What happened Tuesday

A review of things you need to know before you go home on Tuesday; no rate changes, online sales distortions, big layoff, more bank loan impairments, 90 day bank bill rates slumps, NZD slips, & more

28th Apr 20, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes today.

TERM DEPOSIT RATE CHANGES
Update: Sorry, I missed recording that Kiwibank have chopped between -1 bps and -20 bps from most of their term deposit rates today.

FIRST EFFECTS
Online sales in March started to show the economic reactions to the pandemic. Data from BNZ/Marketview shows that while total online sales were only up +6% on March last year, spending in the Groceries (and liquor) category was up +42%. Overall spending at domestic online retailers was up +24% on March last year while spending at international sites was down -18% on March last year. Remember, March only included 6 days of lockdown, but clearly consumers stocked up. April figures will cover a full month of lockdown and really large disparities will be recorded.

ANOTHER CASUALTY
Listed company Steel & Tube said it will lay off up to 20% of its staff in a major restructuring of the company, one that has been struggling recently. It currently has about 1000 employees. The sudden downturn in demand has undermined its current plans to return to profitability. It has cancelled almost all capex and "non-essential operational spending". The company as taken $5.5 mln in Covid-19 Wage Subsidies for 790 employees. Those it didn't take subsidies for seem to be the target. The company has the ACC Corporation as a 7.5% shareholder.

WESTPAC DETAILS COVID-19 LOAN PROVISIONS
Westpac Banking Corporation, parent of Westpac NZ, says it expects to announce loan impairment charges with its first-half financial results on May 4 of A$2.238 billion before tax. This includes A$600 million from individually assessed provisions and net write-offs, and A$1.6 billion of additional impairment charges related to COVID-19 impacts. Westpac also expects to make an A$900 million provision for the anti-money laundering case brought against it by AUSTRAC.

LOCAL UPDATE
There are 1472 Covid-19 cases identified in New Zealand, with +3 new cases today and more than yesterday's zero increase (net zero). Nineteen people have died, unchanged from yesterday, all geriatric patients. There are now 9 people in hospital with the disease, with one in ICU. Our recovery rate is now up over 82% and rising.

AUSTRALIA UPDATE
In Australia, there are now 6720 cases, 83 deaths and a recovery rate of 83%, all unchanged levels. 113 people are in hospital there with 43 in ICU.

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 3,037,600 and up +35,000 from earlier today which is bit of a surprise bump in that time. Now, just under 33% of all cases globally are in the US, which is up +31,200 since this morning's tally taking the total to 987,500 and by the time you read this, will probably be over 1 mln. This is a faster rate of increase too. US deaths now exceed 56,000. Global deaths are about to exceed 211,000. Russia now has more cases than China. And something has gone seriously wrong in Singapore where infections now exceed 14,000 and are growing by nearly +1000 per day (most in immigrant worker dormitories, so the news is downplayed in tightly-controlled Singapore). Other than China or India, no other Asian nation is this infected. Japan, which thinks it has a serious renewed outbreak, is only getting 200+ new cases per day in a country with more than 20x the population.

KRAMER JOINS FONTERRA BOARD
Fonterra has appointed a new Independent Director, Holly Kramer, who will join the Fonterra Board as an Independent Director on 11 May 2020. She replaces Simon Israel when he retired from the Fonterra Board in November last year. Among many earlier board positions, she was on the AMP board, then Woolworths Australia. Farmers will be asked to ratify her appointment as part of voting at this year’s Annual Meeting.

EQUITY UPDATE
The NZX50 Capital Index is up a very strong +3.0% so far today. Yesterday, the ASX200 rose +1.2% when the NZX was closed. Today, the ASX200 is unchanged. Overnight, the S&P500 rose +1.5% after European markets rose about +2.5%. At their opening today, Shanghai is down-1.3%, Hong Kong is flat, while Tokyo is down -0.6% after a very strong rise yesterday (+2.7%).

