Transcript Local Debt Monitor

Interest Rate Monitor
July 21, 2013
Brief Overview
International
MENA Region
US: Bond yields drop further as Bernanke again
emphasizes that the Fed is in no hurry to withdraw
its monetary-policy support
Egypt: Foreign reserves increase to $20bn after
GCC aid
Eurozone: Bond market remain calm despite
increased political tensions within the periphery
GCC News Highlights
UK: BOE minutes of meeting show no sign of further
QE, with a shift towards forward guidance, as
economic data point to stronger recovery
China: GDP growth slowdown accelerates, and
government starts first steps to liberalizing financial
markets
GCC interbank rates
Markets overview
Major Indices: US stocks give back Bernanke gains
Commodities and Currencies: Gold up 5% this month
Central Bank Meeting Calendar
Comparative MENA Markets
Local Economy
New and analysis
 Trade deficit decrease by 2.6% in the first
5 months of the year
Markets overview
 Amman Stock Exchange
Interest Rate Forecast
 Local Debt Monitor
The Week Ahead
 Prime Lending Rates
2
International
3
Treasuries capped a second consecutive weekly yield drop as
markets digested signs that the Fed is in no hurry to withdraw its
monetary-policy support
•
U.S. Treasuries prices rose on Friday as disappointing
earnings from technology giants Google and Microsoft
weighed on stocks and rekindled safe-haven bids for
bonds, pushing benchmark yields to two-week lows.
•
Moreover, Fed Chairman Ben Bernanke reassured
investors on several occasions over the past week that the
central bank is in no rush to pull back on buying bonds.
•
After soaring to a 23-month peak of 2.756% on July 8, the
benchmark 10-year note's yield fell to 2.49%, down 10
basis points on the week.
As of July 19
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years
0.01%
0.03%
0.07%
0.30%
1.30%
2.48%
3.56%
1 Week Ago A Month Ago
0.03%
0.04%
0.07%
0.35%
1.42%
2.59%
3.64%
0.02%
0.05%
0.08%
0.33%
1.31%
2.41%
3.51%
4
Bernanke’s testimony: no "preset course" for the Fed's $85 billiona-month bond-buying program
•
Ben Bernanke emphasized in his 2-day Congressional testimony that monetary policy will not be tighter
for the foreseeable future and that it's too early to tell when tapering will begin.
•
Bernanke again tried to draw the distinction between paring back bond purchases and raising interest
rates, implying that policy will remain accommodative even if the Fed ends quantitative easing since rates
will remain near zero.
•
He also said that it was too early to say when the first reduction in bond buying will happen. Bernanke
said the Fed wants to see sustainable improvement in labor markets as it weighs reducing bond
purchases.
•
The Fed’s asset purchases depend on economic and financial developments, if economic data turn out to
be worse than the Fed’s forecast, the purchases can go up, conversely, if data show marked improvement
then tapering might occur faster than previously outlined.
•
Bernanke had laid out a timeline at a June 19 news conference that has the Fed reducing its monthly
bond purchases later this year if the economy improves the way the Fed expects, and ultimately end the
program by mid-2014.
•
Nevertheless, Mr. Bernanke seemed to emphasize that headwinds for the economy and tepid inflation
might keep the easy-money policies in place longer than the Fed indicated last month.
5
Economic headwinds and tepid inflation might keep easy-money
policies in place longer than expected
•
Meanwhile, Bernanke played down Wednesday the unemployment rate's
weight in the central bank's calculation of when to start raising short-term
borrowing costs.
•
Since last December, the Fed has been saying short-term interest rates—now
near zero—won't go up at least until the jobless rate drops below 6.5%, and
as long as inflation stays near 2%.
•
But Mr. Bernanke suggested the Fed might keep rates near zero long after
the jobless rate, which was 7.6% in June, falls below that 6.5% threshold. It is
a point he has made before, but he placed new emphasis on it in the first of
two days of congressional testimony about the economy and monetary
policy.
•
If very low inflation accompanies a drop in unemployment, Mr. Bernanke
said, the Fed might feel less urgency about pulling back on cheap credit.
•
Moreover, the jobless rate may continue to fall partly because people are
leaving the labor force, which means they are no longer looking for work and
aren't counted as unemployed. In this case, Mr. Bernanke said, the Fed might
disregard a falling jobless rate as a misleading indicator of the economy's
vigor and keep rates low even after the rate falls below 6.5%.
