A review of things you need to know before you go home on Friday; no retail changes today, employment confidence stays low, Oceania seeks $125 mln, AirNZ covers cash burn, bond yields stable, NZD firms, & more

A review of things you need to know before you go home on Friday; no retail changes today, employment confidence stays low, Oceania seeks $125 mln, AirNZ covers cash burn, bond yields stable, NZD firms, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
None here either, so far.

DAYLIGHT SAVING TO START
Daylight savings starts again early on Sunday morning. Clocks will go forward by one hour at 2am on Sunday 27 September and continue until Sunday 4 April 2020. This will distort the time difference between us and those states in Australia for a week because Australian daylight saving doesn't start until the first Sunday in October.

LOOKING TOUGH AHEAD
Confidence in the labour market was broadly unchanged, albeit at a low level, in September. The number of respondents looking for work has increased over the last three months as the Covid-19 wage subsidy has expired. A sharp rise in the jobless rate is ahead of us.

ANOTHER CORPORATE GOES TO THE BOND WELL
Oceania Healthcare is looking to raise up to $125 mln of secured unsubordinated fixed rate bonds in a new seven year issue. It will be an offer open until October 9. Pricing will be based on the seven year swap rate on that date plus a margin that will be determined in the bookbuild process.

IIP DETAIL
Stats NZ released some interesting detail about our international investment situation as at March 2020. Of New Zealand’s $301.7 bln total investment abroad, 65% was in the USA, Australia, and the United Kingdom, 9% was direct investment, 50% was portfolio investment, 17% was other investment, and 23% was financial derivatives and reserve assets. Of the $481.0 bln total foreign investment in New Zealand, 58% was from Australia, the United Kingdom, and the USA, 25% was direct investment, 50% was portfolio investment, 17% was other investment, and 7% was financial derivatives.

CASH BURN CONTINUES
The cash burn at Air New Zealand (which is majority owned by the NZ Government) is rising and requiring them to start drawing on the $900 mln Crown Standby Facility for liquidity support. The national carrier is a long way from returning to either profitability, or normal operations. It has parked up 12 of its largest airliners, some now in deep desert storage. Without the Government support it would clearly be trading while insolvent. The chances of them ever repaying the $900 mln does seem remote at present. More here.

CONFIDENCE LEAKS AWAY
In South Korea, consumer confidence is falling again and that is from a low base to start with. It is a worrying sign for them.

GOLD PRICE EVEN SOFTER
The gold price closed in London at US$1862/oz and down -US$11 on the day (-0.5%). It rose +US$7 in New York to close there at US$1868. But in open trading on Asian markets it is now slightly firmer at US$1867. Silver has fallen -6.6% today.

EQUITIES UPDATE
At the close on Wall Street, the S&P500 ended up +0.3% (after yesterday's -2.4% fall). In the four weeks of September, the S&P500 capitalisation has lost -US$675 bln, -US$711 bln, -US$177 bln, and so far this week -US$602 bln. It is heading for at least a -US$2.1 tln retreat, or -7.2%. Shanghai has opened up +0.3%, Hong Kong is up +0.6% and Tokyo has opened up +0.7%. The ASX200 is up +1.6% in afternoon trade on the back of banks (because they smell success in their campaign to rollback responsible lending rules issued after the Hayne Report). That should be enough to erase all the prior losses for the week. The local share market however has done much better. The NZX50 Capital Index is up +0.6% and is heading for a weekly gain of +1.0%.

SWAP & BOND RATES STOP FALLING
We don’t have the final data for today yet and if it is significant we will update it here. The 90 day bank bill rate is unchanged at 0.30%. The Australian Govt ten year benchmark rate is unchanged at 0.87%. The China Govt ten year bond is up +2 bps at 3.12%. The New Zealand Govt ten year is up +1 bp at 0.47% and above the earlier RBNZ-recorded fix of 0.45% which is a record low. And the NZGB five year is still negative at -0.06% pa now. The US Govt ten year is unchanged at just under 0.68%.

NZD FIRMER
The Kiwi dollar is marginally firmer at 65.5 USc. Against the Aussie we are also firmer at 92.8 AUc. Against the euro we are firmer at 56.2 euro cents. That means our TWI-5 has eased up to 69.2

BITCOIN HIGHER
Bitcoin is up +3.9% to US$10,705.

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 »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
End of day UTC
Source: CoinDesk

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.

18 Comments

One highly controversial proposal among many to reduce obesity being discussed in the UK is around introducing 'junk' taxes to ensure the price of poor dietary choices reflect the 'true cost' to the taxpayer. Should NZ consider something similar since we already impose high taxes on alcohol and cigarettes to dissuade consumption?

