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UST auction demand softens; Canadian inflation up; Emirates airline running out of cash; iron ore prices rise; Australia cancels China's local B&R deals; UST 10yr at 1.57%; oil down and gold up; NZ$1 = 72.1 USc; TWI-5 = 73.9

UST auction demand softens; Canadian inflation up; Emirates airline running out of cash; iron ore prices rise; Australia cancels China's local B&R deals; UST 10yr at 1.57%; oil down and gold up; NZ$1 = 72.1 USc; TWI-5 = 73.9

Here's our summary of key economic events overnight that affect New Zealand with news of increasing signs of drift rather than progress.

The large US$29 bln US Treasury 20yr bond auction today went at a yield of 2.144% pa, down from the 2.29% at the March auction for this same bond. US$62 bln was bid and that was the lowest level of support since the 20yr term was relaunched in May 2020 after a 34 year hiatus. Market observers called today's auction evidence of struggling demand.

US mortgage applications rose last week, but are still running -10% lower than for the same week a year ago. American mortgage interest rates are starting to dip again.

In Canada their inflation rate is rising, now at 2.2% but the gain was not as much as was expected.

The Canadian central bank held its policy rate unchanged in an overnight review, still at 0.25%. But they did taper their bond buying, reflecting "progress made in the economic recovery". And markets now expect them to start raising their policy interest rate in the second half of next year.

In the Middle-East, Emirates airline may need to raise more cash this year, possibly through another equity injection from the Dubai government, if demand for air travel does not pick up soon, it confirmed overnight.

The spot price of iron ore surged higher yesterday and today, resetting at its highest in more than a decade, on strong Chinese steel mill margins and continuing supply concerns from Brazil. China is frustrated at "being milked". Coal prices are rising in China too. China sees these rises and pressures are short-term however, and expects to cope with them without too much problem.

Meanwhile in Australia, Canberra has torn up Victoria’s controversial Belt and Road agreement with China, saying it falls foul of the country’s national interest, in a move that will further inflame tensions between the two countries.

And staying in Australia, retail sales were up +2.5% in March from the same month a year ago, and rising at a rate slightly above what was expected. This is a bounce back from the February snap lock downs.

On Wall Street, the S&P500 is staging a small recovery after a string of declines. It is up +0.7% in early afternoon trade, but this is really just more drift. Overnight, European markets also rose about +0.7% on average. Yesterday, Shanghai ended unchanged, Hong Kong ended down a chunky -1.8%, and Tokyo was down another -2.0%. The ASX200 ended yesterday down -0.3%, and the NZX50 Capital Index ended down -1.1%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 143,257,000 have been infected at some point, up +953,000 in just one day, largely driven by rises in India where new lockdowns and super spreading events are underway. Turkey and Iran have awful problems too. Global deaths reported now exceed 3,049,000 and up +15,000 in one day. Vaccinations in the world are also rising fast, now up to 935 mln (+14 mln) and in the US more than half of their population (212 mln) have had at least one dose as they keep up their fast rollout. More than a quarter have been fully vaccinated. The number of active cases there is unchanged at 6,860,000 with as many new infections as recoveries.

In New Zealand, 183,400 vaccine doses have been given, but only 0.9% of our population is fully vaccinated. This is on the official target. In Australia, they have given 1.7 mln doses, but it is unclear what proportion have been fully vaccinated there. But they are miles behind their original target, and well behind their revised targets.

The UST 10yr yield starts today at 1.57% and a small +1 bp rise. The US 2-10 rate curve is little-changed at 142 bps. Their 1-5 curve is also stable at +74 bps, as is their 3m-10 year curve at +156 bps. The Australian Govt 10 year yield is little-changed at 1.69%. The China Govt 10 year yield is also holding at just on 3.17%. But the New Zealand Govt 10 year yield is now at 1.61% and -4 bps lower.

The price of gold starts today at US$1794/oz and that is up +US$16 since this time yesterday, and that takes it to its highest level since late February. Silver is rising too, but only to a one month high.

Oil prices are much softer, down -US$1.50 at just over US$61/bbl in the US, while the international price is just under US$65/bbl. There are rumours of an imminent deal for Iran to export crude oil again.

