Transcript Local Debt Monitor

Interest Rate Monitor
August 25, 2013
Brief Overview
International
US: Treasuries strengthen, putting a brake on yield’
surge to 3% as uncertainty over ‘tapering’ continues
Eurozone: Business activity points to further expansion
MENA Region
Egypt: Borrowing costs rise from 28-month
low
GCC News Highlights
UK: Economic recovery shows faster growth
China: Manufacturing activity rebounds sharply
Japan: Exports rise at fastest pace in three years
Emerging markets were in focus after significant
capital outflows that might threaten global economy
Markets overview
Major Indices: US stocks end week on bright note
Commodities and Currencies: Gold jumps to a twomonth high, near $1,400
Central Bank Meeting Calendar
GCC interbank rates
Comparative MENA Markets
Local Economy
New and analysis
 Fiscal deficit down 26% in first half of the
year, while trade deficit increased by 2.5%
Markets overview
 Amman Stock Exchange
Interest Rate Forecast
 Local Debt Monitor
The Week Ahead
 Prime Lending Rates
2
International
3
U.S. Treasury bond market strengthened, putting a brake on yield’s
surge toward 3%, last breached in July 2011
•
•
Earlier in the week, treasury yields jumped to two-year
highs, amid increasing worries that an improving
economy would prompt the Fed to start slowing the flow
of liquidity by tapering bond purchases as early as
September. On Thursday, the yield reached 2.936% in
intraday trading, the highest since July 2011.
However, Treasury yields pulled back after disappointing
housing data where US new home sales tumbled 13.4% in
July, with the 10-year yield down 7bp on Friday, closing
the week down 1bp at 2.82%.
As of August 23 1 Week Ago A Month Ago
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years
0.02%
0.03%
0.06%
0.38%
1.62%
2.82%
3.80%
0.05%
0.05%
0.07%
0.35%
1.57%
2.83%
3.86%
0.02%
0.03%
0.07%
0.35%
1.38%
2.59%
3.65%
4
U.S. Fed minutes left markets uncertain, underscoring the
importance of economic growth
•
Federal Reserve officials reaffirmed their plan to try winding down an easy-money program that
has charged up global markets but left investors uncertain again about when or how aggressively
they would move.
•
Minutes of the Fed's July 30-31 policy meeting, released Wednesday, suggested officials were on
track to start winding down the $85 billion-a-month bond-buying program by the end of the
year, possibly as early as September, if the economy strengthens as they expect.
•
The Fed minutes showed that "few" officials favored reducing its bond-purchase programs soon,
while a "few" urged more caution.
•
The minutes were, however, a bit more uncertain than in June about whether economic growth
would pick up as they forecast and about the gains they were seeing in the job market. If
anything, the minutes underscored that the Fed's decision on any pullback will depend in large
part on how the economy is holding up—putting even more emphasis on coming data, including
the monthly jobs report due Sept. 6.
•
Reflecting the cautiousness shown in the minutes and their own uncertainty about how the
economy will perform in the months ahead, some Fed officials have begun talking about making
a small move when they do start pulling back on bond buying.
5
Minutes indicate that changes to forward guidance
thresholds are possible down the line
•
The Fed's deliberations have roiled global markets in the past few
months, pushing up U.S. interest rates and knocking down emerging
markets, which initially benefited from the Fed's easy-money policies.
•
Interest rates had stabilized in July but shot higher in August as
investors weighed the possibility that the Fed might move at the
Sept. 17-18 meeting. Officials have just four weeks to make a
judgment about moving then, and only a few more pieces of
important economic data, such as a jobs report for August.
•
Meanwhile, the most interesting part of the minutes was the
discussion about changes to the forward guidance on both asset
purchases and the fed funds rate. Current forward guidance calls for
exceptionally low interest rates to remain in place until the
unemployment rate falls to 6.5%, and as long as inflation does not
rise above 2.5%. Unemployment rate in July was 7.4%.