6
Bernanke says recent financial tightening 'unwelcome'
•
Meanwhile, Mr. Bernanke Thursday said recent financial tightening which is associated with the rise in
interest rates is "unwelcome".
•
Laying out several reasons for the recent backup in rates, Mr. Bernanke said one likely culprit is the
unwinding of "leveraged and perhaps excessively risky" positions by investors lulled by the Fed's ultraeasy money policies.
•
"It's probably a good thing to have that happen, although the tightening that's associated with that is
unwelcome," Mr. Bernanke told members of the Senate Banking Committee.
•
Fed officials were jarred four weeks ago by the sharp market reaction to the central bank's tentative
timetable for winding down the bond-buying program. Stocks initially fell, though they have recovered,
and interest rates shot up.
•
Mr. Bernanke also said Thursday that at least part of the interest-rate spike in recent weeks happened
because investors misinterpreted what he was trying to say at that news conference.
•
In other news, global finance chiefs sought to reinforce the global economic recovery by promising
“carefully calibrated” policies that won’t spook markets. The Group of 20 nations heeded calls from
emerging-market countries to guard against shockwaves when U.S. growth is secure enough for the
Federal Reserve to cut back on its bond buying, according to a statement issued after their meeting in
Moscow Friday.
7
US inflation accelerated the most in five months
•
U.S. consumer prices in June posted their sharpest rise in five months,
a pickup in inflation that could give Federal Reserve officials more
confidence about scaling back their stimulus.
•
After tepid springtime inflation readings, the consumer-price index
advanced a seasonally adjusted 0.5% in June, the Labor Department
said Tuesday. The gain, led by a sharp increase in gasoline prices, was
slightly larger than analysts expected.
•
Consumer prices are up 1.8% from a year earlier. Excluding the volatile
food and energy categories, prices rose a milder 1.6% over the past
year. Both figures are still shy of the Fed's 2% target.
•
Fed policy makers are closely monitoring inflation measures. Tepid
inflation has led some officials to argue for delaying the curtailment of
stimulus.
•
Separately, U.S. industrial production rose in June as factories built
more autos and machinery, a sign that businesses and consumers may
be pulling the sector out of its spring slump. Industrial output
increased a seasonally adjusted 0.3% last month.
8
Moody’s upgrades US credit outlook
•
America is pulling out of its economic malaise, slowly but surely,
according to the Moody's Investors Service rating agency.
•
Moody's has raised its outlook on U.S. debt to stable, shedding the
negative outlook that it has maintained for nearly two years.
•
The move reflects a decline in the U.S. budget deficit, which is
expected to continue to shrink over the next few years, in conjunction
with a moderately improving U.S. economy, Moody's said in its report
released late Thursday.
•
Moody's also affirmed its top rating -- Aaa -- for the U.S. government,
noting that the nation's "debt trajectory is on track to meet the
criteria laid out in August 2011 for a return to stable outlook."
•
The rating agency referred to an estimate from the Congressional
Budget Office that the budget deficit for the 2013 fiscal year is
expected to decline to 4% of GDP from its 2012 level of 7%.
•
The U.S. gross domestic product rose at a 1.8% annual rate during the
first quarter of the year, which is anemic, but still positive.
9
Recent economic data point to downside risks:
US retail sales disappoint
•
Consumers moderated their spending in June, pointing to a weaker US
economy in the second quarter.
•
Retail sales grew a softer-than-expected 0.4% last month, the
government said Monday. If purchases of cars and gasoline are
excluded—these purchases tend to be volatile—spending actually
dropped 0.1%, the first decline in a year.
•
The June report suggests consumers remain cautious about buying
anything other than basics four years into the recovery. Consumer
spending, which drives about two-thirds of the demand in the
economy, has powered much of the nation's growth this year but
remains much weaker than in past recoveries.
•
A string of lukewarm economic data has led economists to downgrade
their estimates for growth between April and June, with many now
expecting growth to fall below 1%. Yet economists are hoping that the
overall economy will pick up in the second half of the year.
•
Spending could pick up in coming months. Rising home prices and this
year's rally in the stock market are making some Americans more
confident about the economy and willing to spend. Job growth has
picked up in recent months, while Americans' paychecks are also
starting to grow, albeit slowly.