SWAP RATES UPDATE
Update: There were huge falls today in wholesale swap rates. The two year was down -11 bps, the five year was down -9 bps. And the ten year was down -5 bps. The 90-day bank bill rate fell hard today, down -5 bps to 0.26%. The Aussie Govt 10yr is softer, down -2 bps to 0.92%. The China Govt 10yr is unchanged at 2.52%. The NZ Govt 10 yr yield is down a very sharp -10 bps at just on 0.73%. The UST 10yr is unchanged from this morning at 0.65%.

NZ DOLLAR SLIPS
The Kiwi dollar has slipped somewhat today, back to 60 USc where it was on Friday. Against the Aussie we are down a further -½c at 93.2 AUc and its lowest level in five months. Against the euro we are at 55.4 euro cents. That means the TWI-5 has slipped to 66.1.

BITCOIN FIRM
The price of Bitcoin is up +0.5% from this morning to US$7,712. Bitcoin "halves" on May 14 (NZT) - that is, future supply will grow at half the current rate ~~one coin becomes two~~. (Thank you to many readers for the correction.) 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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71 Comments

by sharetrader | 28th Apr 20, 4:12pm 1588047146

why is it we include probable cases in our total but the aussies only count confirmed cases, if it walks like a duck and quakes like a duck its normally a duck.
and America is opening up for business, i saw today you will need a face mask to fly on jet blue
https://www.usatoday.com/story/travel/airline-news/2020/04/27/jetblue-a…

by solardb | 28th Apr 20, 4:11pm 1588047096

Presumably the probables are tested and confirmed within a couple odf days , so doesn't make a huge difference.

by sharetrader | 28th Apr 20, 4:16pm 1588047408

probables are a either a negative test or someone (old) that cant be tested but all the symptoms show it is very high probability its covid
we seem to be one of the only countries reporting them that way so our figures are most likely more accurate

by gingerninja | 28th Apr 20, 5:19pm 1588051150

"Mortality statistics show 122,000 deaths in excess of normal levels across 14 countries analysed by the FT"

But, this implies that the death are *MUCH* higher, because global lockdowns will have been reducing incidence of many other deaths in the short term (accidental deaths, especially in vehicles and other contagions like flu), we should have been seeing *less* than normal levels.

https://www.ft.com/content/6bd88b7d-3386-4543-b2e9-0d5c6fac846c (free to read btw)

by Lapun | 28th Apr 20, 8:17pm 1588061835

Do we have any figures for NZ mortality statisitcs for the last month? Subtract the 19 we know are Covid-19 and we would get a figure for lives saved by a lockdown. Then apply that to all the OECD countries that have had similar lockdowns. Deduce true Covid-19 deaths. Note in locations where hospitals could not cope (eg Lombardy) many of those deaths would be caused by Covid-19 indirectly - the patient with a stoke but no spare hospital bed and doctor.

by Fritz | 28th Apr 20, 6:19pm 1588054745

Probables vs Possibles, just like the good ole days of All Black trials

by solardb | 28th Apr 20, 4:10pm 1588047009

North Island slipping back to too dry , rain this Sunday / Monday hopefully.

by Andrewj | 28th Apr 20, 4:56pm 1588049762

yep this dry is making us rethink the risk of drought. If you add to this the regional councils requirement to have consent to farm , I can see a lot of people wanting to exit industry.
We have been steadily getting dryer and dryer. When I was young I used to own raincoats and leggings now I hardly ever wear them. I remember helping my father feed out hay in mud, I remember duck shooting 1st week of May, crops were nearly to the top of the fence. Today those crops are hardly out of the ground and the dams are dry. Something has changed and it's hard to know how to react.

