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No Kiwi travel bubble

Good morning! Put away your jandals and your chilly bin because New Zealand's Prime Minister Jacinda Ardern said her country is not yet ready to open a travel bubble with Australia. However, she did confirm that a decision on a commencement date will be made on 6 April.

Market Wrap

CBA reverts its yield curve

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Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The NASDAQ was the big mover overnight (+1.2%) with tech stocks and their lofty valuations benefiting from a slight retreat in US government bond yields. The US 10-year is now 1.69%, down from 1.73% on Friday.

Interest rates: The Commonwealth Bank of Australia (CBA) increased its four-year fixed rate by 20 basis points while cutting its one- and two-year rates by 10 and 20 basis points, respectively. The change is likely due to the upcoming cessation of the Reserve Bank of Australia's 'Term Funding Facility', which provided billions of dollars in guaranteed, virtually-free cash (0.1% interest) to the big banks to be repaid over three years, enabling them to reduce rates on their longer-term fixed-rate offerings.

Crisis in Turkey: President Erdogan fired the country's central bank chief, Naci Agbal, and replaced him with Sahap Kavcioglu, an proponent of loose monetary policy. The Turkish lira immediately fell 15%.

Telstra goes Alphabet: Telstra wants to split its infrastructure business into three distinct subsidiaries, all under the umbrella of a new holding company called Telstra Group. The move would set Telstra up to either buy the government's National Broadband Network (NBN – which in late 2019 was valued below $A10 billion) or sell off some of its own infrastructure.

Tech Wrap

This is getting ridiculous

'Unknown Artist' aka John Cleese's masterpiece.
'Unknown Artist' aka John Cleese's masterpiece. John Cleese/OpenSea

John Cleese is attempting to sell his first NFT (non-fungible token), a drawing of the Brooklyn Bridge by his alter ego "Unnamed Artist". The current high bid is worth about $US36,000, although Cleese's reserve price has not yet been met. 🤔

Caveat emptor: For most NFTs – including this one – ownership is meaningless other than for the bragging rights over the fact you wasted a large amount of money to acquire... bragging rights. How does that saying about a fool and his money go again?

Elsewhere: Former US President Donald Trump plans to return to social media using "his own platform". Does the world need another social media platform? Does the right need another Gab or Parler? The only way this is in any way game changing is if for some reason Trump took his social activity to the Fediverse. But if you think that's a possibility then we have an NFT to sell you..!

Econ Wrap

Aussie house prices – up, up and away?

In light of rapidly increasing house prices – house prices and loans are increasing at the fastest pace since 2003 – the Australian Financial Review (AFR) yesterday pondered a couple of options that the Australian Prudential Regulation Authority (APRA) might take to cool things down a touch. Those measures – know as 'macroprudential' by the industry – included:

  • limits on loan to value ratios; or
  • limits on very high (more than six times) debt-to-income lending.

Given "the government's own First Home Loan Deposit Scheme... specifically facilitates higher loan-to-value lending", the second measure was deemed the most likely, although the analysts interviewed expected APRA will allow things to keep on rolling into 2022.

Stepping back: Rapidly rising house prices are caused by a mismatch of supply and demand. Supply is relatively rigid due to the time it takes from dwelling conception to completion, while demand can turn on a dime.

Property in many Australian cities was already relatively expensive by global standards prior to the government's COVID-19 response – both at the state (building bonuses) and federal (JobKeeper, monetary policy) level – which further stimulated housing demand.

Rising risk: If leverage in the property sector increases too much, too quickly, it can have far-reaching implications for financial stability.

Corona Wrap

The vaccine rollout is not going to plan

Tracking Australia's progress towards full vaccination.

We put the above chart together to visualise just how far Australia still has to go before the government considers us 'COVID-Safe', i.e. all adults fully vaccinated.

Not looking good: Australia is well behind the eight-ball, missing its target in the first week and currently on track to miss its end of March target by a significant margin. Unless the situation improves, there is very little chance that all Australians will be vaccinated by the end of October 2021.

It gets worse: The AstraZeneca vaccine – which is what most Australians will receive – has "no efficacy against the B.1.351 [South African] variant in preventing mild-to-moderate coronavirus disease". However, the study did not test its efficacy against severe disease, which is arguably the most important question. It was also hopeful that a longer interval between the first and second doses (which results in an enhanced antibody response) may be sufficient to produce "neutralizing activity against the South African variant".

Random Wrap

If something stinks...

...there's a good chance it's rotten. The proprietors of a Silicon Valley startup that offered a direct-to-consumer service called a "Gut Explorer" – essentially, a poop examination – were charged in $US60m fraud scheme. The startup had received funding from high profile venture capital funds including 8VC and Andreessen Horowitz but declared bankruptcy in late 2019.

Too good to be true: This startup was "once compared to Theranos", the fraudulent blood-testing business which at its peak was valued at $US10 billion. The scam was essentially the same, too, involving a web of lies (falsifying documents, lying, concealing facts, and misleading and defrauding investors) and a product that didn't actually work.