A review of things you need to know before you go home on Tuesday; many retail rate changes (cuts), retail spending dives, business confidence follows, power use down, swaps stablise, NZD firm, & much much more

A review of things you need to know before you go home on Tuesday; many retail rate changes (cuts), retail spending dives, business confidence follows, power use down, swaps stablise, NZD firm, & much much more
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Here are the key things you need to know before you leave work today. First, go get a coffee - this update is a long one today.

MORTGAGE RATE CHANGES
KiwiSaver scheme Simplicity says its member first home buyer floating mortgage rate has been dropped from 2.95% to 2.80%. They say they have had more than 1000 people enter their draw, with 120 successful so far and of them, 30 had pre-approval. One borrower is now in a home. NBS has cut its one year fixed rate to 4.09%, a -16 bps reduction

TERM DEPOSIT RATE CHANGES
Co-operative Bank is trimming -5 bps from their six and 12 month TD rates. Heartland Bank has cut most of its term deposit rates, many of which were market-leading. ANZ, BNZ and Kiwibank all reduced their already low savings account rates today. You are now lucky to get as much as 0.7% pa on a "bonus saver" - bank savings account names are now pretty ironic.

RETAIL GYRATIONS
Paymark is reporting that spending through their network dropped a huge -72% below year-ago levels on Thursday 26 March, not surprisingly, being the first day of the Level 4 restrictions. Retail spending then remained down by similar levels for rest of the week ending Sunday. In contrast spending on Monday and Tuesday in the Level 2 & 3 days prior had been around +50% above the same time a year ago as people stocked up.

CREDIT DEMAND DIVES
Local credit agency Centrix says credit demand has fallen consistently and significantly throughout March, dropping by nearly -50%. This fall takes into account credit card applications, vehicle and personal loans, mortgages, as well as other lines of credit.

SHARP TURN INTO REVERSE BEFORE THE CRASH
Although the eight month to date Crown Accounts came in with a $1.3 bln surplus, there were unmistakable signs of trouble in these accounts. The full 'Operating Balance' that includes gains & losses of investment positions turned negative sharply, and the economic crisis hadn't even really started to bite. That full accounting result went from a sis month surplus of +$4.5 bln to an eight month deficit of -$4.7 bln. The March accounts are going to be very ugly indeed when they are released on April 30, 2020.

SECOND HIGHEST, LONG TIME BETWEEN DRINKS
Most regions recorded double digit growth in new dwelling consents in the year to February, Statistics NZ says. That means there were 37,882 consents for new dwellings in the year, near a high-water mark reached in 1974 when 40,025 were consented, when our population was only 3.1 mln. Now our population is touching 5 mln. Given the sudden economic crisis, it seems unlikely that 1974 peak will be topped any time soon.

RECORD LOW BUSINESS CONFIDENCE
Business confidence has dived, not unexpectedly. It is now at its second-lowest level ever (-63.5) recorded, beaten by the 1987 Crash (-68). It is now even lower than when the 2017 election of the current coalition Government (-50.3). The more important Own Activity indexes also crashed, now down to an all-time low of -26.7. A key cause for alarm is the export subindex.

NO WORD YET
So far, we have not heard that the IRD is shifting back the payment dates for PAYE, provisional tax, or GST. Without that adjustment, one that has been made in other countries, many SMEs will be in severe liquidity trouble. It may also undermine the wage subsidy program where employers get some funding to keep staff on the payroll. But becoming illiquid because tax payments are DUE NOW may make that impossible.

BANKS SHOULD BE OK
Ratings agency S&P says it is confident that the main New Zealand banks can weather the economic crisis and that no ratings downgrade is imminent. They put that down to the fiscal actions taken which won't undermine banking positions. Ratings agency Fitch has looked at our high household debt and expects us to handle that ok in this crisis too, also largely because of the way the local stimulus has been rolled out.

CONSTRUCTION COMPANIES MAYBE NOT
The infrastructure sector could shed up to -30% of staff over the next 6 months unless immediate measures are taken to protect workers and restart construction, according to sector lobby group Infrastructure NZ.

ABOUT TIME
Lost in a stream of more urgent news, the NZX today announced a proposal to structurally separate the Exchange's commercial and regulatory roles. Long overdue.

SHUTTING OFF
We are now starting to see some pretty chunky drops in weekday electricity demand, reflecting the lockdown realities. On Friday, March 27 it was down about -15%, but the falls were less on the weekend days. Yesterday (Monday) the reduction was back to -13%.