The Kiwi dollar opens today at just under 72.1 USc and firmer from this time yesterday and in fact its highest in more than a month. Against the Australian dollar we are marginally firmer at 93 AUc. Against the euro we are also a little firmer at 59.9 euro cents. That means our TWI-5 is up at 73.9 and also a one month high.

The bitcoin price will start today at a marginally lower level than this time yesterday, at US$55,852 and a mere -0.4% lower. Volatility in the past 24 hours has been moderate at +/- 2.5%. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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57 Comments

18
up

David Parker has gone a bit quiet on his belt and road aspirations. Lets hope he stays that way.

Australian government has moved on that. What though remains is the glaringly stupid reality that Darwin, their most strategically located port, is leased to Chinese interests.

That lease is possibly being rescinded (https://www.abc.net.au/news/2021-03-17/government-urged-consider-reclaim...)

BTW, "Sorry to read the New Zealand FM has downgraded NZ role in 5 eyes arrangement. And they upgraded FTA with China in February while China was imposing sanctions on Australia. Used to be our best mates. Not now." Alexander Downer

https://twitter.com/AlexanderDowner/status/1384627862133739521

For those suffering short term memory loss.
Remember a year ago.

Christchurch’s leading Chinese diplomat is warning the Government’s travel ban from China could damage trade and tourism in the future.

https://www.odt.co.nz/star-news/star-christchurch/warning-chch-businesse...

But Chinese Consul General in Christchurch Wang Zhijian said the ban was an “overreaction” - which could harm business between the two countries in the future.

“We believe this kind of ban will not do good to the relationship between China and New Zealand,” he said.

“It could not only hurt the New Zealand economy but also the sentiment Chinese people hold towards New Zealand.”

Maybe it really is that the FM has gone so woke, she is blinded to all other stimulus, data & information.
https://youtu.be/Nr71Mw7wD4E

ANZAC Day is becoming very important now.

Well guess from that particular perspective, NZ can only then be seen as ungrateful and uncooperative for not allowing CV19 carriers from China to disseminate throughout NZ and decimate our health system and worse, much worse.

11
up

Re. Australia cancelling international agreement - one agreement with Iran, one with Syria and two with China torn up. Interesting message being sent.

Interesting triad there - pressure from the US?

The Quad. Recent meeting, high level, USA, India, Japan, Australia. Much objection, that that should even happen, expressed by the CCP.

At the same time NZ finds itself under scrutiny internationally over recent statements by this government said to be at odds with the longstanding five eyes security arrangement. The statement by our foreign minister was though, hardly inflammatory. What it evidences unfortunately is just how vulnerable NZ is as small remote nation, when/if the big players seek a convenience with which to play to play tug of war. There has been on this site an ever increasing view being expressed, with the obvious exception of Comrade X, that NZ needs to be more cautious, alert to losing its independence to influences forthcoming from China. Indeed the groundswell would indicate that is at an unhealthy level now. If that is so, it should not be overlooked that the pathfinding for our situation was keenly promoted by the previous government.

We live in changing and interesting geopolitical times.
Lots of little events occurring such as Mahuta's recent comments.
The big picture is clearly China is looking to increase its international presence and influence - such as its belt and road initiative - as its economy becomes more dominant .
I can't help but look at the similarities with Japan and USA leading up to WW2.
Currently China seems to be wagging this through economic and political persuasion - and hopefully it remains as such - but it is increasingly becoming one where nations are expected to pick sides.
New Zealand is clearly trying to walk the middle ground. The reality is that this economic and political power balance is going to affect us and one only needs to look to its increasing influence in the Pacific nations as an example of this.

How about this then. “ Their economic purpose was to seize raw materials, markets and labour power; their political purpose was to free the Pacific of British and American domination and to establish an Asiatic sphere of co-prosperity.” Written 1943 by Jack Belden following his retreat with General Stilwell through Burma to India. Their then applied to Japan, today it applies to China one could suggest.