Numerous studies link junk foods to depression due to the chronic inflammation such foods cause in the body, among other reasons.

There's more in this for our horticulture sector policies if we aim for a net-zero revenue by putting all the proceeds from these taxes into reducing consumption taxes on fruits and veggies instead.

Brilliant idea !!

In principle I'm for that kind of thing - as we have a state funded healthcare system, it makes sense to target taxes at things that are likely to increase costs for that system. However, looking at the UK's different taxes on similar foods - cooked vs uncooked foods, biscuits vs cakes etc, it looks like a nightmare to administer. I'm confident that we would fall into the same trap here in NZ, were it to be introduced.

Diddling with GST will, quite simply, foobar it. My takes (plural) here and here. Just don't. Note also that alcohol and baccy are Excise Duties, not GST.....

"The New Zealand Govt ten year is up +1 bp at 0.47% and above the earlier RBNZ-recorded fix of 0.45% which is a record low."

33s offered at 60bps this morning, lowest I've seen it in several months. Yield curve is collapsing.

Aussie govt loosens up on lending:

Responsible lending laws that fuelled a bitter court fight between the corporate regulator and Westpac will be scrapped for banks, which will be subject to less onerous credit rules to encourage the flow of loans and boost the economic recovery from the COVID-19 recession.

https://www.afr.com/policy/economy/responsible-lending-laws-to-be-axed-2...

I wonder where this bill has got to – changing 10 years to 20 years superannuation requirement - haven’t heard much since the first reading back in July.

https://www.stuff.co.nz/national/politics/122014823/parliament-supports-...

With the mountain of debt being piled up I would have thought this a quick and easy way to save a few $$’s – along with applying a large dose of common sense.

10 years – absurd nonsense – once again, migrants just can’t believe their luck.

DC: you might like this

Extract from an email from a long time Melbourne client today checking out how I'm going

I am not trading the futures anymore but just Dabble in stocks I like. The only other person I read daily apart from your bulletins for information now is David Chaston. You put me on to him years ago. He is better than the Financial Review for a summary of what is going on in the world

:)

"New Zealnders have no appertite for a capital gains tax" Ok, can we have a referendum on capital gains tax? I dare you......

If it excluded the family home, and it's benefits were outlined in a balanced manner, I reckon it would be a close call.

Theres more poor people than wealthy people in NZ. I reckon it would pass.

Australias is simple. Unless in a company, any CGT is at marginal tax rates, with a 50% discount if the asset is held for more than 12 months. Doesnt apply to family home.

Yes, excluding the family home, only on the investment properties.

at the same time hold one on whether or not unemployed people turning down a job picking fruit should continue to get their jobseekers or not == i dare you back pretty sure that one will not be close !

new form of democracy - pure referendum - bang goes light rail again -- an jacindas dodgy ihumata deal !

Great idea - tax policy by referendum . What could possibly go wrong ?

Checking Auction Result of B&T of 22 Sep and price jump is unbelievable. In Pakuranga area houses that would go 900000 or if market is up for a million going for 1.2million or for 1.3 million.

Never seen this jump fron already high price. RBNZ and Government turning blind eye under panademic excuse.

Good for people owning but definitely bad for FHB who may have to even stop dreaming of a decent house unless wants to pay a million and be in debt for a pigeon hole.

Surprisingly no one raising the issue though bigger the bubble than last year.

I'm one of those skeptics who has been insisting for years that the party has to end, while the party has stubbornly refused to end.
I also have my own biases as someone of typical FHB age who is, looking at things rationally, astonished by what is considered a completely normal and rational debt burden to take on.
I've had to acknowledge, in recent months, the resilience of the local property market, and the real reasons why it is so. They aren't trivial, they're real reasons, and I've had to change my opinions accordingly.
Nonetheless, this latest surge has actually reinforced my belief that there has to be a crash. It's too much, too fast, too much in the face of fundamentals. Prices holding in the face of recession and mass unemployment, I could rationalise as a response to low interest rates. But now it's froth and FOMO. In the weeks, the very few weeks before subsidies roll off.
Anyway, I make no special claims, I've been wrong before. But this feels like an irrational top. I'm about to learn something, either way.

Yes, I think we were lucky with the timing in several ways: March is the end of the busy tourist season, and we were several weeks into the University and school year, meaning most international students were here already. This coming summer will be crunch time for tourism, and March next year will be when universities will really start to feel the hit (as will accommodation services etc). Mortgage deferrals also run out then, and by that stage we will have had a year with very low net migration. Unemployment will also likely be at its highest. Wild card is of course what the government will do to prop up property