Transcript Local Debt Monitor

Interest Rate Monitor
July 14, 2013
Brief Overview
International
MENA Region
US: Bond yields drop following dovish comments by
Bernanke that assure accommodative policy
Egypt: Treasury yields continue to fall as
IMF: IMF slashes global growth forecast again
GCC News Highlights
Eurozone: Peripheral concerns were rekindled and
eurozone recovery remains uncertain
GCC interbank rates
China: Data continue to point to slowdown in china;
government still refuses to intervene
Comparative MENA Markets
Japan: BOJ keeps policy unchanged but assesses
that economic recovery improved moderately
Markets overview
Major Indices: US stocks edge to fresh highs
Commodities and Currencies: Continued geopolitical
pressures push oil prices higher
Central Bank Meeting Calendar
foreign aid flows in
Local Economy
New and analysis
 Inflation reaches 6.5% during first half of
the year; upward pressures increase on
interest rates
Markets overview
 Amman Stock Exchange
Interest Rate Forecast
 Local Debt Monitor
The Week Ahead
 Prime Lending Rates
2
International
3
Bonds jumped as markets digested signs that the Fed is in no hurry
to withdraw its monetary-policy support
•
Minutes from the Fed's latest rate-setting meeting released
Wednesday showed that officials are deeply divided over
when to start peeling back the central bank's bond-buying
program.
•
Soothing comments from Mr. Bernanke on Wednesday put a
ceiling on the rise in yields for now. The Fed chief reassured
investors that the central bank isn't in a rush to taper its
bond-buying program and that a pullback on the central
bank's bond-buying program doesn't mean a shift to raising
interest rates.
•
The yield on the 10-year US Treasury was up 1bp at 2.59%
Friday, but down 13bp over the week.
As of July 12
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years
0.03%
0.04%
0.07%
0.35%
1.42%
2.59%
3.64%
1 Week Ago A Month Ago
0.03%
0.04%
0.08%
0.39%
1.59%
2.72%
3.69%
0.04%
0.05%
0.08%
0.31%
1.10%
2.18%
3.33%
4
Bernanke’s dovish comments,,,
•
•
Federal Reserve Chairman Ben Bernanke sought to reassure jittery
markets that while the central bank could start winding down its $85
billion-a-month bond-buying program later this year , Fed officials
aren't abandoning their broader commitment to easy-money policies.
"You can only conclude that highly accommodative monetary policy
for the foreseeable future is what's needed in the U.S. economy," he
said Wednesday at a conference held by the National Bureau of
Economic Research, citing the high unemployment rate, low inflation
and "quite restrictive" fiscal policy; hitting home the message that a
scaling back, or “tapering”, of the Fed’s quantitative easing
programme was not the same thing as policy tightening.
•
Among other things Bernanke said that the 6.5% should not be
regarded as a fixed benchmark for when Fed will start raising interest
rates. It might be some time after the jobless rates hits 6.5% before
interest is raised, particularly if inflation stays below 2% - inflation is
currently near 1%.
•
Mr. Bernanke, speaking at Wednesday's conference, said he was
"somewhat optimistic" about the economy. However, he noted the
7.6% June unemployment rate "probably understates the weakness
of the labor market," inflation is running below the Fed's 2%
objective and fiscal policy is quite restrictive.
June:
7.6%
7.0%: Fed target for finishing quantitative easing
6.5%: Fed target for considering rate hikes
5
Fed minutes: tapering not a done deal
Uncertainty surrounding the Fed is likely to continue
•
The remarks Wednesday came a few hours after minutes of the Fed's June policy meeting showed officials
deeply divided over when to start unwinding the bond-buying program. Bernanke had indicated at a
conference following the meeting that tapering would start later this year and that its bond purchase
would be completely terminated by mid-2014.
•
However, the main message from the minutes from the June Fed meeting is that there is no clear
consensus on when Fed should start tapering, how gradual the process should be how it should be
communicated to the market.
