A review of things you need to know before you go home on Monday; rate changes keep coming, RBNZ adds to support, insurers promise support, fear stalks fixed interest markets, NZD firm, & more

A review of things you need to know before you go home on Monday; rate changes keep coming, RBNZ adds to support, insurers promise support, fear stalks fixed interest markets, NZD firm, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
SBS Bank cut rates today across the board. They are staying close to market levels, but with no market leading rates.

TERM DEPOSIT RATE CHANGES
Kiwibank ended its 2.70% six month rate, reverting back to 2.50%. Heartland Bank has said its existing-customer offer of 100 days at 2.70% IAM, and 10 months at 2.90% interest paid quarterly, will both end on Friday, April 3, 2020.

RBNZ GOES FURTHER ...
The RBNZ will buy more government bonds, as well as corporate and asset-based securities to support liquidity in the corporate sector. Basically, it means that banks can sell-on corporate loans to the RBNZ to realise more liquidity. The RBNZ is hoping that means banks will keep lending to the corporate sector if they know they can offload these loan contracts to the RBNZ. More here.

... TO DEAL WITH ISSUES LIKE THIS
The type of distress that Smiths City is going through is what the RBNZ is trying to prevent. Following discussions last Friday, Smiths City’s bank ASB has agreed to delay by four weeks, the repayment of $1.5 million of the company’s $65 million Senior Secured Facility due for payment on Tuesday 31 March 2020. 

ANOTHER MILLION
The Government has fast-tracked up to $1 mln to help Air New Zealand move urgent freight to and from New Zealand, with the first flight to Shanghai leaving tonight.

ASSET FINANCE GETTING NEW OWNER
Clare Investment Management will acquire an 83% share in Whakatane's Asset Finance following Clare's proposed purchase of Blackstar Finance from Hong Kong's Blackstar Capital Group in the first half of 2020. It won't change Asset Finance's sub-investment grade rating of B-, according to S&P.

MONEY & INVESTMENT IN A CRISIS
Authorised financial adviser Martin Hawes says he will be running free financial webinars every day starting Wedenesday, April 1, daily at 4pm. The first seminar is: Money and Investment in a time of crisis. The topics for this seminar will include: Investment, KiwiSaver, Taking stock, Income and expenditure, Mortgage and debt. This is not a commercial event and there is no 'sponsor'. You can sign up here. He says topics will change over time and he expects to offer this webinar service during the rest of the lockdown.

ANOTHER VERY GOOD YEAR FOR INSURERS
According to updated data published today by regulator the RBNZ, insurers booked a +29% rise in profits in 2019 although that was down from a +38% rise in 2018. Life insurers however saw their net premium income fall -17% while general insurers booked a rise of more than +8% in premium income. Insurers earnings from investments were the star however, up +48% in 2019 to almost $5.4 bln. Some of this will have been unrealised of course so is likely to have crashed since then. Investment gains made up only 18% of their total net revenue however. (As a knowledgeable commenter pointed out, this is an industry that has not yet stepped up with premium deferral plans to help get their clients through the current crisis. Insurance clients have the bridges burned behind them if such arrangements aren't forthcoming. It is not possible to get or keep a mortgage, for instance, if you don't keep the house insurance policy up to date.) Update: see below.

IAG NZ'S COVID-19 ASSISTANCE FOR SMEs
IAG New Zealand says it will defer premium payments for small businesses experiencing financial hardship due to the COVID-19 pandemic. It also says small businesses that need to close premiums due to COVID-19 can maintain full insurance cover on the premises with no increase to their premium. IAG, NZ's biggest general insurer, also says it has reduced payment times to suppliers to no more than 15 business days. IAG is considering options for other customers experiencing COVID-19 related financial hardship. There's more detail from IAG here.

INSURERS TO 'RESPOND FLEXIBLY & RESPONSIBLY'
The Insurance Council of New Zealand (ICNZ) says support for customers' financial hardship due to the COVID-19 pandemic will be up to each member to implement. The ICNZ, whose members don't include health and life insurers, says its members will continue to handle all insurance claims and support customers. In addition they will "respond flexibly and responsibly" to those in genuine financial hardship or are vulnerable or have difficulties communicating with them. The ICNZ says all customers should contact their insurer if they are in genuine financial hardship.

