A review of things you need to know before you go home on Thursday; more rate cuts, price-match promise back, confidence grim, job numbers fall, swaps flat, NZD unchanged, & more

A review of things you need to know before you go home on Thursday; more rate cuts, price-match promise back, confidence grim, job numbers fall, swaps flat, NZD unchanged, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
Kāinga Ora cut rates today. Police Credit Union cut as well. And TSB has said it is bringing back its offer to rate match the Aussie banks on home lending. At the same time it trimmed its own 2 year rate to 2.79%, a -20 bps reduction.

TERM DEPOSIT RATE CHANGES
TSB has cut all its term deposit rates by between -10 bps and -25 bps.

WORRYINGLY GRIM
Business confidence is still bleak in May - just not quite as bleak as April according to the ANZ Business Outlook. 'While the outright disruption is easing, the recession is just getting started', says ANZ.

'THE RECESSION IS JUST BEGINNING'
Economists at the country's biggest bank say based on their bank's card data, spending has returned to 'normal' - but there's no sign of any catch-up on spending that was 'lost' during lockdown. And it may settle at a lower level.

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BIG RETREAT
Statistics New Zealand says job numbers fell by -37,500 in April, the biggest volume and percentage fall since its 'filled jobs series' began in 1999. Almost certainly, these decreases will grow in comiong months.

SOME HOUSES ARE SELLING
Although auction numbers are still well down on where they were at this time last year, the sales ratio is higher. But May auction levels are higher than April.

NOT AS POPULAR (NOT AS DESPERATE?)
Another $1.05 bln in NZ Government bonds were tendered today, in the three usual tranches. However today's tender only brought bids of just over $2 bln, well down from the $2.8 bln in the previous tender. The April 2023 bond brought a yield of 0.22% pa, and well above the prior yield of only 0.08% pa. The April 2029 bonds achieved a yield of 0.60% pa and also above the 0.53% at the prior event. The April 2037 bonds achieved a yield of 1.01% and only marginally above the 0.98% previously.

RELATIVE VULNERABILITIES
New Zealand exports NZ$17 bln to China each year or 28% of all our exports. More than 60% of our exports are agricultural products. Our relationship with China is OK at the moment. On the other hand, Australia exports AU$150 bln annually to China, 72% in minerals, 12% in Services, 9% in food, and 7% in manufactured goods. This is 34% of all their exports. Australia's relationship with China is deteriorating. putting some of that at risk. The non-food elements are at risk solely because of the global slowdown. But when things get tight, all the power is with the buyer.

AN UNCERTAIN RECOVERY BOUNCE
Export log prices rose in May because Chinese log buyers have been concerned about log supply, helped by a weakening NZD and relatively cheap ocean freight costs. But this rise apparently isn't based on rising demand in China, so may peter out soon. Domestic demand hasn't generated any increases however.

NOT SEEKING HELP, WHEN YOU SHOULD
Good Shepherd NZ’s chief executive Fleur Howard cites “optimism bias” as a contributing factor to people not seeking help – meaning that many people who are usually in paid employment won’t identify with needing support. “Before COVID-19, we saw employed people who thought that they were doing OK financially because they had jobs and wages coming in. In reality their situation was more dire than they realised, particularly for those living in private rental accommodation,” says Fleur. “We are concerned that this same optimism is keeping people from accessing support now."

ONLY ONE SIGNIFICANT EVENT
The 2019 Timaru hailstorm was the most expensive insured event in New Zealand last year, costing insurers $131 mln of the total $167 mln in weather-related claims last year. It was a year of low claims, making it a very profitable one for general insurers. (ICNZ revealed 2018 cost their members $218 mln in weather related claims. It cost them $243 mln in 2017.)