•
It is unlikely anything will be changed at the September meeting, but
several participants were willing to contemplate lowering the
unemployment threshold if additional accommodation were to
become necessary.
•
The impact if agreed would be to delay the first interest rate rise,
allowing for greater space between tapering and real tightening in
asset purchases.
7.0%: Target for Fed to end its bond buying program
6.5%: Target for Fed start conversation about raising
rates
6
U.S. housing sector facing concerns amid rising mortgage
rate
•
Sales of newly built homes fell sharply in July to the lowest level in nine months, heightening worries that higher
mortgage rates will slow the housing recovery.
•
New-home sales fell 13.4% in July from a month earlier to an annual rate of 394,000, the Commerce Department
said Friday. That was the steepest drop in three years and sent sales down to the lowest level since October. The
report also showed that June sales were lower than previously estimated.
•
The drop in new-home sales came at a time of concerns that higher mortgage rates, which effectively raise the
cost of buying a home, would scare away potential buyers. The average rate on a 30-year mortgage rose to 4.58%
this week, according to Freddie Mac, up from 4.40% a week ago and more than a point higher from the level in
May.
•
Many economists say it is still too early to tell how the higher rates are affecting the industry. But the big drop in
new-home sales could add to worries that overall sales, including previously owned properties, will slow in
coming months.
•
Nevertheless, even with the decline, new-home sales are still up on the year. Sales in July were 6.8% higher than a
year ago.
•
Meanwhile, other reports indicate that housing remains strong. Sales of previously owned homes rose 6.5% in
July from a month earlier to the highest level in nearly four years, the National Association of Realtors, said earlier
this week. Some economists said that might reflect buyers rushing to lock in ahead of higher rates. The median
price of homes sold that month continued to climb.
7
Eurozone bond market remains calm, though yields rose
slightly this week
•
Peripheral bond markets in the euro area
continue to perform, and despite a slight selloff, have not been greatly affected by the
general risk aversion in markets related to
Fed tapering. Fundamentals are improving in
these countries as signs of recovery are
materializing.
•
Preliminary eurozone purchasing managers’
data for August offered further evidence that
the region’s economy was picking up pace.
•
Ten-year-bond yields in Spain and Italy were
up 10pb and 14bp respectively, to end the
week at 4.46% and 4.33%.
•
Meanwhile, German sovereign debt also sold
off over the course of the week and the Bund
yield rose 1bp on Friday to 1.94% for a 4bp
gain over the five-day period.
8
Eurozone business activity points to further expansion
•
Eurozone business activity increased at its fastest pace in two years, a closely
watched survey of purchasing executives showed, adding to recent evidence that
the German-led recovery is beginning to spread to southern Europe.
•
The Purchasing Managers Index on Thursday suggested that the eurozone recovery
has extended in the summer months, after the bloc's GDP expanded 1.1%, at an
annualized rate, during the second quarter, breaking a string of six-straight
contractions.
•
The eurozone PMI increased 1.2 points in August to 51.7, according to the data firm
Markit, exceeding expectations. The index, which includes manufacturing and
services firms, was the highest since June 2011. Index readings above 50 signal
expansion in activity.
•
Nevertheless, the pickup appears modest, however, and insufficient to bring down
record-high unemployment or reduce large debt loads.
•
The PMI readings imply GDP growth rates of only around 1%, economists said,
about half the pace needed to bring unemployment in the region down from its
record-high 12.1%. Despite rising business activity, employment fell in August for a
20th-straight month, according to Markit.
•
Moreover, the fragility in the area’s growth was underlined by the contraction in
France’s activity in France, the eurozone's second-largest economy after Germany.
9
Flash PMIs add to recent evidence that the German-led
recovery is beginning to spread to southern Europe
•
Euro area flash PMIs once again came out better than
expected. Both manufacturing and service PMI for the
euro area have increased for four consecutive months
and are now above 50.
•
Manufacturing PMI increased to 51.3 in August from
50.3 in July while service PMI increased to 51.0 from
49.8 .
