Transcript Interest Rate Monitor March 10, 2013

Interest Rate Monitor
March 10, 2013
Brief Overview
International
US: Treasury yields rise amid strong US jobs data
pointing to recovery momentum
MENA Region
Egypt receives US aid but with string attached
Eurozone: Fitch downgrades Italy as ECB gives little
hope of action
GCC News Highlights
UK: BoE decides against further QE as UK service
sector grows
GCC interbank rates
China: inflation on the rise amid signs of softer data
Comparative MENA Markets
More aggressive easing in the horizon, as data point to
end of recession
Markets overview
Major Indices: Wall street wrapped up positive week
with record highs
Local Economy
New and analysis
 Interest Rate Forecasts
Commodities and Currencies: yen reached 3 ½ year
low against dollar
 Signals point to less pressure on domestic
liquidity
Central Bank Meeting Calendar
Markets overview
Interest Rate Forecast
The Week Ahead
 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates
2
International
3
US Treasury bond rates
•
•
A bigger-than-forecast gain in U.S. employment
sparked selling in safe-harbor Treasury bonds for a
fifth straight session, sending benchmark yields to the
highest levels in 11 months, pushing up the yield to
2.058%.
This reflected brightened sentiment over the U.S.
labor market and the broader economy, which has
sent U.S. stocks to record highs.
As of March 9
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years
0.09%
0.09%
0.11%
0.25%
0.89%
2.05%
3.25%
1 Week Ago A Month Ago
0.07%
0.11%
0.12%
0.24%
0.75%
1.85%
3.07%
0.04%
0.07%
0.11%
0.25%
0.83%
1.96%
3.17%
4
Moody’s Expects Higher Treasury Yields & Thinner Spreads
•
Treasury yields have extra room to increase,
when rates compared to three years GDP
average for the last 30 years. (2.40% is the
projected rate for Q1 2014)
•
Treasury yields may rise further as capacity
utilization, employment and consumer
spending are riding the upward trend.
•
10 years Inflation expectations have recently
shown higher figures indicating wider room for
yields to improve.
•
US Equity market has reached a record high in
terms of market value; reflecting better
economic and labor market fundamentals.
•
US equity market performance is a major
Driver for households consumer spending and
economic activity, since it is linked to pensions
and savings.
5
Moody’s Expects Higher Treasury Yields & Thinner Spreads
•
Moody’s does not expect yields on noninvestment grade bonds to go higher
despite the expected increase in US
treasury yields.
•
The rationale behind this forecast is thinner
spreads to come, on Moody’s opinion.
•
Investors should seek lower compensation
for credit default risk; especially since
default rates are moving lower and
economic fundamentals are improving.
•
Equity market volatility index VIX suggests
that credit spreads for lower grades’ bonds
can go thinner by 100 bps to reach 380 bps
from treasuries.
6
Hiring picked up in February and unemployment rate
down to its lowest level since December 2008
•
U.S. job growth accelerated and the unemployment rate fell
to the lowest level in more than four years in February,
signs of a steadily improving labor market and stronger
economic gains.
•
The U.S. economy added 236,000 jobs in February,
according to a Labor Department report released Friday.
That's much stronger growth than in January, when
employers hired a revised 119,000 workers.
•
Meanwhile, the unemployment rate dipped to 7.7%, as 12
million workers were counted as unemployed. The drop
was partly because more people said they got jobs, but also
because 130,000 people dropped out of the labor force.
•
For all of last year, the economy added an average of about
183,000 jobs a month. Over the past four months, that pace
has picked up a little to an average of 205,000 a month—
though the gains have been choppy.
•
The increase in jobs and decrease in the unemployment
rate were better than expected. Stocks rose modestly in
early trading Friday, with the Dow hitting yet another
record high.
February
+236,000
7
But some headwinds remain
•
Private sector employers added 246,000 jobs in February, where one of
the brightest stars in the labor market was the construction sector,
which added 48,000 jobs in February, and 151,000 jobs over the past
five months.
•
The latest snapshot of the labor market comes against a backdrop of an
improving housing market, big gains for the stock market, rising
consumer confidence and other signs of momentum for the economy.
ISM non-manufacturing, which tends to fluctuate with private
consumption rose in February from 55.2 to 56.0.