LOCAL UPDATE
There are now 589 Covid-19 cases identified in New Zealand, with another 75 new cases since, in six important clusters. One person has now died here. We have twelve people in hospital with the disease, and three are expected to be discharged soon. Most hospitals have now discharged patients who are 'elective' and/or who may be vulnerable if they fill up with virus cases. Hospitals are now less than 50% full, awaiting a rush that hopefully never comes.

GLOBAL UPDATE
Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 721,000 of officially confirmed cases, up 115% in a week and at this rate, the total will exceed 1 mln before Friday. 20% of all cases globally are in the US, up +325% in a week. The US is facing a vast death toll, with the Administration saying it will be "a victory" if it comes in under 100,000. Others see 200,000 dead in the US. This is what delay and stupidity can wreak. 14% of the global tally are in Italy (up +65% in a week), and 11% in China (up +1%) and Spain (up +180%) each. Australia has now over 4000 cases, and 16 deaths. The pace of global infection is accelerating even quicker and global deaths now exceed 34,000.

STOCK MARKET UPDATES
The NZX is the first market to open this week, and it is setting the global stage with a -0.6% fall so far on the NZX50 Capital Index. The ASX200 is up +2.1% so far. Shanghai has just opened to a -1.3% fall, Hong Kong is down -2.0% and Tokyo is down -3.4% in very early trade.

FEAR STALKS FIXED INTEREST MARKETS
Wholesale swap rates are lower today across the board. The two year is down -2 bps, the five year is down -5 bps, and the ten year is down -8 bps. All swap rates are now at record, all-time lows. The 90-day bank bill rate is up +3 bps to 0.51%. In Australia, their swap curve is even taking a sharper bear flattening with their 2 year down -1 bp, their five year down -8 bps and their ten year down -13 bps. The Aussie Govt 10yr is down -16 bps to 0.76%. The China Govt 10yr is up +2 bps at 2.70%. The NZ Govt 10 yr yield is down -6 bps to 1.03%. The UST 10yr is down very sharply ahead of the NYSE opening, down -16 bps at 0.66% and falling sharply.

NZ DOLLAR FIRM
The Kiwi dollar has has stayed up today and is now at 60.3 USc. Against the Aussie we holding at 98.2 AUc. Against the euro we are firm too, up to 54.4. That means the TWI-5 is now up to 66.5.

BITCOIN LOWER
The price of Bitcoin is softer, now at US$6,014 and down -12% from this time on Friday. The bitcoin price is charted in the currency set below.

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.

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47 Comments

19
up

"Basically, it means that banks can sell-on corporate loans to the RBNZ to realise more liquidity."

Well repackaged loans yes. Its troubling. If the GFC taught us anything it's that credit agencies and banks can't price credit risk.

What hope do we have that RBNZ are buying these assets at fair market levels ?

The last thing we need is RBNZ cleaning the balance sheets of banks and taking the hit on their bad loans because that means the tax payer is taking the hit that should have been taken by the banks shareholders.

If the GFC taught us anything it's that credit agencies and banks can't price credit risk.

In fairness, it also taught us that they can price credit risk then lie about it to buyers.

FYI: Late addition to DEPOSIT RATE CHANGES: Kiwibank Notice Saver 32 days rate drops from 1.65% to 1.25% and their Notice Saver 90 days rate drops from 2.7% to 2.1% effective 3 April 2020

Yes, I like that one. 4 days notice on a 90 day notice saver. No power imbalance there between the bank and the consumer.

I think the NZ banks will do what the US banks did in 2008 QE, that is, take some of the cheap money off the RBNZ, but then sit on it to strengthen their balance sheets.

11
up

The type of distress that Smiths City is going through is what the RBNZ is trying to prevent. Following discussions last Friday, Smiths City’s bank ASB has agreed to delay by four weeks, the repayment of $1.5 million of the company’s $65 million Senior Secured Facility due for payment on Tuesday 31 March 2020.

Why doesn't the RBNZ directly buy the distressed portion of ASB's loan facility to Smiths City, which would give ASB capacity to function in a normal manner? But with restrictions to dedicate more lending to productive GDP qualifying enterprises at lower RWA capital requirements.