•
Germany's PMI rose to 53.4, a seven-month high, in part
because of rising exports. In contrast, France's index
slipped further below the 50 threshold, to 47.9 from
49.1.
•
With Germany and France largely canceling each other
out, much of August's PMI rise appears to have been
driven by Italy and Spain, analysts said.
•
GDP in these countries contracted last quarter, but at
much slower rates than in previous quarters.
10
Schäuble provokes a storm in admission that Greece will
needs more aid
•
In a sign of the currency area's problems, German Finance
Minister Wolfgang Schäuble said Tuesday that Greece will need a
third bailout, the bluntest admission by a top German official
that the €246 billion of international aid loans pledged so far
won't be enough to save the country from bankruptcy.
•
"There will have to be another program in Greece," Mr. Schäuble
told an election rally of his Christian Democratic Union party
near Hamburg, news agencies reported. The statement implies
that Greece will need a third bailout, raising prospect of a step
that could be deeply unpopular domestically, just five weeks
before national elections on Sept. 22.
•
Mr. Schäuble has previously warned Germany's parliament and
media that European taxpayers might have to lend Greece more
money. But his language on the campaign trail was less hedged
than before.
•
Other German officials, including Chancellor Angela Merkel, have
been taken pains to avoid making an explicit commitment to
more money for Greece, saying there was no need to discuss the
matter now, and that Greece's situation would be reviewed
later.
2013
forecast:
176%
11
Greece continues to face a deep problem of a ballooning
debt load
•
The eurozone's loan disbursements to Greece under its current program are set to end in mid
2014, while the International Monetary Fund will carry on lending to Greece until 2016. The
IMF estimates that Greece faces a financing shortfall of €11.1 billion in the next two years.
•
The IMF has grown increasingly impatient with European governments' unwillingness to face
Greece's uncovered financing needs. The fund has warned Europe that it won't release more
money for Greece unless Europe sorts out where Greece's funding will come from after mid2014. The issue is expected to come to a head this fall, after the German elections,
•
The thornier problem is that Greece's debt load has ballooned to a level far beyond what most
economists and investors think it can repay. Another loan package—although it would be
smaller than the previous one—would merely add to Greek debt.
•
Greece's public debt is expected to reach 176% of its total economic output this year, far above
the 120% level the IMF considers sustainable.
•
The IMF—which insists on its loans being repaid in full—has warned that Europe will have to
come up with ways to cut Greece's debt.
•
Germany has led Europe's resistance to outright debt forgiveness, saying writing down past
loans while extending new loans would break German law. Schäuble reiterated last Tuesday
that there would be no further debt haircut for Athens.
12
U.K. economy shows faster growth
•
The U.K. economy grew faster than previously though in the
second quarter, benefiting from a broad-based pick-up in activity
that looked to have put the country's recovery on a firmer footing.
•
Gross domestic product expanded 0.7% from the previous quarter,
months—0.1 percentage point higher than the initial reading July
25, data from the Office for National Statistics showed on Friday,
beating its initial estimate and economists' forecasts.
•
On an annualized basis the economy grew 2.9%, placing it
alongside Germany as the fastest-growing of the world's largest
industrialized economies in the second quarter. In comparison, the
U.S. economy expanded by 1.7% in the second quarter, while the
euro zone expanded at 1.1% and Japan at 2.6%.
•
The ONS said small upward revisions across all sectors of the
economy led to the overall increase. Economists said the revisions
indicate a more durable recovery taking place, British exports rose
at the fastest pace since late 2011 and business investment grew
faster than household spending, suggesting a shift towards more
balanced growth in an economy that has been driven mainly by
domestic consumption and imports.
13
Markets await Carney comments next week
•
But despite the U.K.'s stronger-than-expected expansion in the second quarter, which followed
growth of 0.3% in the first three months of the year, the country's economic output remains 3.2%
below its pre-crisis peak in the first quarter of 2008.
•
Economists said the economy still faces serious constraints, such as the government's austerity
measures and weak bank lending, while the continuing problems in the euro zone also present a
risk to the recovery.