•
•
•
•
February
7.7%
Nevertheless, recent benchmarks reflect a recovery that is moving
forward but at risk of losing pace as its main engine—consumer
spending—is strained by higher taxes, government cutbacks and gas
prices.
The recession in Europe and weakness in other U.S. export markets also
pose threats, as do possible shocks from Washington's budget
wrangling.
Even with recent gains, the unemployment rate is expected to remain
well above the 6.5% threshold the Federal Reserve is targeting before
allowing interest rates to rise. The Fed's next policy meeting is March
19-20.
8
Tension rises in Italy while nervousness elsewhere abates
•
On Friday, Fitch Ratings downgraded Italy's
credit ratings by a notch to triple B-plus.
Though the move added some tension, the
Italian ten-year bond yields increased
slightly, at their high for the day at 4.59%.
•
Aside from the Fitch downgrade there seems
to be an easing of eurozone sovereign debt
tensions with broader market sentiment
•
Nervousness in European bond markets
continued to abate with Spain garnering
robust demand at a sovereign debt sale and
Portuguese bond yields falling to a onemonth low after Standard & Poor's upgraded
its outlook on the country's debt to stable.
•
A solid auction of Spanish debt this week is
contributing to a 14bp fall for Madrid’s yields
to 4.75%, the lowest since November 2010.
Spain
Italy
9
Fitch downgrades Italy
•
Fitch downgraded Italy's credit rating Friday, saying the lack
of a stable government in Rome puts the nation's already
fragile economy at risk.
•
The No. 3 ratings agency cut Italy's credit rating to BBB+,
which is still investment grade. The outlook for Italy is
negative, suggesting that further downgrades are possible.
•
Italy has been without clear leadership for weeks as
politicians struggle to form a coalition following last
month's inconclusive election.
Fitch said it is unlikely that a stable government will be
formed in the next few weeks.
•
•
The latest economic data underscored that the recession in
Italy is "one of the deepest in Europe," according to Fitch.
•
Fitch expects the Italian economy to shrink 1.8% this year,
following a 2.4% decline in 2012.
The ongoing recession could put additional pressure on the
government's finances. Fitch expects government debt in
Italy to reach 130% of gross domestic product this year.
•
10
ECB Gives Little Hope of More Action
•
•
The European Central Bank cut its forecasts for the eurozone economy this year and next, but
President Mario Draghi played down the possibility of taking further steps to revive it, saying the
central bank has already done what it could.
The overall message from Mario Draghi seems to be that as long as the medium-term outlook is okay
the ECB will not cut rates further but the ECB will keep rates unchanged at low levels for a long time.
•
In his monthly news conference, Mr. Draghi appeared to rule out most forms of further stimulus,
despite data this week that showed the economy contracted for a fifth straight month, that
unemployment was at a record high of nearly 19 million and that inflation had now fallen within the
ECB's targeted range.
•
But he stressed that the central bank's policy would remain "accommodative" for as long as needed,
giving eurozone politicians and banks the breathing space to implement structural reforms and
reduce their debts.
•
Mr. Draghi repeated that the economy is expected to start recovering in the second half of the year,
and said that the process of recovery would be helped by a continued healing in financial markets.
•
Mr. Draghi also dodged invitations to comment on the political stalemate in Italy. He repeated that
there would be no special favors for Italy from the ECB's new and still-untested program of bond
purchases—known as Outright Monetary Transactions—insisting that the new government would
have to ask for a euro-zone program first.
11
ECB: Europe's recession deepens
•
•
Mr. Draghi said the ECB now expects the eurozone economy to
shrink by around 0.5% this year. That is below its central estimate of
a 0.3% contraction in December, and below the European
Commission's and IMF's forecasts for this year. For next year, the
central projection was cut to growth of 1.0% from 1.2% previously.
Draghi emphasized that the downward revision in 2013 was due
mainly to weak carry over. Economic activity is expected to start
stabilizing in the first part of the year and then a gradual recovery
should commence in the second part of the year.
•
The bank's governing council made only a fractional adjustment to
its projections for inflation, leaving this year's central estimate
unchanged at 1.6% and cutting next year's to 1.3% from 1.4%.
•
Meanwhile, the head of the IMF, said in a Speech in Dublin on Friday
that the ECB should consider a further cut in its key interest rate.
Christine Lagarde said European policymakers had to ensure the
recent improvement in market sentiment toward the eurozone also
translated into more jobs and higher incomes.
