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Prospects Daily: Canada’s GDP shrinks (m/m) in August…India’s and Colombia’s central banks keep key interest rate on hold

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Financial Markets…Global corporate bond sales surged to $3.3 trillion thus far this year, nearing a full year record high of $3.4 trillion reached in 2009. Unprecedented global liquidity pushed yields on the safe-haven government securities close to or below zero, prompting investors to put money into corporate debts that provide better returns.

Spanish government bonds gained on Wednesday, with the benchmark 10-year yields sliding 7 basis points to 5.6%, after the country posted a current-account surplus and amid optimism that Euro Area finance ministers may grant Greece more time to meet its bailout target. 2-year Spanish yields fell also 10 bps to 2.99%, after declining 44 bps this month.

Foreign investors’ holding of Malaysian local-currency debt rose to a record high of 216 billion ringgit ($71 billion) in September, up 8% from the previous high reached in August. Foreign holdings of the country’s ringgit-denominated debt rose 29% from the same month last year, as the nations’ currency has gained 4.1% this year.

High-income EconomiesCanada’s GDP shrank 0.1% in August, the first monthly decline since February. Metal ore mining declined 4.7%, partly due to scheduled maintenance in August, while manufacturing output fell 0.6% in August, partly reversing a 0.9% increase in July. On a year-on-year basis, GDP growth softened to 1.2% (y/y) from 1.9% in July. 

The Euro Area unemployment rate edged up 11.6% in September from 11.5% in August, the highest on record, amid Euro Area debt difficulties that have pushed several countries into recession and eroded business and consumer confidence.  

Italy’s consumer price inflation on a EU-harmonized basis dropped to 2.8% (y/y) in October, the lowest in more than a year, from 3.4% in September, mainly as energy (in particular gasoline) prices declined on a monthly basis.

Greece’s retail sales continued to fall 9.2% (y/y) in August, the same pace of decline as in July, amid a deepening five-year recession and fiscal austerity that have cut into consumer spending.

Developing Economies…The central bank of Angola kept its base rate unchanged at 10.25%. Angola's annual inflation rate eased to 9.65% in September, the lowest level in 2012, from 9.87% in August.

Colombia's central bank kept its benchmark policy rate unchanged at 4.75%. The headline inflation in September was 3.1% (y/y) - close to the midpoint of the central bank's target inflation range at 3% (+/- one percentage point).

The Central bank of Trinidad & Tobago held its repurchase rate unchanged at 2.75% with the headline inflation slowing to 7.7% in September from 7.9% in August.

India's central bank kept its benchmark repurchase rate steady at 8.0% on inflation concerns, but cut its Cash Reserve Ratio (CRR) by 25 basis points to 4.25%. The Reserve Bank of India (RBI), which also cut its CRR by 25 basis points last month, stated that the reduction in CCR would inject some 175 billion rupees into the banking system.

The Peoples Bank of China injected 395 billion yuan, a single-day record amount cash injection into the banking system, in a continued use of the open market operations to adjust short-term liquidity.

Malaysia's producer prices dropped by 1.3% (y/y) in September reflecting weak industrial production on continued weak export demand. 
 
Turkey’s exports declined 6.8% on a monthly basis in September while imports grew by 4.1%. Despite the monthly decline, exports were 21% (y/y) higher at $13.0 billion in September, while imports were down 6.4% (y/y) at $19.8 billion. The trade deficit narrowed to $6.8 billion in September from a record $10.5 billion for the same month a year earlier. Income from tourism in the third quarter dropped 4.1% (y/y) despite the growing number of tourists visiting Turkey which went up 3.7% (y/y) in the third quarter growing to 15.5 million.

South Africa's trade deficit widened to ZAR 13.8 billion in September from ZAR 12.2 billion in August. Exports were down 7.7% (m/m) and imports decreased 4.2% from a month ago. The cumulative deficit for the year to date totaled ZAR 86.1 billion compared to ZAR 5.8 billion in 2011.

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