Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No more changes here today.
TERM DEPOSIT RATE CHANGES
ANZ has cut rates across the board, between -5 and -15 bps. The Bank of India has cut all its shorter term rates. TSB has also trimmed term deposit rates today, some quite aggressively.
IT'S NOT THE PAYMENTS, IT'S THE DEPOSIT
House prices at the bottom end of the market have declined -7.3% from their March peak, while mortgage interest rates continue to slide. That shift lower along with lower interest rates means that first home buyer affordability is improving. Our new analysis accounts for the interest rate premiums FHBs must pay if they don't have the full 20% deposit. Accumulating the deposit is now the key stress point.
BOUNCEBACK AFTER LOCKDOWN
Monthly mortgage borrowing shot up +57% in May compared with the lockdown month of April - but the figure of $4.3 bln advanced was still down by about a third compared with the same month a year ago.
SMALLER TRADE DEFICIT
Plunging imports are behind the biggest improvement in our annual trade deficit since 2014. Statistics New Zealand says low levels of imports in April and May have caused our deficit to 'quickly shrink' to just $1.3 bln for the year to May. Imports were down -26%, exports however were down just -6%.
NO LONGER A GOOD INVESTMENT
NZ Refining's Marsden Point refinery is looking like it will be scaled back severely or even closed to manufacturing as the justification for major capital spending on technology can no longer be justified. These sorts of commitments need long profitable payback periods ahead of them and fossil fuel demand looks set to shrink significantly now. Proponents now need "someone else" to pay - because they can't justify it any longer.
INVESTOR CONFIDENCE HIGH DURING PANDEMIC
The FMA's annual Investor Confidence Survey (which was conducted between 5 and 14 May, during Level 3 lockdown) has found two-thirds of investors (66%) were confident in New Zealand’s financial markets, in line with 65% of investors last year. This year the proportion of investors saying they didn’t know about confidence in the markets shrank from 15% to 8%, indicating that New Zealanders are taking more interest to form a view. The proportion of investors very confident is now at an eight-year high of 10%. You do have to wonder about the quality of general financial literacy in these circumstances.
RISING YIELDS
After reaching an all-time low in mid-May, NZGB bond yields rose again in today's tender, the third consecutive rise. $1.05 bln was on offer over three tranches (April 2023/April 2029/April 2037) and overall bids totaled $2.7 bln. Only 58 bids were accepted of the 153 that were submitted.
FALLING CONFIDENCE
According to the Westpac-McDermott Miller Regional Economic Confidence survey, regional economic confidence fell for the second consecutive quarter in June, with most regions seeing double-digit declines. Confidence fell in nine regions, was unchanged in one, and rose in another.
AUSTRALIA UPDATE
COVID-19 infections are rising faster across the ditch. In Australia, there have been 7557 cases, +36 since yesterday in a rising trend especially in Victoria. Their death count is up +1 at 104 deaths and their recovery rate is back down slightly to 92%. There are now 529 active cases in Australia (+26).
GLOBAL UPDATE
The latest compilation of COVID-19 data is here. The global tally is now 9,405,800 and up +168,000 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 before the end of the week.) Total American cases have risen by +35,000 again today to 2,380,500. That is a larger-than-usual daily rise too. The number of active cases in the US is now 1,602,300 and up +25,200 in one day. US deaths now exceed 122,000. Global deaths now exceed 482,000.
GOING DOWN I
Australian job vacancies recorded their largest ever fall in the last three months and workers were laid off in record numbers.
GOING DOWN II
Compounding the income loss from job losses, average Australian household wealth fell -$9,982 or -2.3% to AU$428,585 in the three months to March 31 due to falling superannuation balances and share market losses. It was the largest wealth decrease since September 2011.
