Transcript Local Debt Monitor

Interest Rate Monitor
March 24, 2013
Brief Overview
International
US: FOMC affirms QE; housing sector rebounds;
budget deal approved
MENA Region
Egypt: Central bank raises rates as unsettled
political conditions continue
Eurozone: All eyes remain focused on whether Cyprus
will avoid meltdown
GCC News Highlights
UK: Fitch warns of downgrade amid higher debt levels
and slower recovery
GCC interbank rates
Comparative MENA Markets
China: Data suggest recovery not losing steam
Japan: Trade deficit narrows and Kuroda affirms
2% inflation target for central bank
Markets overview
Local Economy
New and analysis
Major Indices: Stocks end week on mildly positive note
 Interest Rate Forecasts
Commodities and Currencies: Euro rallies slightly
despite Cyprus uncertainty
 US plans to guarantee Eurobond; oil bill
down 44%
Central Bank Meeting Calendar
Markets overview
Interest Rate Forecast
The Week Ahead
 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates
2
International
3
US Treasury bond rates
•
The Fed reaffirmed this week its commitment to its
$85 billion asset purchases, indicating that the Fed is
not yet ready to tighten; amid downside risks from
spending cuts to come into effect this month.
•
Moreover, fragile global economic recovery; especially
with the high uncertainty and weak indicators in the
eurozone, is still fueling demand for US treasuries.
•
The yield on the 10-year Treasury was down 6bp over
the week , ending Friday at 1.93%.
As of March 23
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years
0.07%
0.07%
0.11%
0.25%
0.80%
1.93%
3.15%
1 Week Ago A Month Ago
0.07%
0.09%
0.11%
0.25%
0.84%
1.99%
3.21%
0.11%
0.13%
0.14%
0.25%
0.83%
1.97%
3.16%
4
FOMC reaffirms QE, not yet ready to tighten
•
This week’s FOMC meeting did not deliver groundbreaking news, the
Federal Reserve maintained its asset purchase program, continuing its
pace of $85 billion a month, and the first Fed rate hike is not expected
before 2015.
•
The Fed’s asset purchases will remain divided between $40 billion a
month of mortgage-backed securities and $45 billion a month of
Treasury securities.
•
In addition, the Fed reiterated it would keep short-term interest rates
pinned near zero until the jobless rate drops to 6.5%, as long as inflation
is stable, i.e. inflation does not exceed 2.5%. Most Fed officials don't
expect those levels to be met until 2015.
•
Bernanke mentioned that the Fed may chose to adjust the volume and
pace of those purchases in coming months, in response to economic
data. Though, further gains in the US labor market are needed before it
could consider reducing its monetary easing.
•
This said, it is also clear that a slowdown in purchases is not imminent
and if job growth continues in the coming months, then it would likely
trigger a scaling down of the QE programme in the fourth quarter of this
year, or earlier if data turn out better than expected.
5
Fed lowers 2013 growth forecast amid downside risks
of the Sequester
•
•
•
The Fed confronts a mixed economic outlook.
Growth has picked up after what the Fed described
as a "pause" late last year. But officials are worried
about the cumulative impact of tax increases and
federal government spending cuts (sequester) and
continue to see downside risks to economic growth.
New economic projections released by the central
bank reflected the Fed's caution at the moment. Fed
officials trimmed their forecasts for economic
growth in 2013, but predicted Wednesday that
unemployment would move a bit lower than
previously expected.
New Fed Projections
Q4/Q4, %
2013
2014
2015
Longer Run
Change in real GDP
Dec projection
2.3 to 2.8
2.3 to 3.0
2.9 to 3.4
3.0 to 3.5
2.9 to 3.7
3.0 to 3.7
2.3 to 2.5
2.3 to 2.5
Unemployment rate
Dec projection
7.3 to 7.5
7.4 to 7.7
6.7 to 7.0
6.8 to 7.3
6.0 to 6.5
6.0 to 6.6
5.2 to 6.0
5.2 to 6.0
PCE inflation
Dec projection
1.3 to 1.7
1.3 to 2.0
1.5 to 2.0
1.5 to 2.0
1.7 to 2.0
1.7 to 2.0
2.0
2.0
Core PCE Inflation
1.5 to 1.6 1.7 to 2.0
Dec projection 1.6 to 1.9 1.6 to 2.0
1.8 to 2.1
1.8 to 2.0
Source: Federal Reserve
The Fed expects the U.S. economy to grow between
2.3% and 2.8% this year, slightly weaker than its
prior estimate. Meanwhile, the central bank expects
the unemployment rate to fall to between 7.3% to
7.5% by the end of the year.