•
New Staff Projections
Q4/Q4, %
Change in real GDP
Dec. projection
Inflation
Dec. projection
2013
2014
-0.9 to -0.1
-0.9 to 0.3
1.2 to 2.0
1.1 to 2.1
0.0 to 2.0
0.2 to 2.2
0.6 to 2.0
0.6 to 2.2
Source: Europea n Centra l Ba nk
12
Business activity data again point to recession
•
Data on Thursday confirmed that the eurozone appears to be heading
for a fourth consecutive quarter of economic contraction, as surveys of
purchasing managers indicate business activity shrank at a faster pace
in February.
•
Data provider Markit said the composite Purchasing Managers' Index
for the eurozone fell to 47.9 in February from 48.6 in January. The sub50 reading means activity across the currency bloc's manufacturing and
services sectors declined month-to-month.
•
The figures mean eurozone gross domestic product will probably fall in
the first though at a slower pace —and may not show growth until the
end of the year.
•
Official data have shown the eurozone economy shrank throughout the
last nine months of 2012. Output between October and December fell
by a particularly sharp 0.6% from the previous three-month period,
according to the latest figures released by Eurostat.
•
Meanwhile, figures released by the Eurostat offered a tentative sign of
a pickup in consumer spending, with retail sales rising at the fastest
pace in almost two years in January.
The volume of retail sales rose by 1.2% from December, a stronger
outcome than the 0.3% increase forecast by economists, and the
largest pickup since April 2011.
•
13
Bank of England decided against further QE
•
The Bank of England left its monetary policy unchanged Thursday, but its inaction masks a lively
debate among policy makers over whether new tools are needed to rekindle growth in the U.K.'s
stalled economy.
•
Some market participants were expecting the Monetary Policy Committee to extend the assetpurchase program.
•
The BoE said in a statement that its MPC voted to leave the central bank's benchmark interest
rate at 0.5% and the size of its bond-buying stimulus program at £375 billion.
•
Nevertheless, many economists believe further bond buying is imminent, even though annual
inflation, measured at 2.7% in January, is expected to rise further above the BoE's target this
year.
•
This view was reinforced when minutes of February's policy meeting revealed Governor Mervyn
King and markets chief Paul Fisher joined longtime stimulus advocate David Miles in voting for
more bond buying. They were defeated by the remaining six officials on the nine-person panel.
•
While the BoE considers ways to revive the flat-lining economy, U.K. Prime Minister David
Cameron on Thursday made it clear that his government will stick to its austerity drive and wider
economic plan, despite calls for a change of course from within his coalition government.
14
UK service sector receives boost
•
Meanwhile, a gauge of activity in the U.K.'s
services sector, which accounts to more than
three-quarters of GDP, rose to its highest level
since September.
•
The purchasing managers' index for the services
sector published by data firm Markit and the
Chartered Institute for Purchasing and Supply
rose to 51.8 in February from 51.5 a month
earlier, Markit said on Tuesday. A reading
above 50 indicates activity in the sector is
expanding.
•
The improvement in the services sector in
February should offset weaker performances by
the manufacturing and construction industries
in the same period. The data suggest the U.K.
economy may return to growth in the first
quarter after shrinking 0.3% in the final three
months of 2012, economists said .
15
China’s inflation on the rise
•
China's policy makers are grappling with an uptick in data released Saturday show.
China's consumer inflation jumped to 3.2% year-on-year in February, up from 2% in
January, for the highest increase since April last year. Prices were likely boosted by the
Lunar New Year holiday, which often brings a spike in prices for food and other goods.
•
Also compounding the challenges for the government was data showing that property
sales have been soaring, rising 77.6% from last year's levels in value terms over the
first two months of the 2013, highlighting the difficulties in keeping the economy
growing at a steady pace while avoiding steep rises in prices.
•
While the rise in consumer inflation was somewhat steeper than expected in February,
some analysts said that the index could drop back in March.
•
After months of relatively subdued inflation, rising prices may once again have policy
makers worried. Premier Wen Jiabao, in his report to the annual session of parliament
on Tuesday, set an inflation target of 3.5% or below for this year, and the central bank
has dropped hints of monetary tightening later in the year.
16
China’s Economic Data Show Weakest Start Since 2009
•
China’s retail sales and industrial output had their
weakest combined start to a year since the global
recession in 2009, adding to signs of a moderating
rebound in the world’s second-biggest economy.