•
Some wanted more information about the economy before laying out a plan to start reducing the bond
purchases. A few were concerned that inflation was getting so low that pulling back the program might be
unwarranted.
•
On the other hand, about half the officials walked into the meeting thinking the central bank might end
the program altogether by the end of the year, the minutes showed.
•
The minutes also showed that Fed officials appear largely in agreement that their decision on the bond
program is separate and distinct from their decision-making on raising short-term rates, which have
hovered near zero since late 2008. "Many members indicated that decisions about the pace and
composition of asset purchases were distinct from decisions about the appropriate level of the federal
funds rate," and that rates were likely to stay low for a considerable time after the bond program ends, the
minutes said.
6
Consumer Sentiment in U.S. Unexpectedly Declines
•
Consumer confidence unexpectedly cooled in July as
Americans became less optimistic about the outlook for the
economy.
•
The Thomson Reuters/University of Michigan preliminary index
of consumer sentiment decreased to 83.9 in July from 84.1 the
month prior, today’s report showed. The gauge reached an
almost six-year high of 84.5 in May.
•
The recent increases in mortgage rates and prices at the gas
pump may have restrained consumers’ views on the economy
in the next six months. At the same time, the group’s gauge of
current conditions jumped to a six-year high as stock prices
approached a record after falling in the middle of June.
•
Nevertheless, U.S. consumers are very upbeat about the
present economy. The current conditions index in early July
jumped to 99.7 from 93.8 at the end of June. It is the highest
reading since July 2007.
•
Meanwhile, inflation expectations remain low, according to the
Michigan report. The one-year inflation expectations reading
for early July increased to 3.3% from a final June reading of
3.0%. Inflation expectations covering the next five to 10 years
remained at 2.9%.
7
IMF cuts global growth forecasts
•
The International Monetary Fund cut its forecast for world
economic growth for a third time this year due to slowing
emerging markets and a prolonged recession in the
eurozone.
•
In an update to its World Economic Outlook, the IMF said
Tuesday that it now expects world output to expand by just
3.1% in 2013, down from 3.3% in April. In January, it was
forecasting growth of 3.5%.
•
The revision means the global economy will have failed to
pick up pace over the past two years, although the IMF
expects a slight acceleration in growth in 2014 to 3.8%.
•
Since its last global report in April, the IMF has cut its 2013
growth forecasts for the U.S. and China to 1.7% and 7.8%,
respectively. And it now expects the eurozone economy -mired in its longest recession -- to shrink by 0.6% this year,
double the rate of contraction forecast in April.
•
The Fund said it underestimated the depth of the recession
in Europe, and also did not expect the United States to go
ahead with growth-stunting spending cuts.
8
IMF also warns that global growth could slow further if the pull-back
from QE in the US triggers reversals in capital flows
•
"While old risks remain, new risks have emerged, including the possibility of a longer growth
slowdown in emerging market economies," the IMF said, pointing to slowing credit growth
and the possibility that capital will return to the U.S. if the Federal Reserve begins to unwind
its policy of buying government bonds to keep interest rates low.
•
Top fund officials have recently criticized the Fed for not communicating clearly enough
about its exit plans. The IMF, which acts as the world's emergency lender and economic
counselor, said the U.S. central bank should keep its $85 billion-a-month cash injections
going until at least the end of the year, and only slightly let up on the easy-money
accelerator in early 2014.
•
The knock-on effect of slower growth in China is already being felt in other commodity-rich
emerging markets such as Brazil and South Africa. The IMF cuts its forecast for Brazil to 2.5%
from 3% and for South Africa to 2% from 2.8%.
•
Three major economies should buck the trend, however. Japan, basking in the early success
of Abenomics, could see growth of 2% this year, up from a previous forecast of 1.6%. The
IMF has also revised up its 2013 forecasts for the U.K by 0.3% to 0.9% growth this year and
Canada was revised up by 0.2%.
9
Peripheral concerns were rekindled this week
•
Fresh concerns about the outlook for the eurozone
periphery were rekindled this week, despite Greece
securing its next loan tranche at Monday’s Eurogroup
meeting.