10
Recent economic data point to downside risks:
Signs that that the recovering housing sector might be in trouble
•
Construction of new homes fell sharply in June, highlighting
risks to the sector's recovery from rising mortgage rates and
supply constraints.
•
Housing starts declined 9.9% in June from a month earlier to a
seasonally adjusted annual rate of 836,000 units, the
Commerce Department said Wednesday. Building permits, a
key measure of future construction activity, fell by 7.5%. The
readings were much worse than expected, with most
economists forecasting modest gains in both categories.
•
But the decline in housing starts was primarily driven by a 26%
drop in multifamily housing, a category that has traditionally
been volatile and has lately shown signs of overbuilding. Starts
for single-family homes, which account for the largest share of
activity, fell by 0.8%. Single-family permits rose 0.1%.
•
The housing sector has been strengthening in recent months as
low prices and steady employment gains have fueled stronger
demand. The rebound has been providing key support to the
U.S. economy, helping to offset public-sector budget cuts and a
struggling manufacturing sector hit by weak overseas demand.
11
Peripheral concerns due to political instability continue to
be the highlight of the week
•
Political instability continues within the euro
area’s periphery. Governments in Portugal and
Greece have buckled under the pressures of
international
bailout
programs.
An
embezzlement scandal this week engulfed
Mariano Rajoy, Spain’s prime minister. Italy’s
coalition remains fragile.
•
Such crises, however, have not blown up into
the sort of eurozone-wide systemic threat that
previously sent financial markets reeling.
•
Bond markets remained somewhat calm, as
investors seem to believe that the European
Central Bank will act as a backstop if an
existential eurozone crisis re-erupted.
•
Despite political tensions in Madrid and Rome,
Spanish 10-year yields, which move inversely
to prices, fell back below 4.7% this week.
Spain’s 10-year yields fell 10bps, while Italy’s
fell 7 bps.
12
Portugal is not out of the woods, as political turmoil
escalates
•
The good news was that Portugal's government survived a vote of no confidence on Thursday, but the country was
not out of the woods. The socialist party, which backed the vote of no-confidence on Thursday, still had to come to
an agreement with the two ruling coalition parties over €4.7 billion in spending cuts and austerity measures to
keep the country's bailout on track until mid-2014.
•
However, Portugal's three main parties failed Friday to agree on a "national salvation pact" to keep the country's
international bailout on track, raising the possibility that the president could call immediate new elections.
•
The latest twist in a political crisis that has dragged on for weeks will likely once again spook investors. It will also
create a big problem for the country's lenders—the EU and the IMF—which had hoped to use Portugal as a
success story for its austerity prescription.
•
But Portugal has seen domestic support for its austerity program wane after two years of relative calm. Earlier this
month, two ministers resigned amid increasing pressure to soften the program, which has been blamed for a
three-year recession and a jump in unemployment to more than 17%.
•
The yield on Portugal's benchmark 10-year bond fell back below 7% on Friday, after the vote on Thursday. But the
latest turmoil could reignite investor fears and push yields back up nest week.
•
In separate news, the Greek parliament passed the austerity bill needed to release the next EU/IMF tranche. The
cuts, which were demanded by the country’s creditors in return for bailout loans, include thousands of public
sector job losses. Around 12,500 staff will be subject to involuntary transfers, while 15,000 layoffs are likely by the
end of next year.
13
Eurozone’s prospect for growth look bleak
•
Exports from the 17 countries that share the euro slumped in May, as did imports, an indication that
the currency area's longest postwar contraction may have continued into a seventh straight quarter.
•
The EU's statistics agency said Tuesday that adjusted for seasonal factors, exports from the eurozone
to the rest of the world fell 2.3% from April, while imports were down 2.2%, a sign of weak domestic
demand.
•
It was the second straight month in which exports fell sharply, and the largest month-to-month fall
since June 2011.
•
With rising unemployment, low wage growth and government cutbacks damping domestic demand,
rising exports are essential if the eurozone is to return to growth. But with growth in many other
parts of the global economy faltering, a significant pickup in overseas sales appears unlikely in the
months ahead.
•
The eurozone economy shrank in the first quarter of the year as exports declined. Eurostat won't
release its first estimate of gross domestic product in the three months to June until mid-August, but
business surveys and economic data releases suggest output fell again.
