BNZ Research

Our research team offers expert commentary on economics, foreign exchange, fixed interest and credit, to help inform your organisation’s risk analysis and decision making. 

See our team.

Publications available

Currency Research

NZD/AUD: Macro headwinds still in play

Jason Wong -

Macro forces suggest further downside potential in the NZD/AUD cross rate.
These include (i) the likelihood of a relatively weaker economic recovery in NZ (ii) lower NZ-AU interest rates and (iii) much greater RBNZ vs RBA balance sheet expansion.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD Corporate FX Update

Jason Wong -

We see scope for some consolidation in NZD/USD through the rest of the year, ahead of a renewed upswing next year to the 0.70 mark and beyond.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD: Sweden Case Study

Jason Wong -

Expectations that the RBNZ will take the OCR negative next year is now a widely-held consensus view. This will come amidst a massive quantitative easing (QE) programme, with the current cap on RBNZ bond purchases at $100bn (over 30% of pre-COVID nominal GDP). What are the implications of these policies for the NZD? We take a look at Sweden’s experience of negative rates alongside the Riksbank’s QE programme to see if there are any obvious take-outs for the NZD.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD: Currency debasement

Jason Wong -

Last week the NZ government revealed its preference in dealing with COVID19 outbreaks. These involve significant lockdown restrictions at the expense of near-term economic growth, a negative factor for the NZD.

The RBNZ’s policy intentions also became clearer – more QE to drive down interest rates across the curve and a preference towards a negative OCR next year if further stimulus is deemed necessary – additional negative factors for the NZD.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.


NZD: The futility of intervention

Jason Wong -

According to the RBNZ, foreign currency intervention is part of the monetary policy toolkit should the need for further stimulus arise. The Bank has said this could include the systematic purchase of foreign assets or buying fixed quantities on set dates.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

BNZ/NAB FX Strategy Forecast Update

Jason Wong -

Our forecast for all G10 currencies have been revised to reflect our increased conviction that the recent weakening in the USD is ’for real’ and has a fair way to play out over the coming couple of years at least.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD Corporate FX Update

Jason Wong -

The expected NZD/USD recovery is running slightly ahead of expectations and we nudge up our forecast track by 2 cents. After a strong run, we see near term consolidation ahead of a sustained 0.66-0.70 trading range developing later in the year. Our view on NZD crosses is not so overtly positive.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Economy Watch

RBNZ Forward Guidance Maintained

Stephen Toplis -

- RBNZ reiterates it will keep the cash rate unchanged until after the February meeting
- But it maintains its strong easing bias
- And indicates an early implementation of the proposed Funding for Lending Programme
- November MPS will provide much more detail
- Our rate forecasts are unchanged, for now

A surprise-free 12.2% GDP collapse!

Stephen Toplis -

Perhaps the biggest surprise in today’s GDP data was that there was no surprise. Never before have we experienced such volatility in economic activity. Never before has our statistics agency been faced with so difficult a task in collating its data. The potential for a rogue number was high. But, as it turned out, the 12.2% collapse in GDP reported for Q2 was about as close to our projections (of a 13.0% decline) as could ever be expected. In times gone past a 0.8% error in one’s quarterly forecast might be seen as a shocker. In the new world it’s about as good as it gets!

Recession Narrows External Deficit

Doug Steel -

The external accounts are commanding little market attention at present. This seems fair enough with most focus on the evolution of the Covid-19, the massive hit it has made to economic activity, and the way forward. Nonetheless, it is still notable that NZ’s annual current account deficit continues to shrink and now stands at just 1.9% of GDP for the year to June 2020. We forecast the deficit to narrow even further.

PREFU Highlights Medium-term Fiscal Challenges

Craig Ebert -

The theme of today’s Pre-election Economic and Fiscal Update (PREFU) was of things being not nearly as bad as May’s Budget figured on, but with greater appreciation of the country’s economic and fiscal challenges over the medium-to-long term. And this is about more than just COVID-19.

Ups and downs

Craig Ebert -

Activity in New Zealand’s services sector returned to contraction mode for August, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

Newly Restricted

Craig Ebert -

With New Zealand’s COVID-19 restriction levels re-tightened on 12 August, it was no great surprise to see the recent recovery in job advertising take a knock in the month. It slipped a seasonally adjusted 3.1% – the first backward step since April. This caused advertising to slip a bit on an annual basis also – to -32.5%, from -31.5% in July.

Levels of Difference

Doug Steel -

Expansion in New Zealand’s manufacturing sector dropped during August, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

BNZ Joins Negative Rate Clan

Stephen Toplis -

We are somewhat belatedly joining the throng who believe the Reserve Bank of New Zealand will take its cash rate negative in 2021. We are doing so because the RBNZ has, for all intents and purposes, said it will. We said in our MPS review there was a 50/50 chance we’d do this, we are now over the line.

Steady service

Craig Ebert -

Activity in New Zealand’s services sector remained at the same expansionary level since last month, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for July was 54.3, which was the same as June (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining).

BusinessNZ chief executive Kirk Hope said that the solid result for July builds
on the return to expansion in June, although possible headwinds with recent COVID-19 community transmission may impact the results ahead.