•
Industrial production grew slightly more slowly, with a
9.9% year-on-year rise in January and February, after
a 10.3% gain in December. The government releases
combined figures for the first two months of the year
to avoid distortions related to the timing of the Lunar
New Year holiday.
•
Retail sales were up 12.3% on-year in January and
February, compared with a 15.2% rise in December.
•
Fixed-asset investment rose 21.2% on-year in January
and February, compared with a 20.6% rise in the
whole of 2012.
17
China Posts Surprise Trade Surplus
•
China posted a surprise trade surplus in February thanks to stronger-than-expected
exports as the global economy recovered, and a drop in imports.
•
Exports were up 21.8% from a year earlier—slower than January's 25% pace but well
above economists' expectations of 5%, and a positive sign for the world's second-largest
economy.
Imports were down 15.2%, data from the General Administration of Customs showed
•
•
The strong export performance, shown in customs data released Friday, contributed to a
February trade surplus of $15.25 billion, when most analysts had expected a deficit.
•
Economists cautioned that the data are difficult to interpret because of the week-long
Lunar New Year holiday, which fell in mid-February this year and in January last year.
Factories shut down for the festival and many migrant workers go home, though they
often work overtime before the holiday, making data less reliable at this time of the year.
•
Meanwhile, China set a growth target of around 7.5% for this year as it kicked off a
meeting to finalize its leadership transition, reflecting how Beijing is turning away from
breakneck growth based on exports in favor of a broader economy driven by spending at
home.
18
Japan's economy begins to show signs of growth
•
Japan's economy performed better in the fourth
quarter than previously thought, according to revised
data released Friday that could embolden the
government in its drive to stimulate growth and end
deflation.
•
The data showed that Japan's economy grew at an
annual rate of 0.2% in the final three months of 2012
-- much better than the negative 0.4% rate initially
reported by Japan's Cabinet Office. On a quarterly
basis, Japan's gross domestic product was unchanged
compared with previous data showing a fall of 0.1%.
•
The upward revision was not exactly a surprise, as
other economic indicators have pointed to stronger
activity in recent weeks.
•
The report also provides some political cover for
Prime Minister Shinzo Abe, who is pursuing an
aggressive set of policy changes in a bid to boost
growth.
19
Japan: more aggressive easing expected
•
The BoJ kept policy settings on hold at the final board meeting of governor Masaaki Shirakawa’s fiveyear term, rejecting proposals for more aggressive easing from two of his board members.
•
Board member Sayuri Shirai proposed that rather than wait until next year, the central bank should
immediately resort to "open-ended" purchases of more bonds. The proposal it was voted down 8-1.
Haruhiko Kuroda, the government's pick for next BOJ governor, told his confirmation hearing this week
that the option should be discussed.
•
•
Another board member, Ryuzo Miyao, also proposed for the third straight month that the central bank
keep its policy rate at the current level of around zero until its 2% inflation target is in sight. Mr. Miyao's
proposal was also rejected by 8-1.
•
The central bank voted unanimously to leave unchanged its policy rate, or the unsecured overnight call
loan rate, in a 0.0%-0.1% range.
•
Attention is already turning to the BOJ's next meeting in April, set to be chaired by Mr. Kuroda, if, as
expected, his nomination as the central bank's new governor is approved by parliament.
•
Analysts see the BOJ taking additional stimulus measures under Mr. Kuroda, who has criticized the
central bank's past policies. Some believe there is a possibility of two consecutive rounds of easing at
the policy board's April 3-4 and April 26 meetings.