•
The IMF last week said it expects the currency union's economy to contract this year by 0.6% before
a 0.9% rebound next year. It also urged the ECB to cut policy rates and use other tools to spur
lending.
14
BOE was unanimous on stimulus at July meeting
•
The Bank of England's nine monetary policy makers all voted
to keep the central bank's existing stimulus programs on
hold earlier this month, according to minutes released
Wednesday.
•
Even though the vote at the Monetary Policy Committee's
meeting on July 3 and 4 produced a unanimous result—the
first since October 2012—some members still believed more
stimulus would be needed. Paul Fisher and David Miles had
previously called for an increase in asset purchases.
•
But they wanted to see what options besides asset
purchases will be available for boosting the economy under
the leadership of Mr. Carney, who took the reins at the BOE
at the start of July.
•
Those options are likely to include forward guidance—
explicit communication by the bank on how long it expects
to keep interest rates and asset purchases at the current
levels.
•
The pound rose on currency markets following the release of
the minutes, suggesting traders interpreted the vote as a
signal the U.K.'s central bank is unlikely to expand its bondpurchase program.
15
Markets now await Carney’s forward guidance
•
Wednesday's minutes suggested there were three camps within the committee at July's meeting. In
addition to those wanting stimulus now but undecided on what form it should take, others were open
to stimulus at some point in the future if the recovery runs out of steam, while a third group saw little
further need for asset purchases given their expectation that the economy will continue to recover, as
well as a fear that inflationary pressures will mount.
•
Jobs figures released Wednesday will likely strengthen the resolve of those opposed to more stimulus
on the grounds that the economy is growing. The number of Britons claiming unemployment benefit
fell by 21,200 in June—the biggest fall since June 2010. A wider measure of unemployment showed the
number of Britons out of work fell 57,000 in the three months to May, although the unemployment
rate was unchanged at 7.8%.
•
In August, the MPC's members will decide on a more formal framework for giving guidance on likely
future policy, potentially similar to the forward guidance implemented by Mr. Carney in his former role
heading the Canadian central bank.
•
The IMF in its final surveillance report into the UK economy, gave some backing for Canrey’s forward
guidance, but Fund staff warned that that “it is unlikely that the forward guidance by itself could
instigate a recovery”.
•
The Fund again emphasized that the UK remains a long way from a strong and sustainable recovery.
16
U.K. retail sales increase , a positive indication for Q2 GDP
growth
•
U.K. retail sales rose sharply in the second quarter of the year, boosted
by a stronger housing market and adding to evidence that an economic
recovery that started in the first quarter gained momentum between
April and June.
•
UK retail sales rose by 0.2% in June from the month before, helped by
department store discounts. The Office for National Statistics said the
figure meant sales were up 2.2% from a year earlier.
June's modest rise compares with May's strong growth of 2.1%, but will
add to hopes of UK economic revival.
•
•
The rise in consumer spending comes at a time when real wages are still
falling, with consumer prices rising more rapidly than salaries. But a
pickup in house prices and the lower cost of repaying mortgages appear
to be supporting consumer spending.
•
Forecasts are for gross domestic product to increase 0.6% from the first
quarter, when it rose 0.3%. The Office for National Statistics will publish
the data, a first estimate, on July 25.
•
Growth is forecast by economists to be led by services, the largest part
of the economy, with recent reports suggesting rising house prices and
falling unemployment are spurring consumer confidence.
17
UK inflation accelerates in June
•
U.K. consumer price inflation accelerated in June, worsening a
squeeze on consumer spending that threatens the country's
economic recovery.
•
The annual inflation rate climbed to 2.9% in June from 2.7% in
May, the Office for National Statistics said Tuesday. That is the
highest rate since April 2012.
The BOE targets inflation at 2.0% over the medium term
•
•
In its most recent set of economic forecasts in May, the BOE
predicted the inflation rate would continue rising until the middle
of this year, before falling to around its target rate in 2015.
•
The relatively high U.K. inflation rate has been caused in part by
growth in university tuition fees and regulated energy tariffs. In
concert with record-low rates of wage growth, it has resulted in a
long-running squeeze in workers' disposable income that has
throttled consumer spending and dented the economy's
prospects.
•
That squeeze is likely to persist calling into question the
sustainability of the country’s recovery.
18
China’s GDP slowdown accelerated in Q2
•
Growth in China, the world's second-biggest economy, has been
slowing since 2007's peak, but that slowdown has accelerated
recently.