The rain forecast is the same pattern as all this year, looks good, gets cut back and then is gone. Hot here with drying wind.

by Uninterested | 28th Apr 20, 5:24pm 1588051452

I have noticed that in recent years the forecasts are biased towards what they consider to be "events".
Both in terms of wind and rain.
Being a windsurfer I have been getting very excited about the strong wind forecasts but on the day.... only 15 knots or so. Same with rain. Rain forecast and only showers turn up. There is something wrong with their computer models.
Plus I suspect that there is a H&S aspect where they do not want to be held responsible if people go out on their boat and drown due to an under- estimation of wind strength. So its biased upwards. Which means that its actually WRONG.

by powerdownkiwi | 28th Apr 20, 6:14pm 1588054492

Windy TY is what I sail by. Best site on the planet.

by Uninterested | 28th Apr 20, 6:48pm 1588056487

Thanks, I'll give that one a go...

by scarfie | 28th Apr 20, 8:00pm 1588060816

No so accurate with the surf forecast. About 10% of the time it differes from whatever engine the Metservice use, and the Metservice has been right each time for me.

by wirehunt | 28th Apr 20, 9:40pm 1588066829

yr.no is all I use.

by solardb | 28th Apr 20, 8:03pm 1588060991

Yes, its these dam highs getting stuck over NZ. Mean't we got no cyclones , or even edges of one. and kept southern lows well to the south .
The scary thing is , these maps are based on soil moisture. Relevant to current grass growth , but what about the water table level? After 2 years of drought, Its gotta be low.

by Houseworks | 28th Apr 20, 9:20pm 1588065637

Last year looked hell of a wet in the hawkes bay with blues Andrew. Not this year

by Shamino | 28th Apr 20, 4:11pm 1588047091

'Bitcoin "halves" on May 14 (NZT) - that is, one coin becomes two.' - Just a clarification, this would be a fork (i.e. Bitcoin forking into Bitcoin Cash). After the halvening there is still one coin, but the daily production rate halves.

by rastus1 | 28th Apr 20, 4:16pm 1588047404

Half of nothing is still nothing I guess.

by theglc | 28th Apr 20, 4:33pm 1588048410

Well as long as there is a bigger fool...

Time for an Obi Wan Kenobi quote

"Who's the more foolish? The fool, or the fool who follows him? "

by frazz | 28th Apr 20, 6:09pm 1588054177

Nope currently $USD 3,846 cold hard cash ..which can be in your bank in 1 minute and guess what - no storage fees to boot. Keep it up though its what been what 11 years now?

by Speechless | 28th Apr 20, 5:48pm 1588052909

So its value is derived from the fact it can buy a relatively stable fiat currency?

by frazz | 28th Apr 20, 6:09pm 1588054145

Yup..just like gold, shares, property...whats is your point exactly?

by rastus1 | 28th Apr 20, 6:14pm 1588054452

Gold is money. That the point. Btc is a digit in your pc.

by lonewolfnz | 28th Apr 20, 6:55pm 1588056919

You know that you can short BTC with leverage right? (using fiat). So if you think BTC is going to zero, place a bid and you'll be rich.

I like gold. But it is not money as it is not divisible nor transferrable across the world in the blink of the eye at a transaction cost of less than a cent. Gold is also much much more confiscable that BTC which can be exported from your country, secured by a hidden code or even memorized 16 word security phrase. Try moving a billion dollars of gold from country to country for 1 cent. People do that every week or so on the blockchain.

by rastus1 | 28th Apr 20, 8:39pm 1588063183

Yes it is. Via gold backed crypto. No brainer compared to a crypto backed by zilch.

by lonewolfnz | 28th Apr 20, 10:18pm 1588069102

I love gold backed crypto. About to large a position. How's your short going?

by frazz | 28th Apr 20, 8:04pm 1588061097

Bitcoin backed credit cards...aka money

by Independent_Observer | 28th Apr 20, 4:14pm 1588047247

I'm just wondering how long it is going to take before all these staff layoffs (many of whom probably have mortgages to service), e.g. the Steel & Tube announcement, start showing up as significant stress on the banks - or is that already happening?