“Comments from those in the services sector still place COVID-19 front and centre in terms of negative influences, with recovery comments a key feature of positive influences. With uncertainty ahead, we need to take results month by month.

BNZ Senior Economist Craig Ebert said that “even if the current restrictions don’t last a lot longer, they will surely knock the PSI for August. And not just from business shutdown impacts but also via bruised economic confidence more generally”.

Onwards and upwards

Doug Steel -

New Zealand's manufacturing sector showed further expansion in July, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for July was 58.8 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up 2.6 points from June, and now the highest result since April 2018.

BusinessNZ's executive director for manufacturing Catherine Beard said that in a similar vein to the last month, the path towards recovery continues for many manufacturers through increased orders and production in full swing.

“This is obviously a welcome outcome given the halt in any activity for many over lockdown. However, we should be careful not to interpret this as a new dawn for the sector, rather a catch-up for many trying to get back to a new sense of normality.”

“While the key indices of new orders (67.4) and production (61.4) showed further expansion, employment (46.5) remained weak and in contraction for the fifth consecutive month.”

BNZ Senior Economist, Doug Steel said that “July’s PMI had firmly set up the idea that manufacturing GDP would bounce back strongly in Q3 after what was surely a very large decline in Q2. The latest virus outbreak calls that into question and adds to the reservations that we already had for growth in Q4.”

Employment Report: Slowing Gains

Craig Ebert -

It was good to see the further gains in job advertising during July. However, their increase of 9.8%, strong as it appeared, marked a much slower rate of recovery than June’s +47% and May’s +70%. This left a sense of petering impetus, and a level of advertising 32.5% shy of where it was in July last year.

RBNZ Turns Even More Dovish

Stephen Toplis -

The RBNZ today delivered a more dovish Monetary Policy Statement than we had expected. Instead of maintaining a monetary policy stance similar to the May MPS, the RBNZ instead produced a document containing not only heightened stimulus measures but a heightened prospect of using more alternative tools to give the economy an even bigger kick. And right at the top of the Bank’s list was a negative OCR.

Labour Market Data Kind of Frozen in Time

Craig Ebert -

Timing, as they say, is everything. It’s certainly important in understanding today’s June quarter labour market data, whether it be the stuck-low jobless rate (4.0%, from 4.2%), the minimal fall in employment (-0.4%) or the relative resilience in the rate of labour force participation (69.7%, from 70.5%). To an extent, these were frozen in time, because of the lockdown New Zealand endured through in the quarter. The question is, what happens as things thaw?

NZ Businesses Lose the Rebound Memo

Craig Ebert -

Having shown some good promise in early July, the ANZ business survey disappointing in its full and final read for the month. Throughout, there was a lack of follow-through, leaving the economic outlook – from a business perspective – with a clearly negative hue. This remains an important over-arching message, especially when many of the immediate economic indicators are doing well, some remarkably so.

Over the line

Doug Steel -

Like its sister survey in the manufacturing sector, activity in New Zealand’s services sector rose back into expansion, according to the BNZ - BusinessNZ Performance of Services Index (PSI).

The PSI for June was 54.1, which was 16.6 points up from May (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was the first time the sector exhibited expansion since February, and the highest value since January.

BusinessNZ chief executive Kirk Hope said that the comments from respondents underlie the two broad effects COVID-19 is currently having on the sector.

On the positive side, a number outlined a catch-up or bounce back from post lockdown conditions. However, those outlining negative comments are squarely centred on the disruption COVID-19 is still playing on their business. With comments split 44.4% vs 55.6% in terms of a negative stance, there is still scope for improvement ahead.

BNZ Senior Economist Doug Steel said that “activity/sales and new orders, which were hit hard over recent months, have led the bounce back. The activity/sales index has ramped up to 58.7 from 32.7 in May, while new orders jumped to 59.6 from 35.2. It is positive, if only one step forward after a giant leap backwards.”

Back in black

Doug Steel -

New Zealand’s manufacturing sector showed expansion for the first time since February, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for June was 56.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up 16.5 points from May, and the highest result since April 2018.

BusinessNZ’s executive director for manufacturing Catherine Beard said that a return to expansion for the sector was obviously a welcome result given the very difficult period experienced over the last three months. However, given the path towards recovery has simply meant trying to get back to standard operational levels for many, it was just a matter of time before the sector would be back in black.

Leading the way were the key indices of production and new orders (both at 58.6). Like the main result, these were at the highest level of expansion since April 2018.

Overall, we should remain cautious that one expansionary result does not represent a trend given ongoing offshore uncertainty around COVID-19. A consistent trail of new orders over the coming months would go a long way towards ensuring the second half of 2020 is better than the first.

BNZ Senior Economist, Doug Steel said that “New Zealand’s PMI average through April and May was at the bottom when looking across usual comparator countries. But with the country at alert level 1, activity has picked up. Long may it continue.

Lower Inflation Amid Loud Noise

Doug Steel -

Today’s CPI release revealed a 0.5% decline in Q2, pulling annual inflation down to 1.5% from 2.5% in Q1. The price decline in the quarter was not quite as big as many thought might be the case, with market expectations at -0.6%. We had -0.7%, as did the RBNZ. But no major surprises here, given the circumstances.