6
Housing sector rebound
•
Signs that the housing market continues to improve increased this week as data released showed that
sales of previously owned properties grew last month to the highest level in more than three years, and
more people put their properties up for sale.
•
Existing-home sales increased 0.8% in February from a month earlier to a seasonally adjusted annual
rate of 4.98 million, the highest level since November 2009, the National Association of Realtors said
Thursday. Sales were 10.2% above the same month a year earlier, the 20th consecutive month of yearover-year gains.
•
After contracting since last July, the number of homes on the market has started to increase as sales
grow and prices recover
•
While rising inventories were a big economic drag during the recession and real-estate bust, the most
recent rise is likely due to more people putting their homes on the market in response to higher prices.
A separate report earlier this week showed that over the past year 1.7 million households regained
equity in their homes in 2012, meaning that until recently they owed more on their mortgage than the
home was worth.
•
•
Many economists believe the housing market will be one of the main drivers of the economy this year
as inventories shrink further, prices rise and builders break ground on more projects.
7
Congress passes funding bill, though debt limit debate
still lurks
•
Congress moved Thursday with remarkably little fuss to pass a major
funding bill to keep the government open through September, just
two months after Congress voted to temporarily suspend the federal
debt limit without an 11th-hour showdown.
•
The smooth passage of the spending bill defied speculation early this
year that it could be held hostage in another budget battle and risk
shutting down the government after the current funding measure
expired March 27.
•
The spending bill keeps the government funded through the end of its
2013 fiscal year. It keeps overall spending to the level mandated by
the sequester, the $85 billion in cuts that began March 1, despite
strenuous efforts by Mr. Obama to replace them.
•
The bill blunts the impact of the cuts in some areas such as military
operations and maintenance, nutrition aid for women and children,
and border security, but cuts deeper in other areas to make up for it.
•
Nevertheless, lurking in just a few months is a new fiscal flashpoint
since the US will need to raise its borrowing limit, probably by August.
This process, which requires congressional approval, was amicably
suspended in February but was deeply fraught in August 2011, risking
a dramatic US default on its debt.
8
Sovereign debt worries heightened, but peripherals
showed some resilience
•
Peripheral eurozone government
bonds showed some resilience, in
spite of a sell-off at the start of the
week, following Cyprus’s bailout
debacle.
•
Spain’s 10-year yield ended the
week at 4.84%, down 7bp over the
week, while Italy's yield fell 9bp to
4.51%, according to Bloomberg.
•
On the other hand, the
combination of fresh concerns
about the eurozone economic
outlook and heightened sovereign
debt worries helped fuel demand
for “safe have” German 10-year
bonds.
•
The bund yield rose 2bp to 1.38%
on Friday but was down 7bp over
the week.
9
Will Cyprus avoid meltdown?
•
Cyprus remained locked in 11th-hour talks with international
creditors in a frantic effort to reach a deal to rescue the country
from economic collapse before emergency liquidity for its banks
dries up early next week.
•
Cyprus's government has been scrambling to raise the €5.8 billion
($7.5 billion) that it needs to prop up its banks and qualify for a €10
billion bailout from the eurozone and the International Monetary
Fund.
•
A deal on Cyprus's bailout talks must be reached by Sunday
evening when eurozone finance ministers will meet in Brussels, EU
economics chief Olli Rehn said in a statement Saturday. The
finance ministers are scheduled to meet at 5 p.m. GMT Sunday.
•
Late Saturday, the country's president Nicos Anastasiades
expressed hope that a deal could be reached soon.
•
Nicosia has spent much of this week looking for alternatives to a
rescue program it had initially agreed with the eurozone and the
IMF on March 16. Under the original plan—which was rejected by
parliament Tuesday—all large deposits on the island would be
taxed by at 9.9% and deposits of less than €100,000 at 6.75%.
10
Cyprus’s financial system will breakdown if no deal was
agreed by Monday evening
•
A second proposal by the Cypriot government to tap pensions in order to
raise the cash required for an international rescue was rejected by the
German government.
