A review of things you need to know before you go home on Friday; PM pregnant; PMI drops sharply; trans-Tasman travel strong; Aussie heat stress; NZGB yields up, swap rates up strongly, NZD softer

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

No changes to report here.

ANZ has tweaked some term deposit rates.

The only story of the day is Jacinda Ardern's pregnancy, her impending part-time PM role, and the elevation of W. Peters to the Prime Minister position "for six weeks". None of this will be anything but unsettling for financial markets, just as they get to grips with a new public policy direction. It will take a week or two for implications to sink in. We will be watching and reporting on those market reactions.

The BNZ-BusinessNZ PMI revealed a massive drop today, only barely expanding. Business confidence surveys like ANZ's and NZIER's QSBO are subject to bias influences, but this PMI is much more gritty, focused on new orders, production, and employment measures, rather than impressions. But this survey confirms the business confidence results, lending credence to them. BNZ says "whichever way you look at it, the data are disconcerting at face value. The 51.2 reported for the month of December was the lowest reading since December 2012, and the 6.5 point drop in the index between November and December has only been exceeded twice before (and one of those occasions was during the GFC)." Of particular concern are the sharp falloffs in new orders and deliveries and the declines were nationwide (except for Otago, where they weren't very robust to start with).

In Australia, data out today shows that Kiwis were where the largest number of short-term visitors arrived from in November, still outpacing China, the UK and the USA. We visited 114,700 times in November, a +4.7% rise over the same month a year ago. But the growth from China is catching our position fast. New Zealand is also the single most popular overseas destination for Aussies, the only country where more than 100,000+ visits were made in November. (Aussies visiting the US fell -11% in November 2017 from the same month in 2016 and that reduced the popularity to an annual 0% change after being +8.4% positive the year before. The Trump impact is tough on US tourism.)

Record hot temperatures in Australia and caused one of their major coal-fired electricity generators to shutdown. That is causing a huge spike in wholesale electricity costs there today.

There are stories in the Aussie media that ANZ's UDC is being pursued by "Heartland Bank and two parties out of Asia". The information is obviously being leaked out of Sydney investment banks, probably those not involved in the deals. More when we know more.

Local swap rates are +2 bps to +5 bps higher again today. The two year is up +2 bps, the five year is up +4 bps and ten years is up +5 bps. On top of other rises this week, we have seen the two year gain by +6 bps, the five year by +7 bps and the ten year by +9 bps. These are not huge rises, but given the long period where they were flat or soft, this does represent quite a change. And the curve is steepening. It's is not just New Zealand. The UST 10yr is sharply higher at 2.64%, another jump of +5 bps. In China, their sovereign 10yr yield is at 4.05% firming by +1 bp. The NZ Govt 10yr yield is up even more at 3.01% (another +7 bps). And the Aussie 10yr is higher too at 2.85% (+6 bps). It is yield rises across the globe.

The NZ dollar is a little higher since this time yesterday at 72.9 USc. Apprehension of the US debt deal and shutdown risk are hurting the greenback. We are a little softer against the Aussie at 91.1 AUc and level pegging at 59.6 euro cents. This puts the TWI-5 at 74.3. But the NZD is lower against all currencies compared with earlier in the day following the Ardern announcement which seems to have taken -15 bps of the NZD.

We haven't reported this ever - bitcoin is unchanged since this time yesterday at US$11,522 (yesterday at this time it was US$11,571). As far as I can tell, trading volumes are light today. The first CBOE bitcoin futures contract was settled today. It (F8) opened in mid December just above US$15,000 and settled today at US$11,055 for a -24% fall. Good it you shorted it; not good otherwise.

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Source: CoinDesk

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Financial markets deeply unsettled by a pregnancy?!
Sounds like Lange’s description of the financial markets as ‘reef fish’.

Too bad if it is unsettling for markets. The world won't end. I doubt it will have much unsettling influence. She will be 'out of action' for a very short period and will have a lot of support in place no doubt.
Congratulations to Jacinda and Clarke

Dropping PMI is not good.

Probably evidence of business buying into the "Labour is bad" myth. I think it's post-election transitory data.

"focused on new orders, production, and employment measures, rather than impressions."

Or is it the business cycle simply playing itself out - it's been a long expansion - the hot air can't, and doesn't, last forever.

Interesting now the longer end UST’s playing catch up – this chatter of CB’s being ahead etc simply doesn’t wash.
Too much complacency and suddenly a flattening curve has gone.
Bond holders may well be feeling a little anxious – a rush for the door coming?