•
The yield on the 10-year German Bund, meanwhile,
dipped 7bp to 1.55% Friday, for a weekly decline of 17bp,
in part reflecting these concerns.
•
On the other hand, yields for 10-year Italian and Spanish
bonds rose by 6bp and 12bp respectively.
•
Portugal returned to the spotlight Friday as its 10-year
yield jumped 63bp to 7.52% – leaving it 40bp higher over
the week. Fresh political uncertainty in the country
heightened concerns about its ability to adhere to
reforms demanded by its “troika” of creditors.
•
Fitch removed France's triple-A credit rating, the last of
the three main ratings agencies to downgrade France
from the top credit rating bench, though it seems that the
market has shrugged it off.
•
S&P’s Tuesday cut Italy’s sovereign credit rating by one
notch BBB citing worsening economic prospects, and
maintains a negative outlook for the country.
10
Eurozone’s recovery look to be uneven
•
Germany, the region's biggest economy, provided a stark
reminder Monday of the mountain Europe still has to climb. Its
exports to the eurozone fell by 9.6% in May compared with the
same month last year, and by 1.6% to countries outside
Europe.
•
Meanwhile, eurozone factory output fell in May for the first
time in four months, data showed on Friday, suggesting a
fragile and uneven recovery in the bloc that is struggling with
record joblessness and renewed political tensions in southern
Europe.
•
Industrial production in the 17 countries using the single
currency fell 0.3% on the month, following a revised 0.5%
increase in April, data from the EU's statistics office Eurostat
showed.
•
Compared with the same period last year, factory output in
May dropped as expected by 1.3%, after a 0.6% contraction in
April. Production in Europe's two biggest economies, Germany
and France, dropped in May, with Italy and Spain showing
small increases.
11
Considerable risks continue to face eurozone’s expected
return to growth
•
Meanwhile, business sentiment surveys have
begun to suggest the rate of decline in the
eurozone is slowing but there's still considerable
risk to official forecasts of a return to growth later
this year.
•
In a report on the eurozone last week, the IMF
warned that fragmented financial markets and the
high cost of borrowing in peripheral nations was
depressing activity across the region.
•
It called on European leaders to do more to repair
bank balance sheets, complete work on a banking
union, provide further support to the economy via
easy monetary policy and show more flexibility on
austerity while preserving medium-term debt
reduction goals.
12
Berlin objects to latest proposal for restructuring banks
•
The European Commission proposed itself as the single authority for
winding down banks in the eurozone, which was swiftly rejected by
Germany Wednesday.
•
The proposal on bank resolution—the so-called "single resolution
mechanism"—announced Wednesday was to form the second pillar in
the eurozone's banking union project which aims to break the link
between indebted governments and banking systems. The first
pillar is a single supervisor for eurozone banks, a task the ECB is
expected to assume in the fall of 2014.
•
Under the commission's proposal, a "single resolution board" would
prepare and carry out restructurings of any of the 6,000 eurozone
banks that hit financial problems. It would be backed by a shared fund
of some €60 billion financed by contributions from banks. The
Commission would reserve the right to make a final decision.
•
Germany has warned repeatedly that a single authority risks
contravening EU treaty law, which limits the power of Brussels over
national finances.
•
Berlin is calling instead for a two-step approach that starts with a
network of national authorities, and only creates a centralized
authority once EU treaties have been changed.
13
EU Agrees to Keep Aid Flowing to Greece
•
Greece's international creditors reported Monday that all isn't well with the
country's mammoth bailout program, but eurozone finance ministers decided the
problems weren't enough for them to stop the flow of financial aid to Athens.
•
It seems that eurozone ministers appear to be in a more-forgiving mood. The
Greek program is broadly on track—a sharp departure from previous versions of
the country's bailout—and some of Greece's toughest critics appeared wary of
creating fresh turmoil by turning off the aid spigot again.
•
The ministers agreed to unlock €4 billion in financing due to the Greek
government—provided Athens moves to trim government payrolls and adopt
other measures demanded by its creditors by July 19.