QSBO Shows COVID Shock

Doug Steel -

Today’s NZIER Quarterly Survey of Business Opinion did not make pretty reading. It was never going to, given the economic disruption and dislocation the nation has suffered over the past few months. In short, the QSBO confirms the economic damage done. So, nothing to move financial markets. But the Q2 outcomes were worse than what firms previously expected, bringing abrupt adjustment. That adjustment is not yet complete.

Financial Markets Wrap

A Middling Performance By The NZD In August

Jason Wong -

• The NZ TWI was flat in August, with gains versus the USD and JPY offset by modest falls for other crosses
• Increased conviction of a negative OCR next year and front-loaded QE saw NZ rates fall to record lows, against the global trend of higher rates
• World equities make record highs, fuelled by cheap central bank money, and less so by improved fundamentals

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD higher in July; mixed performance on the crosses

Jason Wong -

• Extension of recovery in risk appetite supports NZD, although poor USD performance was behind much of the gain
• NZD weaker against strong performance by EUR and GBP, following historic agreement on EU Recovery Fund
• Central bank buying drives NZ and global rates lower

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Interest Rate Strategy

Outlook for Borrowers: Post-September MPR

Nick Smyth -

• At its policy meeting, the RBNZ kept the OCR on hold at 0.25% and maintained a strong easing bias.
• The RBNZ flagged it would launch a long-term lending scheme for banks before the end of the year.
• We still think there is a high chance that the RBNZ follows this up with a negative OCR next year. At this stage, we are forecasting the OCR to fall to -0.5%.
• We expect short-term wholesale rates to gravitate lower, and into negative territory, as these OCR cuts approach.
• Long-term wholesale rates might still fall a bit further, but they are getting closer to the bottom.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

How Much Has RBNZ QE Been Worth?

Nick Smyth -

In this note we come up with some rough and ready estimates for the impact of QE on NZ 10-year rates, both swap and bond.
RBNZ QE may have lowered the 10-year swap rate by 25-45bps, relative to where it might otherwise be now.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZDM cuts bond programme, NZGBs to outperform swap

Nick Smyth -

NZDM announced a $10b reduction to the bond programme for the current 2020/21 fiscal year (from $60b to $50b), alongside the Pre-Election Economic and Fiscal Update (PREFU). This reduces forecast net issuance from $49b to $39b for this fiscal year (still ~13%/GDP).

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

The NZ Curve Should Steepen With A Negative OCR

Nick Smyth -

At the August MPS, the RBNZ raised the prospect of a negative OCR, paired up with a Funding for Lending-type scheme, next year. A negative OCR is a clear bullish impulse for NZGB yields and NZ rates in general. The outlook for the curve is more ambiguous. In this note we cover how offshore curves behaved around negative rates and why we think the NZGB curve should ultimately steepen, if the RBNZ goes down this route, as seems likely.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Outlook for Borrowers: Post-August MPS

Nick Smyth -

Yesterday the RBNZ signalled an extended bond buying programme to support lower-for-longer rates across the curve.
The RBNZ signalled a negative OCR as the likely next policy step, beyond March next year. We now think there’s around a 50% chance of a negative OCR and we think the market will gravitate towards this view too.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZ Rates To Outperform On Negative Rate Risk

Nick Smyth -

The RBNZ increased the LSAP limit from $60b to $100b and extended the timeframe to June 2022.
The limit on its holding of nominal NZGBs has been increased from 50% to 60% of outstandings.
The RBNZ will increase purchases next week, potentially signalling a shift towards a more tactical approach to LSAP.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Is this the worst time ever to own long-term government bonds?

Nick Smyth -

Here we provide some thoughts on the medium-to-long run return outlook for government bonds.
Long-term government bond yields are at, or near, historical lows. In the absence of major central banks embracing negative interest rates, they offer very little capital appreciation potential.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Supply-Demand Dynamics Support LGFA Spread Tightening

Nick Smyth -

LGFA is already well ahead of its funding task, just one month into the new fiscal year (ending June 2021). LGFA raised $1.1b in July ($900m via a dual tranche syndication and $200m via tender issuance), which equates to its entire forecast net issuance for the fiscal year. The residual $1.43b of forecast gross bond issuance to be raised by the end of June fully matches off against its May-2021 bond maturity.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Kiwi linkers – it’s their time to perform

Nick Smyth -

NZ linkers got battered during the crisis, but their inclusion in the RBNZ’s LSAP has been crucial in restoring some confidence in the market.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

RBNZ August Meeting – Bond Market Permutations

Nick Smyth -

At the RBNZ’s June meeting, the Bank kept its policy settings unchanged but flagged a review at the August MPS. It said it would “reassess the appropriate quantum” of LSAP as well as discuss its readiness to use other unconventional policy tools, like a term lending facility, negative rates and FX intervention.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

An Initial Look at RV on the NZGB May 2041

Nick Smyth -

Late last month, New Zealand Debt Management (NZDM) said it intended to syndicate a new May-2041 maturity NZGB in the week of 13th July. The May-2041 will be the longest bond on the curve, extending it by four years from the Apr-2037.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Markets Outlook

Wage Flexibility Helping to Preserve Jobs?

