A review of things you need to know before you go home on Wednesday; more TD rate cuts, dairy prices retreat, farm sales lower, exports hold up, A2 Milk shines, swaps stable, NZD down, then firms, & more

A review of things you need to know before you go home on Wednesday; more TD rate cuts, dairy prices retreat, farm sales lower, exports hold up, A2 Milk shines, swaps stable, NZD down, then firms, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes today.

TERM DEPOSIT RATE CHANGES
Late yesterday, the Co-operative Bank made a -5 bps cut for its 9 and 12 month TD offers. Today, SBS Bank cut -10 bps from all its terms from 6 months to 36 months.

DAIRY PRICES RETREAT
The dairy auction last night was a wobbly one. Overall prices were -4.2% lower in US dollar terms and -3.8% in New Zealand dollar terms. Most products took falls at these level,s with WMP down -3.9% and SMP down -4.9%. This adds to a string of chunky falls since the beginning of February with only one auction in the past six able to hold the line. These falls are mounting so that since the start of 2020 overall prices are down -11% and year-on-year they are down -17%. The growing retreat won't be able to be ignored in the farm gate milk price.

A SHARP PULLBACK
There were 105 farms sold in March, much less than the 143 sold in the same month a year ago. March is usually a prime sales month but not so this year, for obvious reasons. Far, far fewer finishing, grazing and horticulture units sold, and there were zero sales of arable farms, a very unusual result. However, there was also an unusual surge in forestry blocks sold in the month, the most (26) in any one month since we have been tracking this since 2007. Their low $/ha values kept the overall average farm price metric quite low at $21,130/ha. Also see this. And we should note that the main farm realestate portals show that listings are also down about -15% too.

THE END OF NORMAL
Lifestyle block sales have held up surprisingly well, bolstered by good sales in Northland, Auckland and Waikato. There has been consistent sales in the Manawatu and Canterbury, but some other regions are softening. Overall, the 626 sales in March was remarkably close to the 650 in February and also close to the 668 in March 2019 which is surprising given the pandemic fears that hit in the latter half of the month. It is hard to imagine April sales being like a normal April however.

3% GET A 3% RATE
ASB says it "has approved $123 million of business temporary or permanent overdraft facilities at the significantly lower rate of just 2.95%." It also claims that it has "helped over 8,600 business customers providing more than $4 billion across its various relief packages". Presumable the other $3.9 bln were at its normal interest rates.

NOT A DISASTER
StatsNZ updated their goods export tracking data through to April 15 today. It shows exports haven't fallen off a cliff even if they are softer than the equivalent period last year. But confusing this picture is the Easter break; it cam earlier this year (April 10) than last year (April 19) andthat will be accentuating the decline somewhat. China's demand is what is holding us up. New Zealand is being 'saved' by being overweight in food exports and China as a customer.

ANOTHER $800 MLN
The Treasury is back in the bond market tomorrow seeking another $800 mln in three separate issues (2025, 2027, 2033). The RBNZ will be in the wings making sure it all gets placed. ["Don't bet against the Fed."]

AN UPTICK?
Electricity demand had been down more than -10% for most of April so far compared with the same period a year ago. but in the past few days we have seen an uptick that has narrowed the decline noticeably. (The relative timing of Easter might have been a part of that of course.) Rainfall ignore things like Easter, and our storage lakes are filled to about their long-run average levels.

'DON'T EXPECT ANY SLACK'
The Insurance Council has pushed back today against the idea that sizable refunds could be due because cars aren't being used (or damaged) in the way car insurance assumed when premiums were set. They rolled out their own tame "expert" to debunk the refund theory.

'WE'RE WATCHING'
In chaotic markets, the opportunities for insider trading rise. The FMA today warned New Zealanders that they are on the lookout for such behaviour here. You do wonder if they will actually catch anyone. If they don't, what are the chances there was none?

HEADING FOR A WIPEOUT
The GDPLive team has been tracking updated data in the real estate and related industry. What they see is a very sharp, recent retreat, down more than -80% in late March and early April.

LOCAL UPDATE
There are now 1451 Covid-19 cases identified in New Zealand, with another +6 new cases today and more than yesterday's +5 increase. Fourteen people have died here now, one more than yesterday, all geriatric patients. There are now 11 people in hospital with the disease today, with two in ICU. Our recovery rate is now up over 71% and rising.