•
The IMF is due to release another €1.8 billion for Greece once the fund's board
meets July 29. The money will be used to keep the government operating, make
interest payments and repay €2.17 billion of bonds on Aug. 20 that are now held
by the ECB.
•
In October, the government will receive another €1 billion if ministers determine
that Greece continues to follow its bailout program.
•
The so-called troika (ECB, IMF and the EU) also said the economic outlook remains
"uncertain." Greece's economy, in free fall for the past five years, has "prospects"
of returning to growth in 2014 albeit at a meager rate of 0.6%, it said.
14
China’s economic slowdown: how much can the economy
slow before government decides to intervene
•
A number of data suggests that economic growth in China is slowing, a trend that will
test the resolve of the country's leaders as they seek to execute painful but
necessary structural reforms.
•
China reported a surprise 3.1% decline in exports from a year earlier on Wednesday,
compared with a 1% increase in May and far below the 10.4% average increase for
the first half of 2013. Imports were down too, by 0.7% from a year earlier, indicating
weaker domestic demand.
•
Recent manufacturing data hasn't been much better, and suggests activity is slowing
in China's factories. And perhaps most worrying, interbank lending rates spiked to
20% in late June during.
•
The scale of the challenge facing China's leaders should become clearer next week
when GDP figures for the second quarter are published. Many economists have
scrambled to lower their growth estimates recently, with the consensus settling
around an annual rate of 7.5%. Expansion at that pace would make most countries
green with envy, but it will be among the slowest rates China has reported in the
past two decades.
•
Weaker growth could derail reforms meant to shift the world's second biggest
economy to a more sustainable growth model, in which consumption drives growth.
President Xi Jinping is by all accounts determined to proceed with the reforms, even
if it means tolerating slower growth for now.
15
China 'may accept growth below 7%'
•
A top Chinese official has signaled Beijing could live with a significantly lower growth
rate, raising the prospect of a sharper slowdown in the world's second-largest
economy, and suggesting that the chances of a return to stimulus spending are low.
•
Speaking at a U.S. China summit in Washington D.C. on Thursday, China's Minister of
Finance Lou Jiwei said "reaching this year's target shouldn't be too big a problem. But
we also don't think there is any big problem with [a growth rate of] 7% or 6.5%."
•
Mr. Lou's remarks also suggested the government may have informally discarded its
earlier 7.5% growth target for the year, though it was unclear whether they reflect a
new official position. "Growth in the first quarter was 7.7%, the second half could be a
bit lower, but achieving the full year target of 7% growth is not a big problem," he said.
•
A 7% growth rate for the year would be the lowest since 1990, and implies a drop in
growth to below 7% in the second half of the year.
•
However, in an English-language story released Friday, Xinhua said it corrected a quote
attributed to Lou to “there is no doubt that China can achieve this year’s growth target
of 7.5%” from its original story dated July 11 that cited him as saying “there is no doubt
that China can achieve the growth target, though the 7% goal should not be considered
as the bottom line.”
•
Xinhua’s correction of Lou’s comments may indicate the government is seeking to
avoid diminishing confidence in the country’s economic outlook already shaken by
sliding exports and a cash crunch.
16
China’s inflation was stronger than expected
•
In other news, Chinese CPI came in stronger than expected on
higher food prices and partly due to a credit surge earlier this year,
rebounding to a four-month high.
•
China's inflation rate rose by more than expected in June,
increasing to 2.7% from 2.1% the month before. Higher pork prices,
a major component of China’s consumer price basket, were the
biggest contributor to the jump.
•
On the other hand, the producer price index fell 2.7% y-o-y in June,
another indication of the economy’s underlying weakness.
•
While the headline inflation number was above analysts'
expectations, it remains below the government's target figure of
3.5%.
•
Analysts say the latest figure reduces the prospect of interest rate
cuts in 2013. Cutting interest rates risks inflating a property bubble,
while tightening may put additional pressure on the economy in
the middle of the current global economic uncertainty.
