What happened Monday

A review of things you need to know before you go home on Monday; more rate cuts, REINZ reports, migration and overseas tourism stops, huge new Govt bond issue, swaps unchanged, NZD holds, & more

15th Jun 20, 3:59pm by David Chaston

ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
Kookmin Bank cut both their floating rate and their fixed rates

TERM DEPOSIT RATE CHANGES
Bank of Baroda, NBS and NZCU Auckland all cut term deposit rates today.

PICK UP, SLIP DOWN
Housing sales picked up in May but prices were weaker in the main centres. The REINZ national median selling price dropped from $680,000 in April to $620,000 nationally in May. The Auckland median dropped less, from $925,000 to $910,000

LIMITED SERVICE
Activity in New Zealand’s services sector improved somewhat for May after its lowest ever result in April, according to the BNZ - BusinessNZ Performance of Services Index. Less bad readings in May compared to April were seen in nearly all areas across industries, regions, firm sizes, and major components. One glaring exception was employment, which fell further, reflecting still very poor conditions through May.

I'LL HAVE DOUBLE PLEASE
Treasury announced the launch of a new $2 bln, 0.50% coupon 15 May 2024 nominal bond. Given the timing of the launch, they cancelled the $1.05 bln tender scheduled for 18 June 2020, which included the 15 April 2025, 15 April 2027 and 14 April 2033 nominal bonds.

LABOUR'S LIST
The Labour Party has announced its 2020 Party List. Some anonymous current list MPs have sunk, and there are some surprising retention of some nonperforming ministers at the top (Twyford, Clark). You can compare all the lists here.

NO ONE CAME
Visitor arrivals fell almost -100% - but not quite because of the occasional yachtie who arrived. There was a similar suspension in Australia.

EMPTY QUEUES
There was a net migration gain of just +48 in April as the lockdown all but closed the border. Most of the people who arrived in this country long term in April were returning New Zealand citizens.

LOCKDOWN FOOD PRICES HIGHER
Although they fell from April to May, food prices increased +2.9% for the year. Over the year, fruit and vegetable prices increased +3.6%, meat, poultry, and fish prices increased +2.9%, grocery food prices increased +2.8%, non-alcoholic beverage prices increased +0.8%, and restaurant meals and ready-to-eat food prices increased +3.6%.

AUSTRALIA UPDATE
In Australia, there have been 7335 cases (+48 since this time on Friday), 102 deaths (unchanged) and a recovery rate of just over 93% (up). 16 people are in hospital there (-2 since Friday) with 3 in ICU (+1). There are now 395 active cases in Australia (-29). Small but significant numbers of community transfer cases are popping up there however.

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 7,899,500 and up another +399,000 from this time Friday. This is still rising at a faster pace than recently. American cases rose by +72,000 since Friday to 2,094,000. US deaths now exceed 116,000. Global deaths now exceed 433,000.

EQUITY MARKET UPDATES
Shanghai, Hong Kong and Tokyo equity markets have all opened lower today. The ASX200 is also down a similar -0.4%. The NZX50 is today's standout, up +0.3% so far. The futures market suggests Wall Street will open -1.2% lower tomorrow.

SWAP RATES UPDATE
Swap rates are probably unchanged 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 still at 0.27%. The Aussie Govt 10yr has slipped slightly to 0.87%. The China Govt 10yr slipped -1 bps to 2.77%. And the NZ Govt 10yr yield is also little-changed at 0.80%. The UST 10yr is down -4 bps since the end of the Friday Wall Street session at 0.67%.

NZ DOLLAR HOLDS
The Kiwi dollar at the same level we left it at on Friday of 64.2. Against the Aussie we are also holding at 94 AUc. Against the euro we are slightly firmer at 57 euro cents. The net off all that means the TWI-5 is just on 69.1.

BITCOIN SOFT
The price of Bitcoin is holding at its new lower level US$9,259. 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

Select chart tabs

Source: RBNZ

Source: CoinDesk

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37 Comments

by Glitzy | 15th Jun 20, 4:10pm 1592194201

"Swap rates are probably unchanged today."

I would say this is probably wrong ;)

by David Chaston | 15th Jun 20, 4:50pm 1592196643

The two and five year rates are unchanged, the ten year is down -2 bps. According to the NZFMA data. Our chart updated soon.

by Glitzy | 15th Jun 20, 6:01pm 1592200895

David, have you tried approaching ANZ, ASB or Craig's for indicative closing prices for swaps and bonds ? I'd imagine that if you give them credit for supplying current market data youd have good prices daily by your 4pm. Each already produce a 9am (ish) fixed income daily price sheet so pressing refresh and send, ideally automatically shouldn't be an issue.

by Audaxes | 15th Jun 20, 8:11pm 1592208662

ICAP is the best bet .

by Logicthinker | 15th Jun 20, 10:27pm 1592216851

Are the Aussie banks going to follow Kiwibank's lead and reduce their Floating Rates down to 3.4%.
I am very interested.

by Independent_Observer | 15th Jun 20, 4:29pm 1592195350

National median price falls from $680,000 to $620,000.