Craig Ebert -

We wonder if jobs are being saved by flexible pay arrangements, rather than just mostly by the wage subsidy. If so, it would be another example of good disinflation/deflation, which is helping clear markets – in this case, for labour. But any deflation, of course, tends to engender a great sense of failure for a central bank these days, who instead tend to see increased inflation as a necessity for economic success.

RBNZ to Defer Guidance Shift to November’s MPS

BNZ Research -

We can imagine the Bank’s “commitment” to keep its Official Cash Rate (OCR) at 0.25% until at least March 2021 will probably be left in for Wednesday’s Monetary Policy Review. It could be a case of damned if you do, damned if you don’t. But removing it, at this juncture, seems the bigger risk, in that it could cause a market shunt that the Bank feels a tad confronting to its optionality around OCR movements and timing thereof.

GDP and Monetary Policy Preview

BNZ Research -

By the end of the next two weeks we will have a much better view of the damage done to the economy by the initial Covid-driven lockdown. Moreover, we will have confirmation of the way the authorities, both fiscal and monetary, will continue to support the economy as it continues its recovery from the depths of the initial Covid lockdown.

GDP Hard To Measure But Important To Judge

BNZ Research -

Of course, measurement of economic activity, with any precision, is always difficult. And the task has become even harder with the disruptions brought about by COVID-19. Nonetheless, the degree to which economic activity is, in fact, bouncing around is still important to appreciate. It can’t be discounted just because it’s hard to measure.

Doing Our Level Best

BNZ Research -

If we had to highlight one of the measurement issues raised by Statistics NZ, it is that the value-add concept of GDP will be impacted by not just top-line sales/activity but also what intermediate costs are doing. We’re not sure if this amounts to a warning from our statistics office, regarding Q2 GDP. But it’s certainly a reminder that businesses costs are more than just (subsidised) wages, but extend to ongoings such as rent, insurance, as well as compliance costs. All of it affects profitability, which is another lens of thinking about GDP.

A Most Revealing Decision

BNZ Research -

The most important news for the economy this week will be what the government announces this afternoon regarding alert levels. The regional split in these might prove to be the most revealing, given the latest virus outbreak is still seemingly confined to Auckland.

Covid Boosting, Next Paring “Population” Impacts

BNZ Research -

While the latest COVID-19 restrictions have been a surprise, they simply strengthen our view that economic activity was going to start to struggle by the end of the year anyway, after the creditable bounce it has traced since the depths of April. We still envisage a fall in Q4 GDP, after a decent rebound in Q3. Border controls reinforce this pattern. To date they have largely stymied seasonal (winter) short-term departures but will soon turn to preventing seasonal (summer) travel arrivals.

MPS Preview: Enough Already?

BNZ Research -

At Wednesday’s Monetary Policy Statement (MPS), the RBNZ is bound to acknowledge the better-than-anticipated local data – and starkly so relative to its May MPS expectations. However, the Bank will also surely reiterate the many risks it sees on the broader horizon. So, there will be plenty to keep the Bank with a clear easing bias. Having said this, and while noting the risk of a further easing in monetary policy in some way shape or form, we think the RBNZ is likely to leave its policy settings unchanged at this juncture, the LSAP metrics included.

Cutting to the Employment Outlook

BNZ Research -

For all the ups and downs in GDP, the labour market will be key to understanding the economy’s trajectory. And by this we mean the coming many quarters, rather than just the June quarter data due for release on Wednesday, which might not look that bad.

Thinking Ahead

BNZ Research -

The ANZ business survey’s partial read, for early July, encouragingly showed a sense of recovery that was largely lacking through June. Can its full update for July build on this, is the question?

In many ways, it needs to. This is in order to validate the idea the economy is firmly in rebound mode, as many would now appear to presume (aided by the feel-good factor of a Covid-free NZ community).

Time Is On RBNZ’s Side

BNZ Research -

At face value, the case for the RBNZ to hold policy steady at its August Monetary Policy Statement appears quite straightforward. The balance of developments since its previous May projections have tended to be on the better side of expectations. This argues for the LSAP limit to stay at $60b for the time being, given that provides plenty of headroom at present. The OCR is expected to stay at 0.25% for quite some time. But there remains much to monitor, including obvious offshore risks.

Some Resilience To The World’s Ills

BNZ Research -

The pandemic has seen incomes dented and unemployment rise across the globe – conditions usually associated with lower commodity prices. While some prices for NZ’s major primary export products have fallen, many have shown a fair degree of resilience over recent months. This ultimately helps support activity and, combined with lower imports, will help move the trade balance back into surplus. Thursday’s Q2 CPI is likely to be the start of a period of easing annual inflation.

Holding Up

BNZ Research -

We continue to monitor many high frequency data series to help gauge the very latest changes in economic conditions. Recent readings, across several indicators, have shown a general theme of holding up reasonably well, especially given the circumstances.This spans areas such as housing, commodity prices, external trade, domestic spending, and employment. But there are caveats. We also look at how the unemployment rate will be influenced by labour force participation rate and what Australia’s experience might be telling us.