GLOBAL UPDATE
Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 2,475,800 and up +73,000 this time yesterday which is an unchanged rate from yesterday. Now, just under 32% of all cases globally are in the US, which is unchanged in a day, and they are up +28,000 since this time yesterday to 786,600. This is a slower rate of increase. Just over 9% of all US cases have recovered so far, which is no improvement. Infection rates in Russia are rising very quickly. Australia has now over 6500 cases and little-changed over the past week; their recovery rate to 63% and also unchanged in almost a week. Global deaths are now at 170,000, up +50% in a week, with very variable reporting across jurisdictions. Countries like the US, the UK and Australia only report hospital deaths. Countries like China include community deaths as well (as does New Zealand). There is a widening conversation in Australia about the quality of their data, with one estimate there could be up to 30,000 people infected.

EQUITY UPDATE
The S&P500 took a dive at the end of trading today and ended down more than -3%, a similar result to Europe overnight. The NZX50 Capital Index is down -1.4%, held up by A2 Milk. The ASX200 fell sharply at the open but has clawed back most of that to be down just -0.3%. Meanwhile, the major Asian markets have opened negative but not to the extent of Wall Street.

A ONE-OFF EXPLOSION
In Australia, panic buying in March saw their retail sales levels rise more than +8% year-on-year. It wa a surprise to analysts. It will have been a one-off though.

SWAP RATES UPDATE
Yesterday, swap rates basically held the whole curve even if slightly soft. We don't have wholesale swap rates movement details today yet. We will update this later in the day if they show a significant change. They probably fell again; everything else has. The 90-day bank bill rate is down another -2 bps at 0.33% and now getting very low. The Aussie Govt 10yr is softish, down -1 bp at 0.83%. The China Govt 10yr is also unchanged again at 2.58%. The NZ Govt 10 yr yield is also down just -1 bp at 0.89%. The UST 10yr is down more, by -4 bps to just on 0.56%.

NZ DOLLAR HOLDS
The Kiwi dollar has hovered little-changed at 59.7 USc after the overnight shift lower. Against the Aussie we are much softer at 94.6 AUc as they are boosted by their share of increased Chinese infrastructure spending. Against the euro we are back up to 55.1 euro cents. That means the TWI-5 has firmed very slightly to 66.1.

BITCOIN HOLDS
The price of Bitcoin is doing nothing today, virtually unchanged at US$6,882. 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.

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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58 Comments

Insider trading - what chance?
Remember this is NZ where until recently the RBNZ governor used to give advance notification of changes.

Corruption only exists of we succumb to the temptation to look for it.

by Nzdan | 22nd Apr 20, 7:37am

Still half asleep, I misread your comment as "Mainland Cheese leaving Hong Kong housing market."

I'm still half asleep, I read your comment as China literally exporting a tank (the military sort).

14
up

I'm going to have to do something about this. Chinese exports down the plug, gone to the dogs, dropped off the cliff, hit the wall, beaten like a redheaded stepchild.

During the latter part of the GFC mainland Chinese selling in HK drove the market down about 50%. Quite short lived falls, perhaps 3 months, but the GFC didnt really have much direct effect on China.

I'd imagine property in Remuera and Herne Bay is looking pretty shakey in months to come.

10
up

Love to know where Chinese nationals got their funding, if it's borrowed against property in China brace yourself. Also if better opportunities for investment arise in China, back it goes.;

I'm not so sure - I suspect that they will default in China rather then sell overseas.

19
up

The Chinese are often leveraged at home to push money abroad. The forced selling that occurred in 2009/10 was to cover losses on equity positions and domestic investments.

As the factory orders dry up and Chinese are retrenched in increasingly large numbers I'd be surprised if we don't see selling in the all the cities that attracted so much Chinese money ~ London, Manchester, Vancouver, Sjngapore, HK, Macau, Bangkok, here, Sydney and Melbourne etc.

Bear in mind never in human history has the population of a major economic powerhouse worked so hard to channel funds abroad. Japan in the late 80s did it in the corporate world but the average middle class family didnt buy investment homes. It's a house of cards on a global scale.

Well said and how Im thinking.

What about the amorphous barons ruling the world with the actual reserve currency - eurodollars and all they entail.

they want more security

Its interesting you should mention that. One of the sad facts of this unfolding crisis is that the rich will get richer and the poor poorer.