•
On Friday, the Parliament in Nicosia adopted two key bills that would
allow it to close down Cyprus Popular Bank, its second largest bank, and
aggressively curtail the free flow of money on the island in a bid to avoid
a meltdown of the country's financial system before Monday evening.
•
The ECB has threatened to block Emergency Liquidity Assistance (ELA) to
the Cypriot banks if a deal is not in place on Monday. The two biggest
banks have received EUR9bn in ELA from the Cypriot Central Bank.
•
The new legislation will allow authorities to restrict noncash transactions,
freeze check cashing, limit withdrawals and even convert checking
accounts into fixed-term deposits when banks reopen. They have been
closed since March 16.
•
The bank restructuring law would see depositors in Popular Bank, also
known as Laiki Bank, lose as much as 40% of their savings above
€100,000, Cypriot and European officials said. European and Cypriot
officials familiar with the latest plans said they left a funding hole of some
€3 billion.
11
Will the latest plan be enough to cover the gap in
funding?
•
As details of the latest plan emerged late Friday and Saturday, there were signs that the
country may be forced to also resolve Bank of Cyprus, its biggest lender. The government
in Nicosia was fighting to avert this by proposing an even deeper levy on the lender's
uninsured depositors than one demanded earlier by euro-zone partners, according to
officials involved in the bailout talks.
•
Sources said the government in Nicosia had proposed to levy a 20% tax on depositors with
more than €100,000 in their accounts in Bank of Cyprus. The government hoped that
would enable them to protect the lender, which holds more than one-third of total
deposits on the island, with some €28 billion.
•
But in a call Friday evening, senior European finance-ministry officials expressed doubts
that the plan would raise enough money to protect the lender, according to two officials
on the call.
•
Meanwhile, it seems that there is no help for Cyprus from Russia and that Russia is now
urging its citizens to take their money out of western banks immediately.
•
Standard & Poor's (S&P) ratings agency has downgraded Cyprus’s sovereign credit rating by
one notch from CCC+ to CCC saying there are "acute problems" in the Cypriot banking
sector, and warned the outlook for the rating was negative.
12
Latest flare-up of the crisis came against a backdrop of
growing concerns about the region’s economy
•
A surprisingly sharp fall in eurozone business activity in March
cemented fears the bloc's economy has shrunk in the first quarter of
the year, extending a contraction that has already lasted 15 months.
•
The worsening state of business activity also suggests that eurozone
policy makers' hopes for a recovery in the coming months could be
misplaced.
•
The survey was conducted before news of Cyprus’s bailout deal broke,
indicating that the final reading which will be released at the start of
April will provide an even bleaker picture.
•
Markit said on Thursday its flash composite purchasing managers'
index for the eurozone fell to 46.5 in March from 47.9 in February,
putting it further below the threshold of 50 that separates growth from
contraction. March's figure was the worst in four months.
•
Having already contracted since the second quarter of last year, Markit
said the latest PMI data suggested the eurozone economy would shrink
0.3% in the current quarter.
•
Thursday's business surveys suggest weakness also in Germany. The
country has in recent months shown signs of recovering more strongly
from a slump in late 2012 than many of its neighbors, but Thursday's
figures showed the German manufacturing sector shrinking, and the
services sector suffering a sharp fall in growth.
13
Fitch warns of heightened possibility of UK downgrade
•
The rating agency Fitch has warned that it may
downgrade the UK's credit rating in April.
•
It has put the UK's long-term rating on Credit Watch
Negative, which it said showed "a heightened
probability of a downgrade".
•
The agency said it was due to higher-than-expected
debt levels and downward revisions to UK growth
forecasts.
•
Last month, Moody's stripped the UK of its top AAA
rating, arguing that sluggish growth was making it
harder for the government to cut its overspending.
•
The review follows the Budget this week in which UK
growth forecasts for 2013 were halved
14
UK recovery will be slower and borrowing higher than
previously thought
•
U.K. Treasury chief George Osborne Wednesday unveiled lower growth
forecasts and conceded again that the government would have to borrow
more than planned, as he presented his annual budget amid criticism of his
stewardship of the economy.
•
Mr. Osborne said he was determined to stick to his strategy of cuts in
government spending. Still, amid increasing calls for steps to revive the
economy, the he introduced some modest measures aimed at providing a
boost, such as help for home buyers.
•
The budget also contained some tax giveaways (e.g. lowering the corporate
tax rate to 20% in April 2015).
