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Prospects daily: Greece issues new 10-year bond at premium price

Global Macroeconomics Team's picture

Important developments today:

1. Greece issues new bond

2. U.S. initial claims fall ahead of February's employment report

3. Malaysia raises policy rate for the first time since late 2005

 

Greece sells new 10-year bond. Greece began selling a new 10-year euro-denominated bond today, after the Greek government announced yesterday new austerity measures to reduce its excessive fiscal deficit. The government is offering investors a premium to sell the bonds, pricing them at a spread of 300 basis points (bps) more than the mid-swap rate, or a yield of 6.39%. That is an interest premium of 32 bps over the country’s existing benchmark issue due 2019. Demand for the Greek debt was strong, receiving €14.5 billion (about $20 billion) in bids when the books were closed, according to the country’s debt-management agency. The new offering is targeted to cover short-term funding gaps partially, as the Greek government needs to borrow about €54 billion this year to meet its financing requirements without a bailout from other euro-zone countries. The relative success of the Greek bond offering must be seen as a positive for market sentiment.


U.S. jobless claims show improvement in labor markets. The number of persons filing new claims for unemployment insurance declined by a larger than-expected 29,000 persons to 469,000 in the final week of February. The Labor Department’s 4-week moving average, which provides a less volatile measure of layoffs, eased modestly to 470,750. This marked the first encouraging sign in labor markets after 3 weeks of unexpectedly sharp increases in layoffs. However, the latest easing in redundancies may not provide an accurate picture of labor markets at present. Unseasonably cold weather across the Northeast throughout February was blamed for a spike in layoffs; and market analysts are widely predicting a grim employment report for the month, which will be released tomorrow.

 

Source: Department of Commerce

 


In a separate report from the Commerce Department…new orders at factory gates posted the largest increase in four months in January, as orders increased by 1.7% (m/m) on a surge of demand for commercial aircraft. Excluding transportation, orders were up a modest 0.1% (m/m), while demand for durable goods came in with a 2.6% increase, slightly less than estimated last week. While factory demand was dominated by aircraft, January still marked a ninth month out of the previous ten showing an increase in orders, with U.S. manufacturers benefitting not only form a revival in domestic demand but also from external markets.


U.S. housing market continues to show signs of stress…the National Association of Realtor’s index for pending sales of previously owned homes fell 7.6% (m/m) in January, in another indication that the housing market is not yet responding to the extension of the federal tax credit extension. Pending sales for January, or contracts that have not yet resulted in a complete transactions, were higher than a year ago, but are much lower than expected given the large number of potential buyers eligible under the expanded home-buyer tax credit.


Among emerging markets:

In East Asia and the Pacific, Malaysia’s central bank raised its overnight policy rate by 25 basis points today to 2.25%, the first increase in policy rates since late 2005. Malaysian GDP economy grew 4.5% during the 4th quarter of 2009 (saar), and though inflation is expected to remain moderate in 2010, the central bank has begun the process of normalizing monetary policy to thwart upward pressure on domestic prices and prevent the risk of financial imbalances.


In Latin America and the Caribbean, Mexico’s consumer confidence unexpectedly dipped in February to a reading of 80.6 from 82.1 in January, as inflationary pressures and new taxes weighed on consumers’ spirits.
 

In Central and Eastern Europe, the Slovak Republic continued to recover in Q4-2009, posting GDP growth of 2% (q/q, saar). On an annual basis the economy fell 2.6% in the fourth quarter. The finance ministry projects gains of some 2.8% for 2010.