Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that German officials have signaled that Greece may have to restructure its debt.
This is the first official recognition that Greece's bailout plan is not working and it is reaching a point where it can't service its debt any more. See more here at Reuters.
The fear is that those who hold Greek debt will have to take 'haircuts', where the value of their bonds is rewritten down, forcing pension funds, banks and others to recognise losses on the debt.
All the bailouts in Greece, Ireland and soon Portugal are designed to fend off the spectre of debt restructurings.
Greek bond yields rose as investors priced in the risk of either a default or a haircut. Greek 2 year government bond yields hit 18.4%, while 10 year yields rose to 13.4%, meaning international bond investors think Greece is riskier than Bridgecorp...
Ominously, Spanish bond yields rose too.
Spain is the big Kahuna of the European Sovereign Debt crisis because its economy is much bigger than the first three PIGs (Portugal, Ireland, Greece). Spanish yields had been relatively stable through the latest Portugese crisis, giving some hope that the contagion would not spread to Spain. Spain has also been reassured by China that China would continue to buy its bonds. So a rise in Spanish yields is unsettling.
All this matters for New Zealand because further turmoil on global financial markets makes it more expensive and difficult to roll over our short term foreign debts (ie less than 90 days), which are currently worth around 50% of GDP. The IMF and others have warned we are vulnerable if there is another Lehman Brothers style crisis in financial markets.
Meanwhile, the New Zealand dollar rose overnight to a high of 79.5 USc, the highest since the level hit on November 6 last year of 79.6 USc. That was itself its highest level since March 2008, just before the Global Financial Crisis hit, which pushed our currency down to a low of 49 USc in March 2009. See the interactive currency chart below.
The New Zealand dollar is surging thanks to an historic shift upwards in commodity prices and because huge capital inflows are driving up the currency. The government is expected to borrow as much as NZ$20 billion this fiscal year, with more than 60% coming from offshore creditors.
Also, about NZ$15 billion of foreign reinsurance money is flooding in to pay for earthquake damage suffered in Christchurch.
On top of that, banks are also out lending again in the mortgage market. Some of that borrowing is funded offshore from foreign borrowing. Some banks are offering 95% home loans again and the March 10 cut in the Official Cash Rate has sparked new activity. Kiwibank cut its 6 month mortgage rate yesterday to 5.4%. See our article here.
Reserve Bank figures out late yesterday show mortgage approvals have averaged over NZ$800 million a week for the last four weeks, the first time this has happened in 18 months. Mortgage approvals are growing at their fastest annual rate since December 2009. See our interactive chart on mortgage approvals here.
No chart with that title exists.
20 Comments
Friday fun
The Female Demerit System
In the world of romance, one single rule applies: Make the woman happy. Do something she likes and you get points. Do something she dislikes and points are subtracted. You don't get any points for doing something she expects. Sorry, that's the way the game is played.
Here is a guide to the point system:
SIMPLE DUTIES
You make the bed (+2
You make the bed, but forget the decorative pillow (0)
You throw the bedspread over rumpled sheets (-1)
You go out to buy her what she wants (+5) in the rain (+8)
But return with Beer (-5)
You check out a suspicious noise at night (+1)
You check out a suspicious noise, and it is nothing (0)
You check out a suspicious noise and it is something (+5)
You pummel it with an iron rod (+10)
It's her pet (-20)
SOCIAL ENGAGEMENTS
You stay by her side the entire party (0)
You stay by her side for a while, then leave to chat with an old school friend (-2)
Named Tina (-10)
Tina is an exotic dancer (-20)
Tina has silicone implants (-80)
HER BIRTHDAY
You take her out to dinner (+2)
You take her out to dinner and it's not a sports bar (+3)
Okay, it's a sports bar (-2)
And it's all-you-can-eat night (-3)
It's a sports bar, it's all-you-can-eat night, and your face is painted the colors of your favorite team (-10)
A NIGHT OUT
You take her to a movie (+2)
You take her to a movie she likes (+4)
You take her to a movie you hate (+6)
You take her to a movie you like (-2)
It's called 'Death Cop' (-3)
You lie and say it is a film about reunited long lost lovers (-20)
YOUR PHYSIQUE
You develop a noticeable potbelly (-15)
You develop a noticeable potbelly and exercise to get rid of it (+10)
You develop a noticeable potbelly and resort to baggy jeans and baggy Hawaiian shirts (-30)
You say, "It doesn't matter, you have one too." (-8000)
THE BIG QUESTION
She asks, "Do I look fat?" (-5) (Yes, you lose points no matter what)
You hesitate in responding (-10)
You reply, "Where?" (-35)
Any other response (-20)
COMMUNICATION
When she wants to talk about a problem, you listen, displaying what looks like a concerned expression (0)
You listen, for over 30 minutes (+50)
You listen for more than 30 minutes without looking at the TV (+500)
She realizes this is because you have fallen asleep (-4000)
Obviously buying gold/ silver isn’t an issue, despite paper losing its value. Under the current worldwide economic, financial circumstances and developments isn’t that irresponsible by our government ?