•
China's second-quarter gross domestic product released early
Monday showed the economy expanded 7.5% from the year earlier,
putting the economy on track for its weakest year since the late
1990s.
•
Weighed down by declining exports and faltering investment, it was
the second consecutive quarter of weakened growth, confirming that
a rebound at the end of last year had been shortlived. China grew
7.7% year on year in the first quarter, down from its7.8% pace last
year.
•
There is a real risk that China will fall below the government’s target
of 7.5% growth in 2013. It would be the first time since the Asian
financial crisis 15 years ago that the Chinese government has missed
its annual growth rate.
•
China is trying to pull off a tricky rebalancing. It hopes to reshape its
economy to be less reliant on construction and heavy industry, and
more reliant on consumer spending.
19
Economic data continue to point to slowdown
•
To boost domestic consumption, the government has raised minimum
wages to put more money in people's pockets and loosened controls on
interest rates to give household savers better returns. It has tilted tax and
land incentives toward industries that cater to consumption, such as food
and autos, and away from heavy industries suffering from overcapacity, such
as steel making and ship building.
•
China also said Monday that industrial output rose 8.9% in June from a year
earlier, compared to a forecast of 9.1% and lower than May's 9.2% growth.
While not far from expectations, the data showed that the manufacturing
industry is increasingly struggling with the decline in exports.
•
Fixed-asset investment also disappointed slightly, with 20.1% growth in the
first half compared to a forecast of 20.2%.
•
Consumer spending was a bright spot, as retail sales accelerated to 13.3% in
June, compared with 12.9% growth in May. But disposable income growth
for urban households slowed, to 6.5% year-on-year in the first half, down
from 9.7% growth in the first half of 2012.
•
China's economic growth is still strong, compared with much of the world.
But recent single-digit expansion rates are a notable comedown from a
14.2% peak in 2007.
20
China takes first step to liberalize financial markets
•
China offered its strongest signal yet of worry over slowing growth and its commitment to
financial reform, as it loosened a key control over its banks.
•
China's central bank said late Friday that beginning on Saturday it will scrap controls on lending
interest rates and let financial institutions price loans by themselves. The move could let some
borrowers tap cheaper loans at a time when China's economy threatens to slow to a 20-year
low and as corporate and local government borrowers struggle with a growing burden of
interest payments.
•
Under China's banking system, the People's Bank of China sets guidelines for interest rates as
well as deposit rates—a system that has kept state-run banks flush with cash and ready to
fund the big spending projects that have long fueled China's growth.
•
The change, effective Saturday, eliminates a limit set at 30% below the current 6% benchmark,
according to a PBOC statement today.
•
The shift came after a cash squeeze in money markets curbed a record expansion in China’s
credit. The nation’s overnight interbank rate jumped to a record 12.85% on June 20 as the
PBOC withheld cash and restricted its communication, spurring speculation policy makers
wanted to expose banks using short-term funds too aggressively for longer-term investments.
•
Nevertheless, the move leaves on the to-do list more difficult but rewarding reforms, such as
liberalizing the interest rate on bank deposits—an important move toward increasing income
for China's households and driving higher consumption.