by sharetrader | 28th Apr 20, 4:21pm 1588047692

depends on how many are resident or work permit, and they ones we lay off on a work permit what happens to them, we have thousands in the country
Immigration NZ statistics show that in the 2019/2020 year, 154,446 people arrived on a work visa.
The Maxim Institute report by researcher Julian Wood said the number of people in New Zealand on a temporary work visa had increased from about 30,000 in the early 1990s to 170,000. He said that was a "six-fold increase without any public debate".

by Houseworks | 28th Apr 20, 9:28pm 1588066101

I dont think that you are one who says it IO but there are others who say the AS should be abolished. Those who have mortgages do also get the assistance. Through no fault of their own they suddenly find themselves out of work, many will have no savings to rely on.

by bw | 28th Apr 20, 4:15pm 1588047332

Dig below the surface of Westpac Banking Corp's $1.6 billion COVID-19 impairment charge and you will find a worrying analysis of the commercial property market. The bank believes we are heading for a severe downturn in commercial property valuations.

(AFR)

by theglc | 28th Apr 20, 4:42pm 1588048972

I expect a number of commercial building will be transitioned from office space to residential apartments over the coming years

by Henry_Tull | 28th Apr 20, 4:19pm 1588047584

Everyone is a winner.
Approval ratings % in 70's, 80's & 90's %
Polling show massive support for each State Premier in Australia.

https://youtu.be/L3koiMKTc40

Perspective from sky news

by scarfie | 28th Apr 20, 5:05pm 1588050316

Could be called motive?

by rastus1 | 28th Apr 20, 4:20pm 1588047611

Question for the int team. If an employer takes the subsidy and then lays off staff, do the staff still qualify for unemployment or are they considered as earning $580 per week? Are they expected to take the boss on and get what’s owed.
If not, looks like us taxpayers will be paying twice huh!

by sharetrader | 28th Apr 20, 4:26pm 1588047976

in theory the boss should hold them for twelve weeks as that is what they have been paid for, so just a guess i wonder how many will go through the process which will coincide with the end of that period, we have been told they will review at the end of 12 weeks to see what shape our business is in and we are already been cut working hours by 20% so i am guessing that will become a permanent thing and they will downsize

by bw | 28th Apr 20, 4:32pm 1588048363

Employers had to nominate Approved Workers to get the subsidy. That included the employee IRD number and confirmation of recent wages.
Anyone applying for any other benefit will be flagged as having already qualified for the subsidy.
If it hasn't been on-paid to them, the employer can expect a call from the IRD.

by rastus1 | 28th Apr 20, 4:33pm 1588048439

Nope. It’s not administered by ird. MSD is the one. Still leaving the question out there as seems a vague situation to me.

by Foreign buyer | 28th Apr 20, 4:30pm 1588048239

It no longer matters. Its a free for all. Why not just have one week were everyone who plays lotto wins the million dollar jackpot. Do anything just so that the failing businesses and property investors keep up their sham enterprises.

by Kate | 28th Apr 20, 4:36pm 1588048617

Here's the search function to find if your employer took the subsidy - and two forms: one to find out if you were listed as an employee who should be getting the subsidy and secondly, a form to complain that you have not been paid if you are a listed employee.

https://www.msd.govt.nz/about-msd-and-our-work/newsroom/2020/covid-19/c…

And yes, if not collecting the subsidy, NZ perm residents and citizens can register for the Jobseeker benefit.

by frazz | 28th Apr 20, 5:22pm 1588051360

Facepalm..the subsidy has to be actually paid out as a wages - if not it will be paid back. Audits are happening as we speak ..

by rastus1 | 28th Apr 20, 6:18pm 1588054727

Face palm. Has to be doesn’t mean it is is. Have a look at beneficiary debt levels to msd from overpayments and then tell me you have confidence they will ever recover any of this.

by frazz | 28th Apr 20, 8:09pm 1588061348

Well I have had a phone call and 2 of my clients have... you seem to have lack of knowledge in data held by government agencies now..the IRD can quickly see the state of company revenue by comparing GST returns.