The rulers of liquid capital the world over are going to be sweeping up distressed assets and prime assets at discount prices in the coming year or two and turning substantial returns.

What these flows highlight however is globalism and the inherent disparity in tax rates and regimes which favor the ultra rich.

Unless you happen to be in the select crowd with high liquid net worth this reset wont see you making much if anything at all.

Yeah and don't forget that the US is trying to sue China for causing the outbreak. Not surprising that China is trying to shirk responsibility.
BBC US state sues China over virus. "The mid-western state of Missouri files a civil lawsuit in a US court, accusing China of deception. "The Chinese government lied to the world and silenced whistleblowers," the lawsuit says. https://www.bbc.com/news/live/world-52377357

Where's DGZ?

Haha same.

["Don't bet against the Fed."]
Hmmmm....

The collateral bottleneck long feared was proved, and then some, during March 2020’s GFC2; a global dollar shortage meltdown that Jay Powell was powerless to halt (just like Bernanke had been in 2008). The collateral case was on full display, the repo market front and center, its dysfunction and chaos completely overwhelming. The evidence unequivocal.

And it’s showing up in all these same markets again in April 2020. Only starting with bill yields. Link

Dallas branch President Richard Fisher, realized in 2014 when it came to UST buying via Operation Twist:

MR. FISHER. In summary, I want to mention that, as I said earlier, most of these variations that have been suggested are very un-Bagehot-like. And what I mean by that is, twisting entails purchasing assets that investors are fleeing toward, not assets that they are fleeing from.Link

That vaccine is a long long way off.

While it may have mutated how different are the mutations-- that is a more important question.

Was going to say the same thing, typically mutations are benign and don't inhibit the virus.

Indeed, 50% of the 8 NZ samples uploaded to https://nextstrain.org/ncov/global?f_country=New%20Zealand&l=radial have nucleotide mutations.

What country is going to be the first to sail into NZ and say 'this is ours now!'
The US I'm guessing..

19
up

Being a southern Hawaii wouldn't be a bad fate. Infinitely better than being the new Tibet.

Check our history and legal documents. We belong to the United Kingdom.

Hawaiki. Already happened

"We've worked out different scenarios, and from best to worst case we are losing $5m or $14m. There is no upside," he said.

https://i.stuff.co.nz/business/121150004/scenic-hotel-group-mothballing-...

And the immediate social crisis in Queenstown.
https://www.odt.co.nz/regions/queenstown/queenstown-renters-struggling-s...

Where are the Greens telling the West Coasters "dont mine, there are plenty of jobs in tourism".

The Earth Day release of Michael Moores movie Planet of the Humans delivers them some hits below the waterline.

Australia has had 74 deaths and 6700 reported cases, with 1.5% of resolved cases resulting in death, compared to NZ is sitting at 1.4%. We are no different. Iceland is at 0.7% so possible that up to 2x as many cases here and in Aus undiscovered. Not that it really matters as numbers are trending to zero.

As explained do you really believe the Australia data?

10
up

Absolutely. More than the NZ data. For a brief moment today our death toll was even higher than theirs. When they reported the latest, they inched ahead by a minute fraction. Believing Australia is just making up their numbers is the highest sign of dedication to the path Jacinda has chosen.

Elements of contrast.

we will be announcing testing is open to anyone with symptoms who wants a COVID test," Dr Chant said.

The move follows Prime Minister Scott Morrison's edict that easing social distancing restrictions was contingent on widespread, rapid testing and "industrial capacity" contact tracing.

https://www.smh.com.au/national/nsw-health-says-covid-19-testing-for-any...

Australia are only counting positive tests, our figure includes people that they think has the virus but have not been tested (probable)
also they have a lot lot more require hospital than we have currently 352 in hospital
https://www.theguardian.com/australia-news/datablog/ng-interactive/2020/...

Then your a fool.Boer..Australia only count deaths in hospitals.

Their argument is based on modelling with reference to CFR from chinese data???? LOL. If it could be demonstrated that there were significant excess deaths in Aus not being reported as covid deaths (as in UK, Italy, US and other severely affected countries) then maybe they would have a case to make, but deaths are generally caught pretty well at lower levels, and real world always trumps models. With CFR of 1.5% they (and we) are only about 2x best in world of 0.7% seen in Hong Kong and Iceland, a factor that could be accounted for by 50-80% asymptomatic cases we know exist and little testing in NZ and Aus at early stages of epidemic.