HOUSES YES, BUSINESESS NO
The RBNZ released a lot of debt data today for February, 2020. But of course this is now only of academic interest. Suffice to note that housing debt rise +7.2% in the year to February, the fastest growth in 31 month, since before the current coalition Government took power. Business debt demand sagged a little bit, and rural debt actually fell -0.2% year-on-year, its first such decline since 2012.

STILL GROWING DEPOSITS WITH BANKS
On the household deposits front, they were still growing in February, up +4.3% year-on-year to $184.5 bln. That is a similar rise as we have seen in the past nine months. It is a crucial measure of confidence in our banking system. Low retail interest rates aren't shifting balances out of this type of saving.

LOCAL UPDATE
There are now 647 Covid-19 cases identified in New Zealand, with another 58 new cases today and well below the 75 new cases yesterday, now in 14 important clusters. One person has now died here. We have nine people in hospital with the disease. The Government released its health modeling the use to plan their public health policies and response actions.

FIRST OF MANY EXTENSIONS
The State of National Emergency to help stop the spread of the virus has been extended for a further seven days. The initial declaration on March 25 lasted seven days and can be extended as many times as necessary.

GLOBAL UPDATE
Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 784,300 and rising slower than we have had recently. The 1 mln level may be further away than we think. 21% of all cases globally are in the US and they are up +22,500 in one day. Australia has now over 4400 cases, and 16 deaths. Global deaths now exceed 37,600.

FALSE DAWN?
The NZX50 Capital Index is up +2.3% today from yesterday. The ASX200 is up +2.4% so far. Shanghai has just opened to a +0.4% rise, Hong Kong is up +1.3% and Tokyo is up +0.6% in very early trade. The S&P500 closed up +3.4%. Investors feel they can't lose from all this pain-numbing stimulus. Just don't look too far ahead.

TESTING DEEP-SEATED BIAS
There has been a stunning bounce-back in the Chinese PMIs for March, a recovery that was as swift as it was unexpected. This is the official data; cue questions on credibility. But it may underpin Western expectations that we will get a similar effect.

SWAP RATES STOP FALLING
Wholesale swap rates are up +2 bps across the curve, up from yesterday's record lows. The 90-day bank bill rate is down -2 bps to 0.49%. In Australia, their swap curve has moved similar to ours. The Aussie Govt 10yr is up +5 bps to 0.81%. The China Govt 10yr is unchanged at 2.70%. The NZ Govt 10 yr yield is up +4 bps to 1.07%. The UST 10yr is up +4 bps to 0.70%.

NZ DOLLAR FIRM
The Kiwi dollar has has stayed firm today and is now at 60.2 USc. Against the Aussie we softer with teh AUD firming faster and we are now at 97.4 AUc which is more than a -¾c fall since this time yesterday. Against the euro we are firm, up to 54.6. That means the TWI-5 is now up to 66.6.

BITCOIN RISES
The price of Bitcoin is stronger, up +8.6% in a day to US$6,530. The bitcoin price is charted in the currency set below.

Now get a beer.

This soil moisture chart is animated here.

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Our exchange rate chart (including bitcoin) is here.

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46 Comments

10
up

JHK has opined about the likely post-Covid era. Hint: it ain't like the present. Sharpen yer digging implements and start weaving them Hairshirts.....Winter is Coming. Queue 'Ride of the Valkyries'.....perhaps, with all that That implies.

Still, a Ray of Hope. We'll still have Choo-choo's. Be still my beating heart.....

Ray of Hope you say? Let's hope so...
" On top of that we’re surly, impolite, clownish, blustering, greedy, and improvident. Believe me, that is going to change. Hardship is a great attitude-adjuster. When (we) awake from the corona coma like millions of Rip Van Winkles, it will matter again to be upright and to act in good faith. This will be a different country."

I am reminded of a line is a Robert Heinlein book, he askes Friday what is the sign of a sick civilisation. While there are a few signs of one in decay, when sickenss is terminal people stop being polite to each other.

But, but, but, I thought buses and trains and planes were now nasty, disease ridden, virus transmission devices? Not so long ago they were supposed to be good for us, of course, not sure why that was exactly. "My car is my bubble" could be the new way.

Bit like 'single-use plastic bags' were Whale-killers, but now reusable shopping bags are Covid Carriers. Oh, how the world turns.

And the Choo-choo bit was occasioned by the arrival of postcards from our recent excursion on the Strahan-Queenstown (TAS) Abt railway. Ah, nostalgia, it will be a long while before that sort of touristerizing again becomes feasible....

Not one of our bags were ever single use, unless they were ripped.