17
Bank of Japan sees modest recovery in economy
•
The Bank of Japan (BoJ) said Tuesday the country's
economy is "starting to recover modestly". It is the first
time the BoJ has described the world's third-largest
economy as being on the path towards expansion in
more than two years.
•
The upbeat assessment of the economy came as the BoJ
left its huge monetary easing programme unchanged.
The bank is to stick to its plan of pumping more than
60tn yen ($606bn) a year into the economy.
•
In a sign of confidence in its easing program, which it
launched in April in an effort to reverse 15 years of
falling prices, the central bank left policy unchanged and
stuck to its optimistic outlook for fiscal 2015.
•
Thursday's announcement may add weight to the view
that the BOJ won't modify its easing program for the
time being, unless it becomes clear that more easing
steps are needed to produce 2% inflation in two years,
the bank's primary policy objective.
18
BOJ changes inflation projections,,,
•
At the policy meeting, the BOJ also conducted
an interim review of its semiannual growth and
inflation projections covering a three-year
period from this April, and held on to what
many private-sector economists consider an
overly optimistic price forecast.
•
The board members' median forecast tipped
Japan's core Consumer Price Index to rise 1.9%
in the Japanese fiscal year starting April 2015,
unchanged from April, when the bank released
its first semiannual forecast report under Mr.
Kuroda.
•
But the BOJ now sees 0.6% inflation for the
current fiscal year, down from an initial
forecast for a rise of 0.7%. For the next fiscal
year, the bank now predicts 1.3% inflation,
down from an initial prediction of 1.4% price
growth.
19
U.S. stocks edged up to fresh highs
20
Oil prices continue to increase due to geopolitical pressures
21
Major Interest Rate Forecasts
Rate (%)
Market yield
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
(July 12)
United States
US 10-year
2.58
2.50
2.62
2.78
2.90
3.03
3.16
Fed Fund Target Rate
0.25
0.25
0.25
0.25
0.25
0.25
0.25
1.56
1.62
1.75
1.87
1.98
2.09
2.26
0.50
0.50
0.38
0.38
0.38
0.50
0.50
2.33
0.50
2.21
0.50
2.38
0.50
2.52
0.50
2.64
0.50
2.79
0.50
2.92
0.50
Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg
22
The Week Ahead,,,
Economic Data Release Calendar
July 14, 2013 - July 19, 2013
Date
14-Jul Sun
Currency / Event
CNY GDP (YoY)
CNY Real GDP (QoQ)
CNY Industrial Production (YoY)
CNY Retail Sales (YoY)
15-Jul Mon USD Advance Retail Sales
AUD RBA Policy Meeting - July Minutes
16-Jul Tue GBP Consumer Price Index (YoY)
GBP Core Consumer Price Index (YoY)
EUR Euro-Zone Consumer Price Index (YoY)
EUR Euro-Zone Consumer Price Index - Core (YoY)
EUR Euro-Zone Trade Balance (euros)
EUR Euro-Zone ZEW Survey (Economic Sentiment)
EUR German ZEW Survey (Economic Sentiment)
USD Consumer Price Index (YoY)
USD Consumer Price Index Ex Food & Energy (YoY)
USD NAHB Housing Market Index
JPY Bank of Japan June 10-11 meeting minutes
17-Jul Wed GBP Bank of England Minutes
GBP ILO Unemployment Rate (3M)
CAD Bank of Canada Rate Decision
USD Fed's Bernanke Delivers Semi-Annual Policy Report to House
USD U.S. Federal Reserve Releases Beige Book
CNY China June Property Prices
18-Jul Thu EUR Euro-Zone Current Account s.a. (euros)
GBP Retail Sales (YoY)
USD Continuing Claims
USD Fed's Bernanke Delivers Semi-Annual Policy Report to Senate
EUR G20 Finance Ministers and Central Bank Governors Meeting in Russia
19-Jul Fri EUR German Producer Prices (YoY)
CAD Consumer Price Index (YoY)
GMT
Forecast
Previous
02:00
02:00
02:00
02:00
12:30
01:30
08:30
08:30
09:00
09:00
09:00
09:00
09:00
