Global Economic Prospects 2015

The global economy is still struggling to gain momentum. Read more ...

Development Prospects

Providing information, analysis, and advice on global trends in the world economy.  Find out more ...

Global Economic Monitor

Now free. Daily and monthly updates on global economic developments and relevant topical issues. Find out more ...

Syndicate content

Prospects daily: Spain feels pressure in bond markets; German manufacturing orders stregthen

Global Macroeconomics Team's picture


Important developments today:

1. Spain feels pressure in bond markets

2. German manufacturing orders strengthen

3. India's exports surge 54% from last year



Spain feels pressure in bond market. As investor concerns over  potential contagion from Greek debt crisis intensify, the borrowing cost for Spain surged to a 23-month high in the latest bond sale. Spain successfully sold €2.35 billion of benchmark 5-year bonds today, but paid a yield of 3.58%, the highest price since May 2008. That was up 78 basis points (bps) from the 2.8% yield the country paid on similar securities in March, when it sold €4.5 billion in 5-year bonds. The new bond sale met with strong demand, with a bid-to-cover ratio of 2.35, up from average ration of 1.76 in the previous four auctions of 5-year government bonds, highlighting robust demand from domestic financial institutions. Meanwhile, the yield premium on the 10-year Spanish government bond over German bunds (the benchmark for borrowing in Europe) narrowed slightly to 136 bps from the record high level of 139 bps, shortly after the auction. This might reflect the relative success of the new debt sale (though it is too early to say whether the downward trend will last through day).

U.S. initial claims for unemployment insurance decrease. New claims for unemployment insurance dropped by 7,000 in the latest week to 444,000, while the 4-week moving average of claims declined marginally from 463,250 to 458,500. Although this is the third consecutive week of decreases in layoffs, claims appear to be stabilizing at very high levels, indicating that while companies are beginning to hire, the process is likely to be very slow in terms of net job creation. The Labor Department’s employment report for April, due to be released tomorrow morning, will likely show that payrolls increased for a third time in four months, following the addition of 162,000 new jobs in March.


Source: Economy Ministry


German manufacturing orders strengthen…New orders at German factory gates grew by 5% (m/m) in March after reporting zero growth a month earlier. Demand was strong from both domestic firms, which increased orders 5.4% over the period, and from external importers of German industrial goods, which increased orders by 4.7% in March. Indeed, in momentum terms (3 month average, saar) growth in total orders jumped to 28.5% from 10% in the previous month, while the year-over-year difference increased to 26%. Today’s latest numbers from the Economy Ministry provide evidence that the winter-related stall in factory production is over and the manufacturing sector rebound in Germany will continue to pick up speed once again.



Among emerging markets:  

In South Asia, India’s exports surged 54% (y/y) to $19.9 billion in March, the fastest pace in six years, on stronger demand for cars and jewelry. This surge in exports comes notwithstanding the appreciation of the currency for a four month in April. Exports are rebounding after a 16.5% drop in 2009. Meanwhile imports rose 67% in March to $27.7 billion.

In Latin America and Caribbean, Chile’s monthly economic activity index, Imacec, declined 6.6% (m/m) in March, the most since the bank started tracking the figures in 2003. Relative to a year earlier the economy shrank 2.8%.

Brazil’s manufacturers increased the use of installed capacity to 82.6% in March up from a revised 81.1% in February.

In Central and Eastern Europe and the CIS, Czech Republic’s central bank unexpectedly cut its key rate to 0.75%, down 25 basis points to help protect the economic recovery that is threatened by the crisis in Greece. 

In Middle East and North Africa, Egypt’s central bank kept its overnight deposit rate unchanged at 8.25% and the overnight lending rate at 9.75% as urban inflation slowed to 12.2% in March from 12.8% the previous month, while core inflation remained flat at 7%.

In Sub-Saharan Africa, Namibia’s economy contracted by a preliminary 0.8% in 2009, after expanding an upwardly revised 4.3% in 2008. The contraction was largely due to a sharp 40.7% drop in mineral production, following on the heels of a 22.5% percent decline in the mineral production in 2008 on account of low demand. The central bank expects the economy to expand 4.2% this year on a rebound in mineral output.


Add new comment