•
The Office for Budget Responsibility on Wednesday lowered its growth
forecast for the U.K. for this year and next to 0.6% in 2013 and 1.8% in
2014. Mr. Osborne unveiled the growth figures provided by the office
during his budget speech.
•
The OBR’s forecasts showed UK general government gross debt peaking at
100.8% in the 2016-17 fiscal year.
•
The government is expected to borrow some £240 billion more over the
five-year period ending in April 2016 than had been forecast when Mr.
Osborne came to power in 2010.
15
More flexibility for BoE but inflation target remains
•
Mr. Osborne also announced changes to the Bank
England's inflation-fighting mandate, a move aimed
paving the way for incoming governor Mark Carney
deploy more of the central bank's formidable firepower
lift the U.K.'s economy out of stagnation.
of
at
to
to
•
The new remit fell short of some analysts' expectations for a
wholesale overhaul of Britain's monetary-policy regime.
•
The new remit affirms the inflation target as the policy
framework (as it has been since 1997).
•
The BoE is tasked with keeping annual inflation at 2% but
over the past five years it has tolerated frequent overshoots
of the target to avoid pushing up borrowing costs and
strangling the economy.
•
More significantly, the new mandate formally recognizes the
use of ‘unconventional tools’ to meet the target, including
policies aimed at easing the flow of credit to the private
sector, and making use of Fed-style guidance on the future
path of interest rates and the size and pace of its efforts to
stimulate growth through bond purchases.
February:
2.8%
BoE 2% inflation target – inflation has
been above target for over 3 years
16
China: Data suggests recovery not losing steam
•
China's factory activity expanded at a quicker pace in March,
according to a key early gauge of the manufacturing sector's
performance.
•
Global bank HSBC said its "flash" index of purchasing managers'
sentiment rose to 51.7 in March from February's final reading of
50.4, and confirmed that the weakness evident in February was due
mostly to seasonal distortions due to the Chinese New Year holiday.
Any reading above 50 signals expansion in the manufacturing
sector.
•
The pace of expansion was quicker than economists had
anticipated, but the index remains below levels hit in January. The
report showed a quickening pace of new orders and output.
•
Moreover, the average level of the HSBC manufacturing PMI in Q1
2013 was 51.5, compared with 50.5 in Q4 2012 and hence the HSBC
manufacturing PMI suggests the Chinese economy remains in a
moderate acceleration phase.
•
Some of the recent data, such as industrial production for January
and February, have indicated that the Chinese could already be
losing steam. However, the HSBC manufacturing PMI suggests that
this fear is exaggerated.
17
Japan: trade data still show deficit and Kuroda affirms
2% inflation target
•
Japan's merchandise trade deficit in February narrowed from its
record pace in the previous month, the Ministry of Finance said
Thursday.
•
The trade balance came to a deficit of ¥777.5 billion ($8.1 billion) in
January, narrower than January's ¥1.630 trillion but still the eighth
straight monthly deficit—the longest such spell since 1980.
•
Exports in February totaled ¥5.28 trillion, a 1.9% decline compared to
the previous month due partly to the celebration of the Chinese New
Year across Asia in February, while imports reached ¥6.06 trillion.
•
Over recent months, the yen’s weakening by about 20% against the
dollar has helped export manufacturers but also boosted the cost of
purchases of LNG and crude oil to make up for electricity shortfalls.
•
On 19 March, Haruhiko Kuroda assumed the leadership of the Bank of
Japan (BoJ). In his comments after becoming BoJ board governor,
Kuroda has maintained a strong commitment to the 2% inflation
target, saying he believed it could be achieved within two years.
•
Kuroda’s comments also suggest he will push to make BoJ asset
purchases open ended (without ceiling and termination date) from
this year and extend the maturity of the BoJ’s government bond
purchases.
