What happened Wednesday

A review of things you need to know before you go home on Wednesday; RBNZ open to more stimulus, Twyford's light rail plan axed, CFR tells banks to be looser with lending standards, swaps steepen, NZD dips, & more

24th 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
No more changes here today as we await reaction to the RBNZ review.

TERM DEPOSIT RATE CHANGES
NBS has cut TD rates. Update: ANZ has cut rates across the board, between -5 and -15 bps.

OCR & QE UNCHANGED, BUT ...
RBNZ says the balance of economic risks still remains on the downside and it is prepared to provide additional stimulus as necessary.

MR NO
NZ First has blocked the Auckland's light rail project. The Ministry of Transport however backs the NZ Infra bid but it is unclear whether NZ Infra is interested in continuing with the project after the election.

'WE NEED YOU TO BE WEAKER'
In Australia, regulators have told banks that they expect them to run down their capital buffers, supporting their customers with increased lending in high risk situations. No doubt these same regulators will throw the law books at the banks if things go pear-shaped.

THE AUSSIES LOVE ARDERN
An updated poll of Australian attitudes (in March) to other countries and their leaders reveals a sharp fall in trust of global leaders. Only one in three Australians (30%) express some or a lot of confidence in US President Trump ‘to do the right thing regarding world affairs’. Confidence in China’s President Xi has also fallen sharply, with only 22% of Australians expressing confidence in him. New Zealand’s Prime Minister tops the list of leaders again, with 87% of Australians expressing confidence in her. 73% expressed confidence in Japan’s Prime Minister, a rising trend. 60% have confidence in the Australian Prime Minister.

CHINA COVETS THE TPP
China is showing more detailed interest in joining the TPP, now seeking Japan's attitude to an application. It's own RCEP isn't looking so attractive these days, even to it.

AUSTRALIA UPDATE
COVID-19 infections are rising faster across the ditch. In Australia, there have been 7521 cases, +29 since yesterday. Their death count is up +1 at 103 deaths and their recovery rate is back down slightly to 92%. There are now 503 active cases in Australia (+28).

GLOBAL UPDATE
The latest compilation of COVID-19 data is here. The global tally is now 9,237,600 and up +164,000 since this time yesterday. This is a rising pace. (And a reminder, when this tally exceeds 10 mln, we plan to give up reporting the number daily. And at the current rate that may be by before the end of the week.) American cases have risen by +35,000 in one day to 2,345,900. That is a larger-than-usual daily rise too. The number of active cases in the US is now 1,577,100. US deaths now exceed 121,000. Global deaths now exceed 477,000.

EQUITY MARKET UPDATES
At the end of the New York session, the S&P500 fell away and ended up a little less than +0.4%. The Shanghai index has opened +0.2% higher today, Hong Kong is +0.6% up and Tokyo is up +0.4% is early trade. The ASX200 is flat but the NZX50 is up almost a full +1.0%.

SWAP RATES UPDATE
Swap rates were probably higher at the long end 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 staying up at 0.30%. The Aussie Govt 10yr is up +2 bps at 0.93%. The China Govt 10yr is down -3 bps at 2.93%. The NZ Govt 10yr yield is much firmer, up another +5 bps at 0.97%. The UST 10yr is marginally firmer at 0.72%.

NZ DOLLAR FALLS
The Kiwi dollar dropped -40 bps on the RBNZ announcement and then rose immediately by +15 bps. A sharp correction following an RBNZ announcement is very normal, followed in a few days by a rising rate, above where it started. The NZD is currently at 64.8 USc and only a net fall of -20 bps. Against the Aussie we are also softer at 93.3 AUc. Against the euro we are down at 57.3 euro cents. That means the TWI-5 is lower by -10 bps at 69.4.

BITCOIN UNCHANGED
The price of Bitcoin is unchanged at US$9,640. 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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Source: RBNZ

Source: CoinDesk

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37 Comments

by Foyle | 24th Jun 20, 4:07pm 1592971662

With nearly half a million deaths to date and Infection Fatality Rate for covid likely about 0.5% (many sources) that means around 100million infected to date. 1.4% of the world population. We are still closer to the beginning of the epidemic than the end.

by Kezza R | 24th Jun 20, 4:47pm 1592974076

A 10k increase per day (one third) in the US over the past two weeks. They can't afford to do LD again so up she goes. It remains to be seen if the death stats rise sharply due to over crowding of hospitals in the US as it did in the likes of Italy. The US mindset of 'leave no man behind' is to be put to the test of how the public will react. Not well is my guess.