Milk auction is concerning as this is a large amount of tax the government is now relying on if it keeps dropping which it seems it will we are in big big trouble as tourism and dairy are our 2 main contributors to our economy.
It looks like everything in NZ is going to reset to new levels and nothing will stop it.

I thought it was a proven beyond all reason fact that dairy farmers don't pay tax.

Hopefully Fonterra pay some but yes most dairy farms would pay very little.

Construction is the biggest single contributor to wealth generation. But dont despair, this is fkd too.

"Presumable the other $3.9 bln were at its normal interest rates."

Well there's only so many businesses that qualify as risk free. Clearly AirNZ will always be "too kiwi to fail" so will always enjoy taxpayer support and will enjoy accompanying interest rates.

That's a very different proposition to your average business in New Zealand.

David: Countries like ...the UK and Australia only report hospital deaths.

Is that actually true for Australia? That's definitely not the impression I get when they report deaths. They give the locations where people died, many not in hospital.

UK: the Guardian reported weeks ago that Covid-19 deaths outside hospital were going to be included.

Do you have any authoritative sources for this?

On the US: it depends on the state. So as far as I understand you can't say the US does not include Covid-19 deaths outside hospital. Some states do, some don't.

"UK coronavirus death toll 40 percent higher than reported" (report -18 hours old, still, lagged figures)
https://www.aljazeera.com/news/2020/04/uk-coronavirus-death-toll-40-perc...

The UK NHS is certainly under a lot of stress and there seems to be a lot more younger people being effected by the virus more then we realize. Here's an interesting account that highlights how things are going over there. BBC A coronavirus survivor's story: 'I touched death'.
"Elizabeth, 49, knows she is lucky to be alive. After falling seriously ill with Covid-19, she was admitted to hospital earlier this month. This is her story, which she chose to tell partly to thank the hospital staff who treated her." https://www.bbc.com/news/uk-52353275

We had some trapped English tourists in the place behind us; 4 weeks odd of incarceration for a young couple and their baby, and tonight the place is empty. They must have caught to evacuation flight out today. And now the house is dark and cold looking.
It's surprising how easy it is to get used to something and almost miss it when it's gone.
Maybe we'll all look back fondly on 'iso' and be proud of what we had to do.

Who is buying the forestry blocks?

Japan?

Japan own a significant chunk of forestry aka Panpac

Mutations? Article here outlines mild and more aggressive strains.
https://www.rt.com/news/486425-covid-19-mutations-deadlier-strains/
Govts play number and power games, yet what we need is information, if we know it can mutate, and as the article says, some strains more aggressive, then shouldn't we learn more about that? It makes a vaccine look more difficult, and that is something we need to be aware of. ie, news stories of a vaccine by end of year, good chance they are rubbish.

Another report I saw says East Asia, Oz and NZ got the same milder strain that the west coast of USA got. Maybe we were never going to be as bad as Italy.

And so much for anti Chinese sentiment, they're the ones saving our export market. NZ is very small country, perhaps it's times like this we need to excel in diplomacy.

Lark
It shouldn’t be a problem.
Trump routinely says he and Xi have “good conversations”, refers to Xi as “my good friend”, claims he is “an incredible guy” and that the US and China “are working closely together”.
Oh . . . . that was Trump just this past month!
At least with Xi you know where he stands - actually I trust and could deal with Xi and China more so than Trump. ;)

Naive Neville Chamberlain decided to look the other way too. China must be stopped before they get even more powerful.

Well said. 1.48bn people need food. Irrespective of whether we buy Chinese goods they have to buy our food. We don't seem to understand the cards we have been dealt.

Perfect time to explore our options I think

Yes I know many of you think Covid-19 is the end of the world as we know it but this Nobel laureate doesn’t think it is...

https://www.rnz.co.nz/national/programmes/sunday/audio/2018743210/no-evi...

Yes, Fritz. "Every person we lose to Covid-19 is a tragedy," said director general of health Dr Ashley Bloomfield.[NZ Herald today]. But in the real world, as Michael Levitt points out, people do die as they become elderly. And the tragedy is this may well all be a panic for nothing. The unfolding of a tragedy that will cost so dearly in economic, psychological and other ways.
And , as he points out, the advisors and politicians won't be accountable but will falsely take credit.