18
Stocks ended week on a mildly positive note
19
Euro rallied Friday despite Cyprus uncertainty
20
Major Interest Rate Forecasts
Rate (%)
Market yield
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
(March 23)
United States
US 10-year
1.93
1.92
2.00
2.16
2.31
2.48
2.64
Fed Fund Target Rate
0.25
0.25
0.25
0.25
0.25
0.25
0.25
1.38
1.58
1.67
1.82
1.97
2.08
2.20
0.75
0.75
0.75
0.75
0.75
0.75
0.75
1.85
0.50
2.01
0.50
2.11
0.50
2.27
0.50
2.41
0.50
2.53
0.50
2.63
0.50
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
March 24, 2013 - March 29, 2013
Date
Currency / Event
GMT
Forecast
25-Mar Mon EUR German Retail Sales (YoY)
EUR German GfK Consumer Confidence Survey
26-Mar Tue USD Durable Goods Orders
USD S&P/Case-Shiller Composite-20 (YoY)
USD Consumer Confidence
USD New Home Sales
USD New Home Sales (MoM)
27-Mar Wed EUR French Gross Domestic Product (YoY)
GBP Current Account (Pounds) (4Q)
GBP Gross Domestic Product (QoQ)
GBP Gross Domestic Product (YoY)
EUR Euro-Zone Consumer Price Index Estimate (YoY)
EUR Italian Retail Sales (YoY)
EUR Euro-Zone Consumer Confidence
USD Pending Home Sales (MoM)
USD Pending Home Sales (YoY)
JPY Large Retailers' Sales
28-Mar Thu EUR German Unemployment Change
EUR German Unemployment Rate s.a.
GBP Index of Services (3Mo3M)
CAD Gross Domestic Product (YoY)
USD Gross Domestic Product (Annualized)
USD Gross Domestic Product Price Index
JPY Nomura/JMMA Manufacturing Purchasing Manager Index
JPY Jobless Rate
JPY National Consumer Price Index Ex Food, Energy (YoY)
JPY National Consumer Price Index (YoY)
JPY Industrial Production (YoY)
29-Mar Fri USD Personal Consumption Expenditure Core (YoY)
USD U. of Michigan Confidence
Previous
2.40%
12:30
13:00
14:00
14:00
14:00
07:45
09:30
09:30
09:30
10:00
10:00
10:00
14:00
14:00
23:50
08:55
08:55
09:30
12:30
12:30
12:30
23:15
23:30
23:30
23:30
23:50
12:30
13:55
3.80%
6.90%
50.00
-0.10%
-8.50%
5.90
-5.20%
6.80%
69.60
437K
15.60%
-0.30%
-12.8B
-0.30%
0.30%
1.80%
-3.80%
4.50%
10.40%
-3.50%
-3K
6.90%
-0.10%
0.80%
0.10%
0.90%
48.50
4.20%
-0.70%
-0.30%
-5.80%
1.30%
22
Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate
Expected Rate
Decision
May 1
0.25%
0.25%
European Central Bank (ECB)
April 4
0.75%
0.75%
Bank of England (BoE)
April 4
0.50%
0.50%
Bank of Japan (BOJ)
April 3
0.10%
0.10%
Swiss National Bank (SNB)
June 20
0.00%
0.00%
Bank of Canada (BOC)
April 17
1.00%
1.00%
Reserve Bank of Australia (RBA)
April 3
3.00%
3.00%
Reserve Bank of New Zealand (RBNZ)
April 23
2.50%
2.50%
Central Bank
Month
US Federal Reserve (FOMC)
23
Regional
24
Egypt’s central bank raises rate to curb inflation
•
Egypt's central bank Thursday raised its overnight
deposit rate and overnight lending rate by 50 basis
points to 9.75% and 10.75% respectively, in an effort to
rein in inflation, support the Egyptian Pound, and
stabilize an economy that recently failed to secure a
much-needed international bailout.
•
The Central Bank of Egypt's monetary policy committee
also raised the discount rate by 75 basis points to
10.25%.
•
Egypt's urban consumer inflation rate surged to 8.2% in
February from 6.3% in January, while the downward
pressure on the Egyptian pound made food imports
more expensive, according to the state statistics
agency.
•
The increase in food prices, which accelerated from a
5.5% year-on year rise in November to a 9.3% rise in
February, could lead to fresh bouts of civil unrest as the
economy weakens.
•
Egypt’s government failed to seal a deal with the
International Monetary Fund for a $4.8 billion loan.
25
Egypt now expects $4bn loan from Iraq, as Moody’s
downgrades amid unsettled political conditions
•
Egypt now expect an Iraqi loan worth $4 billion dollars aimed at
supporting its foreign exchange reserves, a senior official in the
Egyptian Central Bank reported. The details, amount and time
of the loan have not been disclosed yet.