Foxglove
I’m sure that there are equally similar and valid statements from a 1930s Japanese and current Chinese perspectives regarding the USA (and the West).

those statements about 'prosperity' miss a big bit. the bit about "under our control". Today it is china, back then it was Japan. The advantage of the US it is a democracy and it must uphold at least the appearances of democracy and allow us ours, China observes no such restraint.

When the #US invaded #Afghanistan, #Iraq and #Syria, did it think about respecting their sovereignty and territorial integrity? Link

Fair comment Audaxes, but there is a huge BUT here. the ruling Taliban were not about to hand over Bin Laden, when they figured he was hiding there. I don't know, but I suggest the US even possibly asked them to, but were rebuffed, as the Taliban, as fundamentalist Muslims had elevated the US to 'Great Satan' status, and would not be able to be seen doing business with them. So in effect, through sheltering the architect of 9/11, and providing him with a base of operations, the Taliban were held to account as complicit in the attack.

14
up

NZ has already chosen China - as NZ economy depends on them.

NZ economy depend on China and Housing. Jacinda Arden has no choice but bow to them and we thought Bill English was ready to......with China but reality is ........

https://www.nzherald.co.nz/nz/nz-china-relations-jacinda-ardern-faces-bi...

Jacinda Arden first term it seem had Winston Peter - for good or bad and even Green party to talk to but this time on their own are clueless what they want and where they stand.

Maybe NZ got what they deserve so next time they take voting seriously.

China depends on the rest of the world for food - its a two way street and China knows it. "Maybe NZ got what they deserve so next time they take voting seriously." yes we finally smart enough to get rid of the deadwood Winnie and his dregss so some big decisions could be made.

Mind reading.
Look at facts.

China picks commodity spec only, NZ can rationalise this as food aid.
Look at Oceania, spec product, made with imported China ingredients.

Otherwise explain Fonterra being swindled 3 xs
San Lou
Beningmate
Fonterra Farms.

Look at Synlait.
Most all of their formula (in China) brands failed

A2.
Massive share losses as the informal (buy from ANZ supermarket & post with till receipts to China) sales channel failed.
& pulling down Synlait further.

P.S. where are all the refugees flooding into China for a better life?

At least A2 has bought Mataura Valley Milk off the Chinese. Well done there. Hopefully the price paid was not affected by fraud.

11
up

I'm surprised this isn't getting a lot more coverage in NZ as it is big news in the UK and Australia. It's a massive geo-political change of direction by NZ and there will be consequences - both positive and negative.

I'm intrigued there's been little to no comment or analysis on this site (did I miss it?) on the government's plan for reforming the health sector - the biggest structural changes in health care in a generation. This on top of merging the Polytechs, the proposals to address the 3 waters. Quite a centralising thing going on ... ? Can't say changes in the health sector aren't needed, though.

We are 'past peak' in terms of what we can do. I see this as being past an energy (and therefore work do-able) peak. Thus what we could do, replicate, compete wastefully etc, is being curtailed. The lid is lowering, as it did on Rome (Diamond, Tainter and Wright). As they did, we have to consolidate (while refusing to acknowledge the problem).

You rightly address other spheres - the question is, however, being addressed in money/budget terms. Really, it's a resource/energy allocation issue, and we're heading down a triage track. Appropriate, re health....

Of interest, a quote last year from James Renwick that I only just came across;

Renowned weather and climate researcher James Renwick, professor of physical geography at Victoria University, highlighted the effects of climate change on Kāpiti Coast. As a coastal region it would be particularly affected by rising sea levels, the degree of which depended on what would be done through human intervention.

“Every 10cm of sea level rise will triple inundation occurrence,” he said. “There will be damage to houses, roads and train lines.”

Higher temperatures would warp train tracks and damage road surfaces, and put the viability of horticulture and agriculture at risk.

What could be done? Retreat from the coast, improve drainage and change land uses, he suggested.

He said growth should be halted in all its forms. “Growth is just not sustainable in the long term.”

There would be more coastal inundation, floods, heatwaves and drought.

“We are entering a climate not seen for thousands of years. Everything is changing.”

https://otakitoday.com/summit%20offers%20climate%20challenges

Meanwhile, the Council event that he was speaking at is planning in their LTP for another 200,000 residents over the next decade.