by rastus1 | 28th Apr 20, 8:47pm 1588063644

I’ll say it again. MSD administer this, Not IR. Secondly, comparing revenues means zilch as it’s not a definitive in or out qualification criteria (and msd don’t have access to it regardless). You my are the one who is displaying a complete lack of knowledge. Pity your clients.

by frazz | 29th Apr 20, 4:46am 1588092371

Ha..my clients are more up to date than you are rastus...they follow the rules and the Grant is currently booked as a liability to the Government while it is paid out as wages. Commentators such as you offer nothing but confusion and as your bitcoin comments go complete ignorance.

by frazz | 29th Apr 20, 4:49am 1588092565

MSD and IRD share information...that is why on the application you provide IRD numbers of your employees. Stop digging

by Justa comment | 28th Apr 20, 4:23pm 1588047811

Read a lot of comments today re negative OCR and TD depositors. The only carrot you could offer for low rates is guaranteed deposits. I would be interested to know at the moment do the 'Japanese housewives' prefer 2.3% in NZ TDs, or, 1.01% guaranteed in Aus ?? Can NZ hold on to 80 billion $ of TDs at below 1.5% ?

by Foreign buyer | 28th Apr 20, 4:33pm 1588048417

FE investments was always a good return too

by Te Kooti | 28th Apr 20, 4:42pm 1588048970

Low rates are the opposite of a carrot, they want you to spend not save.

by theglc | 28th Apr 20, 4:50pm 1588049446

Well thats the big question isnt it

cash in a safety deposit box is a good option too as it cant get restricted if a bank run eventuates

chuck a bit of gold and silver in there too

by JimboJones | 28th Apr 20, 4:25pm 1588047922

Can we have level 4 back please? My afternoon walk has already been ruined by cars hurtling down our residential street towards me at 60km/hr. Maybe time to reassess our residential speed limits?

by Squishy | 28th Apr 20, 4:52pm 1588049569

They have a proposal to reduce the soeed limit in Wellington. Of course you'd struggle to average a fraction of that speed most of the time between congestion and traffic lights so it seems a bit academic.

by Audaxes | 28th Apr 20, 4:37pm 1588048645

The NZ Govt 10 yr yield is down a very sharp -10 bps at just on 0.73%.

And yet again, another QE present for the rentier bond trading cohort.
A week ago, Treasury issued $350m of the 5.5% 15/04/23s @ 0.3405% - clean price $115.303 per $100 face value.
Today, RBNZ scoops up $145m of the 5.5% 15/04/23s @ 0.099% - clean price $115.954 per $100 face value.
The later settles 30/04/20. A profit of ~$943,950 in just over a week.
Quantitative easing for the entitled. No? But underwritten by the majority.

by Te Kooti | 28th Apr 20, 4:44pm 1588049089

These puppies will be negative by CoB Friday.

by Audaxes | 28th Apr 20, 5:12pm 1588050722

Looks deflationary in terms that some are more interested in the return of their money than the return on it.
But without doubt those who just released their savings will be in for another round while the rest of us feel the impact of sharply rising liability costs, since 3 yr government bond yields were nearly cut in half twice in just over a week.

by Te Kooti | 28th Apr 20, 6:11pm 1588054282

Yields are going negative, the front end of the swap curve will trade negative within days.

by Audaxes | 28th Apr 20, 6:32pm 1588055539

Yields are going negative..
Together with the economy. Orr will have to find a way to plow money into the economy rather than RBNZ reserve liability ledgers. Bank claims to reserves do not translate to copious quantities of new bank credit creation for economic players.

by scarfie | 28th Apr 20, 7:49pm 1588060176

He might yet need to figure out a way to take money out of the economy to prevent prices deflating :-P

by iconoclast | 28th Apr 20, 7:27pm 1588058845

Clean as mud for the un-initiated.
Can you please explain that - what is the clean price and how do you calculate it, and how do you calculate the profit. Is 5.5% the coupon rate?

by Audaxes | 29th Apr 20, 10:13am 1588112020

Ok
The tender confirming the existence of the 5.5% 15/04/23 government note can be viewed here

