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Prospects Daily: US bonds advance on safe-haven flows, Japan consumer confidence rises, South Africa retail sales accelerate

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Financial Markets…U.S. government bonds advanced for the fourth time in five days, with the benchmark 10-year note yields sliding to a 4-month low of 1.7%, as a sell-off in stocks and commodities spurred demand for the safe-haven assets. Notably, U.S. Treasuries outperformed the S&P 500 index thus far this month for the first time since November.

Slovenia sold €1.1 billion of 18-month Treasury bills today, more than doubling the amount initially planned (€500 million) after last week’s failed auction raised speculation that the country might seek an international bailout. The cost of insuring Slovenian government debt against default sank 20 basis points to 352 bps following the sale. The country’s CDS spreads soared 141 bps since the beginning of the year through yesterday amid bailout concerns.

Developing-country stocks erased earlier gains, with the benchmark MSCI Emerging Market Index sliding 0.3% as falling commodity prices pulled shares lower. Russia’s Micex Index sank 1.5%, sliding for a fifth day, and Poland’s WIG20 Index fell 1.9%. In contrast, lower commodity prices had subdued impacts on Turkish and Indian stocks with their benchmark indices remaining a little changed.

High-income EconomiesJapan's consumer sentiment improved for the third successive month in March, with the headline seasonally adjusted consumer confidence index rising to 44.8 in March from 44.2 in February, with households more optimistic about employment prospects and intentions to buy durable goods.

Germany's ZEW index of investor confidence fell sharply in April to 36.3 points from March's three-year high of 48.5, suggesting that recovery in Europe's largest economy is losing momentum, The decline followed four months of successive increases and indicated growing pessimism about euro area economic prospects.

UK unemployment rose 70,000 to 2.56m, the third consecutive increase and the highest level since July, pushing the unemployment rate 0.2 points higher to 7.9%. Meanwhile the number of people in work fell 2,000 to 29.7m in the period, the first drop for 16 months, while earnings growth (excluding bonuses) slumped to just 1% (y/y), the lowest since records began.

Developing EconomiesEurope and Central Asia: Russia’s unemployment edged down to 5.7% in March, from 5.8% in February, despite the signs of a slowdown in Q1 2013.

Latin America and the Caribbean: Brazil’s business confidence dropped in April to 55.4, the lowest level in eight months, down from 57.1 in March. Reading above 50 indicates positive confidence level.

South Asia: Sri Lanka central bank kept its policy rates unchanged at 7.5% and 9.5%, respectively as inflation trend has become more positive in March, with inflation moderating to 7.5% (y/y), the lowest reading in 10 months.

Sub-Saharan Africa: South Africa’s inflation remained unchanged in March at 5.9% (y/y) from February and it remains at the top of the central bank's target range of 3-6%. Separately, retail sales accelerated for the first time in three months in February to 3.8% (y/y), up from a revised 2.2 percent in January.

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