EQUITY MARKET UPDATES
At the end of the New York session, the S&P500 fell away and ended down -2.6% on the day. The Shanghai and Hong Kong markets are closed for the Dragon Boat Festival holiday. (Shanghai won't reopen until Monday, Hong Kong will reopen tomorrow.) Tokyo is down -1.3% in early trade. The ASX200 is down -1.6% and the NZX50 is down -1.1% in late trade.
SWAP RATES UPDATE
Swap rates were probably lower 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 down -5 bps to 0.88%. The China Govt 10yr is down -2 bps at 2.91%. The NZ Govt 10yr yield is lower as well, down -3 bps to 0.94%. The UST 10yr is also lower, down -5 bps to 0.67% as the bond market also signals risk-off.
NZ DOLLAR FALLS THEN HOLDS
The Kiwi dollar dropped sharply overnight following the combination of the RBNZ OCR signal and the global risk-off tone, to 64.1 USc but has held that level in local trade today. Against the Aussie we are marginally firmer at 93.5 AUc. Against the euro we are softer at 57 euro cents but that too is a slight firming from this morning. That means the TWI-5 is lower at 69.
BITCOIN LOWER
The price of Bitcoin is a lot lower today, down -3.8% from yesterday 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
Select chart tabs
50 Comments
Air NZ has $5 billion tied up in its airplane fleet. At cost less depreciation
With 90% of its fleet moth-balled in a boneyard out the back of Alice Springs what value are they today? Watch carefully their annual financial accounts. If the auditors do their job properly those assets are no longer worth $5 billion which will result in a considerable enforced non-cash write-down in the value of those assets. How much? Anybody's guess. $1 billion this year, $2 billion next year
After reaching an all-time low in mid-May, NZGB bond yields rose again in today's tender, the third consecutive rise. $1.05 bln was on offer over three tranches (April 2023/April 2029/April 2037) and overall bids totaled $2.7 bln. Only 58 bids were accepted of the 153 that were submitted.
Interestingly, interpolated mid IR swap yields traded deeply negative to all three tendered bond yields.
23s yield 0.327%, swaps -9.51bps
29s yield 0.8233%, swaps -16.25bps
37s yield 1.2546%, swaps -21.37bps
The demand to receive fixed must be outstanding.
Someone commented re Queenstown similarly this morning! A worldwide phenomenon then...
"For many local residents who have had to put up with all the externalities of unfettered mass-tourism it will probably make a welcome change. But for those whose jobs, businesses and rental income depend on tourism, the pain has only just begun.
A worldwide phenomenon then...
Kyoto in Japan had become a zoo with all the foreign tourist horders, but I hear that it's not gone back to its quiet, tranquil, and majestic beauty. Of course, the economy will be suffering. Countries such as Vietnam and Thailand are also doing it tough because of the lack of foreign tourists.
"NZ Refining's Marsden Point refinery is looking like it will be scaled back severely or even closed to manufacturing as the justification for major capital spending on technology can no longer be justified. These sorts of commitments need long profitable payback periods ahead of them and fossil fuel demand looks set to shrink significantly now."
Its somewhere close to the definition of madness we are building a cycle bridge to the North Shore but we cant invest in a strategically important refinery.
Take your comment as a challenge - $360m involving destruction of homes for a cycleway that will be used by a couple dozen on a wet day being given priority over a port that reduces the distance ships travel and requires little dredging compare to alternatives to cater for modern large ships. That is madness. I'm trying to think of a worse example. Can anyone assist?
The simple answer is to suspend all further development at the Port of Auckland, divert the funds to Northport, and progressively develop Northport with that capital. It is a nonsense to claim that PoA would be closed, picked up, lock-stock-and-barrel and transferred to Northport.
You don’t think being able to easily walk and cycle between two of the countries most populated areas is more important than propping up the oil industry? God help the planet!
I would argue the best thing we can do is invest in not using oil rather than invest in refining it.
The same feeling with AJ hackett who has profited beyond handsomely for years and years, then you look at a charitable trust like Ruapehu Alpine lifts that NZers actually use and is on its knees. Madness.