21
U.S. stocks give back Bernanke gains following lackluster
corporate results
22
Gold up 5% this month as fears of a rapid QE exit have
eased
23
Major Interest Rate Forecasts
Rate (%)
Market yield
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
(July 19)
United States
US 10-year
2.48
2.50
2.62
2.78
2.91
3.03
3.15
Fed Fund Target Rate
0.25
0.25
0.25
0.25
0.25
0.25
0.25
1.52
1.65
1.75
1.87
1.97
2.06
2.23
0.50
0.50
0.38
0.38
0.38
0.50
0.50
2.28
0.50
2.30
0.50
2.43
0.50
2.56
0.50
2.66
0.50
2.79
0.50
2.90
0.50
Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg
24
The Week Ahead,,,
Economic Data Release Calendar
July 21, 2013 - July 27, 2013
Date
22-Jul Mon
23-Jul Tue
24-Jul Wed
25-Jul Thu
26-Jul Fri
Currency / Event
GMT
Forecast
Previous
USD Existing Home Sales (MoM)
JPY Cabinet Office Monthly Economic Report for July
EUR Euro-Zone Consumer Confidence
JPY Adjusted Merchandise Trade Balance (Yen)
JPY Merchandise Trade Exports (YoY)
JPY Merchandise Trade Imports (YoY)
AUD Consumer Prices Index (YoY)
CNY HSBC Flash Manufacturing PMI
EUR German Purchasing Manager Index Manufacturing
EUR German Purchasing Manager Index Services
EUR Euro-Zone Purchasing Manager Index Manufacturing
EUR Euro-Zone Purchasing Manager Index Services
EUR Euro-Zone Purchasing Manager Index Composite
USD Markit US PMI Preliminary
USD New Home Sales (MoM)
NZD Reserve Bank of New Zealand Rate Decision
EUR German IFO - Business Climate
GBP Gross Domestic Product (QoQ)
GBP Gross Domestic Product (YoY)
GBP Index of Services (3Mo3M)
USD Initial Jobless Claims
USD Durable Goods Orders
JPY National Consumer Price Index Ex Food, Energy (YoY)
JPY National Consumer Price Index (YoY)
14:00
1.40%
4.20%
14:00
23:50
23:50
23:50
01:30
01:45
07:30
07:30
08:00
08:00
08:00
12:58
14:00
21:00
08:00
08:30
08:30
08:30
12:30
12:30
23:30
23:30
-18.30
-¥573.5B
10.00
13.60
2.50%
48.50
49.20
50.70
49.10
48.70
49.10
52.50
1.80%
2.50%
106.10
0.60%
1.40%
0.70%
340K
1.10%
-0.30%
0.10%
-18.80
-¥821.0B
10.10
10.10
2.50%
48.20
48.60
50.40
48.80
48.30
48.70
USD U. of Michigan Confidence
13:55
84.00
83.90
2.10%
2.50%
105.90
0.30%
0.30%
0.80%
334K
3.60%
-0.40%
-0.30%
25
Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Central Bank
Month
Current Rate
Expected Rate
Decision
US Federal Reserve (FOMC)
September 18
0.25%
0.25%
European Central Bank (ECB)
August 1
0.50%
0.50%
Bank of England (BoE)
August 1
0.50%
0.50%
Bank of Japan (BOJ)
August 7
0.10%
0.10%
Swiss National Bank (SNB)
September 19
0.00%
0.00%
Bank of Canada (BOC)
September 4
1.00%
1.00%
August 6
2.75%
2.75%
July 24
2.50%
2.50%
Reserve Bank of Australia (RBA)
Reserve Bank of New Zealand (RBNZ)
26
Regional
27
Egypt's foreign reserves reach around $20 billion in Arab aid
•
Egypt’s Treasury yields continued to fall by as much as 0.50% as
Egypt’s central bank governor stated that it’s FX reserves reached
around $20 billion as Gulf countries pledged $12 billion in aid in
the form of grants, central bank deposits and oil products.
•
According to the governor, the rise in FX reserves came after the
transfer of $3 billion aid package that was pledged by the UAE.
•
The fuel grants promised by the three countries will also relieve
the pressure on the foreign reserves.
•
Egypt has been suffering a high cost of subsidies for oil and energy
products since the beginning of the 2011 unrest, as its
government spends annually 20% of the GDP on fuel subsidies.
•
In February, Egypt's foreign reserves dropped to an alarming level
of 1$3.5 billion.
•
With aids from Qatar, Turkey and Libya, the reserves went up to
$16.04 billion at the end of May, but fell to $14.9 billion at the
end of June.
•
FX reserves stood at about $36 billion in January 2011, right
before the eruption of protests that ousted former President
Hosni Mubarak, and had been on a drastic decline since then.
Source: Bloomberg
Breakdown of grants and aid:
Foreign Aid
(US$ bn)
Saudi Arabia
Kuwait
UAE
Total
Grant
1.0
1.0
1.0
3.0
Central Bank
Deposits
2.0
2.0
2.0
6.0
Oil
Products
2.0
1.0
3.0
28
Egypt’s new finance minister says no to IMF aid
•
In light of the inflow of aid pledged by the Gulf countries,
Egypt’s new finance minister Ahmad Galal stated the Egypt will
not be needing an IMF loan soon.
•
Earlier this year, Egypt were seeking a much needed $4.8
billion loan from the IMF, but was halted due to requirements
on lifting subsidies on certain commodities, fearing social
unrest.