And while the RBNZ is busy loading banks up with inert central bank reserves the government's deficit spending into the settlement cash balance is doing the heavy lifting.

The cost is being realised by significantly higher value and more regular T Bill tenders.

They also wrongly assume that government deficits create money, when actually they create national debt & growing regressive interest transfers from the many poor to the few rentiers who they seem to be serving Link

There are also many ways the shareholders of Smith's could participate ~ a heavily discounted rights issue, a CB issue at a very discounted share price etc.

RBNZ seems to be becoming the first point of call rather than the lender of last resort.

Responding to the root cause of liquidity dislocation is surely preferred to letting the rentier class disgorge their high quality securities portfolios upon the taxpayer, together with the contingent liabilities, which they are largely underwriting with taxes. Moreover, who wants Smith City CP?

Thanks for sharing, great article.

Best to concentrate on the local default situation and the impact upon yourself and family and the fact that it is basically irredeemable - China is distant and really uninterested in rounding error nations such as ours.

Is Smith's City a NZ zombie company? How long has it been on debt life-support?

They have had a few dices with death. Went into receivership in the mid-1990s and got support to ride through the GFC. Maybe time is finally up?

10
up

It's telling that the first urgent freight flight is to Shanghai. That's the economic truth of NZ at the moment. Maybe we sent urns.

Maybe the return flight will.

Hopefully they don't send us dodgy testing kits as they have to Spain: https://www.businessinsider.com.au/coronavirus-spain-says-rapid-tests-se...

To put our economy in? RIP.

Kiwibank cut it's savings account rates. Used to return 1.2% p.a. but now at 0.7% p.a. Both lower than inflation of course.

Can you imagine how deflationary it would be if people or the country ever had to repay any of this debt being accumulated? Catastrophic.

It was such a beautiful day at the park today, the sun was shining & there wasn't a breath of wind. It just felt great to be alive, for about an hour.

Im cutting firewood in the drizzle. 6ml so far and that's just not enough. back country is short and brown we needed 50 ml or more and it's just not happening. Looks like works are cutting kill to %50 for lamb and %30 for beef.
Shaping up to be one hell of a winter, i'm just trying to grow something before May, when things pretty much stop around here. Wondering whats going to happen now the US ethanol industry is shutting down, that's about %30 of US corn.

Check weather watch , cyclone forming in New Caledonia area , possibly know next week if it will come near NZ>

Just talked to a friend inland and he's had next to no rain from this, next week is going to be too late for him.

It would be a victory if it comes in under 100,000. Was 17/18 stupid? Those numbers were with a flu vaccine. "An estimated 80,000 Americans died of flu and its complications last winter, according to the US Centers for Disease Control and Prevention."
The 1957 Asian flu in the US was 116,000 dead.
https://edition.cnn.com/2018/09/26/health/flu-deaths-2017--2018-cdc-bn/i...

Hi DC, any chance of getting the FX & swap rate charts back?

Trump talking about victory, pretty clear which victory he is thinking of .
But my prediction is he won't be the Republican's Presidential candidate. They won't publicly roll him , he will resign, or not stand , citing health reasons.

Trump.
Running the numbers.
Updating dates.
USA do nothing numbers, 2.2 million deaths.

https://youtu.be/pej7vM4mvjE
And
https://youtu.be/TJPrRM5iRy8

Watching the 6pm news, and as expected it is clear the lockdown is a disaster.

All "guilty" parties are rightly saying but we were told we could choose to "extend our bubble", that they are "allowed to exercise", that they are doing x/y/z for their "Mental health", and that they have stayed local because "I rode my bike here"

All the experts, ministers, and heads of various government departments are now stuck saying yes it is in line with what was stated, but is not in line with the intent.

Talk about polishing a turd. It is a losing battle when the PM went on National TV and said stay at home, well try and stay at home, well try and stay local, well only if you have too, then proceeded to give out a list of valid excuses.

The question is how do they rectify this without blaming the PM?

https://www.newsroom.co.nz/2020/03/20/1092200/why-urgency-not-gradualism...

Sam Morgan argues the usual governmental gradualism isn't enough to deal with the Covid-19 threat. He calls for more aggressive social distancing and testing measures because "each day of urgency will save lives"

I've been working full time to respond to the Covid-19 threat through whatever I can do with investors, philanthropists and the companies I'm connected with to prevent New Zealanders from dying unnecessarily.

