After weathering relatively well the Great Recession, labor markets in developing countries face macroeconomic and structural policy challenges that make them vulnerable to a global slowdown.
The dollar strengthened against the yen on Wednesday, supported by higher U.S. Treasury yields and widespread expectation that the Fed may signal it is on track for its first rate hike since 2006 by year’s end. The yield on the benchmark 10-year Treasury note rose 5 basis points to 2.38 percent, as higher U.S. bond yields tend to support the dollar by raising return on dollar-denominated securities. The greenback was up 0.7 percent to 124.27 yen, while it was little changed versus the euro at $1.1243.
Relative to the advanced economies, the Great Recession had a mild impact on the labor markets of developing countries. The resilience of developing-country labor markets reflects, in large part, stronger output growth during and after the crisis. Moderating growth in several large developing countries has not yet had a large labor market impact, but some signs of weakness are emerging.
Spanish and Italian government bonds slumped on Friday as the growing risk of a Greek default rose prompted a sell-off in the Eurozone’s higher-yielding debt. The yield on Spanish 10-year bond rose 18 basis points (bps) to 2.31 percent, the biggest jump since May 5, while similar-maturity Italian yield increased 15 bps to 2.30 percent, after sliding 15 bps over the previous two days. Yields on Greek 2-year and 10-year securities rose 27 bps to 11.50 percent and 87 bps to 25.53 percent, respectively.
The discovery and development of shale oil fields in the United States has transformed the global outlook for oil supplies. The U.S. oil shale industry has been resilient and flexible, quickly adjusting production in response to changes in prices, which may lead to a “new and tighter” range for oil prices.
German government bonds extended a sell-off that pushed 10-year yields up last week by 36 basis points (bps) to the highest since November amid signs of the country’s improving growth outlook. The yield on German 10-year bunds gained 3 bps to 0.87 percent after hitting as high as 0.9 percent earlier trading. The rise in German 10-year yields since mid-April, from near zero to just below 1 percent last week, has been a central driver of the European bond markets.
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