Markets Today

BNZ Markets Today

Jason Wong -

Newsflow has been light but risk appetite has improved as the new week kicks off, with strong broadly-based gains in equity markets. The USD is struggling alongside the yen, while GBP has outperformed as a new round of UK-EU trade negotiations begin.

BNZ Markets Today

Jason Wong -

US equities rebound, but S&P500 still down for the week
Fiscal talks news and US Supreme Court nomination post-date Friday close
NZD flat; NZD/AUD closes above 0.93

BNZ Markets Today

Jason Wong -

Risk sentiment has recovered somewhat, sending US equities into positive territory after a weak start. This has also been evident in currency markets, with the NZD and AUD in recovery mode as we go to print. GBP has been supported by a mini-fiscal stimulus, something still absent from the US, but the market hasn’t given up on hope for that.

BNZ Markets Today

Jason Wong -

Yesterday’s recovery in US equities turned out to be one of a dead-cat nature, with a tech-led fall overnight. The NZD and AUD are the weakest currencies for the day, with yesterday’s falls extending overnight.

BNZ Markets Today

Nick Smyth -

It has been a better session for risk assets overnight, with US and European equities rising by 0.5-1.5%. The USD has strengthened to an almost six week high, despite the recovery in risk appetite, while US rates are little changed. The AUD has underperformed after RBA Deputy Governor Debelle reiterated the possibility of further easing measures. The RBNZ Monetary Policy Review takes place at 2pm, although we’re not expecting any major surprises.

BNZ Markets Today

Jason Wong -

Investors are rolling out the excuses to sell risk assets as the new week begins, with chunky falls across global equities, a shift to the safety of government bonds, and safe-haven currencies outperforming.

BNZ Markets Today

Nick Smyth -

Equity markets in the US and Europe fell again on Friday, on little news, and the USD and JPY benefited from a safe-haven bid. Global bond yields, in contrast, were a touch higher. The NZD outperformed on Friday, and NZ rates ticked up a little, after some positive comments from Finance Minister Robertson. For the week ahead, the RBNZ Monetary Policy Review takes place on Wednesday (no major changes expected) while the government reviews the NZ COVID-19 alert level restrictions today.

BNZ Markets Today

Nick Smyth -

Equity markets have had another big fall overnight, mainly tech stocks, but without much impact on other asset markets. US Treasury yields are marginally lower than yesterday’s close and FX changes against the USD are all within +/-0.2%. The GBP has underperformed, albeit not by much, after the Bank of England flagged that it would consult with the banking regulator on negative rates, as a possible policy tool. Yesterday’s NZ GDP data confirmed that the economy suffered an enormous hit in Q2, but it was close enough to expectations to cause little reaction.

BNZ Markets Today

Jason Wong -

There has been only a small market reaction to the Fed’s updated policy statement, even as it included forward guidance on rates linked to inflation and employment outcomes. US equities have held on to its gains, and US bond yields continue to track sideways. Currency movements have been mostly modest, with the GBP continuing to recover and the NZD adding slightly to gains seen yesterday.

BNZ Markets Today

Jason Wong -

The recovery in global equities this week has seen some follow-through overnight, with stronger than expected Chinese economic data yesterday adding to the positive vibe. Currency movements have been modest, with the NZD and AUD modestly higher for the day, but with no follow-through in overnight price action. GBP has recovered a little further.

BNZ Markets Today

Jason Wong -

The new week has begun with a recovery in risk appetite, seeing a rebound in US equities and providing some support for the NZD, although we suspect that its gains have come at the expense of the AUD on increased speculation that the RBA is set to ease monetary policy further.

BNZ Markets Today

Nick Smyth -

Equity markets were again volatile on Friday. The NASDAQ declined again, capping off a big fall for the week, while the S&P500 was unchanged. Movements in currencies and bonds were more muted. Over the weekend, AstraZeneca and Oxford University said they would resume Phase 3 vaccine trials in the UK, which should provide a welcome boost to risk assets to start the week. The government makes its decision on the COVID-19 alert levels today.

BNZ Markets Today

Nick Smyth -

Equity markets remain volatile. Earlier gains in the S&P500 and NASDAQ have given way to another sizeable sell-off. The risk-off backdrop has driven an appreciation in the USD, falls in commodity currencies and a decline in global rates. The standout mover in currency markets has been the GBP, which has fallen heavily again overnight on mounting concerns around Brexit.

BNZ Markets Today

Jason Wong -

The rout in the tech sector is either finished or paused. In a mirror image of the previous day’s moves, equities and global rates are higher, safe-haven currencies have underperformed and commodity currencies have outperformed. The NZD has maintained a 0.66 handle, moving from the bottom end to the top end.

BNZ Markets Today

Jason Wong -

US investors have come back from holiday in a grumpy mood, extending the tech-led selloff in equities that began late last week. In a shift to safer assets, global rates are lower and safe-haven currencies have outperformed. NZD has extended its losses this week, now trading just above 0.66.

BNZ Markets Today

Jason Wong -

Trading has been quiet with the US public holiday. European equities had a strong session and S&P futures are pointing to a positive open tonight. The USD shows some small broadly-based gains, while GBP has underperformed on negative Brexit talk.