And I'm at a loss as to why more is not being done: we're simply not going fast enough. Our Government seems committed to a failed policy of gradualism dressed up as faux-decisiveness. Our leaders and political systems are designed for peacetime. We have no experience of wartime. Our systems don’t understand needing to move before you have the data you would like. The data may not be here in New Zealand yet, but it is certainly there in front of governments in Italy, US, UK, Spain and so on.

I think most nations only ever had two options.
1. An absolute lockdown - i.e. do not leave your front door, or
2. No lockdown and accept some deaths.

We were lucky and had a third option unavailable to many others:
3. Shut the border completely.

Labour made the wrong choice. But, in absolute honestly I think National would have done worse.

The western world as a whole does not have "Leaders" in Government. We have a bunch of corporate managers - https://dilbert.com/strip/2019-04-23

but they did dily daly on option 3, and even when they so called cracked down all they did was hand people a pamphlet and send them on their way.
if they had shut the borders a month ago and did proper enforcement and testing of returning kiwis we would not be locked down.

We got one government, there is nothing to compare it to, other than it's own track record.
Are your prospects brighter than before
How is your hip pocket.
We all moving in the right direction.

However, there remains confusion and debate as to what activities are permitted under lockdown, with some people under the impression that they cannot leave their homes under any circumstances, while others are continuing to walk, surf, run and play golf.

https://www.theguardian.com/world/2020/mar/30/new-zealand-site-to-report...

There is evidence of price gouging by the Duopoloy in the Supermarket sector , ostensibly under the guise of excess demand .

Its very subtle but the cost of our shop the day before the shutdown was, shall we say , expensive .

And we did not buy any more than we normally do , no hoarding , with just enough fresh fruit and veggies for a week , and long life milk instead of fresh ( which we normally buy twice a week ).

When I complained about tomatoes at a ludicrous $4,99 at NW, I was told that tomatoes will be $5,99 per kg at New World by next week.

That's almost equal to the discount cost of a kilo of Pork , ........... frankly we should be outraged , particularly when we have not yet had any frost or very cold weather , and more so given tomatoes can be grown all year round in tunnels .

Someone somewhere is clipping a very big ticket in this scam

Maybe its time some entrepreneur brought in tomatoes from the Phllippines ( they are around 70 cents a Kg there ) , like we do with bananas and pineapples , or Australia where they are retailing at Aus $2,99 in Qld.

We could be more than 100% more expensive than Aussie by next week it appears .

There is not much we can do about this other than vote with our $ and not pay outrageous prices for anything where we feel we are being fleeced

So for me its quite simple, we will not be buying tomatoes at that price , and hope others follow suit and the tomatoes go rotten and have to be discarded , it will serve that bunch of thugs running our supermarkets right

Over $7 for a Cauliflower at Dunedin packnsave today.
The meat prices were normal but the amount of NZ meat sitting arround the price will be lower for the supper market to buy at.

Supermarkets have held growers and consumers to ransom for years with their anti-competitive behaviour. They bully the growers for low prices then mark it up to on sell to us. Ever wonder why so many local butchers have closed over the recent years?

Sad really. Process tomato harvest in Hawkes Bay still has 3 weeks to run, minimum order 550t per day..

Spare a thought for Wilson Parking.

Bugger Wilsons Parking ............they are another bunch of rogues that have shaken Kiwis down for years

Let's start a list:

Wilson parking
Supermarkets
Petrol stations
Internet providers (a little better recently)
Furniture stores

Banks
Power
Insurance
Councils

I have deleted my comment about certain professions, and decided to Be Kind :)

Books are expensive in NZ

Issues a Virus Wartime leader needs consider.
With references to wartime FDR.

https://youtu.be/n3CAhqAWYkw
VDH

I still haven't received my wage subsidy!!!

yes Smiths City has made bad decisions ROY Campbell is away with fairies , they have employed staff and got rid of long servers , there flagship store is run by ex warehouse stationery staff who don't have a clue about the old traditional offerings We have spent 40k with group over 36 months BUT would never deal with company again due lack of knowledge

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