12:30
12:30
14:00
23:50
08:30
08:30
14:00
14:00
18:00
01:30
08:00
08:30
12:30
14:00
7.50%
1.80%
9.10%
12.90%
0.70%
7.70%
1.60%
9.20%
12.90%
0.60%
3.00%
2.30%
1.60%
1.20%
12.0B
40.00
1.60%
1.60%
51.00
2.70%
2.20%
1.60%
1.20%
14.9B
30.60
38.50
1.40%
1.70%
52.00
7.80%
1.00%
7.80%
1.00%
1.60%
19.5B
2.10%
2977K
06:00
12:30
0.60%
1.30%
0.20%
0.70%
23
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%
September 19
0.00%
0.00%
July 17
1.00%
1.00%
August 6
2.75%
2.75%
July 24
2.50%
2.50%
Swiss National Bank (SNB)
Bank of Canada (BOC)
Reserve Bank of Australia (RBA)
Reserve Bank of New Zealand (RBNZ)
24
Regional
25
Egypt’s Treasury yields continue to fall as foreign aid flows in
•
Egypt’s Treasury yields fell for the second consecutive week, as Gulf
states gave Egypt $12 billion in grants, deposits and loans following
the ousting of President Morsi.
•
One-quarter of the money is coming in the form of grants, and the
bulk of the remainder (US$6bn) will be used to prop up the Central
Bank's depleted stock of foreign reserves, which have more than
halved since end-2010, from US$35.8bn to just US$14.9bn in June.
•
The remaining aid will come in the form of fuel products, as Egypt
suffers persistent fuel shortages.
Source: Bloomberg
Breakdown of grants and aid:
Foreign Aid
(US$ 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
The amount dwarfs Egypt's balance-of-payments deficit of US$2.1bn
in the first nine months of 2012/13 (July 1st-June 30th).
Unsurprisingly, the pound strengthened on the news of the aid and
the rate on credit default swaps on Egyptian debt plunged.
Source: Bloomberg
26
Egypt's annual urban inflation up to 9.8% in June 2013
•
Egypt’s annual urban inflation rose to 9.8% in June,
compared to 7.3% in June of 2012, the most in two years.
•
The rate of urban inflation increased by 0.9% in June
compared to May 2013.
•
The Egyptian governmental body CAPMAS attributed the rise
in CPI to an increase in the cost of vegetables, which was up
23.1% in comparison with June 2012, grain and bread by
16.3%, rent and utility bills by 5.5%.
•
However, the Egyptian pound reached a low of 7.0293
against the Dollar last week, but has since appreciated
against the Dollar which should ease inflationary pressures.
•
In May, the International Monetary Fund had predicted that
consumer price inflation would reach 10.9% by the end of
the 2013 fiscal year in June.
•
The Fund said this figure would climb to 11.6% in 2014 if the
Egyptian government implements the subsidy cuts it pledged
in negotiations with the Fund over a possible $4.8 billion
loan.
27
GCC Economic Highlights:
Qatar's real GDP grows 6.2% in Q1
•
According to the Qatar Statistics Authority, Qatar’s real GDP expanded
at a rapid pace in the first quarter of 2013, registering growth of 6.2%
compared to the same period last year.
•
Manufacturing was the fastest growing sector 12.5%, followed by
construction at 11.7%, while restaurants and hotels grew at 10.5% for
the first quarter of 2013, compared to the same period last year.
•
On the other hand, the oil and gas sector, which accounts for 42% of
GDP, was the lowest contributor to growth, expanding at annual rate of
0.8%.
•
This indicates that Qatar is diversifying away from its traditional role as a
hydrocarbon exporter toward a manufacturing and services hub.
•
The acceleration in economic activity is expected to continue as large
infrastructure projects are being implemented in Qatar including the
$35 billion metro and railway project.
•
At the same time, the current account surplus peaked on robust export
performance and inflation remained moderate (3.5% in June year-onyear).