One thing will be pretty clear: That the folks in charge of things gave trillions of dollars to Wall Street while tens or perhaps hundreds of thousands of Covid-19 survivors got wiped out financially with gargantuan medical bills. Do you think the Chargemaster part of the hospital routine will just stop doing its thing during this emergency? The billings will continue – just as the proverbial beatings will continue until morale improves! In the aftermath, I can’t even imagine the ‘splainin’ that will entail. The rage may be too intense to even get to that. For some, it may be time to lubricate the guillotines?

Hmmm........"A Multitrillion Dollar Helicopter Credit Drop": How The Fed Turned $454 Billion Into $4.5 Trillion

Although the eight month to date Crown Accounts came in with a $1.3 bln surplus, there were unmistakable signs of trouble in these accounts. The full 'Operating Balance' that includes gains & losses of investment positions turned negative sharply, and the economic crisis hadn't even really started to bite.

The operating balance (excluding minority interests) was $4.7 billion below forecast mainly owing to ACC’s
outstanding claims liability valuation losses being $2.8 billion higher than forecast primarily due to a decrease
in the discount rates. In addition unfavourable changes in market prices resulted in net investment gains
being lower than forecast by $2.0 billion.

This is just the beginning, the OCR rate cut from 1.00% to 0.25% will inflict severe damage. The discounted present value of future liability cash flows will explode.

Shanghai cases of Covid19 on the rise. Chinas PMIs for March had a lot of caveats. I believe one from the NBS read 50% of factories are now operating. But at what capacity...

Right. As expected, these 'back to BAU' numbers are nothing but foul play on the part of the regime.
Reports coming out earlier this month said industrialists were asked to leave their lights on despite little to no activity at their factories so as to put on a facade of recovery for observing satellites.

https://www.dailymail.co.uk/news/article-8086057/Chinese-business-leader...

41
up

Housing debt rose at an historically high rate right up to the last moment...
We hit the iceberg at full steam ahead, doing lines in our cabins and lighting our cigars with borrowed hundies.

Good times.

Fantastically good times followed by an unscheduled prolonged ice bath

Nah this ship is UNSINKABLE!!
And Cap'ain Robertson and First Mate Orr have got a HUGE bilge pump fired up...

Gonna need more than one Orr to row this mess ashore

But, it's discharging into the for'ard hold....

Low retail interest rates aren't shifting balances out of this type of saving.

Mainly because those swapping savings for another investment vehicle find their way back via the vendor of said investment.

That's why the RBNZ considers retail deposits "sticky" in terms of CFR:

The CFR addresses their longer-term funding position by forcing them to hold a certain amount of more ‘sticky’ core funding, e.g., long-term wholesale debt with maturities of more than one year, or retail deposits.

Good point. What happens when I take my NZD and exchange them for AUD or USD? Whose NZD balance ends up going up?

Depends where you trade. If vs a bank they do. If you trade on an electronic platform your counterparty is another punter ;)

I'd recommend interactive brokers if you can get set up in NZ ~ trade at spot, tiny commission.

The foreign exchange dealer that sells you the foreign currency deposits your sold NZD in it's correspondent NZD A/C in Wellington while your AUD currency component is lodged in the dealer's correspondent bank account in Sydney for onward credit in an account of your choice.

Eventually, the foreign ownership of NZD deposited in NZ banks needs an investor they can finance to buy NZ's family silver - land, infrastructure etc.

I guess the good old FX & swap charts didn't make it out of Interest's office, before the lockdown.

Im not sure this shutdown is going to work, it may spread out the rate of infection but in the meantime it's going to kill our economy. I'm waiting because shops in town that are sort of open, wait at the door stuff cannot get me parts, now the farm bike needs a new tyre and bike shop is shut.
This just isn't sustainable, or possible in the real world.

https://www.zerohedge.com/health/china-shuts-down-all-cinemas-scientists...

a world gone mad

https://www.zerohedge.com/geopolitical/covid-19-derangement-syndrome-wor...
Jobs may never come back.

https://wolfstreet.com/2020/03/30/the-1-5-trillion-global-tourism-indust...

14
up

As you will know Andrew I have harped on about the mammoth economic and social costs of this.
Of course I have no choice but to accept the decision on the 4 week lockdown.
But I will tell you right now that if this is extended to 6 or 8 weeks our whole society will be toast.
They have to pull it back to level 3 after 4 weeks. Have to.

Agree.

Beyond 4 wks risk social unrest. People will just flout the rules, riot and go back to open their business.