LOCAL UPDATE
There were zero cases again today, leaving the total at 1504 cases identified as either confirmed (1154) or probable (350). But 13 people with the disease were confirmed as recovered taking that total to 1474, so now only 8 people are left with it in New Zealand. Our recovery rate is now just on 98%. One earlier death of a 96 year old has been classified as due to the coronavirus, so official deaths are now 22.

AUSTRALIA UPDATE
In Australia, there have been 7140 cases (+16 since yesterday), 103 deaths (+1) and a recovery rate of just under 92%. 30 people are in hospital there (unchanged) with 6 in ICU (+1). There are now 471 active cases in Australia (-7). There is no way the trans-Tasman travel bubble is happening any time soon - maybe September now.

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 5,690,200 and up +101,000 from this time yesterday. Now, just under 30% of all cases globally are in the US, which is up +18,200 to 1,699,100. US deaths have now reached 101,000. Global deaths now exceed 356,000.

'PLEASE RENT MY SPACE'
In Australia, new data from CBRE shows the volume of Sydney CBD sublease space has risen to levels not seen since the height of the GFC.

EQUITY MARKET UPDATES
The S&P500 ended today's session up another+1.5% following a similar rise in Europe overnight. Today, Shanghai (+0.2%) and Hong Kong (-0.4%) have opened flat but Tokyo is up +2.0% in early trade. The ASX200 is also up +2.0% but the NZX50 Capital Index is down -0.6% in late trade.

SWAP RATES UPDATE
Swap rates moved higher at the long end yesterday, but may have not moved much today. We don't have wholesale swap rates movement details today yet but early suggestions are little-changed. We will update this later in the day if they show a significant movement. The 90-day bank bill rate is unchanged at 0.26%. The Aussie Govt 10yr is little-changed at 0.89%. The China Govt 10yr is holding at 2.70%. The NZ Govt 10 yr yield is marginally firmer, up just +1 bp at 0.72%. The UST 10yr is also marginally firmer at 0.70%

NZ DOLLAR UNCHANGED
The Kiwi dollar is at the same level it was at this time yesterday, now just on 61.9 USc. Against the Aussie we are firmer at 93.5 AUc. Against the euro we are softer at 56.2 euro cents. That means the TWI-5 is little-changed at 67.5.

BITCOIN FIRM
The price of Bitcoin is up +3.9%from this time yesterday at US$9,192. 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 ».

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End of day UTC
Source: CoinDesk

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37 Comments

Riots in the States are getting interesting, Middle class USA won't tolerate getting looted.

https://www.zerohedge.com/political/its-real-ugly-protesters-clash-minne...

https://twitter.com/MrAndyNgo

Here we go, the start of the crazy Yanks going off.
Add food shortages and massively increased infections and deaths and this is going ballistic.

I found this essay fascinating - part 2 is harrowing
The land of the free - huh
https://www.newsroom.co.nz/2020/05/26/1197993/los-angeles-is-burning-part-1

.

12
up

Neck hold? You mean someone kneeling on your neck (while you are handcuffed) until you stop breathing and then some?

11
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Yeah that's straight out murder. They get taught exactly how to restrain people, that's not it and is so dangerous, it's not funny. 2nd degree murder, a lot of malice there, that cop was seriously dumb and either completely incompetent or trying to injure him. Who the hell kneels on peoples necks to restrain them? Other cops should have told him to keep his knee off his neck, their additional restraint means they are accessories.

DB- great piece of writing and an insightful intellect.

Perfectly balanced by HT, I see.

The Zerohedge link gives "The requested page could not be found."

Twitter blew up this afternoon with on the ground coverage. It appears to be triggering riots in other cities around the US.

10
up

Volatile in times of 25% unemployment. But these lootings are in response to the man killed by police. Americans took it without a whimper when Wall Street got another trillion.

Thats because they wouldn't have a clue it happened.

Sad isn't it?

With all the media transfixed on Minneapolis i am missing out on my daily Kardashian news update..

Bloody hell - having spent a few years living in the US, this is really concerning to see.

