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Prospects Daily: U.S. Treasuries rally on slow job growth, China’s export growth slows in December

Global Macroeconomics Team's picture
Financial Markets…US. Treasuries prices rallied while the dollar pared gains on Friday as much weaker-than-expected U.S. job growth in December curbed speculations the Federal will accelerate the pace of its tapering plan. The benchmark 10-year yield tightened 9 basis points (bps) to a two-week low of 2.88% in morning session, and the thirty-year yield dropped 6 bps to 3.82%. The 10-year yield jumped to 3.05% on January 2, maintaining the momentum following the Fed’s tapering decision last month, which was the highest level since July 2011. The U.S. currency weakened 0.7% against the yen, and its fell 0.5% versus the euro to 1.3672.

Mexico sold $4 billion in long-term sovereign global bonds yesterday, becoming the fourth developing-country government to tap the international bond market this week. The Mexican government issued $1 billion in 7-year bonds to yield 120 basis points (bps) over comparable U.S. Treasuries and $3 billion in 30-year bonds to yield 170 bps higher than Treasuries. Developing-country sovereign bond sales have been on a record pace this month, with Sri Lanka, Indonesia, the Philippines, and Mexico raising $10.5 billion combined this week. Furthermore, overall developing-country bond sales (including both corporate and sovereign issues) since the start of the year more than doubled from year-ago levels.
 
Developing Economies…East Asia and Pacific: China’s export growth slowed markedly in December, advancing 4.3% (y/y) compared with November’s growth of 12.7%.  Meanwhile imports accelerated to an annual growth of 8.3%, faster than November’s 5.3% increase.  As a result, the trade surplus shrank to US$25.6bn in December, down from US$33.8bn in November.  For the full year of 2013, exports grew 7.9%, imports rose 7.3%, and the trade surplus amounted to US$259.75bn.
 
Europe and Central Asia: Bulgaria’s industrial production increased for the third consecutive month in November, rising by a working-day adjusted 2.8% (y/y), after a gain of 3.6% in October. Contributing to the November gain, manufacturing production increased 4.7% (y/y) and mining and quarrying rose 28.4% (y/y); while production of electricity, gas, steam and air conditioning fell 11.4% (y/y).
 
Latin America and the Caribbean: Brazil’s annual headline inflation, measured by the consumer price index, accelerated in December, rising to 5.91% from 5.77% in November, approaching the government’s target ceiling of 6.5% for 2014. Contributing to this increase, prices of food and beverages rose 8.48% (y/y), housing costs increased 3.4% (y/y), prices of clothing and footwear climbed 5.38% (y/y) and transportation cost rose 3.29% (y/y). Month-on-month, prices rose 0.92% in December, faster than the 0.54% increase recorded in November. 
 
South Asia: India’s industrial production continued to decline in November, falling 2.1% y/y) after decreasing 1.8% (y/y) in October. Driving the November decline, manufacturing output fell 3.5% (y/y), partially offset by a 1% (y/y) increase in mining production.  Electricity production rose 6.3% (y/y).
 
Separately India’s exports rose 3.49% (y/y) in December, less than the consensus forecast of a 7% gain. Meanwhile, imports fell 15.25% (y/y), slightly more than the expected 15% decline.  As a result, the trade deficit fell to US$10.1bn (y/y) in December from US$17.59bn a year ago.

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