What happened Friday

A review of things you need to know before you go home on Friday; ASB makes deep rate cuts, student visas die, a Kauri issue, Aussies claim they are under attack, swaps steepen, NZD soft & more

19th 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
ASB cut most of their fixed rates. More here.

TERM DEPOSIT RATE CHANGES
ASB made deep cuts to their term deposits, positioning them as the lowest of offer of any bank. More cuts from at least one other bank are coming on Monday.

EDUCATION SECTOR GOES COLD-TURKEY
The number of work and residency visas being issued is picking up again but new student visas are almost non-existent.

A KAURI ISSUE
There was another Kauri bond issued today, a $500 mln issue by a Norwegian local government funding agency. Kauri bonds are NZD issues by entities outside New Zealand. They are becoming less popular and as at the end of May there were $21.7 bln on issue, down -12.8% on a year and down -18% in two years. They were more popular when New Zealand interest rates stood at a premium to the main bond markets. That is not the case today.

BETTER THAN EXPECTED
In Australia, retailing has moved through a number of dramatic phases: an +8% rise from stock-piling in March; the lock-down driven -18% plunge in April; and now a +16% rebound, including an element of catch-up, in May. But after all this, Aussie retail sales look to be -0.4% below their pre-Covid-19 levels and in the circumstances that isn't too bad. Of course, with specific retail categories, the variations are still extreme. The cessation of overseas travel spending is helping. But weak income growth and fragile confidence will continue to weigh on future results.

"UNDER ATTACK"
Australia is claiming that "China's government" has escalated "malicious" cyber attacks against Australian businesses and government agencies including critical infrastructure. The claim coming from a careful public announcement by their Prime Minister. Although he did not name China, he confirmed it is when answering reporters' questions.

AUSTRALIA UPDATE
COVID-19 infections are rising faster in Australia. In Australia, there have been 7397 cases (+7 since this time yesterday), 102 deaths (unchanged) and a recovery rate of just over 93% (up). There are now 418 active cases in Australia (+20).

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 8,463,500 and up another +134,000 from this time yesterday. This is rising at a faster pace than recently. (And a reminder, when this tally exceeds 10 mln, we plan to give up reporting the number daily.) American cases rose by +26,200 since yesterday to 2,189,100. That is a larger daily rise. Epidemiology advice is being ignored in many states. US deaths now exceed 118,000. Global deaths now exceed 453,000.

EQUITY MARKET UPDATES
The S&P500 yo-yo'd during the day, ending unchanged. Heading into tomorrow's final session, the S&P500 is up +2.4% for the week and all of that happened in the Tuesday session. Asian markets have opened little-changed. Shanghai is up +0.4%, Hong Kong has opened -0.1% lower while Tokyo is us +0.3%. The ASX is so restrained, up +0.9% in midday trade and also heading for a weekly gain of +2.4%. The NZX50 Capital Index is up +0.5% so far today and heading for a weekly gain of +3.5%.

SWAP RATES UPDATE
Swap rates were likely higher today at the long end. 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 at 0.29%. The Aussie Govt 10yr has dipped another -2 bps to 0.86%. The China Govt 10yr is up +2 bps at 2.90%. The NZ Govt 10yr yield is up strongly, up +6 bps to 2.90%. The UST 10yr is down -1 bp since this time yesterday at 0.70%.

NZ DOLLAR SOFT
The Kiwi dollar is softer from this time yesterday at 64.2 USc. Against the Aussie we are also softer at 93.6 AUc. Against the euro we are unchanged at 57.3 euro cents. That means the TWI-5 has slipped slightly to 69.1.