This government is dangerously incompetent and National wouldn't fare much better. David Seymour is the only sensible person in Parliament.
I'd missed that this was a loan to RAL from the PGF.
Guess they'll be redoing the numbers on this.
https://www.stuff.co.nz/waikato-times/news/taupo-times/104796432/mayor-…
In other news friends are starting to report the inevitable slowdown in business. One veterinarian reported the clinic is now operating at about 60% of pre Covid revenue and a good deal of clients mentioning wage or job cuts. My pilates studio closes end of June, another victim of the inability to trade for a long period.
I'm thinking the slowdown is already starting in earnest. Another two months of decline and OCR is almost certainly going to be cut again.
My 22 year old son has been out in the Auckland cbd two Saturday evenings in a row and he said it was totally heaving both times.
I have been to a bar or pub 3 early evenings, week days, over the past 2 weeks. Seemed fairly busy at the establishments I frequented.
Was talking to one of the brewery guys from McLeods up at Waipu last night, he said the last few weekends it has been like mid January up there and normally they shut shop this time of year because it's so quiet.
Seems people are getting out and about and making the most of the great place we live.
Probably the answer to that question is not much.
I reckon tho that reducing mortgage rates by pushing down the govt curve is, in the next year or so, going to be the difference between a lot of folks sinking or keeping their heads just above the water.
For now we are still seeing the effects of this biblical spend the govt has made on furlough payments. When wages start to drop and more jobs are lost every penny saved is gonna help.
Not sure how this jives with Auckland council raising rates again but that's another topic for another day.
Factoid for today. Average vet in NZ in a major town (non farming) with 10 years experience makes about 100k per annum. Pre Covid wages should add.
This is a lower wage than a UK or US vet would have started on out of college a decade plus ago.
Not a bad wage but 7 years at uni for the qualification. Not exactly a minter of a profession.
Sunny ole Auckland. Im guessing nationally the number lower ? 100k is small animals (dogs n cats) in central Auckland.
As you are probably aware but others may not know, Govt data suggests 76k as a national average with 5 years experience.
Auckland has higher wages apparently. Presumably to reflect the cost of living...
Neswsflash: (ding ding ding ding ding)
4998 !!!!!!!
It's been weeks and weeks since under 5000. I have read so many pathetic and hateful comments of how the rising number of rental listings was proof of a collapsing economy... well not any more.
PS the number will bounce around and in all likelihood get back over 5000 for a time. Before you jump to judgement this is all very normal.
Pathetic and hateful?
I was reporting a trend, because I am interested in economic trends.
Yes it's now moving a bit in the opposite direction.
I never said it was proof of a collapsing economy, but maybe someone else did.
I would be surprised if it doesn't rise up significantly again.
Anybody not just a mantra-chanter but really wanting to learn about the predicament underwriting everything from waste to GDP to refineries:
Does anyone know? Why are quarantine cost so much more in NZ, whose is taking an overhead charge, where is the money going?
Auckland: $nz 6,200 per person.
Melbourne $aud 2,000 per person.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12339580
The first 40 days of quarantining and isolating all people arriving from overseas amid the Covid-19 pandemic has cost almost $50 million.
With 7755 people being housed and monitored in hotel rooms over that period, from April 10 to May 19, the average cost is about $6200 per person.
https://www.smh.com.au/politics/victoria/hot-hotel-covid-19-patients-mo…
More than 18,500 people have now spent a mandatory two weeks in a room at one of the quarantine hotels.
Federal Health Minister Greg Hunt on Thursday said Victoria's hotel quarantine system "could be improved" and was deficient compared with other states.
The hotel quarantine program has cost Victoria upwards of $36 million since it began in late March, with every person's stay in the hotels – many of which are five-star – costing $2000.
The Age has learnt that guests who test positive for the coronavirus while staying at one of the quarantine hotels are, in most cases, taken by ambulance to a CBD hotel, where health staff from one of the state's major hospitals care for them.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.