The RBNZ LSAP (QE) purchase details can be seen here

The yield to price fortmula can be viewed here- page 7 PDF

Clean price Dirty Price

The profit is the difference between the clean prices divided by 100 then multipled by the nominal amount.

by iconoclast | 29th Apr 20, 10:21am 1588112517

Strike-me - thats an annualised rate of return of 16% on $145 million in 14 days - money for jam for the conduits . My mate Wiremu down at the local Marae wants to know how he can get some of that - and so do I

Can you stick around for a while I want to know what the rationale is for issuing 5.5% treasuries front loaded with the interest righ up front ie $115 clean price

by Audaxes | 29th Apr 20, 10:40am 1588113610

The recent Treasury tender of the 5.5% 15/04/23s is a tap of an older issue which represented the prevailing interest rate when it was first issued.

by iconoclast | 29th Apr 20, 12:31pm 1588120288

Thanks. I'm a bit lost on that. Is the Treasury re-issuing an old issue, or an old issue that wasnt fully subscribed. My main issue is it seems to be a device for the RBNZ to acquire some bonds with a large thank you to the participants acting as conduits on the way through. Why even issue 5.5% paper at this time

by Audaxes | 29th Apr 20, 2:10pm 1588126232

It's re-opening an old issue because it's cheaper than starting fresh with a new syndicated issue at current coupon yields.

by Smalltown | 28th Apr 20, 5:03pm 1588050185

Trouble at head office for Ximon.
Smithy is definitely not on anyones lists for Nat leader but he is pissed at being seen as not relevant. Shame its taken 30 odd years. Time to find a real job for the one with the perpetually excited face.

... and so it begins

https://www.newshub.co.nz/home/politics/2020/04/exclusive-senior-nation…

by gingerninja | 28th Apr 20, 5:15pm 1588050917

It's a shame Simon is incapable of reading the room.

by sharetrader | 28th Apr 20, 5:20pm 1588051242

NS knows where the bodies are buried in the national party that is why he has lasted so long, as for competent please the bus tour a couple of years ago showed how he is passed his use by date. But you have to give it to him to not get pushed out like many before him
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11456694
The Government’s plan to build houses on excess crown land has hit another roadblock. Three sites earmarked for housing can’t actually be built on.
Building and Construction Minister Nick Smith showed off spare Government land during a bus tour in 2015 as sites he wanted to put houses on.
Fast forward a couple of years, and there’s a problem.
His officials have deemed the Wiri Station Rd site in Auckland “not viable for residential development”.
But on top of not being able to build on Wiri Station Rd, Manukau Station Rd will have 100 fewer homes than planned, Mihini Rd hasn’t been vacated by KiwiRail so it can’t be used and Luke St has already been snatched for a pop up temporary housing site.

by powerdownkiwi | 28th Apr 20, 6:19pm 1588054795

But, but, but, but...... he's a keen kayaker

by Andrewj | 28th Apr 20, 5:13pm 1588050834

Lockdowns effects USA
https://wolfstreet.com/2020/04/27/what-manufacturing-executives-said-ab…

by taimaiakka0 | 28th Apr 20, 6:40pm 1588056013

Level 3 and business has started so market will move up as per EXPERTS.

Freeze has been lifted and price fall which was also freezed will start to roll now as lockdown was a blessing in disguise hor RE industry as fall had freezed.

https://amp-rnz-co-nz.cdn.ampproject.org/v/s/amp.rnz.co.nz/article/114f…

by bw | 28th Apr 20, 8:38pm 1588063115

Do we think it will be any different here?

The amount of housing stock effectively in the market could be substantially higher than advertised online due to the surging number of unlisted homes offered for sale...the amount of off-market properties jumped by about 50 per cent as more vendors refuse to pay thousands of dollars to list amid a weakening market.

(AFR)

by Fritz | 28th Apr 20, 10:53pm 1588071211

Auckland rental availability shooting up. Now just under 4500.
Watch rents drop.