the annual trade deficit to -$3.3 bln which has down to half the trade deficit in the equivalent year to February 2019. In the year to February 2020 we ran major trade surpluses with China (+$4.1 bln) and Australia ($1.4 bln), and lesser trade deficits with the USA (-$0.6 bln) and Japan (-$0.6 bln). These were improvements from New Zealand's point of view from the January annual results (ie, larger surpluses or smaller deficits for these for top countries).

CURRENT TRADE DATA IS HOLDING
Stats NZ is also tracking current export and import data on a weekly basis and through to March, exports were down -3.7% in the period from February 1 while imports were down -11%. That means we have been having an improved trade balance at the start of this crisis period. With China, both exports and imports were both about -15% lower in the same period. We haven't fallen out of bed on trade - yet anyway.

MORE 'YESTERDAY' DATA
February 2020 levels on new mortgage lending were up +$780 mln from the 2019 levels, a +16% rise. The outlier here was the rise in borrowing by investors, which was up +27% in that same period to over 20% of all new mortgage lending. But to be fair, it was the November 2018 to July 2019 period where investor lending was suppressed, so the recent rise is just a partial recover of historical levels.


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HUGE-ER, & MUCH MORE TO COME
There are now more than 205 cases identified in New Zealand, with another 50 new cases today, including four community transfer cases confirmed. Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 418,000 of officially confirmed cases, up +40,000 from this time yesterday and +110% in a week. There are now 336,000 cases outside China and almost all of them are in five core countries. Italy is up +5300 from just this morning's tally. The US is up +7000 cases from this morning, almost ten times more than one week ago. Most other countries are not exploding like these two however. Australia is now over 2000 cases, up +20% in one day.

MORE CHUNKY RISES
The NZX50 Capital Index is higher again today, up more than +3.2% so far and taking some cues from the S&P500 that was up +9.3% earlier today in New York. The ASX200 is up a similar 3.3%. Tokyo opened higher by another +4.7% and Hong Kong opened +2.6% higher. Shanghai is up +2.3 at their open.

LOCAL SWAP RATES YO-YO
Wholesale swap rates are firmer today and steeper. The two year is up +1 bp on the day, the five year is up +5 bps and the ten year is up +7 bps. The 90-day bank bill rate is down another -2 bps to 0.51%. In Australia, their swap curve is up in a similar way to us. The Aussie Govt 10yr is up +9 bps to 0.97%. The China Govt 10yr is unchanged at 2.72%. The NZ Govt 10 yr yield is also unchanged at 1.46%. The UST 10yr is up +5 bps at 0.86%.

NZ DOLLAR HOLDS
The Kiwi dollar is essentially unchanged compared to this time yesterday at 58.2 USc. Against the Aussie we are down a tad to 97.5 AUc. Against the euro we are marginally firmer at 53.9. That means the TWI-5 is now at 65.6.

BITCOIN STAYS UP
The price Bitcoin is holding higher, now at US$6.684 and little-changed 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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33 Comments

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"waiving break costs on early redemption of term deposits"
Well done Rabobank. At a time when there may be some nervousness about re term deposits 'safety', and being locked in until maturity, they show great understanding of community concern.

I agree well done, hopefully the money is used wisely and doesnt get eaten when the housing market dips

Rabobank lending is against businesses that actually make money, maybe not a lot but something, not like an unemployed barista. Also they are cautious lenders, they have also moved a lot of at risk clients on to other banks.
Because they lend to business they have higher capital ratios than lending against houses.

It's a good tactic. Stay reasonably small and on solid footing and wait your opportunity to get more market share.

They are the safest bank in NZ

That's a big call - can you substantiate your claim?

Yes well done Rabobank, one very large bank still has a 3% penalty for early withdrawal of TDs, was established when TDs were 5 to 6%. Now its still 3% on TDs that average about 3% over the last 12 months, so thats a 100% penalty now. I would imagine 50% is enough of a penalty, (thats 1,5% break penalty). Come on un-named big bank...

ASB has released a small amount of my TD without any break fee on basis of Covid-19 financial disruption

The US market (and our own) know no reason to be running scared it seems, all is well in asset pumping land, huge tranches of free money coming down the pipeline to keep the markets afloat.
That is until the really big numbers of tested and confirmed cases start to appear in US at 500,000 + within the next week, then no bottom will be low enough.....

Last chance to exit NZX50 may have been today. Even the FED has limits before they detroy the USD to save a market heading into what could be a depression.

Whats your take for NZD/USD? I'm sitting on a decent amount of USD - waiting for an opportune time to bring some baack to NZD.