Ray Dalio has been thinking if this financial crisis isn't dealt with well, we could see a new civil war. Wonder if this could be the start.

It will definitely go bad. There is just no other way that the US population will react to unemployment, more infections, more deaths, money printing, Trump, the Dems, and the whole mess that the States is.
It is just a matter of time.

Not sure if Trump is the right man for the job right now (or possibly ever was!).

In times like these you need leadership that brings people together, instead of dividing them for political purposes (which is what Trump has been driving for years now). If it really boils over and the police lose control, who knows what could happen.

Watching the news tonight and see him threatening to shutdown twitter for their fact checking link on his tweets. His behavior is as bad as the CCP - yet he attempts to take the moral high ground over them which in my view makes him a hypocrite.

President Obama was President when Black lives matter started
Of course this will end in civil war, the world money system is broken and that means war - just depends nation vs. nation or state vs. state . This has been talked about for years and

Yes for sure - I guess that coupled with significant unemployment, many people perhaps grieving lost loved ones, financial uncertainty....it won't take much for it to boil over. Animal spirits in a real sense. Makes you realise how fragile society can be.

We are always only 24 hrs away from anarchy.

What's Gerald Celente's line? "When people have nothing left to lose, they lose it"

Treasury issues bonds.
Bonds bought by investment funds/managers
Same investment funds sell same bonds to RBNZ.
RBNZ buys from market to also influence the rate.

(The rate influence wouldn't occur if Treasury put to RBNZ).

Another $1.05 bln in NZ Government bonds were tendered today, in the three usual tranches. However today's tender only brought bids of just over $2 bln, well down from the $2.8 bln in the previous tender. The April 2023 bond brought a yield of 0.22% pa, and well above the prior yield of only 0.08% pa.

Conventional monetary policy just exchanges treasury debt for money, without increasing the overall supply of money and debt. Whatever arguments there are that this action might affect overall demand for goods and services vanish when interest rates are near zero as they are now. Now, Treasury debt and money are nearly perfect substitutes. To inflate, the government needs to increase the overall quantity of government debt, not alter its composition.

To inflate, the government also has to make it clear that it will not pay back new debt. If we expect that debt or money will be retired with future taxes, then there is no great incentive to go out and spend to get rid of either. Only if it’s clear the debt or money will soon be inflated away does it make sense for people to try to get rid of money or debt now, and go out and buy. Link[my bold]

What inflation requires is public revulsion to government liabilities, and what produces public revulsion is the creation of government liabilities at a rate that destabilizes the expectation that those liabilities remain sound.

Ironically, the revulsion to government liabilities that would be required to produce inflation has been actively prevented by regulations that are intended to allow central banks to impose negative interest rates, in the hope of producing inflation. Links
https://faculty.chicagobooth.edu/john.cochrane/research/papers/fiscal2.htm
https://www.hussmanfunds.com/comment/mc190805/

Thanks Audaxes, always appreciate your comments.
You've got great insight, literally I reckon. -)

Seconded.

Thirded

Add a coupla dozen from the firm I part-time for....

I look at each redundancy as another house with a mortgage that may not get paid the next few years - all roads lead to Rome (the banks).

A 96 year old person who tested positive for CV in early April, then recovered from it, tested negative twice afterwards has now died. She has now been added to the list of people who died due to the CV…
Sounds like a desperate attempt to bolster the amount of CV deaths

14
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Sounds like a desperate attempt to fit the facts to your particular mantra.

:)

Her death has been listed as "Covid related", which is not the same as dying due to or of it.

It hastened their death ?

at 96 how could you tell?

HSBC 1 year fixed down to 2.5% this afternoon, probably not advertised yet. Scary thing is still going down.

Re 'PLEASE RENT MY SPACE':

The floor plate in the building my firm leases space in, with five configured office spaces, has had two never leased during the 3 years we've been there, 1 vacated last year, and two to vacate early next year......