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A review of things you need to know before you go home on Friday; many rate cuts, factory jobs very weak, tax tidbits, rent spikes, swap rates flatten, NZD falls then holds, & more

A review of things you need to know before you go home on Friday; many rate cuts, factory jobs very weak, tax tidbits, rent spikes, swap rates flatten, NZD falls then holds, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
China Construction Bank cut mortgage rates to near market lows.

TERM DEPOSIT RATE CHANGES
Westpac has cut TD rates for terms 5 months to 18 months. WBS and NBS both cut term deposit rates. Kiwibank cut its NoticeSaver rates.

IT'S VERY TOUGH ON THE FACTORY FLOOR
New Zealand's factory sector contracted sharply in May, just not as disastrously as in April. Still, the contraction was near record levels (if you ignore the April), pipped only by the depths of the GFC. One worrying sign is that despite the overall 'improvement' from April, and despite the Government's wage subsidy, the employment sub-index was worse in May than April.

'GOOD HARD LOOK AT TAX SETTINGS' SOME WAY OFF
Revenue Minister Stuart Nash says the Government at some point will have to "take a good hard look at all the tax settings." For now, however, the focus is on putting tax measures in place to allow businesses the best opportunity to move from survival into recovery. Speaking in a Chartered Accountants Australia and New Zealand Zoom call, Nash said "personally I'm not a fan of introducing a whole raft of new taxes. I think that would probably be counter productive to growth." Additionally he said no consideration had been given to reducing GST for a period, and Nash said he was reluctant to consider this because it's very non-targeted.

NOT CHASING $200
If you owe the IRD less than $200 in the 2019/20 income tax year, it will likely be written off by them and you won't have to pay it. The usual threshold for writing off tax is $50. They say that will reduce tax bills for approximately 149,000 taxpayers.

RENT SPIKES, UP IN AUCKLAND, DOWN IN THE SOUTH ISLAND
Median rents for an Auckland three bedroom house rose sharply to $695/week in Auckland, a new record high and up +6.9% in a year. But all the rest of the rental data out today recorded declines, especially in the South Island and especially in the Queenstown region. House rents in Wellington and Christchurch also fell in May. This data is all from MBIE's tenancy bond data. Nationally, rents are up +3.5% across all types.

AUSTRALIA UPDATE
In Australia, there have been 7287 cases (+2 since yesterday), 102 deaths (unchanged) and a recovery rate of just over 92% (unchanged). 18 people are in hospital there (-2 since yesterday) with 2 in ICU (11). There are now 424 active cases in Australia (-15).

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 7,500,800 and up another +143,000 from this time yesterday. This is still rising at a faster pace than recently. Brazil has just hit 800,000 infections, Russia 500,000 and the UK 300,000 but the UK still has recorded more deaths than both Brazil and Russia. American cases rose by +23,000 since yesterday to 2,022,500. US deaths now exceed 114,000. Global deaths now exceed 421,000.

EQUITY MARKET UPDATES
Wall Street ended lower with the S&P500 down -5.9% in today's session. That followed European markets that were down about -4.5%. Asian markets have all opened sharply lower, down at least -1%. Locally the ASX200 is down another -1.7% on top of yesterday's hard hit. The NZX50 Capital Index is down -2.0% in late trade after yesterday's -1% drop.

SWAP RATES UPDATE
Swap rates probably flattened today. We don't have wholesale swap rates movement details yet but we will update this later in the day if they show a significant movement. The 90-day bank bill rate is up another +1 bp to 0.27%. The Aussie Govt 10yr has retreated further today by -5 bps to 0.88%. The China Govt 10yr is down an unusually large -7 bps to 2.78%. And the NZ Govt 10yr yield has fallen by -5 bps to 0.81%. The UST 10yr is down -3 bps since this time yesterday at 0.69%.

NZ DOLLAR FALLS, BUT NOT AS MUCH AS YOU MIGHT HAVE EXPECTED
The Kiwi dollar has held its overnight level of 64.2 but that has embedded in the full overnight -1c fall. Perhaps it is encouraging that it hasn't fallen further in today's local session. Against the Aussie we are firmer at 94 AUc. Against the euro we are down -½c to 56.8 euro cents. The net off all that means the TWI-5 is down sharply to just on 69.

BITCOIN DROPS
The price of Bitcoin is sharply lower than this time yesterday, down -6.0% to US$9,336. 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 ».

Daily exchange rates

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End of day UTC
Source: CoinDesk

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36 Comments

Today, NY time might be interesting to watch. Could be another late night!
"MARKETS RARELY BOTTOM ON A FRIDAY"
https://www.pragcap.com/markets-rarely-bottom-on-a-friday/

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At the start of this CV thing the markets tanked every Friday for three or so weeks. I'm guessing that it was due to the speed of the new news that was happening at that point in time.

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Yeah that's not all that's falling so is Trump's voter approval poll figures now down to 38%. Must be infuriating for him, so much so he's pushing to go out on his ego trip election rallies. Apparently the next on will be held in Tulsa and those who want to attend are being asked to sign a waiver over the coronavirus. And are asked to promise they won't sue the president or organisers if they catch the virus by attending. Health officials in the US warn that large events like rallies could generate a new wave of infections.

Well it's not like they have millions infected with the coronavirus. Oh wait, yes they do over 2 million at the last count. What could go wrong!!!!

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Not a Trump supporter, but I can assure you if States begin defunding the police, he will win by a landslide. Even Bernie Sanders thinks that defunding the po po is ridiculous.
I still can’t believe, the two ‘best’ people to run the most powerful country in the world is a choice between Trump and Biden.......