by mealsonmeals | 24th Jun 20, 8:23pm 1592986981

The US army might have that mindset. The general US population does not echo that whatsoever. In fact, its the exact opposite.

by Kezza R | 24th Jun 20, 9:22pm 1592990543

They don't like it when the body bags start piling up like what happened in Nam.

by theglc | 24th Jun 20, 4:17pm 1592972247

https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12…

by bw | 24th Jun 20, 4:36pm 1592973367

Our quality of Life just keeps being eroded...
"St John Ambulance service will cut up to 100 jobs as the organisation struggles...In an internal email sent to staff on Wednesday, the chief executive described the situation as dire."
More debt, that's what we need! And the cheaper and more of it, the better.....

by Kezza R | 24th Jun 20, 4:43pm 1592973817

St John's not being close to fully funded is a joke.

by frazz | 24th Jun 20, 6:16pm 1592979401

So you are happy to pay more tax to fund them? Without volunteers NZ would be a different place...surf clubs come to mind.

by Masher | 24th Jun 20, 6:26pm 1592980012

Volunteers are free labour.

Its already such a one sided relationship. They should be treated like gold.

by Jolly Penguin | 24th Jun 20, 6:39pm 1592980792

I like the Nordic model with a higher redistributive tax system. So yes, I'd be willing to pay higher taxes if it meant that society was more equitable.

by Kezza R | 24th Jun 20, 7:01pm 1592982093

I've done my time with a surf club.
St Jihns is a different story. Here's an idea, how about the Govt is held accountable for wasting money like the Beehive play ground...

by Nzdan | 24th Jun 20, 7:45pm 1592984701

12 May 2020
https://www.newstalkzb.co.nz/news/sport/racing-gets-72-5-million-emerge…

Racing gets $72.5 million emergency support package

10 June 2020
https://www.tvnz.co.nz/one-news/new-zealand/st-john-ambulance-warns-sta…

St John Ambulance warns staff of job cuts as it grapples with $30m deficit

by Snow | 24th Jun 20, 9:11pm 1592989871

Who decides that St Johns shouldn't be fully funded by the government? St Johns or the government?

by The Person | 24th Jun 20, 9:48pm 1592992134

St Johns are not interested in being taken over by the government, hence it's not govt funded.

by JKB | 25th Jun 20, 6:24am 1593023087

Should be absorbed into Fire & Emergency, many duplications such as premises, admin.

by Believer1980 | 24th Jun 20, 4:42pm 1592973776

You are saying the people losing jobs is bad. which is true. The NZ government is deficit spending (i.e. the RBNZ is printing money) to help these people with welfare payments. Are you saying that NZ government must stop paying welfare? and it should balance its budget to its significant reduced tax income?
There is no doubt that clever people can spend a long time thinking and debating how much deficit we should go into, what to spend it on, how to spend it etc, but i doubt that many people will disagree that not printing money will bring about certain and server hardship and social disorder.

by Kezza R | 24th Jun 20, 4:46pm 1592973992

Social disorder is coming either way, on sooner the other later.

by Believer1980 | 24th Jun 20, 4:56pm 1592974565

So if you were in power, what you would have done? no deficit spending arguing that the outcome will be the same? I seriously doubt that. It is very obvious that the ultimate winner of all government spending is people who own assets in all forms and shapes as money will end up with them (and government). Many people see this as unfair, but what is the alternative? this will be the case if people are allowed to own private assets. And to stop people from owning private asset you have to stop their entitlement as how to spend their wages/earning. Any system that allows holding private assets and recognizes personal authority over them will sooner (more US type) or later (more Scandinavian type) (assuming no wars or revolutions) arrive at this point where money ends up with the rich. All wars and revolutions do is they put some new faces in the game and retire some old players.

by Yvil | 24th Jun 20, 5:17pm 1592975836

Both very interesting posts Believer,
bw, I'd be really interested in your thoughts on Believers post if you would oblige

by Kezza R | 24th Jun 20, 5:20pm 1592976007

I wouldn't stoop that low to be a politian, I am too honest and would tell everyone the real story which would sink my career.
All I said was that social unrest was on the way either way. That is how it is going to play out. Even Jacinda who likes to paint herself as saviour of the nation knows that while BS'ing the masses.

by Audaxes | 24th Jun 20, 4:44pm 1592973841

In Australia, regulators have told banks that they expect them to run down their capital buffers, supporting their customers with increased lending in high risk situations. No doubt these same regulators will throw the law books at the banks if things go pear-shaped.
I thought the RBNZ suspended the implementation of a new hardly there bank capital structure to an undefined future date.
In fact interestdotconz reported this telling observation,

According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.

by gingerninja | 24th Jun 20, 6:06pm 1592978793

Audaxes, i've been meaning to ask... how do you think all this will unfold? Currency deflation? Bond market savaging? MMT and/or UBI? CPI deflation/inflation? You seem to be very well roundly read on the financial market/central bank dance. What is your best guess?

by Audaxes | 24th Jun 20, 7:56pm 1592985379

Bond market savaging?
The most interesting and visible option for clues to the future.