The interesting thing Kate, is that while a local Council may declare or recognise a climate emergency, the reality reflected in their actions are that they don't really understand what it means or what to do about it. Except possibly to find ways to charge their rate payers more.

Or right in the face of that profound, pious proclamation invest in a new wide body jet airport, not even in their catchment area. Not even with consultation their own ratepayers. Go figure.

Centralising all sectors is this Govts aim.
Te Pukenga is 2 years in, with layers of senior management, and little change on the ground. Supposedly to provide better regional tertiary Ed, but still a focus on income producing international Ed.

3 waters is an area I am familiar with. Procurement and standardization of materials would be the main areas that need addressing. For example, many councils have their own proprietary style of cast iron surface boxes e.g. Napier is different to Hastings.

Some councils prefer mPVC pipe, others uPVC, some oPVC, is it dimensionally to Series 1 or Series 2? Sometimes Ductile Iron pipe is specified, other times it's Cement Lined Steel, other times it HDPE.

There's a council that still specifies AS4331 flange drill patterns on their bulk water mains, when the rest of the country has moved to AS4087, which means any project needs pipe fittings indented from overseas at 3x the cost of the fittings on the shelf in NZ. Often times the job is a rubber ring joint pipe system and the only flanges are on the scour/drain line, nope must be AS4331.

Interesting points Dan. I think the question is not Centralized vs Local. The question is the right mix of it. It is obvious that some stuff must be done at a National level and some stuff at a local level. But setting this up would require a highly competent team of people. As often, building up that team is where the failure begins. I know people directly involved with restructuring of polytechnics and all of them, from different Polytechs across the country have only very negative feedback about how the restructure is being done.

Definitely needs to be a balance. Central Government should set the rules, but leave it up to local authorities to manage within those rules. The Councils do have their procurement guidelines, but it's a very gray area.

For example, NZ Government Procurement Rules states any procurement over $100k should go through a competitive tender process, however some councils frequently give purchase orders to ratepaying manufacturers for product in excess of $100k value and then go to tender via GETS with materials as "Free issue by principal". I can understand keeping the ratepayer employed, but how is it a competitive tender process?

But on the other side of it, you have contractors who will deal with suppliers solely due to rebates, which can include trips to the Melbourne Cup and boxes of prezzy cards. It's not about cheapest price, but the best rebates. Particularly if a job is weighted heavily on non-price attributes.

Great examples. It's a sad indictment on the local government sector that they haven't pushed these sorts of infrastructure standardisation exercises themselves. In my area as well, it took central government to initiate the standardisation of common rules and formatting in RMA plans. The local government sector has been plagued by competition, individualism and hubris - all the while complaining they need more/new revenue sources.

basically Centralisation is the fall back to chasing an "economies to scale" type solution
which is a wet band aid at best ... Sectors like health will only ever be a bottomless pit

But, far better than acknowledging any confronting realities right ... like

we cant afford it
we dont live for ever
theres too many living too long and far too many people in general
throwing resources at the (elderly) is just stealing further from the young

theres too many living too long and far too many people in general

The real issue is how healthy the population is in old age - I so hope with a centralised system we put a much, much greater emphasis on preventative care. To me one of our biggest issues going forward is the diabetes epidemic;

https://www.stuff.co.nz/national/health/122849222/new-type-2-diabetes-dr...

Seems to be folks a living longer but wearing out earlier. Put that down to the hugely upped tempo life is discharged at nowadays and all the associated pressures. Think that condition even impacts more, outweighs the earlier generations having to absorb world wars and great depressions.

My apologies for living too long. And I'm enjoying life more than ever. For maximum utilitarian happiness we need to get rid of the miserable young.

LOL - yes, I'm noticing a lot of woke whinners out there.

ham 'n eggs,

Fine, but you now need to explain just how the 'elderly'(at what age does one qualify?)should be dealt with in the society you envisage. Would you refuse to offer a medical intervention to anyone over a certain age? What about those with health insurance?
You perhaps forget that 'the young' will themselves grow older.
Of course there will be serious issues to be faced with an ever increasing cohort of elderly citizens, but your 'final solution' to the problem is not one I find appealing. Will you elect to be euthanised at a particular age? Do you have older relatives and if so, how do you explain your views to them?