•
In an effort to encourage spending and investment, the Bank of England said earlier this month it
would not raise borrowing costs while unemployment remained above 7%, a level it did not expect
to be breached for at least three years.
•
But the threshold may be crossed sooner if Britain's recovery maintains momentum, and since the
bank gave its forward guidance, the news on the economy has been predominantly upbeat.
•
Factories' order books looked in their best shape for two years in August, consumer confidence and
retail sales soared in July, and surveys found robust growth across manufacturing, construction and
services at the start of the third quarter.
•
In a speech next week, BoE governor Mark Carney is tipped to try to talk down expectations of an
earlier rise in the base rate, which have caused conditions to tighten on money markets.
14
China manufacturing activity rebounds sharply
•
China's crucial manufacturing sector picked up steam in August, a
further sign of stabilization in the world's second-largest economy.
•
A preliminary survey for HSBC’s Purchasing Managers' Index (PMI), a
key gauge of the sector's health, rose to 50.1 from 47.7 in July, as
orders picked up and piled stocks fell in August.
•
A reading above 50 shows expansion. For the first time in four months,
the HSBC reading has passed that point.
•
That follows better-than-expected data on industrial production and
exports in July. It indicates that the Chinese economy, which slowed to
7.5% year-over-year growth in the second quarter from 7.7% in the first
quarter, may now be regaining some of its lost momentum.
•
The uptick in growth likely reflects a combination of targeted
government support such as tax cuts and investment in railways and
slum renovation, as well as the delayed effects of a surge in lending
during the first months of the year.
15
Japan exports rise at fastest pace in nearly three years
•
Japanese exports rose 12.2% in the year to July after a 7.4% rise in June, at the fastest annual pace in
nearly three years as the benefits of a weak yen finally started to take hold, with a recovery in overseas
demand.
•
Japan still ran its third-biggest trade deficit on record at 1.02 trillion yen ($10.5 billion) in July, as the weak
yen and rising oil prices made energy imports ever more expensive, which may drag on corporate profits
ahead. Imports rose 19.6% in July, the biggest gain in three years .
•
The stronger exports show Japan’s economy is benefiting from a recovery in demand in Europe and the
U.S., and the yen’s 11% decline against the dollar this year. The health of the economy will be the key to
Abe’s decision in the next month on whether to raise a sales tax to 8% in April from 5% now, a step that
would drag on consumption while supporting the nation’s finances.
•
Japan's economy expanded for three straight quarters in April-June as Prime Minister Shinzo Abe's
reflationary policies brightened sentiment and bolstered personal consumption.
•
But growth slowed in the second quarter on an unexpected fall in capital expenditure, casting doubt on
whether the economy can withstand the pain from a planned sales tax hike next April.
•
Analysts expect the economy to head for a steady recovery, although some warn of risks such as the
continued slowdown in China, Japan's biggest trading partner.
16
Emerging markets have been in focus over the past
week
•
The potential tapering of Fed asset purchases from $85bn a month
has pushed up US interest rates and led to falling currencies in
emerging markets as capital flows back to the developed world.
•
Emerging economies like India, Brazil, Indonesia and countries in
Eastern Europe all benefited from large influxes in U.S. dollar-based
loans over last couple of years years.
•
But now, as the Fed prepares to slow and then eventually end its
simulative policies, the U.S. dollar is already rising versus foreign
currencies. Investors are pulling their money out of these countries,
triggering fears of a panic.
•
The Indian rupee, the Brazilian real, the Turkish lira, the South
African rand and Indonesia’s rupiah have all weakened substantially
since May, some losing 15% against the U.S. dollar, and others
reaching record lows Thursday, after Fed minutes signaled that
tapering is likely to go ahead.
•
This prompted a variety of responses from governments and central
banks, with the biggest move coming from Brazil unveiling a $60bn
currency intervention programme on Thursday
17
Fed warned of global risks to tapering
•
In a sign of growing concern among international policy makers, emerging
market wobbles was one of the main themes of the Fed’s annual central
bankers’ meeting in Jackson Hole on Friday.