BITCOIN SOFT
The price of Bitcoin is a bit softer today, down -1.1% at US$9,301. 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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62 Comments

by bw | 19th Jun 20, 4:07pm 1592539643

"The NZX50 Capital Index is up +0.5% so far today" Maybe, but good to see that at least one firm has it head screwed on the right way around!
"Air New Zealand shares are more than 100 per cent overvalued, says one of the country's largest share brokerage firms. Forsyth Barr reduced its target price per share for Air New Zealand ...."

by Wrong John | 19th Jun 20, 4:10pm 1592539821

Is that NZ Govt 10 Year right?

by Avocado | 19th Jun 20, 4:20pm 1592540449

by Wrong John | 19th Jun 20, 4:13pm 1592539997

I'm beginning to believe that the pricing of global share markets is more about how much money is floating (sloshing) around in the system with nothing better to do, than it is with what the companies listed on these markets are really worth. The P/E's seem wildly over valued to a dummy like me.

by Foreign buyer | 19th Jun 20, 4:22pm 1592540569

The Fed has been keeping that dead cat from bouncing back down to earth by unscrupulous means..... Brrrrrrr. Its just like the RBNZ keeping house prices from crashing by lowering the OCR but eventually reality bites. The markets will start dropping soon, already probably have, and the housing prices are already dropping at a big rate. $680k to $620k in one month is VERY BIG. Cash is king in times like this. Keep safe and don't let a spruiker ruin your life, don't give them that pleasure!

by brisket | 19th Jun 20, 4:23pm 1592540607

Basically everyone agrees that shares are overpriced. It's become a game of chicken, because no one wants to miss out on the gains from 'all those other idiots' piling in to buy the dips, especially when there's so little profit to be made elsewhere. There was a survey of US hedge fund managers recently where 85% agreed that equities are overpriced; but also that most of those same managers had recently been moving their funds into more equities. You don't keep customers if you miss the hype train. Obviously, it's going to end really well.

by Pragmatist | 19th Jun 20, 4:49pm 1592542150

You're a bit late to the party.. but come on in anyway :)

by Houseworks | 19th Jun 20, 4:58pm 1592542708

Still largely based on conservative forecast earnings. So those companies that have reported reasonable yet unspectacular results have rallied as investors including myself, are chasing good dividend yield. Those that are maintaining or reinstating their dividends will do well. Honestly I would rather have a good property investment to shares that gyrate on a daily basis when the latest sentiment dives.

by Independent_Observer | 19th Jun 20, 5:12pm 1592543549

Yet you’ve never lived through a housing market crash.

by streetwise | 19th Jun 20, 6:11pm 1592547108

And I bet Houseworks has never had a property trashed by what looked like good tenants. The insurance company won't come to the party because they'll claim that each instance of damage was 'a separate incident' to which the excess must apply. For instance, if every fixture in the bathroom is damaged: eg the shower curtain rail pulled from the wall leaving a big hole in the plaster, the new vanity basin is crazed, the bath porcelain chipped in several places, the toothbrush holder ripped from the wall, the once-new lino damaged, then your insurance company will say that these are 5 separate instances of damage and that your excess, say $500, will apply separately to each of those instances of damage meaning you will have to fork out $2500 before the insurance company will pay a cent.
A friend some years ago had a hole burnt right through the lounge floor of an Onehunga rental when the tenants roasted a pig in the fireplace.
A good rental property? Be careful what you wish for.

by Uninterested | 19th Jun 20, 7:22pm 1592551356

So the question to the prospective new tennant is: How do you cook your pig sir?

by Houseworks | 19th Jun 20, 9:53pm 1592560399

Perfect question !

by Houseworks | 19th Jun 20, 9:55pm 1592560554

Learned from experience no doubt streetwise. I guess we've just been lucky over 25 years and after hundreds of tenancies we have copped a few though

by CN | 19th Jun 20, 6:08pm 1592546884

Market price volatility in the share market scares many people.

Due to low historical market price volatility for real estate (both residential and commercial), many purchase residential real estate for their peace of mind (and most do it with high levels of leverage).

by Pacman_46 | 19th Jun 20, 7:59pm 1592553574

Ah, the old “safe as houses” adage

by Houseworks | 20th Jun 20, 5:07am 1592586442

IO yes we have but I haven't personally had anything to write home about in terms of big losses from real estate. We don't generally invest in houses that individual homeowners or FHB can own..

by dictator | 19th Jun 20, 5:06pm 1592543206

In the US a P/E ratio of 300 is still a decent purchase.

by scarfie | 19th Jun 20, 4:17pm 1592540259

Sad that we've now lost a bobby just doing their duty. https://www.stuff.co.nz/national/300038459/live-police-officer-dies-in-…

You can't help but wonder if the shooter has succumbed to the rhetoric/propaganda doing the rounds on MSM.

