What happened Thursday

A review of things you need to know before you go home on Thursday; many more retail rate cuts, business confidence up; cranes still up, swaps little-changed, NZD soft, & more

8th Oct 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 changes to report today.

TERM DEPOSIT RATE CHANGES
Rabobank trimmed its term deposit rates today. And in case you missed it yesterday, late in the afternoon both ANZ and the Cooperative Bank trimmed their TD rates. General Finance, and Heretaunga Building Society both also cut today.

BUSINESS CONFIDENCE UP
ANZ Business Outlook preliminary survey results for October show another widespread improvement in forward looking activity indicators - with some measures stronger than a year ago.

GOVT PROJECTS PROP UP CONTRUCTION INDUSTRY
According to today’s release of the 3Q 2020 RLB Crane Index®, there are currently 123 construction cranes working on key projects across New Zealand, marking a relatively small -4% decline in overall crane numbers in the main centers since March and the outbreak of COVID-19. But this masks a large reduction in private sector work which has been covered by a large rise in public sector work especially for hospitals.

AN UNCERTAIN OUTLOOK
The Warehouse Group released it unaudited annual result today, a week ahead of its official release. The $68 mln wage subsidy windfall it received from the taxpayer saved them from reporting a trading loss. The retail chain won't be paying a dividend this year and says it faces continued uncertainty around its trading outlook.

ANOTHER $650 MLN GOVT. BOND TENDER
Treasury tendered another $650 mln of bonds today in four tranches. They got bids totaling $2.365 bln, leaving a massive $1.7 bln unsatisfied. The May 2024 tender of $250 mln attracted $1.45 bln of bids and the 9 winners accepted a yield of just 0.01% pa. (30 bidders missed out.) The second tranche wasn't as heavily bid. It $250 mln offering brought only $560 mln of bids from 41 parties for the May 2031 portion. The 17 winners accepted a yield of 0.63% pa. The May 2041 $100 mln brought $260 mln in bids and the 1.18% pa yield was won by 12 of 40 bidders. There was also a September 2035 inflation adjusted offer of $50 mln. It was won at -0.42% pa plus inflation (yes, less than whatever inflation will be).

WHERE THE GAINS ARE
Updated RBNZ data shows that the value of all residential property in New Zealand stalled at $1.228 tln as at June 30, with zero rise since March. But it was up +8.5% from June 2019, or +$97 bln. The same data shows that in the year to March, investor rental property rose +9% but owner-occupied residences rose in value by only +3%.

PULLING HORNS IN I
The August level of building consents in Australia was flat year-on-year, masking a huge -18% fall in approvals for apartments and townhouses.

PULLING HORNS IN II
Earlier today (and after we published our 90@9 article), the US Fed released its August household debt data. Instead of the expected $14 bln rise from July, this debt fell by -US$7.2 bln, an unexpected -US$21 bln shift lower, and indicating American households are not helping their economic recovery by extra spending. The August level is only +0.4% more than the equivalent 2019 level.

GOLD PRICE LITTLE-CHANGED
The price of gold is now at US$1885/oz in early Asian trading, and up +US$5 from yesterday's equivalent price. That is +US$1 more than the closing price in New York earlier, and the same as the London afternoon fix.

EQUITIES UPDATE
On Wall Street, the S&P500 ended trading earlier up +1.7% when talks over fiscal relief got resurected. Shanghai is still closed. Hong Kong is %, and Tokyo is up +0.5% in their opening session. The ASX200 is up +0.9% in mid-day trade. The NZX50 Capital Index is up +1.6% near the close.

SWAP & BOND RATES RISE
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 today to 0.28%. The Australian Govt ten year benchmark rate is up +3 bps at 0.88%. The China Govt ten year bond is unchanged at 3.16%. Meanwhile, the New Zealand Govt ten year is up +3 bps at 0.55% but below the earlier RBNZ-recorded fix of 0.56% (+6 bps). And the NZGB five year is up +6 bps and is now at +0.07% pa. The US Govt ten year is up +4 bps from this time yesterday to just under 0.79%.