•
Meanwhile, Egypt’s parliament approved on Tuesday a law
allowing the issuance of Islamic bonds which could provide the
heavily-indebted government with a new form of finance.
•
Finance Minister Al-Mursi Al-Sayed Hegazy said at the time that
Egypt could raise around $10 billion a year from the sukuk
market - much more than some analysts expect - but added that
it would take at least three months to push through the
necessary regulations.
•
Highlighting unsettled political conditions, Moody's Investors
Service Thursday downgraded Egypt's government bond ratings
to Caa1 from B3.
•
The ratings company said the cut reflected a significantly
weakened economy, a greater risk of default and continued
uncertainty surrounding the Egyptian government's ability to
secure financial support from the IMF.
26
GCC new highlights
GCC banking sector likely to continue steady recovery
•
Gulf banks will likely continue their steady recovery from the global financial
crisis this year, aided by healthy economic growth in the Gulf Cooperation
Council (GCC) and still high oil prices, says Standard & Poor's Ratings Services
yesterday in a report titled "A Growing Economy and Strong Capitalization
keeps Gulf banks on a path to recovery.“
•
"Our forecast for average 4.6% GDP growth in the GCC for 2013 should keep
demand for bank credit high and expand banks' earnings. "We believe strong
bank lending on the back of corporate and infrastructure growth will help
expand revenues of banks in Saudi Arabia, and Qatar," said Standard & Poor's
Credit Analyst Timucin Engin. "Specifically, we expect average lending growth
to remain above 10% level for Saudi Arabia.“
•
"In Kuwait, the UAE, and Bahrain, however, which have seen a less
pronounced rebound in growth, we envisage a slower pick-up in lending. Yet,
loan losses are gradually declining at banks in these countries because they
cleaned up their balance sheets between 2008 and 2012. This should
continue to foster a recovery in profitability in the region, albeit at a slower
pace than in recent quarters.
•
Meanwhile, Islamic banking assets with commercial banks in the GCC reached
$ 445 billion at the end of 2012, up from $ 390 billion in 2011, with the
outlook for the industry remaining relatively positive in 2013. This represents
a 14% year-on-year growth, which is considerably lower than the five-year
average of 19%.
27
GCC new highlights
Fitch affirms Saudi rating and revises outlook to positive
•
Fitch Ratings has affirmed Saudi Arabia's long-term foreign and local currency Issuer Default Ratings (IDRs) at
"AA-" and revised the Outlook to Positive from Stable. In addition, Fitch has affirmed Saudi Arabia's Country
Ceiling at "AA" and its Short-Term foreign currency IDR at "F1+".
•
The decision reflects the following factors:
–
Tangible progress in addressing key potential sources of social stress. Employment of nationals in the
private sector has jumped by 60% between May 2011 and February 2013 in response to labor market
reforms and access to housing finance has improved.
–
The banking sector is liquid, well capitalized and well regulated, non-performing loans are low and loanloss coverage is high.
–
The government's balance sheet is very strong. High oil revenues enabled further accumulation of
sovereign assets and reduction in government debt in 2012. Net general government debt, at 55.3% of
GDP, is the lowest of all rated sovereigns. With a general government surplus of 6% of GDP forecast for
2013, fiscal buffers will be strengthened further.
–
Real nonoil private sector growth has remained strong, at 7.5% in 2012, illustrating some progress
towards economic diversification and resilience. At an annual average of over 6%, real nonoil growth is
expected to exceed growth in the oil sector for 2013 and 2014. However, oil still accounts for 90% of
government revenues and 80% of current account receipts.
28
GCC Economic News Highlights
•
Saudi bank deposits rise to SAR1.27trn: The depositary
base of Saudi banks has reached SR 1.27 trillion during
January, according to the latest SAMA (Saudi Arabian
Monetary Agency) bulletin, a rise of 13.7% over the same
month last year
•
Saudi banks to slow pace of credit to 'avoid overheating‘:
The banking system is expected to soften the pace of
credit to avoid overheating their balance sheets. However,
deposits in the Saudi financial system are more than
adequate to accommodate the rising credit market and its
potential.
•
Saudi labor reforms add 600,000 private sector jobs:
Saudi Arabia’s attempts to reform its expatriate-heavy
labor market have put more than 600,000 locals into jobs
at private companies, a senior official said on Tuesday, a
sharp increase over previous rates. Unemployment among
men last year dropped to 6.1%, the lowest figure since
2000.