As a side note, one of the predictions I made ten years ago is that one day a simple speeding fine will cost a Police Officer their life. People take it for now, but in a severe economic downturn the stakes will be so high for someone under pressure they will do something stupid in the heat of the moment.

by Foreign buyer | 19th Jun 20, 4:25pm 1592540740

Its the government fault for letting gangs run free destroying communities.

by Lanthanide | 20th Jun 20, 8:09am 1592597390

It's successive governments fault, and therefore the fault of voters at large, for creating a society in which gangs need to exist for their members to feel like they're getting ahead in life.

by ShoreThing | 19th Jun 20, 4:30pm 1592541018

I was told we needed to ban guns in order to prevent this kind of thing. Next they'll be telling us the shooter didn't even have a firearms license!

by Rosenstein | 19th Jun 20, 10:10pm 1592561416

No how it works is that shooters (like Chch) get firearms licenses because police don't do due process on background checks, then police cover it up by trying to change perfectly good legislation and to deflect from their failings.

by bw | 19th Jun 20, 4:33pm 1592541185

When I was growing up in the UK my father instilled in me "Never hit a policeman. If he dies, they'll hang you".
Ronald Ryan found that out to his detriment in Melbourne some years back.
Whatever it is, there has to be a deterrent to protect those that protect us.

by Houseworks | 19th Jun 20, 5:00pm 1592542800

Dont hit a policeman Bruce

by Henry_Tull | 19th Jun 20, 4:59pm 1592542795

Just the saddest news.
The rhetoric was not helpful.
The flaw in the activitists message exposed.

by streetwise | 19th Jun 20, 5:43pm 1592545402

I'm now more than happy to see the recent aborted trial for the police to carry guns be carried into operation. They have to protect themselves. In fact, I will go on record to say that if National resumes its scrapped plans for a new high-security prison I will vote National for the first time in my life. The government is looking more and more like a feather duster on law and order.

by Audaxes | 19th Jun 20, 4:43pm 1592541810

There was another Kauri bond issued today, a $500 mln issue by a Norwegian local government funding agency. Kauri bonds are NZD issues by entities outside New Zealand.

They were more popular when New Zealand interest rates stood at a premium to the main bond markets. That is not the case today.

The RBNZ recently noted:

FX swap market funding. Banks sometimes borrow money from offshore and swap the debt back to New Zealand dollars. In recent days the cost of performing this swap has exploded. Left unchecked, this could have caused an increase in the cost of funding New Zealand banks, which in turn could have led to higher interest rates in New Zealand. The RBNZ has essentially offered to facilitate some of those swap arrangements, which will keep the cost of overseas funding contained.Link

Xccy basis swap quotes at the time were:
3y NZDUSD xCCY is trading at ~NZD BKBM+36/USD LIBOR
5y NZDUSD xCCY is trading at ~NZD BKBM+40/USD LIBOR

The NZD swap lender (supranational Kauri bond issuer) who is in receipt of the USD Libor basis points wants the discount to USD Libor financing to facilitate the trade - nothing more - the general level of NZD interest rates is immaterial. Our local NZ banks are USD swap lenders, but are subject to a NZD leg liquidity premium, hence they pay the positive Libor basis.

by Uninterested | 19th Jun 20, 7:26pm 1592551576

I wish that I could understand this intelligence. Alas, my intelligence is not quite up to it, today.

by Audaxes | 20th Jun 20, 9:03am 1592600590

This BIS primer might offer some insight.

More FX basis swap news - the basis in this case has moved deeply negative due to USD funding shortages out of Japan, hence raising the USD funding costs to the YEN swap lender, since the USD swap lender is in receipt of the basis.