NZD SLIPS AGAIN
The Kiwi dollar is down almost -½% from this time yesterday at 65.5 USc and a drop similar to yesterday's. Against the Aussie we are even weaker at 91.9 AUc. Against the euro we are lower at 55.7 euro cents. That all means our TWI-5 is down at 68.9.

BITCOIN HOLDS
Bitcoin is marginally firmer in today's trade, now at US$10,630. The bitcoin rate is charted in the exchange rate 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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21 Comments

by Advisor | 8th Oct 20, 4:21pm 1602127300

Energy storage lakes beyond full in the Otago region, lower than historical average elsewhere.

https://www.transpower.co.nz/system-operator/security-supply/hydro-info…

by Masher | 8th Oct 20, 4:24pm 1602127461

More QE needed:

https://www.bloomberg.com/news/articles/2020-10-07/top-fed-economist-sa…

Just for some context, 3.5 trillion seconds is 111,000 years.

by bw | 8th Oct 20, 4:36pm 1602128192

I remember the days when a trillion dollars was a lot of money.....and then, it wasn't.
https://tinyurl.com/y4s4j9lj

by Apex Andy | 8th Oct 20, 4:39pm 1602128356

At the end of Orrs tenure a trillion dollars should buy a nice unit in Papatoetoe. How many houses has he got again?

by bw | 8th Oct 20, 4:45pm 1602128758

Actually, it won't buy anything. That's the irony. Who is going to take it in exchange for something of real value - like, say, a loaf of bread? (As Germany found out to their horror a century ago, and swore they would never let it happen again)
That's what happens. The nice unit in Papatoetoe is 'worth' both a trillion dollars and nothing at the same time because the medium of exchange has been destroyed.

by powerdownkiwi | 8th Oct 20, 4:48pm 1602128925

Yep. I've got the Mona Lisa in my backpack but I haven't eaten for ten days.

Will swap for one burger, fries appreciated if you can manage it.

PS - you might be able to use the frame for something....

by Noncents | 8th Oct 20, 4:57pm 1602129479

"The nice unit in Papatoetoe is 'worth' both a trillion dollars and nothing at the same time"

Schrödinger's house

by bw | 8th Oct 20, 5:02pm 1602129766

Yes. And even he's not brave enough to peek inside to see if it's dead. But the RBNZ box is getting a bit whiffy.....

by J.C. | 8th Oct 20, 4:59pm 1602129574

At the end of Orrs tenure a trillion dollars should buy a nice unit in Papatoetoe. How many houses has he got again?

Or maybe 10 bitcoin.

by Masher | 8th Oct 20, 5:13pm 1602130425

Which will work out to be 2 digibyte right?

by JimboJones | 8th Oct 20, 7:44pm 1602139452

Plenty of countries gave the printing presses a good thrashing during the GFC without creating hyperinflation

by powerdownkiwi | 8th Oct 20, 8:37pm 1602142623

Of housing prices, they did.....

by JimboJones | 8th Oct 20, 8:45pm 1602143125

True that. Doesn’t help them get their CPI linked bonuses though.

by Audaxes | 8th Oct 20, 4:46pm 1602128764

Earlier today (and after we published our 90@9 article), the US Fed released its August household debt data. Instead of the expected $14 bln rise from July, this debt fell by -US$7.2 bln, an unexpected -US$21 bln shift lower, and indicating American households are not helping their economic recovery by extra spending.

That’s not all; in terms of credit demand, the only one truly taking advantage of low rates in reality has been the only one which really can. Another key piece of evidence for the interest rate fallacy, basically the sole source of credit growth (which, obviously, doesn’t even come close to making up for this credit shortfall even factoring a reasonable baseline that excludes the pre-crisis bubble levels) has been the federal government (as well as other sovereign issuers around the world).

