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Prospects Daily: Spanish government 10-year bonds attract record bids, Eurozone government debt narrows for first time in 6 years,Thailand’s central bank leaves policy rate unchanged at 2.25%

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Financial Markets… Spanish government sold €10 billion ($13.6 billion) of 10-year bonds after receiving record bids of almost €40 billon. The record demand for Spanish debt seemed to underscore growing investors’ confidence on the country and the strong appetite for high-yielding government securities. The new bond was sold at a yield of 178 basis points (bps) over the mid-swap rate, down from a yield of 278 bps at a similar sale in May.
 
Ukraine financial markets slumped on Wednesday following a night of deadly street protests. Yields on the country’s benchmark government debt jumped 255 basis points (bps), the steepest increase since December 2, 2013 to 9.29%; while the benchmark stock index fell 2.6% to the lowest level since November 4.
 
High Income Economies… In a further sign that the region's long-drawn debt crisis is easing, the gross debt of Eurozone governments narrowed in Q3 2013, marking the first decline in nearly six years.  Total government debt dropped to 92.7% of GDP from 93.4% in Q2. It was the first decline since Q4 2007.  In the EU, the debt-to-GDP ratio increased modestly to 86.8% in Q3 from 86.7% in Q2.
 
The U.K. jobless rate dropped more-than-expected to 7.1% for the September to November period, just a tad above the Bank of England's threshold of 7.0% for an interest rate hike.  The latest reading was the lowest since December 2008 - February 2009.  But policymakers of the Bank of England said there is no immediate need to raise the interest rate, even if the threshold is reached.
 
The Bank of Canada kept its target for the overnight rate at 1%, as inflation is expected to remain below target for some time.
 
Developing Economies…East Asia and Pacific: Malaysia’s annual headline inflation, measured by the consumer price index, edged up in December 2013, rising to 3.2% (y/y) from 2.9% in November, driven by higher food and transportation prices.  Month-on-month, prices rose 0.3%.
 
At the interest rate meeting of January 22nd Thailand’s central bank decided to leave the benchmark policy rate unchanged at 2.25%. The monetary policy committee noted that monetary policy was already accommodative and appropriately supportive of economic growth, which slowed in the fourth quarter of 2013 amid softening domestic demand.   
 
Sub-Saharan Africa: South Africa’s annual consumer price inflation increased in December 2013, rising to 5.4% after declining to 5.3% in November, remaining close to the central bank’s 6% target ceiling. Contributing to the higher inflation reading, costs of housing and utilities rose to 5.5% (y/y) from 5.3% in November, and transportation costs increased 6.3% (y/y) from 5.8%. Food prices eased to 3.5% (y/y) from 3.8%. Month-on-month, prices edged up to 0.3% from 0.1% in November. Core inflation, which excludes prices of food, non-alcoholic beverages, petrol and energy rose 0.3% in December on a monthly basis but remained unchanged at 5.3% year-on-year.

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