I think short term will be USD strong and we may see sub 50 range but they have unlimited QE which may weaken it in the longer term.
I was on the fence but have decide to hedge myself with gold longer term rather than USD as I see no end insight from money printing.
Also watch gold if everyone else gets the same idea and switch out of USD gold will go crazy.
As of 2015, the projected ratio of gold vs global financial values was $1 gold vs $195.56 global financial assets.
I wonder how that figure will look in 6 months and what would happen if only 1 percent of that money chased gold.
https://www.jmbullion.com/investing-guide/paper-investments/gold-silver-...

Sounds like Air NZ might be releasing more staff than initially advised...but guess that isn't surprising for anyone.

Could be worse, check out what's happening in the UK airlines: BBC Coronavirus: No extra help for airlines, chancellor says. " Image copyright Getty Images. The UK chancellor has told airlines to find other forms of funding and not turn first to the government for help getting through the coronavirus crisis". https://www.bbc.com/news/business-52027342

I believe they said they will only need 30 percent of current staff on restart.

Editor: your last four days of updates all have NZ 10 yr on 1.46%. That is patently not correct. In the time you've been reporting that unchanging figure it's been down to 0.96%, currently on 1.11%.

What's going on here?

RBNZ has the official word here.

Notably, the NZ 10 yr government note yield rose from 0.96% to 1.06% today, despite the RBNZ's inaugural permanent LSAP (QE) reserve injection operations which are apparently designated to temper interest rate rises in the longer end of the curve - I guess our domestic traders took their cue from the UST 10 yr which rose 7bps earlier this morning at the close

Yes. Whenever CBs (including Fed) aren't in the markets long rates tick, sometimes shoot, up. CBs barely in control outside insane liquidity.

The RBNZ has committed to buying half of all outstanding nominal bonds over the next year. As of today, 50% are owned by offshore investors.

Will the RBNZ ever sell them back into the market and, in terms of the OCR equivalent, how much stimulus is this? One minute Orr is not doing anything, the next he's cutting 75bp and buying half of all outstanding nominal NZGB.

How do banking institutions transform their individual claims to central bank liabilities, better known as reserves, into visible and recordable stimulus in the terms of actual realised loans to business beyond financing GDP less asset sale and purchase activity?

Do you mean how do they stimulate borrowing in a supply side shock overlaying an existing demand side descent. Who exactly is credit worthy?

This is an interesting article...

https://edition.cnn.com/2020/03/24/economy/china-economy-coronavirus/ind...

Basically, China is going to sacrifice it's 300 million migrant workers to get the economy going.

From what Trump's saying, he maybe thinking the same thing with Mexicans and the low paid.

Modern cannon fodder.

peso has died and been buried.

Coronavirus may have infected half of UK population — Oxford study

New epidemiological model suggests the vast majority of people suffer little or no illness
The new coronavirus may already have infected far more people in the UK than scientists had previously estimated — perhaps as much as half the population — according to modelling by researchers at the University of Oxford.

If the results are confirmed, they imply that fewer than one in a thousand of those infected with Covid-19 become ill enough to need hospital treatment, said Sunetra Gupta, professor of theoretical epidemiology, who led the study. The vast majority develop very mild symptoms or none at all.

“We need immediately to begin large-scale serological surveys — antibody testing — to assess what stage of the epidemic we are in now,” she said.

The modelling by Oxford’s Evolutionary Ecology of Infectious Disease group indicates that Covid-19 reached the UK by mid-January at the latest. Like many emerging infections, it spread invisibly for more than a month before the first transmissions within the UK were officially recorded at the end of February.

The research presents a very different view of the epidemic to the modelling at Imperial College London, which has strongly influenced government policy. “I am surprised that there has been such unqualified acceptance of the Imperial model,” said Prof Gupta.

So a very low death rate then. Worth shutting the world down for though?

I have always been a skeptic.

Its an unverified model. Without a widespread survey to determine how many people have antibodies its nothing to get excited about.

Rosenstein, I have questioned the same in the past, I got abused from most...

Hope the study and you are right. Short sharp oops we were wrong to shut down much better than bugger we were right.

Just an excuse think about the timing of this when markets and debts are at all time highs and this virus arrives a great reason for a correction and change some rules to control us.
Rather than blame governments etc for allowing this debt bubble to get out of control.
I feel sad for all the small people who will get detroyed by this.
Why are they closing fruit and vegetable shops and liquor stores yet supermarkets allowed to carry on and increase profits with no competition.
Just today one of the main supermarket chains said the are not having any specials??? wow how long till the other chain follows.

Substitute "Stock Market" for "Residential Real Estate" and it would probably ring true for gods own.

I'm a bit wary of this, but if it is accurate then it is 2007 rinse and repeat.

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