Source: Trading Economics
28
Source: Gulf Times
GCC Economic Highlights:
Abu Dhabi inflation inches up 0.9% in June
•
The consumer price inflation in the emirate of Abu Dhabi
was 0.9% in June 2013 compared with the same month
last year, according to Statistics Centre Abu Dhabi (SCAD).
•
The “transport” group accounted for 31.4% of the overall
increase in prices during the period under review, due to a
rise of 2.9% in the prices of this group, while the
“Restaurants and hotels" group, which advanced 6.9%,
accounted for 30.8% of the overall y-o-y increase observed
during the period under review.
•
Additionally, “furnishings and household equipment” grew
by 3.0% during the first six month of 2013 compared with
the same period of 2012, contributing to 16.3% of the net
increase.
•
The “housing, water, electricity, gas and other fuels" group
was among the main groups that slowed down the rise in
consumer prices for the time period. The group detracted
30.3% from the overall rise in CPI, as the group’s prices decline
by 0.7%
29
OPEC and IEA predict demand will rise, but warn on geopolitical
threats to supply
•
OPEC said Wednesday global oil demand will pick up pace next year and rise by about 1 million
barrels a day, but it warned of political risk to supply going forward.
•
The caution comes as crude prices have already risen sharply on concerns an Egyptian crisis could cut
shipments through the Suez Canal, and away from previous attention to ample supply gushing out of
U.S. shale oil formations.
•
In its first estimate for 2014, the Organization of the Petroleum Exporting Countries said world oil
demand will surge by 1.04 million barrels a day next year, an increase of around 300,000 barrels
compared with the growth predicted for the current year.
•
OPEC, whose members produce more than one in three barrels consumed in the world each day, says
it won't benefit from rising oil demand. It sees demand for its crude next year declining by about
300,000 barrels a day to average 29.6 million barrels a day.
•
But the organization warned its supply forecasts from rival producers were subject to a "high level of
risk"--largely due to political unrest. It emphasized turmoil in African countries such as South Sudan
and in Middle-Eastern nations like Syria and Yemen.
•
Similarly, the International Energy Agency also warned Thursday that geopolitical and other risks
could pare any supply gains from a U.S. oil boom next year, as it also predicted global demand for the
commodity will pick up pace. While the supply picture is fraught with risks, the agency is predicting
global oil demand will grow by 1.21 million barrels a day in 2014. That compares with an upwardly
revised forecast for oil demand growth of 930,000 barrels a day this year.
30
GCC interbank rates
Source: Bloomberg
31
Comparative MENA Markets
For the period 07/07 – 12/07
32
Locally
33
Inflation reached 6.5% during first half of the year
•
According to figures released by the Department of
Statistics, the inflation rate eased slightly to 6.5%
during the first half of 2013 compared to the same
period last year.
•
Inflation seemed to have eased over the past few
months, but at 6.5% inflation remains high and
further inflationary pressures remain present.
•
Among the main commodities groups which
contributed to this increase were: Transportation
(15.8%); Fuel and Electricity (24.5%); Meat and
Dairy (7.1%); Fruits and Vegetables (14.2%); Rents
(3%)
•
•
The report also showed that inflation reached 5.8%
during the month of June compared to the same
period last year, down from 7.1% the previous
month. Inflation was driven by the same groups as
mentioned above, but prices of tobacco and
cigarettes, medical care and cereals were down.
Meanwhile, on a monthly basis inflation rose by
0.8% in June compared to the previous month.
Forecast:
•Hikes in electricity tariffs for industrial and commercial outlets are
expected to go into effect after Ramadan. Moreover, an increase in
electricity tariffs on certain consumption levels for households is
expected to be in the range of 5% to 7.5%.
•According to studies by the IMF and statements by the Minister of
Finance Umayya Toukan, raising electricity tariffs is expected to
cause inflation to increase by 1% to 1.5%.
•Electricity hikes are back on the agenda, after the recent disruption
in Egyptian gas supply, which is expected to increase the financial
losses of the NEPCO by 1.2 to 1.4 million JD per day.