BNZ Markets Today

Nick Smyth -

There was another big sell-off in the S&P500 and NASDAQ on Friday before a sharp recovery late in the session pared losses to about 1%. US Treasury yields ignored the weakness in equities and focused on a strong US employment report, which pulled rates up by 8-10bps at the long-end of the curve. The USD initially appreciated after the payrolls report but gave back those gains as equity markets recovered – currency changes, including for the NZD, were minimal. The US bond and stock markets are closed tonight for Labor Day.

BNZ Markets Today

Jason Wong -

Well, it had to happen sooner or later, but a slump in big tech names is dragging global equity markets lower, seeing the S&P500 down about 4%. The flight to safety sees slightly lower US Treasury yields and stronger safe-haven currencies, while commodity currencies are weaker.

BNZ Markets Today

Jason Wong -

Global equity market continue to power on up while global rates have pushed lower. For a change, the USD has shown some broadly-based gains overnight, with EUR falling from fresh highs and the NZD down from its recent high.


BNZ Markets Today

Nick Smyth -

In overnight market moves, US Treasury yields have fallen and the curve flattened while the S&P500 has pushed higher. The USD made a fresh two-year low but it has recovered over the past few hours and is now slightly higher on the day. The NZD has outperformed despite a further increase in OCR rate cut expectations ahead of RBNZ Governor Orr’s speech today.

BNZ Markets Today

Jason Wong -

Newsflow has been quiet to start the week and end the month. US equities are ending a strong August on a flat note, the US Treasuries curve has flattened and the USD remains on the soft side. The NZD and AUD have printed fresh year-to-date highs.

BNZ Markets Today

Nick Smyth -

Fed Chair Powell’s speech at Jackson Hole continued to reverberate around markets on Friday, driving a big fall in the USD to a fresh two-year low and pushing equities and inflation expectations higher again. US Treasury yields reversed some of their sharp rises from the previous session, albeit with further steepening out to the long-end of the curve. The weaker USD catapulted the NZD to its highest close in more than a year and the AUD to its highest level since late 2018. Assistant Governor Hawkesby told Bloomberg that the RBNZ was thinking the same way as the Fed and would likely embrace a period of inflation above 2%.

BNZ Markets Today

Nick Smyth -

Chair Powell announced the Fed’s widely anticipated shift to an average inflation targeting regime overnight, essentially endorsing an even longer period of low rates. Markets are still digesting the speech but the initial reaction is a modest tick of approval. The S&P500 is higher, the US yield curve has steepened sharply, market-based inflation expectations have risen a little and the USD is little changed. The NZD is higher against all currencies bar the AUD due to firmer risk appetite.

BNZ Markets Today

Jason Wong -

Market sentiment remains positive, seeing fresh record highs in US equities, while the MSCI All-Country index also stretched to a record high. The USD remains under pressure and the NZD has outperformed, regaining the 0.66 handle. Global rates are slightly higher

BNZ Markets Today

Jason Wong -

It has been another quiet day in financial markets. US equities are treading water around record high levels and currency markets show modest movements, with the USD and JPY underperforming. Global rates have pushed higher, while NZ bond yields fell to a fresh record low yesterday.

BNZ Markets Today

Jason Wong -

Newsflow and trading conditions have been light to start the new week. Equity markets have continued to rise, while currencies are little changed. Global bond rates have nudged higher, while NZ government bond yields fell to a record low.

BNZ Markets Today

Nick Smyth -

US equities pushed higher on Friday, leaving the S&P500 and NASDAQ at all-time highs. Disappointing European PMIs led to a fall in the EUR and a rise in the USD, while the NZD held its ground, ending the week around 0.6540. NZ rates continue to fall, with the RBNZ increasing its bond buying pace for this week.

BNZ Markets Today

Nick Smyth -

It has been a night of mixed market moves. US equity markets have mostly recovered their post-FOMC minutes sell-off, led by tech stocks. In contrast, global bond yields have pushed lower. The USD is generally weaker, but the NZD has significantly underperformed and is trading back towards 0.65. NZ rates continue to hit new lows.

BNZ Markets Today

Nick Smyth -

It has been a night of mixed market moves. US equity markets have mostly recovered their post-FOMC minutes sell-off, led by tech stocks. In contrast, global bond yields have pushed lower. The USD is generally weaker, but the NZD has significantly underperformed and is trading back towards 0.65. NZ rates continue to hit new lows.

BNZ Markets Today

Jason Wong -

The USD has shown some broadly based gains for the day, extending its gains after the Fed’s minutes of the July meeting were released, even though there was little news. NZD/USD is back below 0.66, but the currency has generally done better on the crosses.

BNZ Markets Today

Jason Wong -

There has been little news overnight but much of the focus has been on the new record set for the S&P500, during a quiet trading session. That has been helped by further weakness in the USD that sees the NZD regain the 0.66 handle. The NZD is also higher on most of the crosses, even following record lows set for NZ short-term rates.

BNZ Markets Today

Nick Smyth -

US equities have pushed higher, on the verge of breaking the record close set in February, with the market not caring much about the lack of a fiscal stimulus bill or US-China tensions. Global rates are lower after last week’s bond market sell-off, while the NZD has lagged the gains seen in other commodity currencies, against a backdrop of a soft USD.