29
GCC Economic News Highlights
Oil revenues remain strong
•
Oil earnings of GCC hit USD737bn: Strong oil
prices along with higher output to boost the
combined 2012 income of Gulf hydrocarbon
producers by nearly $42 billion to their highest
level in current prices. From around $695.9
billion in 2011, the collective oil and gas export
earnings of the six member Gulf Cooperation
Council (GCC) countries climbed to a record
$737.5 billion in 2012.
•
The surge last year was a result of an increase in
oil prices to their highest annual average of
around $110 a barrel from nearly $106 in 2011
and a rise in the region's crude output as most
GCC nations boosted production last year.
•
A breakdown showed Saudi Arabia's oil export
earnings swelled to around $351 billion last year
from $326 billion in 2011 while the United Arab
Emirate's income grew to a record high of nearly
$124.7 billion from $119.2 billion in the same
period.
30
GCC Interbank Rates
31
Comparative MENA Markets
For the period 17/03 – 22/03
32
Locally
33
Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury
Market yield
(March 24)
Q1 2013
Q2 2013
Q3 2013
Q4 2013
7.95
7.95
7.55
7.75
8.00
Previous forecast
Window Rate
7.95
4.00
7.95
4.00
7.65
4.00
7.85
4.25
8.00
4.25
Source: CAB forecasts
•
Our interest rate forecast for 2 years
government bonds was revised lower
mainly due to higher JD liquidity in the
market, and positive news amid
Obama’s visit to Amman.
•
Moreover, foreign factors weighing on
the economy have decreased in the
first 2 months of the year, mainly as
Egyptian gas supplies more than
doubled, and oil bill decreased
significantly.
34
US plans to guarantee Jordanian bond issue
•
The Minister of Planning and International
Cooperation yesterday announced that Congress
has agreed to be the guarantor on the Eurobond
the Jordanian government plans to auction in
international markets, with a value between $1-2
billion.
•
The minister also added that the guarantee will
be based on the need and duration of the bond,
and will be decided upon by both parties.
•
As for the duration of the bond, in September of
last year, the Jordanian government had thought
of a period of 7-10 years.
•
Attaining the US guarantee will allow Jordan to
borrow from international markets at
competitive rates closer to rates of US sovereign
bonds
•
In other news, President Obama offered an
additional $200 million to the $360 million in aid
to Jordan for this year, in light of the
considerable number of Syrian refugees in the
Kingdom since the uprising.
35
Positive outlook by CBJ governor
•
Deposits in Jordanian dinars rose by JD800 million during the first
two months of this year, while those in dollars went down by $150
million during the same period, Central Bank of Jordan Governor Ziad
Fariz said during a technical meeting with banks' chairmen and
general managers.
•
The governor discussed the possibility of issuing development bonds
to the public and decided that the mechanisms of issuance and sale
be specified after thorough examination by experts.
•
He said Jordan has overcome the economic crisis in cooperation with
banks, commending the government's decision to lift subsidies and
channel support to those who deserve it in a fair manner.
•
He expected the economic growth to stand at around 3.3% this year,
noting that the IMF voiced satisfaction over the local economy's
performance during its first round of review.
•
Moreover, the CBJ governor said the inflation rate will most probably
remain around 6%, despite the latest figures that showed that
inflation reached 7.2% during the first two months of the year.
36
Jordan's Oil Bill Down 44% in January,,,
•
According to the Department of Statistics, Jordan’s oil bill fell by 44.11% at
the end of January of this year to reach JD 285.49 million, compared to JD
510.67 million for the same period last year.
•
Breaking down this drop in the oil bill for the same time period, we find:
–
Petrol import bill fell by almost 30% to reach JD 177.47 million from JD
252 million.
–
The biggest drop came in diesel fuel by 77.6% to reach JD 29 million,
compared to JD 130 million.
–
Heavy fuel imports fell to 0, compared to a bill of JD 38.1 million the
year before.
–
However, natural gas’s bill increased by 240% to reach JD 18 million,
compared to a bill of less than JD 6 million last year. This increase is a
result of the average daily supply of natural gas from Egypt at 100
million cubic feet, which is still well below the 250 mcf agreed upon by
both countries.
–
To cover this gap in natural gas supply, Jordan consumes daily 100,000
barrels of crude oil to meet electricity demand, which is a 50% increase
compared to last year.