Japanese banks could also be acting to raise USD for Chinese counterparties, as they have in the past, given Hong Kong is in turmoil.

by Uninterested | 20th Jun 20, 9:21am 1592601696

Thanks, I'll give that a read.

by Audaxes | 22nd Jun 20, 9:26am 1592774817

Re US central bank liquidity swaps:

There are a couple of important points to takeaway from the unexplored details of this sordid little tale. First, weening doesn’t necessarily mean much. I write this because, surprise, surprise, after writing last Friday how swap lines were still at full volume (for GFC2) first Europe’s central bank along with England’s and now Japan’s are finally beginning the weening process. Link

by CourtJester | 19th Jun 20, 4:52pm 1592542326

David, at this point there has been no confirmation whatsoever from ScoMo that China is behind the cyber attacks. Even in the linked interview, he refuses to deny or confirm that it is China.

by Henry_Tull | 19th Jun 20, 4:56pm 1592542579

Asked whether the attack came from China, Mr Morrison did not name the foreign state but emphasised the level of sophistication of the intrusion.

"What I can confirm, with confidence, based on the advice, the technical advice that we have received, is that this is the action of a state-based actor with significant capabilities," he said.

https://www.smh.com.au/politics/federal/morrison-reveals-malicious-stat…

by CourtJester | 19th Jun 20, 5:03pm 1592543029

So? That's not a confirmation that it's China. Is China the only state on Earth with such capabilities? I mean yeah, it's most likely China, but it could be Russia, the US, UK, India, North Korea etc...

by realterms | 19th Jun 20, 5:35pm 1592544935

Could be. But it's not, is it?

by CourtJester | 19th Jun 20, 6:05pm 1592546729

How do you know?

by Pragmatist | 20th Jun 20, 8:29am 1592598565

You going to blame china for the attack on fisher&paykel too? Even tho f&p is owned by Haier?

by stuart786786 | 19th Jun 20, 6:14pm 1592547284

Just for Though:

Any news of war be it physical for land (With Tibet, Taiwan, India, Hongkong ...) or sea (South China Sea) where possible or Economy war (Australia, USA......) or Biological goofups or Cyber Attack (Australia, India....) - One country name stands out : China.

With small countries : Try to catch them in Debt Trap ( Africa, Maldives, Sri Lanka.....) or by throwing money / obliging political leaders like in NZ (Rock Star Economy) and Pacific Islands.

by theglc | 19th Jun 20, 6:27pm 1592548052

The dragon has awoken and is ready to slay all in its path

by Rosenstein | 19th Jun 20, 7:43pm 1592552591

Where have you been since 2001?

by Lapun | 19th Jun 20, 4:56pm 1592542597

My guess is North Korea. If it was Chinese govt then the australian media and electricity and phone network would all be down and the electronic prison doors all open.

by Foreign buyer | 19th Jun 20, 5:03pm 1592543029

If NK did it CCP told them to.

by Audaxes | 19th Jun 20, 6:10pm 1592547053

Could be a US false flag operation with Chinese fingerprints deliberately left behind?

Imagine the surprise in the US state department and in the halls of power in Australia, then, when Pompeo appeared to leave open the possibility of suspending some forms of information sharing with Australia, a steadfast American ally, over the state of Victoria’s possible future involvement with Xi Jinping’s Belt and Road Initiative.Link

by youngdumbandbroke | 19th Jun 20, 9:59pm 1592560769

You'll need to cherry pick from a better article to prove that point. Had a quick browse and nothing in it would suggest the US wants anything more than to defend the 5 eyes comms.

by Audaxes | 19th Jun 20, 10:33pm 1592562804

The Wikileaks CIA Vault 7 exposure suggested they had the capacity, if I recall correctly. You can do better and disprove it.

by youngdumbandbroke | 20th Jun 20, 3:11pm 1592622709

Having the ability doesn't make them complicit. Given the Chinese aggression against various other nations currently, maybe you could do better to disprove China haven't used their "capacity"

by Audaxes | 21st Jun 20, 6:34pm 1592721274

Vault 7 was the name given to cyber attack tools developed by the CIA’s Center for Cyber Intelligence (CCI), and published by WikiLeaks in March 2017. It was the largest data breach in Langley’s history, with long-lasting consequences. For example, Chinese cybersecurity companies recently used Vault 7 evidence to show that the US has been hacking China for over a decade. Link

by taimaiakka0 | 19th Jun 20, 5:54pm 1592546064

"UNDER ATTACK"
Australia is claiming that "China's government" has escalated "malicious" cyber attacks against Australian businesses and government agencies including critical infrastructure. The claim coming from a careful public announcement by their Prime Minister. Although he did not name China, he confirmed it is when answering reporters' questions.