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Lousy choices I agree but is it better than being in a system where it is Winston's choice?

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Winston only holds power because Nat and Labour let him. The two could go into coalition. It’s called democracy.

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I beg to differ. Democracy would be when the demos choose who governs - not packs of back room dealing career politicians.

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Yes agreed that it is a bit sad, that out of all the candidates they came up with those two. Hay ho. But there's another five months to go for Trump to continue to screw up the US economy, along with allowing a big percentage of his voters to die off due to cornonavirus. Since he's rather use tax payers money for a useless wall that still hasn't been built yet rather than use the money for medical care for his people.

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There are a few bombshells to come before then especially around the origins of the Russia probe, this could get messy as it was clearly a setup job and big names like Comey & Rice risk jail time if they purger themselves.

https://thehill.com/homenews/senate/501096-gop-votes-give-graham-broad-…

The Dems will be hoping that BLM continues to dominate the news

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Trump hasn't even started to campaign yet. When he does Sleepy Joe will have to come out of his bunker and no doubt make a number of dumb statements that will have the Democrat Election Management shaking their heads again.
On another front, I understand Australia has sold its wheat supply to India after China refused to buy. I hope the Aussies can find an alternative market for their Iron Ore. That would hurt the Chinese Government's big time for their motor vehicle supply chain. Brazil is hurting because of the pandemic.Karma China - Karma China.

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Well Trump should just hold a riot and lootin' rather than a rally and they then everything will ok with corona virus. Just ask any lefty CDC epidemiologist.

"The threat to Covid control from protesting outside is tiny compared to the threat to Covid control created when governments act in ways that lose community trust. People can protest peacefully AND work together to stop Covid. Violence harms public health."
https://twitter.com/DrTomFrieden/status/1267796218496901121

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Humm lots of Trump supporter packed in to a stadium for long periods of time whilst he rambles for hours and in the midst of a pandemic. What could go wrong. ¯\_( ͡ᵔ ͜ʖ ͡ᵔ )_/¯

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A lot could go wrong compared to what? A BLM rally in a pandemic? The bar is very low at the moment.

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Wait until you see where the BLM donations are going...

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What bit of fake news have you been reading?

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Is fake news stuff you don't like the explanation of?

Google is your friend. It isnt hidden.

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It's not as infectious as trump derangement syndrome.

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Is that what fawning uncritical Trump supporters display?

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The exact opposite of that is spot on.

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You really do read and listen to too much Fake News. The Democratic Machine does its best to show him in a bad light. He did consider running as a Democrat for the presidency sone years ago. If he did, I wonder how your comments would be about him if he had.

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That's uncanny. Was going to post about this excellent article.

Unless you work in finance, you probably haven’t heard of CLOs, but according to many estimates, the CLO market is bigger than the subprime-mortgage CDO market was in its heyday. The Bank for International Settlements, which helps central banks pursue financial stability, has estimated the overall size of the CDO market in 2007 at $640 billion; it estimated the overall size of the CLO market in 2018 at $750 billion. More than $130 billion worth of CLOs have been created since then, some even in recent months. Just as easy mortgages fueled economic growth in the 2000s, cheap corporate debt has done so in the past decade, and many companies have binged on it.

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All the large junk-rated leveraged loans of the last 7+ yrs M&A are backed into CLO's. These loans are cov-light, levered junk. The only way the senior CLO tranches get AAA rated is for the ratings agency's to dial correlation right down. However, with COVID the market tanked with a correlation of 1- so the CLO's got monstered. Without the Fed stepping in to buy the underlying junk loans this would have been catastrophic. Some CLO sellers hit 70c bids on their AAA bonds only to see them back at par a week later - the fix was in.

Heads they win, tails you lose.

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Thanks for that TK

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“We are not in the midst of a conventional downturn.” Sound ominous, but…
“I’ve been concerned about AAA CLOs failing in the next crisis for several years. This crisis is more horrifying than I anticipated.... Loan defaults are already happening. There were more in April than ever before. Several experts told me they expect more record-breaking months this summer. It will only get worse from there.”

Nothing to worry about then! Buy the Dip.....

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Good ol' RobinHood. It's like an amped Sharesies. Conceptually nothing. Schwab Mobile was also offering free trades.

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DC, do you please have a link to more details on the latest rental levels in NZ? Thanks

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"If you owe the IRD less than $200 in the 2019/20 income tax year, it will likely be written off by them and you won't have to pay it."
Bummer, I just spent 10 minutes paying the IRD 28 cents for the tax I owed this past tax year.

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Another 837 joined jobseeker this week - the rate is increasing now on previous weeks.

https://www.stuff.co.nz/business/300033425/benefit-numbers-up-again-as-…

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Its a shame to see. There might be some tough decisions to make in the next few weeks.

As much as I respect Adern's 'kindness' approach....sometimes kindness can turn out to be cruelty in disguise.

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as much as I like to see progressive economic policies, I have to agree that changing anything too dramatically would be just too hard for the bulk of NZ's SME's to cope with right now...god knows they are a change averse lot during the best of times....although they do seem to have been able to adapt awfully fast to the IRD's cashflow loans....Hmmm....whats with that?

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I see you are reporting that kiwibank have dropped their 90 day notice saver account to 1.75%. Their website still says 2.1%. I have contacted them and they say their website is correct. Did they tell interest.co about the drop but not their staff?

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