If working towards a 20% deposit, then that's $136,000 down to $124,000.

Another $12,000 less to save on horrible deposit rates less RWT. That isn't insignificant for your typical FHB.

Who knows, wait until the end of the year and that deposit might be less than $100,000?

by Jock Silver | 15th Jun 20, 4:56pm 1592197014

As long as FHB is not relying on kiwisaver...

As you rightly observe, FH deposit thresholds seem to have taken on bitcoin-like volatility of late.

by Independent_Observer | 15th Jun 20, 5:03pm 1592197424

That is true, although I'm assuming if you were intending on using your kiwisaver in the next 12-24 months for the purchase of a home, you'd be relatively balanced or conservative with your kiwisaver fund - but perhaps not based on Martin Hawes recent article!

by Carlos67 | 15th Jun 20, 7:09pm 1592204953

A fact IO not even mentioned on One news tonight. Got to stick with the houses only go up year on year narative. No stock for sale either but strangely now taking much longer to sell.

by Independent_Observer | 15th Jun 20, 7:18pm 1592205485

Yes was watching 3 news tonight and thought hang on - National median just fell by $60,000! Yet the less informed will be thinking, shit, prices are still rising.

A $60,000 fall is quite a lot, especially if your 20% deposit on a new home at that price is around $130,000. I.e. if you buy now and that pattern occurs again the next few months, you could lose half your equity in the home in a month or two! We should be talking about that point. At that rate, you could be in negative equity in 3-4 months time. That should have alarm bells going for FHB's and the banks.

by Foyle | 15th Jun 20, 5:33pm 1592199215

Labour list: 1 Jacinda Ardern 2 Kelvin Davis [WTF?] 3 Grant Robertson 4 Phil Twyford [WTF?] 5 Megan Woods 6 Chris Hipkins 7 Andrew Little 8 Carmel Sepuloni 9 David Parker 10 Nanaia Mahuta [WTF?] 11 Trevor Mallard 12 Stuart Nash 13 Iain Lees-Galloway 14 Jenny Salesa 15 Damien O’Connor 16 Kris Faafoi 17 David Clark 18 Ayesha Verrall 19 Peeni Henare 20 Willie Jackson.
3 WTF's in top 10, what, other than tokenism or ?? can justify their presence near top of list, they haven't demonstrated any talent for the job.

by Independent_Observer | 15th Jun 20, 5:42pm 1592199767

Yip was thinking the same thing as well today.

Then again National had Paula Benefit at no.2 for a few years which was an even bigger WTF so who knows.

by Masher | 15th Jun 20, 6:19pm 1592201952

If i was Labour id be keeping #2 away from the camera come election time.

If i wasnt Labour Id be attacking #2 come election time. Easy target.

by Fritz | 15th Jun 20, 7:13pm 1592205198

And 4. Even numbers.

by Officebound | 15th Jun 20, 7:24pm 1592205857

Kelvin Davis at #2 is a definite WTF, and likely tokenism.

Haven't heard from/about him, and Grant is closing in on #1, let alone #2

by Albert2020 | 15th Jun 20, 11:00pm 1592218806

Isn’t he the labour deputy? Where else you gonna put your deputy?

by Brock Landers | 15th Jun 20, 10:40pm 1592217615

When you remember these people subscribe to the ideology of "diversity" quotas instead of meritocracy it makes more sense.

by Foyle | 15th Jun 20, 5:41pm 1592199716

$360 million 'Skypath' walking route over harbour bridge to be fast tracked. Jesus wept. Believe it or not that is about the same as the inflation adjusted cost of the harbour bridge itself. What an absolutely incredible white elephant. You could put on free 24hr a day cycle+pedestrian carrying buses at 10minute intervals in perpetuity for probably a 10th of that.

by J.C. | 15th Jun 20, 6:05pm 1592201122

Oh, I've taken my bike from Birkenhead Wharf to central Auckland on the ferry. Honestly, people look at you like you're a leper. Rarely saw any other cyclists doing the same. Generally, the hatred for cyclists in Auckland is palpable. I'm not talking about the MAMILs on bikes far more expensive that their ability to ride and fitness level, but just in general.