•
The new minister states that the aid from Arab states will carry
Egypt through its transition period, and has put IMF
negotiations on hold.
•
In other news, ratings agency S&P’s maintained Egypt’s long
and short-term sovereign credit ratings on Egypt at CCC+/C
with a “stable outlook” last week, noting that the source of
this reassurance is the pledged financial aid by Gulf countries.
•
It said: “these funds reduce the pressure on the balance-ofpayments and afford officials some time to address Egypt’s
economic and political challenges, which was the reason for
the downgrade in last May.”
Source: Bloomberg
29
GCC Economic Highlights:
Qatar's CPI rises by 3.4% YoY
•
The Ministry of Development Planning and Statistics (MDPS)
has released the consumer price index (CPI) for the month of
June, showing a 0.5% increase compared to May of 2013, and
a 3.4% increase compared to June 2012.
•
A comparison of the CPI of June 2013 with that of the
previous month by major groups shows increases in most
groups.
•
Transport and communications rose by 1.2%, entertainment,
recreation and culture by 0.9% and food, beverage and
tobacco by 0.8%. However, prices declined by 1.0% in
miscellaneous goods and services.
•
Comparing the index in June 2013 to June 2012, we find that
increases were recorded in all groups except miscellaneous
goods and services, where prices declined by 2.0%.
•
The highest increases recorded in various groups include:
(entertainment, recreation and culture) 8.1%, (rent, fuel and
energy) 6.8% and (transport and communications) 1.1%.
Source: Trading Economics
30
GCC Economic Highlights:
Saudi Inflation down to 3.5% YoY
•
Inflation in Saudi Arabia reversed a steady rise for many
months and declined in June for the fourth consecutive
month this year, driven by falling core inflation and food
prices.
•
Inflation in the world's largest oil exporter eased to 3.5% in
June compared with 3.8% in May.
•
The drop was driven by a slow down in food inflation to 6.1%
year-on-year (0.1% month-on-month) in June compared with
6.4% (0.2% month-on-month) in May.
Source: Trading Economics
•
On a monthly basis, prices slightly increased by 0.2%
compared with 0.1% in May.
•
Core inflation was mainly driven by the restaurant and hotel
group (down 4.4% year-on-year) followed by furnishings,
household equipment and maintenance (down 2.8% year-onyear).
•
However, inflation is expected food to increase in July due to
the strong demand in the fasting month of Ramadan while
strong housing demand will keep the upside risk to rental
inflation.
Source: Arab News
31
GCC Economic Highlights:
Saudi Arabia Real GDP growth slows sharply
•
Saudi Arabia’s economy, the Arab world’s biggest, slowed in the first
three months this year for the second straight quarter as oil output
shrank, registering the slowest rate of expansion since Q1 of 2011.
•
Gross domestic product grew at an annual rate of 2.1%, according to
official data released.
•
The primary cause of the economic slowdown was a 6.3% contraction in
the mining and quarrying sector (which is dominated by oil output).
•
Meanwhile, the slowdown in the construction and wholesale and retail
trade sectors needs to be viewed in the context of an exceptionally
strong performance previously. The construction sector still grew at a
healthy 6.7%, with retail and wholesale trade expanding at an even
quicker 6.9% (down from 8.9% in the final quarter of 2012).
•
Although the decline in the pace of economic expansion had been
expected, following the fall in oil output in the first few months of this
year, the extent of the slowdown came as something of a surprise. With
the exception of government services, every sector in the economy
witnessed a lower year-on-year rate of expansion in the first quarter
compared with the last three months of 2012.
32
GCC interbank rates
Source: Bloomberg
33
Comparative MENA Markets
For the period 14/07 – 19/07
34
Locally
35
Trade deficit decreased by 2.6% during first 5 months
•
Last week, the Department of Statistics released figures showing that
Jordan’s trade deficit decreased by 2.60% during the first 5 months of
the year, compared to the same period last year.
•
The trade deficit stood at 3,962.6 million JD for the first 5 months of
this year, compared to 4,070.4 million JD for the first 5 months of
2012.
•
Breaking down the deficit, we find that exports fell by 0.2% and
imports fell by 1.8%.
•
Exports fell to 2,284.8 million JD from 2,289.6 million JD for the time
period, while imports fell to 6,247.4 million JD from 6,360.0 million JD
for the same time period.
