A review of things you need to know before you go home on Thursday; no rate changes, low NZGB offers, farm sales rise, creditcard growth slows, hydro lakes normal, swaps flatten, NZD firms, & more

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

Nothing to report today.

None here either.

Demand for the latest issue of NZ Government bods was unusually low, barely covering the amounts on offer. Treasury offered $200 mln and received bids for just $236 mln. Yowser, that is a very skinny coverage ratio for this April 2037 issue - but it has happened before for a 2037 bond in the August 2018 offer. The last time an offer failed was in May 2015 for an IIB (linker) offer. Despite all this, the yield achieved was just 2.70% and that is substantially lower than the 3.07% yield for the same bond in November. The investors who bid didn't realise that they were the only ones.

Farm sales turned up +12% in December, building the Q4 results into a good space. Year-on-year, sales for dairy units and horticulture units are substantially lower, but that is more than made up by fast-rising sales in the arable, grazing and finishing sectors. Prices/ha details are here.

Over in the lifestyle block market, the levels are slipping. In December they were down -8% compared with the same month a year ago.

The rise in the amounts outstanding on our credit cards is slowing. There is now $7.584 bln in this type of debt, up +4.1% in December 2018, the slowest rise 1n more than 18 months. It grew +6.5% in March 2018 and +5.2% in November.

It is hot this summer but not too dry. Our hydro lakes are in reasonable shape, not far off normal levels and in better shape than last year, which we survived fine. Soil moisture levels (below) are near long-run normal levels too.

In Australia, the heatwave cascading over them is taking a toll on its electricity supply. In addition to the warnings about South Australia and Victoria, their electricity network is now extending that to NSW as well. Blackouts are apparently a real possibility as load-shedding orders are in place to protect the network.

And staying in Australia, a better-than-expected jump in jobs created has pushed their unemployment rate to its lowest level since June 2011 at 5.0%. But the increase in jobs was mainly for part-time positions. Full-time employment decreased -3,000 to 8,678,800 and part-time employment increased +24,600 to 4,035,300. Their participation rate was little-changed at 65.6%. Market reactions (equities, bonds, currency) were all minor.

Aussie PMIs are bifurcating in January. The rate of expansion in business activity slowed to the weakest in the 33-month survey history during January as softer service sector growth outweighed a pick-up in the rate of expansion at manufacturing firms.

In Japan, their January factory PMIs show their weak expansion has stalled altogether.

Local wholesale swap rates are little-changed at the short end today but are softer at the long end. The UST 10yr yield is still where it was this time yesterday, at 2.75% but their 2-10 curve has slipped slightly to +15 bps. The Aussie Govt 10yr is at 2.30% and up +2 bps, the China Govt 10yr is also up +2 bps at 3.15%, while the NZ Govt 10 yr is at 2.38% and up +1 bp. The 90 day bank bill rate market is unchanged at 1.88%.

The bitcoin price is marginal lower at US$3,536.

The Kiwi dollar has stayed form today, moving up to 68.0 USc and its highest level in more than a week. On the cross rates, we are up to 95.0 AUc, and are firmer at 59.7 euro cents. That pushes the TWI-5 up more to 72.2.

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What an Investment Fund, Forced to Take a Big Loss, Said about the Housing Bust in Prime Central London
“Probably now enduring its most protracted period of price suppression since records began.”
Here is an interesting and colorful tidbit on the housing market in Prime Central London, one of London’s most expensive areas and once the hotbed of London’s breath-taking property bubble, and now a deep morass.


25 years ago I lived in London E1 - 15 min walking distance to the city. Made a killing buying in 1991 and selling in 2003 so i checked property for sale today - if you think prices are mad in Auckland then see the London terraced shoeboxes for sale at over a million (NZ$) on streets that used to be dangerous after dark.

Who would start doing business in China these days?


All banks are now offering 3.99% or 3.95% fixed for one year mortgages - that's not the published rates for anyone other than Westpac but with house sales volume down 20% in Auckland the bankers are keen to do deals in 2019.

Did someone mention that interest rates in aussie are going to fall? Oops they are wrong

It's worth a gander (and a swig of 2019 Schadenfreude) at the AEMO despatch overview - the near-real-time display changes all the time but my screen shows the following prices per mWh:

QLD 118.69
NSW 129.73
VIC 14500.00
SA 13783.39
TAS 13.28

WA is not part of the NEM, being as how there are no lines across the Nullabor....

As ye sow (or in SA and VIC's cases, take coal-fired generation out of the mix - Playford/Northern and Hazelwood, respectively), so shall ye Reap......

This AEMO Notice shows Actual lack of reserve (LOR) as 500MW - Hazelwood was a 1600MW nameplate capacity.

Market Notice 66630

Actual Lack Of Reserve Level 2 (LOR2) in the VIC region - 24/01/2019

An Actual LOR2 condition has been declared for the VIC region from 1600 hrs.
The Actual LOR2 condition is forecast to exist until 2000 hrs

The capacity reserve required is 560 MW
The minimum reserve available is 56 MW

AEMO is seeking an immediate market response.
Manager NEM Real Time Operations

And the market response is - eye-wateringly high bids that are promptly capped (still at extreme levels) by AEMO, who have to keep the lights on and the AC running.

It's worth observing that AC loads which matter are for the malls, high-rises and apartment blocks which, as TonyFromOz notes here, cannot be switched off.

This is due, as you say, to air conditioning, but that air conditioning is in every high rise building you see in towns, cities, large cities and Capitals where there are those tall structures.

As I have mentioned often, those units on the roof of every tall building supply breathing air circulating through them all, the only way to get breathable air into and out of those buildings.

However, in Summer, the differential between inside temp and outside ambient is much larger, hence those compressors (the huge consumer of electricity) now must work overtime to keep the temp inside at the set level, when compared to the outside ambient. The level would be around 15 to 20 degrees, considering all that glass raises the inside temp, so the compressor works for extra time, (much extra) trying to keep the temp at that comfortable level for the people in that building, be it living accommodation or the (much larger by number) working buildings.

In Winter, that differential is much smaller, hence the compressors do not work anywhere near as much as they have to in the Summer, hence less power consumption in that middle portion of the day.

THAT ….. is where that huge Summer power consumption comes into play.

And to cap it all off: a refresh of the AEMO despatch overview now shows:
Energy $99.46 $103.02 $11,326.12 $14,500.00 $-0.74

Who else is sick of this crap?


Such an amateurish country when it comes to property and development.

Yip, the Tenancy Tribunal will have a field-day with this, and rightly so.

The tenants knew it was a leaky building and it looks like the rent was well below market (otherwise where does the $300pw increase come from). I'm not advocating treating tenants poorly, just for balanced reporting. Many would choose a 7 day notice clause for a deep rental discount.