20
Wall street wrapped up one of the best weeks this year
21
Yen at its weakest against the dollar for 3 ½ years
22
Major Interest Rate Forecasts
Market yield
(March 10)
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
US 10-year
2.04
1.84
1.99
2.13
2.29
2.51
2.67
Fed Fund Target Rate
0.25
0.25
0.25
0.25
0.25
0.25
0.25
1.52
1.60
1.71
1.81
1.92
2.04
2.21
0.75
0.75
0.75
0.75
0.75
0.63
0.75
2.06
0.50
1.98
0.50
2.09
0.50
2.23
0.50
2.40
0.50
2.52
0.50
2.64
0.50
Rate (%)
United States
Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg
23
The Week Ahead,,,
Economic Data Release Calendar
March 10, 2013 - March 15, 2013
Date
Currency / Event
10-Mar Sun JPY Machine Orders (YoY)
JPY Japanese Parliament May Vote on BoJ Governor
Nominations
11-Mar Mon EUR German Imports s.a. (MoM)
EUR German Trade Balance (euros)
EUR German Current Account (euros)
EUR German Exports s.a. (MoM)
EUR Italian Gross Domestic Product s.a. and w.d.a. (QoQ)
EUR Italian Gross Domestic Product s.a. and w.d.a. (YoY)
12-Mar Tue EUR German Consumer Price Index - EU Harmonised (YoY)
EUR German Consumer Price Index (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
13-Mar Wed EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Less Autos
NZD Reserve Bank of New Zealand Rate Decision
CNY Actual FDI (YoY)
AUD Employment Change
AUD Unemployment Rate
14-Mar Thu JPY Industrial Production (YoY)
CHF Swiss National Bank Rate Decision
USD Current Account Balance
USD Producer Price Index (YoY)
USD Producer Price Index Ex Food & Energy (YoY)
USD Fed Releases Comprehensive Capital Analysis and Review
EUR ECB Publishes Monthly Report
15-Mar Fri EUR Euro-Zone Consumer Price Index (YoY)
EUR Euro-Zone Consumer Price Index - Core (YoY)
USD Consumer Price Index (YoY)
USD Consumer Price Index Ex Food & Energy (YoY)
USD Industrial Production
USD U. of Michigan Confidence
GMT
Forecast
Previous
23:50
-0.30%
-3.40%
07:00
07:00
07:00
07:00
09:00
09:00
07:00
07:00
09:30
09:30
11:30
15:00
10:00
12:30
12:30
20:00
0.70%
14.4B
10.5B
0.50%
-0.90%
-2.70%
1.80%
1.50%
0.00%
-1.30%
12.0B
17.3B
0.30%
-0.90%
00:30
00:30
04:30
08:30
12:30
12:30
12:30
20:30
10:00
10:00
12:30
12:30
13:15
13:55
-2.00%
0.50%
0.50%
2.50%
-4.80%
10.0K
5.50%
0.00%
-$112.8B
1.70%
1.80%
1.30%
1.80%
2.00%
0.30%
78.00
1.80%
1.50%
-1.70%
-£3201
88.90
0.00%
-2.40%
0.10%
0.20%
2.50%
-7.30%
10.4K
5.40%
-5.10%
0.00%
-$107.5B
1.40%
1.80%
1.80%
1.30%
1.60%
1.90%
-0.10%
77.60
24
Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate
Expected Rate
Decision
March 20
0.25%
0.25%
European Central Bank (ECB)
April 4
0.75%
0.75%
Bank of England (BoE)
April 4
0.50%
0.50%
Bank of Japan (BOJ)
April 3
0.10%
0.10%
Swiss National Bank (SNB)
March 14
0.00%
0.00%
Bank of Canada (BOC)
April 17
1.00%
1.00%
Reserve Bank of Australia (RBA)
April 3
3.00%
3.00%
Reserve Bank of New Zealand (RBNZ)
March 13
2.50%
2.50%
Central Bank
Month
US Federal Reserve (FOMC)
25
Regional
26
U.S aid to Egypt with strings attached
•
Last week, US secretary of state John Terry visited Egypt
and offered more aid to help revive its economy. Kerry
pledged $250 million as the first part of a larger package of
aid to Egypt, acknowledging the country's "extreme needs."
The total aid expected by the U.S to Egypt this year is
expected to be $1 billion.
Egyptian Treasury Yields (%)
As of March 10
14.2%
14.0%
13.8%
13.6%
13.4%
•
Egypt’s official foreign currency reserves went down to
$13.5 billion in February, which cover less than three
months of imports. However, U.S. officials say that
accessible, liquid reserves total only $6 billion to $7 billion.
•
Egypt will get the aid after Morsi's assurance that he plans
to complete the IMF process, referring to a $4.8 billion loan
Egypt is currently negotiating with the IMF. Negotiations
are expected to continue this month, after Egypt submitted
it’s final draft to the IMF last week.
•
Egypt's urban consumer inflation jumped by 8.2% in the 12
months to February as a sliding Egyptian pound pushed up
food prices. The rate jumped from an annual 6.3% in
January, putting inflation at the highest since May last year.
