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Prospects Daily: One-month U.S. T-bill rates spike, U.S. Congress reported to be heading towards resolution to reopen the federal government, Thailand’s central bank keeps its key benchmark policy rate unchanged

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Financial Markets…Global financial markets were on edge on Wednesday as investors awaited on U.S. debt deal. European stocks opened lower in morning trade after U.S. equities slumped yesterday following failed U.S. House plan to a debt-ceiling agreement, while Asian markets excluding Japan also suffered. Fitch Rating put U.S.’s AAA credit rating on negative watch yesterday, citing the government’s failure to avert the debt default as the deadline looms large. Nevertheless, many investors remained hopeful that U.S. politician would reach last-minute deal to prevent the nation missing payment on its debt with $120 billion of Treasury bills coming due tomorrow.

Rates on the one-month U.S. Treasury bill jumped to the highest level since 2008 amid concerns the U.S. Treasury might have to delay debt payments if the government fails to reach the debt ceiling agreement by today.  The one-month T-bill rates climbed 6 basis points to 0.40% in morning trade, while the benchmark 10-year note yield rose 1 bps to 2.74%.  U.S. short-term borrowing costs have been on upward trend since the start of the U.S. government shutdown.

High Income Economies…USA Today reported that U.S. Congress was heading towards a resolution Wednesday to reopen the federal government after a 16-day partial shutdown and avert an unprecedented debt default.  House and Senate leaders were negotiating how to maneuver a package through both chambers and get it to President Obama's desk before the Oct. 17 default deadline.  According to USA Today, a formal deal was at hand between Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell and involved a narrow package that includes a stopgap spending measure through Jan. 15, a suspension of the debt ceiling until Feb. 7, and a framework for formal budget negotiations to begin.  Negotiators are tasked with reporting out by Dec. 13 recommendations for longer-term spending levels and deficit reduction.  Senate leaders reasserted control of negotiations after House Speaker John Boehner failed Tuesday to corral GOP lawmakers behind a competing budget proposal.

Annual inflation in the Euro area was 1.1% (y/y) in September 2013, down from 1.3% in August.  European Union annual inflation was 1.3% (y/y) in September 2013, down from 1.5% in August.  In September 2013, the lowest annual rates were observed in Bulgaria (-1.3%), Greece (-1.0%) and Latvia (-0.4%), and the highest in the United Kingdom (2.7%), Estonia (2.6%) and the Netherlands (2.4%).  Compared with August 2013, annual inflation fell in seventeen Member States, remained stable in eight and rose in three.  The largest upward impacts to euro area annual inflation came from tobacco (+0.10 percentage points), electricity (+0.09) and accommodation services (+0.08), while fuels for transport (-0.30), telecommunications (-0.15) and medical & paramedical services (-0.07) had the biggest downward impacts.

Amid higher mortgage rates and the government shutdown, U.S. homebuilder confidence, as measured by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, unexpectedly fell to 55 in October from a downwardly revised 57 in September.

Italy’s trade surplus was €958m in August, an improvement from the deficit of €483m seen in August 2012.  Exports decreased 4.4% (y/y) in August, but increased 1.7% (m/m) compared to July.  The value of imports fell sharply by 9.8% (y/y) in August form a year earlier, but increased by 1.1% (m/m) when compared to July.

Developing Economies…Europe and Central Asia: Bulgaria’s current account balance improved notably in August with a surplus amounting to €884.4m (y/y), surpassing the surplus of €366.6m recorded in August 2012.  This increase was due to surpluses on the services, current transfers and foreign trade accounts.  As a result, during the eight-month period January-August, the current account surplus rose to €1.26bn compared with a deficit of €279.2m recorded during the same period last year.
East Asia and Pacific: The Monetary Policy Committee of Thailand’s central bank decided at its meeting today to leave its benchmark policy rate unchanged at 2.5% for the third time in a row.  It stated that that the accommodative monetary policy in support of Thailand’s economic recovery was appropriate given downside risks stemming from the uncertain global economic recovery and the delay in fiscal disbursement especially for infrastructure projects.
Sub-Saharan Africa: South Africa’s retail sales growth was unchanged in August at 3% (y/y), compared with the revised growth of 2.9% (y/y) in July.  This was still better than consensus expectations that retail sales growth would slow to 1.2% (y/y) in August. Month-on-month, retails sales were up 1.1%; and in the three months ending in August, retail sales increased 2.4% compared with the same period last year.