I agree. A complete waste of money.

by Uninterested | 15th Jun 20, 6:25pm 1592202344

I commuted by bike on the North Shore ferry a few years ago. One day I was stashing my old rusty thing (salt spray makes any steel item on bikes rust), leaning it onto the other bikes in the normal way. Alas, a guy rushed over and stopped me. His bike was a carbon thing which could not be sandwiched between other bikes or so he said. OMG, well fair enough I suppose but how impractical to use that as a commuter bike.

by oldbloke1 | 15th Jun 20, 6:40pm 1592203201

You're pushing a lot of negativity today. Got an inside look at national's latest polling?

by JimboJones | 15th Jun 20, 8:03pm 1592208196

A second harbour crossing was estimated at $6 billion a while back, prob $10 billion now. The supposed white elephant northern busway has allowed a significant postponement of that investment. If Skypath takes more cars off the bridge it would delay the need for that investment even further or perhaps forever. Sounds like a sensible investment to me.
If I happened to live in takapuna or similar and work in the city I’d definitely ride, why wouldn’t you?

by Lapun | 16th Jun 20, 8:10am 1592251821

Age. Lack of facilities to have a shower and change clothhes after the journey. But if the entire working population of Takapuna travelled by cycle across the bridge it still would not be financially viable - unlike those who cycle from the east and the west into the CBD. Surely adding buses with bike-racks would be the cost effective way of reducing vehicles crossing the bridge.

by Ben72 | 15th Jun 20, 5:55pm 1592200528

Dow futures plummets 700 points already, market carnage grew even more in tomorrow’s trading.

by frazz | 15th Jun 20, 6:13pm 1592201632

Plummet's? Thats a mere blip on the radar..wake me up when its 5000 points drop.

by guwop | 15th Jun 20, 6:24pm 1592202243

Deflationary busts hitting right now. Watch Gold & BTC, they will drop hard and then harder.

USD up.

by J.C. | 15th Jun 20, 7:13pm 1592205220

"hitting right now". Any reason for that? Gold holding up but bitcoin taking a, bit of a pasting. BTC hasn't really been tested by deflation and it is uncorrelated

by Uninformed Hillbilly | 15th Jun 20, 9:08pm 1592212125

Selling to cover margin calls , I think . It's distorted by futures rubbish now to

by guwop | 15th Jun 20, 9:35pm 1592213740

Eurodollar shortage plus the Sharesies herd are losing their virginity.

by iconoclast | 16th Jun 20, 7:25am 1592249119

Sleight of Hand - Main Street misses out again

After an 800 point plunge into negative territory at the open the Dow Jones rebounded as the Federal Reserve announced it would begin buying Corporate Bonds on the open market. Note that they are buying existing bonds which simply releases buying capacity in the hands of existing bond holders. It will not inject the funds into the hands of the coprporates themselves.

WASHINGTON (AP) — The Federal Reserve said Monday that it will begin purchasing corporate bonds as part of a previously-announced plan to ensure companies can borrow through the bond market during the pandemic. The program will purchase existing bonds on the open market, as opposed to newly-issued debt. The central bank said will seek to build a “broad and diversified” portfolio that will mimic a bond-market index. The bonds will have to be from highly-rated, investment-grade companies, or firms that fit that description before the viral outbreak struck. The announcement boosted the stock market, which was already rebounding from early losses.

https://www.seattletimes.com/business/federal-reserve-launches-corporat…

by thewanderer | 15th Jun 20, 7:11pm 1592205064

There's a James Crow on the Green party list. I wonder what his nickname is?

by Independent_Observer | 15th Jun 20, 7:37pm 1592206653

Anyone know if the banks lent at the 0% LVR?

And given the $60K drop in the average NZ home, do we already have some FHB's/investors in negative equity?

David Chaston - this might be an interesting take on an article, especially for FHB's. Even at a 20% LVR for a first home purchased around April, say a 20% deposit for a $650K home = $130,000. And the average home just dropped by $60,000. Almost half of your equity just went (that might have been years of hard work and saving for many!). Another month or two at that rate of fall and you're in negative equity. It could happen quite quickly and then you're stuck.

The banks must be shitting themselves if that trend happens for another few months as I understand there was a lot of lending to FHB's at the end of last year/early this year. There could be quite a lot of negative equity happening quickly but nobody appears to be talking about it.

by kensinma | 16th Jun 20, 8:44am 1592253843

There is no 0% LVR! The banks have (almost) always had minimum deposit requirements and although they will look at 10% applications they are not approving many of them unless there are very strong mitigants and a clear plan on how to build equity fast (i.e repay the loan quickly). As for the $60k drop in value, certainly haven't seen anything like that in Northland, I am an adviser and have never been so busy.

by Houseworks | 15th Jun 20, 8:05pm 1592208316

Net migration is a positive number, that's a triumph in itself

by Wrong John | 15th Jun 20, 8:24pm 1592209459

Net migration is not a positive. Net migration is a longer trip to work, a house that costs double what it should be (considering its mediocre quality) and a longer wait in the queue for your next operation. Quality migration is better than the quantity migration strategy we currently run.

by youngdumbandbroke | 15th Jun 20, 9:21pm 1592212914

Bang on

by Averageman | 16th Jun 20, 6:58am 1592247514

Well said LJM.