BNZ Markets Today

Nick Smyth -

It was a reasonably quiet end to the week for markets. Reports that a scheduled review of the US-China Phase-One trade deal had been delayed didn’t hurt sentiment. The NZD underperformed on Friday and was the weakest currency last week. The Prime Minister announces at 10am whether the election goes ahead as originally scheduled, on September 19th, or is delayed.

BNZ Markets Today

Nick Smyth -

Overseas market moves have been reasonably subdued overnight. Global rates have continued to push higher while the S&P500 made an all-time high, before falling back. Despite global moves, NZ rates experienced another chunky fall yesterday as the market continues to digest the dovish RBNZ MPS. The NZD has fallen over the past 24 hours and is back near its post-RBNZ lows.

BNZ Markets Today

Jason Wong -

Risk appetite has improved overnight, with US equities making strong gains and on a cusp of a record high, while global rates track higher. The NZD has recovered its losses seen in the aftermath of the dovish RBNZ Monetary Policy Statement.

BNZ Markets Today

Nick Smyth -

The big news for NZ is that there has been COVID-19 community transmission and Auckland moves to a Level 3 lockdown today, initially for three days. The NZD has underperformed, but not significantly. Offshore, US Treasury yields have had a big move higher while the S&P500 has moved to within 1% of its all-time high.

BNZ Markets Today

Jason Wong -

It has been an uneventful start to the new week, with only small changes in asset prices across equities, bonds and currencies. The NZD trades slightly weaker, just below the 0.66 mark while the AUD is flat at 0.7150.

BNZ Markets Today

Nick Smyth -

Tech stocks were hit on Friday after Trump announced forthcoming bans on Chinese-owned apps Tik Tok and WeChat, ratcheting up tensions with China ahead of the election. Negotiations over a US fiscal stimulus extension failed to provide a breakthrough, but Trump announced executive orders over the weekend to provide some stimulus measures. US rates and the USD were both higher on the day, assisted by a stronger-than-expected nonfarm payrolls release. The NZD pulled back to below 0.66.

BNZ Markets Today

Doug Steel -

Equities have pushed higher in the US, brushing aside equity declines in Europe on disappointing earnings. US bond yields and the US dollar are marginally lower, with commodity currencies outperforming. The NZD has hit fresh highs for the week.

BNZ Markets Today

Jason Wong -

Risk sentiment is higher, with gains in US and European equity markets and higher US Treasury yields. The USD is the biggest loser for the day, although there has been little sustained progress in the NZD and AUD overnight.

BNZ Markets Today

Nick Smyth -

There hasn’t been much movement overnight across equities and currencies. Global bond yields, on the other hand, have continued to push lower, with the US 10-year rate hovering just above 0.5%. There is still no breakthrough in negotiations over a new US fiscal stimulus package. The NZ labour market report is released today.

BNZ Markets Today

Jason Wong -

Stocks have begun August on a positive note while the USD and US Treasuries have reversed course from the pressures seen last month, with the USD higher and the US 10-year rate also nudging higher. The NZD and AUD have slightly underperformed.

BNZ Markets Today

Nick Smyth -

US equities ended last week on a strong note, bolstered by impressive earnings reports from some of the big tech firms. The USD recovered on Friday, but still recorded its biggest monthly fall since January 2018. The NZD fell about 1% to 0.6630 while NZ long-term wholesale fixed rates closed in on record lows. There is still no sign of a breakthrough in negotiations over an extension to the enhanced US unemployment benefits, which expired on Friday, which may see risk assets open lower this morning.

BNZ Markets Today

Nick Smyth -

Equity markets had a dive overnight, after Trump suggested delaying the US election, but they have mostly recovered. Global rates and the USD continue to grind lower. The EUR has reached a fresh two-year high while the NZD has shown little movement. There is still no sign of an agreement over a US fiscal package yet, with enhanced US unemployment benefits set to expire tonight.

BNZ Markets Today

Jason Wong -

Market sentiment has been positive overnight, ahead of the US FOMC. The Fed made little change to its statement, as expected, maintaining a dovish stance, and price action following the meeting was fairly muted. The USD remained under pressure ahead of the meeting, and as we go to press, it has just popped higher after falling immediately after the statement.

BNZ Markets Today

Jason Wong -

Markets are in a cautious mood, with US equities flat overnight, US Treasuries lower and the NZD sustaining the loss it saw yesterday afternoon. CHF and JPY have outperformed overnight but GBP has been the best performer.

BNZ Markets Today

Jason Wong -

The USD weakness theme has continued, sending assets priced in USD higher, including US equities and many commodities. The NZD touched a fresh multi-month high overnight and the AUD is stronger, but EUR is leading the way.

BNZ Markets Today

Nick Smyth -

The USD continued to weaken on Friday, despite generally softer risk appetite. The EUR reached its highest level since September 2018, helped by stronger-than-expected PMIs and positive sentiment related to the EU Recovery Fund. The NZD and AUD underperformed on Friday but were up strongly on the week. The US 10-year bond yield hit its lowest level since April before recovering.

BNZ Markets Today

Jason Wong -

Risk appetite has fallen overnight, with focus on the increase in US jobless claims. US equities are on track to break a 4-day streak higher, while the NZD and AUD have retreated.

