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Prospects Daily: U.S. government bonds fall this week, Japan tertiary industry index plunges in February, India’s bank loan growth eases in March

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Financial Markets

U.S. Treasuries posted the first weekly losses in a month as diplomatic talks on the Ukraine crisis ended with an accord at ending the conflict and another round of strong economic data damped safe-haven government debt—trading of U.S. government securities is closed today for Good Friday. The benchmark 10-year yields fell 10 basis points (bps) this week to 2.72%, the highest level since April 7. The yield on 30-year bond yield rose 4 bps this week to 3.52% after falling to a nine-month low of 3.43% on April 15, while 5-year bond yield jumped 16 bps to 1.74%.

Russian bonds and stocks rallied following an accord aimed at defusing the crisis in Ukraine. The country’s benchmark stock gauge (Micex) climbed 2.2% on Friday, paring this week’s loss to 0.3%, and the yield on Russia’s local government debt due 2027 slid 15 basis points to 9.02%, the lowest in a week. In contrast, the Russian ruble weakened 0.2% versus the central bank’s basket of dollar and euros to 41.68 after surging 1.4% yesterday, the most this month.

High Income Economies

The Conference Board's leading economic index for France declined in February, after increasing in the previous four months. The leading economic index dropped 0.3% (m/m) in February, following a 0.4% increase in January. Declines building permits were one of the main reasons behind the latest fall in the leading index. The coincident index, which measures the current economic situation, rose 0.1% in February, reversing the 0.1% decline in January.

Even as inflation accelerated after policy rates were lowered in October 2013, the Chilean central bank maintained its key rate at 4.0%. The Bank announced that it will consider the possibility of making additional policy rate cuts depending evolution of domestic and external macroeconomic conditions and its implications on the inflationary outlook, with the projected inflation still standing at 3% over the policy horizon.

An index measuring tertiary industrial activity in Japan was down 1.0% (m/m sa) in February standing at 100.6, following the 0.9% jump in January. The unexpected decrease was driven by less activity in the accommodations, finance, transportation, wholesale trade, real estate and healthcare industries, activity increased for communications and utilities.

Developing Economies

Europe and Central Asia Gross wage growth in Hungary increased at a fast pace in February, rising 1.7% (y/y) after gaining 0.9% (y/y) in January. In the January-February period, gross wage increased 1.3% (y/y).

South Asia Bank loan growth in India eased in March, rising 13.8% (m/m) following a 14.3% (m/m) increase in February. Deposit growth edged higher, rising 15% (y/y) after increasing 14.6% (y/y) in February. Meanwhile, for the period ended April 5th 2014, foreign reserves stood at US$309.44 bn up from US$306.65 bn in the previous period.

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