13.2%
13.0%
12.8%
3M
6M
9M
12M
27
GCC Economic News Highlights
•
UAE maintains its position as second largest Arab economy: The UAE
maintained its position as the second largest Arab economy in 2012 after
its gross domestic product (GDP) swelled by $23 billion in current prices
to reach $375 billion, an increase of 6.5%. The UAE has remained the
second largest Arab economy after Saudi Arabia for more than 10 years
because of a steady and rapid growth in its GDP as a result of high public
spending, a surge in oil prices and a steady increase in private sector
investment.
•
Moody's placed subordinated debt ratings of 12 GCC banks on review
for possible downgrade; all other ratings and outlooks unaffected:
Moody's has placed on review for possible downgrade the subordinated
debt ratings of 12 banks in the (GCC) countries.
The affected banks are Arab National Bank, Banque Saudi Fransi, Abu
Dhabi Commercial Bank, Emirates NBD PJSC, First Gulf Bank,
Mashreqbank PSC, Commercial Bank of Qatar, Doha Bank, Qatar
National Bank, Burgan Bank, Bank Muscat and BBK B.S.C.
While Moody's continues to view government support for banks across
GCC countries as high, the rating agency's decision to initiate a review
for possible downgrade of the 12 banks' subordinated debt ratings is
driven by the growing risk of 'bail-ins' for subordinated debt
instruments. This is as a result of Basel III guidelines on bank capital and
regulatory efforts aimed at enhancing market discipline.
•
•
28
GCC Economic News Highlights
•
•
•
•
Qatar’s Central Bank to issue 7 billion riyals debt:
Qatar's central bank said on Sunday that it would issue
4 billion riyals ($1.1 billion) of local currency sukuk and 3
billion riyals of local currency conventional bonds, as
part of an adjustment of monetary policy and in order
to help commercial banks meet Basel III liquidity
requirements.
The central bank did not give the time period for these
issues; it said the timing would be announced later.
Local currency debt will be issued every quarter, half
with three-year maturities and half with five-year.
Sukuk Issuance totals $22 billion by end of February:
Sukuk issuance momentum continues in 2013 with a
total issuance of $22.0bln to date. The Malaysian
market makes up 70% of the total market share.
Governments remained the majority issuers during
February, with sovereigns and government-related
entities accounting for over 90% of issuances during the
month.
29
GCC interbank rates
GCC Interbank Rates (%)
2.0%
Qatar (QIBOR)
1.8%
1.6%
UAE (EIBOR)
Saudi Arabia (SAIBOR)
Bahrain (BHIBOR)
1.4%
Kuwait (KIBOR)
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
1M
3M
6M
12M
30
Comparative MENA Markets
For the period 03/03 – 08/03
31
Locally
32
Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury
Window Rate
Market yield
(March 10)
Q1 2013
Q2 2013
Q3 2013
Q4 2013
7.95
4.00
7.95
4.00
7.75
4.00
7.95
4.25
8.25
4.25
Source: CAB forecasts
•
The excess liquidity in the banking system
has increased following the $500 million
USD denominated bond issuance and less
demand by the government on domestic
debt.
•
The increase in excess liquidity is
anticipated to place downward pressure
on JOD interest rates, especially if foreign
reserves continues it upward trend.
33
Less Pressure on Domestic Liquidity & Interest Rates
Up to March 10th 2013
Sum of new issuances:
745 million JOD
Jordanian Government
Sum of bonds redeemed
:
822 million JOD
Net: -77 million JOD
•
Since the beginning of the year, government bonds worth 822 million JOD have matured,
while new issuances amount to 745 million JOD.
•
This means that domestic debt has decreased by JD 77 million.
•
This fall in government borrowing in JD is due to the 500 million USD denominated internal
bond issued by the Jordanian government last month, providing the sufficient funds the
government needs to meet its expenses.
34
Government Bonds Coverage Ratio Up since start of 2013
•
Coverage ratio for 3 year
government bonds have gone up
since the beginning of 2013. This
shows a sign of increased
appetite
for
the
local
government bonds that provide
a return of 8.6% for 3 years.
•
This increased appetite is also
supported by the increase in
excess liquidity for the same
period.