BNZ Markets Today

Jason Wong -

The NZD and AUD made fresh highs overnight, despite downward pressure on the yuan on rising US-China geopolitical tensions. US equities have spent much of the session in positive territory while global rates markets remain well-contained.

BNZ Markets Today

Nick Smyth -

EU leaders finally found a compromise solution to the €750bn Recovery Fund yesterday, which triggered an increase in the EUR and broad-based USD weakness. The Risk sensitive currencies have outperformed, with the AUD rising almost 2% and the NZD decisively breaking above resistance at 0.66. Equities have pushed higher while bond yields have again done nothing.

BNZ Markets Today

Nick Smyth -

Markets have traded with a risk-on tone overnight. Sentiment has been lifted by positive trial results for a number of COVID-19 vaccine candidates and reports that EU countries are closer to a compromise solution over the proposed EU Recovery Fund. Equities are higher and the USD is slightly weaker while global rates have again shown little movement. The NZD has increased slightly.

BNZ Markets Today

Nick Smyth -

There was little change in markets on Friday, with equities and global rates nudging higher and the USD falling modestly. The NZ yield curve flattened again, with the 10-year swap rate falling to the bottom of its recent (very tight) trading range. EU leaders have been negotiating over the weekend over the proposed EU recovery fund but have, so far, failed to reach an agreement. The EUR and risk assets may fall this morning when markets open.

BNZ Markets Today

Nick Smyth -

It has been a mild risk-off session overnight, with equities falling, the USD appreciating and bond yields declining slightly. The NZD has fallen overnight but remains rangebound. The market’s main focus in the coming session is likely to be the EU leaders’ summit tonight and tomorrow, where countries are trying to broker agreement on the proposed EU recovery fund

BNZ Markets Today

Nick Smyth -

Risk sentiment has been boosted overnight by encouraging news around potential COVID-19 vaccines. Equity markets are higher, the USD is lower while global bond yields again haven’t moved very much. The NZD has performed better overnight and is trading towards the top of its recent range.

BNZ Markets Today

Nick Smyth -

Markets have been choppy overnight but with reasonably modest net moves across equities, currencies and rates. The NZD has underperformed, despite a broadly weaker USD, and trades this morning around 0.6520. New Zealand Debt Management issued $4.5b of a new 20-year government bond yesterday.

BNZ Markets Today

Nick Smyth -

Equity markets have had a rollercoaster night. The S&P500 briefly moved back into positive territory for 2020 and the NASDAQ made a fresh all-time high, before both reversing lower over the past hour. Interest rate markets have remained unmoved despite the volatility in equities. The NZD continues to hold under resistance at 0.66.

BNZ Markets Today

Nick Smyth -

Equity markets finished last week on a strong note after Gilead reported its COVID-19 treatment drug, Remdesivir, could significantly reduce the death rate of those with the virus. Global rates and commodity prices increased. FX moves were muted, despite a sharp turnaround in the S&P500, with the NZD finishing the week around 0.6575.

BNZ Markets Today

Doug Steel -

The risk rally took a step back overnight European and US equities fell, along with US treasury yields. The US dollar is marginally higher, amid contained currency movements.

BNZ Markets Today

Doug Steel -

Markets largely remain in a holding pattern. US equity indexes are marginally higher, so to US 10-year Treasury yields. Commodity prices and currencies are up, while the US dollar is weaker.

BNZ Markets Today

Doug Steel -

The was a consolidation of risk appetite overnight. Equity markets are generally lower, led by Europe, while the USD is marginally higher. US interest rates have edged lower.

BNZ Markets Today

Jason Wong -

Risk assets are higher, driven by a surge in Chinese equities as the government encouraged a bull market, with the move spilling over into other markets. The USD is broadly weaker, while the NZD and AUD have pushed higher, although without much follow-through overnight.

BNZ Markets Today

Jason Wong -

With US markets closed for Independence Day on Friday, financial markets saw a quiet end to last week. European equities and S&P futures were on the soft side, while the NZD and AUD ended the week on a positive note.

BNZ Markets Today

Nick Smyth -

A strong US nonfarm payrolls report has given equities another push higher overnight, although there has been less movement in other asset classes. Global bond yields are flat-to-lower overnight and currency changes have been minimal. The NZD has been the big outperformer over the past 24 hours, rising above 0.65.

NZ At A Glance

New Zealand At A Glance

Stephen Toplis -

The New Zealand economy is bouncing back strongly from the depths of the recession. There is genuine cause for optimism that the country is on the right track. However, this needs to be tinged with a good dose of realism, as economic activity simply cannot recover to pre-Covid levels for some time, and the full pain of what may prove to be a double-digit unemployment rate is yet to be felt. Fiscal policy will remain the primary source of stimulus though it is imperative that it is well directed towards high-returning investment activity. Monetary policy will remain the supporting act and will be highly stimulatory for the foreseeable future

Rural Wrap

Farmers Well But Cautious

Doug Steel -

The highly cautious tone from the latest Federated Farmers New-Season Farm Confidence Survey should not really surprise anyone. A global pandemic simply demands vigilance from a sector that sells the bulk of its produce into offshore markets. This is even if the sector has done relatively well to date.