37
Cheaper oil bill successfully narrowed trade deficit for
the first month of the year
•
•
The drop in the oil bill was reflected in a narrower trade deficit for the first month of the year.
–
The trade deficit for January fell by 18.6% to reach JD 746.1 million, compared to JD 916.2
million during January 2012.
–
Imports fell by 13.9% in January, reaching JD 1,167 million compared to JD 1,355 million for the
same period the previous year. The main reason behind the drop is likely the fall in the oil
import bill as discussed above.
–
Meanwhile, exports at JD 421 million in January, fell by 4.1% compared to the same period last
year.
Analysis:
–
The 44% fall in the oil bill should reflect positively on the Jordanian government’s fiscal position
and deficit.
–
This, in turn, should ease pressure on the JD and put downward pressure on interest rates.
–
A narrower trade deficit will likely ease pressures on the balance of payments and FX reserves.
38
Amman Stock Exchange
For the period 17/03 – 21/03
ASE free float shares’ price index ended the week at (2089.9)
points, compared to (2070.8) points for the last week,
posting an increase of 0.92%. The total trading volume
during the week reached JD(136.1) million compared to
JD(71.4) million during the last week. Trading a total of
(129.3) million shares through (32,889) transactions
The shares of (177) companies were traded, the shares
prices of (79) companies rose, and the shares prices of (54)
declined.
Top 5 losers for the last week
Top 5 gainers for the last week
Stock
% chg
Stock
% chg
Union Land Development Corporation
26.74%
International Brokerage & Financial Markets
(21.57%)
Comprehensive Multiple Project Company
24.59%
National Steel Industry
(19.23%)
Union Tobacco & Cigarette Industries
22.75%
United Cable Industries
(16.67%)
Union Investment Corporation
22.51%
United Arab Investors
(16.67%)
Jordan Poultry Processing & Marketing
22.22%
Northern Cement Co.
(12.83%)
39
Local Debt Monitor
Latest T-Bills

As March 24, the volume of excess reserves, including the overnight window deposits held at the CBJ
JD(2,368) million.
3 months T-Bills
Issue Date
Maturity Date
Size - million
Yield (%)
29/2011
14/12/2011
14/03/2012
50
2.898%
28/2011
12/12/2011
12/03/2012
50
2.844%
6 months T-Bills
Issue Date
Maturity Date
Size - million
Yield (%)
02/2012
14/02/2012
14/08/2012
50
3.788%
01/2012
23/01/2012
23/01/2012
50
3.433%
27/2011
08/12/2011
08/06/2012
50
3.232%
9 months T-Bills
Issue Date
Maturity Date
Size - million
Yield (%)
05/2012
04/03/2012
04/12/2012
75
4.285%
04/2012
29/02/2012
29/11/2012
75
4.229%
03/2012
22/02/2012
22/11/2012
75
4.169%
1 year T-Bills
Issue Date
Maturity Date
Size - Million
Coupon (%)
03/2013
26/02/2012
26/02/2014
70
6.750%
02/2013
14/02/2012
14/02/2014
50
6.750%
01/2013
27/01/2012
27/01/2014
70
6.750%
22/2012
24/12/2012
24/12/2013
60
6.750%
40
Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T0813
18/02/2013
18/02/2015
80
7.950%
T0513
05/02/2013
05/02/2015
60
7.950%
T0313
29/01/2013
29/01/2015
70
7.950%
3 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T1613
21/03/2013
21/03/2016
75
8.301%
T1513
19/03/2013
19/03/2016
75
8.394%
T1413
17/03/2013
17/03/2016
75
8.459%
4 year T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T0312
15/01/2012
15/01/2016
37.5
7.246%
T4211
16/11/2011
16/11/2015
50
6.475%
5 years T-Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
T0712
11/03/2012
11/03/2017
75
7.750%
T0412
19/01/2012
19/01/2017
50
7.489%
Public Utility Bonds
Issue Date
Maturity Date
Size - million
Coupon (%)
PB55 (Water Authority)
05/09/2012
05/09/2015
26
8.134%
PB005 (Housing & Urban Development)
29/07/2012
29/07/2015
20
7.966%
PBO12 (National Electricity)
26/04/2012
26/04/2017
150
7.724%
41
Prime Lending Rates
42
Disclaimer

The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.

The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.

Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
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
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opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.

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43