Heart monitor

The University of Canterbury's seen some declines in student numbers since last February's earthquake. The New Zealand Herald last week gave some details.

"We have lost a whole pipeline of students," said Keith Longdon, the university's acting chief financial officer.

The university, which had 15,500 students enrolled this year, expects to lose about 20,000 full-time students over the next eight years. The number of first year students discontinuing or failing to complete study fell 25 per cent, international students by 30 per cent and continuing students 8 per cent.

Student tuition fees are $5 million below its 2011 forecast while operating costs are $12 million more than projected, partly reflecting a more than doubling of insurance costs to $6.2million from $2.5 million and a $1.8 million increase in energy costs, the university says.

The University's fortunes in the longer term seem tied to the speed and strength of the Christchurch rebuild. If things perk back up quickly, students will want to live here and the University will be in fine shape. If the ancillary amenities that students expect from a city take a while to come back, and if the government doesn't fill the temporary gap, there's risk of downward spiral where worsened conditions lead to the loss of our best academic staff which, eventually, cuts enrolment.

As Canterbury's bonds are traded on NZX, it's probably worth my keeping an eye on yields there. Here's a bit of fun though. First, here's the two year yield history on Canterbury's bond issue:

The bond was issued with a 7.25% coupon rate. It rose a tiny amount with the 4 September earthquake, and had returned to pre-quake lows immediately prior to the 22 February quake. We see bits of movement upward subsequent to the half-year report released 1 September, but nothing huge - just bouncing around between 6.9% and 7.35%. 

If you zoom in to the last four days, you see a 10,000 unit move at 10 am 7 December pushing the price up to 7.75%. At 12:38 PM, this story came out, with sensational headlines on whether Canterbury could meet its bond obligations but concluding that there's pretty much no chance we fail to meet bond payment obligations. Another 10,000 unit trade pushes yields up to 8.6% at 1:35 PM before they fall at 11:40 am 8 December on a 25,000 unit trade back to 8%; it's been flat at 8 on low volumes since then. 

Weird things happen in thin markets on low volumes. I'm not sure there's anything substantial in the newspaper article that wasn't in the University's 1 December forecast statement other than that the news story frames things in terms of students lost where the forecast was in dollars. But the market didn't move subsequent to the forecast, only subsequent to the news story. 

Alas, staff who might be worried about redundancy as part of any temporary restructuring at the University can't really use the NZX contract as a hedge except against exceedingly unlikely Armageddon events where the government withdraws financial support, bond default looms, and many staff are set for redundancy. But for more minor transitional changes, we could as easily see yield drops with redundancies that are part of a bailout package as yield increases where redundancies give new news about finances. 

As for me, I'm looking forward to today's graduation ceremonies; I'm especially looking forward to Ruth Richardson's Honorary Doctorate. Her work on the Fiscal Responsibility Act alone would have qualified her for it, but she's achieved rather more than that. Congratulations Ruth!