•
Higher coverage ratios have
encouraged CBJ to reduce the
amounts of weekly and monthly
repos with commercial banks.
35
Negotiations with IMF
•
The Jordanian government met with the IMF staff last week in order to negotiate the
next step in the economic reform program. The IMF is directing the Jordanian
government to go ahead with raising tariffs on electricity and water, while government
officials are trying to delay the inevitable decision as long as possible.
•
Jordan must tackle a soaring energy import bill by reducing power subsidies to get its
economy back on track, the International Monetary Fund said on Wednesday.
•
It is expected that the government will eventually raise electricity tariffs in June.
•
The IMF board is expected to meet in mid April to decide on granting the Jordanian
government the second tranche of $385 million of the agreed loan.
•
Reappointed Prime Minister Dr. Abdullah Ensour has refused concerns by members of
parliament to retract the decision taken to lift subsidies on oil in November 2012.
•
The PM’s stern decision is a well received sign by the IMF that the Jordanian government
is committed to the economic reform program.
36
Amman Stock Exchange
For the period 03/03 – 07/03
ASE free float shares’ price index ended the week at
(2059.9) points, compared to (2042.4) points for the last
week, posting a decrease of 0.85%. The total trading
volume during the week reached JD(78.9) million compared
to JD(63.8) million during the last week. Trading a total of
(110.7) million shares through (36,841) transactions
The shares of (181) companies were traded, the shares
prices of (84) companies rose, and the shares prices of (52)
declined.
Top 5 losers for the last week
Top 5 gainers for the last week
Stock
% chg
Stock
% chg
United Arab Investors
66.67%
Assas For Concrete Products Co.ltd
(17.39%)
Darat Jordan Holdings
26.32%
International Brokerage & Financial Markets
(13.64%)
Al-tahdith For Real Estate Investments Company
23.94%
Jordanian Expatriates Investment Holding
(13.21%)
Union Investment Corporation
23.53%
The Arab International Food Factories
(13.04%)
The Investors And Eastern Arab For Industrial And Real Estate
Investments
20.00%
Darkom Investmen
(11.76%)
37
Local Debt Monitor
Latest T-Bills

As March 10, the volume of excess reserves, including the overnight window deposits held at the CBJ
JD(2,094) million.
3 months T-Bills
Issue Date
Maturity Date
Size - million
Yield (%)
29/2011
14/12/2011
14/03/2012
50
2.898%
28/2011
12/12/2011
12/03/2012
50
2.844%
6 months T-Bills
Issue Date
Maturity Date
Size - million
Yield (%)
02/2012
14/02/2012
14/08/2012
50
3.788%
01/2012
23/01/2012
23/01/2012
50
3.433%
27/2011
08/12/2011
08/06/2012
50
3.232%
9 months T-Bills
Issue Date
Maturity Date
Size - million
Yield (%)
05/2012
04/03/2012
04/12/2012
75
4.285%
04/2012
29/02/2012
29/11/2012
75
4.229%
03/2012
22/02/2012
22/11/2012
75
4.169%
1 year T-Bills
Issue Date
Maturity Date
Size - Million
Coupon (%)
03/2013
26/02/2012
26/02/2014
70
6.750%
02/2013
14/02/2012
14/02/2014
50
6.750%
01/2013
27/01/2012
27/01/2014
70
6.750%
22/2012
24/12/2012
24/12/2013
60
6.750%
38
Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T0813
18/02/2013
18/02/2015
80
7.950%
T0513
05/02/2013
05/02/2015
60
7.950%
T0313
29/01/2013
29/01/2015
70
7.950%
3 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T1113
07/03/2013
07/03/2016
75
8.584%
T1013
04/03/2013
04/03/2016
70
8.600%
T0913
20/02/2013
20/02/2016
60
8.600%
4 year T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T0312
15/01/2012
15/01/2016
37.5
7.246%
T4211
16/11/2011
16/11/2015
50
6.475%
5 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T0712
11/03/2012
11/03/2017
75
7.750%
T0412
19/01/2012
19/01/2017
50
7.489%
Public Utility Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
PB55 (Water Authority)
05/09/2012
05/09/2015
26
8.134%
PB005 (Housing & Urban Development)
29/07/2012
29/07/2015
20
7.966%
PBO12 (National Electricity)
26/04/2012
26/04/2017
150
7.724%
39
Prime Lending Rates
40
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
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
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41