•
Top officials discussed that lack of defenses in emerging markets to prevent
potentially huge capital outflows, leaving global financial stability at risk, as
one country after another was forced to liquidate holdings of foreign
reserves to shore up its currency.
•
Two papers presented in Jackson Hole urged central bankers to think of the
international repercussions of their own domestic policies. Christine Lagarde,
managing director of the International Monetary Fund, also delivered a
speech calling for more international cooperation.
•
The world needs to build “further lines of defense” against a possible
emerging markets crisis but the International Monetary Fund stands ready to
provide financial support if needed, its managing director Christine Lagarde
said on Friday.
18
US stocks end week on a bright note
19
Gold jumps to a two-month high at nearly $1,400
20
Major Interest Rate Forecasts
Market yield
(August 23)
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
US 10-year
2.82
2.66
2.77
2.91
3.05
3.17
3.23
Fed Fund Target Rate
0.25
0.25
0.25
0.25
0.25
0.25
0.25
1.93
1.68
1.77
1.89
1.93
2.08
2.17
0.50
0.50
0.50
0.50
0.50
0.50
0.50
2.71
0.50
2.46
0.50
2.55
0.50
2.65
0.50
2.78
0.50
2.85
0.50
3.00
0.50
Rate (%)
United States
Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg
21
The Week Ahead,,,
Economic Data Release Calendar
August 25, 2013 - August 30, 2013
Date
26-Aug Mon
27-Aug Tue
28-Aug Wed
29-Aug Thu
30-Aug Fri
Currency / Event
USD Durable Goods Orders
USD Dallas Fed Manufacturing Activity
EUR German IFO - Business Climate
USD S&P/Case-Shiller Composite-20 (YoY)
USD Consumer Confidence
GBP Nationwide House Prices n.s.a. (YoY)
EUR German GfK Consumer Confidence Survey
USD Pending Home Sales (MoM)
USD Pending Home Sales (YoY)
JPY Retail Trade (YoY)
EUR German Unemployment Change
EUR German Unemployment Rate s.a.
EUR German Consumer Price Index - EU Harmonised (YoY)
EUR German Consumer Price Index (YoY)
USD Gross Domestic Product (Annualized)
USD Initial Jobless Claims
GBP GfK Consumer Confidence Survey
JPY Nomura/JMMA Manufacturing Purchasing Manager Index
JPY Household Spending (YoY)
JPY Jobless Rate
JPY National Consumer Price Index Ex Food, Energy (YoY)
JPY National Consumer Price Index (YoY)
JPY Industrial Production (YoY)
JPY Vehicle Production (YoY)
JPY Construction Orders (YoY)
EUR German Retail Sales (YoY)
EUR Italian Unemployment Rate s.a.
EUR Euro-Zone Consumer Price Index - Core (YoY)
EUR Euro-Zone Consumer Price Index Estimate (YoY)
EUR Euro-Zone Unemployment Rate
CAD Quarterly Gross Domestic Product Annualized
CAD Gross Domestic Product (YoY)
USD U. of Michigan Confidence
GMT
Forecast
Previous
12:30
14:30
08:00
13:00
14:00
-3.60%
4.20%
4.40
106.20
12.20%
80.30
3.90%
7.00
-0.40%
9.10%
1.60%
-7K
6.80%
1.90%
1.90%
1.70%
336K
-16.00
50.70
-0.40%
3.90%
-0.20%
0.20%
-4.60%
-9.50%
21.90%
-2.80%
11.90%
1.10%
1.60%
12.10%
2.50%
1.60%
80.00
06:00
14:00
14:00
23:50
07:55
07:55
12:00
12:00
12:30
12:30
23:05
23:15
23:30
23:30
23:30
23:30
23:50
04:00
05:00
06:00
08:00
09:00
09:00
09:00
12:30
12:30
13:55
107.00
11.90%
79.30
3.30%
7.10
0.10%
-0.10%
-5K
6.80%
1.70%
1.70%
2.30%
-14.00
0.20%
3.90%
-0.20%
0.70%
2.00%
1.70%
12.10%
1.10%
1.40%
12.10%
1.60%
80.50
22
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)
September 5
0.50%
0.50%
Bank of England (BoE)
September 5
0.50%
0.50%
Bank of Japan (BOJ)
September 4
0.10%
0.10%
Swiss National Bank (SNB)
September 19
0.00%
0.00%
Bank of Canada (BOC)
September 4
1.00%
1.00%
Reserve Bank of Australia (RBA)
September 3
2.50%
2.50%
Reserve Bank of New Zealand (RBNZ)
September 11
2.50%
2.50%
23
Regional
24
Egypt's borrowing costs jump from 28-month low
•
Egypt’s Treasury yields rose from the lowest in more than two
years by as much as 0.30% as violence and unrest persisted in the
country.