https://www.google.com/amp/s/amp.abc.net.au/article/12372470

It is clear who has done and not to forget that they are doing the same in India :

https://www.timesnownews.com/india/article/amid-border-tensions-china-t…

Is this what world want after Corona Virus - Cyber War.

by Uninterested | 19th Jun 20, 7:32pm 1592551972

It is almost certain that it is China. May not even be official channels. Possibly just overenthusiastic nationalists.
However, I'm very surprised that China would do such a thing or allow such a thing. Because it serves no useful purpose. Its just provides additional training for the IT security guys in Oz who will study what this was about and learn all sorts of stuff.
But it beggars belief that there is no switch where companies can just switch off the internet. If I was in charge, thats what I would have. A big red pushbutton with a normally closed switch which is latched opened when the switch is pushed.

by Pragmatist | 20th Jun 20, 8:28am 1592598485

Except then you stop the flow of your customers orders into your system.

We are supporting one of our customers that is under attack. They had a new shiny $80m production facility with zero production for a week, not sure if its back up and running yet, lastI heard they were still trucking product from queensland down to melbourne because the qld plant was stil running

by taimaiakka0 | 19th Jun 20, 5:42pm 1592545362

Is the Stock and Housing market on Cliff to leap forward to Higher peaks or to fall from the cliff?

Fundamentals does not support the leap but fed and government does not want it burst and are just short of giving more money/deposit to people to buy more stock and house - do anything and everything to see that the bubble should continue (moment it burst government will lose vote and be out of power be it NZ or USA-so print as who cares not going from personal pocket)

https://www.marketwatch.com/amp/story/guid/3C46413E-B016-11EA-BAAD-B305…

by theglc | 19th Jun 20, 6:33pm 1592548438

Its all propaganda in an attempt to avoid slipping down the slope

by Independent_Observer | 19th Jun 20, 7:38pm 1592552309

Lost decade ahead for sharemarkets?

https://www.businessinsider.com.au/stock-market-verge-lost-decade-dalio…

by Becnz | 19th Jun 20, 8:03pm 1592553833

Big problem when people are arriving to checkin into quarantine hotels they do not cross check against flight lists.
This is why the homeless man just checked himself in and could also mean people arriving can skip the process and just go home and no one would know.
The system is a total joke and I fear we will soon pay the price for this.

by oldbloke1 | 19th Jun 20, 9:15pm 1592558116

And your solution? Or do you only do criticism?

by Ex Expat | 19th Jun 20, 9:42pm 1592559753

Change the Government. This lot have had their chance.

by Houseworks | 19th Jun 20, 10:05pm 1592561152

I agree. Megan woods was explaining how its really difficult and not as easy to organise as people would think. Megan, a uni student or a child could have come up with a more foolproof system than you.
Its unbelievable that they have got this far

by Lapun | 19th Jun 20, 10:26pm 1592562413

Keeping people in one place? Any teacher of grade 1 manages to do it daily with far more difficult people than the average international traveller.

by Houseworks | 20th Jun 20, 5:39am 1592588348

Just last week (what?!) they implemented tests on 3rd and 12th days. It's not running smoothly yet (wtf??!!). Pathetic what more can I say.

by frazz | 20th Jun 20, 8:21am 1592598116

Well you still don't have Covis

by frazz | 20th Jun 20, 8:20am 1592598054

Get some farmers on the case..they are experts on herding sheep ...on wait Bovis?

by bw | 20th Jun 20, 7:19am 1592594358

"Bank Of England Announces An Additional £100 Billion In Stimulus" + "The UK inflation fell..." = "Well, this is all going very well, chaps!" (Or, to put is another way "Stock-market legend who called 3 financial bubbles says this one (looming economic disaster) is the ‘Real McCoy,’ this is ‘crazy stuff’ "