Here goes antz.
1. DHBs and PHOs gone. Great.
2. Health NZ. Won't lead to improvement unless execution lifts. Unlikely.
3. A proper funder provider split would help immensely.

Merging DHBs is hard enough.
PHO's are going to be difficult to replace, and with what?.They are doing a great job and have evolved over time to suit their local conditions, which was intended.
They also have assets like GP surgeries and others.They are integrated into the communities they serve and GPs would function less well without them..
GPs are shareholders in PHOs
What happens to these assets?, who or what will buy them? or will they just be nationalized?
Is Andrew Little (aka Heather Simpson).even aware of the legal and financial complexities of unwinding PHOs, has he any idea of the work they do in facilitating the functioning of general practice, how they are structured, who is going to do the work and admin they do?(Probably has Little or no idea, just has Big ideas).
He has admitted that he has not costed the reforms.
This is another Twyford moment, on steroids this time.(We'll build 100000 houses, never mind no builders, land materials or money, all detail to work out later).
Reforms of this scale are easy to dream, hard to pay for and never work out.
Justified by elimination of postcode lottery and reduction in bureaucracy ? pure fantasy and self delusional.

FYI https://dpmc.govt.nz/our-business-units/transition-unit/response-health-...

13
up

"Australia cancels China's local B&R deals"

This is a very bold step as will hit the dictatorial regimes below the belt as was a dream ambitious project of their Supremo and if that fails, he fails so will go all out to salvage it but many countries who did signed earlier now are able to see through the true intention of China and have either backed off or thinking of opting out.

Peace with Australia will take ages and NZ will have to take side and one side will be democratic western world vs dictatorial China and China with it's policy of throwing money in guise of development and economy in african countries, pacific islands and many small countries like NZ have postured a posistion of power that the government of the day will have to now do what their master command or face hardship and this is exactly what Jacinda Arden is doing for so called prosperity and fear that may lose all and who cares about souverignity.

I have the impression the NZ government are just completely lost and don't know where to turn. That's even more concerning. I'm in Australia and it's big news over here. There is a real sense that NZ is letting Aus down and it will affect our relationship.

In case you were living under a rock, the greatest debate about Bitcoin Vs Gold went down this morning between Michael Saylor and Frank Giustra.

http://webinar.danielacambone.com/#/client/DaniDebate

This will be off the radar for most Paccy. Looking forward to watching later. Giustra is a legend btw and an incredible businessperson in his own right. Would be great if NZ had homegrown role models like him.

Yeah you’re probably right JC. Without wanting to spoil it for you, I think Giustra was way out of his depth and his lack of understanding was evident. Michael is a genius and technologist who understands both sides of the argument. Enjoy

You mean 'if you were living under a rock'.

The rest of us couldn't give a rodent's behind. Compared to the 6-7 billion too many people on the planet, compared to the rate at which we are destroying it, compared to the debt-issued surfeit of forward bets on it - your 'debate' is completely irrelevant.

You’re like chaff in the wind. The iceberg is coming despite your pointless howling. For every one of you, there are billions that don’t care.

I can assure you that the billions of refugees the world over do care - they've already hit the iceberg.

Sorry I didn’t make myself clear. Billions of people don’t care about climate change, and overpopulation as power down hermit states every chance he gets. They only care if they can buy food next week or next year, as their currencies are collapsing.

fascinating
i wonder if they are will be still arguing about which is better when they are trading the last rat in the ghetto?

I thought this was a forum designed to help people make investment decisions (whatever they may be)? Instead it seems like a place where old elephants come to ruminate about the past, and die in their despair.

in that case, I've got a breeding pair of Ostriches you might be interested in?

I came here for help in making business decisions and I'm glad I did. When my TD matured, I purchased gold.

Physical I hope?? Not your keys, not your coins.

I come here to listen to people talking up speculative investment assets that they own. Homes and Bitcoin are my favourites.

Thank goodness for the rock Pacman.

Bit late for the morning news but I see the Church of Church has relocated to my region and is now doing his best to talk up my property value. Yay...?

https://www.oneroof.co.nz/news/39305