•
The average yield on one-year notes increased 24 basis points to
12.92% and the six-month yield climbed 30 basis points to
12.47%, according to central bank data on Bloomberg.
•
Due to the events, demand for government debt is slumping,
forcing up borrowing costs. One-year bills sold Aug. 19 attained a
coverage ratio of 1.7, the lowest in seven weeks. The debt sales
are part of a government effort to raise 200 billion EGP this
quarter to fund the country’s growing budget deficit.
•
According to Planning Minister Ashraf el-Arabi, the deficit swelled
to about 14% of GDP at the end of the fiscal year in June, up from
10.8% a year earlier, while end of calendar year deficit is
estimated at 11.3% by the IMF (estimated before Mursi’s ousting).
•
According to data compiled by Bloomberg, Egypt, which spends
more than a quarter of its budget on interest payments, is facing
565 billion Egyptian pounds ($81 billion) of maturing debt by the
end of 2014, most of which is in the form of local treasury bills.
Source: Bloomberg
Source: Bloomberg
25
GCC Economic Highlights:
Qatar government spending growth slows sharply in 2012/13
•
Qatar’s government spending rose 2.2% to a record 178.2 billion riyals
($48.9 billion) in its last fiscal year, only slightly missing the target of
178.6 billion riyals for its fiscal year that ended in March. Average
annual growth rate for government spending from 2002-2012 is 24%.
•
This is the first time the government’s annual spending undershot its
budget plan since 1990; a sign of the difficulties Qatar is facing in
pushing forward huge and complex infrastructure projects.
•
Expenditure on development was 49.3 billion riyals, well below the
62.1 billion riyals which the government had originally earmarked for
the year. Public sector wages increased by 15% during the fiscal year to
reach a record 34.1 billion riyals.
•
However, revenue jumped 24.7% to a record 277.4 billion riyals.
Revenues from oil and gas sales accounted for roughly 62% of income
in 2012/13, down from 70% in the previous year because of a rise in
investment returns and other revenue.
•
Therefore, the government's budget surplus more than doubled to a
record 99.2 billion riyals last fiscal year, or 14.2% of GDP
•
The government plans to raise spending to 210.6 billion riyals in the
current fiscal year as it steps up the infrastructure building program.
Source: Trading Economics
26
GCC Economic Highlights:
UAE bank deposits at all-time high
•
Deposits with UAE banks climbed to an all-time high at the end of the first half of
2013 to peak at Dh1,255.6 billion at the end of June, registering a growth rate of
7.5% in the first half of 2013, and 0.7% in June.
•
It is believed that UAE banks are flooded with depositor’s cash due to the
country’s political stability and sustainable economic growth, as regional and
global investors are looking for safe havens at a time when the geopolitical
tensions in the region are rising.
•
One analyst pointed out that interest rates offered by the banks is not the driver,
rather the stability of the UAE banking sector, as well as the UAE dirham’s peg to
the US dollar, which partly eliminates exchange rate fluctuations and risks.