•The number of Syrian refugees that are entering the country are
placing pressure on industries, services and infrastructure in Jordan.
34
Egypt to resume natural gas supply to Jordan in 10 days
•
On the 8th of July, Egypt said it will resume natural gas supplies to Jordan
within 10 days after repairing a pipeline in the Sinai Peninsula that was
damaged by explosives planted by unidentified militants early last Sunday.
•
Jordan depends on the gas to generate electricity, and if gas supplies are low,
Jordan resorts to importing oil at higher prices to meet electricity needs.
•
The recent disruption in Egyptian gas supplies is estimated to increase the
financial losses of the NEPCO and raise power generation costs by an average
of JD1.2 and JD1.4 million every day.
•
As part of the National Economic Reform Program, the IMF has set target
losses for NEPCO in the upcoming years, and the disruption in gas will cause
a setback in the performance of NEPCO.
•
Part of the plan is to combat the volatility in the cost of generating electricity
by raising electricity tariffs. The government is expected to increase
electricity tariffs for industrial and commercial outlets after Ramadan by up
to 15%.
•
Moreover, Minister of Energy and Mineral Resources Malek Kabariti on
Tuesday said the increase in the electricity tariffs for households will range
between 5% and 7.5% on segments that consume between 601 and 1,000
kilowatt-hours (kWh).
35
Upward Pressure on Interest Rates
•
New 2 and 3 year government bond yields have begun to
increase again, due to low coverage ratios, a delay in the
Eurobound due to be released this year, and increasing
cost of time deposits on banks.
•
The latest 2 year bond saw a coverage ratio of only 1.10,
while the average yield accepted was 6.299%, up from a
low of 6.039% earlier this year.
•
Additionally, the latest 3 year bond attained a coverage
ratio of only 1.04, while the average yield accepted was
6.686%, up from a low of 6.498% earlier this year.
36
Upward Pressure on Interest Rates
•
Moreover, the delay in the Eurbound in the
amount of $1-1.5 billion has added extra
pressure on local excess liquidity and the
government’s ability to maintain a solid buffer
for excess reserves.
•
Even though yields on government bonds
declined drastically during the year, the
weighted average interest rate paid at licensed
banks increased continuously throughout the
year, reaching 5.53% in May, indicating that
markets still see upward pressure on interest
rates.
•
The government responded to these factors by
injecting more stimulus in the market through
an extra weekly repo in the amount of 100
million JD, with all repos now totaling 575
million JD.
37
Amman Stock Exchange
For the period 07/07 – 11/07
ASE free float shares’ price index ended the week at
(1953.5) points, compared to (1966.8) points for the last
week, posting a decrease of 0.67%. The total trading
volume during the week reached JD(31.9) million compared
to JD(41.1) million during the last week, trading a total of
(26.5) million shares through (11,204) transactions
The shares of (163) companies were traded, the shares
prices of (48) companies rose, and the shares prices of (61)
declined.
Top 5 losers for the last week
Top 5 gainers for the last week
Stock
% chg
Stock
% chg
Alshamekha For Realestate And Financial Investments
14.15%
Siniora Food Industries
(21.89%)
South Electronics
12.50%
Irbid District Electricity
(16.89%)
The Jordan Pipes Manufcaturing
10.61%
Arab Company For Investment Projects
(16.36%)
Philadelphia Pharmaceuticals
10.53%
Arabia Steel Pipes Manufacturing
(12.16%)
Alentakeya For Investment & Realestate Development Com. Plc.
8.89%
Specialized Trading & Investment
(11.94%)
38
Local Debt Monitor
Latest T-Bills

As of July 14, the volume of excess reserves, including the overnight window deposits held at the CBJ
JD(2,536) 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 (%)
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%
01/2013
27/01/2013
27/01/2014
70
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 (%)
T3713
02/07/2013
02/07/2016
50
6.686%
T3513
18/06/2013
18/06/2016
50
6.546%
T3213
29/05/2013
29/05/2016
50
6.530%
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 or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
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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