•
Looking at the drop in imports, we find that the oil bill fell by 33.2%,
to reach 1,476.8 million JD, compared to 2,211.2 million JD for the
first 5 months of this year compared to last year.
•
Although oil imports fell by 730 million JD in the first 5 months
compared to last year, imports only fell by around 100 million JD for
the same time period, indicating that non oil-imports increased by
more than 600 million JD, probably due to the influx of Syrian
refugees.
36
Trade deficit decreased by 2.6% during first 5 months
•
The table on the right shows a breakdown of Jordan’s
monthly oil bill.
•
Overall, the drop in the numbers indicate that Egyptian
gas levels are averaging higher than the past year, which
will reflect positively on the government’s budget deficit
and NEPCO losses.
•
Comparing Brent oil prices in May 2012 to May 2013, we
find that the average barrel price fell by $7, which could
have contributed to the drop in the oil bill in May.
•
However, given the recent disruption in Egypt’s gas
supply, we expect Jordan’s oil bill to increase in the month
of June compared to June 2012, unless significant
developments on the pipeline occurs.
•
Moreover, comparing Brent oil prices in June 2012 to June
2013, we find that the average barrel price increased
$7.41, which will add more pressure on June’s bill. This
will add pressure on Jordan’s FX reserves as and its
widening budget deficit.
January
February
March
April
May
Total
2012
488.7
334.0
482.9
560.2
345.4
2,211.2
2013
262.8
387.7
358.9
213.5
253.9
1,476.8
Nominal Change
-225.9
53.7
-124
-346.7
-91.5
734.4
37
Amman Stock Exchange
For the period 14/07 – 18/07
ASE free float shares’ price index ended the week at
(1944.0) points, compared to (1953.5) points for the last
week, posting a decrease of 0.49%. The total trading
volume during the week reached JD(32.0) million compared
to JD(31.9) million during the last week, trading a total of
(32.0) million shares through (12,248) transactions
The shares of (162) companies were traded, the shares
prices of (48) companies rose, and the shares prices of (69)
declined.
Top 5 losers for the last week
Top 5 gainers for the last week
Stock
% chg
Stock
% chg
Specialized Trading & Investment
18.64%
Alshamekha For Realestate And Financial Investments
(18.18%)
Arab Investors Union Co. For Real Estates Developing
16.13%
Jordan Phosphate Mines
(15.83%)
Specialized Investment Compounds
12.12%
International For Medical Investment
(13.51%)
Middle East Diversified Investment
11.88%
Arab Company For Investment Projects
(13.04%)
South Electronics
11.11%
Arab Electrical Industries
(12.35%)
38
Local Debt Monitor
Latest T-Bills

As of July 21, the volume of excess reserves, including the overnight window deposits held at the CBJ
JD(2,657) 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
23/07/2012
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 (%)
05/2013
21/07/2013
21/07/2014
50
5.535%
04/2013
15/04/2013
15/04/2014
75
5.345%
03/2013
26/02/2013
26/02/2014
70
6.750%
02/2013
14/02/2013
14/02/2014
50
6.750%
39
Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T3813
08/07/2013
08/07/2015
50
6.299%
T3613
24/06/2013
24/06/2015
50
6.129%
T2613
28/04/2013
28/04/2015
50
6.039%
Issue Date
Maturity Date
Size - million
Coupon (%)
T4013
17/07/2013
17/07/2016
50
6.745%
T3713
02/07/2013
02/07/2016
50
6.686%
T3513
18/06/2013
18/06/2016
50
6.546%
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%
Issue Date
Maturity Date
Size - million
Coupon (%)
T3913
11/07/2013
11/07/2018
50
7.692%
T3413
10/06/2013
10/06/2018
50
7.561%
Issue Date
Maturity Date
Size - million
Coupon (%)
PB59 (Water Authority)
30/06/2013
30/06/2018
20
7.786%
PB58 (Water Authority)
13/06/2013
13/06/2018
12
7.703%
PB57 (Water Authority)
06/06/2013
06/06/2018
15
7.684%
PB005 (Housing & Urban Development)
29/07/2012
29/07/2015
20
7.966%
3 years T-Bonds
4 year T-Bonds
5 years T-Bonds
Public Utility Bonds
40
Prime Lending Rates
41
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
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materials described in the report at any time without notice.

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
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
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42