•
Not long ago, the UAE banks landed in a liquidity squeeze, due to the global
financial crisis that forced international banks to withdraw surplus funds,
deposits and investments from international markets, to bolster liquidity at
home.
•
On the other hand, loans surged by nearly Dh16 billion in June to one of their
highest levels of about Dh1,147.4 billion, their highest monthly growth in nearly a
year.
27
GCC interbank rates
Source: Bloomberg
28
Comparative MENA Markets
For the period 18/08 – 23/08
29
Locally
30
Fiscal deficit down 26% in first half of the year
•
•
The government budget deficit reached JD 309.2 million down by 26%
in the first half of the year, compared to the same period the previous
year.
The drop in the deficit was mainly due to increased foreign grants,
indicating that the budget balance remains under pressure.
–
•
Total revenues and grants increased by JD 474 million in the first half
of the year, as a result of an increase of foreign grants by JD 408
million for the same period, compared to an overall drought of grants
last year.
–
Domestic revenue increased by JD 65.8 million to reach JD 2,545
million, mainly due to an increase in tax on goods and services, while
other revenues such as mining continue to be lower than last year’s
levels.
–
On the other hand, both current and capital expenditures increased,
resulting in a total increase in expenditure of around JD366 million for
the same period, with the increase mainly stemming from an increase
in military spending and interest payments.
Looking at the fiscal deficit before grants, we find that the
deterioration in budget balances is significant, as the deficit reached
JD742 million during the first half of the year, an increase of
JD300 million from the same period last year.
JD Million
Jan – June Jan - June
2013
2012
Total Revenues and Grants
2,977.9
2,504.1
Domestic Revenue
2,544.7
2,478.9
433.2
25.2
3,287.1
2,920.8
Current Expenditures
2,983.1
2,716.4
Capital Expenditures
324.0
204.4
-309.2
-416.7
-742.4
-441.9
Foreign Grants
Total Expenditures
Fiscal Deficit/Surplus Including
Grants
Fiscal Deficit/Surplus Excluding
Grants
31
Public debt at 72.2% of GDP
•
•
Public debt reached around JD17.3 billion by the end of June
2013, estimated at around 72.2% of 2013 GDP according to the
Ministry of Finance’s calculations. This posts an increase of
JD742 million during the first half of the year.
Breaking down the increase, we find that domestic debt
increased by around JD304 million during the first 6 months of
the year, compared to the end of 2012. On the other hand,
external debt increased by around JD438 million during the
same period.
•
The government is expected to rely on external borrowing this
year to meet financing needs, and it recently signed an
agreement with the U.S. which allows Jordan to issue
Eurobonds in the global financial markets with the U.S as its
guarantor, further increasing its dependency on external
borrowing.
•
The amount of the bond is expected to be around $1.25 billion
for a period of up to 7 years. This will allow Jordan to borrow
from international markets at competitive rates, minimizing the
cost of borrowing and reduce the government’s need to
borrow from the domestic market, providing funds for the
private sector to expand.
JD Million
External Debt
Percent of GDP
Internal Debt
Percent of GDP
Public Debt
Percent of GDP
June
2013
2012
2011
5,370.7
4,932.4
4,486.8
22.4%
22.5%
21.9%
11,952.0
11,648.0
8,915.0
49.8%
52.7%
43.5%
17,322.7
16,581.0
13,401.8
72.2%
75.5%
65.4%
32
Trade deficit increased by 2.5% during first half of 2013
•
Last week, the Department of Statistics released figures showing that
Jordan’s trade deficit increased by 2.60% during the first half of the
year, compared to the same period last year.
•
The trade deficit stood at 4,795.6 million JD for the first 6 months of
this year, compared to 4,680.9 million JD for the same period in 2012.
•
Breaking down the deficit, we find that exports fell by 1.6% and
imports jumped by 0.9%. Exports fell to 2,758.0 million JD from
2,2802.3 million JD for the time period, while imports jumped to
7,553.6 million JD from 7,483.2 million JD for the same time period.