Wow - New Zealand http://en.wikipedia.org/wiki/Gold_reserve -zip – 0 – null or is it stored in secret under the beehive ?
http://www.youtube.com/watch?v=b_HM48QdBMw
Go to Aussie for a job? "AUSTRALIAN Bureau of Statistics figures released yesterday have revealed the Gold Coast unemployment rate climbed to 8.1 per cent last month, ...Gold Coast Combined Chambers of Commerce President Bob Janssen said "And I think that figure is still too low..."
So maybe not to Queensland for a job then!
Interesting that the Roy Morgan poll consistently shows Oz unemployment to be 2-3% higher than the ABS poll.
http://www.roymorgan.com/news/polls/2011/4650/
They have explained why they think the ABS poll is fudged here: "Its time" for a realistic measure of unemployment in Australia" and would probably conclude the same about the NZ HLFS
FYI A post earthquake survey conducted by the New Zealand Manufacturers and Exporters Association (NZMEA) shows that most manufacturers are filling their orders. The survey, conducted between the 30th of March and the 8th of April, also found that Canterbury manufacturers were generally pleased with the response of Civil Defence and the Christchurch City Council.
Further results are available here.
Considering the vast majority of manufacturers are not located in the cordon, it is not surprising that the vast majority weren't troubled by the CCC or Civil Defence. Note the comments from NZMEA:
“On the performance of the City Council and Civil Defence respondents were positive overall, but it is worth noting that ANYONE with a business INSIDE THE CORDON WAS AND IS extremely frustrated. Procedures to gain access through the cordon could have been managed better.”
“Responses to the performance of insurance companies were not as positive with some firms reporting what they were experiencing slow decisions. That said, overall responses were positive.”
“Areas where manufacturers recognised a need for further work were communication, regulation and staff shortages. The communication problems that have HURT firms inside the cordon MUST NOT continue into the rebuilding process and regulations must allow firms to rebuild with a minimum of red tape."
""All this matters for New Zealand because further turmoil on global financial markets makes it more expensive and difficult to roll over our short term foreign debts (ie less than 90 days), which are currently worth around 50% of GDP. The IMF and others have warned we are vulnerable if there is another Lehman Brothers style crisis in financial markets."
Thinking outside the box - why not RBNZ print our own money, fund the rollover, ban foreign borrowings and allow the central bank to control the money supply. The govt would bail out the banks anyway if the next financial crisis eventuates so what risk in being the banks major creditor?
Maybe the next financial crisis is actually needed though?
Bollard is looking at ways to avoid doing that....ie the retail arm keeps going so we can buy food....meanwhile the mortgage/debt arm goes into / stays in receivership...
The IMF cant bail out everybody...it sum total of cash is made of of fee/borrowings from countries.
regards
I think you have a few things about face...
Consuming is bad....or maybe I should clarify that as over-consuming and especially where its based on debt is bad and when most of your economy is made up of selling imports, thats bad. We have to have an exporting economy that is what makes us a richer nation....
USD weakness comes from a indebted economy with nothing to sell unless it first imports the materials....weak USD more expensive oil...
regards
Pity you have such a poor understanding on the matter Westminster...Bernanke is exporting inflation..driving up commodity prices to encourage speculative market plays, to enrich the US banks and market players...his actions are compounding food price problems in many countries...
You say.." good for NZ as commodity prices are high enough to offset the effect of the strong Kiwi on exporters profits"....this is pure waffle
and..." it will be good for NZ consumers"....not all of them Westminster...those who do not suck on the fuel get to pay the higher food prices...milk butter cheese ...and anyone building, faces higher materials costs plus gst....your point is weak and full of holes
But that's not all you fail to see..." lower prices for other imported goods"...you see as good....failing to realise it means more spending of borrowed money on imports and a blowout in the trade balance account.
You finish off by dismissing the crisis in the USA as something they can and will bounce back from...utter rubbish...do try to improve Westminster....
The Economist magazine is running a weekly series on countries benefiting from the commodity boom. This week it is Australia.
They said that in a few weeks they will feature New Zealand.
The world is starting to see how New Zealand will benefit in the next few years from current economic conditions. I think the future looks very positive for New Zealand's economy.
I think the future looks very positive for New Zealand's economy.
Rubbish, we’re all going to be broke and living in shacks worth a fraction of their massive mortgages that were forced on us by the banking barons with Goldman Sacks turning us into pitiful slaves to be sold off to the corporate interests of free trade and globalism and overseas megatropawoppaolisis! We’re doomed. We won’t even be allowed to paddle our dingies demanding land rights for gay whales and equality for lesbian fish!
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.