Banks won’t lend to anyone else, but “somehow” they sure do love their UST’s (yet we’ll continue to hear about how there’s “too many”). Balance sheet recession? No. Liquidity/money problems? You betcha.

And it becomes a self-reinforcing cycle, the very one the central bank exists to break the economy and money/financial system free from – if instead of fairy tales about money the central bank actually did money in the way the textbooks all claim.

With federal government borrowing the largest additional credit source to the economy, it is also the least economically efficient method which only adds more to negative factors piling up against legitimate growth.

The more only the government can borrow, the more only the government does borrow. And the more the government does borrow, the harder it is to get the economy growing (sorry, Krugman). The more difficult it is for meaningful growth, the more banks will only lend to the government. Link

by Apex Andy | 8th Oct 20, 5:04pm 1602129879

Is Orr actually a cosmologist? His policies seem to closely follow the big bang inflation theory?

"According to the standard Big Bang model, the universe was born during a period of inflation that began about 13.8 billion years ago. Like a rapidly expanding balloon, it swelled from a size smaller than an electron to nearly its current size within a tiny fraction of a second."

by sharetrader | 8th Oct 20, 5:47pm 1602132477

NSW starting to see the beginnings of a couple of clusters
NSW records eight cases of COVID-19 as Premier's patience on business compliance wanes
NSW has recorded eight cases of local transmission as Premier Gladys Berejiklian's patience for businesses that do not have COVID-safe plans wears thin.
Ms Berejiklian said the government was considering making the government's QR code scan in for venues compulsory, after a positive case visited a restaurant that had not collected the details of all walk-in diners.
NSW Premier Gladys Berejiklian warned the government may mandate the use of the Service NSW QR code.
"Everybody has had ample notice to register to get information with those COVID safe plans in place, and when organisations go beyond complacency and don't fulfill those obligations, well, they let everybody down," she said.
The Premier said she has received advice from health authorities that some businesses are not properly implementing their COVID-safe plans, and those found doing the wrong thing would face "the full force of the law".
looks like those flying to NSW on the 17th better have the time and money for isolation when they come back
https://www.theage.com.au/national/nsw/positive-news-on-local-covid-19-…

by JimboJones | 8th Oct 20, 7:41pm 1602139293

Let’s hope they don’t get it as bad as Old North Wales did.

by sharetrader | 8th Oct 20, 8:09pm 1602140978

the priemer of NSW bleats and moans about the other states (labour held) but apart from VIC they dont have community transmission, so NSW and VIC hold back the whole of aussie.
the good news looks like the travel bubble with the cook islands is going ahead so very very unlikely we will let NSW people in without quarantine, but we will get bubbles going with the other states shortly as well, namely WA, OLD SA and NT

by JimboJones | 8th Oct 20, 8:49pm 1602143382

Yet another poll with national doing badly. I’m surprised as I thought Judith was doing surprisingly well. Really the only result of interest is the greens; the only way labour could lose power is if the greens don’t get 5% (and Chloe doesn’t win Auckland city)

by sharetrader | 8th Oct 20, 9:12pm 1602144751

how would that happen , on the poll labour has 47% and national and act only combined only has 40% that means labour would govern on their own if the greens do not make it as they would still have 7% more of the vote so more Mps. if greens dont get in, those MPS are given to the remaining parties in proportion to their party vote so labour would pick enough seats at the moment to govern on its own.
i heard national and act spreading that scenario the other day so had to reread the MMP rules as i thought do i not understand MMP but sure enough its national still working in a FPP system spreading misinformation again
https://elections.nz/democracy-in-nz/what-is-new-zealands-system-of-gov…

by JimboJones | 8th Oct 20, 9:37pm 1602146242

Basically the greens have to 5 and then National need to do much better than they’re polling at. I get the feeling they will do better and labour supporters may be complacent and not vote. But it’s still unlikely. But if the greens get 5% then it’s all over.