•
Looking at the change in imports, we find that the oil bill fell by
30.5%, to reach 1,727.8 million JD, compared to 2,485.6 million JD for
the first 6 months of this year compared to last year.
•
On the other hand, looking at the drop in exports, we find that
phosphate exports fell by 25.0%, fertilizers by 30.2%, and vegetables
by 37.4%.
•
It is important to note that despite a 757 million JD drop in Jordan’s
oil bill, Jordan’s overall import bill increased during this time period,
suggesting an increase in non-oil imports, probably due to the influx
of Syrian refugees. This will place excessive pressure on balance of
payments.
33
Trade deficit increased by 2.5% during first half of 2013
•
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.
•
However, comparing Brent oil prices in June 2012 to June
2013, we find that the average barrel price increased by
$7.41, which minimized the potential drop in June’s bill .
•
In addition, given the recent disruption in Egypt’s gas
supply, Jordan’s oil bill is expected to increase in the
coming months, unless significant developments on the
pipeline occurs.
•
Moreover, comparing Brent oil prices in July 2012 to July
2013, we find that the average barrel price increased by
$4.71, which will add more pressure on July’s bill. This
will also add pressure on Jordan’s FX reserves and its
widening budget deficit.
January
February
March
April
May
June
Total
2012
488.7
334.0
482.9
560.2
345.4
274.4
2,485.6
2013
262.8
387.7
358.9
213.5
253.9
251.0
1,727.8
Nominal Change
-225.9
+53.7
-124
-346.7
-91.5
-23.4
-757.8
34
Amman Stock Exchange
For the period 18/08 – 22/08
ASE free float shares’ price index ended the week at
(1929.9) points, compared to (1921.9) points for the last
week, posting an increase of 0.41%. The total trading
volume during the week reached JD(38.7) million compared
to JD(21.2) million during the last week, trading a total of
(40.0) million shares through (19,592) transactions
The shares of (171) companies were traded, the shares
prices of (64) companies rose, and the shares prices of (65)
declined.
Top 5 losers for the last week
Top 5 gainers for the last week
Stock
% chg
Stock
% chg
Tuhama For Financial Investments
200.00%
Transport & Investment Barter Company
(22.76%)
Afaq For Energy Co. P.l.c.
20.92%
Rum Aladdin Industries
(16.87%)
Union Investment Corporation
20.81%
Taameer Jordan Holdings Public Shareholding Company
(16.67%)
Alentkaeya For Investment & Real-estate Development Company
19.15%
Comprehensive Multiple Project Company
(15.33%)
Jordan Ceramic Industries
18.18%
Darwish Al-Khalili and Sons Co. Plc
(11.11%)
35
Local Debt Monitor
Latest T-Bills

As of August 25, the volume of excess reserves, including the overnight window deposits held at the CBJ
JD(2,817) 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 (%)
08/2013
01/08/2013
01/08/2014
50
5.766%
07/2013
30/07/2013
30/07/2014
50
5.736%
06/2013
28/07/2013
28/07/2014
50
5.654%
05/2013
21/07/2013
21/07/2014
50
5.535%
36
Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T4413
19/08/2013
19/08/2015
50
6.112%
T4113
24/07/2013
24/07/2015
50
6.404%
T3813
08/07/2013
08/07/2015
50
6.299%
Issue Date
Maturity Date
Size - million
Coupon (%)
T4313
14/08/2013
14/08/2016
50
6.537%
T4013
17/07/2013
17/07/2016
50
6.745%
T3713
02/07/2013
02/07/2016
50
6.686%
Issue Date
Maturity Date
Size - million
Coupon (%)
15/01/2012
15/01/2016
37.5
7.246%
Issue Date
Maturity Date
Size - million
Coupon (%)
T4513
22/08/2013
22/08/2018
50
7.324%
T4213
6/08/2013
6/08/2018
50
7.700%
T3913
11/07/2013
11/07/2018
50
7.692%
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
T0312
5 years T-Bonds
Public Utility Bonds
37
Prime Lending Rates
38
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
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39