Better for the govt to keep the people on side and do lower restrictions after 4wks but not full lockdown.

When "elimination" does not mean "eradication" of the virus, but "lockdown" does mean severe and prolonged financial and economic destruction, then the tension between these two undesirables can only cause Grief. This kind of unhappiness must take expression. Inner calm may not be an appropriate response.

'Covid-19 derangement syndrome'. Brilliant.

How many others have been fobbed off when looking to arrange a this season flu vaccination ?

https://i.stuff.co.nz/national/health/coronavirus/120701649/coronavirus-...

Receiving influenza vaccination may increase the risk of other respiratory viruses

Influenza vaccination and respiratory virus interference among Department of Defense personnel during the 2017-2018 influenza season.

Abstract
PURPOSE:

Receiving influenza vaccination may increase the risk of other respiratory viruses, a phenomenon known as virus interference. Test-negative study designs are often utilized to calculate influenza vaccine effectiveness. The virus interference phenomenon goes against the basic assumption of the test-negative vaccine effectiveness study that vaccination does not change the risk of infection with other respiratory illness, thus potentially biasing vaccine effectiveness results in the positive direction. This study aimed to investigate virus interference by comparing respiratory virus status among Department of Defense personnel based on their influenza vaccination status. Furthermore, individual respiratory viruses and their association with influenza vaccination were examined.

more
https://www.ncbi.nlm.nih.gov/pubmed/31607599?fbclid=IwAR18MOEqrb3tLd1gA8...

The folk that govern us are lightweights, they can be relied on to mess it up. They only know BAU, and this is wayyyy beyond that.

Well the good news is, China’s manufacturing activity actually expanded over March.
“China’s National Bureau of Statistics said in its announcement of the PMI reading that there was continued improvement in the prevention and control of the outbreak in March, with a significant acceleration in the resumption of production.”
Markets are up... it’s like nothing happened. Phew!!!

BS of the highest order!

Do you want sources? Or do we just shout BS when we don't like something? Or is your sarcasm gauge buggard today?

Do you really trust data coming out of that regime?

You know I don’t Fritz... I thought you’d understand my post was a scoff at the messages out of Beijing...but the problem I see is that there investors and people who see Beijing as the way out of this mess and will sell their souls to ‘save’ themselves...

Do you do anything other than complain hubbub?
Is there some information that comes out other than knocking people down, now would be a good time to engage.
Please note your 'Or is your sarcasm gauge buggard today?' As you put it abov, your gauge should be the amount of likes you get. A big fat bubble zero!

What the heck are you talking about?
Someone said what I said was BS. I offered ‘proof.’
But in case you don’t understand about the sarcasm gauge... I was being sarcastic that China was saying everything is under control. Usually people understand that China is lying...
Am not sure collecting ‘likes’ is something grown ups do... it’s more of a teenage Facebook thing....

This from CNBC -
China says manufacturing activity expanded in March, defying expectations of a contraction - https://www.cnbc.com/2020/03/31/china-reports-march-manufacturing-pmi-am...

Point. 'China say'... No body believes a thing they say.

Manufacturing yeah catching up on what they were short of as expected. Now they have no orders to fill because guess what their markets are on lock down and will be for quite a time. After that who is going to deal with them in the long run remains to be seen. I will certinally pay extra to buy from elsewhere.
Are you one of Xing's paid pro China mates?

Well that was published out of CNBC, did you check the references?... I didn’t make it up. Your comment about being on XI’s pay list is just silly...

And this - Coronavirus is still smashing through markets — but investors have found one they like - https://www.cnbc.com/2020/03/31/coronavirus-shakes-markets-but-investors...

All just smoke and mirrors of the next big govt pump to float the market. Out of the market again before it drops in WiFlu round two.
So what's your point hunhub?

Uhmmm... did you read the article and see it in the context of my initial post... bet you didn’t. You just went off half cocked as usual.

Are you joking the markets are not up it is just a pause in the drops while we await the next news cycle for more pain.
If this is the bottom the world is now totaly fake and free markets are no more.
The figures that will be released from rest of the world in coming months will show what China covered up.
Look at New York that will playout for the next 6-9 months around the world and then lets see where markets will be.
The markets are in a bull trap anyone going long in this market are just rewarding day traders.

To date we have had one death. One death too many of course but of a total 647 infected individuals is minuscule. Community infections (if any) is near zero so the so called deadly virus is pretty tame in NZ. It's the bumbling pollies you have to watch out for not the virus

Becnz, I think you are absolutely correct... I am really worried as to how far things will fall...

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