Currently, DM sovereign bond markets signal disinflation caused by tight global monetary conditions no matter what central bankers would have you believe. Yes, there are instances where high bond prices cause banks to lend to a select coterie of citizens to speculate in other asset classes to capitalise the rising discounted present value of associated cash flows, but that is not the stuff of coherent global growth for all.

To be clear, I am not ideologically tied to any dogma and run with the trend no matter what. However, over many years the bond market has never failed me in it's collective ability to signal economic reality - it just takes a little skill, mainly time, to read the various parts of the curve to lend weight to one's investment decisions on any particular day.

by Albert2020 | 24th Jun 20, 5:01pm 1592974862

Aussie (Victoria) looking like they are letting this get away from them a bit...

by sharetrader | 24th Jun 20, 5:19pm 1592975959

yes and the people in NSW are getting angry that they wont close the border like Queensland
meanwhile Queensland , WA, SA are all saying we wont open any time soon because of VIC
Jen B

I’m sick of Victoria being the laughing stock of the country!
Just been to Coles and every second person walking out with toilet paper - the crazies are back!

by J.C. | 24th Jun 20, 5:30pm 1592976619

Everyone's got their hand out. I would have thought AJ Hackett Bungy should have some savings. Apparently not.

https://www.stuff.co.nz/business/300041475/aj-hackett-bungy-to-receive-…

by Yvil | 24th Jun 20, 5:38pm 1592977101

Well what do you expect when the "caring" & "kind" government dishes out $ to whoever want some… (btw these are $ the government doesn't have and that we'll have to repay in the future)

by frazz | 24th Jun 20, 7:00pm 1592982001

Hmm.. so you did not apply for the Covid grant for your Motel business I take it? ...and pays no tax on $900K profit house sale. Excuse us if we cannot take your comments seriously.

by Nzdan | 24th Jun 20, 7:46pm 1592984785

I love it how Yvil tries to speak on behalf of net taxpayers.

by Yvil | 24th Jun 20, 7:49pm 1592984960

Of course I took the the employee subsidy for the Motel, also I paid no tax on the profit of the sale of my own house. Your comment doesn't make sense at all, that's exactly the problem, this government is giving away too many easy $. You don't get it, if the government offers free $ and people legitimately qualify for it, people will take the $, me and you included. It becomes a lolly scramble

by Kezza R | 24th Jun 20, 8:27pm 1592987277

Again they lack planning and management.

by Sthview | 24th Jun 20, 6:09pm 1592978945

Absolutely furious about this decision......Tourism is toast as we see COVID numbers increase, just moth ball these ventures or let them fail, just good money after bad for lets face it the same result and a follow up inquiry in two years time just incase enough dough hasn't been squandered

by Fritz | 24th Jun 20, 7:30pm 1592983803

Agree. That's a joke.

by Kezza R | 24th Jun 20, 8:30pm 1592987455

And they want to spend money on a project or two in Q'town when it will be a few years until it gets busy again.

by dictator | 24th Jun 20, 5:36pm 1592977009

The idea of the buffers in the bank reserves is so that when loans fail they don't have to scramble around trying to comply with the regulations. If the banks run down the buffers prior to a big wave of defaults they will be in serious trouble.

by Masher | 24th Jun 20, 6:30pm 1592980244

*We

by Henry_Tull | 24th Jun 20, 10:59pm 1592996391

The Minister of Health out making election advertisements.

https://www.newshub.co.nz/home/politics/2020/06/health-minister-david-c…

Watch the video. This is what happens when the PM and her dept take Clarkes job away (Woods) while not sacking him, leaving a wounded, cornered minister carving up a public servant.

As for Dr B, stay put. Think of it as attempted constructive dismissal, resignation gives em the scapegoat they need sacrifice.

https://www.employment.govt.nz/ending-employment/constructive-dismissal…